<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 1-8260
PRIMARK CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MICHIGAN 38-2383282
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1000 WINTER STREET, SUITE 4300N, WALTHAM, MA 02451-1241
(Address of principal executive offices) (Zip Code)
</TABLE>
781-466-6611
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Number of shares outstanding of each of the registrant's classes of common
stock, as of July 31, 1999:
Common Stock, without par value: 20,439,292
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<PAGE> 2
PRIMARK CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
COVER....................................................... i
INDEX....................................................... ii
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements............................. 1
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition.......... 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................ 17
PART II -- OTHER INFORMATION
Item 4. Results of Votes of Security Holders............. 18
Item 6. Exhibits and Reports on Form 8-K................. 19
SIGNATURE................................................... 20
</TABLE>
ii
<PAGE> 3
PART I
FINANCIAL INFORMATION
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------- -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates
market value)........................................... $ 21,873 $ 51,630
Billed receivables less allowance for doubtful accounts of
$4,679 and $3,762, respectively......................... 99,441 88,770
Unbilled and other receivables............................ 13,445 13,203
Other current assets...................................... 20,762 15,806
Net assets of discontinued operations..................... -- 8,900
-------- --------
155,521 178,309
-------- --------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $89,099 and
$81,048, respectively................................... 597,754 526,624
Capitalized data and other intangible assets, less
accumulated amortization of $32,864 and $29,670,
respectively............................................ 38,682 38,703
Capitalized software, less accumulated amortization of
$22,963 and $18,578, respectively....................... 47,604 37,765
Other..................................................... 12,960 9,797
-------- --------
697,000 612,889
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment........................................ 73,675 79,837
Leasehold improvements.................................... 17,288 19,267
Other..................................................... 27,971 10,901
-------- --------
118,934 110,005
Less-accumulated depreciation............................. (66,254) (58,649)
-------- --------
52,680 51,356
-------- --------
$905,201 $842,554
======== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable............................................. $ 92,073 $ 6,750
Accounts Payable.......................................... 9,016 12,059
Accrued employee payroll and benefits..................... 31,387 31,924
Taxes payable............................................. 25,204 41,318
Deferred income........................................... 102,097 80,004
Current portion of long-term debt, including capital lease
obligations............................................. 425 640
Other..................................................... 49,304 53,441
-------- --------
309,506 226,136
-------- --------
LONG-TERM DEBT AND OTHER NON-CURRENT LIABILITIES
Long-term debt, including capital lease obligations....... 151,143 151,489
Deferred income taxes..................................... 11,432 9,599
Other..................................................... 15,518 15,152
-------- --------
178,093 176,240
-------- --------
Total liabilities....................................... 487,599 402,376
COMMITMENTS AND CONTINGENCIES (NOTE 6)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital............... 68,957 90,239
Retained earnings......................................... 362,040 355,380
Accumulated other comprehensive income (loss)............. (13,395) (5,441)
-------- --------
Total common shareholders' equity....................... 417,602 440,178
-------- --------
Total liabilities and shareholders' equity................ $905,201 $842,554
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
1
<PAGE> 4
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES.......................................... $122,170 $108,874 $239,514 $213,285
OPERATING EXPENSES
Cost of services.......................................... 50,173 43,252 99,340 84,201
Selling, general and administrative....................... 45,592 41,555 91,174 80,649
Depreciation.............................................. 5,030 4,397 10,016 8,503
Amortization of goodwill.................................. 4,709 3,813 8,867 7,935
Amortization of other intangible assets................... 4,386 4,350 8,377 9,173
Restructuring Charge...................................... (4) 68,677 (4) 68,677
-------- -------- -------- --------
Total operating expenses................................ 109,886 166,044 217,770 259,138
-------- -------- -------- --------
Operating income........................................ 12,284 (57,170) 21,744 (45,853)
-------- -------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Interest income and expense -- net........................ (4,727) 363 (8,144) (3,594)
Other income and expense -- net........................... (340) 613 (177) 310
-------- -------- -------- --------
Total other income and (deductions)..................... (5,067) 976 (8,321) (3,284)
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES..................................................... 7,217 (56,194) 13,423 (49,137)
INCOME TAX EXPENSE (BENEFIT)................................ 3,026 (8,217) 6,544 (4,782)
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................... 4,191 (47,977) 6,879 (44,355)
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax expense of $0
and $883 and $0 and $4,607, respectively................ -- 1,214 -- 6,112
Gain on disposal of discontinued operations net of income
tax expenses of $0 and $101,053 and $0 and $101,053,
respectively............................................ -- 173,225 -- 173,225
-------- -------- -------- --------
Total discontinued operations........................... -- 174,439 -- 179,337
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE............................ 4,191 126,462 6,879 134,982
Extraordinary item-loss on early extinguishment of debt,
net of income tax benefit of $0 and $3,614 and $0 and
$3,614, respectively.................................... -- (5,121) -- (5,121)
-------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE................................................. 4,191 121,341 6,879 129,861
Cumulative effect of change in accounting principle, net
of income tax benefit of $109........................... -- -- (219) --
-------- -------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK....................... $ 4,191 $121,341 $ 6,660 $129,861
======== ======== ======== ========
EARNINGS PER COMMON SHARE -- BASIC
Income (loss) from continuing operations.................. $ 0.20 $ (1.77) $ 0.33 $ (1.64)
Discontinued operations................................... -- 6.45 -- 6.64
Extraordinary item........................................ -- (0.19) -- (0.19)
Cumulative effect of change in accounting for derivative
financial instruments................................... -- -- (0.01) --
-------- -------- -------- --------
Total earnings per share................................ $ 0.20 $ 4.49 $ 0.32 $ 4.81
======== ======== ======== ========
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION
Income from continuing operations......................... $ 0.20 $ (1.77) $ 0.33 $ (1.64)
Discontinued operations................................... -- 6.45 -- 6.64
Extraordinary item........................................ -- (0.19) -- (0.19)
Cumulative effect of change in accounting for derivative
financial instruments................................... -- -- (0.01) --
-------- -------- -------- --------
Total earnings per share................................ $ 0.20 $ 4.49 $ 0.32 $ 4.81
======== ======== ======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING
Basic..................................................... 20,592 27,054 20,656 26,998
Effect of Dilutive Securities............................. 497 -- 477 --
-------- -------- -------- --------
Diluted................................................... 21,089 27,054 21,133 26,998
-------- -------- -------- --------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
2
<PAGE> 5
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998
----------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 6,660 $129,861
Adjustments to reconcile net income to net cash flows from
operating activities:
Discontinued operations................................... -- (6,112)
Gain on sale of subsidiary................................ -- (173,225)
Restructuring Charge -- intangible assets................. -- 60,650
Extraordinary loss on early extinguishment of debt........ -- 5,121
Cash (contributed to) discontinued operations............. -- (7,066)
Depreciation and amortization............................. 27,260 25,611
Other charges and credits -- net.......................... 2,496 2,318
Changes in operating working capital, excluding the effect
of acquisitions:
(Increase) in billed, unbilled and other
receivables-net....................................... (8,507) (30,094)
(Increase) in other current assets..................... (2,863) (7,521)
(Decrease) in accounts payable......................... (2,738) (1,426)
Increase in accrued payroll and benefits............... 360 388
Increase in income and other taxes payable -- net...... 4,168 4,191
Increase in deferred income............................ 10,566 14,074
(Decrease) increase in other current liabilities....... (7,126) 9,808
--------- --------
Net cash provided from operating activities.......... 30,276 26,578
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable...................... 460,010 215,405
Repayment of short-term notes payable..................... (381,687) (128,312)
Repayment of long-term debt............................... -- (332,503)
Common stock repurchased and retired...................... (25,653) (154,383)
Common stock issuance..................................... 4,371 8,188
Debt issue costs and other................................ (1,492) (745)
Call premium.............................................. -- (2,873)
--------- --------
Net cash provided by (used for) financing
activities.......................................... 55,549 (395,223)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................... (13,452) (9,716)
Capitalized software...................................... (10,192) (9,163)
Purchase of subsidiaries -- net of acquired cash.......... (79,118) (2,271)
Proceeds from sale of discontinued operations............. 8,900 432,000
Tax paid on disposal of discontinued operations........... (21,381) (30,000)
Other -- net.............................................. -- (191)
Cash (contributed to) discontinued operations............. -- (2,628)
--------- --------
Net cash (used for) provided by investing
activities.......................................... (115,243) 378,031
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... (339) 106
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (29,757) 9,492
CASH AND CASH EQUIVALENTS, JANUARY 1........................ 51,630 12,780
--------- --------
CASH AND CASH EQUIVALENTS, JUNE 30.......................... $ 21,873 $ 22,272
========= ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
<PAGE> 6
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
----------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
COMMON STOCK
Balance -- beginning of period.............................. $ 425
Issued for employee stock purchase and option plans......... 5
Retirement of common stock.................................. (21)
--------
Balance at June 30.......................................... 409
--------
ADDITIONAL PAID IN CAPITAL
Balance -- beginning of period.............................. 89,814
Tax benefit relating to stock option plans.................. 842
Issued for employee stock purchase and option plans......... 3,524
Retirement of common stock.................................. (25,632)
--------
Balance at June 30.......................................... 68,548
--------
RETAINED EARNINGS
Balance -- beginning of period.............................. 355,380
Net income.................................................. 6,660
--------
Balance at June 30.......................................... 362,040
--------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance -- beginning of period.............................. (5,441)
Net gain on derivative instruments designated as cash flow
hedges.................................................... 336
Foreign currency translation adjustments.................... (8,290)
--------
Balance at June 30.......................................... (13,395)
--------
TOTAL COMMON SHAREHOLDERS' EQUITY........................... $417,602
========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
4
<PAGE> 7
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1999 1998 1999 1998
------- --------- ------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
NET INCOME.............................................. $4,191 $121,341 $ 6,660 $129,861
------ -------- ------- --------
Other comprehensive income, net of tax:
Net gain on derivative instruments designated as cash
flow hedges........................................... 230 -- 336 --
Cumulative translation adjustment....................... (1,929) (869) (8,290) (677)
------ -------- ------- --------
OTHER COMPREHENSIVE INCOME (LOSS)....................... (1,699) (869) (7,954) (677)
------ -------- ------- --------
COMPREHENSIVE INCOME (LOSS)............................. $2,492 $120,472 $(1,294) $129,184
====== ======== ======= ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
5
<PAGE> 8
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS
During 1999, the Company made the acquisitions described below, each of
which has been accounted for as a purchase. Accordingly, the purchase price has
been allocated on a preliminary basis to the identifiable net assets acquired
based upon estimates of their fair market values as of the acquisition dates and
the excess of purchase price over the estimated fair value of total net assets
acquired was allocated to goodwill. The consolidated financial statements
include the operating results of each business from the date of acquisition.
<TABLE>
<CAPTION>
REMAINING
20%
INTEREST IN
WORLDSCOPE A-T EXTEL
----------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash................................................ $ 9,000 $35,306 $30,669
Convertible Notes Issued............................ 7,000
Acquisition Fees.................................... 825 1,250
Other............................................... -- 34 --
------- ------- -------
Total Consideration............................ $16,000 $36,165 $31,919
Acquired Cash....................................... -- (1,253) --
------- ------- -------
Net Consideration.............................. $16,000 $34,912 $31,919
======= ======= =======
Excess of Purchase Price over Fair Value............ $16,566 $30,029 $30,283
======= ======= =======
</TABLE>
a. A-T
On February 5, 1999 Primark acquired all of the outstanding shares of A-T
for $34.9 million, which is net of acquired cash. The excess of purchase price
over fair value of net assets acquired of approximately $30.0 million is being
amortized on a straight-line basis over 40 years. Founded in 1987, A-T's
customers are users of real time information, such as money managers, traders,
banks and other institutional investors.
b. Extel
On February 19, 1999 the Company acquired the Company Fundamental Data
business and the Extel brand name ("Extel") from The Financial Times Group, part
of Pearson plc, for $31.9 million, subject to certain post closing adjustments.
The excess of purchase price over fair value of net assets acquired of
approximately $30.3 million is being amortized on a straight-line basis over 25
years. Extel is a widely recognized brand name in the European and Asian markets
and provides summarized company "tear sheets" for rapid corporate analysis,
historical company fundamental information, image-based data, textual corporate
profiles and company news to the investment industry worldwide.
c. Worldscope
On June 1, 1999 the Company acquired the remaining 20% minority interest in
Worldscope for $16.0 million, giving Primark 100% ownership of this business.
The purchase price consisted of a $9.0 million cash payment and two $3.5 million
convertible subordinated notes. The notes pay interest at 5%, have a maturity
date of June 1, 2014, are due upon demand at any time after January 1, 2000 and
are convertible into Primark common shares at a price of $30 per share. The
notes are callable by Primark in the event of a change in control. The excess of
the purchase price over the fair market value of net assets acquired of
approximately $16.6 million is being amortized on a straight line basis over 25
years. Worldscope produces a leading database covering global company financial
information on over 24,000 companies from 53 countries. A special feature of the
Worldscope database is the standardization of company account information to a
common format for meaningful cross-border comparisons and analysis.
6
<PAGE> 9
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. RESTRUCTURING AND INTEGRATION CHARGES
Effective June 1, 1998, the Company was reorganized in order to focus
solely on its information services businesses. In connection with this
reorganization, the Company recorded $68.7 million in operating expenses for
direct and other reorganization related costs in June 1998. The restructuring
charge included the write-off of intangible assets for (i) $25.0 of previously
capitalized software related to the planned integration of several product
offerings on common software platforms, (ii) $1.5 million of data determined to
be duplicative and not usable as a result of database integration, (iii)
write-off of $23.9 million of goodwill associated with software and data, which
was established as part of purchase accounting, (iv) write-off of $7.2 of
goodwill related to DAFSA, and (v) write-off of $3.1 of a trademark no longer
used in the restructured organization. The level of impairment was determined
based upon the discounted value of estimated future cash flows.
An additional $8.0 million of the charge related primarily to termination
benefits in the phased reduction of employees and the abandonment of leased
facilities, including leasehold improvements. Salaries and termination benefits,
either in the form of one-time or periodic payments, were made when the employee
ceased employment. These employees were in management, sales and administrative
support.
During the second quarter of 1999, the Company decided not to abandon
certain leased space primarily as a result of acquisitions made since the
restructuring charge was recorded in June of 1998. Also the Company was able to
sub-lease or otherwise abandon certain leases for less than was originally
estimated. This resulted in a reduction of restructuring expense and the related
accrual in the second quarter of approximately $2,986,000. Also during the
second quarter the Company wrote off leasehold improvements and amortized
unfavorable leases in an amount equal to approximately $177,000.
During the second quarter of 1999, as part of its integration program, an
additional $3,051,000 was incurred of which $2,875,000 was paid to 56 employees
notified, and terminated in the second quarter of 1999.
The severance accrual was changed by $332,000 in the second quarter due to
$69,000 for amounts settled favorably, $439,000 for severance amounts paid
offset by $176,000 related to severance for under accruals and for people
notified in the second quarter who will be terminated in the third quarter.
As of June 30, 1999 the restructuring program was substantially complete
and the remaining accrual totaled $837,000. This amount represents $90,000 of
real estate brokerage fees to be paid in the third quarter of 1999, $457,000
related to the abandonment of leased facilities expected to be utilized over the
remainder of the applicable lease, and $290,000 related to four staff reductions
to be completed in the third quarter. As of August 11, 1999, there are two
remaining employees to be terminated associated with the restructuring.
Details of activity related to the restructuring and integration costs in
1998 and 1999 are as follows:
<TABLE>
<CAPTION>
UTILIZED IN UTILIZED IN
1998 UTILIZED QUARTER ENDING QUARTER ENDING JUN. 30, 1999
PROVISION IN 1998 MAR. 31, 1999 JUN. 30, 1999 ACCRUAL
--------- -------- -------------- -------------- -------------
(AMOUNTS IN 000'S)
<S> <C> <C> <C> <C> <C>
Abandonment of leased
facilities, including
leasehold improvements....... $5,156 $ 883 $563 $3,163 $547
Salaries and termination
benefits..................... 2,871 1,890 359 332 290
------ ------ ---- ------ ----
Total.......................... $8,027 $2,773 $922 $3,495 $837
------ ------ ---- ------ ----
</TABLE>
7
<PAGE> 10
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the effect to the income statement for
restructuring and integration items in the second quarter of 1999:
<TABLE>
<S> <C>
Salaries and termination benefits........................... $3,051
Leasehold and related items not abandoned due to recent
acquisitions or items settled for amounts less than
originally anticipated.................................... (2,986)
Salaries and termination benefits settled for amounts less
than anticipated.......................................... (69)
------
Total....................................................... (4)
======
</TABLE>
3. REPURCHASE OF COMMON STOCK
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. On November 10, 1998, the Board of Directors approved an
expansion of the open market purchase program by an additional 2,000,000 shares,
bringing the total potential buyback to 4,000,000 shares. As a result, under the
two repurchase programs totaling 4,000,000 shares, the Company has purchased
2,646,246 shares through June 30, 1999, and had authority remaining to buy back
up to 1,353,754 additional shares of its common stock. For the six months ended
June 30, 1999, 1,077,746 shares were purchased at a total cost of $25.7 million.
During July 1999, the Company did not repurchase any additional shares.
4. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 133, (FAS 133), "Accounting for Derivative Instruments
and Hedging Activities." FAS 133 requires the Company to recognize all
derivatives on the balance sheet at fair value. Depending on the nature of the
underlying exposure being hedged, changes in the fair value of derivatives are
either recognized in the statement of operations or other comprehensive income.
The ineffective portion of a derivative's change in fair value is recognized in
the statement of operations. In accordance with the Company's risk management
policy, Primark uses foreign currency options and foreign currency forward
contracts. The Company does not hold or issue derivative instruments for trading
purposes.
Forward and option contracts related to foreign exchange market risk are
utilized to reduce the exposure of the Company to excessive foreign currency
fluctuations. Significant portions of Primark's revenues are denominated in
currencies other than the U.S. Dollar. For the quarter ended June 30, 1999,
approximately 58% of total revenues were denominated in non-U.S. Dollar
currencies. Approximately 35%, 17% and 6% were denominated in U.K. Sterling,
currencies of Continental Europe, and Asian currencies, respectively. The
majority of Primark's revenues are generated from subscription arrangements of
up to two years in duration.
Additionally, a significant percentage of Primark's operating costs are
denominated in foreign currencies. Primark maintains significant production,
product development, sales and administrative functions in the United Kingdom.
Also, Primark maintains local sales and customer service functions in most
financial centers of Europe and Asia. For the quarter ended June 30, 1999,
approximately 42% of operating income exclusive of goodwill amortization was
denominated in non-U.S. Dollar currencies. This 42% can be broken down between a
negative margin of (2%) in U.K Sterling, 37% in Continental Europe and 7% in
Asia. The primary market risk that Primark faces is the U.S. Dollar
strengthening versus the Euro, Swiss Franc, Swedish Krona and Japanese Yen.
The Company principally enters into contracts to deliver foreign currencies
for U.K. Sterling at agreed-upon exchange rates with maturities not exceeding
two years. The Company accounts for these instruments as cash flow hedges. In
accordance with FAS 133, the fair value of changes of derivative instruments
related to the effective portion of cash flow hedges are initially recorded as a
component of other comprehensive income. Unrealized gains and losses on cash
flow hedges accumulate in other comprehensive income and are
8
<PAGE> 11
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reclassified into earnings when the forecasted transaction affects earnings.
During the quarter ended June 30, 1999, there was no ineffective portion of
derivative gains or losses reported in earnings. Net gains from hedge
transactions expiring during the quarter ended June 30, 1999 totaling $147,000
were reclassified from other comprehensive income to revenues. At June 30, 1999,
the fair value of outstanding instruments was $336,000, recorded in other
current assets with the offset to other comprehensive income. The gain will be
recognized in revenues over the next 12 months as the forecasted revenues are
recognized.
Forward and option contracts are also entered into to protect anticipated
repatriations of excess cash flow, primarily from the U.K., under intercompany
loan agreements or other financial transactions. The Company accounts for these
instruments as fair value hedges and changes in the fair market value of such
contracts are recorded each period in non-operating income or loss. During the
quarter ended June 30, 1999, a net gain on fair value hedging contracts of
$24,000 was recorded to non operating income.
Certain foreign subsidiaries of the Company loan excess cash to the U.K. as
part of the Company's cash management program. All such loans are denominated in
the currency of the lending entity. The Company's U.K. subsidiary designates
such foreign currency loans as hedges in its net investment in foreign
subsidiaries, and the gain or loss resulting from periodic revaluation of such
loans is recorded to a separate component of the cumulative translation
adjustment. For the quarter and year to date periods ended June 30, 1999, $1.2
million and $3.4 million of net gains, respectively, from revaluation of
intercompany loans were recorded to the cumulative translation adjustment.
The cumulative effect of a change in accounting principle due to adoption
of FAS 133 as of January 1, 1999 had a $219 thousand negative impact on
earnings.
5. 1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
On May 26, 1999 the Company established the 1999 Stock Option Plan for
Non-Employee Directors, which provides for the granting of 200,000 options to
purchase shares of Primark common stock. Options under this plans: (i) are
granted at prices equal to the fair market value of the stock on the date of
grant, (ii) vest immediately, and (iii) expire ten years from the date of grant.
As of June 30, 1999, 167,070 options have been granted under this plan.
6. CONTINGENCIES
There have been no other significant developments with respect to the
Company's contingent liabilities which were disclosed in the Company's 1998
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.
7. DISCONTINUED OPERATIONS
The accompanying consolidated financial statements reflect the operating
results of TASC and TIMCO separately from the Company's continuing operations
for 1998. 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 represent the net book value of the Company's investment
in TASC and TIMCO and consist principally of working capital, fixed assets,
goodwill and other non-current assets and liabilities. A purchase price
adjustment of $8.9 million associated with the sale of TASC was received by
Primark in January of 1999.
9
<PAGE> 12
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
QUARTER ENDED YEAR TO DATE
DISCONTINUED OPERATIONS JUNE 30, 1998 JUNE 30, 1998
----------------------- ------------- -------------
(AMOUNTS IN 000'S)
<S> <C> <C>
INCOME
TASC........................................................ $ -- $ 3,755
TIMCO....................................................... 1,214 2,357
------ -------
Total.................................................. $1,214 $ 6,112
====== =======
NET ASSETS
TASC........................................................ $ --
TIMCO....................................................... 43,915
-------
Total.................................................. $43,915
=======
</TABLE>
8. EARNINGS PER SHARE
Due to the loss from continuing operations for the three and six months
ended June 30, 1998, 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. If options and other potential
common shares were included, weighted average common equivalent shares
outstanding would have been as follows:
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
------------------ ----------------
(AMOUNTS IN 000'S)
<S> <C> <C>
Basic............................................... 27,054 26,998
Effect of Dilutive.................................. 1,066 1,187
------ ------
Diluted............................................. 28,120 28,185
</TABLE>
9. GENERAL
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 1998 Annual Report on Form
10-K.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Earning per Share
Primark Corporation reported income from continuing operations for the
second quarter and six months ended June 30, 1999 at $4.2 million ($0.20 per
share) and $6.9 million ($0.33 per share) compared to losses of $48.0 million
($1.77 per share) and $44.4 million ($1.64 per share) for the respective periods
last year. A restructuring charge of $68.7 million was recorded in the second
quarter of 1998. Exclusive of that restructuring charge and the related tax
benefit, Primark in 1998 would have had income from continuing operations in the
second quarter and six months ended June 30, 1998 of $6.7 million ($0.24 per
share on a dilutive basis) and $10.3 million ($0.37 per share on a dilutive
basis), respectively.
Net income for the three and six months ended June 30, 1999 was $4.2
million ($0.20 per share) and $6.7 million ($0.32 per share), compared to $121.3
million ($4.49 per share) and $129.9 ($4.81 per share) for the same respective
periods last year. Included in net income for the six months ended June 30, 1999
is a loss, net of tax, of $0.2 million ($0.01 per share) associated with the
cumulative effect of a change in accounting principle for the adoption of
Statement of Financial Accounting Standards No. 133 ("FAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." Discontinued operations for the
three and six months ended June 30, 1998 include $174.4 million ($6.45 per
share) and $179.3 million ($6.64 per share) for operations and gains on disposal
of TASC and TIMCO, the Company's former applied technology and aircraft
maintenance operations, respectively. Also in the second quarter of 1998,
Primark used the proceeds from the sale of discontinued operations to repay $220
million of commercial bank debt and $112 million of senior notes resulting in an
extraordinary loss of $5.1 million ($0.19 per share)
Acquisitions
During the first quarter of 1999, the Company acquired the businesses of
A-T Financial Information Inc. ("A-T") for $34.9 million and the Extel company
fundamental data business, along with the Extel brand name, for $31.9 million.
During the second quarter of 1999, Primark acquired from Wright Investors'
Service its 20% minority interest in Worldscope, giving Primark 100% ownership
in this business for $16.0 million; OnPoint Technologies Inc. was also acquired
for $3.3 million.
Founded in 1987, A-T is a leading provider of Windows-compatible real time
financial market data and software to money managers, traders, banks and other
institutional investors. A-T has launched a competitive Internet site for
individual investors, which is marketed as "A-T Attitude." The company reported
approximately $13 million in revenues for 1998, which is an increase of 29% over
the prior year.
Management plans to integrate A-T's leading real-time data and software
capabilities with the full range of Primark's financial information products. In
April 1999, A-T released a new North American market datafeed, called Primark
SpeedFeed, which is collected directly from 35 sources. Management believes that
this new feed will enable Primark to offer superior quality Internet and
institutional products, especially when combined with the many unique databases
available from Primark today. For example, by combining A-T's robust North
American coverage with the European market data collected by its ICV unit in
London, Primark will have excellent real-time and historical coverage for the
world's two largest financial markets. Building on Primark's extensive presence
in Asia and developing countries, management intends to expand this capability
to the rest of the globe.
Management also intends to use the existing A-T Internet delivery system as
the foundation of a 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 real-time and historical securities
prices, indices, company financial reports and documents, ownership, insider
trading, earnings estimates, broker research, market-related economic analysis,
forecasts and news -- with securities trading and portfolio management
capabilities. Distinctive features of this new Internet service will be its
global coverage of countries, markets, industries and securities, together with
Primark forecasts and analytical tools. Most of the data will be drawn from
Primark's financial and economic information businesses, along with third party
information such as Dow Jones news to complete the service.
11
<PAGE> 14
The Primark brand and its information products are currently on the
Internet in many ways. The Disclosure Global Access product (www.disclosure.com)
is authorized to deliver company financial information through the Internet to
over 500,000 users. Broker research (www.trapeze.net), earnings estimates
(www.ibes.com), securities analysis (www.baseline.com), prices
(www.marketeye.co.uk), and economics (www.wefa.com) are other prime examples.
For the retail community, Primark proprietary data is delivered via AOL, MSN,
Stock Smart, FT.com, WSJ.com, Quote.com, E*Trade and many others.
In February 1999, the Extel company fundamental data business and the Extel
brand name were acquired from The Financial Times Group, part of Pearson plc,
for $31.9 million in cash, subject to certain post closing adjustments. Extel,
perhaps best known for its "Extel Card" company tearsheets for rapid corporate
analysis, provides historical company accounts, image-based data, and textual
corporate profiles and company news to the investment industry worldwide. The
acquired business reported revenues of approximately $18 million in 1998.
Management intends to integrate the Extel data production operation within
its Worldscope operation while leveraging the premier Extel name by providing
Extel branded information across the full range of Primark's product lines. This
will be done both by integrating Extel corporate and historical news content
with Primark's current products and through adding value to Extel products with
Primark's data and functionality. Extel's strength in the Europe and
Asia-Pacific regions complements Primark's existing North American strength.
Primark will also incorporate elements of Extel data into its existing and
planned real-time information services. These services are being strengthened
through the acquisition of real-time provider A-T Financial Information. Extel
data will be included on real-time products such as TOPIC as part of Primark's
drive to become the world's leading supplier of equity data.
The purchase price for the remaining 20% stake of Worldscope was $16
million consisting of a $9 million cash payment and two $3.5 million convertible
subordinated notes. The notes pay interest at 5%, have a maturity date of June
1, 2014 and are convertible into Primark common shares at a price of $30 per
share. The notes are callable by Primark in the event of a change of control.
Worldscope produces a leading database covering global company financial
information on over 24,000 companies from 53 countries. A special feature of the
Worldscope database is the standardization of company account information to a
common format for meaningful cross-border comparisons and analysis. With 100%
ownership of Worldscope, Primark will integrate across all business units every
aspect of company account data collection, production and delivery. This
integration should allow Primark to provide its customers with more complete and
timely coverage, which will be achieved at lower costs to Primark.
Primark acquired OnPoint Technologies Inc., a firm specializing in
developing internet-based financial applications and software products for the
financial services sector. OnPoint's web-focused development team will use
Primark's information resources and technical infrastructure to develop
financial products for the Internet.
The acquired businesses of A-T Financial Information Inc., Extel and
OnPoint Technologies Inc. have been made part of the Primark Financial
Information Division (PFID) and their financial results are included with PFID.
Worldscope has always been included within PFID.
12
<PAGE> 15
Operating Results
The following table summarizes the operating results of Primark by
Division:
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ -----------------------------
REVENUE 1999 1998 % CHANGE 1999 1998 % CHANGE
------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
PFID.................... 85,433 77,360 10.4% 168,455 152,559 10.4%
PFAD.................... 22,788 18,322 24.4% 44,606 35,881 24.3%
PDID.................... 13,949 13,192 5.7% 26,453 24,845 6.5%
------- ------- ------- -------
122,170 108,874 12.2% 239,514 213,285 12.3%
======= ======= ======= =======
EBITDA
PFID.................... 18,523 16,622 11.4% 35,269 35,641 (1.0)%
PFAD.................... 6,569 5,654 16.2% 12,611 10,725 17.6%
PDID.................... 2,380 3,923 (39.3)% 2,989 4,990 (40.1)%
Corp.................... (1,067) (2,132) 50.0% (1,869) (2,921) 36.0%
------- ------- ------- -------
26,405 24,067 9.7% 49,000 48,435 1.2%
======= ======= ======= =======
OPERATING INCOME
PFID.................... 7,823 7,264 7.7% 14,742 16,757 (12.0)%
PFAD.................... 4,657 3,963 17.5% 8,835 7,279 21.4%
PDID.................... 1,272 2,669 (52.3)% 798 2,411 (66.9)%
Corp.................... (1,472) (2,389) 38.4% (2,635) (3,623) 27.3%
------- ------- ------- -------
12,280 11,507 6.7% 21,740 22,824 (4.7)%
======= ======= ======= =======
</TABLE>
The above table does not include the restructuring charge of $68.7 million
taken in the second quarter of 1998. Of this amount $50.7 million relates to
PFID, $17.8 million relates to PDID and $225,000 relates to PFAD.
EBITDA represents operating income excluding restructuring charges plus
depreciation and amortization expense 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 a required disclosure under generally accepted accounting
principles, EBITDA is a widely used measure of a company's performance in its
industry. EBITDA 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). Management
of the company believes that EBITDA is a meaningful measure given the widespread
industry acceptance as a basis for financial analysis. Further, certain of the
company's debt agreements include financial covenants that are based upon
EBITDA, as defined above. Due to the variety of methods that may be used by
companies and analysts to calculate EBITDA, the EBITDA measures presented herein
may not be comparable to that presented by other companies.
Revenues from continuing operations for the second quarter and six months
ended June 30, 1999 were reported at $122.2 million and $239.5 million compared
to $108.9 million and $213.3 million for the same respective periods last year.
Operating and EBITDA margins in second quarter of 1999 improved compared to the
first quarter of 1999 due to revenues from new products being introduced in 1999
and further expense savings associated with completing Primark's integration
efforts.
PFID
PFID's growth in sales can be primarily attributed the following factors:
1) excellent sales of Datastream's research product in Europe and Asia,
2) strong sales in the UK of the investment accounting systems offered by the
Primark Information Management System (PIMS) product line, 3) a good reception
by the market of Disclosure's next generation electronic products line led by
Global Access and Piranha. Continued weakness in Disclosure's traditional CD Rom
and document delivery business partially offset this growth.
13
<PAGE> 16
Excluding Disclosure's traditional products, management expects this
division's growth to continue due to synergy created by recent acquisitions and
due to the impact of new products and enhancements to existing products released
in 1999.
PFAD
The Primark Financial Analytics Division (PFAD) had another strong quarter
of growth in revenues, EBITDA and operating income. The Baseline product leads
this growth with an increase in revenues of 34% and 37% for the quarter and year
to date, followed by IBES with growth of 18% for both the quarter and year to
date and Vestek with growth of 24% and 19% for both the quarter and year.
Management expects this performance to continue with the sale of new or recently
released products such as Trapeze, Active Express, and Vestek's mutual fund
warehouse offering.
PDID
The Primark Decision Information Division (PDID) derives revenues from two
major sources. Under the brand name of the Yankee Group, this Division sells
subscription and consulting services to both the vendors and users of
telecommunications and computing capabilities. Growth in revenues from these
services was up 24% and 26% for the quarter and year, respectively.
Under the brand name of Primark WEFA, PDID sells subscriptions to economic
services as well as economic consulting for analysis and planning. Revenues
dropped by 10% and 8% for the quarter and year primarily as a result of product
transitions. This drop in revenues is the primary reason for the deterioration
of margins within this Division. WEFA's customer base and product line is
transitioning from services provided to traditional corporate economists, a
market which is flat to down, to marketing, financial and operating
professionals, a market growing robustly. Management expects the revenues and
margins at WEFA to improve modestly for the balance of 1999 when compared to the
first half of the year.
Other comprehensive income dropped by approximately $ 8.0 million primarily
due to a change in the cumulative translation account resulting from the dollar
strengthening against the pound. The Company has a significant goodwill asset
denominated in U.K. Sterling.
Capital Resources and Liquidity
Primark's cash and cash equivalent balances decreased $29.8 million during
the six months ended June 30, 1999 as a result of operating activities
contributing $30.3 million, financing operations generating $55.6 million and
investing activities absorbing $115.2 million.
The $3.7 million increase in cash flows from operating activities is a
result of timing differences associated with working capital accounts.
Financing activities, for the most part, reflect a net increase of $83.8
million on Primark's revolving credit facility, resulting in $243.6 million of
funded debt outstanding as of June 30, 1999. 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. In addition, on
November 10, 1998, the Board of Directors approved an expansion of the open
market purchase program by 2,000,000 shares, bringing the total potential
buyback to 4,000,000 shares. As a result under the two repurchase programs
totaling 4,000,000 shares, the Company had authority remaining to buy back up to
1,353,754 additional shares of its common stock as of June 30, 1999. For the six
months ended June 30, 1999, 1,077,746 shares were purchased at a total cost of
$25.7 million. Additionally, Primark received proceeds of $4.4 million on the
issuance of common stock associated with stock option and employee stock
purchase plans.
Investing activities included the use of $79.1 million for the purchase by
Primark of four companies in the first six months of 1999, Extel, A-T Financial,
the remaining 20% of Worldscope and Onpoint Technologies Inc. In addition,
investing activities included $13.5 million of capital expenditures and $10.2
million of capitalized software. The capital expenditures consisted primarily of
computer equipment purchases, which totaled $10.0 million for the six months
ended June 30, 1999. In early 1999, the Company received
14
<PAGE> 17
$8.9 million in cash associated with a purchase price adjustment from the sale
of its TASC subsidiary in April of 1998. This amount was offset by $21.4 million
of taxes paid in 1999 on the gains realized on the sale of discontinued
operations in 1998. Management estimates that it will be required to pay
approximately $8.0 million of additional taxes in the remainder of 1999
associated with the gain on the sale of discontinued operations realized in
1998.
Newly Adopted Accounting Standards
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 133, (FAS 133), "Accounting for Derivative Instruments
and Hedging Activities". FAS 133 requires the Company to recognize all
derivatives on the balance sheet at fair value. Depending on the nature of the
underlying exposure being hedged, changes in the fair value of derivatives are
either recognized in the statement of operations or other comprehensive income.
The ineffective portion of a derivative's change in fair value is recognized in
the statement of operations. In accordance with the Company's risk management
policy, Primark uses foreign currency options and foreign currency forward
contracts. The Company does not hold or issue derivative instruments for trading
purposes.
The cumulative effect of a change in accounting principle due to adoption
of FAS 133 as of January 1, 1999 had a $219 thousand negative impact on
earnings.
Restructuring and Integration Charges
Effective June 1, 1998, the Company was reorganized in order to focus
solely on its information services businesses. In connection with this
reorganization, the Company recorded $68.7 million in operating expenses for
direct and other reorganization related costs in June 1998, subsequently
adjusted to $68.0 million.
The following summarizes the second quarter activity pertaining to the
restructuring accrual:
<TABLE>
<CAPTION>
UTILIZED IN
QUARTER
MAR. 31, 1999 ENDING JUN. 30, 1999
ACCRUAL 1999 ACCRUAL
------------- ----------- -------------
(AMOUNTS IN 000'S)
<S> <C> <C> <C>
Abandonment of leased facilities, including
leasehold improvements.......................... $3,710 $3,163 $547
Salaries and termination benefits................. 622 332 290
------ ------ ----
Total........................................ $4,332 $3,495 $837
====== ====== ====
</TABLE>
During the second quarter of 1999, the Company decided not to abandon
certain leased space primarily as a result of acquisitions made since the
restructuring charge was recorded in June of 1998. Also the Company was able to
sub-lease or otherwise abandon certain leases for less than was originally
estimated. The remaining amounts in abandoned leased facilities represents
accrued brokerage fees for space to be abandoned in August and the difference
between the cost of the leases and the sub-lease income to be generated. As of
June 30, 1999 there are four employees still to be severed as part of the
restructuring program.
Also during the second quarter as a part of its integration program, an
additional $3.1 million was incurred of which $2.9 million was paid to 56
employees notified and terminated in the second quarter of 1999.
As of June 30, 1999 the restructuring program was substantially complete
and the remaining accrual totaled $837,000. This amount represents $90,000 of
real estate brokerage fees to be paid in the third quarter of 1999, $457,000
related to the abandonment of leased facilities expected to be utilized over the
remainder of the applicable lease, and $290,000 related to four staff reductions
to be completed in the third quarter. As of August 11, 1999, there are two
remaining employee to be terminated associated with the restructuring.
15
<PAGE> 18
Year 2000 Readiness Disclosure
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 once the
new century begins.
The Company has been actively addressing all known Y2K issues since 1995,
with the goal of providing continuous and reliable service to the Company's
customers and a seamless transition to the new Millennium. The Company's Y2K
plan focuses on each of the Company's internal systems, products and third
parties with which the Company has a significant business relationship. In
addition to the databases and software that the Company provides to its
customers, the Company is reviewing, fixing, and testing all aspects of its
internal operations -- from hardware systems (e.g., servers, LANs), software
(e.g., production database systems, HR and finance information systems), and
desktop PC programs to physical security systems, fire suppression, and other
building control systems. In addition to managing our internal Y2K efforts, this
program involves working with many other organizations. These include key data
suppliers, hardware manufacturers, telecommunications companies, electric
utilities, and many others.
The Company is also prepared to assist its users with Y2K issues relating
to their internal systems that directly interface with the Company's systems.
All Primark companies are working together to achieve compliance by sharing
information and resources. The Company believes that all material systems will
be Y2K compliant before the end of the third quarter of 1999.
All Primark companies dealing with the Y2K issues must address the many
effects that this issue will have on their significant business relationships,
including suppliers and customers. The Company is undertaking steps to work with
third party vendors to understand their ability to continue to provide services
and products.
The Company has notified all customers with older products which are not
Y2K compliant and which the Company will no longer support. All other Company
products are Y2K compliant.
The Company has undertaken a rigorous verification of suppliers. Primark
business units incorporate data derived from many different suppliers. A major
component of the Y2K project is reviewing every one 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, the Company will seek
alternatives within a suitable time frame.
The Company is preparing contingency plans to deal with major risks that
could result from Y2K problems beyond the Company's control. This includes the
failure of infrastructure support, e.g., utilities, as well as possible supplier
and customer issues.
The Company projects to incur costs related to its Y2K initiative of $5.0
million for the year ended December 31,1999. The Company expects to resolve
every known significant Y2K problem and have the solutions thoroughly tested in
the third quarter of 1999.
The Company expects its Y2K efforts will be successful. However, the
Company's products and services as well as the tools that Primark uses to
conduct its Y2K evaluation are dependent on technological components, equipment
and software that were developed by third parties and that may not be Y2K
compliant. The Company has made extensive efforts to select third party products
that meet our product requirements and that are Y2K-compliant. However, this
compliance is not within the control of the Company. Failure of such third party
components, equipment or software to operate properly with regard to the Y2K
could interrupt ongoing operations or require the company to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
the Company's business and operating results.
Certain Factors that May Affect Future Results
In addition to historical information presented here, this report includes
statements that may constitute forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Although Primark believes the expectations contained in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove correct. This information may involve risks and uncertainties that could
cause the actual results of Primark to differ materially from the
forward-looking statements. Factors which could cause or contribute to such
differences include, but are not
16
<PAGE> 19
limited to (i) the risks associated with operating on a global basis, including
fluctuations in the value of foreign currencies relative to the U.S. dollar, and
the ability to successfully hedge such risks, (ii) the extent to which Primark
seeks growth through acquisitions, and the ability to identify and consummate
acquisitions on satisfactory terms, (iii) uncertainty regarding the development
and market acceptance of new products, (iv) loss of market share through
competition, (v) deterioration in economic conditions, particularly in the
financial services industry, and (vi) Primark's inability to complete the
implementation of its Y2K plans on a timely basis.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is provided under the caption
"Foreign Currency Exchange Risk Management" under Item 2--Management's
Discussion and Analysis of Financial Condition and Results of Operations. Also
see Item 7A. Quantitative and Qualitative Disclosures About Market Risk in
Primark's 1998 10-K.
17
<PAGE> 20
PART II
OTHER INFORMATION
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
The Company's Annual Meeting of shareholders was held on May 26, 1999 for
the purposes of electing a board of directors, amending the Company's Articles
of Incorporation to increase the number of directors from 7 to 8, approving the
grant of a stock option and approving the appointment of independent auditors.
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934.
All of management's nominees for directors listed in the proxy statement
were elected with the following vote:
<TABLE>
<CAPTION>
SHARES VOTED SHARES BROKER
"FOR" % WITHHELD % NON-VOTES %
------------ ----- -------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Kevin J. Bradley.................... 18,735,620 90.2% 269,714 1.3% 1,068,984 5.1%
John C. Holt........................ 18,699,404 90.0% 305,930 1.5% 1,068,984 5.1%
Joseph E. Kasputys.................. 18,728,840 90.2% 276,494 1.3% 1,068,984 5.1%
Steven Lazarus...................... 18,734,692 90.2% 270,642 1.3% 1,068,984 5.1%
Patricia McGinnis................... 18,735,964 90.2% 269,370 1.3% 1,068,984 5.1%
Jonathan Newcomb.................... 18,751,483 90.3% 253,851 1.2% 1,068,984 5.1%
Constance K. Weaver................. 18,743,854 90.2% 261,480 1.3% 1,068,984 5.1%
David Taylor........................ 18,737,807 90.2% 267,527 1.3% 1,068,984 5.1%
</TABLE>
Proposal to approve an amendment to the Company's Articles of Incorporation
to increase the number of directors from 7 to 8 was approved by the following
vote:
<TABLE>
<CAPTION>
SHARES
SHARES VOTED VOTED SHARES BROKER
"FOR" % AGAINST % ABSTAINING % NON-VOTES %
- ------------ ----- ------------ ---- ---------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
18,363,397 88.4% 534,548 2.6% 107,389 0.5% 1,068,984 5.1%
</TABLE>
Approval of the grant of a stock option to Mr. Steven L. Schneider,
President and CEO of Primark Financial Information Division was voted as
follows:
<TABLE>
<CAPTION>
SHARES
SHARES VOTED VOTED SHARES BROKER
"FOR" % AGAINST % ABSTAINING % NON-VOTES %
- ------------ ----- ------------ ---- ---------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
15,562,201 74.9% 3,284,564 15.8% 158,569 0.8% 1,068,984 5.1%
</TABLE>
The appointment of Deloitte and Touche LLP as independent auditors for the
year ended December 31, 1999 was approved by the following vote:
<TABLE>
<CAPTION>
SHARES
SHARES VOTED VOTED SHARES BROKER
"FOR" % AGAINST % ABSTAINING % NON-VOTES %
- ------------ ----- ------------ ---- ---------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
18,817,405 90.6% 117,899 0.6% 70,030 0.3% 1,068,984 5.1%
</TABLE>
18
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1* Stock Option Agreement between the Company and David Taylor dated
February 24, 1999.
3.1* Restated Articles of Incorporation of the Company.
10.1 Primark Corporation 1999 Stock Option Plan for Non-Employee
Directors dated May 26, 1999 (Exhibit 4.1 to the Company's
Registration Statement on Form S-8 dated July 28, 1999).
10.2* Memorandum of Understanding between the Company and David Taylor
dated March 15, 1999.
10.3* Employment extension between the Company and John C. Holt dated
July 9, 1999.
27* Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended June 30,
1999.
- ---------------
* Indicates document filed herewith.
19
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIMARK CORPORATION
By: /s/ STEPHEN H. CURRAN
----------------------------------
Stephen H. Curran
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 12, 1999
20
<PAGE> 1
Exhibit 2.1
PRIMARK CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement (the "Option Agreement") is made
as of the 24th day of February, 1999 by and between Primark Corporation, a
Michigan corporation (the "Company"), and David Taylor (the "Optionee").
WHEREAS, the Company has determined that it is desirable and in its best
interests to grant to the Optionee an option to purchase a certain number of
shares of the Company's Common Stock (the "Stock"), all according to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
the Company hereby grants to the Optionee on this date (the "Grant Date") the
right and option (the "Option") to purchase from the Company, on the terms and
subject to the conditions hereinafter set forth, 10,000 shares of Stock.
2. PRICE. The per share purchase price (the "Option Price") for each
share of Stock subject to the Option is $20.8125 (the closing price on the Grant
Date of a share of stock on the New York Stock Exchange).
3. EXERCISE OF OPTION. Except as otherwise provided herein, the Option
granted pursuant to this Option Agreement shall be subject to exercise as
follows:
A. TIME AND EXERCISE OF OPTION. The Optionee shall have a cumulative
right to exercise up to 33% of the shares of Stock covered by the Option after
the first year following the Grant Date, 67% after the second year and 100%
after the third year. To the extent exercisable, the Optionee may exercise the
Option (subject to the limitations on exercise set forth herein), in whole or in
part, at any time and from time to time, from and after the date hereof and
prior to the termination of the Option as set forth in Subsection F below;
provided, that no single exercise of the Option shall be for less than 100
shares, unless the number of shares purchased is the total number at the time
available for purchase under this Option, and PROVIDED, FURTHER, that in no
event may the Option be exercised for a fractional share.
B. EXERCISE BY OPTIONEE. During the lifetime of the Optionee, only
the Optionee (or, in the event of the Optionee's legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise the
Option.
C. TERMINATION OF CONSULTANT STATUS. The Optionee may exercise the
Option only while the Optionee is employed as a consultant of the Company, and
immediately upon the termination of Optionee's employment with the Company the
Option shall terminate and the Optionee shall have no further right to purchase
shares of Stock under this Option Agreement, except as provided in Subsections D
and E of this Section.
<PAGE> 2
D. DEATH. In the event of the Optionee's death either while a
consultant of the Company, or within the one-year period following the
termination of such employment during which the Option was exercisable pursuant
to Subsection E of this Section, the Optionee's designated beneficiary or, in
the absence of a beneficiary designation, the personal representative or
legatees or distributees of the Optionee's estate, as the case may be, shall
have the right (subject to the limitations on exercise set forth in Subsection A
above) to exercise all or any part of the Option to the extent the Option was
exercisable on the date of the Optionee's death, at any time within one year
after the date of the Optionee's death but not later than the original
expiration date of the Option. The Optionee may designate to the Company on a
form provided by the Company for that purpose, a beneficiary who may exercise
the Option after the Optionee's death under this Subsection D. Such designation
may be cancelled or changed by the Optionee in his discretion, but no
cancellation or change will be recognized by the Company unless effected in
writing on a form provided by the Company for that purpose and filed with the
Company.
E. DISABILITY. If the Optionee's employment with Company is
terminated by reason of "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code")),
the Optionee or the Optionee's guardian or legal representative shall have the
right (subject to the limitations on exercise set forth in Subsection A above)
to exercise all or any part of the Option to the extent the Option was
exercisable at the time of such termination, at any time within one year after
such termination, but not later than the original expiration date of the Option.
F. TERMINATION OF OPTION. The Option shall terminate upon the
earlier of (i) the expiration of a period of ten years from the date of grant of
the Option, as set forth in Section 13 below; or (ii) the date on which the
Optionee's employment with Company is terminated, unless such termination falls
within the scope of Subsection D or E of this Section and in such event upon the
expiration of the period after the Optionee's employment with the Company is
terminated within which the Option is exercisable as specified in such
subsections.
4. METHOD OF EXERCISE OF OPTION. Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by delivering written notice
of exercise to the Company, at its principal office, addressed to the attention
of the Secretary of the Company, which notice shall specify the number of shares
for which the Option is being exercised, and shall be accompanied by payment in
full of the Option Price of the shares for which the Option is being exercised.
Payment of the Option Price for the shares of Stock purchased pursuant to the
exercise of the Option shall be made in cash. If the person exercising the
Option is not the Optionee, such person shall also deliver with the notice of
exercise appropriate proof of his or her right to exercise the Option. An
attempt to exercise the Option granted hereunder other than as set forth above
shall be invalid and of no force and effect. Promptly after exercise of the
Option as provided for above, the Company shall deliver to the person exercising
the Option a certificate or certificates for the shares of Stock being
purchased.
5. LIMITATIONS ON TRANSFER. The Option is not transferable or assignable
by the Optionee, other than by will or the laws of descent and distribution in
the event of death of the Optionee.
2
<PAGE> 3
6. RIGHTS AS SHAREHOLDER. Neither the Optionee nor any executor,
administrator, distributee or legatee of the Optionee's estate shall be, or have
any of the rights or privileges of, a shareholder of the Company in respect of
any shares of Stock transferable hereunder unless and until such shares have
been fully paid and certificates representing such shares have been endorsed,
transferred and delivered, and the name of the Optionee (or of such personal
representative, administrator, distributee or legatee of the Optionee's estate)
has been entered as the shareholder of record on the books of the Company.
7. EFFECT OF CHANGES IN CAPITALIZATION.
A. CHANGES IN STOCK. If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Company occurring after the date the Option is granted, a
proportionate and appropriate adjustment shall be made by the Company in the
number and kind of shares subject to the Option, so that the proportionate
interest of the Optionee immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such adjustment
in the Option shall not change the total Option Price with respect to shares
subject to the unexercised portion of the Option but shall include a
corresponding proportionate adjustment in the Option Price per share.
B. REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING CORPORATION.
Subject to Subsection C of this Section, if the Company shall be the surviving
corporation in any reorganization, merger or consolidation of the Company with
one or more other corporations, the Option shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
Option would have been entitled immediately following such reorganization,
merger or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregated Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger or consolidation.
C. REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING
CORPORATION OR SALE OF ASSETS OR STOCK. Upon the dissolution or liquidation of
the Company, or upon a merger, consolidation or reorganization of the Company
with one or more other corporations in which the Company is not the surviving
corporation, or upon a sale of substantially all of the assets of the Company to
another corporation, or upon any transaction (including, without limitation, a
merger or reorganization in which the Company is the surviving corporation)
approved by the Board which results in any person or entity owning eighty
percent (80%) or more of the combined voting power of all classes of stock of
the Company, the Option hereunder shall terminate, except to the extent
provision is made in connection with such transaction for the continuation
and/or the assumption of the Option, or for the substitution for the Option of
new options covering the stock of a successor employer corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and kinds
of shares and exercise prices, in which event the Option shall continue in the
manner and under the terms so provided. In the event of any such termination of
the Option, the Optionee shall have the right (subject to the limitations on
exercise set forth in Section 3 above), for thirty (30) days immediately prior
to the occurrence of such termination, to exercise the Option in whole or in
part, to the extent the Optionee was otherwise entitled to exercise such Option
at the
3
<PAGE> 4
time such termination occurs. The Company shall send written notice of an event
that will result in such a termination to the Optionee not later than the time
at which the Company gives notice thereof to its shareholders.
D. ADJUSTMENTS. Adjustments specified in this Section relating to
stock or securities of the Company shall be made by the Compensation Committee
of the Board of Directors of the Company (the "Committee"), whose determination
in that respect shall be final, binding and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
8. NON-COMPETE. In consideration of this Option and the acceptance
thereof, the Optionee agrees that in the event of termination of employment with
the Company or any of its direct or indirect subsidiaries ("Primark") for any
reason, the Optionee will not, without the written consent of the Company, for a
period of six (6) months thereafter, alone or with or for others, in whatever
capacity, directly or indirectly, (i) compete with Primark for business with
current or contemplated customers for whom you provided a service while at
Primark, (ii) solicit or encourage any person who is an employee of Primark to
leave the employ of Primark, or (iii) interfere with existing or contemplated
relationships between Primark and its customers and employees (the provisions of
this paragraph are hereinafter referred to as the "Noncompetition Provisions").
In the event of a conflict between the Optionee's consultant agreement with
Primark, if any, and any provisions of this paragraph, the provisions of this
paragraph will govern to the extent, and only for that period of time, if any,
that such provisions survive beyond the related provisions in such agreement.
9. GENERAL RESTRICTIONS. The Company shall not be required to sell or
issue any shares of Stock under the Option if the sale or issuance of such
shares would constitute a violation by the individual exercising the Option or
by the Company of any provision of any law or regulation of any governmental
authority, including without limitation, any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares subject to the Option
upon any securities exchange or under any state or federal law, or the consent
or approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the issuance or purchase of shares
hereunder, the Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Option. Specifically in connection with the Securities Act of 1933 (as now in
effect or as hereafter amended), unless a registration statement under such Act
is in effect with respect to the shares of Stock covered by the Option, the
Company shall not be required to sell or issue such shares unless the Company
has received evidence satisfactory to it that the holder of the Option may
acquire such shares pursuant to an exemption from registration under such Act.
Any determination in this connection by the Company shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now is
effect or as hereafter amended). The Company shall not be obligated to take any
affirmative action in order to cause the exercise of the Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that the Option shall not be exercisable unless and until the shares
of Stock covered by the Option are registered or are subject to an
4
<PAGE> 5
available exemption from registration, the exercise of the Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption. In any event, Optionee understands that the certificates
representing shares of Stock acquired upon the exercise of the Option will bear
a legend restricting their transfer. Optionee further understands that the
shares of Stock acquired upon the exercise of the Option (even if registered)
will be restricted securities within the meaning of the federal securities laws
and may not be sold, assigned, transferred, pledged, encumbered or otherwise
disposed of absent registration under applicable federal and state securities
laws or unless such transaction is exempt from, or not subject to, such
registration.
10. DISCLAIMER OF RIGHTS. No provision in this Option Agreement shall be
construed to confer upon the Optionee the right to be employed by the Company or
any Subsidiary, or to interfere in any way with the right and authority of the
Company or any Subsidiary to terminate any employment or other relationship
between the Optionee and the Company or any Subsidiary.
11. INTERPRETATION OF THIS OPTION AGREEMENT. All decisions and
interpretations made by the Committee or the Board of Directors of the Company
with regard to any question arising under this Option Agreement shall be binding
and conclusive on the Company and the Optionee and any other person entitled to
exercise the Option as provided for herein.
12. GOVERNING LAW. The Option Agreement is executed pursuant to and shall
be governed by the laws of the Commonwealth of Massachusetts (but not including
the choice of law rules thereof).
13. DATE OF GRANT. The date of grant of this Option is February 24, 1999.
14. BINDING EFFECT. Subject to all restrictions provided for in this
Option Agreement and by applicable law relating to assignment and transfer of
this Option Agreement and the option provided for herein, this Option Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, and assigns.
15. NOTICE. Any notice hereunder by the Optionee to the Company shall be
in writing and shall be deemed duly given if mailed or delivered to the Company
at its principal office, addressed to the attention of the Committee, or if so
mailed or delivered to such other address as the Company may hereafter designate
by notice to the Optionee. Any notice hereunder by the Company to the Optionee
shall be in writing and shall be deemed duly given if mailed or delivered to the
Optionee at the address specified below by the Optionee for such purpose, or if
so mailed or delivered to such other address as the Optionee may hereafter
designate by written notice given to the Company.
16. ENTIRE AGREEMENT. This Option Agreement constitutes the entire
agreement and supersedes all prior understandings and agreements, written or
oral, of the parties hereto with respect to the subject matter hereof. Neither
this Option Agreement nor any term hereof may be amended, waived, discharged or
terminated except by a written instrument signed by the Company and the
Optionee; provided, however, that the Company unilaterally may waive any
provision hereof in writing to the extent that such waiver does not adversely
affect the interests of the Optionee hereunder, but no such waiver shall operate
as or be construed to be a subsequent waiver of the same provision or a waiver
of any other provision hereof.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement, or caused this Option Agreement to be duly executed on their behalf,
as of the day and year first above written.
PRIMARK CORPORATION
By: /s/ Joseph E. Kasputys
Title: Chairman, President & CEO
OPTIONEE:
/s/ David Taylor
-------------------------------
David Taylor
ADDRESS FOR NOTICE TO OPTIONEE:
c/o Primark
--------------------------------
Skandia House
--------------------------------
23 College Hill
--------------------------------
London EC4R 2RA
U.K.
<PAGE> 1
Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
PRIMARK CORPORATION
1. These Restated Articles of Incorporation (the "Restated Articles") are
executed 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, 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
<PAGE> 2
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, 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
2
<PAGE> 3
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;
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
3
<PAGE> 4
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.
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
4
<PAGE> 5
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 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
5
<PAGE> 6
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 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
6
<PAGE> 7
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.
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 Cumula-
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tive 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 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
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<PAGE> 9
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 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
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<PAGE> 10
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 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
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<PAGE> 11
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.
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 Corpora-
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tion 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.
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
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<PAGE> 13
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 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
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<PAGE> 14
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 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
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<PAGE> 15
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.
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
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<PAGE> 16
prepaid, to the holder thereof or to such holder's designee, at the address
designated 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 conversion of all the shares of Series A Preferred
Stock then outstanding. Nothing
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<PAGE> 17
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
anniversary 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.
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<PAGE> 18
(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:
Anniversary of the Number of Shares of
Original Date of Issuance Series A Preferred Stock
------------------------- ------------------------
7 150,000
8 150,000
9 150,000
10 All then outstanding
shares of Series A
Preferred Stock
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.
(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
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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 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.
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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 subparagraph
(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
20
<PAGE> 21
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 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
21
<PAGE> 22
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.
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
22
<PAGE> 23
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 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
23
<PAGE> 24
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:
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
24
<PAGE> 25
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 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.
25
<PAGE> 26
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
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
26
<PAGE> 27
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.
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
By: /s/ Michael R. Kargula
---------------------------------
Michael R. Kargula
Executive Vice President,
General Counsel and Secretary
27
<PAGE> 28
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY)
Date Received This document is effective on the date filed, unless
a subsequent effective date within 90 days after
JUN 01 1999 received date is stated in the document.
- -----------------------
- ----------------------- FILED
Name JUN 01 1999
517-663-2525 Ref #93548
Attn: Cheryl J. Bixby Administrator
MICHIGAN RUNNER SERVICE CORP. SECURITIES & LAND DEV. BUREAU
2.0. Box 266
Eaton Rapids, MI 48827 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS YOU ENTER ABOVE.
IF LEFT BLANK DOCUMENT WILL BE MAILED TO THE REGISTERED OFFICE.
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT AND NONPROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: Primark Corporation
2. The identification number assigned by the Bureaus is: 243164
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Article VIII of the Articles of Incorporation is hereby amended to read
as follows:
See Annex 1 attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
<PAGE> 29
COMPLETE ONLY ONE OF THE FOLLOWING:
- --------------------------------------------------------------------------------
4. (FOR AMENDMENTS ADOPTED BY UNANIMOUS CONSENT OF INCORPORATORS BEFORE THE
FIRST MEETING OF THE BOARD OF DIRECTORS OR TRUSTEES.)
The foregoing amendment to the Articles of Incorporation was duly adopted on
the ________ day of ________, 19___, in accordance with the provisions of the
Act by the unanimous consent of the incorporator(s) before the first meeting
of the Board of Directors or Trustees.
Signed this __________ day of ____________, 19________
________________________________ _____________________________________
(Signature) (Signature)
________________________________ _____________________________________
(Type or Print Name) (Type or Print Name)
________________________________ _____________________________________
(Signature) (Signature)
________________________________ _____________________________________
(Type or Print Name) (Type or Print Name)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. (FOR PROFIT AND NONPROFIT CORPORATIONS WHOSE ARTICLES STATE THE CORPORATION
IS ORGANIZED ON A STOCK OR ON A MEMBERSHIP BASIS.)
The foregoing amendment to the Articles of Incorporation was duly adopted
on the 26th day of May, 1999 by the shareholders if a profit corporation,
or by the shareholders or members if a nonprofit corporation (check one of
the following)
[X] at a meeting, the necessary votes were cast in favor of the amendment.
[ ] by written consent of the shareholders or members having not less than
the minimum number of votes required by statute in accordance with
Section 407(1) and (2) of the Act if a nonprofit corporation, or
Section 407(1) of the Act if a profit corporation. Written notice to
shareholders or members who have not consented in writing has been
given. (Note: Written consent by less than all of the shareholders or
members is permitted only if such provision appears in the Articles
of Incorporation.)
[ ] by written consent of all the shareholders or members entitled to vote
in accordance with section 407(3) of the Act if a nonprofit corporation,
or Section 407(2) of the Act if a profit corporation.
[ ] by the board of a profit corporation pursuant to section 611(2).
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
Profit Corporations Nonprofit Corporations
Signed this 26th day of May, 1999 Signed this ____day of _____, 19_____
By /s/ Michael Kargula By
------------------------------- -----------------------------------
(Signature of an authorized officer or agent) (Signature of President, Vice President,
Chairperson or Vice-Chairperson)
Michael R. Kargula, Executive Vice President
----------------------------------------------- -------------------------------------------------
(Type or Print Name) (Type or Print Name) (Type or Print Title)
- ---------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 30
Annex I
ARTICLE VIII
A. Number of Directors
Except as otherwise fixed by or pursuant to the provisions of any
class or series of preferred stock to elect additional directors under specified
circumstances, 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 fixed by the entire Board of Directors of the Corporation shall be
no less than five and the maximum number of directors fixed by the entire Board
of Directors of Corporation shall be no more than eight.
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.
<PAGE> 31
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.
<PAGE> 1
Exhibit 10.2
March 15, 1999
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding, dated March 15, 1999 between David Taylor
("Consultant"), and Primark Corporation, a Michigan corporation ("Primark"), is
intended to set forth an interim agreement among the parties in respect of the
consultancy arrangement contemplated by the parties and the related financial
and other arrangements among the parties respect thereto. Although this
Memorandum of Understanding is intended as an interim agreement among the
parties, the terms described below are intended to form the basis of a more
definitive agreement or agreements among the parties hereto, incorporating the
terms hereof, and each party hereto agrees to proceed in good faith to complete
such definitive agreement or agreements.
The following sets forth a summary of the agreements in principle among the
parties:
A. Consultancy services - general. The parties acknowledge that Consultant
will provide an average of two days per week (exclusive of time provided as a
member of the Primark board of directors), or other such amount as may be agreed
by the parties from time to time, effective as of 1 April 1999. Consultant will
be a Strategic Consultant, with a global brief, and will report to the Chairman
and CEO of Primark. Primark acknowledges that Consultant has advised Primark
that he will be a resident of Monaco as of 1 April 1999.
B. Personal Services Company. The parties agree that Consultant will
provide his services through a professional services company.
C. Compensation. Except as otherwise provided in Section C below, and
assuming approximately 100 days of consulting services per year, Primark will
pay Consultant (pound)100,000 annually without additional benefits. The parties
agree that payment is to be made quarterly in arrears by Primark promptly after
receipt of an invoice by Consultant's services company. Invoices for services
will be directed to Primark's executive offices in the United States.
D. Benefits. Primark will pay Consultant an annual first-year bonus of
(pound)50,000, of which (pound)25,000 is guaranteed to Consultant, the remainder
of which will be performance related, based upon specific goals which remain to
be determined by the parties. This performance related bonus will be paid as
soon as practical after March 31, 2000. Thereafter, Primark will pay Consultant
a (pound)25,000 performance-based bonus as soon as practical after each
subsequent anniversary date. In addition, Primark will grant Consultant an
option to purchase 10,000 shares of Primark stock at fair market value, vesting
over a three-year period. Such option would be in addition to any options
granted in Consultant's capacity as a board member of Primark.
<PAGE> 2
E. Board of Directors. The parties acknowledge that any arrangement whereby
Consultant becomes a member of Primark's board of directors is separate and
independent from the proposed consultancy. Primark acknowledges that the
consultancy shall not affect Consultant's standard remuneration and benefits as
a director.
F. Expenses. Consultant agrees to provide his own office and services,
including telephones, faxes, Internet, postage, etc., together with regular
travel in continental Europe; provided, however, that Consultant reserves the
right to invoice for extraordinary expenses on a reasonable basis upon agreement
of the parties. In return Primark agrees to pay a flat rate of (pound)25,000 per
annum paid quarterly in arrears rather than having an out-of-pocket expense
reimbursement policy. The parties acknowledge that at the request of Primark,
Consultant will travel business class at Primark's expense outside Europe when
on Primark business.
G. Term. The parties agree that the initial term of the consultancy
Agreement will be twelve months, and may continue on the same terms for an
additional twelve months or may be terminated by either party giving three
months written notice.
H. Indemnification. The parties agree that the definitive agreement shall
include a provision whereby Primark indemnifies Consultant for claims that arise
in connection with services provided by Consultant for the benefit of Primark,
except under circumstances where it is adjudicated that Consultant acted in a
willfully reckless or grossly negligent manner.
I. Independent Contractor. Consultant's relationship to Primark will be
that of an independent contractor. Consultant is not an agent, employee or legal
representative of Primark for any purpose and has no authority to act for, bind
or commit Primark.
The parties have signed below as of the date first written above to
acknowledge their binding interim agreement set forth above and to evidence
their intent to move forward in good faith to complete more detailed definitive
agreements relating to the same.
/s/ David Taylor
- ----------------------------------
David Taylor
Primark Corporation
By: /s/ Joseph E. Kasputys
Name: Joseph E. Kasputys
Title: Chairman, President & CEO
<PAGE> 1
Exhibit 10.3
[PRIMARK LETTERHEAD]
July 8, 1999
Mr. John C. Holt
313 Ocean Avenue
Marblehead, MA 01945
Dear Jack:
I am pleased to extend your employment with Primark Corporation to July 1, 2002.
During this period, you shall perform such duties and assignments that may be
requested by the undersigned; provided, however, you shall not be obligated to
be present at Primark's offices during the regular business day. The
compensation for this position is $30,000 annually (minus applicable
withholdings). It is my understanding that you expressly waive coverage and
participation in Primark's employee benefits including, but not limited to,
pension, group life insurance, medical coverage, disability, dental and
education benefits.
Your employment may be terminated prior to July 1, 2002 by either you or Primark
Corporation, with or without cause, upon six (6) months prior notice.
If the terms and conditions of this letter are satisfactory to you, please sign
one copy and return it to me. Jack, I am very much looking forward to working
with you for at least the next three years.
Sincerely,
/s/ Joseph E. Kasputys
Joseph E. Kasputys
ACCEPTED AND AGREED
/s/ John C. Holt
- --------------------
John C. Holt
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<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 21,873
<SECURITIES> 0
<RECEIVABLES> 112,886<F1>
<ALLOWANCES> 4,679
<INVENTORY> 0
<CURRENT-ASSETS> 155,521
<PP&E> 118,934
<DEPRECIATION> 66,254
<TOTAL-ASSETS> 905,201
<CURRENT-LIABILITIES> 309,506
<BONDS> 151,143
0
0
<COMMON> 409
<OTHER-SE> 417,193<F2>
<TOTAL-LIABILITY-AND-EQUITY> 905,201
<SALES> 0
<TOTAL-REVENUES> 239,514
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<TOTAL-COSTS> 217,770
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<INTEREST-EXPENSE> 9,003
<INCOME-PRETAX> 13,423
<INCOME-TAX> 6,544
<INCOME-CONTINUING> 6,879
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