<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1999
REGISTRATION NO. 333-71183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRIMARK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MICHIGAN 7370 38-2383282
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1000 WINTER STREET
SUITE 4300N
WALTHAM, MASSACHUSETTS 02451
(781) 466-6611
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MICHAEL R. KARGULA, ESQ.
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
PRIMARK CORPORATION
1000 WINTER STREET
SUITE 4300N
WALTHAM, MASSACHUSETTS 02451
(781) 466-6611
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
STEPHEN W. HAMILTON, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE, N.W.
WASHINGTON, D.C. 20005
(202) 371-7000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
OFFER TO EXCHANGE ALL
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008 FOR
9 1/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2008
OF
PRIMARK CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON APRIL 16, 1999, UNLESS EXTENDED.
------------------------
Terms of the exchange offer:
- We are offering a total of $150,000,000 of new notes, which are
registered with the Securities and Exchange Commission, to all holders
of old notes.
- We will exchange all old notes that are validly tendered and not
validly withdrawn.
- You may withdraw tenders of old notes at any time before the exchange
offer expires.
- We will not receive any proceeds from the exchange offer.
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
- The economic terms of the new notes are identical to those of the old
notes.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March 19, 1999
<PAGE> 3
Primark Logo
<TABLE>
<S> <C> <C>
Primark Financial Primark Financial Primark Decision
Information Division Analytics Division Information Division
- ------------------------------------ ------------------------------------ ------------------------------------
Datastream/ICV I/B/E/S WEFA
Disclosure/Worldscope Baseline Yankee Group
Extel Vestek Primark Decision Economics
A-T Financial
Primark Investment
Management Services
</TABLE>
- ---------------
* Primark Corporation has a 20% equity interest in Primark Decision Economics,
an unconsolidated company.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 4
Risk Factors................................................ 9
Use of Proceeds............................................. 15
Capitalization.............................................. 16
Selected Consolidated Financial Data........................ 17
The Exchange Offer.......................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Industry Overview........................................... 35
Business.................................................... 36
Management.................................................. 52
Security Ownership of Certain Beneficial Owners and
Management................................................ 60
Description of Certain Indebtedness......................... 62
Description of the Notes.................................... 64
United States Federal Tax Considerations.................... 99
Plan of Distribution........................................ 102
Legal Matters............................................... 102
Experts..................................................... 103
Available Information....................................... 103
Information Incorporated by Reference....................... 103
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
Our principal executive offices are located at 1000 Winter Street, Suite
4300N, Waltham, Massachusetts 02451, our telephone number is (781) 466-6611, and
our Internet address is www.Primark.com.
------------------------
3
<PAGE> 5
SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus contains specific terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read the entire prospectus.
SUMMARY OF THE EXCHANGE OFFER
On December 21, 1998, we completed the private offering of our 9 1/4%
Senior Subordinated Notes due 2008. We entered into a registration rights
agreement with the placement agents in the private offering in which we agreed
to deliver to you this prospectus and to complete the exchange offer. If the
exchange offer is not completed on or before June 21, 1999, the interest rate on
the 9 1/4% Senior Subordinated Notes due 2008 will increase by 0.5% until we
complete it. You should read the discussion under the headings "-- Summary
Description of the New Notes" and "Description of the Notes" for more
information about the registered notes.
We believe that the notes issued in the exchange offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act, unless you are an affiliate of Primark or an underwriter or
a broker dealer. You should read the discussion under the heading "The Exchange
Offer" for further information regarding the exchange offer and resale of the
notes.
Registration rights
agreement..................... This agreement entitles holders of old notes to
exchange their notes for registered notes with
identical economic terms. The exchange offer
will satisfy those rights. After the exchange
offer is complete, you will no longer be
entitled to any exchange or registration rights
with respect to your notes.
The exchange offer............ We are offering to exchange up to $150.0
million of the new notes for up to $150.0
million of the old notes. Old notes may be
exchanged only in $1,000 increments.
Tenders; expiration date;
withdrawal.................... The exchange offer will expire at 5:00 p.m.,
New York City time, on April 16, 1999, unless
we extend it. If you decide to exchange your
old notes for new notes, you must acknowledge
that you are not engaging in, and do not intend
to engage in, a distribution of the new notes.
You may withdraw your tender of old notes at
any time before April 16, 1999. If we decide
for any reason not to accept your notes for
exchange, we will return them to you promptly
and without expense after the exchange offer
expires or terminates.
Conditions to the exchange
offer......................... We are not required to accept any old notes in
exchange for new notes. We may terminate or
amend the exchange offer if we determine that
the exchange offer violates applicable law or
any applicable interpretation of the SEC.
Federal tax considerations.... The exchange of old notes for new notes under
the exchange offer will not result in any gain
or loss to you for federal income tax purposes.
4
<PAGE> 6
Use of proceeds............... We will receive no proceeds from the exchange
offer.
Exchange agent................ State Street Bank and Trust Company is the
exchange agent for the exchange offer. The
address and telephone number of the exchange
agent are set forth under the heading "The
Exchange Offer -- Exchange agent."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the new notes and the old notes are identical in all material
respects but two:
- the transfer restrictions and registration rights relating to the
old notes do not apply to the new notes; and
- if we do not complete the exchange offer by June 21, 1999, the
interest rate on the old notes will increase by 0.5% until we
complete it.
Securities offered............ $150.0 million total principal amount of 9 1/4%
Senior Subordinated Exchange Notes due 2008,
which have been registered under the Securities
Act.
Maturity...................... December 15, 2008.
Interest payment dates........ June 15 and December 15 of each year,
commencing June 15, 1999.
Optional redemption........... We may redeem any of the notes beginning on
December 15, 2003. The initial redemption price
is 104.625% of their principal amount, plus
accrued interest. The redemption price will
decline each year after 2003 and will be 100%
of their principal amount, plus accrued
interest, on December 15, 2006.
In addition, before December 15, 2001, we may
redeem up to 35% of the total principal amount
of notes at 109.250% of their principal amount,
plus accrued interest. We may redeem the notes
in this way only if at least 65% of the total
principal amount of notes originally issued
will remain outstanding after the redemption.
Change of control............. Upon a change of control, we must offer to
purchase the notes for 101% of their principal
amount, plus accrued interest to the date of
the purchase. However, we need not offer to
purchase the notes if they have a rating of at
least BBB- by Standard & Poor's Ratings Group
and a rating of at least Baa3 by Moody's
Investors Service, Inc. on the 30th day after
the change of control.
Ranking....................... The notes rank equally with our other senior
subordinated indebtedness. The notes are junior
to our senior indebtedness and all liabilities
of our subsidiaries.
At September 30, 1998, assuming that the
offering had been completed at that time, we
would have had approximately $159.7 million of
indebtedness outstanding of which approximately
$9.7 million would have been senior to the
notes.
5
<PAGE> 7
Covenants..................... The indenture contains covenants that will
limit our ability and that of some of our
subsidiaries to:
- incur indebtedness,
- pay dividends,
- prepay subordinated indebtedness,
- repurchase capital stock,
- make investments,
- create liens,
- engage in transactions with
stockholders and affiliates,
- sell assets, and
- engage in mergers and consolidations.
These limitations are subject to a number of
important qualifications and exceptions.
PRIMARK
Primark is a leading global information service provider of comprehensive
financial, economic and market research information to investment, legal,
accounting, banking, corporate and government customers. We develop and market
"value-added" database and information products that cover established and
emerging markets worldwide. Our proprietary analytical software applications
allow our customers to analyze and present financial, economic and market
research information.
RECENT EVENTS
Acquisition of A-T Financial Information, Inc.
On February 5, 1999, we announced that we had completed the acquisition of
A-T Financial Information, Inc. for $35 million in cash. Founded in 1987, A-T is
a provider of Windows-compatible financial market data and software to money
managers, traders, banks and other institutional investors. A-T has launched an
Internet site for individual investors, which is marketed as "A-T Attitude." A-T
had $13 million in revenues for 1998, which is an increase of 28% over the prior
year. Primark intends to use the existing A-T Internet delivery system as the
foundation of a new global investment service for retail and institutional
investors located in the United States, Europe, Asia and other parts of the
world. The new Internet service will combine financial and economic information
with securities trading and portfolio management capabilities.
Acquisition of Extel Company Fundamental Data
On February 19, 1999, Primark acquired the Company Fundamental Data
business and the Extel brand name from the Financial Times Group, part of
Pearson plc, for approximately $32 million in cash, subject to post-closing
adjustments. Extel is a widely recognized brand name in the European and Asian
markets and provides tearsheets for rapid corporate analysis and historical
company accounts, image-based data, textual corporate profiles and company news
to the investment industry worldwide. Included in the transaction was a one-year
agreement with Pearson for transitional services. The acquired business had
revenues of approximately $18 million in 1998.
1998 Year End Results
On February 16, 1999, Primark reported its full year financial results for
1998 with net income of $156.7 million, or $6.45 per share, and revenues of
$434.5 million.
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary historical consolidated financial data presented below for, and
as of, each of the years ended December 31, 1993 and 1994 have been restated for
the discontinuance of our former subsidiary TASC, Inc. and its affiliated
entities and Triad International Maintenance Corporation, which we call TIMCO.
The summary historical consolidated financial data presented below for, and as
of, each of the years ended December 31, 1995, 1996 and 1997 were derived from
Primark's audited consolidated financial statements and include TASC and TIMCO
as discontinued operations. The summary historical consolidated financial data
for, and as of, each of the nine months ended September 30, 1997 and 1998 were
derived from our unaudited consolidated financial statements. In the opinion of
management, our unaudited consolidated financial statements have been prepared
on the same basis as our audited consolidated financial statements and include
all adjustments, consisting only of normal recurring items, necessary for a fair
and consistent presentation of Primark's results of operations and financial
position for such periods and as of such dates. The results for the nine months
ended September 30, 1998 are not necessarily indicative of results to be
expected for the full fiscal year. The summary historical consolidated data set
forth below should be read together with "Use of Proceeds," "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of Primark contained elsewhere in this prospectus.
The information preceding the table in the section "Selected Consolidated
Financial Data" applies to the table below as well.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- --------- --------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Operating Revenues........................... $ 98,810 $111,621 $ 184,779 $ 277,063 $ 397,875 $294,726 $ 321,819
Operating Expenses:
Cost of Services......................... 41,888 49,689 66,063 104,479 157,327 116,783 129,221
Selling, General and Administrative...... 32,935 37,205 71,921 111,463 151,559 115,957 120,933
Depreciation and Amortization............ 17,569 18,502 25,909 33,282 50,205 37,118 36,750
Restructuring Charge..................... -- -- -- -- 6,800 6,800 68,677
-------- -------- --------- --------- --------- -------- ---------
Total Operating Expenses............. 92,392 105,396 163,893 249,224 365,891 276,658 355,581
-------- -------- --------- --------- --------- -------- ---------
Operating Income (Loss)...................... 6,418 6,225 20,886 27,839 31,984 18,068 (33,762)
-------- -------- --------- --------- --------- -------- ---------
Interest Expense............................. (10,023) (3,184) (8,377) (12,468) (15,986) (11,805) (7,618)
Other Income (Expense) Net................... (683) (191) (2,498) 4,577 3,955 1,948 2,836
Income Tax Benefit (Expense)................. 854 (1,145) (4,630) (7,432) (12,963) (8,533) 100
-------- -------- --------- --------- --------- -------- ---------
Income (Loss) From Continuing Operations..... (3,434) 1,705 5,381 12,516 6,990 (322) (38,444)
-------- -------- --------- --------- --------- -------- ---------
Discontinued Operations...................... 10,446 12,045 13,469 24,592 14,680 13,074 195,361
Extraordinary Item -- Loss on Early Debt
Extinguishment............................. (1,499) -- (534) -- (1,955) (1,955) (5,121)
-------- -------- --------- --------- --------- -------- ---------
Net Income................................... 5,513 13,750 18,316 37,108 19,715 10,797 151,796
-------- -------- --------- --------- --------- -------- ---------
Preferred Stock Dividend..................... (1,426) (1,434) (1,434) (359) -- -- --
-------- -------- --------- --------- --------- -------- ---------
Net Income Applicable to Common Stock.... $ 4,087 $ 12,316 $ 16,882 $ 36,749 $ 19,715 $ 10,797 $ 151,796
======== ======== ========= ========= ========= ======== =========
Earnings Per Common Share -- Basic:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.21 $ 0.49 $ 0.26 $ (0.01) $ (1.52)
Net Income............................... $ 0.22 $ 0.66 $ 0.88 $ 1.48 $ 0.75 $ 0.41 $ 5.99
Earnings Per Common Share -- Assuming
Dilution:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.19 $ 0.46 $ 0.25 $ -- $ --
Net Income............................... $ 0.22 $ 0.62 $ 0.82 $ 1.38 $ 0.71 $ -- $ --
Weighted Average Common and Common Equivalent
Shares Outstanding
Basic.................................... 18,326 18,510 19,150 24,813 26,348 26,415 25,343
Effect of Dilutive Securities............ -- 1,443 1,531 1,758 1,596 -- --
-------- -------- --------- --------- --------- -------- ---------
Diluted.................................. 18,326 19,953 20,681 26,571 27,944 26,415 25,343
======== ======== ========= ========= ========= ======== =========
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- --------- --------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Net Cash Provided From Operating
Activities................................. $ 48,386 $ 40,268 $ 49,305 $ 65,707 $ 58,024 $ 38,412 $ 52,310
Net Cash (Used By) Provided From Financing
Activities................................. (41,663) (19,292) 220,355 4,749 74,746 77,415 (458,888)
Net Cash (Used By) Provided From Investing
Activities................................. (15,743) (10,280) (226,708) (105,989) (144,504) (124,611) 423,773
Effect of Currency on Cash................... (290) 477 57 927 (762) (344) 47
Capital Expenditures:
Equipment and Other...................... $ 7,648 $ 10,765 $ 9,803 $ 19,412 $ 23,965 $ 17,576 $ 14,486
Software................................. 4,021 4,372 5,704 16,916 19,971 14,121 12,591
-------- -------- --------- --------- --------- -------- ---------
Total Capital Expenditures........... $ 11,669 $ 15,137 $ 15,507 $ 36,328 $ 43,936 $ 31,697 $ 27,077
======== ======== ========= ========= ========= ======== =========
EBITDA Before Restructuring Charges.......... $ 23,987 $ 24,727 $ 46,795 $ 61,121 $ 88,989 $ 61,986 $ 71,665
Ratio of EBITDA Before Restructuring Charges
to Interest Expense........................ 2.39x 7.77x 5.59x 4.90x 5.57x 5.25x 9.41x
Ratio of Debt to EBITDA Before Restructuring
Charges.................................... 5.44x 4.67x 5.12x 4.06x 4.16x 4.48x 1.05x
Ratio of Earnings to Fixed Charges........... -- 1.49x 1.90x 2.19x 1.97x 1.53x --
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1998
AS OF DECEMBER 31, -----------------------
------------------------------------------------------ AS AS
1993 1994 1995 1996 1997 REPORTED ADJUSTED
-------- -------- -------- -------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (deficit)........ $(21,183) $ (7,572) $ 22,538 $(60,507) $ (64,325) $ (174,618) $ (29,018)
Total Assets..................... 419,816 427,950 718,184 920,801 1,043,809 811,328 867,763
Total Assets less Goodwill,
Net............................ 267,915 272,048 380,015 427,966 487,072 293,781 350,216
Total Debt....................... 130,386 115,573 239,476 248,340 370,163 103,224 159,659
Shareholders' Equity............. 208,134 224,689 354,062 475,830 470,971 436,821 436,821
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
SUPPLEMENTAL INFORMATION:
As Adjusted Interest Expense................................ $11,876
Ratio of EBITDA Before Restructuring Charge to As Adjusted
Interest Expense.......................................... 6.03x
Ratio of As Adjusted Debt to EBITDA Before Restructuring
Charge.................................................... 1.62x
</TABLE>
8
<PAGE> 10
RISK FACTORS
You should consider carefully all of the information in this prospectus,
including the following risk factors and warnings, before deciding whether to
exchange your old notes for the new notes. Except for the first risk factor
described below, the risk factors generally apply to the old notes as well as to
the new notes.
IF YOU DO NOT EXCHANGE YOUR NOTES PURSUANT TO THIS EXCHANGE, YOU MIGHT NOT BE
ABLE TO EVER SELL YOUR NOTES.
It may be difficult for you to sell notes that are not exchanged in the
exchange offer. Those notes may not be offered or sold unless they are
registered or there are exemptions from the registration requirements under the
Securities Act and applicable state securities laws.
If you do not tender your old notes or if we do not accept some of your old
notes, those notes will continue to be subject to the transfer and exchange
restrictions in:
- the indenture,
- the legend on the old notes, and
- the offering circular relating to the old notes.
The restrictions on transfer of your old notes arise because we issued the
old notes pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the old notes if they are registered under the Securities Act and
applicable state securities laws, or offered and sold pursuant to an exemption
from such requirements. We do not intend to register the old notes under the
Securities Act. To the extent old notes are tendered and accepted in the
exchange offer, the trading market, if any, for the old notes would be adversely
affected.
YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THESE NOTES.
The new notes are being offered to the holders of the old notes only. There
is no public market for the new notes. The placement agents have informed us
that they currently intend to make a market in the new notes. However, the
placement agents may cease their market making at any time. The new notes could
trade at prices that may be higher or lower than the initial offering price of
the old notes. The liquidity of the trading market in these notes, and the
market price quoted for these notes, may be adversely affected by changes in the
overall market for similar securities, existing interest rates, and by our
operating results.
OUR OTHER DEBT OBLIGATIONS MAY PREVENT US FROM MAKING PAYMENTS ON THE NOTES.
The notes are unsecured and we have other debt obligations that come before
them, including all indebtedness under our credit facility and additional senior
debt we may incur under the indenture. Consequently, in the event of any payment
or distribution of our assets upon our bankruptcy, liquidation or
reorganization, the holders of senior debt must be paid in full before any
payments may be made on the notes. We can give no assurance that sufficient
assets would remain to make full payment on the notes. Assuming that the
offering and the application of the net proceeds from the offering had been
completed on September 30, 1998, we would have had $225.0 million available
under the credit facility as of that date.
If we default in payment of any of our senior debt, we will not pay on the
notes unless such default has been cured or waived. In addition, even if we are
repaying our senior debt on time, payments on the notes may be blocked for up to
179 consecutive days if we default on the senior debt in some other way.
9
<PAGE> 11
OUR OPERATING SUBSIDIARIES PROVIDE OUR CASH FLOW BUT THEY ARE NOT OBLIGATED TO
PAY OR GUARANTEE THE NOTES, WHICH EFFECTIVELY SUBORDINATES THE NOTES TO
INDEBTEDNESS OF OUR SUBSIDIARIES.
We have no direct operations and no significant assets other than the stock
of our subsidiaries. Because we conduct our operations through our operating
subsidiaries, we depend on those entities for dividends and other payments to
generate the funds necessary to meet our financial obligations, including the
payment of principal and interest on the notes. In addition, there is no
assurance that the earnings from, or other available assets of, our operating
subsidiaries will be sufficient to make distributions to us to enable us to pay
interest on the notes when due or principal of the notes at maturity. Our
subsidiaries have no direct obligation to pay amounts due on the notes and do
not guarantee the notes. As a result, in general, the notes have the effect of
being subordinated to existing and future unsecured third party indebtedness and
other liabilities of the subsidiaries, including trade payables. If a subsidiary
liquidates or reorganizes, the subsidiary's creditors, including trade
creditors, will generally have preferential rights to satisfy their claims from
the subsidiary's remaining assets before Primark and its creditors, including
the holders of the notes, may satisfy their claims from the subsidiary's assets.
Assuming that the offering and the application of the net proceeds therefrom had
been completed on September 30, 1998, our subsidiaries would have had
approximately $243.4 million of liabilities as of that date.
WE MAY INCUR SUBSTANTIALLY MORE DEBT, WHICH COULD FURTHER LIMIT OUR ABILITY TO
MAKE PAYMENTS ON THE NOTES.
We may use our credit facility or incur additional indebtedness in the
future in connection, for example, with acquisitions, the repurchase of our
common stock, general corporate purposes and capital expenditures. If we incur
substantial indebtedness in the future, it could have important consequences for
you including the following:
- our ability to obtain any necessary financing in the future may be
limited;
- our level of indebtedness could limit our flexibility in planning for, or
reacting to, changes in our business;
- we could be more highly leveraged than some of our competitors, which may
place us at a competitive disadvantage;
- our degree of indebtedness could make us more vulnerable to a downturn in
our business or the economy generally;
- the debt service requirements of any additional indebtedness could make
it more difficult for us to make payments on the notes; and
- a substantial portion of our cash flow from operations could be dedicated
to the repayment of our indebtedness and would not be available for other
purposes.
Assuming that the offering and the application of the net proceeds had been
completed on September 30, 1998, at such time we would have had consolidated
total indebtedness of approximately $159.7 million and consolidated
shareholder's equity of $436.8 million and $225.0 million of availability under
our credit facility.
TO SERVICE OUR INDEBTEDNESS, INCLUDING THE NOTES, WE WILL REQUIRE A SIGNIFICANT
AMOUNT OF CASH WHICH WE MAY NOT BE ABLE TO OBTAIN OR GENERATE.
Our ability to make payments on our indebtedness, including the notes,
depends on our ability to generate cash in the future. If we do not generate
sufficient cash flow to meet our debt service and working capital requirements,
we may need to seek additional financing. A substantial portion of our assets
are, and may continue to be, intangible assets. This may make it more difficult
for us to obtain financing on terms that are acceptable to us or at all. Without
this financing, we could be forced to dispose of assets to make up for any
shortfall in our payment obligations under circumstances that might not be
favorable to us. We cannot provide assurance that our assets could be sold
quickly
10
<PAGE> 12
enough or for sufficient amounts to enable us to meet our obligations, including
our obligations on the notes. Therefore, it may be difficult for you to be paid
in the event of an acceleration of the notes.
Similarly, in the event of a change of control, we must offer to purchase
the notes unless they have a sufficient rating from Moody's and Standard &
Poor's. We cannot guarantee that we will have sufficient funds available at the
time of any change of control to repurchase the notes.
RESTRICTIVE COVENANTS IMPOSED BY DEBT INSTRUMENTS COULD HARM OUR BUSINESS
OPERATING RESULTS.
The indenture and the credit facility restrict our ability to:
- incur additional indebtedness,
- create liens,
- make investments,
- issue stock of subsidiaries,
- create restrictions on the ability of certain subsidiaries to pay
dividends or make payments to us, or
- sell or otherwise dispose of all or substantially all of our assets.
In addition, the credit facility requires us to maintain financial ratios.
See "Description of the Notes -- Covenants" and "Description of Certain
Indebtedness." We cannot guarantee that we can maintain these ratios.
Additionally, covenants in the credit facility may impair our ability to finance
our future operations or capital needs or to engage in other favorable business
activities.
We may be in default of the indenture or the credit facility if we breach
any of the covenants or fail to maintain the required financial ratios. If we
default, we could be prohibited from making any payments on the notes. In
addition, the lenders under the credit facility could require immediate
repayment. If the credit facility lenders require immediate repayment, we might
not be able to repay them and also repay the notes in full.
TECHNOLOGICAL CHANGE MAY HARM OUR BUSINESS.
We operate principally in the information services industry, which changes
rapidly and is characterized by the continuous development of new standards and
technology. Our ability to apply new technology to, and to develop new
applications for, our information services businesses will be a significant
factor in our ability to grow and remain competitive. Changes in the industry,
such as enhancements to computer systems may make collection of data easier and
lower barriers to entry into the information services industry.
Our future success will depend significantly on our ability to continue to
develop and deliver technologically advanced products and services. The cost of
developing such products and services could adversely affect our future results
of operations. In addition, we cannot guarantee that we will be able to respond
promptly to technological changes or that our services will remain competitive
with our competitors' new service offerings.
WE MAY SUFFER ADVERSE EFFECTS FROM COMPETITION WITH OTHER FINANCIAL INFORMATION
OR DATABASE PROVIDERS.
The information services industry is highly competitive and is expected to
continue to be so in the future. In addition, the industry is characterized by
rapid technological change and entry into the field by large and
well-capitalized companies and smaller competitors. Examples of our competitors
include The McGraw-Hill Companies, Inc., Thompson Financial Services and
FactSet. We compete, or may compete, with large, well-established information
providers as well as many of the database providers from whom we obtain data for
inclusion in our systems. Some of our competitors offer databases and
applications similar to those offered by us and also have substantially larger
customer bases, greater name recognition and greater financial, technical and
marketing resources than we do.
11
<PAGE> 13
Technological advances or the introduction of new products and services in
the information services industry could harm us. For example, the release of the
EDGAR database by the SEC in late 1995:
- reduced demand for Disclosure/Worldscope's paper based services,
- allowed new competitors to enter the market at lower prices, and
- resulted in a 5.1% decline in year over year annualized revenues for
Disclosure/Worldscope as of September 30, 1998. However, within this
decline was a 23.6% period to period growth in Disclosure/Worldscope's
electronic business.
We cannot guarantee that we will be able to compete successfully or that
competitive pressures will not harm us.
BECAUSE OUR INTERNATIONAL OPERATIONS ARE SIGNIFICANT, WE ARE VULNERABLE TO
FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES, WHICH COULD ADVERSELY AFFECT
US.
We have substantial international operations, which create special risks.
The primary risk is that unfavorable foreign exchange rate changes will cause us
to lose money. We earn and spend most of our money in foreign currencies, which
makes us vulnerable to currency exchange rate changes. We try to reduce this
risk by engaging in currency hedging transactions. However, we cannot guarantee
that we will be able to continue to engage in such hedging activities on
commercially satisfactory terms, if at all.
We are also subject to the customary risks associated with international
business, including:
- political risks,
- local laws and taxes,
- the potential imposition of trade or currency exchange restrictions,
- tariff increases,
- difficulties or delays in collecting accounts receivable,
- weak foreign economies, and
- a weakening of foreign currencies in countries where we do business
against the U.S. dollar.
In 1997, international revenues and operating income represented
approximately 56% of total consolidated revenues and operating income,
respectively.
FUTURE ACQUISITIONS MAY NOT PROVIDE THE DESIRED ECONOMIC BENEFITS.
We have acquired several companies recently, and may acquire others in the
future. We are actively pursuing several potential acquisitions, although no
agreements have been reached yet. Acquisitions create the following risks:
- They may harm our operating results.
- We may not successfully integrate the new company into our existing
businesses.
- They may divert senior management's attention away from day-to-day
affairs.
- There may also be unanticipated problems or liabilities.
We cannot guarantee that we will identify, finance and complete future
acquisitions on acceptable terms.
THE LOSS OF KEY MANAGEMENT PERSONNEL COULD ADVERSELY AFFECT OUR OPERATIONS.
Our success depends to a significant extent upon our senior management and
key employees and our ability to attract and retain key management, marketing,
finance and technical personnel. The market for experienced management and
highly skilled personnel is very competitive. If we lose the
12
<PAGE> 14
services of key management personnel or cannot attract and retain skilled
technical personnel, we could suffer.
FAILURES TO BE YEAR 2000 COMPLIANT COULD DISRUPT OUR OPERATIONS AND ADVERSELY
AFFECT US.
Year 2000 or "Y2K" issues exist when dates are recorded in computers using
two digits, rather than four, and are then used for arithmetic operations,
comparisons or sorting. A two-digit recording may recognize a date using "00" as
1900 rather than 2000, which could cause our computer systems to perform
inaccurate computations. We have devoted substantial resources to solving our
Y2K problem. For a discussion of our efforts, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000 Readiness
Disclosure." While we expect our efforts to be successful, if we are not Y2K
compliant in a timely manner, it could result in a material adverse effect on
us.
Additionally, our products and services depend on technological components,
equipment and software that third parties developed. These items may not be Y2K
compliant. If these third party components, equipment or software fail to
operate properly, they could interrupt our operations or require us to incur
unanticipated expenses to remedy any problems. These interruptions and expenses
could have a material adverse effect on our business and operating results.
A DOWNTURN IN THE FINANCIAL SERVICES INDUSTRY COULD DECREASE OUR REVENUES AND
PROFITS.
Most of our business serves institutions and professionals in the financial
services industry although we have corporate and governmental customers. A
downturn in the financial services industry could reduce the demand for our
products and, consequently, our revenues and profits. For example, we believe
that the adverse impact on the financial services industry following the 1997
collapse in the Asian financial markets, together with the more recent financial
market volatility caused by concerns over conditions in Russia and Latin
America, has had a negative impact on our revenue growth and profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, financial institutions are continuing to consolidate.
This consolidation increases the leverage of our customers to negotiate price
and decreases the overall potential market for some of our services. These
factors, as well as other changes occurring in the U.S. and international
financial services industry, could weaken our financial position and results of
operations.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
PAYMENTS UNDER THE NOTES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED.
The indebtedness represented by the notes could be avoided, or claims under
the notes could be placed behind all of our other debt, if a court determined
that, after giving effect to the sale of the notes and the application of the
net proceeds:
- we incurred this indebtedness with the intent of hindering, delaying or
defrauding creditors; or
- we received less than reasonably equivalent value or consideration for
incurring this indebtedness; and
- were or became insolvent, or were rendered insolvent by reason of such
transactions;
- were engaged in a business or transaction for which the assets
remaining with us constituted unreasonably small capital; or
- intended to incur, or believed that we would incur, debts beyond our
ability to pay them as they matured.
13
<PAGE> 15
The measure of insolvency for purposes of these fraudulent transfer laws
varies depending upon the law of the jurisdiction. Generally, however, a company
would be considered insolvent if:
- the sum of all its liabilities, including contingent liabilities, were
greater than the value of all its property at a fair valuation, or
- the present fair saleable value of the company's assets were less than
the amount required to repay its liabilities on its debts, including
contingent liabilities, as they become absolute and matured.
Our management believes that the indebtedness represented by the notes was
incurred for proper purposes and in good faith, and that we were, and after the
consummation of the offering continued to be, solvent, with sufficient capital
for carrying on our business and were able to pay our debts as they mature.
OUR FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE.
This prospectus contains "forward-looking statements." These
forward-looking statements, such as:
- our plans and strategies,
- our anticipation of revenues from designated markets,
- statements regarding the development of our businesses,
- the markets for our services and products,
- our anticipated capital expenditures, and
- other statements contained in this prospectus regarding matters that are
not historical facts,
are only predictions and estimates regarding future events and circumstances.
Actual events or results may differ materially from expected events or results
as a result of the risks we face. Such risks include the risks described in this
section. You are cautioned not to place undue reliance on our forward-looking
statements, which speak only as of their dates. We do not intend to update
publicly or revise any forward-looking statements.
14
<PAGE> 16
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. Our net proceeds
from the sale of old notes were approximately $145.6 million, after deducting
underwriting discounts, commissions and other expenses of the offering that we
paid. We have used $122 million of the net proceeds to repay outstanding
borrowings under the credit facility ($93.6 million outstanding as of September
30, 1998) with the balance to be used to fund corporate activities including
acquisitions, repurchases of our common stock, capital expenditures and other
general corporate purposes. We incurred the debt under the credit facility in
1998 to finance the repurchase of 4,540,000 shares of our common stock pursuant
to a Dutch Auction self tender offer and 1,568,500 shares through open market
purchases, along with related fees and expenses. The credit facility will mature
on December 31, 2002, unless extended pursuant to its terms. Amounts drawn under
the credit facility bear interest at floating rates and had a 6.66% weighted
average through September 30, 1998. Any amounts we repay under the credit
facility may be borrowed again from the credit facility. See "Description of
Certain Indebtedness."
15
<PAGE> 17
CAPITALIZATION
The following table sets forth as of September 30, 1998 the historical
capitalization of Primark and as adjusted to give effect to the offering, as if
it had occurred on September 30, 1998. The information set forth below should be
read in conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements of Primark contained elsewhere
in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 30,022 $ 82,057
======== ========
Total debt:
Credit facility............................................. $ 93,565 $ --
Senior subordinated notes offered hereby.................... -- 150,000
Letter of credit and notes to sellers....................... 6,750 6,750
Capital lease obligations and other......................... 2,909 2,909
-------- --------
Total debt........................................... 103,224 159,659
Less-current maturities.............................. (94,382) (817)
-------- --------
Total long-term debt................................. 8,842 158,842
-------- --------
Shareholders' equity:
Common stock and additional paid-in capital................. 88,862 88,862
Retained earnings........................................... 350,454 350,454
Cumulative foreign currency translation..................... (2,495) (2,495)
-------- --------
Total common shareholders' equity.................... 436,821 436,821
-------- --------
Total capitalization.............................. $445,663 $595,663
======== ========
</TABLE>
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data presented below for,
and as of, each of the years ended December 31, 1993 and 1994 have been restated
for the discontinuance of TASC and TIMCO. The selected historical consolidated
financial data presented below for, and as of, each of the years ended December
31, 1995, 1996 and 1997 were derived from Primark's audited consolidated
financial statements, which include TASC and TIMCO as discontinued operations,
and which have been audited by Deloitte & Touche LLP, independent public
accountants. The selected historical consolidated financial data for, and as of,
each of the nine months ended September 30, 1997 and 1998 were derived from
unaudited consolidated financial statements of Primark which, in the opinion of
management, have been prepared on the same basis as Primark's audited
consolidated financial statements and include all adjustments, consisting only
of normal recurring items, necessary for a fair and consistent presentation of
Primark's results of operations and financial position for such periods and as
of such dates. The results for the nine months ended September 30, 1998 are not
necessarily indicative of results to be expected for the full fiscal year. The
selected historical consolidated data set forth below should be read together
with "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of Primark contained elsewhere in this prospectus.
Earnings per common share includes an after-tax gain on the sale of
discontinued operations of $8.4 million in 1996 and $187.4 million in 1998 and
an after-tax extraordinary loss of $5.1 million, $2.0 million and $534,000 for
1998, 1997 and 1995, respectively. It also includes dividends on our outstanding
preferred stock until its conversion to common stock in 1996 and gains and
losses associated with our discontinued operations.
EBITDA before restructuring charges represents operating income plus
depreciation, amortization expense and non-recurring restructuring charges and
should not be considered in isolation from, or as a substitute for, operating
income, net income or cash flows from operating activities computed in
accordance with generally accepted accounting principles. While not computed in
accordance with generally accepted accounting principles, EBITDA is a widely
used measure of a company's performance in its industry because it assists in
comparing performance on a consistent basis without regard to depreciation and
amortization, which may vary significantly depending on accounting methods,
particularly where acquisitions are involved. Certain of our debt agreements
include financial covenants that are based upon EBITDA. Due to the variety of
methods that may be used by companies and analysts to calculate EBITDA before
restructuring charges, the EBITDA before restructuring charges measures
presented in this prospectus may not be comparable to that presented by other
companies. The year ended December 31, 1997 and the nine months ended September
30, 1998 included $6.8 million and $68.7 million of restructuring charges,
respectively.
The ratios of EBITDA before restructuring charges to interest expense and
as adjusted interest expense represent EBITDA before restructuring charges from
continuing operations divided by interest expense and as adjusted interest
expense from continuing operations.
The ratios of debt and as adjusted debt to EBITDA before restructuring
charges are calculated as the total outstanding debt and as adjusted debt of
Primark divided by EBITDA before restructuring charges. This ratio for September
30, 1997 and September 30, 1998 was calculated based on the preceding twelve
months of EBITDA before restructuring charges.
The ratio of earnings to fixed charges is calculated as the amount of
earnings before taxes from continuing operations plus fixed charges from
continuing operations divided by the amount of fixed charges from continuing
operations. Fixed charges include interest expense from continuing operations
plus the estimated interest component of operating leases. The interest
component of operating leases is estimated to be approximately 33% of such
amounts. For the year ended December 31, 1993 and the nine months ended
September 30, 1998, Primark's earnings before fixed charges were insufficient to
cover its fixed charges by $3.4 million and $49.6 million, respectively. The
nine months ended September 30, 1998 includes a restructuring charge of $68.7
million. Excluding restructuring charges, the ratio of earnings to fixed charges
would have been 3.95x for the nine months ended September 30, 1998.
17
<PAGE> 19
Working capital is calculated as current assets minus net assets of
discontinued operations minus current liabilities.
The column entitled As Adjusted under Balance Sheet Data gives effect to
the offering of the old notes, as if it had occurred on September 30, 1998. As
Adjusted Interest Expense under Supplemental Information gives effect to the
offering of the old notes, as if it had occurred on January 1, 1998.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- --------- --------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Operating Revenues........................... $ 98,810 $111,621 $ 184,779 $ 277,063 $ 397,875 $294,726 $ 321,819
Operating Expenses:
Cost of Services......................... 41,888 49,689 66,063 104,479 157,327 116,783 129,221
Selling, General and Administrative...... 32,935 37,205 71,921 111,463 151,559 115,957 120,933
Depreciation and Amortization............ 17,569 18,502 25,909 33,282 50,205 37,118 36,750
Restructuring Charge..................... -- -- -- -- 6,800 6,800 68,677
-------- -------- --------- --------- --------- -------- ---------
Total Operating Expenses............. 92,392 105,396 163,893 249,224 365,891 276,658 355,581
-------- -------- --------- --------- --------- -------- ---------
Operating Income (Loss)...................... 6,418 6,225 20,886 27,839 31,984 18,068 (33,762)
-------- -------- --------- --------- --------- -------- ---------
Interest Expense............................. (10,023) (3,184) (8,377) (12,468) (15,986) (11,805) (7,618)
Other Income (Expense) Net................... (683) (191) (2,498) 4,577 3,955 1,948 2,836
Income Tax Benefit (Expense)................. 854 (1,145) (4,630) (7,432) (12,963) (8,533) 100
-------- -------- --------- --------- --------- -------- ---------
Income (Loss) From Continuing Operations..... (3,434) 1,705 5,381 12,516 6,990 (322) (38,444)
-------- -------- --------- --------- --------- -------- ---------
Discontinued Operations...................... 10,446 12,045 13,469 24,592 14,680 13,074 195,361
Extraordinary Item -- Loss on Early Debt
Extinguishment............................. (1,499) -- (534) -- (1,955) (1,955) (5,121)
-------- -------- --------- --------- --------- -------- ---------
Net Income................................... 5,513 13,750 18,316 37,108 19,715 10,797 151,796
-------- -------- --------- --------- --------- -------- ---------
Preferred Stock Dividend..................... (1,426) (1,434) (1,434) (359) -- -- --
-------- -------- --------- --------- --------- -------- ---------
Net Income Applicable to Common Stock.... $ 4,087 $ 12,316 $ 16,882 $ 36,749 $ 19,715 $ 10,797 $ 151,796
======== ======== ========= ========= ========= ======== =========
Earnings Per Common Share -- Basic:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.21 $ 0.49 $ 0.26 $ (0.01) $ (1.52)
Net Income............................... $ 0.22 $ 0.66 $ 0.88 $ 1.48 $ 0.75 $ 0.41 $ 5.99
Earnings Per Common Share -- Assuming
Dilution:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.19 $ 0.46 $ 0.25 $ -- $ --
Net Income............................... $ 0.22 $ 0.62 $ 0.82 $ 1.38 $ 0.71 $ -- $ --
Weighted Average Common and Common Equivalent
Shares Outstanding
Basic.................................... 18,326 18,510 19,150 24,813 26,348 26,415 25,343
Effect of Dilutive Securities............ -- 1,443 1,531 1,758 1,596 -- --
-------- -------- --------- --------- --------- -------- ---------
Diluted.................................. 18,326 19,953 20,681 26,571 27,944 26,415 25,343
======== ======== ========= ========= ========= ======== =========
OTHER DATA:
Net Cash Provided From Operating
Activities................................. $ 48,386 $ 40,268 $ 49,305 $ 65,707 $ 58,024 $ 38,412 $ 52,310
Net Cash (Used By) Provided From Financing
Activities................................. (41,663) (19,292) 220,355 4,749 74,746 77,415 (458,888)
Net Cash (Used By) Provided From Investing
Activities................................. (15,743) (10,280) (226,708) (105,989) (144,504) (124,611) 423,773
Effect of Currency on Cash................... (290) 477 57 927 (762) (344) 47
Capital Expenditures:
Equipment and Other...................... $ 7,648 $ 10,765 $ 9,803 $ 19,412 $ 23,965 $ 17,576 $ 14,486
Software................................. 4,021 4,372 5,704 16,916 19,971 14,121 12,591
-------- -------- --------- --------- --------- -------- ---------
Total Capital Expenditures........... $ 11,669 $ 15,137 $ 15,507 $ 36,328 $ 43,936 $ 31,697 $ 27,077
======== ======== ========= ========= ========= ======== =========
EBITDA Before Restructuring Charges.......... $ 23,987 $ 24,727 $ 46,795 $ 61,121 $ 88,989 $ 61,986 $ 71,665
Ratio of EBITDA Before Restructuring Charges
to Interest Expense........................ 2.39x 7.77x 5.59x 4.90x 5.57x 5.25x 9.41x
Ratio of Debt to EBITDA Before Restructuring
Charges.................................... 5.44x 4.67x 5.12x 4.06x 4.16x 4.48x 1.05x
Ratio of Earnings to Fixed Charges........... -- 1.49x 1.90x 2.19x 1.97x 1.53x --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------ SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (deficit)....................... $(21,183) $ (7,572) $ 22,538 $(60,507) $ (64,325) $ (174,618)
Total Assets.................................... 419,816 427,950 718,184 920,801 1,043,809 811,328
Total Assets less Goodwill, Net................. 267,915 272,048 380,015 427,966 487,072 293,781
Total Debt...................................... 130,386 115,573 239,476 248,340 370,163 103,224
Shareholders' Equity............................ 208,134 224,689 354,062 475,830 470,971 436,821
</TABLE>
18
<PAGE> 20
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Subject to the terms and conditions set forth in this prospectus and in the
accompanying letter of transmittal, we will accept for exchange old notes that
are properly tendered on or before the Expiration Date and not withdrawn as
permitted below. As used in this prospectus, the term "Expiration Date" means
5:00 p.m., New York City time, on April 16, 1999, or such later date and time to
which we, in our sole discretion, extend the exchange offer.
The form and terms of the notes being issued in the exchange offer are the
same as the form and terms of the old notes except that:
- the notes being issued in the exchange offer will have been registered
under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act, and
- the notes being issued in the exchange offer will not contain the
registration rights contained in the old notes.
As of the date of this prospectus, there is $150.0 million in total
principal amount of notes outstanding. This prospectus and the letter of
transmittal are first being sent on or about March 19, 1999, to all holders of
old notes known to us. Our obligation to accept old notes for exchange pursuant
to the exchange offer is subject to the conditions set forth below under "--
Conditions to the exchange offer."
Notes tendered in the exchange offer must be in denominations of principal
amount of $1,000 and any integral multiple thereof.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the exchange offer is open, and thereby delay
acceptance for exchange of any old notes, by giving oral or written notice of
such extension to the holders of old notes as described below. During any such
extension, all old notes previously tendered will remain subject to the exchange
offer and may be accepted for exchange by us. We will return at no expense to
the holder, any old notes not accepted for exchange as promptly as practicable
after the expiration or termination of the exchange offer.
If any of the events specified in "-- Conditions to the exchange offer"
should occur, we may amend or terminate the exchange offer, and not accept for
exchange any old notes not previously accepted for exchange. We will give oral
or written notice of any extension, amendment, non-acceptance or termination to
holders of old notes as promptly as practicable. In the case of an extension, we
will issue a press release or other public announcement no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
Following consummation of the exchange offer, we may commence one or more
additional exchange offers to those holders of old notes who did not exchange
their old notes for new notes on terms which may differ from those contained in
the registration rights agreement. We may use this prospectus, as amended or
supplemented from time to time, in connection with additional exchange offers.
Such additional exchange offers will take place from time to time until all
outstanding old notes have been exchanged for new notes.
PROCEDURES FOR TENDERING OLD NOTES
The tendering by a holder of old notes, and our mutual acceptance of the
old notes, will constitute a binding agreement between us and the holder on the
terms and subject to the conditions set forth in this prospectus and in the
accompanying letter of transmittal. Except as set forth below, to tender in the
exchange offer, a holder must transmit to State Street Bank and Trust Company,
the
19
<PAGE> 21
exchange agent, at the address set forth under "--Exchange agent" on or before
the Expiration Date either:
- a properly completed and duly executed letter of transmittal, including
all other documents required by such letter of transmittal, or
- if the old notes are tendered pursuant to the book-entry procedures set
forth below, an agent's message instead of a letter of transmittal.
In addition, on or prior to the Expiration Date, either:
- the exchange agent must receive the certificates for the old notes along
with the letter of transmittal; or
- the exchange agent must receive a timely confirmation of a book-entry
transfer of such old notes into the exchange agent's account at The
Depository Trust Company ("DTC") according to the procedure for
book-entry transfer described below, along with a letter of transmittal
or an agent's message instead of a letter of transmittal; or
- the holder must comply with the guaranteed delivery procedures described
below.
The term "agent's message" means a message, transmitted by DTC and received by
the exchange agent and forming a part of the book-entry confirmation, which
states that DTC has received an express acknowledgment from the tendering holder
that such holder has received and agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal against the
holder.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR AGENT'S
MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
GUARANTEE TIMELY DELIVERY. DO NOT SEND LETTERS OF TRANSMITTAL, AGENT'S MESSAGES
OR NOTES TO US.
Signature requirements
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the notes surrendered for exchange are
tendered:
- by a registered holder of old notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or
- for the account of an eligible institution.
An "eligible institution" is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantor must be by an eligible institution. If
old notes are registered in the name of a person other than a signer of the
letter of transmittal, the old notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by us in our sole discretion, duly
executed by the registered holder with the holder's signature guaranteed by an
eligible institution.
If a person or persons other than the registered holder or holders of old
notes signs the letter of transmittal, such old notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders that appear on the old
notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any old notes or
20
<PAGE> 22
powers of attorney, those persons should so indicate when signing, and must
submit proper evidence satisfactory to us of their authority to sign unless we
waive this requirement.
Our interpretations are binding on you
We will determine all questions as to the validity, form, eligibility,
including time of receipt, and acceptance of old notes tendered for exchange in
our sole discretion. Our determination will be final and binding. We reserve the
absolute right to:
- reject any and all tenders of any old note not properly tendered,
- refuse acceptance of any old note if, in our judgment or the judgment of
our counsel, acceptance of the old note might be unlawful, and
- waive any defects or irregularities or conditions of the exchange offer
as to any old note either before or after the Expiration Date. This
includes the right to waive the ineligibility of any holder who seeks to
tender old notes in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer as to
any particular old notes either before or after the Expiration Date, including
the letter of transmittal and the instructions to it, will be final and binding
on all parties. Holders must cure any defects or irregularities in connection
with tenders of old notes for exchange within such reasonable period of time as
we will determine, unless we waive such defects or irregularities. Neither we,
the exchange agent, nor any other person shall have duty to notify anyone of any
defect or irregularity regarding any tender of old notes for exchange, nor shall
any of us incur any liability for failing to notify any person.
Representation you make by tendering
By tendering your old notes, you represent to us that, among other things,
- the person receiving the new notes in the exchange offer is obtaining
them in the ordinary course of its business, whether or not such person
is the holder, and
- neither you nor such other person receiving the new notes has any
arrangement or understanding with any person to participate in the
distribution of the new notes issued in the exchange offer, and
- if you are not a broker-dealer, that you are not engaged in, or intend to
be engaged in, a distribution of new notes.
If you or any person receiving the new notes is an "affiliate," as defined under
Rule 405 of the Securities Act of 1933, of Primark, or is engaged in or intends
to engage in or has an arrangement or understanding with any person to
participate in a distribution of the new notes to be acquired pursuant to the
exchange offer, you or any such other person receiving the notes may not rely on
the applicable interpretations of the staff of the SEC, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, where such old notes were acquired by it as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the new notes. See
"Plan of Distribution." The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" under the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the Expiration Date, all old notes properly
tendered and will issue the new notes promptly after acceptance of the old
notes. See "-- Conditions to the exchange offer." For purposes
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<PAGE> 23
of the exchange offer, we will be deemed to have accepted properly tendered old
notes for exchange when, as and if we have given oral or written notice to the
exchange agent, with written confirmation of any oral notice to be given
promptly thereafter.
For each old note accepted for exchange, the old note holder will receive a
new note having a principal amount of maturity equal to that of the surrendered
note. Interest on the new notes will accrue from December 21, 1998, the original
issue date of the old notes. If the exchange offer is not consummated by June
21, 1999, the interest rate on the old notes, from and including such date until
but excluding the date of consummation of the exchange offer, will increase by
0.5%. We will pay such interest, if any, on old notes in exchange for which new
notes were issued to the persons who, at the close of business on June 1 or
December 1 immediately preceding the interest payment date, are registered
holders of such old notes if such record date occurs prior to such exchange, or
are registered holders of the new notes if such record date occurs on or after
the date of such exchange, even if notes are cancelled after the record date and
on or before the interest payment date.
In all cases, we will issue new notes in the exchange offer for old notes
that are accepted for exchange only after the exchange agent timely receives
either:
- certificates for such old notes or a timely book-entry confirmation of
such old notes into the exchange agent's account at DTC, and
- a properly completed and duly executed letter of transmittal or, in the
case of a book-entry confirmation, an agent's message, and all other
required documents.
If tendered old notes are not accepted for any reason set forth in the
terms and conditions of the exchange offer or if a holder submits old notes for
a greater principal amount than the holder desired to exchange, we will return
such unaccepted or non-exchanged old notes without expense to the tendering
holder as promptly as practicable after the expiration or termination of the
exchange offer. In the case of old notes tendered by book-entry transfer into
the exchange agent's account at DTC, such unaccepted or non-exchanged old notes
will be credited to an account maintained with DTC as promptly as practicable
after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will request to establish an account for the old notes
at DTC for the exchange offer within two business days after the date of this
prospectus. Any financial institution that is a participant in DTC's systems may
make book-entry delivery of old notes by causing DTC to transfer such old notes
into the exchange agent's account at DTC in accordance with DTC's procedures for
transfer. However, although delivery of old notes may be effected through
book-entry transfer at DTC, the letter of transmittal or facsimile thereof, with
any required signature guarantees, or an agent's message in lieu of such letter
of transmittal, and any other required documents, must, in any case, be
transmitted to and received by the exchange agent at one of the addresses set
forth below under "-- Exchange agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes desires to tender such old notes
and the old notes are not immediately available, or time will not permit such
holder's old notes or other required documents to reach the exchange agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
- the tender is made through an eligible institution;
- before the Expiration Date, the exchange agent receives from such
eligible institution a properly completed and duly executed letter of
transmittal, or a facsimile thereof, and notice of guaranteed delivery,
substantially in the form provided by us, by telegram, telex, facsimile
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transmission, mail or hand delivery, setting forth the name and address
of the holder of old notes and the amount of old notes tendered, stating
that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange, Inc. trading days after the date of execution of
the notice of guaranteed delivery, the certificates for all physically
tendered old notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other documents required by the
letter of transmittal will be deposited by the eligible institution with
the exchange agent; and
- the exchange agent receives the certificates for all physically tendered
old notes, in proper form for transfer, or a book-entry confirmation, as
the case may be, and all other documents required by the letter of
transmittal, within three NYSE trading days after the date of execution
of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of old notes at any time before the Expiration
Date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the exchange agent at one of the addresses set forth below under
"-- Exchange agent." Any such notice of withdrawal must:
- specify the name of the person having tendered the old notes to be
withdrawn,
- identify the old notes to be withdrawn, including the principal amount
of such old notes, and
- if you have transmitted certificates for old notes, specify the name
in which such old notes are registered, if different from that of the
withdrawing holder.
If certificates for old notes have been delivered or otherwise identified
to the exchange agent, then, before the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible institution unless such holder is an eligible
institution.
If old notes have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn old notes and
otherwise comply with the procedures of such facility.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices. Our determination will be final and
binding on all parties.
Any old notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the exchange offer. Any old notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder without cost to such holder. In the case of old notes
tendered by book-entry transfer into the exchange agent's account at DTC
pursuant to the book-entry transfer procedures described above, such old notes
will be credited to an account maintained with DTC for the old notes. Any return
or credit will occur as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn old notes may be
retendered by following one of the procedures described under "-- Procedures for
tendering old notes" above at any time on or before the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
We are not required to accept for exchange, or to issue new notes in
exchange for, any old notes. We may terminate or amend the exchange offer if, at
any time before the acceptance of such old notes for exchange or the exchange of
the new notes for such old notes, we determine in our sole and absolute
discretion, that the exchange offer violates applicable law or any applicable
interpretation of the staff of the SEC.
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EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the exchange
agent for the exchange offer. All executed letters of transmittal should be
directed to the exchange agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the exchange agent addressed as
follows:
Delivery to: State Street Bank and Trust Company, Exchange Agent
<TABLE>
<S> <C>
By Hand/Overnight Delivery: By Registered or Certified Mail:
State Street Bank and Trust State Street Bank and Trust
Company Company
Corporate Trust Department Corporate Trust Department
Two International Place, 4th Floor P.O. Box 778
Boston, Massachusetts 02110 Boston, Massachusetts 02102-0078
Attn: Kellie Mullen Attn: Kellie Mullen
</TABLE>
By Facsimile: (617) 664-5290
Confirm by Telephone: (617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE IS NOT VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will not pay any brokers, dealers, or others soliciting acceptances of
the exchange offer.
We will pay the estimated cash expenses to be incurred in connection with
the exchange offer, which are estimated to total $125,000.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange. However, holders who
instruct us to register new notes in the name of, or request that old notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be responsible for the paying of any
applicable transfer tax.
HOLDERS, OTHER THAN AFFILIATES, MAY OFFER OR SELL THE NEW NOTES
Based on interpretations by the SEC staff, as set forth in no-action
letters issued to third parties, we believe that new notes issued in the
exchange offer for old notes may be offered for resale, resold or otherwise
transferred by the holders of such new notes, other than any such holder that is
an "affiliate" of Primark within the meaning of Rule 405 under the Securities
Act. Such new notes may be offered for resale, resold or otherwise transferred
without compliance with the registration and prospectus delivery requirements of
the Securities Act, if:
- such new notes issued in the exchange offer are acquired in the ordinary
course of such holder's business, and
- such holders have no arrangement or understanding with any person to
participate in the distribution of such new notes issued in the exchange
offer.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of new notes and
has no arrangement or understanding to participate in a distribution of new
notes.
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However, we do not intend to request the SEC to consider, and the SEC has
not considered, the exchange offer in the context of a no-action letter. We
cannot guarantee that the SEC staff would make a similar determination with
respect to the exchange offer as in other circumstances.
If any holder is an "affiliate" of ours, as defined in Rule 405 under the
Securities Act of 1933, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the new notes
to be acquired pursuant to the exchange offer such holder:
- could not rely on the applicable interpretations of the SEC staff, and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, where such old notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such new
notes. See "Plan of Distribution."
In addition, to comply with state securities laws, the new notes may not be
offered or sold in any state unless they have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and is complied with. The offer and sale of the new notes to
"qualified institutional buyers," as that term is defined under Rule 144A of the
Securities Act, is generally exempt from registration or qualification under the
state securities laws. We currently do not intend to register or qualify the
sale of the new notes in any state where an exemption from registration or
qualification is required and not available.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis should be read in conjunction with Primark's
consolidated financial statements, the accompanying notes and the other
financial data appearing elsewhere in this prospectus. The discussion and
analysis (1) for the quarter ended September 30, 1998 is extracted from our
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and (2)
for the fiscal year ended December 31, 1997 is extracted from our Annual Report
on Form 10-K for the year ended December 31, 1997. In each case this analysis
does not give effect to subsequent events.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1998 COMPARED TO THREE
MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1997
Primark reported net income of $21.9 million ($0.96 per share assuming
dilution) and $151.8 million ($5.99 per share) for the three and nine months
ended September 30, 1998, respectively. Net income for the three and nine months
ended September 30, 1997 was $7.6 million ($0.28 per share assuming dilution)
and $10.8 million ($0.41 per share). In accordance with SFAS No. 128, per share
calculations for the nine months ended September 30, 1998 and 1997 exclude the
impact of dilutive securities due to the loss from continuing operations
resulting from restructuring charges.
The five significant events which have affected net income for the year
have been:
- the sale of TIMCO,
- the commercial impact of global economic and financial market
uncertainty,
- the sale of TASC,
- the recapitalization of Primark using the proceeds from the sale of TASC,
and
- the restructuring of Primark.
The sale of TIMCO and the commercial impact of recent financial market
uncertainty were third quarter events. The TIMCO sale was finalized on September
22, 1998 for $70 million resulting in an after tax gain of $14.2 million which
has been recorded to discontinued operations.
The beginning of the third quarter was somewhat stronger than the end, due
to the sharp drop in the financial markets in late August and the subsequent
volatility and uncertainty. Many of our customers had large trading losses
and/or had made loans that became uncollectible and had to be written off. These
unfavorable circumstances have caused customers to announce layoffs and cost
controls to compensate for their lower earnings. As a result, our sales of new
products, new subscriptions and one-time items to the financial industry have
softened and we expect this to continue through year-end. Unfortunately, this
slowdown occurs at the very time we are experiencing higher expenses for new
product development, rollout and support, particularly Global Access Piranha,
the Primark Information Optimizer and the Primark/Dow Jones Equities Service.
The uncertainty in financial markets has affected more market segments than just
the financial industry itself. Accounting firms, law firms and consultants are
big users of Primark's products, especially material supplied by Disclosure.
With fewer IPOs, secondary offerings and high-yield debt issues, their business
with the financial industry is down, resulting in Primark doing less business
with these specialized segments.
The September 30, 1998 net income year to date results reflects TASC as
part of discontinued operations. TASC was sold in the second quarter for $432
million in cash plus an estimated equity adjustment of $11.5 million. The equity
adjustment is based upon changes in TASC's consolidated equity account, less
certain inter-company transactions, from September 30, 1997 through the date of
the closing. On July 27, 1998, Litton sent notification that it was contesting
specific components of
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the equity adjustment totaling $4.2 million. Litton and Primark are in the
process of establishing the protocol to resolve all disputed amounts.
We used the proceeds from the sale of TASC to repay $220 million of
commercial bank debt and $112 million of senior notes in the second quarter. We
wrote off the related unamortized deferred bank cost and the call premium on the
senior notes as an extraordinary loss totaling $5.1 million, net of tax. Net
income for the nine months ended September 30, 1997 includes the effect of a
$2.0 million (after tax) extraordinary loss ($0.07 per share) for the write off
of debt issue costs associated with prior debt that was successfully refinanced.
We instituted a corporate restructuring plan to reflect the sale of TASC and to
position the Primark product lines in a more integrated fashion to address
market needs and opportunities. The restructuring plan, including the
extraordinary loss mentioned above, resulted in a $77.4 million charge to
operating income in the second quarter, and lowered net income $59.8 million.
Primark had income from continuing operations of $5.9 million ($0.26 per
share on a dilutive basis) for the three months ended September 30, 1998
compared to $3.4 million ($0.12 per share on a dilutive basis) for the same
period last year. When restructuring items are not included, for the nine months
ended September 30, 1998 Primark had $16.3 million of income from continuing
operations ($0.62 per share on a pro forma dilutive basis) compared to $5.9
million earned last year ($0.21 per share on a pro forma dilutive basis).
Including restructuring charges, the loss from continuing operations was $38.4
million ($1.52 per share, basic and diluted) and $0.3 million ($0.01 per share,
basic and diluted) for the nine months ended September 30, 1998 and 1997,
respectively.
Continuing Operations
The most important decision made by management in 1998 was to sell
unrelated businesses and to create more value from its information service
business by reorganizing Primark into three operating divisions. These three
divisions are the Primark Financial Information Division, the Primark Financial
Analytics Division, and the Primark Decision Information Division, plus the
supporting Primark Data Company. Primark can serve its customers better while
improving margins through this new structure.
The Primark Financial Information Division consists of the businesses of
Datastream/ICV, including Primark Investment Management Services, Disclosure,
and Worldscope. This division accounts for approximately 70% of Primark's
consolidated revenues and is focused on developing "enterprise wide" products
and services for major financial institutions on a global basis. It is also
responsible for all real-time and transactional products, investment accounting,
and the reference and consumer markets. This division grew revenues 6.5% and
4.8% for the three and nine months ended September 30, 1998, respectively. The
Primark Financial Information Division has experienced double-digit percentage
revenue growth on a year to date basis across all product groups with the
exception of Disclosure's traditional paper document and CD-ROM business. While
currency had little impact on the three months ended September 30, there were
adverse currency effects on year to date operating income, primarily for the
Datastream/ICV product lines. A gain on currency transactions of $1.0 million
for the nine months ended September 30, 1998 offset the negative impact of
currency movements. Datastream/ICV's real time and transactional products, led
by Topic 3, are the leading on-line equity trading products in the U.K. with a
market share of approximately 69%. The Topic 3 product line has grown 24.5% and
29.4% for the quarter and year to date, respectively, excluding the effect of
currency. The Disclosure product lines have exhibited growth in the electronic
product revenues of 25.4% and 23.6% for the three and nine month periods,
respectively. This increase, however, was more than offset by decreases in
Disclosure's traditional paper document and CD-ROM business where revenue of
$11.6 million decreased by 17.3% and 18.7% for the three and nine months ended
September 30, 1998, respectively. Management believes that new products to be
released in the latter part of 1998 through the first half of 1999, together
with Disclosure's legacy
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<PAGE> 29
paper document and CD-ROM business stabilizing, should result in improved growth
and profitability prospects for this division.
The Primark Financial Analytics Division accounts for approximately 18% of
Primark's consolidated revenues and includes the businesses of I/B/E/S,
Baseline, and Vestek. This division develops and markets a wide variety of
analytical products, which combine databases, advanced software, analytical
techniques, and forecasts for all phases of the investment process for money
managers, fund sponsors, and other investors. This division grew revenues 23.1%
and 27.0% for the three and nine months ended September 30, 1998, respectively.
Revenues from the sale of I/B/E/S data and analytical solutions increased 16.7%
and 24.1%, Baseline product increased revenues 41.5% and 36.6% and Vestek's
revenues increased 10.6% and 15.6% for the three and nine months ended September
30, 1998, respectively.
The Primark Decision Information Division accounts for approximately 12% of
Primark's consolidated revenues and acquires, develops and operates information
content businesses that are primarily focused in areas other than the financial
marketplace. However, it also provides products and services for decision
support to financial customers as well. This division contains the businesses of
WEFA and the Yankee Group. This division has grown revenues 9.4% and 13.6% for
the three and nine-month periods ended September 30, 1998.
Restructuring charges
Effective June 1, 1998, Primark was reorganized to strategically focus
solely on its information services businesses. In connection with this
reorganization, we recorded a pre-tax charge of $77.4 million, of which $8.7
million is recorded as an extraordinary loss on early extinguishment of debt and
the remaining $68.7 million is recorded within operating expenses for direct and
other reorganization related costs. The associated tax benefit of the
extraordinary item and the other restructuring charges is $3.6 million and $14.0
million, respectively.
The effect of the $68.7 million charge was to reduce 1998 year to date
earnings per share on a pro forma dilutive basis by $2.07. The restructuring
charge was the result of a decision to implement a new organizational structure
designed to better serve our customers, more quickly capitalize on evolving
market opportunities and improve margins. The restructuring charge in 1998
includes:
- $25.0 million of previously capitalized software related to the planned
integration of several product offerings on common software platforms,
- $1.5 million of data that has been determined to be duplicative and will
not be used as a result of the software platform integration previously
discussed,
- write off of $23.9 million of goodwill associated with software and data
written-off which was established as part of purchase accounting,
- write off of $7.2 million of goodwill related to DAFSA, and
- write off of $3.1 million of a trademark no longer used in the
restructured organization.
An additional $8.0 million of the restructuring charge relates primarily to the
integration of domestic and international sales offices and efficiencies gained
from technological advancements that will result in the phased reduction of
approximately 61 employees.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEARS ENDED DECEMBER 31, 1996 AND
DECEMBER 31, 1995
Primark reported net income of $19.7 million ($0.71 per share) for the
twelve months ended December 31, 1997 compared to $36.8 million ($1.38 per
share) in 1996 and $16.9 million ($0.82 per share) in 1995. Net income for 1997
and 1995 includes an after tax extraordinary loss of $2.0 million ($0.07 per
share) and $0.5 million ($0.03 per share) for the write off of debt issue costs
associated with bank debt which was successfully refinanced.
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We reported income from continuing operations of $7.0 million ($0.25 per
share) for the year ended December 31, 1997, compared to $12.5 million ($0.46
per share) and $5.4 million ($0.19 per share) in 1996 and 1995, respectively.
The 1997 income from continuing operations includes restructuring charges of
$6.2 million ($0.22 per share), net of tax, taken at DAFSA and Disclosure during
the first half of 1997. Excluding the restructuring charges, 1997 income from
continuing operations increased 5.4% to $13.2 million ($0.47 per share). Our
decision to discontinue the operations of TASC and TIMCO in 1997, as well as
PSLC in 1996, affected income from continuing operations for all periods.
During 1996 and 1997, management pursued a strategy of focusing our
operations on our information services businesses. In connection with that
strategy, we discontinued three operating segments, as discussed below, and
acquired several businesses in the information industry. We are in the
preliminary stages of investigating further organizational changes to address
the best way to manage the remaining information services segment. This
investigation includes, among other things, the examination of all of our
tangible and intangible assets for possible adjustment.
On December 8, 1997, we entered into an agreement for the sale of TASC for
$432 million in cash. We estimate the sale will generate a net gain of
approximately $179.9 million. On March 30, 1998 the shareholders of Primark
approved the sale. Consequently, the operating results and net assets of TASC
have been reclassified from continuing operations and recorded as a discontinued
operation for all periods presented. As an essential part of the transaction,
TASC and Primark entered into an information technology services agreement.
Under this agreement, TASC will continue to provide Primark information
technology research and development, planning, and technical assistance for a
three year period. TASC will also continue to manage the Primark
Telecommunications Network and supply professional information technology
services to the business units of Primark and their customers. TASC generated
net income of $15.0, $13.0 and $9.7 million, for the twelve months ended
December 31, 1997, 1996 and 1995, respectively.
In June of 1997, we adopted a formal plan to dispose of our transportation
business, TIMCO. Accordingly, the operating results and net assets of TIMCO have
been reclassified from continuing operations and recorded as a discontinued
operation for all periods presented. During the three years ended 1997, 1996 and
1995, TIMCO generated net losses of $0.3 million, and net income of $2.4 million
and $2.7 million, respectively.
In September of 1996, we sold our financial services segment, PSLC, which
resulted in a $8.4 million gain, net of tax. Discontinued operations for the
twelve months ended December 31, 1996 and 1995 included net income of $0.8 and
$1.0 million.
Acquisitions during the first quarter of 1997 and last half of 1996,
together with our stock repurchase program, resulted in Primark increasing its
level of funded debt. As a result, interest costs from continuing operations
increased $3.5 million and $4.1 million during 1997 and 1996. We allocated
interest costs to each of the discontinued operations based upon their ratios of
net assets proportional to total net assets. After allocating interest cost to
discontinued operations, we reported interest expense of $16.0 million, $12.5
million and $8.4 million for the years ended 1997, 1996 and 1995, respectively.
During 1997, our effective tax rate increased due to the non-deductibility
of goodwill created by certain of our recent acquisitions and because no tax
benefits had been recorded for the $8.6 million of net losses incurred at DAFSA
for the year. In 1996, our effective tax rate received a favorable impact from
settling seven years of open tax returns.
We have a formal plan and task force assigned to make all of its financial
systems, product offerings and related databases Year 2000 compliant. In 1997 we
spent $1.5 million of resources on this endeavor and anticipate that we will
need to spend an additional $2.7 million and $2.6 million in
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1998 and 1999, respectively, to be Year 2000 compliant. The majority of the
remaining Year 2000 work will be performed at Datastream/ICV.
Summary of Operating Results
For the year ended December 31, 1997, revenues increased 43.6% and 115.3%
over the same periods in 1996 and 1995. The increase is primarily due to the
effect of the acquisitions of Baseline and WEFA during the first quarter of
1997; ICV, the Yankee Group, DAFSA and a controlling interest in Worldscope
during 1996; and Disclosure and I/B/E/S in 1995. On a pro forma basis to include
the effect of acquisitions, we grew 1997 revenues and operating income 6.7% and
17.6%, respectively, over the same period in 1996. These pro forma growth rates
include adverse currency movements and restructuring charges, a resized DAFSA
and Disclosure's paper based product fall-off.
DAFSA had the single most significant negative impact on operating income
during 1997. During 1997, DAFSA generated revenue of $5.5 million but incurred
operating losses of $8.4 million, which included a $5.0 million restructuring
charge. The restructuring program was implemented in the second quarter of 1997
and, together with the introduction of technology and applications developed at
Disclosure and WEFA, DAFSA was able to achieve near break-even results during
the fourth quarter of 1997.
Datastream/ICV
During 1997, the Datastream/ICV operation grew revenues 8.8%. These
businesses experienced most of the negative impacts of currency fluctuations.
Excluding the effects of currency and exchange fees, the Datastream/ICV
operation grew revenues approximately 13.1% for the year. Exclusive of currency
effects, ICV's Topic 3 product line grew 19.2% for the year but overall revenues
were offset by declining exchange fee revenues. ICV's overall margins increased
due to shifts in product mix, primarily the reduction of minimum margin exchange
fee revenues. Excluding the effects of currency, Datastream grew revenues 12.7%
for the year. Datastream's annual growth in revenues was led by increases in the
UK of 9.4%, the Americas of 10.4%, Continental Europe of 17.3% and Asia of
15.1%. Including the effects of currency, the Pacific Basin accounted for $21.1
million of Datastream's annual revenues. Primark reduced investment in the Far
East region in early 1997 and does not plan to risk any further capital until
management believes the current period of adjustment comes to an end.
Disclosure/Worldscope
Disclosure and Worldscope generated revenues of $88.5 million for the year,
a decrease of 3.0% compared to the same period in 1996. Overall growth in
revenues was impacted by the 14.1% decrease in paper demand business.
Disclosure's electronic products now represent approximately 40% of total
revenues and continue to do very well with 29.9% growth in revenues for 1997. At
the beginning of 1996, the electronic products represented less than 19.6% of
Disclosure's total revenue.
Financial Analytics
The financial analytics group, comprised of I/B/E/S, Baseline, WEFA and
Vestek, generated $90.6 million of revenues for the year. As a group, on a pro
forma basis, these operations grew revenues 24.7% over 1996. The strong
performance in the year was led by I/B/E/S, Baseline and Vestek, which had
record growth in revenues of 42.9%, 32.8% and 18.3%, respectively.
Yankee
We originally acquired The Yankee Group in part, to be the market research
arm of our applied technology segment, focusing on identifying current trends
and future directions in communications and computer industries for commercial,
industrial and consumer markets. With the disposition of
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TASC, management has folded The Yankee Group in with information services.
Yankee finished the year with pro forma revenue growth of 11.2%.
CAPITAL RESOURCES AND LIQUIDITY
THREE MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1998 COMPARED TO THREE
MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1997
Our cash and cash equivalent balances increased $17.2 million during the
nine months ended September 30, 1998 primarily as a result of operating
activities contributing $52.3 million, investing activities providing $423.8
million and financing activities using $458.9 million. Most of the $52.3 million
of operating cash flows is from net income from continuing operations plus the
non cash charges taken for restructuring, the early extinguishment of debt and
depreciation and amortization.
Financing activities for the year used $458.9 million and were affected by
the following three transactions:
- use of the proceeds from the sale of TASC to pay down debt,
- amounts borrowed under Primark's line of credit for shares repurchased
under the "Dutch Auction" self tender offer and share repurchase program,
and
- common stock issued pursuant to our option plans.
We used the proceeds from the sale of TASC to:
- prepay all amounts outstanding on our $112 million senior callable bonds,
including a 4.375% premium aggregating $4.9 million together with the
accrued interest,
- prepay $220 million of our outstanding term loan together with accrued
interest, and
- prepay $500,000 of our other indebtedness.
In conjunction with the sale of TASC, we replaced our outstanding $75
million credit facility with a $225 million revolving credit facility, which
expires in 2002. Interest on the borrowings under the new revolving credit
facility is payable at rates ranging from 0.375% to 1.00% above the prevailing
LIBOR rate of interest.
On May 20, 1998, we announced a "Dutch Auction" self-tender offer, which
expired on June 17, 1998. We purchased 4,540,000 shares at $34 per share under
this arrangement. The total cost of these shares was $154.6 million, including
legal and accounting fees. On July 3, 1998, we implemented an open market
purchase program to buy up to 2,000,000 shares of our common stock from time to
time, depending on market conditions. As of September 30, 1998, we had
repurchased 1,518,500 shares at a total cost of $40.8 million. On October 2,
1998, we purchased an additional 50,000 shares at a total cost of $1,454,000.
Year to date, we have purchased a total of 6,108,500 shares at a total cost of
$196.6 million, representing approximately 22.5% of our total outstanding common
stock. On November 10, 1998 we announced that the Board of Directors approved
the expansion of the open market purchase program by an additional 2,000,000
shares, bringing the total potential buyback to 8,540,000 shares, or
approximately 31% of our total outstanding before the "Dutch Auction." We are
using proceeds from the sale of TASC and TIMCO as well as our revolving credit
facility to fund the common stock repurchases.
On September 22, 1998, we completed the sale of TIMCO for $70 million. On
April 1, 1998 we completed the sale of TASC and its affiliated weather
information companies to Litton Industries for $432 million in cash. We have
paid $43.0 million in taxes to date of the amount owed on both the TASC and
TIMCO sales.
Investing activities also included $14.5 million for capital expenditures
and $12.6 million for software. Capital expenditures consisted primarily of
computer equipment purchases while capitalized software relates primarily to
software used to improve the delivery of our products and services.
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Year 2000 readiness disclosure
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act. The Year 2000 (Y2K) issue relates to a complex set of potential
problems arising from the ways in which computer software and hardware handle
dates. Many older systems use a two-digit date format that may create
ambiguities in passing into the new century.
We have a Y2K plan that we are actively pursuing to address our Y2K issues.
We began working on the Y2K problem in 1995, with the goal to provide continuous
and reliable service to our customers and a seamless transition to the new
millennium. Our Y2K plan focuses on each of our internal systems, products, and
third parties with which we have a significant business relationship. In
addition to the databases and software that we provide our customers, we are
reviewing, fixing, and testing all aspects of our internal operations -- from
hardware systems, software, and desktop PC programs to physical security
systems. This effort involves key data suppliers, hardware manufacturers,
telecommunications companies, electric utilities, and more. We are also prepared
to assist our users with Y2K issues relating to their internal systems that
directly interface with our systems. All Primark companies are working together
to achieve compliance by sharing information, sharing resources and holding
corporate-wide reviews. We believe that all material systems will be compliant
by June of 1999.
All organizations dealing with Y2K must address the effect this issue will
have on their significant business relationships including suppliers and
customers. We are undertaking steps to work with third parties to understand
their ability to continue providing services and products to support our
operations through the change to the Year 2000. If any significant Year 2000
problems are identified with third parties, contingency plans will be developed.
For example, Primark products incorporate data derived from many different
suppliers. A major component of the Y2K projects is reviewing each of the
suppliers to ensure compliance on their part. Where there is any doubt that a
supplier will not be taking reasonable actions to ensure compliance, we will
seek alternatives within a suitable time frame.
There are some older products that are not Y2K compliant that we will no
longer support after 1999. We have notified all affected customers. All other
Primark products are Y2K compliant.
We incurred $1.5 million related to the Y2K procedures in 1997 and expect
to incur costs of $2.7 million and $2.6 million for the years ended December 31,
1998 and 1999, respectively. We expect to resolve every significant Y2K problem
and have the solutions thoroughly tested by June 30, 1999.
While we expect our Year 2000 efforts will be successful, if the
modifications and replaced systems are not made compliant in a timely manner, it
could result in a material adverse effect on Primark. Additionally, our products
and services are dependent on technological components, equipment and software
that were developed by third parties and that may not be Y2K compliant. Failure
of such third party components, equipment or software to operate properly with
regard to the Year 2000 could interrupt ongoing operations or require us to
incur unanticipated expenses to remedy any problems, which could have a material
adverse effect on our business and operating results.
The European Economic and Monetary Union
Beginning January 1, 1999, member states of the Economic and Monetary Union
(EMU) may begin trading in either their local currencies or the euro, the
official currency of the EMU. Parties are free to choose the unit they prefer in
contractual relationships during the transitional period, beginning January 1999
and ending June 2002.
We have focused on the opportunities presented by the euro in order to
become recognized by the market as a leader in euro preparedness.
Technologically, a major milestone was reached at the
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end of September when all of our "customer-facing" software was euro ready and
available for customers to carry out their internal testing. On the content
front, we continue to enhance our euro preparedness through the rapid expansion
of euro data and indices. For example, we recently added euro denominated index
futures contracts, the HSBC Euroblock smaller companies index and certain
indices from the European Commission. We are also producing our own data such as
calculated synthetic benchmark bond yields for the Eurozone, synthetic exchange
rates and short-term interest rate series.
We have shared our euro expertise with our customers in 19 "euro forums"
being held around the world. These have been extremely well attended.
Additionally, we are being asked by many major buy- and sell-side organizations
to provide consultancy on the correct treatment of historical data beginning
January 4th next year.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEARS ENDED DECEMBER 31, 1996 AND
DECEMBER 31, 1995
Primark ended 1997 with $12.8 million in cash and cash equivalents compared
to $25.3 in 1996 and $59.9 in 1995. During 1997, $86.1 million was used to
purchase Baseline and WEFA, $56.2 million to repurchase and retire stock and
$43.9 million to fund capital expenditures. Partially offsetting these uses were
cash flows from operating activities which generated $58.0 million, the issuance
of long-term debt that provided $97.2 million, net of debt issue costs, and the
sale of the Weather Network, which generated $3.5 million. During 1996, we
acquired four separate businesses for $71.1 million in net cash, $8.3 million in
seller notes, 2.2 million shares of common stock and $7.6 million of other
consideration. Primark also increased capital expenditures $20.8 million over
1995.
The 1996 cash expenditures were primarily funded from cash on the balance
sheet, the sale of PSLC for $14.3 million and increased operating cash flows.
During 1995, we issued $125.0 million of commercial bank debt and $106.5 million
of common stock that provided funds partially used for the acquisition of
Disclosure and I/B/E/S for $199.7 million in net cash.
Operating cash flows decreased $7.7 million during 1997. The decrease
reflects a decline in net income primarily attributable to the restructuring
charges, decreases in deferred income, and tax refunds due. The tax refunds
arose because we accepted stock from certain employees to pay taxes due on their
option exercises in accordance with our benefit policies. We received a
compensation deduction associated with the option exercises, which should result
in approximately $25 million of tax refunds to be received in 1998. The increase
between 1995 and 1996 primarily represents additional cash flows from acquired
companies offset by increased working capital requirements. All periods
benefitted from improving growth in the base businesses.
Cash flows from financing activities provided $74.7 million for the year, a
$70.0 million increase over the same period in 1996. The increase is primarily
the result of the $300.0 million bank refinancing arrangement on February 7,
1997 which provided an additional $100.0 million in long term debt. The new
arrangement is comprised of a $75.0 million revolving credit facility and a
$225.0 million term loan expiring in June 2004. The new financing replaced an
outstanding $75.0 million revolving credit facility and a $125.0 million term
loan. We incurred costs of $2.8 million in conjunction with the arrangement that
will be amortized over the term of the debt. The additional borrowings increased
Primark's debt to total capital ratio from 34.3% at December 31, 1996 to 44.0%
at December 31, 1997. Partially offsetting this increase was $56.2 million used
to repurchase our common stock. This repurchase consisted of $26.6 million for a
stock buy back program and $29.6 million associated with our acceptance of stock
from certain employees to pay withholding taxes on option exercises. We retired
these repurchased shares during the year. At year end, we had $27.6 million
outstanding on our revolving credit facility, primarily because of
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withholding taxes due on stock options exercised in December. During 1996, we
entered into several non cash financing transactions including:
- converting $16.9 million of our redeemable preferred stock to 1.2 million
shares of common stock and
- issuing 2.2 million shares of common stock in connection with the
acquisition of ICV.
During 1995, we entered into a $200.0 million credit arrangement with
several banks to support the Disclosure and I/B/E/S acquisition. The credit
arrangement included a $75.0 million revolving credit facility and a $125.0
million term loan, which were refinanced in 1997. In December of 1995, we sold
4.1 million shares of common stock for $107.8 million and used the net proceeds
to repay loan balances and for other general corporate purposes.
Investing activities, primarily for acquisitions, used $144.5 million of
cash during 1997, compared to $106.0 million in 1996 and $226.7 million in 1995.
The majority of 1997 investing uses were for the purchases of Baseline and WEFA,
which used $41.2 million and $44.9 million, respectively. Capital expenditures
and capitalized software amounted to $43.9 million during the year, an increase
of $7.6 million over the same period in 1996. The majority of the expenditures
were for:
- computer equipment,
- leasehold improvements for new facilities at I/B/E/S and ICV, and
- capitalized software and data for upgrading and revising Disclosure's
product line and production operation.
Partially offsetting these uses were proceeds from our sale of our
investment in the Weather Network that provided $3.5 million of cash. During
1996, we acquired four separate operations with net cash consideration totaling
$71.1 million. The sale of PSLC partially offset these uses, providing $14.3
million. During 1995, we purchased Disclosure and I/B/E/S for $199.7 million in
net cash.
In June of 1997, the Financial Accounting Standards Board issued SFAS No.
130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information." We will adopt these
statements during fiscal year 1998 and do not expect that the adoption of these
statements will have a material impact on the consolidated financial statements.
Changes in foreign exchange rates during 1997 decreased our revenues and
operating income by approximately $3.2 million and $4.9 million, respectively.
Management anticipates that the international component of our revenues and
operating income will be approximately 50% and 55%, respectively during 1998. We
will continue to manage foreign currency risk through our hedging program.
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INDUSTRY OVERVIEW
In 1997, in the U.S. alone, the market size of the financial and economic
information services industry was estimated to be approximately $7.4 billion and
was projected to grow by 8.7% per year through 2002. The broader business
information marketplace, which encompasses legal, credit and related financial
information, was estimated in 1997 to be approximately $35.0 billion in the
United States.
We believe the following factors are contributing to the growing demand for
financial and economic information:
- Investment and business decision-making has become increasingly more
complex.
- New types of financial securities are being introduced.
- Cross-border investing is growing rapidly, driving the demand for
information on markets around the world.
- Corporations are increasingly competing in the global marketplace.
- Improved technology is more available.
- The Internet is allowing individual consumers to access information that
was once confined to the institutional investor.
These developments put a greater premium on accurate, timely and
comprehensive information. To be effective, information needs to be organized,
integrated, analyzed and displayed in an easy to understand and user-friendly
manner.
Among the more prominent and growing users of financial and economic
information are:
- Investment and Commercial Banks -- requiring information across a number
of functional activities, including investment research, investment
banking and credit and risk management.
- Investment Firms -- requiring information in the context of asset
allocation and security selection, portfolio construction and tracking,
trading, valuation and reporting.
- Corporations -- requiring information to analyze competitors, marketing
and sales planning and risk exposure.
- Professional Services Firms -- requiring information to analyze markets,
industries and companies.
- Individual Consumers -- requiring information to help in managing their
personal investments and retirement funds.
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BUSINESS
Primark is a leading global information service provider of comprehensive
financial, economic and market research information to investment, legal,
accounting, banking, corporate and government customers. We develop and market
"value-added" database and information products that cover established and
emerging markets worldwide. Our proprietary analytical software applications
provide for the analysis and presentation of financial, economic and market
research information.
We serve customers in the U.S., Europe and the Pacific Rim and compile,
analyze, integrate, package and distribute current and historical data, news and
commentary on financial securities, companies, and markets worldwide. We own and
maintain large-scale databases, which are accessed through our on-line
distribution systems, the Internet, and third-party distributors. Our databases
are authoritative sources of data and analytics to more than 5,000 organizations
worldwide, including:
- 75 of the top 100 banks,
- 82 of the top 100 investment managers,
- 28 of the top 50 insurance companies, and
- 450 of the top 1,000 U.S. companies.
We believe our customers value our products because of their high quality
data as well as our understanding of niche markets, our ability to develop
products to serve these markets and our superior customer service and support.
Our business operations are integrated into three customer-focused
divisions. Each division concentrates on specialized product sets, which address
the needs of specific customer market groups. Our three operating divisions are:
- Primark Financial Information Division. Primark Financial Information
Division develops "enterprise-wide" products and services for major
financial institutions on a global basis. It also has responsibility for
all transactional products, both historical and real-time, as well as
products supporting large-scale investment accounting functions, the
individual investor and the referential needs of very large financial
market customers. This division also manages PrimarkNet, which serves as
the major external delivery channel to our customers on a global basis as
well as serving as an internal channel connecting all three Primark
divisions. This division's product offerings serve most of our customer
types and it is a major service provider to the "sell-side" portion of
the financial markets.
- Primark Financial Analytics Division. Primark Financial Analytics
Division concentrates on developing and marketing a wide variety of
analytical products for money managers, fund sponsors and other
investors. These products combine our databases, advanced software,
analytical techniques and forecasts for all phases of the investment
process. This division's product offerings concentrate on customers in
the "buy-side" portion of the financial markets.
- Primark Decision Information Division. Primark Decision Information
Division acquires, develops and operates information content businesses
that are primarily focused in areas other than the financial marketplace,
and also provides products and services for decision support to financial
customers.
We have established the Primark Data Company to support the data needs of
our operating divisions. Primark Data Company is an essential ingredient in the
overall Primark strategy because of the need for high quality information
provided on an efficient basis. Primark Data Company is responsible for
collecting, verifying and organizing our equity pricing, indices, company
account, ownership and economic data sets throughout the three divisions of
Primark. With major operations in the United States, the United Kingdom, Ireland
and India, Primark Data Company provides global data knowledge and support to
our three divisions.
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Key factors in Primark's success are recognizable quality and international
market acceptance of our branded products sold by the various business units
within the divisions. Primark's business units, and related brands, by division
include:
PRIMARK FINANCIAL INFORMATION DIVISION
- Datastream. Datastream, acquired in 1992, is one of the world's leading
providers of global historical and fundamental real-time securities data
and news covering:
- more than 45,000 stocks from 59 countries,
- 97,000 corporate and government bonds from 32 countries, and
- more than 1,800 major indices.
- ICV. ICV, acquired in 1996, is a leading provider in the U.K. of on-line
equity trading products. In 1997, ICV had a market share of approximately
69% of on-line U.K. equities trading. ICV was the number one rated vendor
to U.K. brokers by the 1996, 1997 and 1998 Kimsey Surveys.
- Primark Investment Management Services. Primark Investment Management
Services is a leading provider of computer-based accounting and other
investment fund services, including portfolio valuation and performance
measurement services, to money managers in the U.K. and, to a lesser
extent, in continental Europe.
- Disclosure/Worldscope. Disclosure, acquired in 1995, and Worldscope, of
which a 50% equity interest was acquired in 1995 and an additional 30%
interest was acquired in 1996, are two of the leading providers of "as
reported" and abstracted financial information. These businesses have
databases including more than five million SEC filings by more than
16,000 U.S. companies, dating back to 1968, as well as foreign company
filings from more than 13,000 companies in 45 countries.
PRIMARK FINANCIAL ANALYTICS DIVISION
- I/B/E/S. I/B/E/S, acquired in 1995, is a leading provider of global
earnings expectations, historical data on earnings surprises and research
reports from more than 800 brokerage firms and 7,000 research analysts on
more than 17,000 companies worldwide.
- Baseline. Baseline, acquired in 1997, offers a leading stock and
portfolio analysis and selection system designed specifically for
institutional portfolio managers.
- Vestek. Vestek, acquired in 1994, is an international provider of
portfolio information, analytics and consulting support to investment
professionals.
PRIMARK DECISION INFORMATION DIVISION
- WEFA. WEFA, acquired in 1997, is an international provider of economic
research, analysis and forecasts.
- Primark Decision Economics. Primark Decision Economics, an
unconsolidated company started in 1996 in which Primark has an equity
interest of 20%, disseminates timely, value-added economic forecasts,
analyses and commentaries covering the world's major economies and
markets.
- The Yankee Group. The Yankee Group, acquired in 1996, is an
international market research and consulting firm focusing on the
communications and computing industries. In 1997, the Yankee Group was
rated number one in credibility by Information Week magazine.
Primark had net operating revenues of $397.9 million and $321.8 million for
the twelve months ended December 31, 1997, and the nine months ended September
30, 1998, respectively. Our principal sources of revenue are from customer
subscriptions, royalty revenues from third party distributors and fees for
consulting services. We have a high customer retention rate, which for 1997
averaged approximately 85%. More than 80% of our revenues are derived from
subscription or royalty
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contracts. A majority of these contracts are paid in advance either quarterly or
annually. For the nine months ended September 30, 1998, approximately 82% of
Primark's revenues were from subscriptions, 4% from royalties and 14% from other
sources. Primark had EBITDA before restructuring charges of approximately $89.0
million for the year ended December 31, 1997 and approximately $71.7 million for
the nine months ended September 30, 1998. For a description of EBITDA, see
"Selected Consolidated Financial Data." Over the past four years ended December
31, 1997, Primark's revenues and EBITDA before restructuring charges have grown
at compounded annual growth rates of 41.7% and 38.8%, respectively.
BUSINESS AND OPERATING STRATEGY
Primark's business and operating strategy is designed to generate strong
revenue growth and increased profitability by selling existing products, by
integrating key products and operations, by launching and acquiring new products
and by capitalizing on our international brands and comprehensive, high quality
data. The key elements of this strategy include:
Expanding customer relationships and cross-selling. We believe that our
customers have an increasing need for financial and economic information from a
select group of integrated providers of such information. By cross-selling our
variety of well-known brands, we believe that we are well positioned to serve
this need. In addition to cross-selling, we believe that we will be able to
expand relationships with existing customers by using our core products and
services as platforms for launching new integrated database and analytic
products drawn from multiple sources within Primark. Management also intends to
integrate our databases with our software products further to encourage service
expansion. Due to the low incremental cost of providing additional products and
services to existing customers, we expect these measures to result in increased
revenues and improved profit margins.
Introducing new products, databases and service enhancements. We believe
we can leverage our existing customer base , databases and technology to
introduce new products and services. For example, Primark recently introduced:
- I/B/E/S Active Express, an on-line platform for delivery of I/B/E/S
information as well as other databases;
- Piranha, a product enabling customers to manipulate and integrate data
from multiple databases on the customer's desktop; and
- World Market Monitor, a daily, weekly, monthly or bi-annual economic
report tailored to the needs of individual customers.
We believe our ability to add new products will continue to provide us with
a competitive advantage.
Leveraging introduction of the euro. In 1997, more than 45% of Primark's
revenues were derived from European customers and we believe we are well
positioned to take advantage of the introduction of the euro on January 1, 1999.
The introduction of the euro is expected to lead to new European securities,
increased cross-border investing and the liberalization of the European pension
and retirement savings industry. We anticipate that all of these trends may also
dramatically increase the demand for our products and services from our existing
customers as well as new customers. Primark currently possesses a leading
position in U.K. equities trading and provides one of the most comprehensive
databases of European company filings available electronically. Management
intends to capitalize on these trends by introducing new databases capturing
European trading and company data, as well as software products and news
services to serve the information needs of customers worldwide.
Capitalizing on, and improving distribution through, new channels and new
partnerships. We currently rely on a variety of distribution channels including
proprietary software, on-line and satellite
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feed delivery, as well as third party distributors, paper-based services, CD-ROM
and the Internet to distribute our products. We believe we can further
capitalize on these distribution channels to introduce new products and services
to both existing and new customers. Primark currently has contracts with America
Online, E-Trade, Microsoft Investor, Quicken and Quote.Com, among others, to
provide database products to on-line customers and will seek to expand these
relationships further.
Leveraging technology. We will continue to use advanced information
technology to increase the efficiency, speed and flexibility of our data
gathering, database construction and customer delivery efforts. For example, we
plan to integrate our database platforms in order to optimize our product
capabilities. We have begun to use new technology that we believe will
facilitate the integration of multiple databases maintained in diverse computer
systems for use by our analytics packages. This will allow us to leverage
existing brands and databases to provide new products to new and existing
customers. For example, through the use of advanced information technology,
Primark has transformed Disclosure from a primarily paper-based business to one
that now derives 42% of its revenues from electronic delivery. Also, we expect
to continue to use new technology to leverage our brand name products and
believe these efforts will increase revenues and improve margins.
Providing superior customer service. Providing superior customer support
and service is a key aspect of Primark's business philosophy and has contributed
to a high customer retention rate. In 1997, this rate averaged approximately
85%. Primark's sales and marketing staff, as well as our technical experts and
consultants, work closely with clients, often on-site, to maximize the value of
Primark products and services and to develop custom applications tailored to
clients' information and software needs. We believe our superior customer
service and support will continue to provide us with increased opportunities for
additional product and service revenues.
Capitalizing on integration of operating units. Primark has grown
primarily through acquisitions over the last six years. In order to capitalize
on the advantages expected to result from the integration of these acquired
businesses, on June 30, 1998 we reorganized our twelve operating units into
three divisions, which focus on common customer groups. We believe that the
restructuring will enable us to:
- reap benefits from combined marketing, sales and administrative
operations more quickly,
- eliminate redundant production and delivery platforms,
- provide broader access to our customer base, and
- deliver current and new product offerings faster and more efficiently.
The restructuring resulted in approximately $68.7 million of restructuring
charges for the period ended June 30, 1998, of which approximately $60.7 million
were non-cash charges.
BUSINESS AND PRODUCTS
OVERVIEW
While Primark supplies information to investment and commercial banks,
investment firms, corporations, government organizations, professional service
firms and individual consumers, we are particularly focused on the needs of the
international investment community. The organizations in the financial community
generally can be divided into two groups, although there are hybrids and
exceptions. One group consists of "buy-side" firms, which invest individual
consumer assets or institutional pension funds. The second group consists of
"sell-side" firms, which perform investment research, brokerage and trading
functions, often combined with corporate finance services.
Within the "buy-side," investment managers can be classified according to
their particular style of investing - large cap, small cap, emerging markets,
value, growth, indices, etc. While the actual method by which they make
investment decisions may vary according to their investment style, the
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overall investment process is essentially similar across all firms. It can be
broken down into five major categories:
<TABLE>
<S> <C> <C> <C> <C>
Asset Security Portfolio Security Fund
deployment & research & construction & trading & accounting
criteria and and tracking
selection
& denotes arrow pointing right
</TABLE>
Primark is involved in all aspects of the investment decision-making
process. Primark Financial Analytics Division focuses extensively on the
"buy-side" sector; however, depending on the functional activity, Primark may
also have either of its other operating divisions supply information and
analytical services to that function. For example:
ASSET DEPLOYMENT CRITERIA. The allocation of resources across
different asset categories -- equity versus fixed income, international
versus domestic, industry selection. Our operations that serve these
activities use Vestek and I/B/E/S products (Primark Financial Analytics
Division) and WEFA and Primark Decision Economics products (Primark
Decision Information Division).
SECURITY RESEARCH AND SELECTION. The evaluation of individual
investment securities. Depending on the investment approach used --
technical, fundamental or quantitative -- the information needs will be
different, as will the analytical tools. Our operations that serve these
activities are through Datastream, Disclosure and ICV products (Primark
Financial Information Division) and Baseline, I/B/E/S and Vestek products
(Primark Financial Analytics Division).
PORTFOLIO CONSTRUCTION AND TRACKING. The process of creating a
portfolio of individually selected securities that collectively possesses
the appropriate risk and return characteristics. Primark Financial
Analytics Division serves these activities through the Vestek and Baseline
products.
SECURITY TRADING. The actual buying and selling of individual
securities. Timing, costs and other technical factors play important roles
in the efficient execution of a funding strategy. Primark Financial
Information Division's ICV products serve these activities.
FUND ACCOUNTING. The accounting for the investment management process
on an intra-day, daily, weekly, monthly and annual basis. This includes
accounting for portfolio valuation, transactions, tax, regulatory and
client reports and performance measurement. Our operations that serve these
activities are the Datastream and Primark Investment Management Services
products through Primark Financial Information Division and the Vestek
products through Primark Financial Analytics Division.
The "sell-side" firms are involved in many aspects of the investment cycle,
and each of these aspects is generating stronger demand for more and better
financial and economic information. All of Primark's divisions offer products
essential to these firms, with Primark Financial Information Division
representing the largest share of those offerings. Some of the functions
performed by the sell-side include:
BROKERAGE. This involves the generation and fulfillment of buy and
sell orders for specific securities from money managers, trust departments,
insurance companies and individuals. Information from Primark Financial
Information Division through Datastream and Disclosure as well as I/B/E/S
and WEFA information through Primark Financial Analytics Division and
Primark Decision Information Division, respectively, are useful in this
process, along with corporate news and securities price quotes.
RESEARCH. Analysts study corporate securities and other investment
instruments to estimate the likely returns from these investments and
arrive at buy and sell recommendations. Primark Financial Information
Division's Datastream, Disclosure and Worldscope together with I/B/E/S and
WEFA (Primark Financial Analytics Division and Primark Decision Information
Division,
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respectively) provide useful data and tools to the investment research
analyst, as well as distribution systems for the results of their work.
TRADING. The actual process of identifying buyers and sellers of
securities and executing orders, whether for customers or the firm's own
account, make up the bulk of activities in trading. Such orders are usually
accomplished through exchanges for most equities, options and futures,
while bonds and foreign exchange are more often traded directly or through
other brokers. Primark Financial Information Division's ICV products
directly support the trading process in London with quotes and news.
However, traders have become interested in value-added data as trading
strategies become more sophisticated. Datastream and Disclosure combined
with Primark Financial Analytics Division's I/B/E/S, and Primark Decision
Information Division's WEFA and Primark Decision Economics to provide
information to this segment.
CORPORATE FINANCE. The traditional investment banking functions
involving the underwriting of securities, determining capital structure and
merger and acquisition activity are very information intensive. All three
divisions through the products of Datastream, Disclosure, Worldscope,
I/B/E/S and WEFA provide extensive support to investment bankers.
In addition to the financial community, our customers include corporations
and governmental organizations.
CORPORATIONS. To aid in the increasing competition in the global
marketplace, corporations require greater financial and economic
information on countries, markets and competitors. Our operations that
serve those needs are Primark Financial Information Division's Disclosure,
Primark Financial Analytics Division's I/B/E/S and Primark Decision
Information Division's WEFA, Primark Decision Economics and Yankee Group
products.
GOVERNMENTAL ORGANIZATIONS. As issues related to commerce, trade and
international finance gain prominence in governmental decision making,
along with fiscal and monetary policy, governmental organizations require
greater amounts of financial and economic data. Our operations that serve
these needs are Primark Financial Information Division's Disclosure,
Primark Financial Analytics Division's I/B/E/S and Primark Decision
Information Division's WEFA, Primark Decision Economics and Yankee Group
products.
The decision to organize Primark under the current divisional structure was
made in June of 1998. It is an important step in fully integrating operational
functions within Primark to meet customer needs efficiently and to allow for
further market penetration with existing and new product offerings.
PRIMARK FINANCIAL INFORMATION DIVISION
The Primark Financial Information Division recorded $292.8 million of
revenues for the 1997 fiscal year. This represented 74% of Primark's total
revenues. Primark Financial Information Division generated $195.9 million of
revenues outside of North America with $112.7 million of those revenues coming
from Datastream products, $47.8 million from ICV and $22.9 million from Primark
Investment Management Services. The $96.9 million generated in North America
represented $71.2 million from Disclosure, $8.8 million from Worldscope and
$14.1 million from Datastream sales.
Datastream. Datastream provides global historical economic and financial
information to customers worldwide and, together with Primark Investment
Management Services products, is a leading provider of computer-based accounting
and other investment fund services in the United Kingdom.
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The core of Datastream's products is its centralized data system. This
system maintains a series of linked databases of extensive international
economic and financial data collected from:
- wire services,
- official publications of national agencies,
- stock options and futures exchanges,
- other information vendors, and
- brokers, dealers, banks and issuers.
Customers have online access to Datastream's databases through personal
computers, networks or workstations. Datastream's products and services enable
customers to perform extensive investment research and analysis, investment
administration and portfolio valuations on securities in all major markets, and
to produce graphics, statistics, time series analysis and perform other
analytical functions. Datastream's products and services fall into two principal
categories -- investment research and fund management services.
Investment research services accounted for approximately 85% of
Datastream's total revenues for each of the fiscal years ended December 31,
1997, 1996 and November 30, 1995, respectively. These services consist of a set
of software programs to manipulate, analyze and present financial and economic
information obtained from Datastream's databases. The software is designed to
facilitate the customers' access to data from any of Datastream's databases and
to manipulate this data through a variety of pre-programmed and user-defined
ways to produce graphs, tables and reports and to perform analyses.
Fund management services accounted for approximately 15% of Datastream's
total revenues for each of the fiscal years ended December 31, 1997, 1996 and
November 30, 1995, respectively. Fund management services, available through
Primark Investment Management Services, provide investment accounting, portfolio
valuation and performance measurement activities.
A critical component of Datastream's business is the data itself.
Datastream's principal supply requirements are for raw financial data, which are
acquired from numerous data suppliers worldwide and developed internally. Once
acquired, the data sets are edited and stored in Datastream's databases for
access and manipulation through Datastream's applications and value-added
software programs. Data suppliers generally retain ownership of the raw data,
but allow Datastream and its customers the use of such data. Datastream places
great importance on the quality of its data and has developed a program to
continuously review its data sources to ensure quality, control and continuity.
Wherever possible, Datastream develops multiple sources of data to provide
backup and cross checking.
Data relating to equities include pricing information for earnings and
dividends on approximately 45,000 stocks from 59 countries, including all major
markets and many emerging markets. This data includes historical earnings and
dividend data, as well as forecast data supplied by market specialists. Data
relating to bonds include maturity and yield on approximately 97,000 corporate
and government bonds from 32 countries, all Eurobonds and related indices. Data
relating to futures and options includes current prices, previously traded
prices, trading volume and intra-day high and low values from the international
options and futures exchanges, including LIFFE (London), MONEP and MATIF
(Paris), SOFFEX (Switzerland), EOE (Amsterdam), DTB (Germany), Chicago and
Philadelphia.
Datastream has included databases from I/B/E/S, Disclosure, Worldscope and
WEFA as an integral part of its investment research services. Consequently, it
has helped these companies gain additional customers, as well as customers new
to Datastream. Datastream has also installed the full Disclosure index on its
online system and offers index searches and electronic ordering of hard copy
documents to Datastream users. Vestek is also developing investment management
software products that have been marketed and supported by Datastream's European
sales and service personnel. This
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responsibility for the European sales and service of Vestek products has now
been shifted to I/B/E/S's European operations as part of the initiatives to
integrate operations within Primark Financial Analytics Division.
ICV. ICV provides real-time on-line prices, news and research on the U.K.
equities market as well as systems for order entry and trade reporting. Our
software combines real-time prices with news and other data in a unique format
which we believe has become the standard presentation for U.K. equity data. ICV
has incorporated Datastream's historical information as an add on to its major
product, TOPIC, and is continuing to integrate both Primark company fundamental
data and third party data into its major products.
The core of ICV products is its central systems that take real-time data
from several exchanges and combine the prices with news. The information is then
broadcast to a customer base of nearly 9,000 terminals using the datacast
bandwidth on terrestrial television, leased telecommunication circuits or via
satellite. The data is broadcast to customers' systems, provided by ICV, where
the signal is decoded, stored on a local database and presented on user screens
utilizing software designed and maintained by ICV. Timeliness and reliability
are important aspects of ICV's service. ICV's central systems are designed to
provide state-of-the-art timeliness by handling incoming data within a few
milliseconds through a program code that resides in memory. Reliability is
provided through several back-up sites. Our investment in trading systems has
allowed for the set up of a U.K.-wide interactive network that can be used to
link customers' offices and provide a future conduit to any new data sources ICV
may acquire or develop in the future. ICV's two principal products are TOPIC and
MARKET-EYE.
TOPIC services accounted for 53%, 47% and 45% of ICV's total revenue for
the fiscal years ended December 31, 1997, 1996 and 1995, respectively. TOPIC
services provide real-time data on prices and comparative quotes from market
makers combined with historical data and broker research. During 1997, the
London Stock Exchange moved to an electronic order driven market. In connection
with this change, ICV was able to meet its customers' requirements for an
interactive trade execution and reporting system through its TOPIC product. The
TOPIC services are used by traders and fund managers, stockbrokers, U.K.
clearing banks and major publicly traded corporations.
MARKET-EYE services accounted for 12%, 11% and 11% of ICV's revenue for the
fiscal years ended December 31, 1997, 1996 and 1995, respectively. MARKET-EYE is
aimed predominantly at small brokers, financial planners and private investors
and is accessible via the Internet. The data include prices and news and may be
combined with analytical and charting packages supplied by third parties.
Stock exchange fees accounted for 29%, 35% and 36% of ICV's revenue for the
fiscal years ended December 31, 1997, 1996 and 1995, respectively. Exchange fees
are revenues collected by ICV and remitted to the stock exchanges to permit
customer use of exchange data feeds. Consequently, the exchange fee business is
a low margin business.
ICV has leveraged its existing technology through alliances with other
information companies, providing access to new markets. During 1996, ICV entered
a joint venture with Merrill Lynch to leverage its technology with Merrill
Lynch's expertise in live trading systems. Also during 1996, Primark and ICV
entered a joint venture with Dow Jones & Company, Inc. and its subsidiary Dow
Jones Markets to develop an international equity trading information product by
combining ICV's technology, Datastream and other Primark subsidiaries'
historical databases, the global news capability of Dow Jones and the real time
data capability of Dow Jones Markets. The product has been named the Primark/Dow
Jones Equities Service.
On May 29, 1998, Dow Jones & Company, Inc. announced that it had closed the
sale of its wholly owned subsidiary Dow Jones Markets to Bridge Information
Systems, Inc. Although both Dow Jones & Company and Dow Jones Markets are
separately contractually obligated to provide
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news and financial information for the Primark/Dow Jones Equities Service
product, we did not begin to sell that product as originally planned for
mid-1998 in the U.K., Ireland, or to global accounts. This suspension of sales
occurred even though development work on the Primark/Dow Jones Equities Service
was finished and client testing was completed with positive reactions. Since
Bridge is both a competitor and also a supplier, we wanted to ascertain whether
the change in the ownership of Dow Jones Markets would adversely affect the
performance of the Primark/Dow Jones Equities Service in any way before placing
the Primark/Dow Jones Equities Service in operational use at client sites. On
September 9, 1998, Dow Jones Markets advised ICV that it would change the
datafeed for the Primark/Dow Jones Equities Service from the original
"Marketfeed" supplied by Dow Jones Markets to a datafeed provided by Bridge. In
our opinion, considerable cost and time would be required to reprogram the
Primark/Dow Jones Equities Service to use this new Bridge feed and the resulting
product would not work as well. We believe Dow Jones Markets is contractually
obligated to supply Marketfeed for the ten-year life of the agreement with Dow
Jones & Company, Inc. and Dow Jones Markets. However, we are seeking to
renegotiate our arrangements with both Dow Jones and Dow Jones Markets to
provide us with greater flexibility and control over the Primark/Dow Jones
Equities Service product, while preserving all of our legal rights under the
current contracts.
Disclosure. Disclosure is a leading provider of "as reported" and
abstracted financial information throughout the world, distributing information
on more than 16,000 U.S. companies and 13,000 foreign companies, derived from a
variety of government and third-party sources. Disclosure's proprietary content
is provided on a subscription and per use basis through electronic media such as
online services and compact laser discs, as well as through printed products.
Disclosure's customers include:
- investment and commercial banks;
- money managers;
- corporations;
- law, accounting and consulting firms;
- libraries; and
- universities.
Disclosure's financial information products and services are based upon a
wide spectrum of SEC documents such as Forms 10-K and 10-Q, proxy statements,
registration statements and material event reports, and increasingly non-SEC
documents such as foreign company financial filings, news, economic data,
pricing information and U.S. and foreign annual reports. The information
included in Disclosure's products is obtained through contractual relationships
with the SEC and major stock exchanges, from other Primark companies and through
commercial acquisition of the information. Once acquired, Disclosure indexes,
tags, abstracts and formats the information to allow for ease in navigation,
searches and analysis.
Primark considers Disclosure's electronic media business, comprised of
Global Access, Worldscope, compact discs and revenues from third party
distributors of its value-added database products, as representing Disclosure's
next generation of product offerings. These products now represent approximately
40% of Disclosure's overall revenues, up from less than 20% in the beginning of
1996.
Disclosure's image-based services are delivered through the Global Access
and Laser D products as well as through Research Centers located in major
cities. Global Access is a web-based front end that offers:
- on-line and real-time access to Disclosure's proprietary electronic index
of public company documents;
- on-line delivery of Disclosure's value-added EDGAR database;
- access to over ten years of data on 29,000 companies in the Worldscope
and SEC databases;
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- institutional and corporate ownership data; and
- links to third-party content such as I/B/E/S, WEFA and industry news.
Global Access provides real-time broadcast alert functionality as well as
desktop full text and field searching and screening of company and industry
information with direct downloading to spreadsheets and wordprocessors. Laser D
is a multi-disc CD-ROM document database that provides a desktop library of
information to high volume document users who require immediate access to
documents filed with the SEC, banking agencies and U.S. and foreign stock
exchanges. The Research Centers are staffed by research specialists who assist
customers in locating requested information and produce alert services for
customers who want early identification of specified documents. Approximately
82%, 81% and 81% of Disclosure's total revenues were derived from document
services for the twelve months ended December 31, 1997, 1996, and 1995,
respectively.
Disclosure's database segment provides products that can be machine read
and manipulated by end users. Disclosure's Global Researcher and Compact D
products provide the capability to perform sophisticated searching of financial
and text information on more than 29,000 companies. These products also provide
reporting and graphing functionality. Proprietary Disclosure databases include:
- EdgarPlus - SEC filings with value-added navigational and style tags;
- the Securities Exchange Act database - more than 11,000 U.S. company
profiles and financial statement abstracts dating back more than 10
years; and
- other databases on institutional corporate insider transactions.
These proprietary databases are offered directly by Disclosure and also by
third-party vendors, which target both the commercial and consumer markets,
enhancing Disclosure's product through their hardware, software and market
focus. Such vendors include America Online, Inc., Bridge Information Systems,
Inc., FactSet Research Corp., Lexis-Nexis, Dialog, UMI Inc. and West Publishing
Co. Approximately 18%, 19% and 19% of Disclosure's total revenues were derived
from database services for the years ended December 31, 1997, 1996 and 1995,
respectively.
Worldscope. Worldscope contains a collection of descriptive profiles and
standardized financial statements on more than 11,900 companies in 45 countries.
The Worldscope database is standardized to a common definition of generally
accepted accounting principles across all major countries, indexed and organized
for cross-border screening and searching. In addition to its global database,
Worldscope offers an emerging market database. Worldscope products are delivered
via third-party distributors, CD-ROM and on-line platforms. In October 1996,
Primark acquired an additional 30% ownership in Worldscope, giving Primark an
80% controlling interest. Primark is presently in negotiations to acquire the
remaining 20% interest in Worldscope.
PRIMARK FINANCIAL ANALYTICS DIVISION
The Primark Financial Analytics Division generated $60.1 million of
revenues for the 1997 fiscal year. This represented 15% of Primark's total
revenues. Within Primark Financial Analytics Division, I/B/E/S accounted for
$32.7 million, Baseline $18.2 million and Vestek $9.3 million of revenues.
I/B/E/S. I/B/E/S is a leading source of global earnings expectational
information for investors, financial institutions and portfolio managers
worldwide. I/B/E/S collects and processes earnings per share estimates provided
by more than 7,000 individual securities analysts, representing approximately
800 firms, on more than 17,000 companies globally. The estimates and related
data are delivered through third-party distributors and I/B/E/S Express, a
proprietary software delivery system. Many I/B/E/S products permit the customer
to perform analytical functions and are enhanced by reports and graphics.
Approximately 40%, 38% and 30% of I/B/E/S' revenues were generated from the
I/B/E/S Express product for the years ended December 31, 1997, 1996 and 1995,
respectively.
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I/B/E/S has expanded its product line by launching I/B/E/S Trapeze, a
real-time, electronic brokerage research distribution system. This
state-of-the-art technology delivers brokerage reports to managers' desks in New
York, London and other financial centers within a few moments, complete with
color graphics, audio and video capabilities.
Baseline. Baseline provides portfolio managers at investment companies,
banks, investment consulting firms, and other institutional investors with
online valuation graphics that portray critical financial information on more
than 7,000 U.S. companies. The Baseline product consists of data and software
that manipulates, analyzes and graphically presents company financial
information to end users through personal computers, typically linked by
computer networks.
Baseline's principal supply requirements are for raw financial data, which
is acquired from numerous data suppliers including other Primark companies. Once
acquired, the data is verified, manipulated and stored in Baseline's database
for manipulation through Baseline's applications and daily transmission to
customers. Baseline places great importance on the quality of its data and has
developed a program to review its data sources continuously to guarantee quality
control and continuity. Wherever possible, Baseline develops multiple sources of
data to provide backup and cross checking.
Vestek. Vestek develops, markets and supports investment information
services and application software used to manage, analyze and optimize
institutional portfolios of equity, fixed income and other financial
instruments. Vestek also provides consulting services for investment managers
and plan sponsors. Through its international sales force, Vestek currently
serves more than 250 clients in nine countries.
PRIMARK DECISION INFORMATION DIVISION
The Primark Decision Information Division generated $44.9 million of
revenues for the 1997 fiscal year, representing 11% of Primark's total revenues.
Within Primark Decision Information Division, WEFA accounted for $25.9 million,
and the Yankee Group $19.0 million. Revenues from Primark Decision Economics are
not included in the Primark Decision Information Division totals as Primark
Decision Economics is not a majority owned operation and is accounted for on the
equity method.
WEFA. Founded by Nobel Laureate Economist Lawrence R. Klein, who remains
active in the business, WEFA is a leading provider of international value-added
economic information, software and consulting services to companies,
governments, universities and financial institutions. WEFA provides analysis and
forecasts for 60 industries across 60 countries through its Global Industrial
Outlook Service, its electronic database and a semi-annual publication. WEFA
recently introduced the World Market Monitor, a desktop application for tracking
and analyzing global economic conditions. Targeted to financial institutions and
corporations, the product provides users with economic, demographic and
financial information on 175 countries.
Primark Decision Economics. In August 1996, Primark invested in a joint
venture with noted economist Dr. Allen Sinai. This joint venture is called
Primark Decision Economics, Inc. and Dr. Sinai has been its Chief Executive
Officer and Chief Global Economist from the outset. The purpose of this venture
is to disseminate timely value-added economic forecasts, analysis and
commentaries covering the world's major economies and markets, and to support
real-time and longer-term decision-making by financial institutions,
corporations and governments engaged in trading, investing and planning.
The Yankee Group. The Yankee Group consists of a global team of highly
skilled technology and market experts that focuses on identifying current trends
and future directions in the communications and computer industries for business
and consumer markets. The Yankee Group markets these insights by providing
strategic planning, technology forecasting, consulting and market
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research to clients worldwide, including vendors and users of major computer and
communications systems and services. The Yankee Group's products and services
fall into three principal categories -- planning services, custom consulting
engagements, and seminars and conferences.
Planning services accounted for 66% and 71% of the total revenues for the
years ended December 31, 1997 and 1996. An annually renewable planning service
subscription provides a customer with consultation time with a research analyst,
quarterly audio conferences, access to the Yankee Group's published research
reports and white papers in both electronic and paper formats and discounts on
seminars. The Yankee Group currently offers 24 planning service packages
covering a broad variety of topics in communications and computing.
Custom consulting engagements accounted for 20% of the total revenues for
the years ended December 31, 1997 and 1996. Custom consulting engagements often
result as an extension of planning services when an inquiry or a study is more
extensive than that offered through a planning service subscription. Custom
consulting contracts are also entered into with external parties where the
company considers the study to be of strategic importance.
Seminars and conferences accounted for 14% and 9% of the total revenues for
the years ended December 31, 1997 and 1996, respectively. The Yankee Group holds
an average of 15 to 20 seminars or conferences a year, often in conjunction with
industry publication houses.
CUSTOMERS
No single customer of the information businesses accounts for more than 2%
of our consolidated revenues.
Primark Financial Information Division
Datastream/ICV's customers include approximately 5,000 financial
organizations in 52 countries, including investment bankers, brokers, investors,
fund managers, insurance companies and market makers that use financial and
economic information. Other users include publishers of financial journals and
daily newspapers, business schools and universities. Datastream/ICV's customers
are based predominantly in the U.K. and typically subscribe through annual
contracts. These contracts are automatically renewed unless notice of
cancellation is given two to three months before the annual renewal date. In
1997, the renewal rate was 93%.
Disclosure's customer base includes the majority of U.S. investment banks,
money managers, corporations, law and accounting firms, together with other
institutions and individuals performing financial research. Disclosure also
distributes its information through over 50 third party vendors. Subscription
services accounted for 53%, 53% and 51% of Disclosure/Worldscope's revenues for
the fiscal years ended December 31, 1997, 1996 and 1995, respectively. In 1997,
Disclosure/Worldscope experienced a renewal rate for its subscription services
of 90%.
Primark Financial Analytics Division
I/B/E/S directly serves more than 2,250 customers worldwide and thousands
more through its distribution networks. I/B/E/S' customers are represented by
financial institutions and portfolio managers worldwide, with particular
interest by the quantitative analysts who access and download information
directly into analytic models. I/B/E/S products are also sold to end users, such
as management consultants and traditional investment analysts who utilize
I/B/E/S for general research. Approximately 97% of I/B/E/S' 1997 revenues were
derived through annual subscription contracts of which 12% were through soft
dollar arrangements. In 1997, I/B/E/S experienced a renewal rate for its
subscription services of 92%.
Baseline serves over 6,000 portfolio managers in nearly 600 organizations,
including investment companies, banks, investment consulting firms, and other
institutional investors located throughout the U.S. and Canada who typically
subscribe through bi-annual and annual contracts. These contracts are
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automatically renewed unless notice of cancellation is given before the renewal
date. In 1997, Baseline experienced a renewal rate for its subscription services
in excess of 95%.
Vestek's clients include major banks, plan sponsors, consultants, insurers
and investment managers. The majority of Vestek's revenues are derived from
online subscription services. In 1997, Vestek experienced a renewal rate for its
subscription services of 92%.
Primark Decision Information Division
WEFA has approximately 1,600 customers operating in corporations, financial
services, governments, utilities and other businesses. WEFA performs consulting
and planning services to analyze the potential impact of various economic
alternatives faced by its customers. In 1997, WEFA experienced a renewal rate
for its subscription services of 88%.
The Yankee Group's customers consist primarily of suppliers and users of
computer and communication technology. Yankee's customer base includes major
consulting firms, telecommunications companies, computer hardware manufacturers,
software companies, research analysts and the information technology departments
of major corporations.
MARKETING
The products and services of Primark's information companies are marketed
worldwide. Increasingly, the individual Primark companies are offering each
other's data through their own delivery platforms.
Primark Financial Information Division
Datastream is located in London, England and has sales and support offices
located in Australia, Belgium, Canada, England, France, Germany, Hong Kong,
Italy, Japan, Luxembourg, the Netherlands, Singapore, South Korea, Spain,
Sweden, Switzerland, Thailand, and the United States. ICV is located in London,
England and has sales and support offices throughout the U.K. Datastream/ICV
sells Disclosure, I/B/E/S and WEFA data through its platforms.
Disclosure and Worldscope market and distribute their products
predominately in the U.S. In addition to employing a domestic and international
sales force, Disclosure extends its sales and marketing reach with Research
Centers strategically located in the major financial centers, including ten
major U.S. cities and several international locations including London,
Frankfurt, Madrid, Paris, Milan, Hong Kong, Mexico City and Tokyo. Disclosure
also incorporates I/B/E/S and WEFA data in its Global Access platform.
Since the creation of Primark Financial Information Division on July 7,
1998, the sales and customer support operations of all Primark Financial
Information Division units have been integrated, with separate managers for this
overall range of activities for North America and for the rest of the world.
Primark Financial Analytics Division
I/B/E/S, headquartered in New York City with offices in London, Hong Kong
and Tokyo, delivers its products directly to customers via state-of-the-art
electronic delivery media. I/B/E/S Express is a PC-based proprietary software,
database management and communications package. The I/B/E/S Express platform
separately provides portions of the data from Disclosure, WEFA and Vestek.
I/B/E/S also offers its products through a network of more than 30 electronic
third-party distributors including Bloomberg L.P., Bridge Information Systems,
Inc., Datastream/ICV, FactSet Research Corp., FAME, Onesource, Reuters Group
PLC, S & P Compustat and Vestek. These third-party distributors offer I/B/E/S a
mechanism to reach new markets and link I/B/E/S data to other databases and
applications software.
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Baseline's product is targeted primarily toward portfolio managers of
domestic equities and carries portions of both I/B/E/S's and Disclosure's data
as part of its product offering. Baseline delivers its product directly to
customers via an online advanced electronic delivery platform. Baseline markets
its product through its own domestic sales force.
Headquartered in San Francisco, Vestek's products are marketed through its
sales force located in New York, Los Angeles and Japan. Vestek's European sales
operations are integrated within I/B/E/S, covering all of Europe from I/B/E/S's
London office. Vestek includes data from I/B/E/S, Worldscope and Datastream in
portions of its product line.
Primark Decision Information Division
WEFA markets its product through its international sales force. With
headquarters in Philadelphia, WEFA has offices in several U.S. cities and in the
U.K., Germany, France, South Africa and Mexico. WEFA also employs analysts in
other countries. WEFA delivers its data online through I/B/E/S, Disclosure and
Datastream/ICV as well as through its own electronic distribution platform. WEFA
believes its historical association with the Wharton School of Business and with
Nobel Laureate Lawrence R. Klein gives it a distinct advantage in the
marketplace.
The Yankee Group markets its services internationally primarily through its
own sales force. We consider its historic record of accurately forecasting the
general direction of communication and computing technology together with its
focus on customer support as its greatest competitive advantages. The Yankee
Group's industry analysts are the company's critical resource. These individuals
have significant expertise in their areas of concentration, gained through
industry experience, constant study of the technology market and ongoing
dialogue with vendors and consumers in the industry. The Yankee Group
headquarters are in Boston, with offices in London and Tokyo.
COMPETITION
The global information industry is highly competitive. There are many large
and successful companies in the information services industry that supply
financial, economic and market research data that compete with products and
services provided by Primark's information businesses.
Principal competitive factors include:
- the quality, reliability and comprehensiveness of the analytical services
and data provided,
- flexibility in tailoring services to client needs,
- experience,
- innovation,
- the capability of technical and client service personnel, data processing
and decision support software,
- reputation,
- price, and
- geographic coverage.
We distinguish our products through our broad international coverage, wide range
of databases, accuracy of data, proprietary software applications, reputation,
experience and quality of customer support provided.
Our ability to remain competitive in the information market will depend
largely upon our ability to maintain and develop new products and access new
markets in a cost efficient manner, as well as the integration of all our
information products and services. We cannot be assured that we will
49
<PAGE> 51
continue to maintain our market share in the future. See "Risk Factors -- We may
not remain competitive."
TECHNOLOGY DEVELOPMENT
An essential element in our strategy has been to offer proprietary
value-added content through state-of-the-art delivery systems that incorporate
the latest improvements in information technology. Over the past several years,
through selected acquisitions and internal development, the information
technology organizations of our financial, economic and market research
businesses have been strengthened, operations and reliability have been
improved, software development and maintenance procedures have been upgraded and
major steps have been taken toward euro and Y2K compliance. We believe that our
information technology resources provide us with enhanced capabilities. In
addition, we intend to take additional steps to further integrate these
information technology functions. For example, the computer operations and
communications departments of Datastream and ICV have been assigned to a single
information technology manager, who has the mandate to consolidate all aspects
of these operations. The opportunities for similar changes in other business
units are being reviewed.
One of the most promising areas for immediate integration is in building
the Primark Telecommunications Network, a worldwide telecommunications network
for Primark that integrates all telecommunications requirements in a common
architecture, providing greater capacity and a higher level of service at lower
costs. We anticipate that the Primark Telecommunications Network will also
facilitate the delivery of new products to our entire customer base. The Primark
Telecommunications Network will provide facilities such as high-speed image
transmission, bulk data downloading and voice/data transmission on the same
lines. Elements of the Primark Telecommunications Network will also allow for
the internal data exchange needed to share data effectively for the creation of
new products.
We have developed a database and software capability called the Primark
Information Optimizer. The Primark Information Optimizer is essentially creating
a unified and integrated database for all of Primark, while each of its
components remain as independent databases compatible with existing legacy
products. The Primark Information Optimizer will enable the rapid development of
new products and allow each Primark company to deliver readily all relevant data
to our customers. We plan to use the capabilities of the Primark Information
Optimizer to create a data and software product that can be offered to financial
clients for their internal use in retrieving and standardizing information in
multiple formats and stored in multiple databases.
TRADEMARKS
Primark's information companies hold numerous trademarks worldwide that are
subject to continuous renewal. These trademarks are significant to our business,
and are registered in all of our major markets to ensure recognition among our
many global trading customers.
EMPLOYEES
On October 1, 1998, Primark and our subsidiaries employed 2,922 persons,
excluding employees employed in discontinued operations. We believe our
relationship with our employees is excellent.
PROPERTIES
We currently occupy our principal executive offices, comprised of
approximately 17,848 square feet, in Waltham, Massachusetts under lease
agreements that expire in July 2001 with provision for two five-year renewal
options.
Baseline occupies 23,000 square feet of space at its New York headquarters.
Baseline also has an office in Philadelphia.
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<PAGE> 52
Datastream's two principal office facilities are located in London,
England. Comprised of an aggregate of 100,995 square feet, these facilities are
occupied under lease agreements that expire in 2005 and 2018. Through its
affiliates, Datastream also occupies, under short-term leases, a total of
approximately 55,000 square feet of office space, principally located in
Australia, Belgium, Canada, England, France, Germany, Hong Kong, Italy, Japan,
Luxembourg, the Netherlands, Singapore, South Korea, Spain, Sweden, Switzerland,
Thailand, and the United States.
Disclosure's headquarters, comprised of approximately 99,640 square feet,
are located in Bethesda, Maryland. The property is occupied under lease
agreements that expire in 2006. Disclosure's regional offices occupy
approximately 63,900 square feet of office space under lease terms that expire
in 2004. These offices are located in California, the District of Columbia,
Georgia, Illinois, Massachusetts, New York and Texas.
I/B/E/S occupies 39,800 square feet of space at its New York City
headquarters under a lease agreement that expires in 2007. Additional office
space totaling 10,950 square feet is located in England, Hong Kong and Japan
with lease terms through 2007.
ICV's facilities occupy approximately 36,000 square feet of space located
primarily in England.
Vestek occupies approximately 13,555 square feet of space at its San
Francisco headquarters under a lease agreement that expires in 1999 with
provision for one five-year renewal option.
WEFA occupies 45,550 square feet of space at its Pennsylvania headquarters
under a lease agreement that expires in 2005. Additional office space of
approximately 29,700 square feet is leased in Canada, Europe and South Africa
expiring in 2005.
The Yankee Group occupies approximately 23,600 square feet of space at its
Boston headquarters under a lease agreement that expires in 2003 and has
international offices located in London and Tokyo.
LEGAL PROCEEDINGS
Our management believes that the outcome of all pending legal proceedings
will not, individually, or in the aggregate, have a material adverse effect on
our business, results of operations or financial condition.
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<PAGE> 53
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth, as of October 1, 1998, information concerning
individuals who were the directors and executive officers of Primark on June 1,
1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph E. Kasputys................. 62 Chairman, President and Chief Executive Officer
Stephen H. Curran.................. 51 Executive Vice President and Chief Financial Officer
Ira Herenstein..................... 61 Senior Vice President of Marketing of Primark Financial
Technologies, Inc.
Michael R. Kargula................. 51 Executive Vice President, General Counsel and Secretary
Patrick G. Richmond................ 48 Executive Vice President of Corporate Development
William J. Swift, III.............. 46 Senior Vice President and Tax Counsel
Kevin J. Bradley................... 70 Director
John C. Holt....................... 57 Director
Steven Lazarus..................... 67 Director
Patricia McGinnis.................. 51 Director
Jonathan Newcomb................... 52 Director
Constance K. Weaver................ 46 Director
</TABLE>
Joseph E. Kasputys, has served as Chairman, President and Chief Executive
Officer of Primark since May 1988. From June 1987 until May 1988, he served as
President and Chief Operating Officer of Primark. Prior to joining Primark in
June 1987, he was Executive Vice President of The McGraw-Hill Companies, Inc., a
publishing and information services company. Prior to joining McGraw-Hill in
1985, he was President and Chief Executive Officer of Data Resources, Inc., an
economic forecasting and consulting firm. Mr. Kasputys has been a Primark
director since 1987. He is a member of the Nominating Committee of the Board.
Mr. Kasputys is also a director of Lifeline Systems, Inc., a company that
develops and manufactures personal response products and provides related
monitoring and other services and New Era of Networks, Inc., a company that
develops, markets and supports application integration software and provides
application services.
Stephen H. Curran, has served as Senior Vice President and Chief Financial
Officer of Primark since 1988. In 1997 he was elected Executive Vice President
and Chief Financial Officer.
Ira Herenstein, has served as Vice President of Marketing of Primark since
December 1996. From June 1995 to November 1996, Mr. Herenstein was Managing
Director of Datastream International, Inc. From March of 1994 to June of 1995,
he was president of Datastream's North American operations. From 1992 until
March of 1994, Mr. Herenstein was an independent consultant in the information
services industry. In addition, Mr. Herenstein was with The McGraw-Hill
Companies, Inc. for 28 years, during which time he held the positions of
President of Standard & Poor's Corporation and Executive Vice President of the
Computer and Communications Information Group.
Michael R. Kargula, has served as Senior Vice President, General Counsel
and Secretary of Primark since 1988. In 1997 he was elected Executive Vice
President, General Counsel and Secretary.
Patrick G. Richmond, has served as Vice President of Corporate Development
of Primark since May 1989. In 1997 he was elected Executive Vice President of
Corporate Development.
William J. Swift III, has served as Vice President and Tax Counsel of
Primark since 1988. In 1998 he was elected Senior Vice President and Tax
Counsel.
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<PAGE> 54
Kevin J. Bradley, served as the Chairman of Corporate Investment
Associates, Inc., an investment management firm from November 1990 to September
1995. From November 1985 until October 1990, he was a Limited Partner of Weiss
Asset Management Limited Partnership, an investment management firm. From 1977
through November 1985, he served as Chairman and Chief Executive Officer of the
Travelers Investment Management Company, a subsidiary of The Travelers
Corporation, a financial services company. Mr. Bradley has been a director of
Primark since 1981. He is Chairman of the Compensation Committee and a member of
the Audit Committee of the Board.
John C. Holt, is a Primark employee and has served as the President and
Chief Executive Officer of TASC, an applied information technology company and
formerly a wholly-owned subsidiary of Primark, and Executive Vice President of
Primark from April 1994 until April 1, 1998. From April 1, 1998 until December
31, 1998, Mr. Holt served as a consultant to TASC. From 1982 until January 1994,
Mr. Holt held the position of Executive Vice President of the Dun & Bradstreet
Corporation, an information services company, and served as a director of that
company from 1985 until 1994. In addition, Mr. Holt was the former Chairman,
President and Chief Executive Officer of the A.C. Nielsen Company, a marketing
information company and a former affiliate of Dun & Bradstreet. Mr. Holt has
been a director of Primark since 1985. He is a member of the Finance Committee
of the Board.
Steven Lazarus, is Managing Director of the ARCH Venture Partners L.P., a
venture partnership investing in companies in the early stage of development,
and has held that position since July 1994. From 1986 to 1994, he was President
and Chief Executive Officer of Argonne National Laboratory/The University of
Chicago Development Corporation, which transforms scientific discoveries into
viable high technology products and services. Prior to joining The Argonne
National Laboratory in October 1986, he was a Group Vice President at Baxter
Travenol Laboratories, Inc., a manufacturer and distributor of hospital supplies
and related medical equipment. Mr. Lazarus has been a Primark director since
1987. He is Chairman of the Nominating Committee and a member of the Audit and
Compensation Committees of the Board. Mr. Lazarus is a director of Amgen Inc., a
biotechnology company and Illinois Superconductor Corporation, an advanced
materials company serving the telecommunications industry. He is also a director
of New Era of Networks, Inc. (described above), Nanophase Technologies Corp., a
developer and marketer of nano-crystalline materials for use as ingredients and
components in a wide range of commercial applications, and First Consulting
Group, Inc., a provider of information technology and other consulting services
to healthcare organizations.
Patricia McGinnis, is the president and Chief Executive Officer of the
Council for Excellence in Government, a national membership organization of
private sector leaders who have served as senior officials in government. She
has held this position since June 1994. From 1982 until May 1994, she was a
principal at the public affairs consulting firm of Winner/Wagner & Francis
(formerly the FMR Group). Previously, she served in various senior policy
positions in the federal government including the Office of the Vice President,
the Department of Health and Human Services, the Department of Commerce, the
Office of Management and Budget and the Senate Budget Committee. Ms. McGinnis
has been a director of Primark since 1995. She is a member of the Compensation
Committee of the Board.
Jonathan Newcomb, is President and Chief Executive Officer of Simon &
Schuster, an educational, computer and English-language book publisher and the
publishing operation of Viacom Inc. and has held this position since June 1994.
From January 1991 until May 1994, he served as President and Chief Operating
Officer of Simon & Schuster. From November 1989 until December 1990, Mr. Newcomb
was Executive Vice President, Operations of that company. He has been a director
of Primark since 1996. Mr. Newcomb is Chairman of the Finance Committee of the
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<PAGE> 55
Board and a member of the Nominating Committee. Mr. Newcomb is also a director
of Marine Midland Bank.
Constance K. Weaver, is Financial Vice President -- Investor Relations of
AT&T Corp., a communications service company, a position she has held since May
1996. From June 1995 to April 1996, she held the position of Senior
Director -- Investor Relations of Microsoft Corporation, a computer software
company. From June 1993 through May 1995, she held the position of Vice
President, Investor Relations of MCI Communications Corporation, a
telecommunications company. From June 1991 until July 1993 and from January 1990
until May 1991, she held the position of Director, Investor Relations and
Director, Corporate Communications, respectively, of that company. From 1988
until January 1990, she was the Executive Director, Business Week Executive
Programs and Services Department for McGraw-Hill, Inc. Ms. Weaver has been a
director of Primark since 1994. She is Chairwoman of the Audit Committee and a
member of the Finance Committee of the Board.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Members of the Board held seven regular meetings and three special meetings
during 1997 and also served on standing committees of the Board. In addition to
the Finance Committee, the Company has the following standing committees of the
Board:
Audit Committee -- The Audit Committee, which held two meetings during
1997, recommends to the Board the selection of independent auditors; reviews the
scope of the independent audit and auditors' fees; reviews the annual financial
statements and audit results, including auditors' recommendations; reviews the
Primark's internal control system; reviews the scope of the internal audit
procedures and results of those procedures; and reviews Primark's policies
relating to business conduct.
Compensation Committee -- The Compensation Committee held two meetings
during 1997. The Compensation Committee establishes the salaries and other
direct compensation for all Primark officers; annually reviews and makes
recommendations to the Board with respect to the compensation to be paid to our
outside directors; and administers certain Primark incentive plans.
Nominating Committee -- The Nominating Committee, which held one meeting
during 1997, is authorized to make recommendations to the Board concerning
nominees for directors to be elected at Primark's Annual Meeting of
Shareholders; nominees to fill vacancies on the Board; policies relating to
tenure and retirement of Primark's directors; and successors to Primark's two
highest ranking officers. The Nominating Committee accepts recommendations from
shareholders of individuals to be considered as nominees for directors.
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<PAGE> 56
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or awarded for
performance during the last three completed fiscal years by Primark or a
subsidiary to Primark's named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- --------------------
AWARDS PAYOUTS
---------- -------
OTHER SECURITIES
ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSA- OPTIONS PAYOUTS COMPENSA-
PRINCIPAL POSITION YEAR ($) ($) TION($) (#) ($) TION($)
------------------ ---- ------ ----- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph E. Kasputys(1)................... 1997 609,583 146,601 -- (2) 1,000,000 -- 7,627(3)
Chairman, President and 1996 601,184 426,948 58,258(4) 40,000 -- 33,419
Chief Executive Officer of the Company 1995 584,376 391,804 56,561(4) 101,000(5) -- 115,377
John C. Holt(6)......................... 1997 427,515 355,050 -- (2) 20,000 -- 30,000(7)
President and Chief Executive Officer 1996 417,510 261,584 -- (2) 16,000 -- 33,515
of
TASC, and Executive Vice President 1995 407,535 237,169 -- (2) 57,000(5) 516,316(6) 30,000
of the Company
Stephen H. Curran(8).................... 1997 232,500 37,345 -- (2) 23,000 -- 6,674(3)
Executive Vice President and 1996 221,846 106,382 -- (2) 11,000 -- 32,466
Chief Financial Officer of the Company 1995 204,751 87,531 -- (2) 14,000 -- 114,424
Ira Herenstein(9)....................... 1997 325,000 76,820 -- (2) 25,000 -- 7,643(3)
Senior Vice President of 1996 325,250 123,312 -- (2) 8,000 274,120(10) 33,435
Marketing of the Company 1995 -- -- -- -- -- --
Michael R. Kargula(1)(8)................ 1997 244,750 43,980 -- (2) 25,000 -- 6,554(3)
Executive Vice President, General 1996 240,285 128,191 -- (2) 13,000 -- 32,346
Counsel
and Secretary of the Company 1995 234,125 117,791 -- (2) 37,000(5) -- 114,304
</TABLE>
- ---------------
(1) Messrs. Kasputys and Kargula previously held the positions of Chairman of
TASC and Vice President and General Counsel of TASC, respectively. In
connection with Primark's sale of TASC to Litton Industries, Inc., Mr.
Kasputys and Mr. Kargula resigned such positions effective as of the
closing date of the transaction.
(2) While the executive officers received other compensation in the form of
perquisites, such perquisites do not exceed the lesser of $50,000 or ten
percent of each executive officer's total annual salary and bonus for 1997
as reported for such executive officer in this table.
(3) Includes matching contributions of $4,750 made by Primark under the Savings
Plan for each of Messrs. Kasputys, Curran, Kargula and Herenstein. Includes
$2,877, $1,924, $1,804 and $2,893 for Messrs. Kasputys, Curran, Kargula and
Herenstein, respectively, representing the premium amounts paid by Primark
for executive life insurance on behalf of such executive officers.
(4) The amount includes $29,260 and $35,395 for fiscal years ended December 31,
1996 and December 31, 1995 for imputed interest relating to a loan by
Primark to Mr. Kasputys for payment of income taxes in connection with the
grant of stock to Mr. Kasputys under the Primark Corporation 1988 Incentive
Plan. This loan is interest-free; evidenced by promissory notes; secured by
40,605 shares of Primark common stock; and, subject to annual repayments,
is fully payable on December 31, 1998. The largest aggregate amount of
indebtedness outstanding under this loan in 1997 was $509,121, of which
$443,781 was outstanding on September 30, 1998.
(5) Includes 51,000, 32,000 and 18,000 shares subject to option for Messrs.
Kasputys, Holt and Kargula, respectively, which options vest in three
annual installments with the first installment having vested during 1996.
The options were granted in recognition of the executive officers'
agreements to accept a 50 percent reduction in the amount of their
respective merit increases in fiscal years 1995, 1996 and 1997.
(6) In connection with the sale of TASC, Mr. Holt resigned as an officer and
director of TASC and as an officer of Primark. He will continue to be a
member of the Board of Directors of
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<PAGE> 57
Primark. In 1995, Mr. Holt was paid $516,316 in connection with a long-term
incentive arrangement under an employment agreement dated February 28, 1994
among Primark, TASC and Mr. Holt.
(7) Includes $19,508 and $10,492 allocated to Mr. Holt's account under the
TASC, Inc. Profit Sharing and Stock Ownership Plan and the TASC
Supplemental Employee Retirement Plan, respectively, for the fiscal year
ended December 31, 1997.
(8) In connection with the exercise of stock options, Messrs. Curran and
Kargula borrowed $216,647 and $393,772, respectively, from Primark. Such
loans are interest-free; evidenced by promissory notes; secured by 13,000
and 20,000 shares of Primark common stock, respectively; and are fully
payable on December 16, 2004.
(9) Mr. Herenstein was not an officer of Primark during fiscal year 1995 or
since June 30, 1998.
(10) Represents the amount paid to Mr. Herenstein pursuant to the terms of an
employment agreement between Primark and Mr. Herenstein dated December 3,
1996, under which Mr. Herenstein is deemed to have exercised as of
September 30, 1996, all value appreciation rights that were granted to him
under the Primark Information Services UK Limited and Affiliates Long-Term
Incentive Plan while he was an executive officer of a Primark subsidiary.
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is information concerning the grant of stock options to
each of the persons named on the Summary Compensation Table during 1997.
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
---------------------------------------------------------------- -----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT DATE OF
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SH) DATE VALUE($)(2) EXERCISABILITY
---- ------------- -------------- ----------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph E. Kasputys......... 500,000(3) 32.84% $ 24.25 January 6, 2007 6,934,033 January 7, 1999
250,000(3) 16.42% $30.313 January 6, 2007 3,026,041 January 7, 2000
250,000(3) 16.42% $36.375 January 6, 2007 2,657,782 January 7, 2001
John C. Holt............... 20,000(4) 1.31% $ 25.00 February 24, 2007 285,972 February 25, 1998
Stephen H. Curran.......... 13,000 .85% $ 25.00 February 24, 2007 197,503 February 25, 1997
10,000 .66% $ 23.50 May 27, 2007 154,137 May 28, 1997
Ira Herenstein............. 25,000(4) 1.64% $ 24.25 January 6, 2007 346,798 January 7, 1998
Michael R. Kargula......... 15,000 .99% $ 25.00 February 24, 2007 227,888 February 25, 1997
10,000 .66% $ 23.50 May 27, 2007 154,137 May 28, 1997
</TABLE>
- ---------------
(1) All stock options have a ten-year term.
(2) As suggested by the SEC's rules on executive compensation disclosure,
Primark used the Black-Scholes model of option valuation to determine grant
date present value. The following assumptions were made for purposes of
calculating the Grant Date Present Value: an option term of ten years,
volatility ranging from 35.46% to 42.02%, dividend yield at 0%, interest
rate ranging from 6.56% to 6.95% and a vesting discount which utilized a 3%
risk of forfeiture that produced a range from .8853 to .94116. Primark does
not advocate or necessarily agree that the Black-Scholes model can properly
determine the value of an option.
(3) The option becomes fully exercisable upon a change of control or, in the
sole discretion of the Compensation Committee, in the event the Board
designates a successor as chief executive officer of Primark.
(4) The stock options vest in three equal annual installments with the first
installment vesting on the Date of Exercisability as noted in the table
above.
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<PAGE> 58
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Set forth below is information concerning the value of unexercised
in-the-money stock options held on December 31, 1997, by each person named in
the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FY-END(#) AT FY-END($)(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph E. Kasputys..................... 1,018,220 37,407,366 414,170 1,016,830 10,661,912 12,339,651
John C. Holt........................... 0 0 343,470 249,530 9,180,396 6,263,292
Stephen H. Curran...................... 166,240 5,909,915 103,000 0 2,419,439 0
Ira Herenstein......................... 0 0 89,640 63,360 2,051,415 1,156,401
Michael R. Kargula..................... 211,580 7,521,775 139,060 5,940 3,357,666 158,524
</TABLE>
- ---------------
(1) The "Value Realized" is equal to the difference between the option exercise
price and the fair market value of Primark's common stock on the New York
Stock Exchange on the date of exercise.
(2) The value is based upon the $40.6875 closing price of a share of Primark's
common stock on the New York Stock Exchange at December 31, 1997, minus the
exercise price.
DIRECTORS' COMPENSATION
During 1997, each director who was not an employee of Primark or of any of
its subsidiaries received as compensation for the director's services an annual
retainer of $20,000. The fee for each Board meeting and committee meeting
attended by a non-employee director is $1,500 and $750, respectively; provided,
however, that if a committee meeting is held on a date when no Board meeting is
held, each non-employee director who is a member of the committee is entitled to
receive $1,500 for each such meeting attended. In addition, non-employee
directors of Primark automatically receive on an annual basis a non-qualified
stock option to acquire 7,500 shares under the Stock Option Plan for
Non-Employee Directors. The directors who serve as officers of Primark or of a
subsidiary receive no compensation for their services as a director other than
their regular salaries and benefits.
Primark maintains the Primark Corporation Supplemental Death Benefit and
Retirement Income Plan, which covers certain key officers and non-employee
directors of Primark. Under the Primark Corporation Supplemental Death Benefit
and Retirement Income Plan, in the event of the death of a non-employee director
prior to his or her retirement from the Board, the director's surviving spouse
is entitled to a lump sum payment of $150,000 payable at the time of the
director's death. The Primark Corporation Supplemental Death Benefit and
Retirement Income Plan also provides that a non-employee director can elect to
receive either (1) a supplemental retirement benefit of $15,000 annually
(payable in monthly installments) for each of the ten years following such
director's retirement at age 65 or older, or (2) a post-retirement death benefit
of $150,000 payable to such director's surviving spouse upon the death of the
director if such death occurs after the director's retirement on or after
attaining age 65.
No benefits are to be payable under the plan unless the director has been a
member of Primark's Board of Directors for at least five years. Additionally, a
non-employee director leaving the Board after a change of control would be
entitled to receive a cash payment of $150,000. A non-employee director
receiving this payment would not be entitled to receive any other payments under
the Primark Corporation Supplemental Death Benefit and Retirement Income Plan.
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<PAGE> 59
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed entirely
of non-employee directors. The three directors comprising the Compensation
Committee are Mr. Kevin J. Bradley, Chairman, Mr. Steven Lazarus and Ms.
Patricia McGinnis.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
During 1997, Mr. Kasputys served as Chairman, President and Chief Executive
Officer of Primark pursuant to an employment agreement, which was approved by
the shareholders at the 1997 Annual Meeting of Shareholders. Pursuant to the
terms of the employment agreement, Mr. Kasputys is employed as the Chairman,
President and Chief Executive Officer of Primark until December 31, 2001, at a
minimum annual salary of $602,000 and is eligible to receive a bonus. Mr.
Kasputys is entitled to participate in (1) retirement and other employee benefit
plans, (2) insurance and fringe benefits provided by Primark, including the use
of an automobile for business purposes, (3) up to $10,000 annually as
reimbursement for expenses incurred in obtaining tax and estate planning
assistance, and (4) annual retirement compensation for life in an amount equal
to 55 percent of his salary (excluding his bonus but including all amounts paid
under our defined benefit plan) during the final year prior to the date he
retires at age 62 or later. If Mr. Kasputys predeceases his spouse at the time
of his retirement or thereafter, his spouse is entitled to 60 percent of Mr.
Kasputys' annual retirement compensation as calculated in the preceding
sentence. If Mr. Kasputys dies prior to his retirement, his spouse is entitled
to 50 percent of his final salary until such time as Mr. Kasputys would have
become 65 and annual payments of 33 percent of such salary thereafter for life.
Although the retirement benefits are paid solely from corporate assets, it
is expected that such costs would be recovered over time through Primark-owned
life insurance on Mr. Kasputys. In the event Mr. Kasputys is terminated prior to
retirement at age 62 for cause or voluntarily terminates his employment, the
retirement obligations described in this paragraph also terminate. If Mr.
Kasputys is terminated without cause prior to age 62, he is entitled to reduced
retirement compensation calculated by reducing the full retirement compensation
amount by two percent for each full year not worked by Mr. Kasputys prior to age
62. Any termination by the Board of Mr. Kasputys' employment, other than
termination for "cause" (as defined) by a two-thirds vote of all of the members
of the Board, does not prejudice Mr. Kasputys' right to compensation or other
benefits under the employment agreement and all options granted to Mr. Kasputys
become exercisable. Termination other than termination for cause by a two-thirds
vote of all of the members of the Board would result in liability for liquidated
damages in an amount equal to two times the amount of Mr. Kasputys' annual
salary and the bonus paid to him in the year prior to termination, on a pro-
rated basis, as well as health, life and disability insurance for a period of
two years in the same amounts provided prior to termination. Mr. Kasputys is
also subject to non-solicitation, non-disclosure and noncompete provisions as
set forth in his employment agreement.
Messrs. Curran and Kargula receive non-contributory supplemental death and
retirement benefits. The pre-retirement death benefit payable to the executive's
surviving spouse will equal, per year, 50 percent of the executive's final
salary until such time as the executive would have reached age 65; thereafter,
payments will equal, per year, 20 percent of such salary until the executive
would have reached age 75. At retirement the executive may elect to receive (1)
supplemental retirement income equal to 20 percent of such executive's final
salary for each of the first ten years following retirement; or (2) other
available post-retirement benefits which are actuarially equivalent to the
foregoing ten-year payment option. Although the supplemental death and
retirement benefits are paid solely from general corporate assets, it is
expected that such costs would be recovered over time through Primark-owned life
insurance on the participants.
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<PAGE> 60
Each of the named executive officers has entered into a separate change of
control agreement. Each change of control agreement was amended on September 29,
1997. The amended change of control agreements provide that in the event of a
change of control of Primark or if a potential change of control exists while
the executive is a Primark employee and the executive's employment is terminated
other than for specified events, Primark will pay to the executive an amount
generally equal to three times the average annual compensation paid to such
executive during the lesser of (1) five calendar years preceding the date of
termination if prior to a change of control, or the date of the change of
control of Primark if such has occurred by the time of termination; or (2) the
portion of such five year period during which Primark existed and the executive
was a Primark employee if the executive's employment is terminated by Primark
without cause within three years after a change of control. The change of
control agreements may be unilaterally rescinded or amended by the Primark Board
of Directors without the consent of the executive prior to a change of control
or the occurrence or threat of actions potentially leading to a change of
control. Mr. Holt's change of control agreement was terminated on the closing
date of the TASC sale pursuant to the terms of the Termination Agreement,
Receipt and Release by and among Mr. Holt, Primark and TASC dated April 1, 1998.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
Based on information filed with the SEC on Schedule l3Gs, information is
set forth below with respect to beneficial owners of more than five percent of
the shares of Primark's common stock as of December 1, 1998.
<TABLE>
<CAPTION>
NUMBER PERCENT OF CLASS
NAME AND ADDRESS OF SHARES AS OF DECEMBER L, 1998
---------------- --------- ----------------------
<S> <C> <C>
Capital Research and Management Company..................... 2,288,900(l) 10.77%
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
GeoCapital, LLC............................................. 1,588,033(2) 7.47%
767 Fifth Avenue
45th Floor
New York, New York 10153-4590
</TABLE>
- ---------------
(l) Based on the Schedule 13G dated July 9, 1998, for the period ended December
31, 1997. Capital Research and Management Company serves as investment
advisor to various investment management companies and has the sole power to
dispose of the reported securities. SMALLCAP World Fund, Inc. is an
investment management company and has the sole power to vote 1,350,000 of
the listed shares.
(2) Based on the Schedule 13G dated February 18, 1998, for the period ended
December 31, 1997. Sole dispositive power was claimed with respect to
1,588,033 shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Primark common stock
beneficially owned as of December 1, 1998, by each director, the chief executive
officer and, as of December 31, 1997, the four other most highly compensated
executive officers and by all Primark directors and executive officers as a
group:
<TABLE>
<CAPTION>
TOTAL NUMBER
NUMBER OF NUMBER OF SHARES OF SHARES PERCENT
NAME SHARES UNDERLYING OPTIONS BENEFICIALLY OWNED OWNERSHIP
---- --------- ------------------ ------------------ ---------
<S> <C> <C> <C> <C>
Kevin J. Bradley.................. 300 57,468(1) 57,768 .27%
Stephen H. Curran(2).............. 130,979 113,000(3) 243,979 1.14%
Ira Herenstein(2)(4).............. 12,484 42,110(3) 54,594 .26%
John C. Holt(2)(4)................ 1,144 574,320(3) 575,464 2.64%
Michael R. Kargula(2)............. 145,010 155,000(3) 300,010 1.40%
Joseph E. Kasputys(2)............. 960,870 931,000(3) 1,891,870 8.53%
Steven Lazarus.................... 21,936 82,404(1) 104,340 .49%
Patricia McGinnis................. 0 30,000(1) 30,000 .14%
Jonathan Newcomb.................. 2,300 22,500(1) 24,800 .12%
Constance K. Weaver............... 0 37,500(1) 37,500 .18%
All directors and executive
officers as a group (12
persons)(5)(6).................. 3,685,965 15.65%
</TABLE>
- ---------------
(1) Represents shares which these directors have the right to acquire pursuant
to the exercise of the options held by them under the Primark Corporation
Stock Option Plan for Non-Employee Directors ("Stock Option Plan for
Non-Employee Directors"). Directors who are employees of Primark, or a
subsidiary thereof, are not eligible to receive option grants under this
plan.
(2) Includes 28,262 shares for each of Messrs. Curran and Kasputys, 29,210
shares for Mr. Kargula and 12,484 shares for Mr. Herenstein allocated to the
participant's account under the Primark Corporation Savings and Stock
Ownership Plan (formerly the Primark Corporation Employee
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Stock Ownership Plan) ("Savings Plan"). Includes 144 shares held by Mr. Holt
under the TASC, Inc. Profit Sharing and Stock Ownership Plan. Also includes
2,473 shares held by Mr. Curran under the Primark Corporation 1992 Employee
Stock Purchase Plan.
(3) Represents shares subject to stock options exercisable within 60 days of
December 1, 1998, which were granted under various Primark plans.
(4) Effective April 1, 1998 and June 30, 1998, each of Mr. Holt and Mr.
Herenstein, respectively, ceased to be an executive officer of Primark. Mr.
Holt continues as a director of Primark and employee and Mr. Herenstein
continues as a part-time employee of Primark.
(5) Includes 2,076,930 shares subject to stock options exercisable within 60
days of December 1, 1998 held by individuals who were executive officers of
Primark on December 31, 1997, under various Primark plans.
(6) Includes 155,237 shares for all executive officers as a group which are held
under the Savings Plan. As to shares held in the Savings Plan, the executive
officers possess both voting and dispositive power with respect to all such
shares. Non-employee directors of Primark are not eligible to participate in
these plans. Also includes 3,131 shares held by executive officers as a
group which are held under the Primark Corporation 1992 Employee Stock
Purchase Plan.
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<PAGE> 63
DESCRIPTION OF CERTAIN INDEBTEDNESS
We have a Revolving Credit Agreement, dated as of February 7, 1997, among
the Company, the lenders that are parties to the agreement from time to time,
the issuing banks referred to in the agreement, and Mellon Bank, N.A., as Agent,
as amended, which provides for the Credit Facility. Under the Credit Agreement,
Primark may, subject to conditions, borrow up to $225 million. The Credit
Facility will mature on December 31, 2002, unless extended pursuant to the terms
of the Credit Agreement. The following summary of the material provisions of the
Credit Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Credit Agreement, a copy of which
is available from us upon request.
The Credit Facility is secured by a pledge of the outstanding common stock
of several Primark subsidiaries.
Amounts drawn under the Credit Facility will bear interest at rates ranging
from 0.375% to 1.50% above the current prevailing LIBOR rate of interest, with
the rate determined according to the results of our operations and financial
position.
The Credit Agreement contains negative covenants limiting our ability to:
- incur debt,
- create liens,
- pay dividends,
- make distributions or stock repurchases,
- make investments or capital expenditures,
- engage in transactions with affiliates,
- sell assets,
- engage in mergers and acquisitions, and
- assume or make guaranties.
In addition, the Credit Agreement contains affirmative covenants, including
covenants requiring:
- compliance with laws,
- maintenance of corporate existence, properties and insurance,
- payment of taxes and performance of other material obligations, and
- the delivery of financial and other information.
The Credit Agreement also requires us to comply with financial tests and to
maintain financial ratios on a consolidated basis as set forth below. We must
maintain:
- a Consolidated Net Worth (Adjusted), as defined in the Credit Agreement,
of not less than $450 million from June 30, 1998 to December 30, 1998,
and increasing such amount by $25 million for each one year period of
December 31 to December 30 thereafter;
- a Consolidated Fixed Charge Coverage Ratio, as defined in the Credit
Agreement, for the period of three consecutive fiscal quarters ending on
December 31, 1998 of not less than 1.25, the period of four consecutive
fiscal quarters ending on the last day of such fiscal quarter within 1999
of not less than 1.50 and thereafter of not less than 2.00; and
- a Consolidated Funded Senior Debt Ratio (Adjusted) for the period of four
consecutive fiscal quarters ending from September 30, 1998 through
December 30, 1998 of not greater than 4.50, ending from December 31, 1998
through March 30, 2000 of not greater than 4.25 and thereafter of not
greater than 4.00.
"Consolidated Funded Senior Debt Ratio (Adjusted)" means, generally,
(a) the amount, not less than zero, equal to
(1) indebtedness of Primark and its subsidiaries other than
indebtedness that is subordinated to the Credit Facility, minus
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(2) the amount, not less than zero, equal to cash and cash equivalents
minus $10.0 million, divided by
(b) consolidated EBITDA, as defined in the Credit Agreement, less capital
expenditures.
Failure to satisfy any of the financial covenants constitutes an event of
default under the Credit Agreement. The Credit Agreement also includes other
customary events of default, including:
- a cross-default to other indebtedness,
- material undischarged judgments,
- bankruptcy, and
- a change of control.
The Credit Agreement permits us to repurchase shares of our common stock up
to $250 million, of which $195 million had been utilized through September 30,
1998.
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<PAGE> 65
DESCRIPTION OF THE NOTES
Primark will issue the notes under an indenture between itself and State
Street Bank and Trust Company, as trustee. The terms of the notes include those
stated in the indenture and those made part of the indenture by reference to the
Trust Indenture Act of 1939. You can find a summary of the definitions of terms
used in this description under the subheading "Definitions." We refer you to the
indenture for the full definitions of all capitalized and defined terms
contained in this description.
The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of these notes. We have filed a copy of the indenture as an exhibit to
the registration statement, which includes this prospectus.
PRINCIPAL, MATURITY AND INTEREST
The old notes are, and the new notes will be, unsecured senior subordinated
obligations of Primark and will mature on December 15, 2008. The trustee
authenticated and delivered old notes for original issue in an aggregate
principal amount of $150.0 million. The new notes will be treated as a
continuation of the old notes, which initially bear interest at 9 1/4% per annum
from December 21, 1998 or from the most recent interest payment date to which
interest has been paid or provided for. Interest is payable semiannually on June
15 and December 15 of each year, commencing June 15, 1999, to holders of record
at the close of business on the June 1 or December 1 immediately preceding the
interest payment date.
If by June 21, 1999, we have not consummated a registered exchange offer
for the old notes or caused a shelf registration statement with respect to
resales of the old notes to be declared effective, the interest rate on the old
notes will increase by 0.5% per annum until the consummation of a registered
exchange offer or the effectiveness of a shelf registration statement. See
"-- Registration rights."
Principal of, premium, if any, and interest on the notes will be payable,
and the notes may be exchanged or transferred, at the office or agency of
Primark in the Borough of Manhattan, the City of New York. Initially, this
address will be the corporate trust office of an affiliate of the trustee at
State Street Bank and Trust Company, N.A., 61 Broadway, 15th Floor, New York,
New York 10006 or in the City of Boston at the corporate trust office of the
trustee at Two International Place, 4th Floor, Boston, Massachusetts 02110.
However, at our option, payment of interest may be made by check mailed to the
holders at their addresses as they appear in the Security Register.
TRANSFER AND EXCHANGE
The old notes are, and the new notes will be, issued only in fully
registered form, without coupons, in denominations of $1,000 of principal amount
and any integral multiple of $1,000. See "--Book-entry; delivery and form." No
service charge will be made for any registration of transfer or exchange of
notes, but Primark may require payment of a sum sufficient to cover any transfer
tax or other similar governmental charge.
WE MAY ISSUE MORE NOTES
Subject to the covenants described below under "Covenants" and applicable
law, we may issue additional notes under the indenture. The notes offered in
this exchange offer and any additional notes subsequently issued would be
treated as a single class for all purposes under the indenture.
OPTIONAL REDEMPTION
On or after December 15, 2003 and before maturity, we may redeem all or
part of these notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices, expressed as
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<PAGE> 66
percentages of principal amount, set forth below plus accrued and unpaid
interest, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003...................................................... 104.625%
2004...................................................... 103.083
2005...................................................... 101.542
2006 and thereafter....................................... 100.000
</TABLE>
At any time before December 15, 2001, we may redeem up to 35% of the total
principal amount of the notes with the Net Cash Proceeds of one or more sales by
Primark of its capital stock other than Disqualified Stock. If so redeemed,
Primark will pay a redemption price of 109.250% of the principal amount of the
redeemed notes, plus accrued and unpaid interest to the redemption date;
provided that
- at least 65% of the total principal amount of notes originally issued
remains outstanding after each such redemption; and
- notice of any such redemption is mailed within 60 days after the
consummation of such sale or sales.
In the case of any partial redemption, the trustee will select notes for
redemption in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed. If the notes are not
listed on a national securities exchange, the trustee will select by lot or by
such other method as the trustee shall deem to be fair and appropriate. However,
no note of $1,000 in principal amount or less shall be redeemed in part. If any
note is to be redeemed in part only, the notice of redemption relating to such
note shall state the portion of the principal amount to be redeemed. A new note
in principal amount equal to the unredeemed portion will be issued in the name
of the holder of that note upon cancellation of the original note.
Holders of record on a Regular Record Date that is on or before the
redemption date shall receive interest due on the Interest Payment Date.
SINKING FUND
There will be no sinking fund payments for the notes.
RANKING
The payment of principal, premium, if any, and interest, on these notes
will be subordinated to the prior payment in full of all existing and future
Senior Indebtedness of Primark.
The notes are senior subordinated indebtedness of Primark and rank equally
in right of payment with all existing and future senior subordinated
indebtedness of Primark and senior in right of payment to all existing and
future subordinated indebtedness of Primark.
After giving pro forma effect to the offering of the old notes, as of
September 30, 1998, Primark and its subsidiaries would have had approximately
$9.7 million of indebtedness outstanding other than the notes, all of which
would have been Senior Indebtedness. See "Capitalization." In addition, all
existing and future liabilities, including trade payables, of Primark's
subsidiaries will be effectively senior to the notes. As of September 30, 1998,
Primark's subsidiaries would have had approximately $243.4 million of
liabilities. See "Risk Factors -- Our other debt obligations may prevent us from
making payments on the notes" and "Risk Factors -- We will rely on cash
generated by our subsidiaries to pay the interest and principal on the notes."
Notwithstanding the foregoing, payment from the money or the proceeds of
U.S. Government Obligations held in any defeasance trust described under
"-- Defeasance" below, will not be
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<PAGE> 67
contractually subordinated in right of payment to any Senior Indebtedness or
subject to the restrictions described in this section.
In the event of a dissolution or winding up or total or partial liquidation
of Primark, upon any payment or distribution of assets or securities of Primark,
the holders of Senior Indebtedness will be entitled to receive payment in full
of all amounts due in respect of such Senior Indebtedness, before the holders of
notes will be entitled to receive any payment with respect to the notes.
However, holders of notes may receive and retain payments made from the
defeasance trust established in accordance with the indenture.
Before any payment may be made by, or on behalf of, Primark on any Senior
Subordinated Obligations, other than with the money, securities or proceeds held
under any defeasance trust established in accordance with the indenture, upon
any such dissolution, winding up, liquidation or reorganization, any payment or
distribution of assets or securities of Primark, to which the holders of the
notes or the trustee on behalf of the holders of the notes would be entitled,
but for the subordination provisions of the indenture, shall be made by Primark
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person making such payment or distribution or by the holders of the
notes or the trustee if received by them or it, directly to the holders of the
Senior Indebtedness, pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or their representatives or
to any trustee or trustees under any indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Indebtedness in full.
Primark also may not make any payment in respect of the notes, except for
payments from the defeasance trust established in accordance with the indenture,
if:
- a payment default on Senior Indebtedness occurs and has not been cured or
waived; or
- any other default occurs and is continuing on Designated Senior
Indebtedness that permits holders of the Designated Senior Indebtedness
to accelerate its maturity
and the trustee receives a notice of such default from the trustee or other
representative for the holders of any Designated Senior Indebtedness or from
holders of at least a majority in principal amount of such Designated Senior
Indebtedness then outstanding.
Payments on the notes may not be made for a period (a "Payment Blockage
Period") commencing on the date of such notice and ending 179 days thereafter.
The Payment Blockage Period shall be terminated (1) by written notice to the
trustee from the trustee for holders of the Designated Senior Indebtedness, (2)
by payment in full of the Designated Senior Indebtedness or (3) if such event or
default has been cured or waived. Not more than one Payment Blockage Period may
be commenced with respect to the notes during any period of 360 consecutive
days. In addition, there must be 180 consecutive days in any 360-day period in
which no Payment Blockage Period is in effect.
No event of default, other than an event of default pursuant to the
financial maintenance covenants under the Credit Agreement, that existed or was
continuing on the date of the commencement of the Payment Blockage Period shall
be, or shall be made, the basis for the commencement of a second Payment
Blockage Period by the representative for, or the holders of, such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days.
If any payment of Senior Indebtedness:
- is declared to be fraudulent or preferential, set aside or required to be
paid to any receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, and
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<PAGE> 68
- is recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person,
then the Senior Indebtedness or part thereof originally intended to be satisfied
shall be deemed to be reinstated and outstanding as if such payment had not
occurred. Similarly, to the extent the obligation to repay any Senior
Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared, along with all other amounts that would come
due had the obligation not been so affected, shall be deemed to be reinstated
and outstanding as Senior Indebtedness as if such declaration, invalidity or
setting aside had not occurred.
By reason of the subordination provisions described above, in the event of
liquidation or insolvency, creditors of Primark who are not holders of Senior
Indebtedness may recover less, ratably, than holders of Senior Indebtedness and
may recover more, ratably, than holders of the notes.
DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
indenture. You should refer to the indenture for the full definition of all
terms as well as any other capitalized term used herein for which no definition
is provided.
"Acquired Indebtedness" means Indebtedness of a Person
- existing at the time such Person becomes a Restricted Subsidiary, or
- assumed in connection with an Asset Acquisition by a Restricted
Subsidiary;
provided that Indebtedness of such Person which is redeemed, defeased, retired
or otherwise repaid at the time of or immediately upon consummation of the
transactions by which such Person becomes a Restricted Subsidiary or such Asset
Acquisition shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income or loss of Primark and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded, without duplication, in computing Adjusted Consolidated Net Income:
(1) the net income of any Person that is not a Restricted Subsidiary,
except to the extent of the amount of dividends or other distributions
actually paid to Primark or any of its Restricted Subsidiaries by such
Person during such period;
(2) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph
of the "Limitation on Restricted Payments" covenant described below
(and in such case, except to the extent includable pursuant to clause
(1) above), the net income or loss of any Person accrued prior to the
date it becomes a Restricted Subsidiary or is merged into or
consolidated with Primark or any of its Restricted Subsidiaries or all
or substantially all of the property and assets of such Person are
acquired by Primark or any of its Restricted Subsidiaries;
(3) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted
by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Restricted Subsidiary;
(4) any gains or losses, on an after-tax basis, attributable to Asset
Sales;
(5) solely for purposes of calculating the amount of Restricted Payments
that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below, any
amount paid or accrued as dividends on Preferred Stock of
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<PAGE> 69
Primark or any Restricted Subsidiary owned by Persons other than
Primark and any of its Restricted Subsidiaries;
(6) the Restructuring Charge;
(7) all extraordinary gains and extraordinary losses, on an after-tax
basis;
(8) write-offs of intangible assets, including research and development,
relating to assets acquired by Primark and its Restricted Subsidiaries
if such write-offs are done at the time of, or within three months
after, such acquisition; and
(9) any non-cash compensation expense incurred in connection with the
exercise of or paid or payable solely with Capital Stock, other than
Disqualified Stock, of Primark or any options, warrants or other rights
to acquire Capital Stock, other than Disqualified Stock, of Primark.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control" as applied
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
The terms "control," "controlling," "controlled by," and "under common control
with" shall have correlative meanings.
"Asset Acquisition" means
(1) an investment by Primark or any of its Restricted Subsidiaries in any
other Person pursuant to which such Person shall become a Restricted
Subsidiary or shall be merged into or consolidated with Primark or any
of its Restricted Subsidiaries; provided that such Person's primary
business is related, ancillary or complementary to the businesses of
Primark and its Restricted Subsidiaries on the date of such investment
or
(2) an acquisition by Primark or any of its Restricted Subsidiaries of the
property and assets of any Person other than Primark or any of its
Restricted Subsidiaries that constitute substantially all of a division
or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the
businesses of Primark and its Restricted Subsidiaries on the date of
such acquisition.
"Asset Disposition" means the sale or other disposition by Primark or any
of its Restricted Subsidiaries, other than to Primark or another Restricted
Subsidiary, of
(1) all or substantially all of the Capital Stock of any Restricted
Subsidiary or
(2) all or substantially all of the assets that constitute a division or
line of business of Primark or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition, including by
way of merger, consolidation or sale-leaseback transaction, in one transaction
or a series of related transactions by Primark or any of its Restricted
Subsidiaries to any Person other than Primark or any of its Restricted
Subsidiaries of
(1) all or any of the Capital Stock of any Restricted Subsidiary,
(2) all or substantially all of the property and assets of an operating
unit or business of Primark or any of its Restricted Subsidiaries, or
(3) any other property and assets, other than the Capital Stock or other
Investment in an Unrestricted Subsidiary, of Primark or any of its
Restricted Subsidiaries outside the ordinary course of business of
Primark or such Restricted Subsidiary and, in each case, that is not
governed by the provisions of the indenture applicable to mergers,
consolidations and sales of assets of Primark;
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provided that "Asset Sale" does not include
(a) sales or other dispositions of inventory, receivables and other
current assets,
(b) sales, transfers or other dispositions of assets constituting a
Restricted Payment permitted to be made under the "Limitation on
Restricted Payments" covenant, or
(c) sales or other dispositions of assets for consideration at least
equal to the fair market value of the assets sold or disposed of, to
the extent that the consideration received would satisfy clause (B)
of the "Limitation on Asset Sales" covenant.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing
(1) the sum of the products of
(a) the number of years from such date of determination to the dates of
each successive scheduled principal payment of such debt security
and
(b) the amount of such principal payment by
(2) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents, however designated, whether
voting or non-voting, in equity of such Person, whether outstanding on December
21, 1998, or issued thereafter, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property, whether real, personal or mixed, of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means the occurrence of any of the following:
(1) a "person" or "group," within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act, becomes the ultimate "beneficial owner,"
as defined in Rule 13d-3 under the Exchange Act, of more than 35% of
the total voting power of the Voting Stock of Primark on a fully
diluted basis; or
(2) individuals who on December 21, 1998, constituted the Board of
Directors (together with any new directors whose election by the Board
of Directors or whose nomination by the Board of Directors for election
by Primark's shareholders was approved by a vote of at least two-thirds
of the members of the Board of Directors then in office who either were
members of the Board of Directors on December 21, 1998, or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of
Directors then in office.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income:
(1) Consolidated Interest Expense,
(2) income taxes, other than income taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or
sales of assets,
(3) depreciation expense,
(4) amortization expense, and
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(5) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all
non-cash items increasing Adjusted Consolidated Net Income, all as
determined on a consolidated basis for Primark and its Restricted
Subsidiaries in conformity with GAAP;
provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced, to the extent not otherwise
reduced in accordance with GAAP, by an amount equal to
(A) the amount of the Adjusted Consolidated Net Income attributable to
such Restricted Subsidiary multiplied by
(B) the percentage ownership interest in the income of such Restricted
Subsidiary not owned on the last day of such period by Primark or
any of its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period,
- the aggregate amount of interest on Indebtedness including, without
limitation,
- amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting;
- all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
- the net costs associated with Interest Rate Agreements; and
- Indebtedness that is Guaranteed or secured by Primark or any of its
Restricted Subsidiaries,
- Preferred Stock dividends on Preferred Stock of Primark or any Restricted
Subsidiary held by Persons other than Primark or a Wholly Owned
Restricted Subsidiary, and
- all but the principal component of rentals in respect of Capitalized
Lease Obligations paid, accrued or scheduled to be paid or to be accrued
by Primark and its Restricted Subsidiaries during such period;
provided, however, that Consolidated Interest Expense excludes:
(1) any amount of such interest of any Restricted Subsidiary if the net
income of such Restricted Subsidiary is excluded in the calculation of
Adjusted Consolidated Net Income pursuant to clause (3) of the
definition thereof (but only in the same proportion as the net income
of such Restricted Subsidiary is excluded from the calculation of
Adjusted Consolidated Net Income pursuant to clause (3) of the
definition thereof), and
(2) any premiums, fees and expenses, and any amortization thereof, payable
in connection with the offering of the notes, all as determined on a
consolidated basis, without taking into account Unrestricted
Subsidiaries, in conformity with GAAP.
For purposes of the preceding sentence, Preferred Stock dividends shall be
deemed to be an amount equal to the actual dividends paid divided by one minus
the combined federal, state, local and foreign income tax rate applicable to
Primark and its Subsidiaries, expressed as a decimal.
"Consolidated Net Worth" means, at any date of determination,
(1) stockholders' equity as set forth on the most recently available
quarterly or annual consolidated balance sheet of Primark and its
Restricted Subsidiaries, which shall be as of a date not more than 90
days before the date of such computation, and which shall not take into
account Unrestricted Subsidiaries, minus
(2) any amounts attributable to
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- Disqualified Stock or any equity security convertible into or
exchangeable for Indebtedness,
- the cost of treasury stock, and
- the principal amount of any promissory notes receivable from the
sale of the Capital Stock of Primark or any of its Restricted
Subsidiaries,
each item to be determined in conformity with GAAP, excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52.
"Credit Agreement" means
(1) the Revolving Credit Agreement, dated as of February 7, 1997, among
Primark, the lenders party thereto from time to time, the issuing banks
referred to therein and Mellon Bank, N.A., as Agent, together with any
agreements, instruments and documents executed or delivered pursuant to
or in connection with the Revolving Credit Agreement, including,
without limitation, any Guarantees and security documents, in each case
as the Revolving Credit Agreement or such agreements, instruments or
documents may be amended (including any amendment and restatement
thereof), supplemented, extended, renewed, replaced or otherwise
modified from time to time (including any agreement extending the
maturity of, refinancing or otherwise restructuring all or any portion
of the Indebtedness under such agreement or any successor agreement, as
such agreement may be amended, renewed, extended, substituted,
replaced, restated and otherwise modified from time to time) and any
refinancing, replacement or substitution thereof or therefor, or in
respect of or for any previous refinancing, replacement or
substitution, and
(2) the Note Backup Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means
(1) any Indebtedness under the Credit Agreement, except that any
Indebtedness which represents a partial refinancing of Indebtedness
previously outstanding pursuant to the Credit Agreement, rather than a
complete refinancing thereof, shall only constitute Designated Senior
Indebtedness if such partial refinancing meets the requirements of
clause (2) below, and
(2) any other Indebtedness constituting Senior Indebtedness that, at the
date of determination, has an aggregate principal amount outstanding of
at least $25 million and that is specifically designated by Primark, in
the instrument creating or evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is:
(1) required to be redeemed prior to the Stated Maturity of the notes,
(2) redeemable at the option of the holder of such class or series of
Capital Stock at any time prior to the Stated Maturity of the notes, or
(3) convertible into or exchangeable for Capital Stock referred to in
clause (1) or (2) above or Indebtedness having a scheduled maturity
prior to the Stated Maturity of the notes;
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provided that any Capital Stock that would not constitute Disqualified Stock but
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the Stated Maturity of the notes
shall not constitute Disqualified Stock if:
- the "asset sale" or "change of control" provisions applicable to such
Capital Stock are no more favorable to the holders of such Capital Stock
than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below
and
- such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to
Primark's repurchase of such notes as are required to be repurchased
pursuant to the "Limitation on Asset Sales" and "Repurchase of Notes upon
a Change of Control" covenants described below.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of December 21, 1998, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the indenture shall be
made without giving effect to
(1) the amortization of any expenses incurred in connection with the
offering of the notes, and
(2) except as otherwise provided, the amortization of any amounts required
or permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person
(1) to purchase or pay, or advance or supply funds for the purchase or
payment of, such Indebtedness of such other Person whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services (unless such purchase
arrangements are on arm's-length terms and are entered into in the
ordinary course of business), to take-or-pay, or to maintain financial
statement conditions, or otherwise, or
(2) entered into for purposes of assuring in any other manner the obligee
of such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof, in whole or in part;
provided that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Acquired Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
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"Indebtedness" means, with respect to any Person at any date of
determination, without duplication:
(1) all indebtedness of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(3) all obligations of such Person in respect of letters of credit or other
similar instruments including reimbursement obligations with respect
thereto, but excluding obligations with respect to letters of credit,
including trade letters of credit, securing obligations (other than
obligations described in (1) or (2) above or (5), (6) or (7) below)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement;
(4) all obligations of such Person to pay the deferred and unpaid purchase
price of property or services, which purchase price is due more than
six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, except
Trade Payables and other accrued current liabilities incurred in the
ordinary course of business;
(5) all Capitalized Lease Obligations;
(6) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the
lesser of
(A) the fair market value of such asset at such date of determination
and
(B) the amount of such Indebtedness;
(7) all Indebtedness of other Persons Guaranteed by such Person to the
extent such Indebtedness is Guaranteed by such Person;
(8) all obligations to redeem or repurchase Preferred Stock issued by such
Person; and
(9) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided
(A) that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of
such Indebtedness at such time as determined in conformity with GAAP,
(B) that money borrowed and set aside at the time of the Incurrence of any
Indebtedness in order to prefund the payment of the interest on such
Indebtedness shall not be deemed to be "Indebtedness" so long as such
money is held to secure the payment of such interest,
(C) that the amount of Indebtedness at any time of any Disqualified Stock
shall be the maximum fixed redemption or repurchase price in respect
thereof, and
(D) that Indebtedness shall not include
(1) indemnities for or guarantees of any obligations of any Restricted
Subsidiary under agreements entered into by such Restricted
Subsidiary in the ordinary course of business, provided that such
obligations do not constitute Indebtedness;
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(2) contingent obligations arising in connection with the acquisition of
any business or Person, based on the future performance of such
business or Person, except to the extent such obligations are not
paid at the time such contingency is resolved under GAAP and are
recorded as a liability on the books of Primark, and its
Subsidiaries, and
(3) any liability for federal, state, local or other taxes.
"Interest Coverage Ratio" means, on any Transaction Date, the ratio of
(1) the aggregate amount of Consolidated EBITDA for the then most recent
four fiscal quarters prior to such Transaction Date for which reports
have been filed with the Commission or provided to the trustee (the
"Four Quarter Period") to
(2) the aggregate Consolidated Interest Expense during such Four Quarter
Period.
In making the foregoing calculation,
(A) pro forma effect shall be given to any Indebtedness Incurred or
repaid during the period (the "Reference Period") commencing on the
first day of the Four Quarter Period and ending on the Transaction
Date (other than Indebtedness Incurred or repaid under a revolving
credit or similar arrangement to the extent of the commitment
thereunder, or under any predecessor revolving credit or similar
arrangement, in effect on the last day of such Four Quarter Period
unless any portion of such Indebtedness is projected, in the
reasonable judgment of the senior management of Primark, to remain
outstanding for a period in excess of 12 months from the date of the
Incurrence thereof), in each case as if such Indebtedness had been
Incurred or repaid on the first day of such Reference Period;
(B) Consolidated Interest Expense attributable to interest on any
Indebtedness, whether existing or being Incurred, computed on a pro
forma basis and bearing a floating interest rate shall be computed
as if the rate in effect on the Transaction Date, taking into
account any Interest Rate Agreement applicable to such Indebtedness
if such Interest Rate Agreement has a remaining term in excess of 12
months or, if shorter, at least equal to the remaining term of such
Indebtedness, had been the applicable rate for the entire period;
(C) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions, including giving pro forma effect to the application
of proceeds of any Asset Disposition, that occur during such
Reference Period as if they had occurred and such proceeds had been
applied on the first day of such Reference Period; and
(D) pro forma effect shall be given to asset dispositions and asset
acquisitions, including giving pro forma effect to the application
of proceeds of any asset disposition, that have been made by any
Person that has become a Restricted Subsidiary or has been merged
with or into Primark or any Restricted Subsidiary during such
Reference Period and that would have constituted Asset Dispositions
or Asset Acquisitions had such transactions occurred when such
Person was a Restricted Subsidiary as if such asset dispositions or
asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such Reference Period;
provided that to the extent that clause (C) or (D) requires that pro forma
effect be given to an Asset Acquisition or Asset Disposition, such pro forma
calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed for which financial information is
available.
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"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means:
- any direct or indirect advance, loan or other extension of credit to such
Person including, without limitation, by way of Guarantee or similar
arrangement; but excluding advances to customers or suppliers in the
ordinary course of business that are, in conformity with GAAP, recorded
as accounts receivable, prepaid expenses or deposits on the balance sheet
of Primark or its Restricted Subsidiaries, or
- any capital contribution to such Person by means of any transfer of cash
or other property to others or any payment for property or services for
the account or use of others, or
- any purchase or acquisition of Capital Stock, bonds, notes, debentures or
other similar instruments issued by, such Person.
The term "Investment" includes:
(1) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary, and
(2) the fair market value of the Capital Stock, or any other
Investment, held by Primark or any of its Restricted Subsidiaries,
of or in any Person that has ceased to be a Restricted Subsidiary,
including without limitation, by reason of any transaction
permitted by clause (3) of the "Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant.
For purposes of the definition of "Unrestricted Subsidiary" and the "Limitation
on Restricted Payments" covenant described below,
(1) "Investment" shall include the fair market value of the assets
(net of liabilities, other than liabilities to Primark or any of
its Restricted Subsidiaries) of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary;
(2) the fair market value of the assets (net of liabilities, other
than liabilities to Primark or any of its Restricted Subsidiaries)
of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments; and
(3) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such
transfer.
Notwithstanding the foregoing, payments by Primark or any Restricted Subsidiary
for contingent obligations arising in connection with the acquisition of any
business or Person that becomes, or prior to December 21, 1998 became, a
Restricted Subsidiary, the payment of which was based on the future performance
of such business or Person, will not constitute an Investment; provided that any
such payment is taken into account in the event such Person ceases to be a
Restricted Subsidiary prior to such payment.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means,
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(a) with respect to any Asset Sale, the proceeds of such Asset Sale in the
form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the
form of cash or cash equivalents, except to the extent such obligations
are financed or sold with recourse to Primark or any Restricted
Subsidiary, and proceeds from the conversion of other property received
when converted to cash or cash equivalents, net of
(1) brokerage commissions and other fees and expenses, including fees
and expenses of counsel and investment bankers, related to such
Asset Sale,
(2) provisions for all taxes, whether or not such taxes will actually be
paid or are payable, as a result of such Asset Sale without regard
to the consolidated results of operations of Primark and its
Restricted Subsidiaries, taken as a whole,
(3) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either
- is secured by a Lien on the property or assets sold or
- is required to be paid as a result of such sale and
(4) appropriate amounts to be provided by Primark or any Restricted
Subsidiary as a reserve against any liabilities associated with such
Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in
conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of
such issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component
thereof) when received in the form of cash or cash equivalents (except
to the extent such obligations are financed or sold with recourse to
Primark or any Restricted Subsidiary) and proceeds from the conversion
of other property received when converted to cash or cash equivalents,
net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Note Backup Agreement" means the Note Backup Agreement, dated as of
February 7, 1997, among Primark and the lenders party thereto from time to time,
the issuing bank referred to therein and Mellon Bank, N.A., as Agent, as amended
together with any agreements, instruments and documents executed or delivered
pursuant to or in connection with such agreement, including without limitation
any Guarantees and security documents, in each case as such agreement or such
agreements, instruments or documents may be amended (including any amendment and
restatement thereof), supplemented, extended, renewed, replaced or otherwise
modified from time to time (including any agreement extending the maturity of,
refinancing or otherwise restructuring all or any portion of the Indebtedness
under such agreement or any successor agreement, as such agreement may be
amended, renewed, extended, substituted, replaced, restated and otherwise
modified from time to time) and any refinancing, replacement or substitution
thereof or therefor, or in respect of or for any previous refinancing,
replacement or substitution.
"Offer to Purchase" means an offer to purchase notes by Primark from the
holders commenced by mailing a notice to the trustee and each holder stating:
(1) the covenant pursuant to which the offer is being made and that all
notes validly tendered will be accepted for payment on a pro rata
basis;
(2) the purchase price and the date of purchase, which shall be a Business
Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Payment Date");
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(3) that any note not tendered will continue to accrue interest pursuant to
its terms;
(4) that, unless Primark defaults in the payment of the purchase price, any
note accepted for payment pursuant to the Offer to Purchase shall cease
to accrue interest on and after the Payment Date;
(5) that holders electing to have a note purchased pursuant to the Offer to
Purchase will be required to surrender the note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side
of the note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day
immediately preceding the Payment Date;
(6) that holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such holder,
the principal amount of notes delivered for purchase and a statement
that such holder is withdrawing his election to have such notes
purchased; and
(7) that holders whose notes are being purchased only in part will be
issued new notes equal in principal amount to the unpurchased portion
of the notes surrendered; provided that each note purchased and each
new note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Payment Date, Primark shall:
(1) accept for payment on a pro rata basis notes or portions thereof
tendered pursuant to an Offer to Purchase;
(2) deposit with the Paying Agent money sufficient to pay the purchase
price of all notes or portions thereof so accepted; and
(3) deliver, or cause to be delivered, to the trustee all notes or portions
thereof so accepted together with an Officers' Certificate specifying
the notes or portions thereof accepted for payment by Primark.
The Paying Agent shall promptly mail to the holders of notes so accepted payment
in an amount equal to the purchase price, and the trustee shall promptly
authenticate and mail to such holders a new note equal in principal amount to
any unpurchased portion of the note surrendered; provided that each note
purchased and each new note issued shall be in a principal amount of $1,000 or
integral multiples thereof. Primark will publicly announce the results of an
Offer to Purchase as soon as practicable after the Payment Date. The trustee
shall act as the Paying Agent for an Offer to Purchase. Primark will comply with
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable, in the event
that Primark is required to repurchase notes pursuant to an Offer to Purchase.
"Permitted Investment" means an Investment by Primark or any Restricted
Subsidiary in:
(1) Primark or a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary or be merged
or consolidated with or into or transfer or convey all or substantially
all its assets to, Primark or a Restricted Subsidiary; provided that
such person's primary business is related, ancillary or complementary
to the businesses of Primark and its Restricted Subsidiaries on the
date of such Investment;
(2) Temporary Cash Investments;
(3) payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses in
accordance with GAAP;
(4) stock, obligations or securities received in satisfaction of judgments;
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(5) an Unrestricted Subsidiary consisting solely of an Investment in
another Unrestricted Subsidiary;
(6) Interest Rate Agreements and Currency Agreements designed solely to
protect Primark or its Restricted Subsidiaries against fluctuations in
interest rates or foreign currency exchange rates;
(7) loans or advances to employees of Primark or its Restricted
Subsidiaries to purchase Capital Stock, other than Disqualified Stock,
of Primark in an aggregate amount outstanding not to exceed $10
million; and
(8) any Person the primary business of which is related, ancillary or
complementary to the businesses of Primark and its Restricted
Subsidiaries on the date of such Investment; provided that the
aggregate amount of such Investments does not exceed $50 million plus
the net reduction in Investments made pursuant to this clause (8)
resulting from distributions on or repayments of such Investments or
from the Net Cash Proceeds from any sale of any such Investment (except
in each case to the extent any such payment or proceeds is included in
the calculation of Adjusted Consolidated Net Income) or from such
Person becoming a Restricted Subsidiary, valued in each case as
provided in the definition of "Investments", provided that the net
reduction in any Investment shall not exceed the amount of such
Investment.
"Put and Call Agreement" means the Put and Call Agreement dated October 15,
1996, as amended, among Disclosure, Disclosure International Incorporated, The
Winthrop Corporation and Wright Investors Services International Limited as in
effect on December 21, 1998.
"Repurchase Program" means repurchases of Capital Stock of Primark after
December 21, 1998, and prior to December 31, 2003 in an aggregate amount not to
exceed $75 million.
"Restricted Subsidiary" means any Subsidiary of Primark other than an
Unrestricted Subsidiary.
"Restructuring Charge" means the $77.4 million of pre-tax charges
(including an extraordinary item) recorded by Primark in the quarter ended June
30, 1998 in connection with the restructuring and integration of Primark's
operations into three divisions.
"Senior Indebtedness" means the following obligations of Primark, whether
outstanding on December 21, 1998, or thereafter Incurred:
(1) all Indebtedness and all other monetary obligations (including, without
limitation, expenses, fees, principal, interest, reimbursement
obligations under letters of credit and indemnities payable in
connection therewith) of Primark, under or in respect of the Credit
Agreement or any Interest Rate Agreement or Currency Agreement relating
to the Indebtedness under the Credit Agreement, and
(2) all other Indebtedness and all other monetary obligations of Primark,
other than the notes, including principal and interest on such
Indebtedness, unless such Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such Indebtedness is
issued, is equal in ranking with, or subordinated in right of payment
to, the notes; provided that the term "Senior Indebtedness" shall not
include
(a) any Indebtedness of Primark that, when Incurred, was without
recourse to Primark,
(b) any Indebtedness of Primark to a Subsidiary of Primark, or to a
joint venture in which Primark has an interest,
(c) any Indebtedness of Primark, to the extent not permitted by the
"Limitation on Indebtedness" covenant or the "Limitation on Senior
Subordinated Indebtedness" covenant described below,
(d) any repurchase, redemption or other obligation in respect of
Disqualified Stock,
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(e) any Indebtedness to any employee of Primark or any of its
Subsidiaries,
(f) any liability for taxes owed or owing to Primark, or
(g) any Trade Payables.
"Senior Subordinated Obligations" means any principal of, premium, if any,
interest, or other amounts due, on the notes payable pursuant to the terms of
the notes or upon acceleration, including any amounts received upon the exercise
of the rights of rescission or other rights of action, including claims for
damages, or otherwise, to the extent relating to the purchase price of the notes
or amounts corresponding to such principal, premium, if any, or interest on the
notes.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries,
(1) for the most recent fiscal year of Primark, accounted for more than 10%
of the consolidated revenues of Primark and its Restricted Subsidiaries
or
(2) as of the end of such fiscal year, was the owner of more than 10% of
the consolidated assets of Primark and its Restricted Subsidiaries,
all as set forth on the most recently available consolidated financial
statements of Primark for such fiscal year.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. and its successors.
"Stated Maturity" means,
(1) with respect to any debt security, the date specified in such debt
security as the fixed date on which the final installment of principal
of such debt security is due and payable; and
(2) with respect to any scheduled installment of principal of or interest
on any debt security, the date specified in such debt security as the
fixed date on which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following:
(1) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the
United States of America or any agency thereof;
(2) time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in
excess of $50 million, or the foreign currency equivalent thereof, and
has outstanding debt which is rated "A," or such similar equivalent
rating, or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act)
or any money-market fund sponsored by a registered broker dealer or
mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
securities of the type described in clause (1) above entered into with
an institution meeting the qualifications described in clause (2)
above;
(4) commercial paper, maturing not more than 270 days after the date of
acquisition, issued by a corporation (other than an Affiliate of
Primark) organized and in existence under the laws of the United States
of America, any state thereof or any foreign country recognized by the
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United States of America with a rating at the time as of which any
investment therein is made of "P-1," or higher, according to Moody's or
"A-1," or higher, according to S&P;
(5) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any
state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at
least "A" by S&P or Moody's; and
(6) any mutual fund investing exclusively in investments of the type
described in clauses (1) through (5) above.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by Primark or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of Primark that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the
manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Restricted Subsidiary, including any
newly acquired or newly formed Subsidiary of Primark, to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, Primark or any Restricted Subsidiary; provided that
(A) any Guarantee by Primark or any Restricted Subsidiary of any
Indebtedness of the Subsidiary being so designated shall be deemed an
"Incurrence" of such Indebtedness and an "Investment" by Primark or
such Restricted Subsidiary, or both, if applicable, at the time of such
designation;
(B) either
1. the Subsidiary to be so designated has total assets of $1,000 or
less, or
2. if such Subsidiary has assets greater than $1,000, such designation
would be permitted under the "Limitation on Restricted Payments"
covenant described below and
(C) if applicable, the Incurrence of Indebtedness and the Investment
referred to in clause (A) of this proviso would be permitted under the
"Limitation on Indebtedness" and "Limitation on Restricted Payments"
covenants described below.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that
(1) no Default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such designation, and
(2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred, and shall be deemed to have been
Incurred, for all purposes of the indenture.
Any such designation by the Board of Directors shall be evidenced to the trustee
by promptly filing with the trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
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"U.S. Dollar Equivalent" means, with respect to any monetary amounts in a
currency other than the U.S. dollar, at any time of determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m., New York City time, on a date not more than two
Business Days prior to such determination.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary, other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law, by such Person or one or more Wholly Owned Subsidiaries of such
Person.
COVENANTS
Limitation on Indebtedness
(a) Primark will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness, other than the notes and
Indebtedness existing on December 21, 1998; provided that Primark or
any Restricted Subsidiary may Incur Indebtedness if, after giving
effect to the Incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, the Interest Coverage Ratio
would be greater than 2.0:1.
Notwithstanding the foregoing, Primark and any Restricted Subsidiary,
except as specified below, may Incur each and all of the following:
(1) Indebtedness pursuant to the Credit Agreement, other than the Note
Backup Agreement, outstanding at any time in an aggregate principal
amount not to exceed $225 million, less any amount of such
Indebtedness permanently repaid as provided under the "Limitation on
Asset Sales" covenant described below;
(2) Indebtedness owed (A) to Primark evidenced by an unsubordinated
promissory note or (B) to any Restricted Subsidiary; provided that
any event which results in any such Restricted Subsidiary ceasing to
be a Restricted Subsidiary or any subsequent transfer of such
Indebtedness, other than to Primark or another Restricted
Subsidiary, shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (2);
(3) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness
(other than Indebtedness Incurred under clause (1), (2), (4), (6),
(7), (8) or (9) of this paragraph) and any refinancings thereof in
an amount not to exceed the amount so refinanced or refunded, plus
premiums, accrued interest, fees and expenses; provided that:
Indebtedness the proceeds of which are used to refinance or refund
the notes or Indebtedness that is equal in ranking with, or
subordinated in right of payment to, the notes shall only be
permitted under this clause (3) if
(A) in case the notes are refinanced in part or the Indebtedness to
be refinanced is equal in ranking with the notes, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is
outstanding, is expressly made equal in ranking with, or
subordinate in right of payment to, the remaining notes,
(B) in case the Indebtedness to be refinanced is subordinated in
right of payment to the notes, such new Indebtedness, by its
terms or by the terms of any agreement
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or instrument pursuant to which such new Indebtedness is issued
or remains outstanding, is expressly made subordinate in right of
payment to the notes at least to the extent that the Indebtedness
to be refinanced is subordinated to the notes and
(C) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated
Maturity of the Indebtedness to be refinanced or refunded, and
the Average Life of such new Indebtedness is at least equal to
the remaining Average Life of the Indebtedness to be refinanced
or refunded; and
provided, further, that in no event may Indebtedness of Primark that is
equal in ranking with or subordinated in rights of payment to the notes
be refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (3);
(4) Indebtedness
(A) in respect of performance, surety or appeal bonds provided in the
ordinary course of business,
(B) under Currency Agreements and Interest Rate Agreements; provided
that such agreements (a) are designed solely to protect Primark
or its Restricted Subsidiaries against fluctuations in foreign
currency exchange rates or interest rates and (b) do not increase
the Indebtedness of the obligor outstanding at any time other
than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; and
(C) arising from agreements providing for indemnification, adjustment
of purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any
obligations of Primark or any of its Restricted Subsidiaries
pursuant to such agreements, in any case Incurred in connection
with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such
acquisition) in a principal amount not to exceed the gross
proceeds actually received by Primark or any Restricted
Subsidiary in connection with such disposition;
(5) Indebtedness, to the extent the net proceeds thereof are promptly,
(A)used to purchase notes tendered in an Offer to Purchase made as a
result of a Change of Control or (B) deposited to defease the notes
as described below under "Defeasance";
(6) Guarantees of the notes and Guarantees of Indebtedness of Primark by
any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with the
"Limitation on Issuance of Guarantees by Restricted Subsidiaries"
covenant described below;
(7) Indebtedness pursuant to the Note Backup Agreement outstanding at
any time in a total principal amount outstanding at any time not to
exceed $8.3 million, less any amount of such Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales"
covenant described below;
(8) Indebtedness in respect of Capitalized Lease Obligations in a total
principal amount outstanding at any time not to exceed $20 million,
less any amount of such Indebtedness permanently repaid as provided
under the "Limitation on Asset Sales" covenant described below; and
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(9) Indebtedness, in addition to Indebtedness permitted under clauses
(1) through (8) above, in an aggregate principal amount outstanding
at any time not to exceed $25 million, or the U.S. Dollar Equivalent
thereof, less any amount of such Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant described
below.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that Primark
or a Restricted Subsidiary may Incur pursuant to this "Limitation on
Indebtedness" covenant shall not be deemed to be exceeded, with respect
to any outstanding Indebtedness due solely to the result of
fluctuations in the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant,
(1) Indebtedness Incurred under the Credit Agreement on or prior to
December 21, 1998, shall be treated as Incurred pursuant to clause
(1) of the second paragraph of this "Limitation on Indebtedness"
covenant,
(2) Guarantees, Liens or obligations with respect to letters of credit
supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included, and
(3) any Liens granted pursuant to the equal and ratable provisions
referred to in the "Limitation on Liens" covenant described below
shall not be treated as Indebtedness.
For purposes of determining compliance with this "Limitation on Indebtedness"
covenant, in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described in the above clauses (other than
Indebtedness referred to in clause (1) of the preceding sentence), Primark, in
its sole discretion, shall classify, and from time to time may reclassify, such
item of Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
Limitation on Senior Subordinated Indebtedness
Primark shall not Incur any Indebtedness that is subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness is equal in ranking
with, or subordinated in right of payment to, the notes; provided that the
foregoing limitation shall not apply to distinctions between categories of
Senior Indebtedness of Primark that exist by reason of any Liens or Guarantees
arising or created in respect of some but not all such Senior Indebtedness.
Limitation on Liens
Primark shall not Incur any Indebtedness secured by a Lien ("Secured
Indebtedness") which is not Senior Indebtedness unless, at the same time,
effective provision is made to secure the notes equally and ratably with (or, if
the Secured Indebtedness is subordinated in right of payment to the notes,
before) such Secured Indebtedness for so long as such Secured Indebtedness is
secured by a Lien.
Limitation on Restricted Payments
Primark will not, and will not permit any Restricted Subsidiary to,
directly or indirectly,
(1) declare or pay any dividend or make any distribution on or with respect
to its Capital Stock held by Persons other than Primark or any of its
Restricted Subsidiaries, other than
(a) dividends or distributions payable solely in shares of its Capital
Stock, other than Disqualified Stock, or in options, warrants or
other rights to acquire shares of such Capital Stock,
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(b) pro rata dividends or distributions on Common Stock of Restricted
Subsidiaries held by minority stockholders, and
(c) dividends on Preferred Stock of Primark or any Restricted
Subsidiary, provided such Preferred Stock was permitted to be issued
under the "Limitation on Indebtedness" covenant;
(2) purchase, redeem, retire or otherwise acquire for value any shares of
Capital Stock of
(A) Primark or an Unrestricted Subsidiary, including options,
warrants or other rights to acquire such shares of Capital
Stock, held by any Person, or
(B) a Restricted Subsidiary, including options, warrants or other
rights to acquire such shares of Capital Stock, held by any
Affiliate of Primark, other than a Wholly Owned Restricted
Subsidiary, or any holder, or any Affiliate of such holder, of
5% or more of the Capital Stock of Primark,
(3) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or
retirement for value, of Indebtedness of Primark that is subordinated
in right of payment to the notes, or
(4) make any Investment, other than a Permitted Investment, in any Person
(such payments or any other actions described in clauses (1) through
(4) being collectively "Restricted Payments")
if, at the time of, and after giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be continuing,
(B) Primark could not Incur at least $1.00 of Indebtedness under the
first paragraph of the "Limitation on Indebtedness" covenant, or
(C) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by
a Board Resolution) made after December 21, 1998 shall exceed the
sum of
(1) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss), determined by excluding
income resulting from transfers of assets by Primark or a
Restricted Subsidiary to an Unrestricted Subsidiary, accrued on
a cumulative basis during the period, taken as one accounting
period, beginning on October 1, 1998 and ending on the last day
of the last fiscal quarter preceding the Transaction Date for
which reports have been filed with the Commission or provided
to the trustee plus
(2) the aggregate Net Cash Proceeds received by Primark after
December 21, 1998 from the issuance and sale permitted by the
indenture of its Capital Stock, other than Disqualified Stock,
to a Person who is not a Subsidiary of Primark, including an
issuance or sale permitted by the indenture of Indebtedness of
Primark for cash subsequent to December 21, 1998 upon the
conversion of such Indebtedness into Capital Stock, other than
Disqualified Stock, of Primark, or from the issuance to a
Person who is not a Subsidiary of Primark of any options,
warrants or other rights to acquire Capital Stock of Primark
(in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the
option of the holder, or are required to be redeemed, prior to
the Stated Maturity of the notes) plus
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(3) an amount equal to the net reduction in Investments, other than
reductions in Permitted Investments, in any Person resulting
from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets,
in each case to Primark or any Restricted Subsidiary or from
the Net Cash Proceeds from the sale of any such Investment,
except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted
Consolidated Net Income, or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries, valued in each case as
provided in the definition of "Investments", not to exceed, in
each case, the amount of Investments previously made by Primark
or any Restricted Subsidiary in such Person or Unrestricted
Subsidiary plus
(4) $25 million.
The above provision shall not be violated by reason of:
(1) the payment of any dividend within 60 days after the date of its
declaration if, at that date of declaration, such payment would
comply with the above paragraph;
(2) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right
of payment to the notes including premium, if any, and accrued and
unpaid interest, with the proceeds of, or in exchange for,
Indebtedness Incurred under clause (3) of the second paragraph of
part (a) of the "Limitation on Indebtedness" covenant;
(3) the repurchase, redemption or other acquisition of Capital Stock
of Primark or an Unrestricted Subsidiary (or options, warrants or
other rights to acquire such Capital Stock) in exchange for, or
out of the proceeds of a substantially concurrent offering of,
shares of Capital Stock, other than Disqualified Stock, of Primark
(or options, warrants or other rights to acquire such Capital
Stock);
(4) the making of any principal payment or the repurchase, redemption,
retirement, defeasance or other acquisition for value of
Indebtedness of Primark which is subordinated in right of payment
to the notes in exchange for, or out of the proceeds of, a
substantially concurrent offering of, shares of the Capital Stock,
other than Disqualified Stock, of Primark (or options, warrants or
other rights to acquire such Capital Stock);
(5) payments or distributions, to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of
the indenture applicable to mergers, consolidations and transfers
of all or substantially all of the property and assets of Primark;
(6) Investments acquired in exchange for Capital Stock, other than
Disqualified Stock, of Primark;
(7) payments under the Repurchase Program; or
(8) other Restricted Payments in an aggregate amount not to exceed $10
million;
provided that, except in the case of clauses (1) and (3), no Default or Event of
Default shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
Except as set forth in the next sentence, each Restricted Payment and
issuance of Capital Stock described in the preceding paragraph shall be included
in calculating whether the conditions of clause (C) of the first paragraph of
this "Limitation on Restricted Payments" covenant have been
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met with respect to any subsequent Restricted Payments. The following Restricted
Payments described in the preceding paragraph shall not be included in such
calculation:
(x) a Restricted Payment described in clause (2),
(y) an exchange of Capital Stock for Capital Stock or Indebtedness
described in clause (3) or (4), and
(z) an Investment described in clause (6) or (8).
In the event the proceeds of an issuance of Capital Stock of Primark are
used for the redemption, repurchase or other acquisition of the notes, or
Indebtedness that is equal in ranking with the notes, then the Net Cash Proceeds
of such issuance shall be included in clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition of
Indebtedness. For purposes of determining compliance with this "Limitation on
Restricted Payments" covenant, in the event that a Restricted Payment meets the
criteria of more than one of the types of Restricted Payments described in the
above clauses, Primark, in its sole discretion, may order and classify, and from
time to time may reclassify, such Restricted Payment if it would have been
permitted at the time such Restricted Payment was made and at the time of such
reclassification.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
Primark will not, and will not permit any Restricted Subsidiary to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to
(1) pay dividends or make any other distributions permitted by applicable
law on any Capital Stock of such Restricted Subsidiary owned by Primark
or any other Restricted Subsidiary,
(2) pay any Indebtedness owed to Primark or any other Restricted
Subsidiary,
(3) make loans or advances to Primark or any other Restricted Subsidiary,
or
(4) transfer any of its property or assets to Primark or any other
Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or restrictions:
(1) existing on December 21, 1998, in the Credit Agreement, the indenture
or any other agreements in effect on December 21, 1998, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced;
(2) existing under or by reason of applicable law;
(3) existing with respect to any Person or the property or assets of such
Person acquired by Primark or any Restricted Subsidiary, existing at
the time of such acquisition and not incurred in contemplation thereof,
which encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or the
property or assets of such Person so acquired;
(4) in the case of clause (4) of the first paragraph of the "Limitation on
Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant,
(A) that restrict in a customary manner the subletting, assignment or
transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset,
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(B) existing by virtue of any transfer of, agreement to transfer, option
or right with respect to, or Lien on, any property or assets of
Primark or any Restricted Subsidiary not otherwise prohibited by the
indenture or
(C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in
the aggregate, detract from the value of property or assets of
Primark or any Restricted Subsidiary in any manner material to
Primark or any Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all
or substantially all of the Capital Stock of, or property and assets
of, such Restricted Subsidiary; or
(6) contained in the terms of any Indebtedness or any agreement pursuant to
which such Indebtedness was issued if
(A) the encumbrance or restriction applies only in the event of a
payment default or a default with respect to a financial covenant
contained in such Indebtedness or agreement,
(B) the encumbrance or restriction is not materially more
disadvantageous to the holders of the notes than is customary in
comparable financings, as determined by Primark, and
(C) Primark determines that any such encumbrance or restriction will not
materially affect our ability to make principal or interest payments
on the notes.
Nothing contained in the "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent Primark or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of Primark or
any of its Restricted Subsidiaries that secure Indebtedness of Primark or any of
its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
Primark will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except:
(1) to Primark or a Wholly Owned Restricted Subsidiary;
(2) issuances of director's qualifying shares or sales to foreign nationals
of shares of Capital Stock of foreign Restricted Subsidiaries, to the
extent required by applicable law;
(3) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving
effect to such issuance or sale would have been permitted to be made
under the "Limitation on Restricted Payments" covenant if made on the
date of such issuance or sale; or
(4) (x) issuances or sales of Common Stock of a Restricted Subsidiary,
provided that Primark or such Restricted Subsidiary applies the Net
Cash Proceeds, if any, of any such sale in accordance with clause (A)
or (B) of the "Limitation on Asset Sales" covenant described below and
(y) issuances or sales of Preferred Stock of a Restricted Subsidiary if
such Restricted Subsidiary would be entitled to Incur such Indebtedness
pursuant to the "Limitation on Indebtedness" covenant and such
Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the indenture providing for a Guarantee (a
"Subsidiary Guarantee") of payment of the notes.
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Limitation on Issuances of Guarantees by Restricted Subsidiaries
Primark will not permit any Restricted Subsidiary, directly or indirectly,
to Guarantee any Indebtedness of Primark which is equal in ranking with or
subordinate in right of payment to the notes ("Guaranteed Indebtedness"), unless
(1) such Restricted Subsidiary simultaneously executes and delivers a
Subsidiary Guarantee of payment of the notes by such Restricted
Subsidiary, and
(2) such Restricted Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against Primark or any
other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Subsidiary Guarantee;
provided that these restrictions shall not apply to any Guarantee of any
Restricted Subsidiary that existed at the time such Person became a Restricted
Subsidiary and was not Incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary.
If the Guaranteed Indebtedness is:
(A) equal in ranking with the notes, then the Guarantee of such Guaranteed
Indebtedness shall be equal in ranking with, or subordinated to, the
Subsidiary Guarantee or
(B) subordinated to the notes, then the Guarantee of such Guaranteed
Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated
to the notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon
(1) any sale, exchange or transfer, to any Person not an Affiliate of
Primark, of all of Primark's and each Restricted Subsidiary's Capital
Stock in, or all or substantially all the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by the
indenture), or
(2) the release or discharge of the Guarantee which resulted in the
creation of such Subsidiary Guarantee, except a discharge or release by
or as a result of payment under such Guarantee.
Limitation on Transactions with Shareholders and Affiliates
Primark will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder or any Affiliate of such holder
of 5% or more of any class of Capital Stock of Primark or with any Affiliate of
Primark or any Restricted Subsidiary, except upon fair and reasonable terms no
less favorable to Primark or such Restricted Subsidiary than could be obtained,
at the time of such transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement providing for such
transaction, in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(1) transactions (A) approved by a majority of the disinterested members of
the Board of Directors or (B) for which Primark or a Restricted
Subsidiary delivers to the trustee a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair
to Primark or such Restricted Subsidiary from a financial point of
view;
(2) any transaction solely between Primark and any of its Wholly Owned
Restricted Subsidiaries or solely between Wholly Owned Restricted
Subsidiaries;
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(3) management and administrative services provided by Primark or any
Restricted Subsidiary to any Restricted Subsidiary or any Person in
which Primark or any Restricted Subsidiary has an Investment;
(4) the payment of reasonable and customary regular fees to directors of
Primark who are not employees of Primark;
(5) any payments or other transactions pursuant to any tax-sharing
agreement between Primark and any other Person with which Primark files
a consolidated tax return or with which Primark is part of a
consolidated group for tax purposes;
(6) any payment made under the Put and Call Agreement; or
(7) any Restricted Payments not prohibited by the "Limitation on Restricted
Payments" covenant.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (2) through (7)
of this paragraph,
(a) the aggregate amount of which exceeds $3 million in value, must be
approved or determined to be fair in the manner provided for in
clause (1)(A) or (B) above, and
(b) the aggregate amount of which exceeds $5 million in value, must be
determined to be fair in the manner provided for in clause (1)(B)
above.
Limitation on Asset Sales
Primark will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (1) the consideration received by Primark or
such Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (2) at least 75% of the consideration received
consists of cash or Temporary Cash Investments or the assumption of Indebtedness
of Primark or any Restricted Subsidiary, other than Indebtedness to Primark or
any Restricted Subsidiary, provided that Primark or such Restricted Subsidiary
is irrevocably and unconditionally released from all liability under such
Indebtedness.
In the event and to the extent that the Net Cash Proceeds received by
Primark or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after December 21, 1998, in any period of 12 consecutive months
exceed $10 million, then Primark shall or shall cause the relevant Restricted
Subsidiary to:
(1) within twelve months after the date Net Cash Proceeds so received
exceed $10 million
(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay Senior Indebtedness of Primark, or any Restricted
Subsidiary providing a Subsidiary Guarantee or Indebtedness of any
other Restricted Subsidiary, in each case owing to a Person other
than Primark or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant to
clause (A) (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement), in
property or assets, other than current assets, of a nature or type
or that are used in a business, or in a company having property and
assets of a nature or type, or engaged in a business, similar or
related to the nature or type of the property and assets of, or the
business of, Primark and its Restricted Subsidiaries existing on the
date of such investment and
(2) apply, no later than the end of the 12-month period referred to in
clause (1), such excess Net Cash Proceeds, to the extent not applied
pursuant to clause (1), as provided in the following paragraph of this
"Limitation on Asset Sales" covenant.
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The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (1)
above and not applied as so required by the end of such period shall constitute
"Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not previously subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, Primark must
commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the holders on a pro rata basis a total
principal amount of notes equal to the Excess Proceeds on such date, at a
purchase price equal to 100% of the principal amount of the notes, plus, in each
case, accrued interest, if any, to the Payment Date.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Primark must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the Payment Date; provided, however, that Primark shall not
be required to commence such an Offer to Purchase if the notes have, on the 30th
day after such Change of Control, a rating of at least BBB- (or equivalent or
successor rating) by S&P and a rating of at least Baa3 (or equivalent or
successor rating) by Moody's.
There can be no assurance that Primark will have sufficient funds available
at the time of any Change of Control to make any debt payment (including
repurchases of notes) required by the foregoing covenant, as well as may be
contained in other securities of Primark which might be outstanding at the time.
The above covenant requiring Primark to repurchase the notes will, unless
consents are obtained, require Primark to repay all indebtedness then
outstanding which by its terms would prohibit such note repurchase, either prior
to or concurrently with such note repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not Primark is then required to file reports with the
Commission, Primark shall file with the Commission all such reports and other
information as it would be required to file with the Commission by Sections
13(a) or 15(d) under the Securities Exchange Act if it were subject thereto.
Primark shall supply the trustee and each holder or shall supply to the trustee
for forwarding to each such holder, without cost to such holder, copies of such
reports and other information.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the indenture:
(a) default in the payment of principal of or premium, if any, on any
note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise, whether or not such payment
is prohibited by the provisions described under "-- Ranking";
(b) default in the payment of interest on any note when the same becomes
due and payable, and such default continues for a period of 30 days,
whether or not such payment is prohibited by the provisions
described under "-- Ranking";
(c) default in the performance or breach of the provisions of the
indenture applicable to mergers, consolidations and transfers of all
or substantially all of the assets of Primark or the failure to make
or consummate an Offer to Purchase in accordance with the
"Limitation on Asset Sales" or "Repurchase of Notes upon a Change of
Control" covenant;
(d) Primark defaults in the performance of or breaches any other
covenant or agreement of Primark in the indenture or under the notes
other than a default specified in clause (a), (b) or (c) above and
such default or breach continues for a period of 30
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consecutive days after written notice by the trustee or the holders
of 25% or more in aggregate principal amount of the notes;
(e) there occurs with respect to any issue or issues of Indebtedness of
Primark or any Significant Subsidiary having an outstanding
principal amount of $10 million or more in the aggregate for all
such issues of all such Persons, whether such Indebtedness now
exists or is created in the future, (1) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not
been discharged in full or such acceleration has not been rescinded
or annulled within 30 days of such acceleration and/or (2) the
failure to make a principal payment at the final, but not any
interim, fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment
default;
(f) any final judgment or order, not covered by insurance, for the
payment of money in excess of $10 million in the aggregate for all
such final judgments or orders against all such Persons (treating
any deductibles, self-insurance or retention as not so covered)
shall be rendered against Primark or any Significant Subsidiary and
shall not be paid or discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to
exceed $10 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
(g) a court having jurisdiction in the premises enters a decree or order
for (A) relief in respect of Primark or any Significant Subsidiary
in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, (B) appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official of Primark or any Significant Subsidiary or for
all or substantially all of the property and assets of Primark or
any Significant Subsidiary or (C) the winding up or liquidation of
the affairs of Primark or any Significant Subsidiary and, in each
case, such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(h) Primark or any Significant Subsidiary (A) commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of
Primark or any Significant Subsidiary or for all or substantially
all of the property and assets of Primark or any Significant
Subsidiary or (C) effects any general assignment for the benefit of
creditors.
If an Event of Default, other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to Primark, occurs and is continuing
under the indenture, the trustee or the holders of at least 25% in total
principal amount of the notes, then outstanding, by written notice to Primark,
and to the trustee if such notice is given by the holders, may, and the trustee
at the request of such holders shall, declare the principal of, premium, if any,
and accrued interest on the notes to be immediately due and payable. Upon a
declaration of acceleration, such principal of, premium, if any, and accrued
interest shall be immediately due and payable. In the event of a declaration of
acceleration because an Event of Default set forth in clause (e) above has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by Primark or
the relevant Significant Subsidiary or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto. If an Event of Default
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specified in clause (g) or (h) above occurs with respect to Primark, the
principal of, premium, if any, and accrued interest on the notes then
outstanding shall by the mere fact become and be immediately due and payable
without any declaration or other act on the part of the trustee or any holder.
The holders of at least a majority in principal amount of the old notes by
written notice to Primark and to the trustee, may waive all past defaults and
rescind and annul a declaration of acceleration and its consequences if (1) all
existing Events of Default, other than the nonpayment of the principal of,
premium, if any, and interest on the notes that have become due solely by such
declaration of acceleration, have been cured or waived and (2) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction. For information as to the waiver of defaults, see "-- Modification
and waiver."
The holders of at least a majority in total principal amount of the old
notes may direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee. However, the trustee may refuse to follow any direction that
conflicts with law or the indenture, that may involve the trustee in personal
liability, or that the trustee determines in good faith may be unduly
prejudicial to the rights of holders of notes not joining in the giving of such
direction and may take any other action it deems proper that is not inconsistent
with any such direction received from holders of notes. A holder may not pursue
any remedy with respect to the indenture or the notes unless:
(1) the holder gives the trustee written notice of a continuing Event of
Default;
(2) the holders of at least 25% in total principal amount of old notes make
a written request to the trustee to pursue the remedy;
(3) such holder or holders offer the trustee indemnity satisfactory to the
trustee against any costs, liability or expense;
(4) the trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period, the holders of a majority in aggregate
principal amount of the old notes do not give the trustee a direction
that is inconsistent with the request.
However, such limitations do not apply to the right of any holder of a note to
receive payment of the principal of, premium, if any, or interest on, such note
or to bring suit for the enforcement of any such payment, on or after the due
date expressed in the notes, which right shall not be impaired or affected
without the consent of the holder.
The Chief Executive Officer or the Chief Financial Officer of Primark must
certify, on or before a date not more than 90 days after the end of each fiscal
year, that a review has been conducted of the activities of Primark and its
Restricted Subsidiaries and Primark's and its Restricted Subsidiaries'
performance under the indenture and that Primark has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof.
Primark will also be obligated to notify the trustee of any default or defaults
in the performance of any covenants or agreements under the indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Primark will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or a
series of related transactions) to, any Person or permit any Person to merge
with or into Primark unless:
(1) Primark shall be the continuing Person, or the Person, if other than
Primark, formed by such consolidation or into which Primark is merged
or that acquired or leased such property and assets of Primark shall be
a corporation organized and validly existing under the laws of
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the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered
to the trustee, all of the obligations of Primark on all of the notes
and under the indenture;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction on a pro forma
basis, Primark or any Person becoming the successor obligor of the
notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of Primark immediately prior to such
transaction;
(4) immediately after giving effect to such transaction on a pro forma
basis Primark, or any Person becoming the successor obligor of the
notes, as the case may be, could incur at least $1.00 of Indebtedness
under the first paragraph of the "Limitation on Indebtedness" covenant;
provided that this clause (4) shall not apply to a consolidation,
merger or sale of all, but not less than all, of the assets of Primark
if all Liens and Indebtedness of Primark or any Person becoming the
successor obligor on the notes, as the case may be, and its Restricted
Subsidiaries outstanding immediately after such transaction would have
been permitted (and all such Liens and Indebtedness, other than Liens
and Indebtedness of Primark and its Restricted Subsidiaries outstanding
immediately prior to the transaction, shall be deemed to have been
Incurred) for all purposes of the indenture; and
(5) Primark delivers to the trustee an Officers' Certificate, arithmetic
computations to demonstrate compliance with clauses (3) and (4), and
Opinion of Counsel, in each case stating that such consolidation,
merger or transfer and such supplemental indenture complies with this
provision and that all conditions precedent provided for herein
relating to such transaction have been complied with;
provided, however, that clauses (3) and (4) above do not apply if, in the good
faith determination of the Board of Directors of Primark, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of Primark and any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations.
DEFEASANCE
Defeasance and discharge
Primark will be deemed to have paid and will be discharged from any and all
obligations in respect of the notes on the 123rd day after the deposit referred
to below, and the provisions of the indenture will no longer be in effect with
respect to the notes if certain conditions are met, including those listed
below. However, this does not apply to, among other matters, certain obligations
to register the transfer or exchange of the notes, to replace stolen, lost or
mutilated notes, to maintain paying agencies and to hold monies for payment in
trust. The conditions to be met include:
(A) Primark has deposited with the trustee, in trust, money or U.S.
Government Obligations that through the payment of interest and
principal in accordance with their terms will provide money in an
amount sufficient to pay the principal of, premium, if any, and
accrued interest on the notes on the Stated Maturity of such
payments in accordance with the terms of the indenture and the
notes,
(B) Primark has delivered to the trustee
(1) either
(x) an Opinion of Counsel to the effect that holders will not
recognize income, gain or loss for federal income tax
purposes as a result of Primark's exercise
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of its option under this "Defeasance" provision and will be
subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not
occurred, which Opinion of Counsel must be based upon, and
accompanied by a copy of, a ruling of the Internal Revenue
Service to the same effect unless there has been a change in
applicable federal income tax law after the Closing Date
such that a ruling is no longer required, or
(y) a ruling directed to the trustee received from the Internal
Revenue Service to the same effect as the above Opinion of
Counsel; and
(2) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of
1940 and after the passage of 123 days following the deposit, the
trust fund will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or Section 15 of the New York
Debtor and Creditor Law,
(C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice
or lapse of time or both would become an Event of Default, shall
have occurred and be continuing on the date of such deposit or
during the period ending on the 123rd day after the date of such
deposit, and such deposit shall not result in a breach or violation
of, or constitute a default under, any other agreement or instrument
to which Primark or any of its Subsidiaries is a party or by which
Primark or any of its Subsidiaries is bound,
(D) Primark is not prohibited from making payments in respect of the
notes by the provisions described under " -- Ranking", and
(E) if at such time the notes are listed on a national securities
exchange, Primark has delivered to the trustee an Opinion of Counsel
to the effect that the notes will not be delisted as a result of
such deposit, defeasance and discharge.
Defeasance of certain covenants and certain events of default
The provisions of the indenture will no longer be in effect with respect to
clauses (3) and (4) under "Consolidation, Merger and Sale of Assets" and all the
covenants described herein under "Covenants," clause (c) under "Events of
Default" with respect to such clauses (3) and (4)under "Consolidation, Merger
and Sale of Assets," clause (d) under "Events of Default" with respect to such
other covenants and clauses (e) and (f) under "Events of Default" shall be
deemed not to be Events of Default upon, among other things, the deposit with
the trustee, in trust, of money and/or U.S. Government Obligations that through
the payment of interest and principal in respect thereof in accordance with
their terms will provide money in an amount sufficient to pay the principal of,
premium, if any, and accrued interest on the notes on the Stated Maturity of
such payments in accordance with the terms of the indenture and the notes, the
satisfaction of the provisions described in clauses (B)(2), (C), (D) and (E) of
the preceding paragraph and the delivery by Primark to the trustee of an Opinion
of Counsel to the effect that, among other things, the holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance of certain covenants and Events of Default and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred.
Defeasance and Certain Other Events of Default
If Primark exercises its option to omit compliance with certain covenants
and provisions of the indenture with respect to the notes as described in the
immediately preceding paragraph and the notes are declared due and payable
because of the occurrence of an Event of Default that remains
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applicable, the amount of money and/or U.S. Government Obligations on deposit
with the trustee will be sufficient to pay amounts due on the notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
notes at the time of the acceleration resulting from such Event of Default.
However, Primark will remain liable for such payments.
MODIFICATION AND WAIVER
The indenture may be amended, without the consent of any holder, to:
(1) cure any ambiguity, defect or inconsistency in the indenture;
provided that such amendments do not adversely affect the
interests of the holders in any material respect;
(2) comply with the provisions described under "Consolidation, Merger
and Sale of Assets";
(3) comply with any requirements of the Commission in connection with
the qualification of the indenture under the Trust Indenture Act;
(4) evidence and provide for the acceptance of appointment by a
successor trustee; or
(5) make any change that, in the good faith opinion of the Board of
Directors, does not materially and adversely affect the rights of
any holder.
Modifications and amendments of the indenture may be made by Primark and the
trustee with the consent of the holders of not less than a majority in aggregate
principal amount of the old notes; provided, however, that no such modification
or amendment may, without the consent of each holder affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any note,
(2) reduce the principal amount of, or premium, if any, or interest
on, any note,
(3) change the place or currency of payment of principal of, or
premium, if any, or interest on, any note,
(4) impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any note,
(5) waive a default in the payment of principal of, premium, if any,
or interest on the notes,
(6) modify the subordination provisions in a manner adverse to the
holders, or
(7) reduce the percentage or total principal amount of old notes the
consent of whose holders is necessary for waiver of compliance
with certain provisions of the indenture or for waiver of certain
defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
Note holders have no recourse against any incorporator, stockholder,
officer, director, employee or controlling person of Primark or against any of
their successors for the payment of the principal of, premium, if any, or
interest on the notes. These people are not responsible for any obligation,
covenant or agreement made by Primark in the indenture, in the notes, or because
of the creation of any Indebtedness represented by the notes. By accepting the
notes, you waive and release all such liability.
CONCERNING THE TRUSTEE
Except during the continuance of a Default, the trustee will not be liable
except for the performance of such duties as are specifically set forth in the
indenture. If an
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Event of Default has occurred and is continuing, the trustee will use the same
degree of care and skill in its exercise of the rights and powers vested in it
under the indenture as a prudent person would exercise under the circumstances
in the conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act of 1939
incorporated by reference therein contain limitations on the rights of the
trustee, should it become a creditor of Primark, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the new notes will initially be issued in the
form of one or more registered new notes in global form without interest coupons
(each a "Global Note"). Each Global Note will be deposited with the trustee as
custodian for, and registered in the name of a nominee of, DTC.
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee, with respect to interests of
participants, and the records of participants, with respect to interests of
persons other than participants. Holders may hold their interests in a
Restricted Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by such Global Note for all
purposes under the indenture and the notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
indenture.
Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither Primark, the trustee nor any Paying Agent will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Primark expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. Primark also expects that payments by participants to owners
of beneficial interests in such Global Note held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
Primark expects that DTC will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate principal amount of notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the
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notes, DTC will exchange the Global Note for notes in registered form without
interest coupons ("Certificated Notes"), which it will distribute to its
participants.
Primark understands that DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code and a
"Clearing Agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies and certain other organizations that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither Primark nor the trustee
will have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by Primark within
90 days, Primark will issue Certificated Notes in exchange for the Global Notes.
Holders of an interest in a Global Note may receive Certificated Notes in
accordance with the DTC's rules and procedures in addition to those provided for
under the indenture.
REGISTRATION RIGHTS
Primark entered into the registration rights agreement with the placement
agents, for the benefit of the holders of old notes. Under this agreement,
Primark agreed to use its best efforts, at its cost, to file and cause to become
effective a registration statement with respect to a registered offer to
exchange the old notes for new notes with terms identical to the old notes,
except that the old notes will not bear legends restricting the transfer
thereof. The registration statement, of which this prospectus is part,
constitutes the registration statement for purposes of the registration rights
agreement. Upon the registration statement being declared effective, Primark
shall offer the new notes in return for surrender of the old notes. The exchange
offer will remain open for not less than 20 business days after the date notice
of the exchange offer is mailed to holders of the old notes. For each old note
surrendered to Primark under the exchange offer, the holder of such old note
will receive a new note of equal principal amount. Interest on each new note
shall accrue from the last Interest Payment Date on which interest was paid on
the old notes so surrendered or, if no interest has been paid on such old notes,
from December 21, 1998. If the applicable interpretations of the staff of the
Commission do not permit us to effect the exchange offer, or under certain other
circumstances, we will, at our cost, use our best efforts:
- to cause to become effective a shelf registration statement with respect
to resales of the old notes, and
- to keep such shelf registration statement effective until the expiration
of the time period referred to in Rule 144(k) under the Securities Act
after December 21, 1998, or such shorter period that will terminate when
all old notes covered by the shelf registration statement have been sold
pursuant to the shelf registration statement.
We will, in the event of such a shelf registration, provide to each holder
copies of the prospectus, notify each holder of old notes when the shelf
registration statement for the old notes has become
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effective and take certain other actions as are required to permit resales of
the old notes. A holder that sells its old notes pursuant to the shelf
registration statement generally:
- will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers,
- will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and
- will be bound by the provisions of the registration rights agreement that
are applicable to such a holder, including certain indemnification
obligations.
If the exchange offer is not consummated and a shelf registration statement
is not declared effective on or before June 21, 1999, the annual interest rate
borne by the old notes will be increased by 0.5% per year until the exchange
offer is consummated or the shelf registration statement is declared effective.
If we effect the exchange offer, we will be entitled to close the exchange
offer 20 business days after the commencement thereof, provided that we have
accepted all old notes previously validly surrendered in accordance with the
terms of the exchange offer. Old notes not tendered in the exchange offer shall
bear interest at 9 1/4% per annum and be subject to all of the terms and
conditions specified in the indenture and to the transfer restrictions set forth
in the legend on the certificate for such old notes.
This summary of certain provisions of the registration rights agreement
does not restate the agreement in its entirety. We urge you to read the
registration rights agreement, a copy of which is filed as an exhibit to the
Registration Statement of which this prospectus is a part.
98
<PAGE> 100
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following summary describes material United States federal income tax
considerations associated with the exchange of the old notes for the new notes
pursuant to the exchange offer and the ownership and disposition of the notes.
The summary is based on the Internal Revenue Code of 1986, and regulations,
rulings and judicial decisions as of the date hereof, all of which may be
repealed, revoked or modified with possible retroactive effect. This summary is
limited to investors who will hold the notes as capital assets within the
meaning of Section 1221 of the Code and does not deal with holders that may be
subject to special tax rules including, but not limited to:
- insurance companies,
- tax-exempt organizations,
- financial institutions,
- dealers in securities or currencies,
- holders whose functional currency is not the U.S. dollar,
- holders who will hold the notes as a hedge against currency risks or as
part of a straddle, synthetic security, conversion transaction or other
integrated investment comprised of the notes and one or more other
investments or,
- except to the extent discussed below, Non-United States Holders (as
defined below).
The summary is applicable only to purchasers of notes in the offering who
acquire the notes at the initial offering price and does not address other
purchasers.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND DOES NOT ADDRESS ALL
ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO HOLDERS OF THE NOTES
IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. IT DOES NOT ADDRESS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES AND
THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER
TAX LAWS.
As used herein, the term "United States Holder" means a beneficial owner of
notes that is:
- a citizen or resident of the United States for U.S. federal income tax
purposes,
- a corporation created or organized under the laws of the United States,
any state in the U.S. or the District of Columbia,
- an estate, the income of which is subject to United States federal income
tax without regard to its source, or
- a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust.
A "Non-United States Holder" is any beneficial holder that is not a United
States Holder.
UNITED STATES HOLDERS AND NON-UNITED STATES HOLDERS
There will be no United States federal income tax consequences to anyone
exchanging an old note for a new note pursuant to the exchange offer. Such
holder will have the same adjusted basis and holding period in the new note as
it had in the old note immediately before the exchange.
99
<PAGE> 101
UNITED STATES HOLDERS
Stated interest on notes
Stated interest on a note generally will be taxable to a United States
Holder as ordinary income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for U.S. federal income tax
purposes.
Sale, exchange or retirement of notes
Upon the sale, exchange, redemption, retirement or other disposition of a
note, a United States Holder generally will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, redemption,
retirement or other disposition and such holder's adjusted tax basis in the
note. However, amounts attributable to accrued but unpaid interest will be
taxable as such. A United States Holder's adjusted tax basis in a note will, in
general, be the United States Holder's cost for that note. This gain or loss
will be capital gain or loss, and, under recently adopted amendments to the
Code, net capital gain (i.e., generally capital gain in excess of capital loss)
recognized by an individual United States Holder upon the disposition of a note
that has been held for more than one year generally will be subject to tax at a
maximum rate of 20%. A note that has been held for one year or less will be
taxed at ordinary income tax rates. The deductibility of capital losses is
subject to limitations.
Market discount
United States Holders, other than original purchasers of the old notes in
the offering, should be aware that the sale of the new notes may be affected by
the market discount provisions of the Code.
Market discount rules
The market discount rules generally provide that if a United States Holder
of a note
- purchased the note, after the original offering, at a "market discount"
(i.e., at an amount less than the adjusted issue price of the note as
determined on the date of such purchase) exceeding a statutorily-defined
de minimis amount, and
- thereafter recognizes gain upon a disposition, including a partial
redemption, of the new note received in exchange for an old note,
the lesser of such gain or the portion of the market discount that accrued while
the old note and new note were held by such United States Holder will be treated
as ordinary interest income at the time of disposition. The rules also provide
that a United States Holder who acquires a note at a market discount may be
required to defer a portion of any interest expense that may otherwise be
deductible on any indebtedness incurred or maintained to purchase or carry the
note until the United States Holder disposes of such note in a taxable
transaction. If a holder of such a note elects to include market discount in
income currently, both of the foregoing rules would not apply.
NON-UNITED STATES HOLDERS
Under present U.S. federal income tax law, subject to the discussion of
backup withholding and information reporting below:
- payments of principal and interest on the notes to any Non-United States
Holder will not be subject to U.S. federal income or withholding tax
provided that:
- the Non-United States Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of
Primark stock entitled to vote,
- the Non-United States Holder is not a bank receiving interest pursuant
to a loan agreement entered into in the ordinary course of its trade
or business,
100
<PAGE> 102
- the Non-United States Holder is not a controlled foreign corporation
that is related to Primark, directly or indirectly, through stock
ownership,
- such interest payments are not effectively connected with a United
States trade or business, and
- the certification set forth in Section 871(h) or Section 881(c) of the
Code has been fulfilled with respect to the beneficial owner. Such
certification will be satisfied if the beneficial owner of the note
certifies on IRS Form W-8 or a substantially similar substitute form,
under penalties of perjury, that it is not a United States person and
provides its name and address, and such beneficial owner files this
form with the withholding agent or in the case of a note held by a
securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade
or business (a "financial institution") and holds the note, the holder
certifies to Primark or its agent under penalties of perjury that such
statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and
furnishes the withholding agent with a copy of the statement; and
- a Non-United States Holder will not be subject to U.S. federal income tax
on gain realized on the sale, exchange, redemption retirement or other
disposition of a note, unless
- the gain is effectively connected with a trade or business carried on
by such holder within the United States or, if a treaty applies,
attributable to the United States permanent establishment maintained
by the holder, or
- the holder is an individual who is present in the United States for
183 days or more in the taxable year of disposition and other
requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest and the proceeds of the sale, exchange,
redemption, retirement or other disposition of the notes payable by a U.S.
paying agent or other U.S. intermediary will be subject to information
reporting. In addition, backup withholding at a rate of 31 percent will apply to
these payments if the holder:
- fails to provide an accurate taxpayer identification number, in the case
of a United States Holder, the certification described above, in the case
of a Non-United States Holder, or other evidence of exempt status; or
- fails to report all interest and dividends required to be shown on its
U.S. federal income tax returns.
Some United States Holders, including corporations and Non-United States Holders
that comply with certification requirements are not subject to backup
withholding. Any amount paid as backup withholding will be creditable against
the holder's U.S. federal income tax liability provided that the required
information is timely furnished to the IRS. PROSPECTIVE INVESTORS SHOULD CONSULT
THEIR TAX ADVISORS AS TO THEIR QUALIFICATION FOR EXEMPTION FROM BACKUP
WITHHOLDING AND THE PROCEDURE FOR OBTAINING SUCH AN EXEMPTION.
101
<PAGE> 103
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that for a period of 180 days after the
Expiration Date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time:
- in one or more transactions in the over-the-counter market,
- in negotiated transactions,
- through the writing of options on the new notes, or
- a combination of such methods of resale.
Such notes may be sold:
- at market prices prevailing at the time of resale,
- at prices related to such prevailing market prices, or
- at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such new notes.
Any broker-dealer that resells new notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on any such
resale of new notes and any commissions or concessions received by any of them
may be deemed to be underwriting compensation under the Securities Act. The
letter of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, we will promptly send
additional copies of the prospectus and any amendment or supplement to the
prospectus to any broker-dealer requesting these copies in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the notes, including any broker-dealers, against
various liabilities, including liabilities under the Securities Act.
Following consummation of the exchange offer, we may, in our sole
discretion, commence one or more additional exchange offers to holders of old
notes who did not exchange their old notes for new notes in the exchange offer
on terms which may differ from those contained in the registration rights
agreement. We may use this prospectus, as it may be amended of supplemented from
time to time, in connection with any such additional exchange offers. Such
additional exchange offers will take place from time to time until all
outstanding old notes have been exchanged for new notes.
LEGAL MATTERS
The legality of the new notes offered hereby is being passed upon for us by
Skadden, Arps, Slate, Meagher & Flom LLP and by Michael R. Kargula, Executive
Vice President, General Counsel and Secretary of Primark.
102
<PAGE> 104
EXPERTS
The consolidated statements of financial position of Primark Corporation
and subsidiaries as of December 31, 1996 and 1997, and the related consolidated
statements of income, common shareholder's equity and cash flows for each of the
three years in the period ended December 31, 1997 included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act, and
in accordance with that act, file reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
can be inspected and copied at the Public Reference Section of the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such reports, proxy statements and other information can also
be obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of prescribed rates, or when
available by accessing the SEC's World Wide Web site of http://www.sec.gov. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. Our common stock is quoted on the New York
Stock Exchange and the Pacific Exchange under the symbol "PMK," and such
reports, proxy statements and other information concerning Primark also can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, and the Pacific Exchange, 301 Pine Street, San
Francisco, California 94104.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information filed by
Primark with the SEC, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
later file with the SEC will automatically update and supersede this
information. We incorporate by reference into this prospectus the following
documents or information filed with the SEC:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997, filed with the SEC on March 30, 1998, as amended by the amendment
to the 1997 10-K filed with the SEC on April 8, 1998;
- Our Quarterly Reports on Form 10-Q filed with the SEC on May 12, 1998,
August 13, 1998 and November 13, 1998;
- Our Current Reports on Form 8-K filed with the SEC on March 3, 1998,
March 6, 1998, March 20, 1998, April 8, 1998, July 7, 1998 and October 6,
1998; and
- All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of the Registration Statement of which
this prospectus is part and before the effectiveness thereof or after the
date of this prospectus and before the termination of the offering made
hereby.
As noted above, any statement contained in this prospectus, or in any
documents incorporated or deemed to be incorporated by reference in this
prospectus shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a subsequent statement contained in this
prospectus or in any subsequently filed document which also is or is deemed to
be incorporated by reference in this prospectus modifies or supersedes such
statement. Any such statement so modified
103
<PAGE> 105
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
This prospectus incorporates documents by reference which are not presented
in the prospectus or delivered with it. These documents are available without
charge upon written or oral request from Stephen H. Curran, Executive Vice
President and Chief Financial Officer of Primark at Primark's principal
executive offices located at 1000 Winter Street, Suite 4300N, Waltham,
Massachusetts 02451, telephone number (781) 466-6611.
------------------------
This exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of outstanding old notes in any jurisdiction in which
this exchange offer or the acceptance of such surrenders would not be in
compliance with the securities or blue sky laws of such jurisdiction.
104
<PAGE> 106
PRIMARK CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Statements of Financial Position at September
30, 1998 and at December 31, 1997 Unaudited............... F-2
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1998 and 1997 Unaudited........ F-3
Consolidated Statements of Retained Earnings for the Three
and Nine Months Ended
September 30, 1998 and 1997 Unaudited..................... F-4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997 Unaudited............... F-5
Notes to the Consolidated Financial Statements at September
30, 1998 Unaudited........................................ F-6
Report of Independent Auditors.............................. F-11
Consolidated Statements of Income for the Years Ended 1997,
1996 and 1995............................................. F-12
Consolidated Statements of Cash Flows for the Years Ended
1997, 1996 and 1995....................................... F-13
Consolidated Statements of Financial Position for the Years
Ended 1997 and 1996....................................... F-14
Consolidated Statements of Common Shareholders' Equity for
the Years Ended 1997, 1996 and 1995....................... F-15
Notes to the Consolidated Financial Statements at December
31, 1997.................................................. F-16
</TABLE>
F-1
<PAGE> 107
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates
market value).......................................... $ 30,022 $ 12,780
Billed receivables less allowance for doubtful accounts
of $2,833 and $2,756, respectively..................... 89,731 70,084
Unbilled and other receivables.......................... 11,603 9,546
Federal and state income tax benefit.................... -- 21,304
Other current assets.................................... 27,690 24,036
Net assets of discontinued operations (Note 2).......... 13,198 197,330
-------- ----------
172,244 335,080
-------- ----------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $77,021 and
$41,834, respectively.................................. 517,547 556,737
Capitalized data and other intangible assets, less
accumulated amortization of $27,487 and $20,710,
respectively........................................... 39,360 47,512
Capitalized software, less accumulated amortization of
$16,168 and $20,162, respectively...................... 30,077 48,645
Other................................................... 4,454 8,980
-------- ----------
591,438 661,874
-------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment...................................... 59,374 63,169
Leasehold improvements.................................. 16,594 17,631
Other................................................... 26,530 9,806
-------- ----------
102,498 90,606
Less-accumulated depreciation........................... (54,852) (43,751)
-------- ----------
47,646 46,855
-------- ----------
$811,328 $1,043,809
======== ==========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable........................................... $ 93,565 $ 27,602
Accounts Payable........................................ 14,592 14,125
Accrued employee payroll and benefits................... 26,849 24,585
Taxes payable........................................... 61,222 10,717
Deferred income......................................... 78,366 69,931
Current portion of long-term debt, including capital
lease obligations...................................... 817 11,301
Other accrued expenses.................................. 58,253 43,814
-------- ----------
333,664 202,075
-------- ----------
LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt, including capital lease obligations..... 8,842 331,260
Deferred income taxes................................... 16,261 21,133
Other................................................... 15,740 18,370
-------- ----------
40,843 370,763
-------- ----------
Total liabilities.................................. 374,507 572,838
COMMITMENTS AND CONTINGENCIES (NOTE 8)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital............. 88,862 275,370
Retained earnings....................................... 350,454 198,658
Cumulative foreign translation adjustment............... (2,495) (3,057)
-------- ----------
Total common shareholders' equity.................. 436,821 470,971
-------- ----------
Total liabilities and shareholders' equity......... $811,328 $1,043,809
======== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-2
<PAGE> 108
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES....................................... $108,534 $99,113 $321,819 $294,726
OPERATING EXPENSES
Cost of services..................................... 45,020 37,361 129,221 116,783
Selling, general and administrative.................. 40,284 37,418 120,933 115,957
Depreciation......................................... 4,328 4,306 12,831 13,187
Amortization of goodwill............................. 3,820 3,957 11,755 11,823
Amortization of other intangible assets.............. 2,991 4,233 12,164 12,108
Restructuring Charge................................. -- -- 68,677 6,800
-------- ------- -------- --------
Total operating expenses........................ 96,443 87,275 355,581 276,658
-------- ------- -------- --------
Operating income................................ 12,091 11,838 (33,762) 18,068
-------- ------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Interest expense..................................... (2,064) (4,090) (7,618) (11,805)
Foreign currency gain (loss)......................... 636 (12) 996 2,325
Investment and other income (deductions) -- net...... (70) 288 1,840 (377)
-------- ------- -------- --------
Total other income and (deductions)............. (1,498) (3,814) (4,782) (9,857)
-------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES.... 10,593 8,024 (38,544) 8,211
INCOME TAX EXPENSE (BENEFIT)............................. 4,682 4,637 (100) 8,533
-------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS........................ 5,911 3,387 (38,444) (322)
-------- ------- -------- --------
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax
(benefit)/expense of $103,000, $(560,000),
$(700,000) and $(892,000) respectively............ 1,835 4,216 7,947 13,074
Gain on disposal of discontinued operations, net of
income tax expense of $7,683,000, $0, $108,735,000
and $0, respectively.............................. 14,189 -- 187,414 --
-------- ------- -------- --------
Total Discontinued Operations................... 16,024 4,216 195,361 13,074
-------- ------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS......................... 21,935 7,603 156,917 12,752
EXTRAORDINARY ITEM-LOSS ON EARLY EXTINGUISHMENT OF DEBT,
net of income tax benefit of $3,614,000 and $1,379,000
respectively........................................... -- -- (5,121) (1,955)
-------- ------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK.................... $ 21,935 $ 7,603 $151,796 $ 10,797
======== ======= ======== ========
EARNINGS PER COMMON SHARE -- BASIC
Income from continuing operations.................... $ 0.27 $ 0.13 $ (1.52) $ (0.01)
Discontinued operations.............................. 0.73 0.16 7.71 0.49
Extraordinary item................................... -- -- (0.20) (0.07)
-------- ------- -------- --------
Total earnings per share........................ $ 0.99 $ 0.29 $ 5.99 $ 0.41
======== ======= ======== ========
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION
Income from continuing operations.................... $ 0.26 $ 0.12 $ -- $ --
Discontinued operations.............................. 0.70 0.15 -- --
Extraordinary item................................... -- -- -- --
-------- ------- -------- --------
Total earnings per share........................ $ 0.96 $ 0.28 $ -- $ --
======== ======= ======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING
Basic................................................ 22,088 25,931 25,343 26,415
Effect of Dilutive Securities........................ 709 1,417 -- --
-------- ------- -------- --------
Diluted.............................................. 22,797 27,348 25,343 26,415
-------- ------- -------- --------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-3
<PAGE> 109
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance -- Beginning of period..................... $328,519 $182,137 $198,658 $178,943
Add -- Net Income.................................. 21,935 7,603 151,796 10,797
-------- -------- -------- --------
Balance -- End of period........................... $350,454 $189,740 $350,454 $189,740
======== ======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-4
<PAGE> 110
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................. $ 151,796 $ 10,797
Adjustments to reconcile net income to net cash flows
from operating activities:
Discontinued operations................................ (7,947) (13,074)
Gain on Sale of subsidiary............................. (187,414)
Loss on extinguishment of intangible assets............ 60,650 18,749
Extraordinary loss on early extinguishment of debt..... 5,121 1,955
Cash provided by (contributed to) discontinued
operations............................................ (9,270) (9,149)
Depreciation and amortization.......................... 36,750 40,656
Other charges and credits -- net....................... (5,455) (5,549)
Changes in operating working capital, excluding the
effect of acquisitions:
Increase in billed, unbilled and other
receivables-net................................. (21,121) (5,028)
(Increase) decrease in other current assets....... (3,392) 4,482
Decrease (increase) in accounts payable........... 1,581 (6,427)
Increase in accrued payroll and benefits.......... 1,587 87
(Decrease) increase in income and other taxes
payable -- net.................................. 8,164 (5,745)
Increase in deferred income....................... 8,032 2,062
Increase in other current liabilities............. 13,228 4,596
---------- ----------
Net cash provided from operating
activities................................ 52,310 38,412
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable................... 665,135 157,746
Repayment of short-term notes payable.................. (599,172) (154,795)
Issuance of long-term debt............................. -- 100,000
Repayment of long-term debt............................ (332,504) --
Common stock repurchased and retired................... (195,417) (26,633)
Common stock issuance.................................. 8,909 3,928
Debt issue costs and other............................. (939) (2,831)
Call Premium........................................... (4,900) --
---------- ----------
Net cash provided from financing
activities................................ (458,888) 77,415
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................... (14,486) (17,576)
Capitalized software................................... (12,591) (14,121)
Purchase of subsidiaries -- net of acquired cash....... (4,826) (88,090)
Proceeds from sale of subsidiary....................... 502,000 --
Tax paid on sale of subsidiary......................... (43,000) --
Other -- net........................................... 171 1,087
Cash provided by (contributed to) discontinued
operations............................................ (3,495) (5,911)
---------- ----------
Net cash used for investing activities....... 423,773 (124,611)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... 47 (344)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ 17,242 (9,128)
CASH AND CASH EQUIVALENTS, JANUARY 1,....................... 12,780 25,276
---------- ----------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30,.................... $ 30,022 $ 16,148
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-5
<PAGE> 111
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying balance sheets and related
interim statements of income and cash flows include all adjustments (consisting
only of normal recurring items) necessary for their fair presentation in
conformity with generally accepted accounting principles. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, and expenses. Examples
include provision for bad debts and the length of asset lives. Actual results
may differ from these estimates. Interim results are not necessarily indicative
of results for a full year. The information included in this Form 10-Q should be
read in conjunction with Management's Discussion and Analysis and financial
statements and notes thereto included in the Primark Corporation 1997 Annual
Report on Form 10-K.
2. DISCONTINUED OPERATIONS
The accompanying consolidated financial statements reflect the operating
results of TASC and TIMCO separately from the Company's continuing operations
for all periods presented. Interest expense has been allocated to discontinued
operations based upon the ratio of net assets to total consolidated net assets.
The net assets of discontinued operations represents the net book value of the
Company's investment in TASC and TIMCO and consists principally of working
capital, fixed assets, goodwill and other non-current assets and liabilities.
A) Sale of TASC
On April 1, 1998, the Company completed the sale of TASC and its affiliated
weather information companies to Litton Industries for $432 million in cash plus
an estimated equity adjustment of $11.5 million. The equity adjustment is based
upon changes in TASC's consolidated equity account, less certain inter-company
transactions, from September 30, 1997 through the date of the closing. On July
27, 1998, Litton sent notification that it was contesting specific components of
the equity adjustment totaling $4.2 million. Both Litton and the Company are in
the process of establishing the protocol to resolve all disputed amounts.
The Company recorded a gain on the sale of $173.2 million which includes
the $11.5 million equity adjustment, transaction costs of $5.4 million, taxes of
$101.1 million and the net book value of TASC's assets. The cash, net of all
transaction costs and taxes, to be received by the Company from the foregoing
sale will be approximately $337.0 million.
B) Sale of TIMCO
On September 22, 1998, the Company completed the sale of all of the
outstanding common stock of its heavy aircraft maintenance unit, the Triad
International Maintenance Corporation (TIMCO), to Aviation Sales Maintenance,
Repair & Overhaul Company (AVS), a division of Aviation Sales Company. The
transaction was executed in accordance with a Stock Purchase Agreement dated
August 10, 1998 for a cash purchase price of $70 million. Pursuant to the Stock
Purchase Agreement, a working capital adjustment of $1.3 million, based upon
TIMCO's closing balance sheet as of September 22, 1998, has been recorded as a
receivable at September 30, 1998. The $1.3 million was received by wire in
November, 1998.
The Company recorded a gain on the sale of $14.2 million which includes the
$1.3 million working capital adjustment, transaction costs of $850,000, taxes of
$8.7 million and the net book value of TIMCO's assets. The cash, net of all
closing adjustments and taxes to be received by the Company from the foregoing
sale will be approximately $52.0 million.
F-6
<PAGE> 112
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
QUARTER ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Income/(Loss)
TASC...................................... $ -- $4,211 $3,755 $13,428
TIMCO..................................... 1,835 5 4,192 (354)
------ ------ ------ -------
Total................................ $1,835 $4,216 $7,947 $13,074
------ ------ ------ -------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C> <C> <C>
Net Assets
TASC............................... $11,500 $155,376
TIMCO.............................. 1,698 41,954
------- --------
Total......................... $13,198 $197,330
======= ========
</TABLE>
3. RESTRUCTURING AND INTEGRATION CHARGES
Effective June 1, 1998, the Company was reorganized in order to
strategically focus solely on its information services businesses. In connection
with this reorganization, the Company recorded a pre-tax charge of $77.4
million, of which $8.7 million is recorded as an Extraordinary Item (see
Refinancing Footnote) and the remaining $68.7 million is recorded within
operating expenses for direct and other reorganization related costs.
The charge included the write-off of intangible assets for (i) $25.0
million of previously capitalized software related to the planned integration of
several product offerings on common software platforms, (ii) $1.5 million of
data that has been determined to be duplicative and will not be used as a result
of the software platform integration previously discussed, (iii) write-off of
$23.9 million of goodwill associated with software and data written off which
was established as part of purchase accounting, (iv) write-off of $7.2 million
of goodwill related to DAFSA, and (v) write-off of $3.1 million of a trademark
no longer used in the restructured organization.
An additional $8.0 million of the restructuring charge relates primarily to
the integration of domestic and international sales offices and efficiencies
gained from technological advancements that will result in the phased reduction
of approximately 61 employees.
There was no utilization of the restructure accrual in the third quarter.
The remaining accrual is expected to be utilized within one year. Details of the
unutilized restructuring and integration costs as of September 30, 1998 are as
follows (000's):
<TABLE>
<CAPTION>
SECOND QUARTER UTILIZED SEPTEMBER 30,
1998 PROVISION TO DATE 1998 PROVISION
-------------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Abandonment of leased facilities, including
leasehold improvements.......................... $5,156 $ -- $5,156
Salaries and termination benefits................. 2,871 185 2,686
------ ---- ------
Total........................................ $8,027 $185 $7,842
====== ==== ======
</TABLE>
Cash flow expenditures, net of tax recovery, will be funded by the
Company's cash flows from operating activities. The overall restructuring plan,
when fully implemented, will reduce amortization
F-7
<PAGE> 113
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
and other costs by over $7.0 million, net of tax, for each of the next several
years. The 1997 restructuring charges relating specifically to DAFSA and
Disclosure have been fully utilized in prior quarters.
4. REFINANCING
On April 1, 1998, the Company amended the terms of its revolving credit
facility and term loan agreement. Under the terms of the revised agreement,
which became effective April 1, 1998, the Company used the proceeds from the
sale of TASC to (i) prepay all amounts outstanding on the Company's $112 million
senior callable bonds, including a 4.375% premium aggregating $4.9 million, (ii)
prepay $220 million of the Company's outstanding term loan together with accrued
interest thereon, and (iii) prepay approximately $500,000 of the Company's other
indebtedness.
In conjunction with the above, the Company replaced its outstanding $75
million credit facility with a $225 million revolving credit facility which
expires in 2002. Interest on the borrowings under the new revolving credit
facility is payable at rates ranging from 0.375% to 1.00% above the current
prevailing LIBOR rate of interest. Pursuant to the credit facility negotiations,
the Company incurred fees of $125,000 upon the sale of TASC and $325,000 for
increasing the amounts allowed to be drawn on the line for the repurchase of
Company shares as part of the "Dutch Auction" self-tender offer.
As a result of the prepayment of debt and amended terms of the revolving
credit facility, the Company wrote off the associated deferred financing costs,
and paid a call premium of $4.9 million related to the prepayment of the $112
million of senior callable bonds. This resulted in an extraordinary loss of $8.7
million, or $5.1 million on an after tax basis for the quarter ended June 30,
1998. As of September 30, 1998, $93,565,000 is outstanding under the revolving
credit facility.
5. REPURCHASE OF COMMON STOCK
On May 20, 1998, the Company announced a "Dutch Auction" self-tender offer,
which expired on June 17, 1998. The Company purchased 4,540,000 shares at $34
per share under this arrangement. Total cost of these shares was $154.6 million,
including legal and accounting fees. On July 3, 1998, the Company implemented an
open market purchase program to buy up to 2,000,000 shares of its common stock
from time to time, depending on market conditions. As of September 30, 1998,
1,518,500 shares had been repurchased at a total cost of $40.8 million. On
October 2, 1998, the Company purchased additional 50,000 shares at a total cost
of $1,454,000. Year to date, the Company has purchased a total of 6,108,500
shares at a total cost of $196.6 million, representing approximately 22.5% of
its total outstanding common stock. On November 10, 1998, the Company announced
that the Board of Directors approved the expansion of the open market purchase
program by an additional 2,000,000 shares, bringing the total potential buyback
to 8,540,000 shares, or approximately 31% of the Company's total outstanding
before the "Dutch Auction." The Company is using proceeds from the sale of TASC
and TIMCO as well as its revolving credit facility to fund the common stock
repurchases.
6. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, Earnings Per Share, which became effective for fiscal years ending
after December 15, 1997. The prior years' earnings per share have been
retroactively restated in accordance with this statement. Basic earnings per
share was determined by dividing net income by the weighted average shares of
F-8
<PAGE> 114
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
common stock outstanding during the year. Diluted earnings per share reflects
the dilution due to stock options based on the treasury stock method.
SFAS No. 128, states that if there is a loss from continuing operations, a
company should not include options and other potential common shares in the
denominator of a dilutive per-share computation even if including these
potential common shares in other dilutive per-share computations may be dilutive
to their comparable basic per-share amounts. Therefore, the "Earnings Per Common
Share -- Basic and Dilutive" included within the Company's Statements of Income
exclude the dilutive effect of options and other potential common shares for the
nine months ended September 30, 1998 and 1997, respectively.
If options and other potential common shares were included, weighted
average common and common equivalent shares outstanding and the related dilutive
earnings per common share would have been as follows (in thousands except per
share amounts):
PRO-FORMA WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Basic....................................................... 25,343 26,415
Effect of Dilutive Securities............................... 1,042 1,163
------ ------
Diluted..................................................... 26,385 27,578
------ ------
</TABLE>
PRO-FORMA EARNINGS PER COMMON SHARE -- ASSUMING DILUTION BENEFIT
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Income from continuing operations........................... $(1.46) $(0.01)
Discontinued operations..................................... 7.40 0.47
Extraordinary item.......................................... (0.19) (0.07)
------ ------
Total earnings per share............................... $ 5.75 $ 0.39
------ ------
</TABLE>
7. NEWLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted the provisions of the
American Institute of Certified Public Accountants (AICPA) Statements of
Positions (SOP) No. 97-2, "Software Revenue Recognition," and No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Adoption of these pronouncements did not have a material effect
on the reported results of operations or financial position.
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income," which was issued by the Financial
Accounting Standards Board (FASB) in June of 1997. This standard requires
companies to report and display comprehensive income and its components in a
full set of general-purpose financial statements beginning with this
F-9
<PAGE> 115
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
year's Annual Report on Form 10-K. The following table provides a reconciliation
of net income to comprehensive income.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Net Income.................................... $21,935 $ 7,603 $151,796 $10,797
Cumulative Translation Adjustment............. 1,239 4,694 562 2,328
Tax Benefit of Option Exercise................ 83 406 2,568 778
------- ------- -------- -------
Comprehensive Income.......................... $23,257 $12,703 $154,926 $13,903
</TABLE>
Also in June of 1997, the FASB issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information," which will be applicable
beginning with this year's Annual Report on Form 10-K.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. The new standard requires that all companies record derivatives
on the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. Management is currently assessing the impact of SFAS No.
133 on the financial statements of the Company.
8. CONTINGENCIES
There have been no other significant developments with respect to the
Company's contingent liabilities which were disclosed in the Company's 1997
Annual Report on Form 10-K. Management cannot predict the final disposition of
such issues, but believes that adequate provision has been made in the financial
statements and that the ultimate resolution of any outstanding issues will not
have a material adverse effect on the Company's financial condition.
F-10
<PAGE> 116
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS OF PRIMARK CORPORATION:
We have audited the accompanying consolidated statements of financial
position of Primark Corporation and its subsidiaries as of December 31, 1997 and
1996 and the related consolidated statements of income, cash flows and common
shareholders' equity for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Primark Corporation and its
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.
[Deloitte & Touche LLP signature]
Deloitte & Touche LLP
Boston, Massachusetts
February 10, 1998
(March 30, 1998 as to Note 14 to the Consolidated Financial Statements)
F-11
<PAGE> 117
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
IN THOUSANDS EXCEPT PER SHARE AMOUNTS FOR YEARS ENDED DECEMBER 31 1997 1996 1995
- ----------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES............................................ $397,875 $277,063 $184,779
-------- -------- --------
OPERATING EXPENSES
Cost of services.............................................. 157,327 104,479 66,063
Selling, general and administrative........................... 151,559 111,463 71,921
Depreciation.................................................. 17,371 12,318 8,176
Amortization of goodwill...................................... 15,805 10,616 6,803
Amortization of other intangible assets....................... 17,029 10,348 10,930
Restructuring charge (Note 4)................................. 6,800 -- --
-------- -------- --------
Total operating expenses............................ 365,891 249,224 163,893
-------- -------- --------
OPERATING INCOME.............................................. 31,984 27,839 20,886
-------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Investment income............................................. 1,085 2,675 967
Interest expense.............................................. (15,986) (12,468) (8,377)
Foreign currency gain (loss).................................. 1,831 1,836 (2,620)
Other......................................................... 1,039 66 (845)
-------- -------- --------
Total other income and (deductions)................. (12,031) (7,891) (10,875)
-------- -------- --------
Income From Continuing Operations Before Income Taxes......... 19,953 19,948 10,011
Income Tax Expense............................................ 12,963 7,432 4,630
-------- -------- --------
Income From Continuing Operations............................. 6,990 12,516 5,381
-------- -------- --------
DISCONTINUED OPERATIONS (NOTE 3)
Discontinued operations, net of income tax expense of $11,988,
$14,005 and $10,482, respectively........................... 14,680 16,192 13,469
Gain on disposal of discontinued operations, net of income tax
expense of $5,407........................................... -- 8,400 --
-------- -------- --------
Total Discontinued Operations....................... 14,680 24,592 13,469
-------- -------- --------
Income Before Extraordinary Loss.............................. 21,670 37,108 18,850
Extraordinary Loss On Early Extinguishment Of Debt (Note 6), net
of income tax benefit of $1,379 in 1997 and $288 in 1995.... (1,955) -- (534)
-------- -------- --------
Net Income.................................................... 19,715 37,108 18,316
Dividends On Preferred Stock.................................. -- (359) (1,434)
-------- -------- --------
Net Income Applicable To Common Stock......................... $ 19,715 $ 36,749 $ 16,882
======== ======== ========
BASIC EARNINGS PER COMMON SHARE (NOTE 8)
Income from continuing operations............................. $ 0.26 $ 0.49 $ 0.21
Discontinued operations....................................... 0.56 0.99 0.70
Extraordinary loss............................................ (0.07) -- (0.03)
-------- -------- --------
Net income.................................................... $ 0.75 $ 1.48 $ 0.88
======== ======== ========
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION (NOTE 8)
Income from continuing operations............................. $ 0.25 $ 0.46 $ 0.19
Discontinued operations....................................... 0.53 0.92 0.65
Extraordinary loss............................................ (0.07) -- (0.02)
-------- -------- --------
Net income.................................................... $ 0.71 $ 1.38 $ 0.82
======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-12
<PAGE> 118
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
IN THOUSANDS FOR YEARS ENDED DECEMBER 31 1997 1996 1995
---------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 19,715 $ 37,108 $ 18,316
Adjustments to reconcile net income to net cash flows from
operating activities:
Discontinued operations............................... (14,680) (24,592) (13,469)
Extraordinary loss on early extinguishment of debt.... 3,334 -- 822
Cash provided by discontinued operations.............. 21,244 13,915 10,735
Depreciation and amortization......................... 50,205 33,282 25,909
Deferred income taxes................................. (3,310) 1,174 (835)
Other charges and credits -- net...................... (9,161) 11,268 1,674
Changes in operating working capital, excluding the effect
of acquisitions:
(Increase) decrease in billed, unbilled and other
receivables -- net.................................. (5,366) (27,531) 8,155
Decrease in other current assets...................... 1,743 303 717
Decrease in accounts payable.......................... (2,896) (1,954) (4,210)
Increase in accrued payroll and benefits.............. 2,515 3,310 5,023
(Decrease) increase in income and other taxes
payable -- net...................................... (5,506) 5,056 (516)
(Decrease) increase in deferred income................ (1,787) 10,848 (6,459)
Increase in other current liabilities................. 1,974 3,520 3,443
--------- --------- ---------
Net change in operating working capital............... (9,323) (6,448) 6,153
--------- --------- ---------
Net cash provided from operating activities........... 58,024 65,707 49,305
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable....................... 225,304 2,598 318,601
Repayment of short-term notes payable...................... (197,702) (2,598) (318,601)
Issuance of long-term debt................................. 100,000 -- 125,000
Repayment of long-term debt................................ (5,000) -- --
Common stock repurchased and retired....................... (56,238) -- --
Common stock issuance...................................... 12,235 8,264 106,528
Debt issue costs and other................................. (3,853) (711) (7,073)
Financing activities of discontinued operations............ -- (2,804) (4,100)
--------- --------- ---------
Net cash provided from financing activities................ 74,746 4,749 220,355
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures....................................... (23,965) (19,412) (9,803)
Capitalized software....................................... (19,971) (16,916) (5,704)
Purchase of subsidiaries -- net of acquired cash........... (88,089) (71,084) (199,734)
Proceeds from sale of subsidiary........................... 3,494 14,300 --
Other -- net............................................... (4,514) (8,503) (2,465)
Investing activities of discontinued operations............ (11,459) (4,374) (9,002)
--------- --------- ---------
Net cash used for investing activities..................... (144,504) (105,989) (226,708)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................... (762) 927 57
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....... (12,496) (34,606) 43,009
CASH AND CASH EQUIVALENTS, JANUARY 1....................... 25,276 59,882 16,873
--------- --------- ---------
CASH AND CASH EQUIVALENTS, DECEMBER 31..................... $ 12,780 $ 25,276 $ 59,882
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION --
CASH PAID FOR:
Income taxes, including amounts paid for discontinued
operations............................................... $ 12,834 $ 12,863 $ 10,616
Interest................................................... $ 25,512 $ 20,664 $ 20,351
========= ========= =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-13
<PAGE> 119
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
IN THOUSANDS AT DECEMBER 31 1997 1996
--------------------------- ---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates
market value)............................................. $ 12,780 $ 25,276
Billed receivables less allowance for doubtful accounts of
$2,756 and $2,234, respectively........................... 70,084 54,466
Unbilled and other receivables.............................. 9,546 10,662
Federal and state income tax benefit........................ 21,304 2,308
Other current assets........................................ 24,036 12,466
Net assets of discontinued operations....................... 197,330 --
---------- --------
Total current assets........................................ 335,080 105,178
---------- --------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $41,834 and
$26,502, respectively..................................... 556,737 492,835
Capitalized data and other intangible assets, less
accumulated amortization of $20,710 and $13,393,
respectively.............................................. 47,512 41,283
Capitalized software, less accumulated amortization of
$20,162 and $10,787, respectively......................... 48,645 35,004
Net assets of discontinued operations....................... -- 192,435
Other....................................................... 8,980 9,907
---------- --------
Total deferred charges and other assets..................... 661,874 771,464
---------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment.......................................... 63,169 49,924
Leasehold improvements...................................... 17,631 14,294
Other....................................................... 9,806 7,947
---------- --------
90,606 72,165
Less -- Accumulated depreciation............................ (43,751) (28,006)
---------- --------
Net property, plant and equipment........................... 46,855 44,159
---------- --------
Total assets....................................... $1,043,809 $920,801
========== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable............................................... $ 27,602 $ --
Accounts payable............................................ 14,125 16,691
Accrued employee payroll and benefits....................... 24,585 19,806
Federal income taxes payable................................ -- 9,071
Foreign and other taxes payable............................. 10,717 12,262
Deferred income............................................. 69,931 62,576
Current portion of long-term debt, including capital lease
obligations............................................... 11,301 6,518
Other....................................................... 43,814 38,761
---------- --------
Total current liabilities.......................... 202,075 165,685
---------- --------
Long-Term Debt and Other Liabilities
Long-term debt, including capital lease obligations......... 331,260 241,822
Deferred income taxes....................................... 21,133 16,189
Other....................................................... 17,463 21,010
---------- --------
Total long-term debt and other liabilities.................. 369,856 279,021
---------- --------
Total liabilities.................................. 571,931 444,706
---------- --------
MINORITY INTEREST........................................... 907 265
---------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital................. 275,370 296,546
Retained earnings........................................... 198,658 178,943
Cumulative foreign translation adjustment................... (3,057) 341
---------- --------
Total common shareholders' equity.................. 470,971 475,830
---------- --------
Total liabilities and common shareholders'
equity........................................... $1,043,809 $920,801
========== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-14
<PAGE> 120
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
IN THOUSANDS FOR YEARS ENDED DECEMBER 31 1997 1996 1995
---------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Common Stock, without par value-authorized 100,000,000
shares, issued 26,800,399; 27,067,951 and 24,435,968
shares, respectively, at $0.02 stated value
Balance -- beginning of year................................ $ 541 $ 489 $ 398
Issued for employee stock purchase and option plans......... 36 2 --
Retirement of common stock.................................. (41) -- --
Purchase of subsidiary...................................... -- 44 --
Conversion of preferred stock to common..................... -- 6 --
Issued in public offering................................... -- -- 91
-------- -------- --------
Balance -- end of year...................................... 536 541 489
-------- -------- --------
Additional Paid-in Capital
Balance -- beginning of year................................ 296,005 226,005 113,696
Tax benefit relating to stock option plans.................. 22,827 3,218 4,177
Issued for employee stock purchase and option plans......... 12,198 1,557 3,076
Retirement of common stock.................................. (56,196) -- --
Purchase of subsidiary...................................... -- 59,906 --
Conversion of preferred stock to common -- net of costs..... -- 4,738 --
Gain on treasury shares..................................... -- 581 439
Issued in public offering................................... -- -- 104,617
-------- -------- --------
Balance -- end of year...................................... 274,834 296,005 226,005
-------- -------- --------
Retained Earnings
Balance -- beginning of year................................ 178,943 141,846 124,964
Net income.................................................. 19,715 37,108 18,316
Dividends on preferred stock................................ -- (359) (1,434)
Change in year-end of subsidiaries.......................... -- 348 --
-------- -------- --------
Balance -- end of year...................................... 198,658 178,943 141,846
-------- -------- --------
Treasury Stock, at average cost, 0; 0 and 1,119,287 shares,
respectively, held in treasury
Balance -- beginning of year................................ -- (14,814) (13,145)
Repurchased................................................. -- -- (6,944)
Conversion of preferred stock to common..................... -- 10,878 --
Reissued for stock purchase and option plans................ -- 3,936 5,275
-------- -------- --------
Balance -- end of year...................................... -- -- (14,814)
-------- -------- --------
Unearned Compensation
Balance -- beginning of year................................ -- (709) (1,674)
Amortization of unearned compensation....................... -- 709 965
-------- -------- --------
Balance -- end of year...................................... -- -- (709)
-------- -------- --------
Cumulative Foreign Currency Translation Adjustment
Balance -- beginning of year................................ 341 1,245 450
Translation adjustment...................................... (5,221) (1,378) 1,262
Income tax benefit (expense) on adjustment.................. 1,823 474 (467)
-------- -------- --------
Balance -- end of year...................................... (3,057) 341 1,245
-------- -------- --------
Total Common Shareholders' Equity................. $470,971 $475,830 $354,062
======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-15
<PAGE> 121
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BUSINESS
The Company is a global information services company with businesses
strategically focused on supplying financial, economic and market research
information to financial and corporate markets.
B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Primark
Corporation and its majority-owned subsidiaries (the "Company"). All significant
intercompany transactions and balances have been eliminated. Investments in
companies of less than 50 percent are accounted for using the equity method.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Effective January 1996, Datastream International Limited and its affiliates
and Vestek Systems, Inc. changed their year-end reporting period from November
30 to December 31. The change was made to provide more timely information and
enhance comparability. The operating results for December 1995 were credited
directly to retained earnings.
Certain reclassifications have been made to prior years' statements to
conform to the 1997 presentation. Prior periods have been restated to separately
present continuing operations from discontinued operations (Note 3).
C. FOREIGN CURRENCY TRANSLATION
The functional currency for most of the Company's foreign operations is the
applicable local currency. Foreign currency accounts are translated into U.S.
dollars using current exchange rates in effect at the balance sheet date for
assets and liabilities, and weighted average monthly exchange rates during the
period for revenues and expenses. Adjustments resulting from translating foreign
functional currency financial statements into U.S. dollars are reported as a
separate component of shareholders' equity. Gains and losses resulting from
transactions and certain balance sheet accounts denominated in currencies other
than the applicable functional currency are included in income. The net effect
of changes in cash are separately identified in the consolidated statements of
cash flows.
D. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into currency exchange and interest rate swap agreements
to minimize interest rate and foreign exchange risk. Gains and losses related to
qualifying accounting hedges of firm commitments are deferred and recognized in
income when the hedged transaction occurs. Gains and losses from financial
instruments that do not qualify for hedge accounting are marked to market and
recognized as a gain or loss in the current period. The Company does not hold or
issue derivative financial instruments for trading purposes.
F-16
<PAGE> 122
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
E. REVENUE RECOGNITION
Revenue derived from subscription contracts is generally billed in advance
of services provided. Amounts billed in advance are recorded as deferred income
and recognized ratably over the periods in which services are performed.
F. CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and short-term, highly liquid
investments with original maturities of three months or less.
G. GOODWILL
Goodwill represents the excess of the purchase price over the fair value of
net identifiable assets acquired and is amortized on a straight line basis over
estimated useful lives ranging from 20 to 40 years. The Company regularly
evaluates the net carrying value of all long-lived assets, including intangibles
and goodwill, for recoverability based upon the undiscounted future cash flows
associated with these assets. Management believes there have been no impairments
of these assets.
H. CAPITALIZED SOFTWARE
Costs related to the conceptual formulation and design of software
developed for internal use are expensed as incurred. Costs incurred subsequent
to establishment of technological feasibility are capitalized and amortized over
periods ranging from 3 to 5 years. Costs to support or service software are
expensed as incurred. The Company does not develop software for sale or lease.
I. CAPITALIZED DATA AND OTHER INTANGIBLES
Costs incurred to update and maintain the Company's database assets are
expensed as incurred. Costs associated with the purchase of historical data not
currently part of the Company's database assets, as well as the cost of
initiating a new database product, are capitalized. Other intangible assets and
liabilities consist of non-compete covenants, trademarks and unfavorable lease
commitments. Data and other intangibles are amortized on a straight line basis
over periods ranging from 3 to 20 years.
J. PROPERTY AND EQUIPMENT
Computer equipment and other property are recorded at cost and depreciated
on a straight line basis over their estimated useful lives, ranging from 3 to 10
years. Leasehold improvements are amortized over the shorter of the remaining
life of the lease or the estimated useful life of the improvement.
K. INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes reflect the impact of temporary differences between assets
and liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. Deferred tax balances are adjusted to reflect
changes in tax rates expected to be in effect during the periods in which the
temporary differences reverse. As temporary differences reverse, the related
deferrals are recorded to income.
F-17
<PAGE> 123
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
L. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share." This standard requires dual presentation of basic and diluted earnings
per share ("EPS") on the face of the income statement and requires a
reconciliation of the numerators and denominators of basic and diluted EPS
calculations (Note 8). The EPS of prior periods have been restated to present
basic and diluted EPS.
M. ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. The impact of recording
stock-based compensation under the fair value method is disclosed in Note 10.
N. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information." The Company will adopt these statements during fiscal year
1998 and does not expect that the adoption will have a material impact on the
consolidated financial statements.
2. ACQUISITIONS
During the three years ending December 31, 1997, the Company made the
acquisitions set forth below, each of which has been accounted for as a
purchase. Accordingly, the purchase price has been allocated to the identifiable
net assets acquired. The excess of the purchase price over the estimated fair
value of net assets acquired has been allocated to goodwill and is amortized on
a straight line basis over periods ranging from 25 to 40 years. Future
adjustments to the total purchase price allocation, if any, are not expected to
materially affect the Company's financial statements. The consolidated financial
statements include the operating results of each business from the date of
acquisition.
A. FISCAL 1997
<TABLE>
<CAPTION>
SUMMARY OF ACQUISITION COSTS (000S) WEFA BASELINE
----------------------------------- -------- --------
<S> <C> <C>
Cash........................................................ $45,000 $40,963
Acquisition Fees............................................ 204 233
------- -------
Total Consideration......................................... $45,204 $41,196
Acquired Cash............................................... (308) (2)
------- -------
Consideration Paid.......................................... $44,896 $41,194
------- -------
Net Excess of Purchase Price over Fair Value................ $44,979 $39,431
======= =======
</TABLE>
WEFA
On February 7, 1997, the Company acquired all of the outstanding stock of
WEFA Holdings, Inc. ("WEFA") for $45,000,000 in cash. Headquartered in
Pennsylvania, WEFA is an international
F-18
<PAGE> 124
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
provider of value added economic information and consulting services to Fortune
500 companies, governments, universities, and financial institutions.
BASELINE
On January 6, 1997, the Company purchased all of the outstanding stock of
Baseline Financial Services, Inc. ("Baseline") pursuant to the terms of a Stock
Purchase Agreement dated November 24, 1996, between the Company, Bowne & Co.,
and another owner for $40,963,000 in cash. Headquartered in New York City,
Baseline provides institutional investors with visual valuation graphics of
financial market information.
B. FISCAL 1996
<TABLE>
<CAPTION>
THE YANKEE
SUMMARY OF ACQUISITION COSTS (000S) ICV WORLDSCOPE GROUP DAFSA
----------------------------------- -------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Cash.................................................. $ 40,316 $5,000 $33,000 $9,000
Stock Issued.......................................... 59,950 -- -- --
Notes Issued.......................................... 8,250 -- -- --
Receivables Forgiven.................................. -- 3,889 -- --
Guaranteed Payment.................................... -- -- 5,000 --
Acquisition Fees...................................... 3,765 237 119 199
-------- ------ ------- ------
Total Consideration................................... 112,281 9,126 38,119 9,199
Acquired Cash......................................... (16,309) (353) (1,600) --
Purchase Price Adjustment............................. -- -- -- (1,316)
-------- ------ ------- ------
Consideration Paid.................................... $ 95,972 $8,773 $36,519 $7,883
-------- ------ ------- ------
Excess of Purchase Price over Fair Value.............. $112,348 $3,926 $34,583 $6,793
======== ====== ======= ======
</TABLE>
ICV
On October 24, 1996, the Company acquired all the outstanding stock of ICV
Limited. The purchase price, excluding fees, consisted of $24,007,000 in net
cash, 2,200,000 shares of Primark common stock at a $27.25 market value and
$8,250,000 in six year notes (the "ICV Purchase Notes"), issued by the Company
to the sellers (Note 6b). ICV supplies a variety of real-time data and news
products to equity traders and investors in London and throughout the United
Kingdom. In accordance with the terms of the purchase agreement, the Company
registered the 2,200,000 shares of its common stock in 1998.
WORLDSCOPE
On October 15, 1996, the Company acquired an additional 30% ownership
interest in Worldscope for $5,000,000 in cash, giving Primark a controlling
ownership interest of 80%. Prior to the transaction, Worldscope was a 50%
partnership accounted for under the equity method. In connection with the
transaction, Primark and the previous 50% owner each forgave working capital
advances equal to $3,889,000. The sellers of the 30% interest in Worldscope have
a non-expiring option to sell their remaining 20% ownership to Primark, in
increments of 5% or 15%. The price of a 5% increment would be at 5 times the
most recent 12 months of revenue multiplied by the 5% ownership. The price of a
15% increment would be at 4 times revenue multiplied by the 15%
F-19
<PAGE> 125
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
ownership. As of October 15, 2006, Primark will have the right to purchase an
additional 15% of Worldscope.
THE YANKEE GROUP
On August 9, 1996, the Company acquired all the outstanding stock of Yankee
Group Research, Inc. (the "Yankee Group"), pursuant to the terms of a stock
purchase agreement by and between the Company and the shareholders of the Yankee
Group. The purchase price included cash payments of $31,000,000 on August 9,
1996; $2,000,000 in September of 1997, a guaranteed payment of $5,000,000 due in
August 1998 and future contingent payments to the former Yankee shareholders
based upon future operating results, ranging from $0 to a maximum of
$27,000,000. Future contingent payments, if any, are due in the year 2000 and
will be recorded as goodwill when incurred. The Yankee Group provides market
research on telecommunications and computer systems.
DAFSA
On June 18, 1996, Datastream International (France) SA acquired all of the
outstanding stock of Groupe DAFSA ("DAFSA"), for $7,883,000 in cash, net of
purchase price adjustments. DAFSA supplies company account information on all
listed companies in France and ownership information on French companies through
print and CD-ROM.
C. FISCAL 1995
Disclosure
On June 29, 1995, the Company acquired all the outstanding stock of
Disclosure Incorporated and certain of its affiliates including I/B/E/S
International Inc. and a 50% ownership of Worldscope for a total purchase price
of $200,000,000 in cash. The Company obtained $215,000,000 of external
financing, of which $185,000,000 was used to finance the cash consideration paid
in the acquisition. The Company incurred fees of approximately $6,076,000
associated with the acquisition. The excess of the purchase price over the
estimated fair value of total net assets acquired of approximately $193,713,000
was recorded to goodwill. Disclosure is a provider of "as reported" and
abstracted financial information, primarily derived from Securities and Exchange
Commission filings and supplemented with information from companies, stock
exchanges and other sources, both in the United States and worldwide. I/B/E/S is
a source of earnings estimates for investors, financial institutions and
portfolio managers on a global basis.
D. PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information reflects the
consolidated results of operations of the Company for the years ended December
31, 1997 and 1996 as though the acquisitions had occurred on January 1, 1997 and
1996. This information has been prepared for comparative purposes only and does
not necessarily represent actual operating results that may be
F-20
<PAGE> 126
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
achieved in the future or that would have occurred had the acquisitions been
consummated on January 1, 1997 or 1996.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION (000S EXCEPT EPS) 1997 1996
--------------------------------------- -------- --------
<S> <C> <C>
Operating revenues.......................................... $400,228 $375,147
Income from continuing operations........................... $ 6,946 $ 4,681
Net income applicable to common stock....................... $ 19,671 $ 28,914
EPS from continuing operations:
Basic.................................................. $ 0.26 $ 0.18
Diluted................................................ $ 0.25 $ 0.17
======== ========
</TABLE>
3. DISCONTINUED OPERATIONS AND DISPOSITIONS
A. DISCONTINUED OPERATIONS
The accompanying consolidated financial statements reflect the operating
results of TASC, TIMCO and PSLC separately from the Company's continuing
operations for all periods presented. Consolidated interest expense has been
allocated to discontinued operations based upon their ratio of net assets to
total consolidated net assets. Net assets of discontinued operations represent
the net book value of the Company's investment in TASC and TIMCO and consist
principally of working capital, fixed assets and other non-current assets and
liabilities.
<TABLE>
<CAPTION>
DISCONTINUED OPERATIONS (000S) 1997 1996 1995
------------------------------ ---- -------- --------
<S> <C> <C> <C>
Income/(loss):
TASC................................................... $ 14,950 $ 13,028 $ 9,749
TIMCO.................................................. (270) 2,411 2,717
PSLC................................................... $ -- 753 1,003
-------- -------- -------
Total............................................. $ 14,680 $ 16,192 $13,469
======== ======== =======
Gain on disposal:
PSLC................................................... $ -- $ 8,400 $ --
-------- -------- -------
Total............................................. $ -- $ 8,400 $ --
======== ======== =======
Net Assets:
TASC................................................... $155,376 $152,505
TIMCO.................................................. 41,954 39,930
-------- --------
Total............................................. $197,330 $192,435
======== ========
</TABLE>
TASC
On December 8, 1997, the Company entered into an agreement to sell its
subsidiary, TASC, Inc. subject to shareholder approval (Note 14), for $432
million in cash, subject to adjustment, including changes in the TASC
consolidated equity account through the date of closing. The sale of TASC
represents disposal of essentially all of the Company's applied technology
segment. On a consolidated basis, TASC had revenues of $437.9, $383.7, and
$346.2 million for the years ended December 31, 1997, 1996 and 1995,
respectively. The purchaser has agreed to indemnify the Company from and against
all expenses and liabilities Primark may incur related to an outstanding claim
against TASC.
F-21
<PAGE> 127
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DISCONTINUED OPERATIONS AND DISPOSITIONS -- (CONTINUED)
TIMCO
In June 1997, the Company adopted a formal plan to sell its non-core
transportation services segment consisting of Triad International Maintenance
Corporation ("TIMCO"). TIMCO reported revenues of $113.3, $106.4 and $79.2
million for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company anticipates that the sale of TIMCO will be completed by June 30, 1998.
PSLC
On September 30, 1996, the Company sold all of the outstanding stock of
Primark Storage Leasing Corporation ("PSLC"), for $14,300,000 in cash. The
disposal of PSLC resulted in an after-tax gain of approximately $8,400,000 and
eliminated $28,700,000 of non-recourse debt from the Company's balance sheet.
The purchaser has agreed to indemnify the Company from and against all expenses
and liabilities that Primark may incur with respect to any adverse environmental
condition relating to PSLC's natural gas storage fields.
B. DISPOSITIONS
On January 7, 1997, the Company completed the sale of its investment in the
Weather Network pursuant to the terms of a sale agreement dated December 5, 1996
for 2,100,000 pounds sterling ($3,500,000). The $2,500,000 pre-tax gain on the
sale has been included in other income.
4. RESTRUCTURING CHARGES
A. DISCLOSURE
During the first quarter of 1997, the Company recorded a $1,800,000 pre-tax
charge, or $0.04 per share, at Disclosure to take advantage of new information
technology, reorganization of Disclosure's document business and other actions
aimed at reducing costs and enhancing efficiency. The restructuring provision
included estimated costs for employee severance and other benefits of $981,200,
asset write-downs of $713,600 and idle facility related costs of $105,200. As
part of the restructuring, 114 employees were eliminated. The spending for these
accrued restructuring costs was completed in June 1997.
B. DAFSA
During the second quarter of 1997, the Company recorded a restructuring
charge of $5,000,000 related to the integration and downsizing of operations at
DAFSA. Due to DAFSA's unprofitable condition, tax benefits associated with
losses incurred during 1997, including the restructuring charge, were not
recognized. Consequently, the restructuring charge resulted in a $0.18 reduction
of earnings per share in 1997.
When the Company acquired DAFSA in June of 1996, approximately $1,500,000
of integration costs were recorded in determining the purchase accounting. The
subsequent restructuring charge is the result of a plan to further integrate
DAFSA's personnel, space and product with those of the Company's other
subsidiaries. The $6,500,000 total restructuring provision includes estimated
costs for exiting a line of business of $1,700,000, the future rent cost of
abandoned space of $1,000,000, employee severance and other benefits of
$1,400,000, asset write-downs of $1,200,000 and legal, professional and other
related costs of $1,200,000. The accrual for abandoned space will be utilized
F-22
<PAGE> 128
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. RESTRUCTURING CHARGES -- (CONTINUED)
over the remaining life of the lease. As of December 31, 1997, $4,800,000 of
restructuring costs had been incurred, of which $1,500,000 related to exiting a
line of business, $1,100,000 related to employee severance and other benefits,
$1,200,000 related to asset write-downs and abandoned lease space and $1,000,000
related to legal, professional and other related costs. As part of the
restructuring, 31 employees of DAFSA have been terminated and an additional 9
employees will be terminated in 1998. The restructuring plan, when fully
implemented, is expected to significantly improve DAFSA's operating margins.
5. LEASES
The Company leases a variety of assets principally under non-cancelable
operating lease agreements, including office facilities, real property, and
computer and office equipment. These leases expire at various dates through
2008. Total rent expense for all operating leases was $15,105,000, $11,563,000,
and $7,649,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
FUTURE MINIMUM LEASE COMMITMENTS (000S) CAPITAL OPERATING
--------------------------------------- ------- ---------
<S> <C> <C>
1998........................................................ $1,390 $13,899
1999........................................................ 534 12,321
2000........................................................ 370 11,259
2001........................................................ 136 10,523
2002........................................................ -- 10,109
Thereafter.................................................. -- 30,171
------ -------
Total minimum lease payments................................ 2,430 $88,282
=======
Amounts representing interest and other..................... (133)
------
Present value of net minimum payments....................... 2,297
Current portion............................................. (1,242)
------
Long-term obligations....................................... $1,055
======
</TABLE>
6. SHORT-TERM AND LONG-TERM DEBT
On February 7, 1997, the Company entered into a $300,000,000 refinancing
arrangement to replace some of the funds expended for recent acquisitions and
enhance liquidity for future opportunities. The new arrangement, comprised of a
$75,000,000 revolving credit facility (the "Credit Facility") and a $225,000,000
term loan (the "Term Loan") replaced an outstanding $75,000,000 revolving credit
facility and a $125,000,000 term loan and provided $8,382,000 as a note backup
agreement. The Company incurred costs of $2,831,000 in conjunction with the
arrangement, which will be amortized over the term of the debt. The write-off of
unamortized debt issue costs related to the original financing generated an
extraordinary after-tax loss of $1,955,000 in the first quarter of 1997. The
Company recognized an extraordinary after-tax loss of $534,000 for the write-off
of unamortized debt issue costs associated with the June 1995 refinancing of its
$75,000,000 revolving credit facility. Deferred debt issue costs are amortized
over the terms of the related debt, ranging from 3 to 18 years.
F-23
<PAGE> 129
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SHORT-TERM AND LONG-TERM DEBT -- (CONTINUED)
A. SHORT-TERM DEBT
<TABLE>
<CAPTION>
SHORT-TERM BANK BORROWINGS (000S) 1997 1996 1995
--------------------------------- ------- ------- -------
<S> <C> <C> <C>
Outstanding borrowings at December 31....................... $27,602 $ -- $ --
Available for future borrowings at December 31.............. $47,398 $74,650 $75,000
Weighted average effective interest rate on average bank
borrowings................................................ 7.7% 8.3% 8.0%
Aggregate borrowings:
Maximum outstanding.................................... $32,695 $ 1,871 $64,324
Average outstanding.................................... $ 5,115 $ 17 $22,661
======= ======= =======
</TABLE>
The Credit Facility expires on October 15, 2000 and bears interest on
outstanding borrowings based upon performance pricing which results in rates
ranging from 0.50% to 1.00% above the current prevailing LIBOR rate. Commitment
fees are payable quarterly at rates ranging from 0.20% to 0.30% per annum on the
average daily unused portion of the facility. The Credit Facility contains
various restrictive covenants, which, among other things, require the Company to
maintain certain minimum levels of consolidated net worth and specific
consolidated liquidity and long-term solvency ratios. The Credit Facility is
secured by a pledge of the outstanding common stock of certain of Primark's
subsidiaries.
B. LONG-TERM DEBT
The Company's outstanding long-term debt, including capital lease
obligations, are shown below.
<TABLE>
<CAPTION>
LONG-TERM DEBT DECEMBER 31 (000S) 1997 1996
--------------------------------- -------- --------
<S> <C> <C>
Primark 8.75% Senior Notes $112,000,000 due 2000............ $111,455 $111,291
Primark bank Term Loan due through 2004..................... 220,000 125,000
ICV Purchase Notes due 2002................................. 7,750 8,250
Capital lease obligations and other......................... 3,356 3,799
-------- --------
Total debt and capital lease obligations.................... 342,561 248,340
Less current maturities..................................... (11,301) (6,518)
-------- --------
Long-term debt and capital lease obligations................ $331,260 $241,822
======== ========
</TABLE>
Required principal payments on long-term debt and notes payable over the
next five years, excluding the Senior Notes and capital lease and other
obligations, are $15,000,000 in 1998, $20,000,000 in 1999, $30,000,000 in 2000,
$35,000,000 in 2001, and $53,250,000 in 2002.
Primark's 8.75% Senior Notes due 2000 ("Senior Notes") are carried at their
principal amount due at maturity less the unamortized discount. Interest on the
Senior Notes is payable semi-annually on April 15 and October 15. The Senior
Notes are unsecured obligations of the Company, contain no mandatory sinking
fund or redemption requirements, and are redeemable in whole or in part at the
option of the Company at redemption prices ranging from 104.375% to 100.00% in
1999 and thereafter, plus accrued interest. The Indenture pursuant to which the
Senior Notes were issued contains various restrictive covenants. Under the most
restrictive covenants, the Company is restricted from paying cash dividends on
its common stock, repurchasing its common stock or making certain other payments
which in the aggregate exceed the sum of: (i) $10,000,000; (ii) 50% of the
Company's consolidated net income (cumulative from the date of issuance of the
Senior Notes); plus (iii) 100% of the net proceeds received from sales of the
Company's common stock for cash.
F-24
<PAGE> 130
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SHORT-TERM AND LONG-TERM DEBT -- (CONTINUED)
The Term Loan is due through June 30, 2004. Principal payments are due
semi-annually on June 30 and December 31. Interest on outstanding borrowings
under the Term Loan is payable at rates ranging from 0.50% to 1.25% above the
current prevailing LIBOR rate of interest. The Term Loan contains various
restrictive covenants which, among other things, require the Company to maintain
certain minimum levels of consolidated net worth and specific consolidated
liquidity and long-term solvency ratios. The Term Loan is secured by a pledge of
the outstanding common stock of certain of the Company's subsidiaries.
On October 24, 1996, the Company entered into five loan note agreements
totaling $8,250,000 in connection with the purchase of ICV (Note 2b). The ICV
Purchase Notes are due October 24, 2002. Interest on the ICV Purchase Notes is
payable quarterly at the current prevailing LIBOR rate. In November 1997, the
Company paid $500,000 of the ICV Purchase Notes. On February 7, 1997, the
Company entered into a $8,382,000 Note Backup Agreement (the "Note Agreement")
which expires on November 8, 2002. Under the terms of the Note Agreement,
standby letters of credit were issued to provide credit enhancement for the
payment of the Notes. Interest on outstanding borrowings under the Note
Agreement is based upon performance pricing and payable at rates ranging from
0.75% to 1.25% above the current prevailing LIBOR rate of interest. Letter of
credit fees are based upon performance pricing and are payable quarterly at a
rate of 0.25% per annum on the average daily unused portion of the facility. As
of December 31, 1997, the Company had no outstanding borrowings under the Note
Agreement.
7. FINANCIAL INSTRUMENTS
A. FOREIGN EXCHANGE RISK MANAGEMENT
The Company enters into forward exchange and currency option contracts to
reduce the exposure of foreign currency fluctuations associated with certain
firm commitments and anticipated cash flows. The Company's principal strategy is
to protect the net cash flow from foreign customers' contracts. As these
contracts are typically under two years in length, most of the derivative
financial instruments are similarly two years or less in duration. The Company
principally enters into contracts to deliver foreign currencies for U.S. dollars
at agreed-upon exchange rates. Other contracts include the purchase of British
pounds and Irish Punts for U.S. dollars. Counterparties to these agreements are
major international financial institutions. The tables below illustrate the U.S.
dollar equivalent of foreign exchange contracts at December 31, 1997 and 1996
along with unrecorded gross unrealized gains and losses.
F-25
<PAGE> 131
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997
------------------ ----------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
NOTIONAL GAINS LOSSES
AMOUNT DEFERRED DEFERRED
-------- ---------- ----------
<S> <C> <C> <C>
FORWARD EXCHANGE CONTRACTS:
Japanese Yen........................................... $ 2,684 $ 57 $(19)
U.S. Dollars/U.K. Pound Sterling....................... 5,087 -- --
U.S. Dollars/Irish Punt................................ 5,895 -- --
Deutsche Mark.......................................... 518 -- --
Swiss Franc............................................ 1,061 15 --
French Franc........................................... 172 3 --
Swedish Krona.......................................... 3,588 54 (21)
Other.................................................. 3,264 254 (9)
------- ---- ----
$22,269 $383 $(49)
======= ==== ====
OPTION CONTRACTS PURCHASED:
Japanese Yen........................................... $ 2,903 $193 $ --
U.S. Dollars/U.K. Pound Sterling....................... 10,665 56 (63)
Deutsche Mark.......................................... 5,562 22 (16)
Swiss Franc............................................ 1,563 14 --
Other.................................................. 2,048 105 (2)
------- ---- ----
$22,741 $390 $(81)
======= ==== ====
OPTION CONTRACTS SOLD:
Japanese Yen........................................... $ 1,495 $ 3 $ --
U.S. Dollars/U.K. Pound Sterling....................... 3,520 -- (28)
Deutsche Mark.......................................... 2,781 12 --
Swiss Franc............................................ 735 1 --
------- ---- ----
$ 8,531 $ 16 $(28)
======= ==== ====
</TABLE>
F-26
<PAGE> 132
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1996
------------------ ----------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
NOTIONAL GAINS LOSSES
AMOUNT DEFERRED DEFERRED
-------- ---------- ----------
<S> <C> <C> <C>
FORWARD EXCHANGE CONTRACTS:
Japanese Yen........................................... $ 2,593 $120 $ (7)
U.S. Dollars/U.K. Pound Sterling....................... 3,956 -- (43)
Deutsche Mark.......................................... 3,804 17 --
Swiss Franc............................................ 2,451 90 --
French Franc........................................... 1,452 5 (1)
Swedish Krona.......................................... 4,432 53 (11)
Other.................................................. 5,460 26 (35)
------- ---- ----
$24,148 $311 $(97)
======= ==== ====
OPTION CONTRACTS PURCHASED:
Japanese Yen........................................... $ 4,302 $123 $ --
U.S. Dollars/U.K. Pound Sterling....................... 11,900 134 --
Deutsche Mark.......................................... 9,547 86 --
Swiss Franc............................................ 5,531 167 --
French Franc........................................... 4,465 37 --
Other.................................................. 3,248 15 (16)
------- ---- ----
$38,993 $562 $(16)
======= ==== ====
OPTION CONTRACTS SOLD:
Japanese Yen........................................... $ 645 $ 3 $ --
U.S. Dollars/U.K. Pound Sterling....................... 11,105 82 --
Deutsche Mark.......................................... 2,616 8 --
Swiss Franc............................................ 569 -- --
French Franc........................................... 1,064 3 --
Other.................................................. 431 1 --
------- ---- ----
$16,430 $ 97 $ --
======= ==== ====
</TABLE>
B. INTEREST RATE SWAP AGREEMENT
On August 1, 1995, the Company entered into an interest rate swap agreement
with a major bank, having a notional principal amount of $18,333,000. The swap
agreement effectively changed the interest rate of a portion of Primark's
long-term debt from a floating rate to a 6.1% fixed rate. This swap agreement
expires in December of 1999. As of December 31, 1997, the notional principal
amount outstanding was $8,333,000. Though the Company is exposed to credit and
market risk in the event of future non-performance by the bank, management does
not anticipate that such an event will occur.
F-27
<PAGE> 133
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS -- (CONTINUED)
C. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying and estimated fair values of certain of the Company's
financial instruments are shown below.
<TABLE>
<CAPTION>
CARRYING VALUE ESTIMATED FAIR VALUE
------------------- ---------------------
DECEMBER 31 (000S) 1997 1996 1997 1996
------------------ -------- -------- --------- ---------
<S> <C> <C> <C> <C>
Forwards............................................ $ 753 $ 1,301 $ 1,087 $ 1,515
Options............................................. $ 195 $ 343 $ 492 $ 986
Interest rate swaps................................. $ -- $ -- $ (23) $ (45)
8.75% Senior Notes.................................. $111,455 $111,291 $115,220 $114,100
======== ======== ======== ========
</TABLE>
Estimated fair values of these financial instruments were based upon quotes
obtained from investment and commercial bankers using comparable securities. The
fair values of currency forward contracts and currency options were estimated
based on quoted market prices of contracts with similar terms. Other financial
instruments have been excluded as their carrying value approximates their market
value.
8. EARNINGS PER SHARE
In February of 1997, the FASB released SFAS No. 128, "Earnings per Share",
effective for fiscal periods ending after December 15, 1997. The statement
simplifies the standards for computing EPS and makes them comparable to
international EPS standards. The statement replaces primary EPS with basic EPS.
Basic EPS is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock. Diluted EPS is computed similarly to
fully diluted EPS previously presented. In accordance with the standard, all
prior period EPS data has been restated.
Options to purchase 785,000; 227,000 and 19,000 shares of common stock were
outstanding for the years ended 1997, 1996 and 1995 respectively but were
excluded in the computation of diluted EPS because the options' exercise price
was greater than the average market price of common shares. The conversion of
preferred stock outstanding during 1995 and the first quarter of 1996 was
excluded from the computation of diluted EPS as its effect was anti-dilutive. A
reconciliation of the
F-28
<PAGE> 134
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. EARNINGS PER SHARE -- (CONTINUED)
numerators and denominators of the basic and diluted EPS computations for income
from continuing operations is shown below.
<TABLE>
<CAPTION>
INCOME SHARES EARNINGS
(000S EXCEPT PER SHARE) (NUMERATOR) (DENOMINATOR) PER SHARE
----------------------- ----------- ------------- ---------
<S> <C> <C> <C>
December 31, 1997
Basic EPS:
Income available to common shareholders............... $ 6,990 26,348 $0.26
Effect of Dilutive Securities Options................. -- 1,596
------- ------
Diluted EPS:
Income available to common shareholders and
assumed conversions................................. $ 6,990 27,944 $0.25
December 31, 1996
------- ------
Basic EPS:
Income from continuing operations..................... $12,516
Less: preferred stock dividends....................... (359)
-------
Income available to common shareholders............... $12,157 24,813 $0.49
Effect of Dilutive Securities Options................. -- 1,758
------- ------
Diluted EPS:
Income available to common shareholders and assumed
conversions......................................... $12,157 26,571 $0.46
December 31, 1995
Basic EPS:
Income from continuing operations..................... $ 5,381
Less: preferred stock dividends............................ (1,434)
-------
Income available to common shareholders............... $ 3,947 19,150 $0.21
Effect of Dilutive Securities Options................. -- 1,531
------- ------
Diluted EPS:
Income available to common shareholders and assumed
conversions......................................... $ 3,947 20,681 $0.19
======= ====== =====
</TABLE>
F-29
<PAGE> 135
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SHAREHOLDERS' EQUITY
A. COMMON STOCK
On May 28, 1997, the shareholders of the Company approved a resolution that
amended the Company's Articles of Incorporation to increase the number of
authorized shares of common stock from 65,000,000 to 100,000,000. Changes in the
number of shares of the Company's common stock are shown below.
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C>
Common Stock Issued...................................... 26,800,399 27,067,951 24,435,968
Common Stock Held
In Treasury:
Balance -- beginning of period........................... -- (1,119,287) (1,392,789)
Treasury shares acquired................................. -- -- (279,154)
Treasury shares reissued:
Employee stock purchase plan............................. -- 79,683 203,647
Exercise of stock options................................ -- 217,715 349,009
Conversion of Preferred Stock............................ -- 821,889 --
---------- ---------- ----------
Balance -- end of period................................. -- -- (1,119,287)
---------- ---------- ----------
Common Stock Outstanding................................. 26,800,399 27,067,951 23,316,681
========== ========== ==========
</TABLE>
In December of 1997, the Company received 722,000 shares of its common
stock to satisfy the exercise price of stock options and payment of withholding
taxes due on option exercises totaling $29,604,000. These shares were retired
upon receipt. The Company drew on its revolving credit facility to satisfy the
withholding tax payment. Primark will receive a compensation deduction related
to the option exercises and anticipates a tax refund of approximately
$25,000,000.
In April 1997, the Company's Board of Directors authorized the repurchase
of up to 2,200,000 shares of the Company's common stock from time to time
through open market and/or privately negotiated transactions. During the second
quarter of 1997, the Company repurchased 1,349,000 shares of its outstanding
common stock in the open market at a total cost of $26,633,000. On May 13, 1997
and June 5, 1997, the Company retired 1,145,300 and 203,700 shares,
respectively.
On October 24, 1996, the Company issued 2,200,000 shares of its common
stock as part of the purchase price for ICV Limited (Note 2b).
On May 2, 1996, the Company received notification to convert the total
outstanding shares of Primark Series A, 8.5% Cumulative Convertible Preferred
Stock into shares of Primark common stock. The 674,943 preferred shares plus
accrued and unpaid dividends were converted into 1,164,276 shares of Primark
common stock based upon the stated conversion rate of $14.49. The preferred
shares were held entirely by the Profit Sharing and Stock Ownership Plan of
TASC, a discontinued subsidiary (Note 3).
On December 5, 1995, the Company completed an equity offering in which it
sold 4,068,200 shares of its common stock and offered an additional 288,000
shares for certain selling shareholders. The sale of common stock together with
option proceeds related to the selling shareholders provided the Company
$107,784,000, net of commissions and expenses. A portion of the proceeds was
used to pay down the outstanding balance of $48,166,000 on the Company's
revolving credit agreement and to prepay $15,000,000 on a loan held by TASC, a
discontinued subsidiary (Note 3).
F-30
<PAGE> 136
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SHAREHOLDERS' EQUITY -- (CONTINUED)
In December of 1995, 92,000 shares of the Company's common stock were
delivered to satisfy the exercise price of stock options and 168,000 shares were
withheld from the exercise of stock options to satisfy the related tax
withholding requirements.
B. RIGHTS AGREEMENT
In May of 1997, the Board of Directors of the Company executed a new Rights
Agreement (the "Rights Agreement") to extend the benefits of the rights
agreement adopted in 1988. The Company's Rights Agreement is designed to deter
coercive or unfair takeover tactics, and to prevent a buyer from gaining control
of the Company without offering a fair price to all of its shareholders. The
Rights Agreement generally becomes effective when an "Acquiring Person" (as
defined in the agreement) beneficially owns 15% or more of the outstanding
shares of Primark's common stock. In general, upon a "Triggering Event" (as
defined in the agreement), each Right represents the right to purchase one share
of Common Stock of the Company at a price per share of $138.00, subject to
adjustment. The Rights, which do not have voting privileges, are redeemable
under certain circumstances at $0.01 per Right and will expire on January 25,
2008, unless previously redeemed. At December 31, 1997, common stock reserved
for issuance under the Rights Agreement was 26,800,399 shares.
10. RETIREMENT AND BENEFIT PLANS
A. EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Primark Corporation Savings and Stock Ownership Plan was amended and
revised effective January 1, 1997 ("ESSOP") to provide for 401(K) contributions,
employer matching contributions and certain other changes. Prior to the
amendment, the plan, which covers all employees of Primark and certain
subsidiaries, was pre-funded in 1989 with 965,000 shares of the Company's common
stock which were allocated to participants, based upon a percentage of
compensation, through 1996. Under the current 401(K) provisions of the ESSOP,
the Company matches 50% of an employee's contribution up to a maximum of 3% of
each participant's compensation. Participating employees' future benefits are
based on their vested portion of contributions, plus their pro rata share of
fund investment gains or losses. Under the 401(K) provisions, the Company
contributed $1,629,000 during 1997. No contributions were made to the ESSOP
during 1996 and 1995.
B. FOREIGN PLANS
Substantially all employees in foreign countries who are not U.S. citizens
are covered by various retirement benefit arrangements, some of which are
considered to be defined benefit pension plans for accounting purposes. Benefits
are based primarily on years of service and employees' salaries near retirement.
In general, plans are funded based upon legal requirements, tax considerations,
local practices and investment opportunities. Plan assets are generally held in
restricted trusts or foundations that are segregated from the assets of the plan
sponsor, and consist primarily of common
F-31
<PAGE> 137
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT AND BENEFIT PLANS -- (CONTINUED)
stock and fixed income securities. The components of net periodic pension cost
for foreign defined benefit pension plans are shown below.
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996 1995
------------------ ------ ------ ------
<S> <C> <C> <C>
Service cost of benefits earned during the period........... $1,348 $1,181 $1,039
Interest cost of projected benefit obligation............... 1,367 1,186 887
Actual return on plan assets................................ (3,072) (883) (974)
Net amortization and deferral............................... 1,358 (523) (370)
------ ------ ------
Net pension expense......................................... $1,001 $ 961 $ 582
====== ====== ======
</TABLE>
The following assumptions were used in accounting for foreign defined
benefit plans.
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
----------- ---- ----- -----
<S> <C> <C> <C>
Discount rate............................................... 7.8% 8.5% 8.5%
Rate of increase in future compensation..................... 5.0% 5.0% 5.0%
Rate of return on plan assets............................... 9.3% 10.0% 10.0%
==== ===== =====
</TABLE>
The funded status on the non-U.S. plans is shown below.
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996
------------------ -------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................... $(17,553) $(14,736)
-------- --------
Accumulated benefit obligation.............................. (17,553) (14,736)
-------- --------
Projected benefit obligation................................ (20,508) (16,578)
Plan assets at fair value................................... 19,661 15,639
-------- --------
Projected benefit obligation more than plan assets.......... (847) (939)
Unrecognized net loss....................................... 3,770 3,501
Unrecognized prior service cost............................. 127 156
Unrecognized net asset...................................... (1,735) (2,023)
-------- --------
Prepaid pension cost........................................ $ 1,315 $ 695
======== ========
</TABLE>
C. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS
Established in 1992, the Primark Corporation Employee Stock Purchase Plan
is available for all employees of Primark and certain subsidiaries. Under this
plan employees may purchase, through periodic payroll deductions, up to a
maximum of 3,000,000 shares of the Company's common stock at 85% of the lower of
the average market price of such shares either at the beginning or end of each
six month offering period.
The Primark Corporation Stock Option Plan for Non-Employee Directors
provides for the granting of options to purchase shares of common stock to each
director who is not an employee. The Primark Corporation 1992 Stock Option Plan
provides for the granting of options to purchase common stock to officers and
certain key employees of Primark and its subsidiaries. This plan limits the
number of shares subject to option that may be granted to any participant in any
year to 100,000 shares. Stock options available for grant in any one year under
Primark Corporation's 1992 Stock Option Plan may not exceed 1.5% of the
Company's outstanding common stock as of January 1 each
F-32
<PAGE> 138
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT AND BENEFIT PLANS -- (CONTINUED)
year, plus any excess of available stock options not granted from previous
years. At December 31, 1997, options available for grant in 1998 included
449,513 stock options under Primark Corporation's 1992 Stock Option Plan.
Generally, options outstanding under the Company's stock option plans: (i) are
granted at prices equal to the fair market value of the stock on the date of
grant, (ii) vest within a three year period, and (iii) expire ten years
subsequent to award.
Changes in the number of options granted under the Company's various stock
option plans are shown below.
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1......... 4,375,865 $12.51 4,213,718 $10.07 4,351,285 $ 8.75
Granted at market value.......... 1,056,875 24.89 464,932 34.38 680,286 16.26
Granted above market value....... 500,000 33.34 -- -- 3,500 24.88
Exercised........................ (1,692,663) 5.68 (251,068) 10.00 (804,109) 8.18
Canceled......................... (123,671) 23.36 (51,717) 23.09 (17,244) 11.78
---------- ------ --------- ------ --------- ------
Outstanding at December 31,...... 4,116,406 $20.71 4,375,865 $12.51 4,213,718 $10.07
---------- ====== --------- ====== ---------
Available for grant at
December 31,..................... 657,361 687,560 675,331
========== ========= =========
</TABLE>
The following table sets forth information regarding options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------- ----------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE
RANGE OF AT REMAINING EXERCISE AT EXERCISE
EXERCISE PRICES 12/31/97 LIFE PRICE 12/31/97 PRICE
--------------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 7.63-$12.88.............................. 956,503 4.37 $11.19 956,503 $11.19
$13.50-$14.00.............................. 964,813 6.30 $13.70 697,818 $13.73
$14.63-$24.25.............................. 827,300 8.65 $22.66 175,484 $19.06
$25.00-$30.31.............................. 872,825 9.00 $27.28 211,843 $25.59
$33.13-$39.75.............................. 494,965 8.61 $37.91 171,615 $39.53
--------- ---- ------ --------- ------
$ 7.63-$39.75.............................. 4,116,406 7.17 $20.71 2,213,263 $16.19
========= ==== ====== ========= ======
</TABLE>
The fair value of options on their grant date, including the valuation of
the option feature implicit in the Company's stock purchase plan, was measured
using the Black-Scholes option-pricing model. The fair value of options on their
grant date and key assumptions used to apply this model are shown below:
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
----------- --------------- --------------- ---------------
<S> <C> <C> <C>
Grant date fair value..................... $ 12.21 $ 13.49 $ 7.12
Range of risk-free interest rates......... 5.51% to 6.82% 5.03% to 6.79% 5.77% to 7.59%
Range of expected life of option grants... 3 to 9 years 4 to 9 years 4 to 9 years
Expected volatility of underlying stock... 37.5% 30.9% 30.9%
=============== =============== ===============
</TABLE>
F-33
<PAGE> 139
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT AND BENEFIT PLANS -- (CONTINUED)
It should be noted that the option-pricing model used was designed to value
readily tradable stock options with relatively short lives. The options granted
to employees are not tradable and have contractual lives of up to ten years. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. However, management
believes that the assumptions used and the model applied to value the awards
yields a reasonable estimate of the fair value of the grants made under the
circumstances.
The Company uses the intrinsic value method to measure compensation expense
associated with grants of stock options to employees. Had compensation cost been
determined based upon the fair value at the grant date for awards under these
plans, reported net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (000S EXCEPT PER SHARE DATA) 1997 1996 1995
---------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Net income.................................................. $12,351 $33,428 $16,360
Basic EPS................................................... $ 0.47 $ 1.35 $ 0.85
EPS Assuming Dilution....................................... $ 0.44 $ 1.26 $ 0.79
------- ------- -------
Net income applicable to common stock....................... $12,351 $33,069 $14,926
Basic EPS................................................... $ 0.47 $ 1.33 $ 0.78
EPS Assuming Dilution....................................... $ 0.44 $ 1.24 $ 0.72
======= ======= =======
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure include only
the effects of grants made subsequent to January 1, 1995 and, accordingly, are
not indicative of future amounts.
11. INCOME TAXES
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996 1995
------------------ ------- ------- -------
<S> <C> <C> <C>
FEDERAL AND OTHER INCOME TAXES CONSISTED OF:
Current provision........................................... $ 7,250 $ 8,311 $ 3,607
Deferred provision (benefit) -- net......................... 5,713 (879) 1,023
------- ------- -------
Total Federal and other income tax expense.................. $12,963 $ 7,432 $ 4,630
------- ------- -------
RECONCILIATION BETWEEN STATUTORY AND ACTUAL INCOME TAXES:
Income from continuing operations........................... $ 6,990 $12,516 $ 5,381
Income tax expense.......................................... 12,963 7,432 4,630
------- ------- -------
Book pre-tax income......................................... $19,953 $19,948 $10,011
------- ------- -------
Statutory Federal income taxes at a rate of 35%............. $ 6,983 $ 6,982 $ 3,504
Adjustments to Federal income taxes:
Amortization of goodwill.................................... 4,737 3,390 2,163
Adjustment of Federal income taxes provided in prior
years..................................................... (1,375) (1,121) 10
Losses of foreign subsidiaries without current benefit...... 2,493 55 --
State income taxes -- net................................... 545 (176) (430)
Effect of foreign tax rates................................. (198) (335) (228)
Other -- net................................................ (222) (1,363) (389)
------- ------- -------
Total Federal and other income tax expense.................. $12,963 $ 7,432 $ 4,630
======= ======= =======
</TABLE>
F-34
<PAGE> 140
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES -- (CONTINUED)
The 1997 adjustment of Federal income taxes provided in prior years is
primarily due to the recognition of net operating losses and the true up of
prior year tax expense. The 1996 adjustment is primarily the result of the
Company settling seven open tax years at lower than anticipated levels.
The tax effects of significant temporary differences that gave rise to
deferred income tax assets and liabilities are shown below.
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996
------------------ -------- --------
<S> <C> <C>
Deferred tax assets:
State taxes................................................. $ 9,645 $ 3,991
Postretirement benefits..................................... 1,509 1,428
Fixed assets................................................ 1,212 763
Unfavorable lease reserve................................... 961 1,186
Net operating loss carry forwards........................... 7,545 7,063
Bad debts................................................... 486 703
Other....................................................... 7,839 2,928
-------- --------
Total deferred tax assets................................... 29,197 18,062
Valuation allowance......................................... (7,199) (6,411)
-------- --------
Net deferred tax assets..................................... 21,998 11,651
-------- --------
Deferred tax liabilities:
Intangibles................................................. (20,379) (9,695)
Fixed assets................................................ (866) (1,398)
Unearned revenue............................................ (2,014) (1,172)
Other....................................................... (9,854) (8,962)
-------- --------
Total deferred tax liabilities.............................. (33,113) (21,227)
-------- --------
Net deferred tax liabilities................................ $(11,115) $ (9,576)
-------- --------
Net current asset........................................... $ 10,018 $ 6,613
Net long-term liability..................................... $(21,133) $(16,189)
-------- --------
Net deferred tax liability.................................. $(11,115) $ (9,576)
======== ========
</TABLE>
The Company's operating loss carry forwards in France of $7,199,000 at
December 31, 1997, expire in the years 1998 through 2002.
12. SEGMENT AND GEOGRAPHIC INFORMATION
During 1997 and 1996, the Company realigned its business segments to
reflect its strategic emphasis in the information services industry. The
realignment included several acquisitions throughout 1996 and 1997 (Note 2) as
well as the discontinuance of two of its previously reported segments, applied
technology and transportation services during 1997 (Note 3). Accordingly, the
Company's continuing operations primarily reflect that of one industry segment,
information services, which provides services and related products principally
in the United States and the United Kingdom. Most of Primark's international
sales are generated through its affiliates, which are located throughout Europe,
Asia and the United States.
F-35
<PAGE> 141
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SEGMENT AND GEOGRAPHIC INFORMATION -- (CONTINUED)
The Company's operations by geographic region are presented in the
following table on a stand-alone basis. Information presented includes acquired
companies from their respective dates of acquisition (Note 2), and has been
restated to exclude discontinued operations (Note 3).
<TABLE>
<CAPTION>
GEOGRAPHIC REGIONS
(000S) 1997 1996 1995
------------------ ---------- -------- --------
<S> <C> <C> <C>
DOMESTIC
Operating Revenues.......................................... $ 173,150 $119,728 $ 63,679
Operating Income (Loss)(1) Non-affiliate.................... $ 19,857 $ 17,167 $ 9,045
Affiliate(2)................................................ $ (7,005) $ (6,374) $ (4,834)
Identifiable Assets......................................... $ 393,572 $297,193 $272,976
---------- -------- --------
UNITED KINGDOM
Operating Revenues Non-affiliate............................ $ 131,889 $ 76,979 $ 60,422
Affiliate(2)................................................ $ 39,894 $ 38,711 $ 33,621
Operating Income (Loss)(3) Non-affiliate.................... $ (18,933) $(17,568) $(16,137)
Affiliate (2)............................................... $ 39,894 $ 38,711 $ 33,621
Identifiable Assets......................................... $ 363,611 $353,098 $160,338
---------- -------- --------
OTHER INTERNATIONAL
Operating Revenues.......................................... $ 92,836 $ 80,356 $ 60,678
Operating Income (Loss)(1) Non-affiliate.................... $ 36,812 $ 34,970 $ 33,993
Affiliate(2)................................................ $ (32,889) $(32,337) $(28,787)
Identifiable Assets......................................... $ 58,063 $ 63,788 $ 47,027
---------- -------- --------
CORPORATE & OTHER (3)
Operating Revenues Affiliate(2)............................. $ (39,894) $(38,711) $(33,621)
Operating Income (Loss)(1).................................. $ (5,752) $ (6,730) $ (6,015)
Identifiable Assets......................................... $ 228,563 $206,722 $237,843
---------- -------- --------
CONSOLIDATED
Operating Revenues.......................................... $ 397,875 $277,063 $184,779
Operating Income (Loss)(1).................................. $ 31,984 $ 27,839 $ 20,886
Identifiable Assets......................................... $1,043,809 $920,801 $718,184
========== ======== ========
</TABLE>
- ---------------
(1) Includes, for 1997, restructuring charges of $6.8 million (Note 4).
(2) Affiliate transfers represent service fees received by Datastream's United
Kingdom operation from its international affiliates.
(3) Corporate and other includes corporate accounts, eliminations and
reclassifications, as well as the net assets of discontinued operations.
13. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in other administrative
proceedings and matters concerning issues arising in the ordinary course of
business. Management cannot predict the final disposition of such issues, but
believes that adequate provision has been made for the probable losses and the
ultimate resolution of these proceedings will not have a material adverse effect
on the Company's financial condition, results of operations or financial
liquidity.
F-36
<PAGE> 142
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<PAGE> 143
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<PAGE> 144
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$150,000,000
PRIMARK CORPORATION
EXCHANGE OFFER
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
------------------------
PROSPECTUS
------------------------
MARCH 19, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNTIL SEPTEMBER 15, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 145
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 561 through 571 of the Michigan Business Corporation Act (the
"MBCA") contain detailed provisions concerning the indemnification of directors,
officers, employees, and agents against judgments, penalties, fines and amounts
paid in settlement of litigation that they may incur in their capacity as such.
Section 561 through 571 of the MBCA, which are filed as Exhibit 99.1 to this
Registration Statement, are incorporated herein by reference.
Article VIII of the Articles of Incorporation of the Registrant provides
that the Registrant shall indemnify any person who is or was a director or
officer of the Registrant or is or was serving at the request of the Registrant
as director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with any threatened, pending or completed
action, suit, or proceeding to the full extent provided by the MBCA from time to
time in effect.
Section 6.1 of the By-laws of the Registrant provides that the Registrant
shall indemnify its officers, directors, employees, agents and other persons to
the fullest extent to which corporations are empowered to indemnify such persons
at law.
Article IX of the Articles of Incorporation of the Registrant provides that
a director of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(iii) for a violation of Section 551(1) of the MBCA or (iv) for any transaction
from which the director derived any improper personal benefit.
The Company maintains a director's and officer's liability insurance policy
that covers its directors and officers for certain claims and actions incurred
in the course of their duties, including, under certain circumstances, alleged
violations of the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
*1.1 Placement Agreement, dated December 16, 1998, among the
Registrant, Morgan Stanley & Co. Incorporated, A. G. Edwards
& Sons, Inc., BT Alex. Brown Incorporated, Chase Securities
Inc. and NationsBanc Montgomery Securities LLC.
1.2 Underwriting Agreement, dated as of March 4, 1998, among the
Registrant, BT Alex. Brown Incorporated and certain selling
shareholders appearing on Schedule I thereto (incorporated
by reference to the Registrant's March 6, 1998 Form 8-K).
2.1 Amended and Restated Partnership Agreement for
Worldscope/Disclosure International Partners; Irish
Partnership Interest Purchase and Sale Agreement; and
Partnership Interest Purchase and Sale Agreement; dated as
of October 15, 1996 (Exhibit 2.5 to the Registrant's 1996
Form 10-K).
2.2 Stock Purchase Agreement by and among the Registrant,
Primark Information Services UK Limited and Litton
Industries, Inc. and Litton U.K. Limited dated as of
December 8, 1997 (Exhibit 2.1 to the Registrant's Form 8-K
filed December 10, 1997).
</TABLE>
II-1
<PAGE> 146
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
2.3 Information Technology Services Agreement by and among the
Registrant, TASC, Inc. and Litton Industries, Inc. (Exhibit
2.2 to the Registrant's Form 8-K filed December 10, 1997).
3.1 Restated Articles of Incorporation of the Registrant.
3.2 By-laws of the Registrant, as amended (incorporated by
reference to the Registrant's September 30, 1990 Form 10-Q).
*4.1 Registration Rights Agreement, dated as of December 16,
1998, among the Registrant, Morgan Stanley & Co.
Incorporated, A. G. Edwards & Sons, Inc., BT Alex. Brown
Incorporated, Chase Securities Inc. and NationsBanc
Montgomery Securities LLC.
*4.2 Indenture, dated as of December 21, 1998, between the
Registrant and State Street Bank and Trust Company, as
Trustee for the 9 1/4% Senior Subordinated Notes Due 2008.
4.3 Rights Agreement dated May 29, 1997 between the Registrant
and Bank Boston, N.A., as Rights Agent, which includes, as
Exhibit A, the Rights Certificate and as Exhibit B, the
Summary of Rights to Purchase Common Stock (Exhibit 4.1 to
the Registrant's Form 8-A dated June 19, 1997).
4.4 Registration Rights Agreement dated January 7, 1997, between
the Registrant and Joseph E. Kasputys (Exhibit 4.1 to the
Registrant's 1996 Form 10-K).
*5.1 Opinion of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant.
*5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Primark Corporation 1992 Stock Option Plan dated March 2,
1992 (Exhibit 10.26 to the Registrant's 1991 Form 10-K);
Amendment dated September 28, 1995 (Exhibit 10.22 to the
Registrant's 1995 Form 10-K).
10.2 Primark Corporation Stock Option Plan for Non-Employee
Directors, as amended, dated January 12, 1988 (Exhibit 10.57
to the Registrant's 1987 Form 10-K); Amendment dated
February 21, 1992 (Exhibit 10.24 to the Registrant's 1991
Form 10-K); Amendment dated September 28, 1992 (Exhibit 28.3
to the Registrant's September 30, 1992 Form 10-Q); Amendment
dated September 22, 1995 (Exhibit 10.2 to the Registrant's
1996 Form 10-K).
10.3 Primark Corporation Executive Share Option Scheme (Exhibit
10.26 to the Registrant's 1992 Form 10-K); Amendment dated
September 28, 1995 (Exhibit 10.24 to the Registrant's 1995
Form 10-K).
10.4 Primark Corporation Savings and Stock Ownership Plan, as
amended and restated, effective January 1, 1997 (Exhibit 4.4
to the Registrant's Registration Statement on Form S-8 dated
December 10, 1996).
10.5 Primark Corporation 1992 Employee Stock Purchase Plan dated
March 2, 1992 (Exhibit 10.27 to the Registrant's 1991 Form
10-K); Amended and Restated Stock Purchase Plan and related
Prospectus as filed under the Securities Act of 1933
(Exhibit 10.27 to the Registrant's 1993 Form 10-K);
Amendment dated October 4, 1995 (Exhibit 10.26 to the
Registrant's 1995 Form 10-K).
10.6 Management Incentive Plan adopted by Board of Directors on
January 12, 1988 (Exhibit 10.64 to the Registrant's 1987
Form 10-K); Amendment dated February 21, 1992 (Exhibit 10.33
to the Registrant's 1991 Form 10-K).
10.7 Promissory notes dated September 30, 1988, issued to the
Registrant by executive officers (Exhibit 10.1 to the
Registrant's September 30, 1988 Form 10-Q).
10.8 Restricted Stock Award Agreements and Stock Option
Agreements (Exhibit 4(b) to the Registrant's Registration
Statement No. 2-3876).
</TABLE>
II-2
<PAGE> 147
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
10.9 Employment and Option agreements between the Registrant and
Joseph E. Kasputys dated January 7, 1997 (Exhibit 10.11 to
the Registrant's 1996 Form 10-K).
10.10 Supplemental Death Benefit and Retirement Income Plan
Agreement, as amended and restated, dated March 25, 1986
(Exhibit 19.1 to the Registrant's March 31, 1985 Form 10-Q);
Certified Copy of Resolution amending the Supplemental Death
Benefit and Retirement Income Plan Agreement (Exhibit 10.17
to the Registrant's 1991 Form 10-K); Amendment dated
September 28, 1992 (Exhibit 29.4 to the Registrant's
September 30, 1992 Form 10-Q).
10.11 Supplemental Medical Reimbursement Insurance Plan (Exhibit
10.15 to the Registrant's 1996 Form 10-K).
10.12 Form of Change of Control Compensation Agreement entered
into between the Registrant and selected executive officers
(Exhibit 10.60 to the Registrant's 1996 Form 10-K); Form of
Amendments dated September 29, 1997 (filed as Exhibit 10.3
to the Registrant's September 30, 1997 Form 10-Q).
*10.13 Refinancing Agreements (Revolving Credit Agreement, Term
Loan Agreement, Pledge Agreement, Collateral Agency
Agreement, and Note Backup Agreement) dated as of February
7, 1997, by and among Primark Corporation, Lenders Parties,
Mellon Bank, N.A. and other related documents (Exhibit 10.17
to the Registrant's 1996 Form 10-K); Amendment dated May 1,
1997 (Exhibit 10.1 to the Registrant's June 30, 1997 Form
10-Q); Amendment dated June 30, 1997 (Exhibit 10.2 to the
Registrant's June 30, 1997 Form 10-Q); Amendment dated
December 1, 1997 (Exhibit 10.16.1 to the Registrant's 1997
Form 10-K); Amendment dated March 6, 1998 (Exhibit 10.16.2
to the Registrant's 1997 Form 10-K); Amendment dated May 8,
1998; Amendment dated June 15, 1998 (incorporated by
reference to the Registrant's Schedule 13E-4 dated June 26,
1998); Amendment dated September 10, 1998; Amendment dated
December 10, 1998.
10.14 Form of variable rate unsecured loan notes dated October 24,
1996 between the Registrant and the former shareholders of
ICV, Ltd. (Exhibit 10.18 to the Registrant's 1996 Form
10-K).
10.15 Credit Agreement dated October 23, 1996, by and among the
Registrant, Lenders Parties and Mellon Bank, N.A. (Exhibit
10.1 to the Registrant's Form 8-K dated November 13, 1996);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K);
Amendment dated January 9, 1997 (Exhibit 10.19 to the
Registrant's 1996 Form 10-K); as amended by the Note Backup
Agreement dated February 7, 1997 (Exhibit 10.17 to the
Registrant's 1996 Form 10-K).
10.16 Revolving Credit Agreement dated as of June 29, 1995,
between the Registrant, Lenders Parties, Mellon Bank, N.A.
and The First National Bank of Boston and other related
documents (Exhibit 10.1 to the Registrant's Form 8-K dated
July 3, 1995); Amendment dated October 23, 1996 (Exhibit
10.20 to the Registrant's 1996 Form 10-K); Amendment dated
December 18, 1996 (Exhibit 10.21 to the Registrant's 1996
Form 10-K); Amendment dated January 9, 1997 (Exhibit 10.19
to the Registrant's 1996 Form 10-K).
10.17 Term Loan Agreement dated as of June 29, 1995, between the
Registrant, Lenders Parties, Mellon Bank, N.A. and The First
National Bank of Boston and other related documents (Exhibit
10.2 to the Registrant's Form 8-K dated July 3, 1995);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K).
*12.1 Statement regarding the computation of ratio of earnings to
fixed charges for the Registrant.
*21.1 Subsidiaries of the Registrant.
</TABLE>
II-3
<PAGE> 148
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant (included in
Exhibit 5.1).
*23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.2).
24.1 Powers of Attorney (included in signature page to
Registration Statement).
*25.1 Statement of Eligibility and Qualification on Form T-1 of
State Street Bank and Trust Company, as Trustee under the
Indenture relating to the Registrant's 9 1/4% Senior
Subordinated Notes due 2008.
*99.1 Sections 561-571 of the Michigan Business Corporation Act.
*99.2 Form of Letter of Transmittal.
*99.3 Form of Notice of Guaranteed Delivery.
*99.4 Form of Letter to Brokers.
*99.5 Form of Letter to Clients.
*99.6 Guidelines for certification of taxpayer identification
number on substitute Form W-9.
</TABLE>
- ---------------
* Previously filed.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 or this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(b) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 149
(e) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 150
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Waltham, Commonwealth of Massachusetts, on March 19, 1999.
PRIMARK CORPORATION
By: /s/ STEPHEN H. CURRAN
------------------------------------
Stephen H. Curran
Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Joseph E. Kasputys, Stephen H. Curran and
Michael R. Kargula, and each of them, with full power to act without the other,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities (unless revoked in writing) to sign any and
all amendments (including post-effective amendments thereto) to this
Registration Statement to which this power of attorney is attached, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully as to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Chairman, President, Chief March 19, 1999
- --------------------------------------------------- Executive Officer and
Joseph E. Kasputys Director (Principal Executive
Officer)
/s/ STEPHEN H. CURRAN Executive Vice President and March 19, 1999
- --------------------------------------------------- Chief Financial Officer
Stephen H. Curran (Principal Accounting and
Financial Officer)
* Director March 19, 1999
- ---------------------------------------------------
Kevin J. Bradley
* Director March 19, 1999
- ---------------------------------------------------
John C. Holt
</TABLE>
II-6
<PAGE> 151
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Director March 19, 1999
- ---------------------------------------------------
Steven Lazarus
* Director March 19, 1999
- ---------------------------------------------------
Patricia McGinnis
* Director March 19, 1999
- ---------------------------------------------------
Jonathan Newcomb
* Director March 19, 1999
- ---------------------------------------------------
Constance K. Weaver
*By: /s/ STEPHEN H. CURRAN
- ----------------------------------------------
Stephen H. Curran
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 152
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
*1.1 Placement Agreement, dated December 16, 1998, among the
Registrant, Morgan Stanley & Co. Incorporated, A. G. Edwards
& Sons, Inc., BT Alex. Brown Incorporated, Chase Securities
Inc. and NationsBanc Montgomery Securities LLC.
1.2 Underwriting Agreement, dated as of March 4, 1998, among the
Registrant, BT Alex. Brown Incorporated and certain selling
shareholders appearing on Schedule I thereto (incorporated
by reference to the Registrant's March 6, 1998 Form 8-K).
2.1 Amended and Restated Partnership Agreement for
Worldscope/Disclosure International Partners; Irish
Partnership Interest Purchase and Sale Agreement; and
Partnership Interest Purchase and Sale Agreement; dated as
of October 15, 1996 (Exhibit 2.5 to the Registrant's 1996
Form 10-K).
2.2 Stock Purchase Agreement by and among the Registrant,
Primark Information Services UK Limited and Litton
Industries, Inc. and Litton U.K. Limited dated as of
December 8, 1997 (Exhibit 2.1 to the Registrant's Form 8-K
filed December 10, 1997).
2.3 Information Technology Services Agreement by and among the
Registrant, TASC, Inc. and Litton Industries, Inc. (Exhibit
2.2 to the Registrant's Form 8-K filed December 10, 1997).
3.1 Restated Articles of Incorporation of the Registrant.
3.2 By-laws of the Registrant, as amended (incorporated by
reference to the Registrant's September 30, 1990 Form 10-Q).
*4.1 Registration Rights Agreement, dated as of December 16,
1998, among the Registrant, Morgan Stanley & Co.
Incorporated, A. G. Edwards & Sons, Inc., BT Alex. Brown
Incorporated, Chase Securities Inc. and NationsBanc
Montgomery Securities LLC.
*4.2 Indenture, dated as of December 21, 1998, between the
Registrant and State Street Bank and Trust Company, as
Trustee for the 9 1/4% Senior Subordinated Notes Due 2008.
4.3 Rights Agreement dated May 29, 1997 between the Registrant
and Bank Boston, N.A., as Rights Agent, which includes, as
Exhibit A, the Rights Certificate and as Exhibit B, the
Summary of Rights to Purchase Common Stock (Exhibit 4.1 to
the Registrant's Form 8-A dated June 19, 1997).
4.4 Registration Rights Agreement dated January 7, 1997, between
the Registrant and Joseph E. Kasputys (Exhibit 4.1 to the
Registrant's 1996 Form 10-K).
*5.1 Opinion of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant.
*5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Primark Corporation 1992 Stock Option Plan dated March 2,
1992 (Exhibit 10.26 to the Registrant's 1991 Form 10-K);
Amendment dated September 28, 1995 (Exhibit 10.22 to the
Registrant's 1995 Form 10-K).
10.2 Primark Corporation Stock Option Plan for Non-Employee
Directors, as amended, dated January 12, 1988 (Exhibit 10.57
to the Registrant's 1987 Form 10-K); Amendment dated
February 21, 1992 (Exhibit 10.24 to the Registrant's 1991
Form 10-K); Amendment dated September 28, 1992 (Exhibit 28.3
to the Registrant's September 30, 1992 Form 10-Q); Amendment
dated September 22, 1995 (Exhibit 10.2 to the Registrant's
1996 Form 10-K).
10.3 Primark Corporation Executive Share Option Scheme (Exhibit
10.26 to the Registrant's 1992 Form 10-K); Amendment dated
September 28, 1995 (Exhibit 10.24 to the Registrant's 1995
Form 10-K).
</TABLE>
<PAGE> 153
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.4 Primark Corporation Savings and Stock Ownership Plan, as
amended and restated, effective January 1, 1997 (Exhibit 4.4
to the Registrant's Registration Statement on Form S-8 dated
December 10, 1996).
10.5 Primark Corporation 1992 Employee Stock Purchase Plan dated
March 2, 1992 (Exhibit 10.27 to the Registrant's 1991 Form
10-K); Amended and Restated Stock Purchase Plan and related
Prospectus as filed under the Securities Act of 1933
(Exhibit 10.27 to the Registrant's 1993 Form 10-K);
Amendment dated October 4, 1995 (Exhibit 10.26 to the
Registrant's 1995 Form 10-K).
10.6 Management Incentive Plan adopted by Board of Directors on
January 12, 1988 (Exhibit 10.64 to the Registrant's 1987
Form 10-K); Amendment dated February 21, 1992 (Exhibit 10.33
to the Registrant's 1991 Form 10-K).
10.7 Promissory notes dated September 30, 1988, issued to the
Registrant by executive officers (Exhibit 10.1 to the
Registrant's September 30, 1988 Form 10-Q).
10.8 Restricted Stock Award Agreements and Stock Option
Agreements (Exhibit 4(b) to the Registrant's Registration
Statement No. 2-3876).
10.9 Employment and Option agreements between the Registrant and
Joseph E. Kasputys dated January 7, 1997 (Exhibit 10.11 to
the Registrant's 1996 Form 10-K).
10.10 Supplemental Death Benefit and Retirement Income Plan
Agreement, as amended and restated, dated March 25, 1986
(Exhibit 19.1 to the Registrant's March 31, 1985 Form 10-Q);
Certified Copy of Resolution amending the Supplemental Death
Benefit and Retirement Income Plan Agreement (Exhibit 10.17
to the Registrant's 1991 Form 10-K); Amendment dated
September 28, 1992 (Exhibit 29.4 to the Registrant's
September 30, 1992 Form 10-Q).
10.11 Supplemental Medical Reimbursement Insurance Plan (Exhibit
10.15 to the Registrant's 1996 Form 10-K).
10.12 Form of Change of Control Compensation Agreement entered
into between the Registrant and selected executive officers
(Exhibit 10.60 to the Registrant's 1996 Form 10-K); Form of
Amendments dated September 29, 1997 (filed as Exhibit 10.3
to the Registrant's September 30, 1997 Form 10-Q).
*10.13 Refinancing Agreements (Revolving Credit Agreement, Term
Loan Agreement, Pledge Agreement, Collateral Agency
Agreement, and Note Backup Agreement) dated as of February
7, 1997, by and among Primark Corporation, Lenders Parties,
Mellon Bank, N.A. and other related documents (Exhibit 10.17
to the Registrant's 1996 Form 10-K); Amendment dated May 1,
1997 (Exhibit 10.1 to the Registrant's June 30, 1997 Form
10-Q); Amendment dated June 30, 1997 (Exhibit 10.2 to the
Registrant's June 30, 1997 Form 10-Q); Amendment dated
December 1, 1997 (Exhibit 10.16.1 to the Registrant's 1997
Form 10-K); Amendment dated March 6, 1998 (Exhibit 10.16.2
to the Registrant's 1997 Form 10-K); Amendment dated May 8,
1998; Amendment dated June 15, 1998 (incorporated by
reference to the Registrant's Schedule 13E-4 dated June 26,
1998); Amendment dated September 10, 1998; Amendment dated
December 10, 1998.
10.14 Form of variable rate unsecured loan notes dated October 24,
1996 between the Registrant and the former shareholders of
ICV, Ltd. (Exhibit 10.18 to the Registrant's 1996 Form
10-K).
10.15 Credit Agreement dated October 23, 1996, by and among the
Registrant, Lenders Parties and Mellon Bank, N.A. (Exhibit
10.1 to the Registrant's Form 8-K dated November 13, 1996);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K);
Amendment dated January 9, 1997 (Exhibit 10.19 to the
Registrant's 1996 Form 10-K); as amended by the Note Backup
Agreement dated February 7, 1997 (Exhibit 10.17 to the
Registrant's 1996 Form 10-K).
</TABLE>
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.16 Revolving Credit Agreement dated as of June 29, 1995,
between the Registrant, Lenders Parties, Mellon Bank, N.A.
and The First National Bank of Boston and other related
documents (Exhibit 10.1 to the Registrant's Form 8-K dated
July 3, 1995); Amendment dated October 23, 1996 (Exhibit
10.20 to the Registrant's 1996 Form 10-K); Amendment dated
December 18, 1996 (Exhibit 10.21 to the Registrant's 1996
Form 10-K); Amendment dated January 9, 1997 (Exhibit 10.19
to the Registrant's 1996 Form 10-K).
10.17 Term Loan Agreement dated as of June 29, 1995, between the
Registrant, Lenders Parties, Mellon Bank, N.A. and The First
National Bank of Boston and other related documents (Exhibit
10.2 to the Registrant's Form 8-K dated July 3, 1995);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K).
*12.1 Statement regarding the computation of ratio of earnings to
fixed charges for the Registrant.
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant (included in
Exhibit 5.1).
*23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.2).
24.1 Powers of Attorney (included in signature page to
Registration Statement).
*25.1 Statement of Eligibility and Qualification on Form T-1 of
State Street Bank and Trust Company, as Trustee under the
Indenture relating to the Registrant's 9 1/4% Senior
Subordinated Notes due 2008.
*99.1 Sections 561-571 of the Michigan Business Corporation Act.
*99.2 Form of Letter of Transmittal.
*99.3 Form of Notice of Guaranteed Delivery.
*99.4 Form of Letter to Brokers.
*99.5 Form of Letter to Clients.
*99.6 Guidelines for certification of taxpayer identification
number on substitute Form W-9.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
PRIMARK CORPORATION
1. These Restated Articles of Incorporation (the "Restated Articles") are exe-
cuted on behalf of Primark Corporation (the "corporation") pursuant to the
provisions of Section 642 of the Michigan Business Corporation Act (the
"Act").
2. The name of the corporation is "Primark Corporation".
3. The identification number assigned by the Bureau is 243164.
4. The corporation has not used any name other than Primark Corporation.
5. The date of filing the original Articles of Incorporation was October 28,
1981.
6. These Restated Articles were duly adopted by the Board of Directors of the
corporation, without a vote of the shareholders, in accordance with Section
642 of the Act on February 24, 1999.
7. The following Restated Articles only restate and integrate and do not
further amend the corporation's Articles of Incorporation, as previously
amended. There is no material discrepancy between the provisions of the
corporation's Articles of Incorporation, as previously amended, and the
Restated Articles.
ARTICLE I
The name of the corporation is Primark Corporation.
ARTICLE II
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Business Corporation Act of Michigan and to have and
exercise all powers conferred by such Act upon corporations organized
thereunder.
ARTICLE III
The total authorized capital stock is:
1. Common Shares Par Value Per Share $
------------------- ---------------------
Preferred Shares 4,000,000 Par Value Per Share $ 1.00
---------------- ---------------------
and/or shares without par value as follows:
2. Common Shares 100,000,000 Par Value Per Share $ .02
------------------- ----------------------
Preferred Shares Par Value Per Share $
---------------- ----------------------
3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
A. CUMULATIVE PREFERRED STOCK
1. ISSUANCE IN SERIES. Shares of Cumulative Preferred Stock may be issued
in one or more series, at such time or times, and for such consideration, not
less than the par value thereof, as the Board of Directors may, from time to
time,
<PAGE> 2
determine. All shares of any one series of Cumulative Preferred Stock shall be
identical with each other in all respects, except that shares of one series
issued at different times may differ as to dates from which dividends thereon
may be cumulative. All series will rank equally and be identical in all
respects, except as permitted by the following provisions of paragraph 2 of this
Division A.
2. AUTHORITY OF THE BOARD WITH RESPECT TO SERIES. The Board of Directors
is authorized, at any time and from time to time, (i) to divide into and to
issue the shares of Cumulative Preferred Stock in one or more series, (ii) to
establish the number of shares constituting each series and to designate each
series so as to distinguish the shares thereof from the shares of the other
series and classes, (iii) to the extent not provided in these Articles of
Incorporation, as amended from time to time, to prescribe variations in the
relative rights and preferences as among series, and (iv) within the limitations
set forth in these Articles of Incorporation, as amended from time to time, to
prescribe the relative rights and preferences of the shares of any series,
including, the following:
a. the dividend rate or rates;
b. certain voting powers, full and limited, if any, of the shares of the
series;
c. whether the shares are redeemable and, if so, the time or times, price
or prices, or rate or rates, and with such adjustments, at which, and the terms
and conditions (except as fixed in paragraph 5 of this Division A) on which, the
shares may be redeemed;
d. the amount or amounts payable on the shares in the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation prior to any payment or distribution of the assets of the
Corporation to any class or classes of stock of the Corporation ranking junior
to the Cumulative Preferred Stock;
e. whether the shares are entitled to the benefit of a sinking, purchase
or analogous fund to be applied to the purchase or redemption of shares of the
series and, if so entitled, the amount of the fund and the manner of its
application, including the price or prices at which the shares may be redeemed
or purchased through application of the fund;
2
<PAGE> 3
f. whether the shares are convertible into, or exchangeable for, shares
of any other class or classes or of any other series of the same or any other
class of stock of the Corporation and, if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and any adjustments
thereof, at which conversion or exchange may be made; and any other terms and
conditions of conversion or exchange; and
g. any other relative rights and preferences.
3. DIVIDENDS. The holders of shares of Cumulative Preferred Stock of each
series shall be entitled to receive, as and when declared payable by the Board
of Directors from funds legally available for the payment thereof, referential
dividends in lawful money of the United States of America at the rate per annum
fixed and determined as herein authorized for the shares of such series, but no
more, payable quarterly on the first day of each of the months of February, May,
August and November (the quarterly dividend payment dates) in each year with
respect to the quarterly period ending on the day prior to each such respective
dividend payment date, to shareholders of record on a date to be fixed by the
Board of Directors not exceeding 60 days preceding each quarterly dividend
payment date. Such dividends shall be cumulative with respect to each share from
and including the quarterly dividend payment date next preceding the date of
issue thereof unless (a) the date of issue be a quarterly dividend payment date,
in which case dividends shall be cumulative from and including the date of
issue, (b) issued during an interval between a record date for the payment of a
quarterly dividend on shares of such series and the payment date for such
dividend, in which case dividends shall be cumulative from and including such
payment date, or (c) the Board of Directors shall determine that the first
dividend with respect to shares of a particular series issued during an interval
between quarterly dividend payment dates shall be cumulative from and including
a date during such interval, in which event dividends shall be cumulative from
and including such date. No dividend shall be declared on shares of Cumulative
Preferred Stock of any series in respect of accumulations for any quarterly
dividend period or portion thereof unless dividends shall likewise be or have
been declared with respect to accumulations on all then outstanding shares of
Cumulative Preferred Stock of each other series for the same period or portion
thereof; and the ratios of the dividends declared to dividends accumulated with
respect to any quarterly dividend period on the shares of each series
outstanding shall be identical. Accumulations of dividends shall not bear
interest.
3
<PAGE> 4
So long as any shares of Cumulative Preferred Stock remain outstanding:
a. no dividend shall be declared on shares of junior stock unless
preferential dividends on all outstanding shares of Cumulative Preferred Stock
for all past quarterly periods and the period which includes the date of such
declaration shall have been previously declared; and
b. no dividend shall be paid or other distribution made on shares of
junior stock, nor shall any shares of junior stock be purchased, redeemed,
retired or otherwise acquired for a consideration, unless preferential dividends
on all outstanding shares of Cumulative Preferred Stock for all past quarterly
dividend periods and the period which includes the date of such payment or
distribution shall have been paid, or declared and set apart for payment,
provided, however, that the restrictions this sub-paragraph b not apply to (i)
the payment of dividends on shares of junior stock if payable solely in shares
of junior stock, (ii) the payment of dividends on shares of junior stock to the
extent that equivalent moneys are reinvested by the recipients of such dividends
in shares of such junior stock upon receipt of such dividends, (iii) the
acquisition of any shares of junior stock through application of proceeds of any
shares of junior stock sold at or about the time of such acquisition, or (iv)
the transfer of any amount from surplus to stated capital attributable to junior
stock; and
c. no funds shall be paid into or set aside for any sinking, purchase or
analogous fund established with respect to outstanding shares of any junior
stock, nor shall any dividend be paid or declared or other distribution made on
shares of junior stock, nor shall any shares of junior stock be purchased,
redeemed or retired or otherwise acquired for a consideration if the Corporation
shall be in default of deficient under any requirement of a sinking, purchase or
analogous fund established with respect to outstanding shares of any series of
Cumulative Preferred Stock for any period of time then elapsed.
4. LIQUIDATION PREFERENCES. In the event of voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Cumulative Preferred Stock of each series outstanding shall be entitled to
receive out of the assets of the Corporation such amount per share as shall have
been fixed by the Board of Directors as the voluntary or involuntary liquidation
price, as the case may be, for the shares of such series plus preferential
dividends at the rate
4
<PAGE> 5
fixed and determined for such series as herein authorized, accrued and unpaid to
the date fixed for payment, but no more. Until payment to the holders of
outstanding shares of Cumulative Preferred Stock as aforesaid, or until moneys
or other assets sufficient for such payment shall have been set apart for
payment by the Corporation, separate and apart from its other funds and assets
for the account of such holders so as to be and continue to be available for
payment to such holders, no payment or distribution shall be made to holders of
shares of junior stock in connection with or upon such dissolution or
liquidation or for declared but unpaid dividends on such junior stock. If upon
any such dissolution or liquidation the assets of the Corporation available for
payment and distribution to shareholders are insufficient to make payment in
full, as hereinabove provided, to the holders of shares of Cumulative Preferred
Stock, payment of such assets shall be made to such holders ratably in
accordance with the respective distributive amounts to which such holders would
be entitled if paid in full.
Neither a consolidation nor merger of the Corporation with or into any
other corporation, nor a merger of any other corporation into the Corporation,
nor the purchase or redemption of all or any part of the outstanding shares of
any class or classes of stock of the Corporation, nor the sale, transfer or
lease of the property and business of the Corporation as, or substantially as,
an entirety shall be construed to be a dissolution or liquidation of the
Corporation within the meaning of the foregoing provisions.
5. REDEMPTION AND PURCHASE. The Corporation may, at its option expressed
by vote of the Board of Directors, at any time or from time to time redeem the
whole or any part of the Cumulative Preferred Stock or of any series thereof, at
the redemption price or prices at the time in effect. Any such redemption of
Cumulative Preferred Stock to be on such redemption date and at such place in
the City of Detroit, State of Michigan, or in the City, County and State of New
York, as shall likewise be determined by vote of the Board of Directors. Notice
of any proposed redemption of shares of Cumulative Preferred Stock shall be
given by the Corporation by mailing a copy of such notice, not more than 60 or
less than 30 days prior to the redemption date, to the holders of record of
shares of Cumulative Preferred Stock to be redeemed, at their respective
addresses then appearing on the books of the Corporation and by publishing such
notice at least once in each week for four successive weeks in a newspaper
customarily published at least on each business day, other than Saturdays,
Sundays and holidays, which is printed in the
5
<PAGE> 6
English language and published and of general circulation in the Borough of
Manhattan, City and State of New York. Publication of such notice shall be
commenced not more than 60 days, and shall be concluded not less than 30 days,
prior to the redemption date, but such notice need not necessarily be published
on the same day of each week or in the same newspaper. In case less than all of
the shares of any series are to be redeemed, the shares so to be redeemed shall
be determined by lot or pro rata in such manner as may be prescribed by the
Board of Directors. On the redemption date the Corporation shall, and at any
time prior to such redemption date may, deposit in trust, for the account of the
holders of shares of Cumulative Preferred Stock to be redeemed, funds necessary
for such redemption with a bank or trust company in good standing, organized
under the laws of the United States of America or of the State of Michigan or of
the State of New York, doing business in the City of Detroit, Michigan, or in
the City, County and State of New York and having combined capital surplus and
undivided profits of at least $5,000,000, which shall be designated in such
notice of redemption. Notice of redemption having been duly given, or said bank
or trust company having been irrevocably authorized by the Corporation to give
such notice, and funds necessary for such redemption having been deposited, all
as aforesaid, all shares of Cumulative Preferred Stock with respect to which
such deposit shall have been made shall forthwith, whether or not the date fixed
for such redemption shall have occurred or the certificates for such shares
shall have been surrendered for cancellation, be deemed no longer to be
outstanding for any purpose, and all rights with respect to such shares shall
thereupon cease and terminate, excepting only the right of the holders of the
certificates for such shares to receive, out of the funds so deposited in trust,
on the redemption date (unless an earlier date is fixed by the Board of
Directors), the redemption funds, without interest, to which they are entitled,
and the right to exercise any privilege of conversion not theretofore expiring;
the Corporation to be entitled to the return of any funds, deposited for
redemption of shares converted pursuant to such privilege. At the expiration of
six years after the redemption date such trust shall terminated. Any such moneys
then remaining on deposit shall be paid to the Corporation by the bank or trust
company with which the deposit shall have been made, free of trust, and
thereafter the holders of the certificates for such shares shall have no claim
against such bank or trust company but only claims as unsecured creditors
against the Corporation for the amounts payable upon redemption thereof, without
interest. Interest, if any, allowed by the bank or trust company as aforesaid
shall belong to the Corporation, and shall be paid to it from time to time
during the term of such trust.
6
<PAGE> 7
Subject to applicable law, the Corporation may from time to time purchase
or otherwise acquire outstanding shares of Cumulative Preferred Stock at a price
per share not exceeding the amount then payable in the event of redemption
thereof otherwise than through operation of a sinking fund, if any.
No shares of Cumulative Preferred Stock shall be purchased, redeemed or
otherwise acquired (whether pursuant to or for any sinking, purchase or
analogous fund established with respect to outstanding shares of any series of
Cumulative Preferred Stock, or otherwise) for a consideration (a) unless all
dividends on all outstanding shares of Cumulative Preferred Stock for all past
quarterly dividend periods shall have been paid or declared and set apart for
payment, or (b) if the Corporation shall be in default or deficient under any
requirement of a sinking, purchase or analogous fund established with respect to
outstanding shares of any series of Cumulative Preferred Stock for any period of
time then elapsed, except for the purpose of wholly or partially eliminating
such default or deficiency.
Any and all shares of Cumulative Preferred Stock which shall at any time
have been redeemed, or purchased through operation of any sinking fund with
respect thereto, or which shall have been converted into or exchanged for shares
of any other class or classes or other securities of the Corporation pursuant to
a right of conversion or exchange reserved in such Cumulative Preferred Stock,
shall be cancelled and shall assume the status of authorized but unissued shares
of Cumulative Preferred Stock and may thereafter be reissued as provided in
paragraph 2 of this Division A.
6. VOTING RIGHTS. So long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation shall not, without the consent (given by vote in
person or by proxy at a meeting called for that purpose) of the holders of at
least two-thirds of the votes of the shares of Cumulative Preferred Stock then
outstanding-
a. Create, authorize or increase the authorized amount of any shares of
senior stock, or any obligations or security convertible into any such shares;
or
b. Alter or change the powers, preferences, priorities or special rights
of then outstanding Cumulative Preferred Stock so as to affect the holders
thereof adversely, provided, however, if any such alteration or change would
adversely affect the holders of the shares of one or more of the series of
Cumulative Preferred Stock
7
<PAGE> 8
at the time outstanding, but would not so affect all series thereof, only the
consent of holders of two-thirds of the shares of each series so affected shall
be required.
So long as any shares of Cumulative Preferred Stock are outstanding, the
Corporation shall not, without the consent (given by vote in person or by proxy
at a meeting called for that purpose) of the holders of a majority of the votes
of the shares of Cumulative Preferred Stock then outstanding.
c. Merge or consolidate with or into any other corporation, provided that
this provision shall not apply to a purchase or other acquisition by the
Corporation of franchises or assets of another corporation in any manner which
does not involve a statutory merger or consolidation, or to a merger or
consolidation with or into any corporation which directly or indirectly
controls, or is controlled by, or is under common control with the Corporation
(for purposes of this sub-paragraph c, control shall be deemed to exist through
ownership of 50% or more of the voting securities of a corporation) but no such
merger or consolidation shall in any way result in the occurrence of an event
described in sub-paragraph a of this paragraph 6 without the consent of the
holders of at least two-thirds of the votes of the shares of Cumulative
Preferred Stock then outstanding or result in the occurrence of an event
described in sub-paragraph b of this paragraph 6 without the consent required by
said sub-paragraph b; or
d. Sell, lease, or exchange all or substantially all of its property and
assets unless the fair value of the net assets of the Corporation after
completion of such transaction shall at least equal the then voluntary
liquidation preference of the Cumulative Preferred Stock of all series, and of
all senior or parity stock, then outstanding.
No consent provided for in this paragraph 6 shall be required in the case
of the holders of any shares of Cumulative Preferred Stock which are to be
redeemed at or prior to the time when the transaction being consented to it to
take effect.
Except as provided by law or as may be specifically provided in a
resolution or resolutions of the Board of Directors establishing a series of
Cumulative Preferred Stock, no consent of any holder of outstanding shares of
Cumulative Preferred Stock shall be required in connection with or as a
condition to any increase in the authorized amount, or issuance of authorized
but unissued shares, of Cumulative Preferred
8
<PAGE> 9
Stock or parity stock, or the creation or authorization of obligations or
securities payable in or convertible into shares of Cumulative Preferred Stock,
or, in each case, parity stock.
If at any time dividends on any of the outstanding shares of Cumulative
Preferred Stock shall be in default in an amount equivalent to four or more full
quarterly dividends, the holders of outstanding shares of Cumulative Preferred
Stock, voting separately as a class, shall be entitled to elect the smallest
number of the Directors necessary to constitute a majority of the full Board of
Directors of the Corporation, which right shall continue in force and effect
until all arrears of dividends on outstanding shares of Cumulative Preferred
Stock shall have been declared and paid or deposited in trust with a bank or
trust company having the qualifications set forth in paragraph 5 of this
Division A for payment on or before the next succeeding dividend payment date.
When all such arrears have been declared and paid or deposited in trust for
payment as aforesaid, such right to elect Directors shall cease and terminate
unless and until the equivalent of four or more full quarterly dividends shall
again be in default on outstanding shares of Cumulative Preferred Stock. At any
time when such right of holders of Cumulative Preferred Stock voting separately
as a class to elect Directors shall be in force and effect, the remaining
Directors shall be elected by the other class or classes of stock entitled to
vote, also voting separately as a class, at each meeting of shareholders held
for the purpose of electing Directors.
When and as voting power for the election of Directors shall be vested in
the Cumulative Preferred Stock as aforesaid, there shall be called a special
meeting of the Cumulative Preferred Stock and of any other class or classes of
stock having voting power with respect thereto, for the purpose of electing
Directors. Such meeting shall be called upon the notice required for annual
meetings of shareholders and shall be held at the earliest practicable date at
the place at which the last preceding annual meeting of the shareholders of the
Corporation was held, but may be held at the time and place of the annual
meeting of the shareholders of the Corporation was held, but may be held at the
time and place of the annual meeting if such annual meeting is to be held within
60 days after such voting power shall be vested in the Cumulative Preferred
Stock. If such meeting shall not be called as required within 20 days after such
voting power shall be so vested, then the holders of record of shares having at
least ten percent (10%) of the votes of the Cumulative Preferred Stock then
outstanding may designate in writing one of their number to call such
9
<PAGE> 10
meeting, and such meeting may be called by such person so designated at the
expense of the Corporation upon the notice required for annual meetings of
shareholders and shall be held at the place at which the last preceding annual
meeting of the shareholders of the Corporation was held. Any holder of
Cumulative Preferred Stock so designated shall have access to the stock books of
the Corporation for the purpose of causing a meeting of shareholders to be
called pursuant to these provisions.
At any meeting so called, and at any other meeting of shareholders held for
the purpose of electing Directors at which the Cumulative Preferred Stock shall
have the right, voting separately and as a class, to elect Directors as
aforesaid, the presence in person or by proxy of holders of record of shares
having one-third of the votes of the outstanding shares of Cumulative Preferred
Stock shall be required to constitute a quorum of such class for the election of
any Director by the Cumulative Preferred Stock as a class. If such quorum of the
shares of Cumulative Preferred Stock be present, then such shares of Common
Stock as may be present at the meeting in person or by proxy, shall, for the
purpose of electing Directors, constitute a quorum of the Common Stock.
If at any such meeting or adjournment thereof a quorum of the Cumulative
Preferred Stock shall not be present, no election of the Directors shall take
place and the meeting shall be adjourned from time to time for periods not
exceeding thirty days until a quorum of the Cumulative Preferred Stock is
present at such adjourned meeting.
The terms of office of all Directors in office at any time when voting
power shall, as aforesaid, become vested in the Cumulative Preferred Stock shall
terminated upon the election of any new Directors at any meeting of shareholders
called for the purpose of electing Directors. Upon any termination of the right
of the Cumulative Preferred Stock to vote for Directors as herein provided, the
term of office of all Directors then in office shall terminate upon the election
of any new Directors at a meeting of the other class or classes of stock of the
Corporation then entitled to vote for Directors, which meeting shall be called
to be held as promptly as practicable after such termination of voting right in
the Cumulative Preferred Stock, upon notice as above provided, and shall be
called by the Secretary of the Corporation upon written request of any holder of
record of outstanding shares of such other class or classes of stock then
entitled to vote for Directors.
10
<PAGE> 11
In case of any vacancy in the office of a Director occurring among the
Directors elected by the holders of Cumulative Preferred Stock, as a class,
pursuant to the foregoing provisions of this paragraph 6, the remaining Director
or Directors elected by the holders of Cumulative Preferred Stock may elect, by
affirmative vote of a majority thereof, a successor or successors to hold office
for the unexpired term of the Director or Directors whose place or places shall
be vacant. Likewise, in case of any vacancy in the office of a Director
occurring among the Directors elected by the holders of the other class or
classes of stock entitled to vote pursuant to the foregoing provisions of this
paragraph 6, the remaining Director or Directors elected by the holders of such
other class or classes of stock may elect, by affirmative vote of a majority
thereof, a successor or successors to hold office for the unexpired term of the
Director or Directors whose place or places shall be vacant.
Each share of Cumulative Preferred Stock shall have the number of votes
determined by multiplying the number one (1) by a fraction, the numerator of
which is the amount of the involuntary liquidation preference of such share and
the denominator of which is $25.
Except as provided in this paragraph 6 of this Division A, or in a
resolution or resolutions of the Board of Directors establishing a series of
Cumulative Preferred Stock, or as by statute at the time mandatorily provided,
holders of outstanding shares of Cumulative Preferred Stock shall not be
entitled to vote; and except as by statute at the time mandatorily provided,
holders of such shares shall not be entitled to receive notice of any meeting of
shareholders at which they are not entitled to vote or consent.
7. JUNIOR, PARITY AND SENIOR STOCK. Junior, parity or senior stock, with
regard to Cumulative Preferred Stock, shall refer to stock of the Corporation
ranking junior, on a parity with or senior to the Cumulative Preferred Stock
upon dissolution or liquidation, or as to dividends.
B. COMMON STOCK
1. DIVIDENDS. Subject to the rights of the Cumulative Preferred Stock,
the holders of the Common Stock are entitled to receive, to the extent permitted
by law, such dividends as may be declared by the Board of Directors.
11
<PAGE> 12
2. LIQUIDATION. In the event of the voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of
Cumulative Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the Corporation, of whatever kind, available for
distribution to shareholders ratably in proportion to the number of shares of
Common Stock held. The merger or consolidation of the Corporation into or with
any other corporation, or the merger of any other corporation into it, or the
purchase or redemption of any shares of stock of the Corporation, of any class,
shall not be deemed to be a dissolution, liquidation or winding up of the
Corporation for the purposes of this paragraph.
3. VOTING RIGHTS. Except as may be otherwise required by law or these
Articles of Incorporation, each holder of Common Stock has one vote in respect
of each share of stock held by him of record on the books of the Corporation on
all matters voted upon by the shareholders.
C. CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE SERIES A
CUMULATIVE CONVERTIBLE PREFERRED STOCK ($1.00 PAR VALUE)
Section 1. DESIGNATION AND NUMBER OF SHARES OF SERIES. A series
of preferred stock is hereby established and designated "Series A Cumulative
Convertible Preferred Stock" par value $1.00 per share (the "Series A Preferred
Stock"). The maximum number of shares which shall constitute the Series A
Preferred Stock shall be 1,000,000, which number may from time to time be
decreased (but not below the number of shares at the time outstanding).
Section 2. DIVIDENDS. The holders of Series A Preferred Stock
shall be entitled to receive, as, when and if declared by the Board of Directors
of the Corporation (the "Board of Directors"), out of funds at the time legally
available therefore, dividends at the rate of 8.5% per annum per share or, at
the option of the Corporation for the first 20 quarters from the date of
original issuance, and only during such 20 quarters, 0% per annum, and no more;
which shall be fully cumulative, shall accrue from the date of original issuance
and shall be payable quarterly on the first day of each of the months of
February, May, August, and November (each a "Dividend Payment Date") each year
to holders of record as they appear on the stock books of the Corporation on
such record dates, not more than 60
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<PAGE> 13
days preceding each such Dividend Payment Date, as shall be fixed by the Board
of Directors; PROVIDED, HOWEVER, that, during such first 20 quarters, dividends
at the rate of 0% per annum per share shall accrue only if a quarterly
distribution of additional shares of Series A Preferred Stock is made in the
amount of 0.02125 share of Series A Preferred Stock for each share of Series A
Preferred Stock outstanding. If any Dividend Payment Date is a Saturday, Sunday
or legal holiday then such dividend shall be payable on the next day that is not
a Saturday, Sunday or legal holiday. The amount of dividends (or distribution of
additional shares of Series A Preferred Stock) payable (or made) for the initial
dividend period and any period shorter than a full quarterly dividend shall be
computed on the basis of a 360-day year of twelve 30-day months. Dividends on
account of arrearages for any past dividend period may be declared and paid at
any time, without reference to any regular Dividend Payment Date. No interest
shall be payable in respect of any dividend payment which may be in arrears.
So long as any shares of Series A Preferred Stock remain
outstanding:
(a) no dividend shall be declared on shares the Corporation's
common stock, no par value (the "Common Stock"), or any other class of stock or
series thereof ranking junior to the Series A Preferred Stock upon dissolution,
liquidation or in the payment of dividends (together with the Common Stock, the
"junior stock") unless preferential dividends on all outstanding shares of
Series A Preferred Stock for all past quarterly periods and the period which
includes the date of such declaration shall have been previously declared; and
(b) no dividend shall be paid or other distribution made on
shares of junior stock, nor shall any shares of junior stock be purchased,
redeemed, retired or otherwise acquired for a consideration, unless preferential
dividends on all outstanding shares of Series A Preferred Stock for all past
quarterly dividend periods and the period which includes the date of such
payment or distribution shall have been paid, or declared and set apart for
payment; PROVIDED, HOWEVER, that the restrictions of this subparagraph (b) shall
not apply to (i) the payment of dividends on shares of junior stock if payable
solely in shares of junior stock, (ii) the payment of dividends on shares of
junior stock to the extent that equivalent moneys are reinvested by the
recipients of such dividends in shares of such junior stock upon receipt of such
dividends, (iii) the acquisition of any shares of junior stock through
application of proceeds of any shares of junior stock sold at or about the time
of such
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<PAGE> 14
acquisition, or (iv) the transfer of any amount from surplus to stated
capital attributable to junior stock; and
(c) no funds shall be paid into or set aside for any sinking,
purchase or analogous fund established with respect to outstanding shares of any
junior stock, nor shall any dividend be paid or declared or other distribution
made on shares of junior stock, nor shall any shares of junior stock be
purchased, redeemed or retired or otherwise acquired for a consideration if the
Corporation shall be in default or deficient under any requirement of a sinking,
purchase or analogous fund established with respect to outstanding shares of the
Series A Preferred Stock for any period of time then elapsed.
Section 3. LIQUIDATION PREFERENCES. In the event of
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, before any payment or distribution of the assets of the Corporation
(whether capital or surplus) shall be made to or set apart for the holders of
any class or classes of stock ranking junior to the Series A Preferred Stock
upon liquidation, the holders of any class or classes of stock ranking junior to
the Series A Preferred Stock shall be entitled to receive out of the net assets
of the Corporation an amount in cash per share equal to $25.00 plus accrued and
unpaid dividends to the date fixed for payment (the "Liquidation Preference"),
but no more. After the holders of Series A Preferred Stock are paid the full
preferential amounts to which they are entitled, they will not be entitled to
further participate in any distribution of assets by the Corporation. Until
payment to the holders of outstanding shares of Series A Preferred Stock as
aforesaid, or until moneys or other assets sufficient for such payment shall
have been set apart for payment by the Corporation, separate and apart from its
other funds and assets for the account of such holders so as to be and continue
to be available for payment to such holders, no payment or distribution shall be
made to holders of shares of junior stock in connection with or upon such
dissolution or liquidation or for declared but unpaid dividends on such junior
stock. If upon any such dissolution or liquidation the assets of the Corporation
available for payment and distribution to shareholders are insufficient to make
payment in full, as hereinabove provided, to the holders of shares of Series A
Preferred Stock, payment of such assets shall be made to such holders ratably in
accordance with the respective distributive amounts to which such holders would
be entitled if paid in full.
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<PAGE> 15
Neither a consolidation nor merger of the Corporation with or into any
other corporation, nor a merger of any other corporation into the Corporation,
nor the purchase or redemption of all or any part of the outstanding shares of
any class or classes of stock of the Corporation, nor the sale, transfer or
lease of the property and business of the Corporation as, or substantially as,
an entirety shall be construed to be a dissolution or liquidation of the
Corporation within the meaning of the foregoing provisions.
Section 4. CONVERSION INTO COMMON STOCK. (a) A holder of
shares of the Series A Preferred Stock shall be entitled, at any time prior to
the close of business on the date, if any, fixed for redemption of such shares
pursuant to Section 5 hereof, to cause any or all of such shares to be converted
into shares of Common Stock, by presentation of the certificate or certificates
representing such shares in person or by registered mail, return receipt
requested with postage prepaid thereon, duly assigned or endorsed for transfer
to the Corporation (or accompanied by duly executed stock powers relating
thereto) at the principal office of the Corporation or the offices of the
transfer agent for the Series A Preferred Stock or such office or offices of an
agent for conversion as may from time to time be designated by notice to the
holders of the Series A Preferred Stock by the Corporation, accompanied by
written notice of conversion. Such notice of conversion shall specify (1) the
number of shares of Series A Preferred Stock to be converted and the name or
names in which such holder wishes the certificate or certificates for Common
Stock and for any shares of Series A Preferred Stock not to be so converted to
be issued and (2) the address to which such holder wishes delivery to be made of
such new certificate or certificates to be issued upon such conversion.
(b) Each share of the Series A Preferred Stock shall be
convertible into the number of shares of fully paid and nonassessable shares of
Common Stock determined by dividing $25.00 by the conversion price in effect at
the time of conversion. The conversion price initially shall be $14.49 and shall
be subject to adjustment from time to time as provided in Section 7 hereof (and,
as so adjusted, is hereinafter referred to as the "Conversion Price").
(c) Upon surrender of a certificate representing a share or
shares of Series A Preferred Stock for conversion, the Corporation shall issue
and send by hand delivery (with receipt to be acknowledged) or by first class
mail, postage prepaid, to the holder thereof or to such holder's designee, at
the address designated
15
<PAGE> 16
by such holder, a certificate or certificates for the number of whole shares of
Common Stock to which such holder shall be entitled upon conversion. In the
event that there shall have been surrendered a certificate or certificates
representing shares of Series A Preferred Stock only part of which are to be
converted, the Corporation shall issue and deliver to such holder or such
holder's designee, in the manner set forth in the preceding sentence, a new
certificate or certificates representing the number of shares of Series A
Preferred Stock which shall not have been converted.
(d) The issuance by the Corporation of shares of Common Stock
upon a conversion pursuant to this Section 4 shall be effective as of the
earlier of (1) the delivery to such holder or such holder's designee of the
certificate(s) representing shares of Common Stock issued upon conversion
therefor or (2) the commencement of business on the second business day after
receipt by the Corporation or the transfer agent for the Series A Preferred
Stock of certificate(s) representing shares of Series A Preferred Stock to be
converted, duly assigned or endorsed for transfer to the Company (or accompanied
by duly executed stock powers relating thereto) as required by the instructions
for conversion appearing on the reverse side of certificate(s) representing
shares of Series A Preferred Stock. On and after the effective date of
conversion, the person or persons entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock, but no allowance or adjustment shall be
made in respect of dividends payable to holders of Common Stock in respect of
any period prior to such effective date. The Corporation shall not be obligated
to pay any dividends which shall have been declared and shall be payable to
holders of shares of Series A Preferred Stock on any Dividend Payment Date if
the Dividend Payment Date for such dividend is subsequent to the effective date
of conversion of such shares.
(e) Shares of the Series A Preferred Stock which shall at
anytime have been converted into Common Stock shall, after such conversion, be
restored to the status of authorized and unissued shares of preferred stock
undesignated as to series, and may thereafter be redesignated and reissued as
part of any series of preferred stock. The Corporation shall at all times
reserve and keep available out of its authorized and unissued Common Stock
and/or shares of Common Stock held in the Corporation's Treasury, solely for
issuance upon the conversion of shares of Series A Preferred Stock as herein
provided, free from any preemptive rights, such number of shares of Common Stock
as shall from time to time be issuable upon the
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<PAGE> 17
conversion of all the shares of Series A Preferred Stock then outstanding.
Nothing contained herein shall preclude the Corporation from issuing shares of
Common Stock held in its treasury upon the conversion of shares of Series A
Preferred Stock into Common Stock pursuant to the terms hereof. The Corporation
shall prepare and shall use its best efforts to obtain and keep in force such
governmental or regulatory permits or other authorizations as may be required by
law, and shall comply with all requirements as to registration or qualification
of the Common Stock, in order to enable the Corporation lawfully to issue and
deliver to each holder of record of Series A Preferred Stock such number of
shares of its Common Stock as shall from time to time be sufficient to effect
the conversion of all shares of Series A Preferred Stock then outstanding and
convertible into shares of Common Stock.
(f) No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon conversion of any shares of Series A
Preferred Stock. If more than one share of Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series A Preferred Stock so
surrendered. If the conversion of any shares of Series A Preferred Stock results
in a fraction, an amount equal to such fraction multiplied by the Per Share
Market Value (as defined in Section 7(f) hereof) of the Common Stock on the date
of conversion shall be paid to such holder in cash by the Corporation.
(g) The issuance of certificates for shares of Common Stock upon
conversion of Series A Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issuance or delivery of such certificate, PROVIDED, HOWEVER,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any such
certificate in a name other than that of the holder of the Series A Preferred
Stock converted and the Corporation shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
Section 5. REDEMPTION. (a) OPTIONAL. The Corporation may,
at its option, redeem the Series A Preferred Stock at any time after the fifth
anniver-
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<PAGE> 18
sary of the original date of issuance of the Series A Preferred Stock in whole
or from time to time in part at a redemption price of $25.00 per share, together
with accrued and unpaid dividends thereon to the date fixed for redemption,
without interest.
(b) MANDATORY. Commencing on the seventh anniversary of the
original date of issuance of the Series A Preferred Stock and on each such
anniversary thereafter (each such date being referred to as a "mandatory
redemption date"), so long as any shares of the Series A Preferred Stock shall
be outstanding and to the extent the Corporation shall have funds legally
available for such payment, the Corporation shall set aside, in trust with a
bank or trust company, as and for a sinking fund for the Series A Preferred
Stock a sum sufficient to redeem and shall redeem the following:
<TABLE>
<CAPTION>
Anniversary of the Number of Shares of
Original Date of Issuance Series A Preferred Stock
------------------------- ------------------------
<S> <C>
7 150,000
8 150,000
9 150,000
10 All then outstanding
shares of Series A
Preferred Stock
</TABLE>
at a redemption price of $25.00 per share, together with accrued and unpaid
dividends thereon to the mandatory redemption date, without interests; PROVIDED,
HOWEVER, that the number of any shares of Series A Preferred Stock that have
been called for redemption, converted or otherwise acquired by the Corporation
may be subtracted from the amount of funds to be set aside for such sinking fund
payments.
(c) ACQUIRED SHARES. Shares of Series A Preferred Stock which
have been issued and reacquired in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
the State of Michigan) have the status of authorized and unissued shares of
preferred stock undesignated as to series and may be redesignated and reissued
as part of any series of the preferred stock.
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<PAGE> 19
(d) PROCEDURE FOR REDEMPTION.
(i) In the event that less than all the outstanding shares
of Series A Preferred Stock are to be redeemed, the number of shares to be
redeemed shall be determined by the Board of Directors, subject to the
provisions of this Section 5, and the shares to be redeemed shall be determined
by lot or pro rata in such manner as may be prescribed by the Board of
Directors.
(ii) In the event the Corporation shall redeem shares of the
Series A Preferred Stock, notice of such redemption shall be given by the
Corporation by mailing a copy of such notice not more than 60 or less than 30
days prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock books of the
Corporation and by publication of such notice in the manner set forth in the
Corporation's Articles of Incorporation. On the redemption date the Corporation
shall, and at any time prior to such redemption date may, deposit in trust, for
the account of the holders of shares of Series A Preferred Stock to be redeemed,
funds necessary for such redemption with a bank or trust company in good
standing, organized under the laws of the United States of America or of the
State of Michigan or of the State of New York, doing business in the City of
Detroit, Michigan, or in the City, County and State of New York and having
combined capital surplus and undivided profits of at least $5,000,000, which
shall be designated in such notice of redemption. Notice of redemption having
been duly given, or said bank or trust company having been irrevocably
authorized by the Corporation to give such notice, and funds necessary for such
redemption having been deposited, all shares of Series A Preferred Stock with
respect to which such deposit shall have been made shall forthwith, whether or
not the date fixed for such redemption shall have occurred or the certificates
for such shares shall have been surrendered for cancellation, be deemed no
longer to be outstanding for any purpose, and all rights with respect to such
shares shall thereupon cease and terminate, excepting only the right of the
holders of the certificates of such shares to receive, out of the funds so
deposited in trust, on the redemption date (unless an earlier date is fixed by
the Board of Directors), the redemption funds, without interest, to which they
are entitled, and the right to exercise any privilege of conversion not
theretofore expiring; the Corporation to be entitled to the return of any funds,
deposited for redemption of shares converted pursuant to such privilege. At the
expiration of six years after the redemption date such trust shall terminate.
Any such moneys then remaining on deposit shall be paid to the Corporation by
the
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<PAGE> 20
bank or trust company with which the deposit shall have been made, free of
trust, and thereafter the holders of the certificates for such shares shall have
no claim against such bank or trust company but only claims as unsecured
creditors against the Corporation for the amounts payable upon redemption
thereof, without interest. Interest, if any, allowed by the bank or trust
company as aforesaid shall belong to the Corporation, and shall be paid to it
from time to time during the term of such trust.
Section 6. VOTING RIGHTS. (a) The holders of record of shares of
Series A Preferred Stock shall not be entitled to any voting rights except as
provided in the Corporation's Articles of Incorporation, as hereinafter provided
in this Section 6 or as otherwise provided by law.
(b) If at any time dividends on any Series A Preferred Stock
shall be in arrears, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Preferred Stock then outstanding shall have been declared and paid or set apart
for payment. During each default period, each share of Series A Preferred Stock
shall entitle the holder thereof to one (1) vote, subject to adjustment as
provided in the Corporation's Articles of Incorporation, on all matters
submitted to a vote of the Corporation, and the holders of shares of Series A
Preferred Stock together with the holders of Common Stock shall vote together as
one class on all matters submitted to a vote of stockholders of the Corporation.
Section 7. ANTI-DILUTION ADJUSTMENTS. (a) In the event that the
Company shall, at any time or from time to time while any of the shares of the
Series A Preferred Stock are outstanding, (1) subdivide the outstanding shares
of Common Stock or (2) combine the outstanding shares of Common Stock into a
smaller number of shares, in each case whether by reclassification of shares,
recapitalization of the Corporation or otherwise, then, subject to the
provisions of subparagraph (e) hereof, the Conversion Price in effect
immediately prior to such action shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such event, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this subpara-
20
<PAGE> 21
graph (a) shall become effective immediately as of the effective date of such
subdivision or combination.
(b) If there is any reorganization or reclassification of the
Common Stock, or merger or consolidation of the Corporation (other than a merger
of the Corporation in which the Corporation is the surviving corporation and the
outstanding Common Stock is not converted into or exchanged for stock,
securities, cash or any other thing of value), in lieu of the shares of Common
Stock theretofore issuable upon the exercise of the conversion rights of the
Series A Preferred Stock, each holder of Series A Preferred Stock shall have the
right to obtain upon exercise of the conversion rights of such Series A
Preferred Stock the kind and amount of shares of stock, other securities, money
and property which such holder would have received at the time of such
reclassification, reorganization, merger or consolidation if such holder had
exercised the conversion rights of the Series A Preferred Stock immediately
prior to such reclassification or reorganization. The provisions of this
subparagraph (b) shall similarly apply to successive reorganizations,
reclassifications, mergers or consolidations.
(c) In the event that the Corporation shall, at any time or from
time to time while any of the shares of Series A Preferred Stock are
outstanding, issue, sell or exchange shares of Common Stock (other than pursuant
to any right or warrant to purchase or acquire shares of Common Stock or any
right or warrant to purchase or acquire any security convertible into or
exchangeable for shares of Common Stock or pursuant to any employee or director
incentive or benefit plan or arrangements, including any employment, severance
or consulting agreement, of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted or pursuant to any exchange of shares of Common
Stock for securities of another person, organization, association or entity, if
the Board of Directors determines that such exchange is fair to the holders of
shares of Common Stock taken as a whole) for a consideration having a Fair
Market Value (as defined in subparagraph (f) hereof), on the date of such
issuance, sale or exchange, less than the Fair Market Value of such shares on
the date of issuance, sale or exchange, then, subject to the provisions of
subparagraph (e) hereof, the Conversion Price in effect immediately prior to
such action shall be adjusted by multiplying such Conversion Price by a
fraction, the numerator of which shall be the sum of (i) the Fair Market Value
of all the shares of Common Stock outstanding on the day immediately preceding
the first public announcement of such issuance, sale or exchange plus (ii) the
Fair Market Value of
21
<PAGE> 22
the consideration received by the Corporation in respect of such issuance, sale
or exchange of shares of Common Stock, and the denominator of which shall be the
product of (a) the Fair Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such issuance, sale or
exchange multiplied by (b) the sum of the number of shares of Common Stock
outstanding on such day plus the number of shares of Common Stock so issued,
sold or exchanged by the Corporation.
(d) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall forthwith place on file with the transfer agent
for the Common Stock and any transfer agent for the Series A Preferred Stock,
and with the Secretary of the Corporation, a statement signed by an officer of
the Corporation stating that the Conversion Price has been adjusted and setting
forth the new Conversion Price and in reasonable detail the method of
calculation upon which the adjustment of the Conversion Price is based. Promptly
after each adjustment to the Conversion Price, the Corporation shall cause a
notice thereof and of the then prevailing Conversion Price to be mailed to the
holders of the Series A Preferred Stock at their last addresses as the same
shall appear upon the books of the Corporation or of any transfer agent for the
Series A Preferred Stock.
(e) Notwithstanding any other provisions of this Section 7, the
Corporation shall not be required to make any adjustment to the Conversion Price
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Conversion Price, PROVIDED, HOWEVER, that the Corporation
may make any such adjustment at its election. Any lesser adjustment which the
Corporation elects not to make shall be carried forward and shall be made no
later than the time of, and together with, the next subsequent adjustment which,
together with any adjustment or adjustments so carried forward, shall amount to
an increase or decrease of at least one percent (1%) in the Conversion Price.
(f) As used herein, "Fair Market Value" shall mean, as to shares
of Common Stock or any other class of capital stock or securities of the
Corporation or any other issues which are publicly traded, the average of the
Per Share Market Value (as defined below) for each of the five (5) consecutive
trading days preceding, and including, the date as of which the Fair Market
Value of a security is to be determined.
22
<PAGE> 23
As used herein, "Per Share Fair Market Value" shall mean on any
particular date (1) the last reported sale price per share of the Common Stock
on such date on the principal stock exchange on which the Common Stock has been
listed or, if there is no such price on such date, then the last price on such
exchange on the date nearest preceding such date, or (2) if the Common Stock is
not listed on any stock exchange, the last reported sale price per share of the
Common Stock on the NASDAQ National Market System at the close of business on
such date, or if there is no such price on such date, then the last sale price
on the date nearest preceding such date, or (3) if the Common Stock is not
quoted on such National Market System, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported by NASDAQ (or any
similar organization or agency succeeding to its functions of reporting prices),
or (4) if bid and asked prices for the Common Stock on each such day shall not
have been reported through NASDAQ, the average of the bid and asked prices for
such day as furnished by any New York Stock Exchange member firm regularly
making a market in such security selected for such purpose by the Board or a
committee thereof, provided that none of the transactions related to the
foregoing shall include purchases by any "affiliate" (as such term is defined in
the General Rules and Regulations under the Securities Act of 1933) of the
Corporation. If the Common Stock is not publicly traded, the "Per Share Market
Value" shall mean the fair market value of the Common Stock as determined by an
independent investment banking or appraisal firm experienced in the valuation of
such securities selected in good faith by the Board or a committee thereof, or
if no such investment banking or appraisal firm is in the good faith judgment of
the Board or a committee available to make such determination, as determined in
good faith by the Board or such committee.
Section 8. NOTICE. If:
(a) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock; or
(b) the Corporation shall authorize the granting to the holders
of the Common Stock of rights (other than the Rights) or warrants to subscribe
for or purchase any shares of any class or any other rights or warrants; or
(c) there shall be any reclassification of the Common Stock
(other than a subdivision or combination of the outstanding Common Stock and
other than
23
<PAGE> 24
a change in the par value, or from par value to no par value, or from no par
value to par value), or any consolidation, merger, or statutory share exchange
to which the Corporation is a party and for which approval of any stockholders
of the Corporation is required, or any sale or transfer of all or substantially
all the assets of the Corporation as an entirety; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up the Corporation;
then the Corporation shall cause to be filed with the conversion agent, and
shall cause to be mailed to the holders of shares of the Series A Preferred
Stock at their addresses as shown on the stock books of the Corporation, at
least 5 days prior to the applicable date hereinafter specified, a notice
stating (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or issuance of rights or warrants, or, if a record is not
to be taken, the dates as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (ii) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property. deliverable upon
such reclassification, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice or
any defect therein shall not affect the legality or validity of the proceedings
described in this Section 8.
Section 9. AMENDMENT. The Articles of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences, priorities or special rights of the
Series A Preferred Stock then outstanding so as to affect the holders thereof
adversely without the consent of the holders of two-thirds or more of the
outstanding shares of Series A Preferred Stock, voting separately as a class.
ARTICLE IV
1. The address of the registered office is:
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<PAGE> 25
30600 Telegraph Road, Bingham Farms, Michigan 48025
2. Mailing address of the registered office if different than above:
same as above
3. The name of the resident agent at the registered office is:
The Corporation Company
ARTICLE V
The corporation shall indemnify any person who is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with any
threatened, pending or completed action, suit, or proceeding to the full extent
provided by the Michigan Business Corporation Act from time to time in effect.
The corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the corporation with similar
25
<PAGE> 26
scope and effect as the foregoing indemnification of directors and officers.
Notwithstanding the foregoing, the indemnification and advancement of expenses
provided by or granted under the Michigan Business Corporation Act shall not be
considered exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under the articles of incorporation,
bylaws, or a contractual agreement.
ARTICLE VI
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) for a violation of Section 551(1) of the Michigan
Business Corporation Act, or (iv) for any transaction from which the director
derived any improper personal benefit. If the Michigan Business Corporation Act
is amended after approval by the stockholders of this provision to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan Business
Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE VII
Any action to be taken at an annual or special meeting of shareholders
may be taken without a meeting, without prior notice and without a vote, if all
the shareholders entitled to vote thereon consent thereto in writing.
ARTICLE VIII
A. Number of Directors
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<PAGE> 27
The number of the directors of the Corporation shall be fixed from
time to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors of the Corporation, except that the minimum number of
directors shall be fixed at no less than five and the maximum number of
directors shall be fixed at no more than seven.
B. Removal
Any director may be removed from office only for cause and only by the
affirmative vote of the holders of at least a majority of the voting power of
all the shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
C. Nomination of Director Candidates
Nominations for election to the Board of Directors of the Corporation
at a meeting of shareholders may be made by the Board of Directors, on behalf of
the Board of Directors by any nominating committee appointed by the Board of
Directors, or by any shareholder of the Corporation entitled to vote for the
election of directors at the meeting. Nominations, other than those made by or
on behalf of the Board of Directors, shall be made by notice in writing
delivered to or mailed, postage prepaid, and received by the Secretary of the
Corporation at least 60 days but not more than 90 days prior to the anniversary
date of the immediately preceding Annual Meeting of Shareholders. The notice
shall set forth (i) the name and address of the shareholder who intends to make
the nomination; (ii) the name, age, business address and, if known, residence
address of each nominee; (iii) the principal occupation or employment of each
nominee; (iv) the number of shares of stock of the Corporation which are
beneficially owned by each nominee and by the nominating shareholder; (v) any
other information concerning the nominee that must be disclosed of nominees in
proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act of
1934 (or any subsequent provisions replacing such Regulation); and (vi) the
executed consent of each nominee to serve as a director of the Corporation, if
elected. The chairman of the meeting of shareholders may, if the facts warrant,
determine that a nomination was not made in accordance with the foregoing
procedures, and if the chairman should so determine, the chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
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D. Vacancies
In case of any vacancy on the Board of Directors through death,
resignation, disqualification, or other cause, the remaining directors (though
less than a quorum of the Board) by affirmative vote of a majority thereof, may
elect a successor to hold office for the unexpired portion of the term of the
director whose place shall be vacant, and until the election and qualification
of his or her successor.
Signed this 11th day of March, 1999.
PRIMARK CORPORATION
/s/ Michael R. Kargula
By: __________________________
Michael R. Kargula
Executive Vice President,
General Counsel and Secretary
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