1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- - --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
PRIMARK CORPORATION
(Name of Registrant as Specified In Its Charter)
PRIMARK CORPORATION
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- - --------------------------------------------------------------------------------
2
[PRIMARK LOGO]
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, MA 02154.1248
Tel 617.487.2102
Fax 617.890.6187
Joseph E. Kasputys
Chairman, President and
Chief Executive Officer
April 10, 1997
Dear Shareholder:
Your Board of Directors cordially invites you to attend the 1997 Annual Meeting
of Shareholders which will be held at 11:00 a.m. on Wednesday, May 28, 1997 at
the Burlington Marriott Hotel, 1 Mall Road, Burlington, Massachusetts. Details
regarding the business of the meeting are contained in the following Notice of
Annual Meeting of Shareholders and Proxy Statement.
I look forward with the other members of the Board of Directors to the
opportunity of greeting personally those shareholders who are able to attend the
meeting. However, regardless of whether you attend the meeting, it is important
that your shares be represented. Accordingly, we urge you to sign the enclosed
Proxy and return it to us promptly in the envelope provided.
Your continued support is very much appreciated.
Sincerely,
/s/ Joseph E. Kasputys
Joseph E. Kasputys
3
[PRIMARK LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1997
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Primark
Corporation ("Company") will be held at the Burlington Marriott Hotel, 1 Mall
Road, Burlington, Massachusetts on Wednesday, May 28, 1997 at 11:00 a.m. for the
following purposes:
(1) To elect a board of seven directors;
(2) To approve an amendment to the Articles of Incorporation of the Company
to increase the number of authorized shares of the Company's Common
Stock from 65,000,000 to 100,000,000 shares;
(3) To approve a new employment and related agreements with Mr. Joseph E.
Kasputys, the Chairman, President and Chief Executive Officer of the
Company and the Chairman of TASC, Inc.;
(4) To approve an amendment to the Primark Corporation 1992 Stock Option
Plan to limit the maximum number of shares subject to option that may
be granted in any calendar year to any participant under such plan;
(5) To approve an increase in the number of shares of Company Common Stock
reserved for issuance under the Primark Corporation 1992 Employee Stock
Purchase Plan from 1,000,000 shares to 3,000,000 shares;
(6) To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the year ending December 31, 1997; and
(7) To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 31, 1997 will be
entitled to vote at the meeting.
You are cordially invited to attend the Annual Meeting in person.
Regardless of whether you expect to attend the meeting in person, the Board of
Directors urges you to sign, date and promptly return the enclosed Proxy in the
accompanying envelope.
By Order of the Board of Directors,
/s/ Michael R. Kargula
Michael R. Kargula
Senior Vice President,
General Counsel and Secretary
April 10, 1997
- - -------------------------------------------------------------------------------
IMPORTANT
Even if you expect to attend the Annual Meeting, regardless of the size of your
shareholdings, it is requested that you promptly date and sign the enclosed form
of Proxy and return it in the envelope provided. If you are able to attend the
meeting and wish to vote your shares personally, you may do so at any time
before your Proxy is voted.
- - -------------------------------------------------------------------------------
4
[PRIMARK LOGO]
PROXY STATEMENT
FOR THE
1997 ANNUAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors ("Board" or "Primark Board") of Primark
Corporation (hereinafter referred to as "Primark" or the "Company"), 1000 Winter
Street, Suite 4300, Waltham, Massachusetts 02154, to be voted at the 1997 Annual
Meeting of Shareholders of the Company to be held at the Burlington Marriott
Hotel, 1 Mall Road, Burlington, Massachusetts on Wednesday, May 28, 1997 at
11:00 a.m., and at any adjournments thereof. The Proxy Statement and form of
Proxy are first being sent to shareholders on or about April 10, 1997.
As of March 31, 1997, the record date for determination of shareholders
entitled to notice of and to vote at the meeting, there were 27,171,251 shares
of Common Stock of the Company ("Shares" or "Common Stock") outstanding. Each
outstanding Share is entitled to one vote on all matters which may come before
the Annual Meeting. All Shares which are represented by signed Proxies received
at or prior to the meeting from shareholders of record will be voted at the
Annual Meeting in accordance with the instructions indicated on such Proxies.
Executed but unmarked Proxies will be voted as recommended by the Board. A Proxy
may be revoked by the person executing it at any time before the authority
thereby granted is exercised by notifying the Secretary of the Company in
writing, or by delivering to the Secretary of the Company a Proxy bearing a
later date, or by attending the Annual Meeting and voting in person.
In accordance with Michigan corporate law, the Company's Articles of
Incorporation and by-laws, each nominee for director will be elected upon
receiving a plurality of the votes cast at the meeting, assuming that a quorum
is present. For purposes of determining the number of votes cast with respect to
the election of directors and many other voting matters, only those cast "for"
or "against" are included. Proxies containing abstentions, withheld votes, or
broker non-votes will be counted as present for purposes of determining a
quorum, but will not be counted as votes cast at the meeting. Under New York
Stock Exchange ("NYSE") rules shares held in street name may not be voted, as to
certain "non-routine" matters, by the brokers in whose names they are held,
absent instructions from the beneficial owner of shares. Actions other than the
election of directors are ordinarily authorized by a majority of the votes cast.
Certain matters, however, require either a majority of the outstanding shares
entitled to vote, or a majority of the shares present and entitled to vote. As
to any of such matters, an abstention or a broker non-vote has the same effect
as a vote against the proposal.
1
5
OTHER MATTERS
Except as set forth herein, the Board has no knowledge of any other matters
to come before the meeting. If, however, any other matters properly come before
the meeting upon which a vote may properly be taken, it is the intention of the
persons named in the Proxy to vote the Proxy in accordance with their judgment
on such matters.
ELECTION OF DIRECTORS (ITEM 1)
Unless otherwise instructed on the Proxy, the persons named therein intend
to vote the Proxy for the election of the following named persons as directors
to hold office until the next Annual Meeting of Shareholders and until their
successors have been duly elected and qualified. The Board believes that, if
elected, each nominee will be able and willing to serve. However, if any nominee
should be unable or unwilling to serve as a director, the Board may select a
substitute nominee and in that event the Proxy will be voted for the person so
selected.
Information as of January 31, 1997 concerning the Board of Directors'
nominees for election as directors is set forth below.
KEVIN J. BRADLEY, 68, served as the Chairman of Corporate Investment
Associates, Inc., an investment management firm from November 1990 to September
1995. From November 1985 until October 1990, he was a Limited Partner of Weiss
Asset Management Limited Partnership, an investment management firm. From 1977
through November 1985, he served as Chairman and Chief Executive Officer of the
Travelers Investment Management Company, a subsidiary of The Travelers
Corporation (a financial services company). Mr. Bradley has been a director of
the Company since 1981. He is Chairman of the Compensation Committee and a
member of the Audit Committee of the Board.
JOHN C. HOLT, 56, has served as the President and Chief Executive Officer
of TASC, Inc. ("TASC"), an applied information technology company and a
wholly-owned subsidiary of the Company, and Executive Vice President of the
Company since April 1994. From 1982 until January 1994, Mr. Holt held the
position of Executive Vice President of The Dun & Bradstreet Corporation
("D&B"), an information services company, and served as a director of that
company from 1985 until 1994. In addition, Mr. Holt was the former Chairman,
President and Chief Executive Officer of the A. C. Nielsen Company, a marketing
information company and a former affiliate of D&B. Mr. Holt has been a director
of the Company since 1985. He is a member of the Finance Committee of the Board.
JOSEPH E. KASPUTYS, 60, has served as Chairman, President and Chief
Executive Officer of the Company since May 1988. From June 1987 until May 1988,
he served as President and Chief Operating Officer of the Company. Prior to
joining the Company in June 1987, he was Executive Vice President of
McGraw-Hill, Inc., a publishing and information services company. Prior to
joining McGraw-Hill in 1985, he was President and Chief Executive Officer of
Data Resources, Inc., an economic forecasting and consulting firm. Mr. Kasputys
has been a director of the Company since 1987. He is a member of the Nominating
Committee of the Board. Mr. Kasputys is also a director of Lifeline Systems,
Inc., a company that develops and manufactures personal response products and
provides related monitoring and other services.
STEVEN LAZARUS, 65, is Managing Director of the ARCH Venture Partners L.P.,
a venture partnership investing in companies in the early stage of development,
and has held that position since July 1994. From 1986 to 1994, he was President
and Chief Executive Officer of Argonne
2
6
National Laboratory/The University of Chicago Development Corporation ("ARCH"),
which transforms scientific discoveries into viable high technology products and
services. Prior to joining ARCH in October 1986, he was a Group Vice President
at Baxter Travenol Laboratories, Inc., a manufacturer and distributor of
hospital supplies and related medical equipment. Mr. Lazarus has been a director
of the Company since 1987. He is Chairman of the Nominating Committee and a
member of the Audit and Compensation Committees of the Board. Mr. Lazarus is
also a director of Amgen Inc., a biotechnology company and Illinois
Superconductor Corporation, an advanced materials company serving the
telecommunications industry.
PATRICIA MCGINNIS, 49, is the President and Chief Executive Officer of the
Council for Excellence in Government, a national membership organization of
private sector leaders who have served as senior officials in government. From
1982 until May 1994, she was a principal at the public affairs consulting firm
of Winner/Wagner & Francis (formerly the FMR Group). Previously, she served in
various senior policy positions in the federal government including the Office
of the Vice President, the Department of Health and Human Services, the
Department of Commerce, the Office of Management and Budget and the Senate
Budget Committee. Ms. McGinnis has been a director of the Company since 1995.
She is a member of the Compensation Committee of the Board.
JONATHAN NEWCOMB, 50, is President and Chief Executive Officer of Simon &
Schuster, an educational, computer and English-language book publisher and the
publishing operation of Viacom Inc. From January 1991 until May 1994, he served
as President and Chief Operating Officer of Simon & Schuster. From November 1989
until December 1990, Mr. Newcomb was Executive Vice President, Operations of
that company. He was elected to the Board on July 23, 1996. Mr. Newcomb is
Chairman of the Finance Committee of the Board and a member of the Nominating
Committee. Mr. Newcomb is also a director of Marine Midland Bank.
CONSTANCE K. WEAVER, 44, is Financial Vice President-Investor Relations of
AT&T Corp., a communications service company. From June 1995 to April 1996, she
held the position of Senior Director - Investor Relations of Microsoft
Corporation, a computer software company. From June 1993 through May 1995, she
held the position of Vice President, Investor Relations of MCI Communications
Corporation, a telecommunications company. From June 1991 until July 1993 and
from January 1990 until May 1991, she held the position of Director, Investor
Relations and Director, Corporate Communications, respectively, of that company.
From 1988 until January 1990, she was the Executive Director, Business Week
Executive Programs and Services Department for McGraw-Hill, Inc. Ms. Weaver has
been a director of the Company since 1994. She is Chairwoman of the Audit
Committee and a member of the Finance Committee of the Board.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Members of the Board held an aggregate of seven regular meetings during
1996 and also served on standing committees of the Board. During 1996, no
director attended less than 75 percent of the (i) total number of meetings held
by the Board, and (ii) total number of meetings held by all committees of the
Board on which the director served. In addition to the Finance Committee, the
Company has the following standing committees of the Board:
Audit Committee -- The Audit Committee, which held two meetings during
1996, recommends to the Board the selection of independent auditors; reviews the
scope of the independent audit and auditors' fees; reviews the annual financial
statements and audit results, including auditors' recommendations; reviews the
Company's internal control system; reviews the scope of the internal
3
7
audit procedures and results of those procedures; and reviews the Company's
policies relating to business conduct.
Compensation Committee -- The Compensation Committee held two meetings
during 1996. The Compensation Committee establishes the salaries and other
direct compensation for all officers of the Company, annually reviews and makes
recommendations to the Board with respect to the compensation to be paid to
outside directors of the Company, and administers certain incentive plans of the
Company.
Nominating Committee -- The Nominating Committee, which held one meeting
during 1996, is authorized to make recommendations to the Board concerning
nominees for directors to be elected at the Company's Annual Meeting of
Shareholders, nominees to fill vacancies on the Board, and policies relating to
tenure and retirement of the Company's directors and successors to the Company's
two highest ranking offices. The Nominating Committee accepts recommendations
from shareholders of individuals to be considered as nominees for directors. In
accordance with the Company's Articles of Incorporation, nominations for
election to the Board of Directors at a meeting of the shareholders may be made
by the Board of Directors, on behalf of the Board of Directors by the Nominating
Committee, or by any shareholder of the Company entitled to vote for the
election of directors. 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,
and received by the Secretary of the Company at least 60 days but not more than
90 days prior to the anniversary date of the immediately preceding Annual
Meeting. A shareholder's notice of nomination must contain certain information
set forth in the Company's Articles of Incorporation concerning each person the
shareholder proposes to nominate for election and the nominating shareholder.
Shareholder nominations for election as directors at the 1997 Annual Meeting
were required to be received by March 24, 1997 in order to be considered timely.
No such nominations were received by that date.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of Shares beneficially owned as
of March 3, 1997 by each director, the chief executive officer and the four
other most highly compensated executive officers, and by all directors and
executive officers of the Company as a group:
NUMBER PERCENT
NAME OF SHARES OWNERSHIP
- - ------------------------------------------------------------------------ --------- ---------
Kevin J. Bradley(1)..................................................... 75,204 .277%
Stephen H. Curran(2)(3)................................................. 306,370 1.120%
Ira Herenstein(2)(3).................................................... 66,474 .245%
John C. Holt(2)(3)...................................................... 344,612 1.256%
Michael R. Kargula(2)(3)................................................ 422,584 1.541%
Joseph E. Kasputys(2)(3)................................................ 1,912,632 6.706%
Steven Lazarus(1)....................................................... 99,840 .367%
Patricia McGinnis(1).................................................... 22,500 .083%
Jonathan Newcomb(1)..................................................... 15,000 .055%
Constance K. Weaver(1).................................................. 30,000 .111%
All directors and executive officers as a group (12 persons)(4)(5)...... 3,579,960 11.942%
- - ---------------
(1) Includes for Messrs. Bradley, Lazarus and Newcomb 74,904, 87,372 and 15,000
Shares, respectively, and for Mdmes. McGinnis and Weaver 22,500 and 30,000
Shares, respectively, which such directors have the right to acquire
pursuant to the exercise of the options held by them under the Primark
Corporation Stock Option Plan for Non-Employee Directors ("Stock Option Plan
for Non-Employee Directors"). Directors who are employees of the Company, or
a subsidiary thereof, are not eligible to receive option grants under this
plan.
(Footnotes continued on next page)
4
8
(Footnotes continued from previous page)
(2) Includes 28,262 Shares for each of Messrs. Curran, Kargula and Kasputys and
12,484 Shares for Mr. Herenstein allocated to the participant's account
under the Primark Corporation Savings and Stock Ownership Plan (formerly the
Primark Corporation Employee Stock Ownership Plan) ("Savings Plan").
Includes 142 Shares held by Mr. Holt under the TASC, Inc. Profit Sharing and
Stock Ownership Plan ("PSSOP").
(3) Includes 1,432,390, 343,470, 259,240, 340,640 and 53,990 Shares subject to
stock options exercisable within 60 days of March 3, 1997 held by Messrs.
Kasputys, Holt, Curran, Kargula and Herenstein, respectively, which options
were granted under various plans of the Company.
(4) Includes 2,656,240 Shares subject to stock options exercisable within 60
days of March 3, 1997 held by executive officers under various plans of the
Company.
(5) Includes 153,936 Shares for all executive officers as a group which are held
under the Savings Plan and PSSOP. As to Shares held in the Savings Plan, the
executive officers possess voting power with respect to all such Shares but
dispositive power only as to 20 percent of such Shares. Non-employee
directors of the Company are not eligible to participate in these plans.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Based on information filed with the Securities and Exchange Commission
("SEC") on Schedules 13D and 13G, the following information as of the dates
indicated is set forth below with respect to beneficial owners of more than five
percent of the Shares (see also "Security Ownership of Management" on page 4
hereof):
NUMBER PERCENT OF CLASS
NAME AND ADDRESS OF SHARES AS OF MARCH 3, 1997
- - --------------------------------------------- -------------------------- -------------------
Dawson-Samberg Capital Management, Inc....... 1,436,100(1) 5.30%
354 Pequot Avenue (as of December 31, 1996)
Southport, Connecticut 06490
The Capital Group Companies, Inc............. 1,738,900(2) 6.42%
Capital Research and Management (as of February 12, 1997)
Company
333 South Hope Street
Los Angeles, California 90071
- - ---------------
(1) Sole voting and sole dispositive power is claimed with respect to 1,436,100
Shares.
(2) The Capital Group Companies, Inc. is the parent holding company of a group
of investment management companies that hold investment power and, in some
cases, voting power over the securities reported. The Capital Group
Companies, Inc. does not have investment power or voting power over any of
the securities reported above; however, The Capital Group Companies, Inc.
may be deemed to beneficially own such securities by virtue of the rules and
regulations promulgated by the SEC.
5
9
EXECUTIVE COMPENSATION
The following table ("Summary Compensation Table") sets forth the
compensation paid or awarded for performance during the last three completed
fiscal years by the Company or a subsidiary to the Company's chief executive
officer and the other four most highly compensated executive officers of the
Company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------------------- ---------- PAYOUTS
OTHER SECURITIES -------
ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSA- OPTIONS PAYOUTS COMPENSA-
PRINCIPAL POSITION YEAR ($) ($) TION($) (#) ($) TION($)
- - ---------------------------------------- ----- ------- ------- --------- ---------- ------- ----------
Joseph E. Kasputys...................... 1996 601,184 426,948 58,258(1) 40,000 0 33,419(2)
Chairman, President and 1995 584,376 391,804 56,561(1) 101,000(3) 0 115,377
Chief Executive Officer 1994 568,840 257,035 50,996(1) 40,000 0 52,096
of the Company, and Chairman of TASC
John C. Holt(4)......................... 1996 417,510 261,584 (5) 16,000 0 33,515(6)
President and Chief Executive 1995 407,535 237,169 (5) 57,000(3) 516,316(7) 30,000
Officer of TASC, and Executive 1994 298,415 275,000 227,120(8) 500,000(9) 0 0
Vice President of the Company
Stephen H. Curran....................... 1996 221,846 106,382 (5) 11,000 0 32,466(2)
Senior Vice President and 1995 204,751 87,531 (5) 14,000 0 114,424
Chief Financial Officer of 1994 194,863 53,862 (5) 15,000 0 51,143
the Company
Ira Herenstein(10)...................... 1996 325,250 123,312 (5) 8,000 274,120(11) 33,435(2)
Senior Vice President of 1995 -- -- -- -- -- --
Marketing of the Company 1994 -- -- -- -- -- --
Michael R. Kargula...................... 1996 240,285 128,191 (5) 13,000 0 32,346(2)
Senior Vice President, 1995 234,125 117,791 (5) 37,000(3) 0 114,304
General Counsel and Secretary 1994 225,771 77,110 (5) 20,000 0 51,023
of the Company, and Vice
President and General Counsel
of TASC
- - ---------------
(1) The amount includes $29,260, $35,395 and $27,539 for fiscal years ended
December 31, 1996, December 31, 1995 and December 31, 1994 for imputed
interest relating to a certain loan by the Company to Mr. Kasputys for
payment of income taxes in connection with the grant of stock to Mr.
Kasputys under the Primark Corporation 1988 Incentive Plan ("Incentive
Plan"). Such loan is interest-free; evidenced by promissory notes; secured
by 100,000 Shares; and, subject to annual repayments, is fully payable on
December 31, 1998. The largest aggregate amount of indebtedness outstanding
thereunder in 1996 was $541,791, of which $476,451 was outstanding on March
31, 1997. See "Approval of the Kasputys Employment and Related Agreements"
on pages 18 to 25 for a discussion of the new employment arrangements
between the Company and Mr. Kasputys.
(Footnotes continued on next page)
6
10
(Footnotes continued from previous page)
(2) Includes $30,542 representing the value of 1,234 Shares of Company Common
Stock on December 31, 1996 which Shares have been allocated to Messrs.
Kasputys', Curran's, Kargula's and Herenstein's accounts under the Savings
Plan (the Company's only qualified retirement plan). Includes $2,877,
$1,924, $1,804 and $2,893 for Messrs. Kasputys, Curran, Kargula and
Herenstein, respectively, representing the premium amounts paid by the
Company for executive life insurance on behalf of such executive officers.
(3) Includes 51,000, 32,000 and 18,000 Shares subject to option for Messrs.
Kasputys, Holt and Kargula, respectively, which options vest in three
annual installments with the first installment having vested during 1996.
The options were granted in recognition of the executive officers'
agreements to accept a 50 percent reduction in the amount of their
respective merit increases in fiscal years 1995, 1996 and 1997.
(4) Mr. Holt was employed by TASC for a partial year during fiscal year 1994.
(5) While the executive officers received other compensation in the form of
perquisites, such perquisites do not exceed the lesser of $50,000 or ten
percent of each executive officer's total annual salary and bonus for 1996
as reported for such executive officer herein.
(6) Includes $18,214 and $11,786 allocated to Mr. Holt's account under the
PSSOP and the TASC Supplemental Employee Retirement Plan, respectively, for
the fiscal year ended December 31, 1996. Also includes $3,515 representing
the value of 142 Shares of Company Common Stock on December 31, 1996
allocated to Mr. Holt's account on January 1, 1997 for the fiscal year
ended December 31, 1996 under the PSSOP.
(7) Pursuant to the terms of the Employment Agreement dated February 28, 1994
(the "Holt Employment Agreement"), Mr. Holt was entitled to a long-term
cash payment if TASC achieved a certain specified aggregate growth in its
"economic value-added" ("EVA"). The Holt Employment Agreement was amended
in the summer of 1995 (the "1995 Amendment"). On February 29, 1996, the
1995 Amendment and the EVA provisions in the Holt Employment Agreement were
canceled. Since $621,490 of future value (owed after 1998) had been earned
by Mr. Holt for 1995 performance under the 1995 Amendment, Mr. Holt was
paid the present value of that amount. See "Long-Term Incentive
Plan -- Award in Last Fiscal Year."
(8) Includes a bonus of $200,000 which was provided to Mr. Holt to help offset
certain expenses associated with the Holt Employment Agreement.
(9) The stock options were granted to Mr. Holt in order to induce him to
execute the Holt Employment Agreement. The stock options vest in five equal
installments, with the first installment having vested on February 27, 1995
and every year thereafter, except the last installment vests on December
31, 1998. In the event of a change of control of the Company or the
termination of employment with TASC without "cause" (as defined in the Holt
Employment Agreement), all unvested stock options become immediately
exercisable.
(10) Mr. Herenstein was not an officer of the Company during fiscal years 1995
and 1994.
(11) Represents the amount paid to Mr. Herenstein pursuant to the terms of an
employment agreement between the Company and Mr. Herenstein dated December
3, 1996 under which Mr. Herenstein is deemed to have exercised as of
September 30, 1996 all value appreciation rights that were granted to him
under the Primark Information Services UK Limited And Affiliates Long-Term
Incentive Plan while he was an executive officer of a Primark subsidiary.
7
11
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is information concerning the grant of stock options to
each of the persons named on the Summary Compensation Table during 1996.
INDIVIDUAL GRANTS
------------------------------------------------------------- GRANT DATE
NUMBER OF % OF TOTAL VALUE
SECURITIES OPTIONS -----------
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE VALUE($)(1)
- - ------------------------ ----------- -------------- ----------- ------------------ -----------
Joseph E. Kasputys...... 40,000(2) 9.53% $ 39.75 February 26, 2006 995,200
John C. Holt............ 16,000(3) 3.81% $ 39.75 February 26, 2006 374,720
Stephen H. Curran....... 11,000(2) 2.62% $ 39.75 February 26, 2006 273,680
Ira Herenstein.......... 8,000(3) 1.91% $ 39.75 February 26, 2006 187,360
Michael R. Kargula...... 13,000(2) 3.10% $ 39.75 February 26, 2006 323,440
- - ---------------
(1) As suggested by the SEC's rules on executive compensation disclosure, the
Company used the Black-Scholes model of option valuation to determine grant
date present value. The following assumptions were made for purposes of
calculating the Grant Date Present Value: an option term of ten years,
volatility at .3825, dividend yield at 0%, interest rate at 6.70% and
vesting discount at .9412. The Company does not advocate or necessarily
agree that the Black-Scholes model can properly determine the value of an
option.
(2) The stock options have a ten-year term and were exercisable as of February
27, 1996.
(3) The stock options have a ten-year term and vest in three equal annual
installments with the first installment vesting on February 27, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Set forth below is information concerning the value of unexercised
in-the-money stock options held on December 31, 1996 by each person named in the
Summary Compensation Table.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FY-END(#) AT FY-END($)(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ----------------------- ----------- -------------- ----------- ------------- ----------- -------------
Joseph E. Kasputys..... 0 0 1,415,050 34,170 25,081,409 367,328
John C. Holt........... 0 0 218,810 354,190 2,452,208 3,785,543
Stephen H. Curran...... 0 0 246,240 0 4,297,990 0
Ira Herenstein......... 0 0 51,350 76,650 421,575 455,300
Michael R. Kargula..... 0 0 319,520 12,060 5,543,811 129,645
- - ---------------
(1) The "Value Realized" is equal to the difference between the option exercise
price and the fair market value of the Company's Common Stock on the NYSE on
the date of exercise.
(2) The value is based upon the $24.75 closing price of a share of the Company's
Common Stock on the NYSE at December 31, 1996, minus the exercise price.
8
12
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
Set forth below is information concerning the cash payment to which the
named executive would be entitled to receive after 1998 in the event a certain
stated cumulative amount of "economic value-added" is achieved by TASC over a
three-year period.
PERFORMANCE OR OTHER PERIOD
NAME UNTIL MATURATION OR PAYOUT MAXIMUM
- - -------------------------------------------------- --------------------------- ----------
John C. Holt(1)................................... 1996-1998 $4,379,000
- - ---------------
(1) Under the Long-Term Incentive Agreement, Mr. Holt is entitled to a cash
payment if TASC achieves a certain cumulative amount of EVA, as such term is
defined in the Long-Term Incentive Agreement from January 1, 1996 through
December 31, 1998. Subject to certain forfeiture provisions, the maximum
cash payment under the Long-Term Incentive Agreement will be $4,379,000 if
the aggregate amount of EVA grows, on a cumulative basis, at an annual
compound rate of 32.57 percent or more over the three-year period ending
December 31, 1998. If the EVA grows, on a cumulative basis, at an annual
compound rate of more than ten percent but less than 32.57 percent, the EVA
bonus payable would be interpolated between zero and the $4,379,000 maximum
amount. No payment will be due if the actual EVA grows at a ten percent or
less annual rate for the entire three-year performance period contained in
the Long-Term Incentive Agreement. Mr. Holt will forfeit any amounts that he
may have earned under this Long-Term Incentive Agreement if (i) he
terminates his employment with TASC prior to December 31, 1998 or his
employment with TASC is terminated for "cause" as that term is defined in
the Holt Employment Agreement; or (ii) TASC does not achieve an annual
compound growth rate of EVA, on a cumulative basis, of greater than ten
percent for the three full years ended December 31, 1998. If Mr. Holt's
employment with TASC is terminated without cause in 1997 or 1998, TASC is
obligated to make a cash payment (in addition to any other severance amount
payable under the Holt Employment Agreement) based upon the EVA which has
been generated in 1996 through the last full calendar year in which Mr. Holt
is employed by TASC; provided, however, that the annual compound growth rate
of such EVA is in excess of ten percent.
DIRECTORS' COMPENSATION
During 1996, each director who was not an employee of the Company or of any
of its subsidiaries received as compensation for the director's services an
annual retainer of $15,000. Effective January 1, 1997, such retainer was
increased to $20,000. The fee for each Board meeting and committee meeting
attended by a non-employee director is $1,500 and $750, respectively; provided,
however, that if a committee meeting is held on a date when no Board meeting is
held, each non-employee director who is a member of the committee is entitled to
receive $1,500 for each such meeting attended. In addition, non-employee
directors of the Company automatically receive on an annual basis a
non-qualified stock option to acquire 7,500 Shares under the Stock Option Plan
for Non-Employee Directors. The directors who serve as officers of the Company
or of a subsidiary receive no compensation for their services as a director
other than their regular salaries and benefits.
9
13
The Company maintains the Primark Corporation Supplemental Death Benefit
and Retirement Income Plan, which covers certain key officers and non-employee
directors of the Company. Under the Primark Corporation Supplemental Death
Benefit and Retirement Income Plan, in the event of the death of a non-employee
director prior to his or her retirement from the Board, the director's surviving
spouse is entitled to a lump sum payment of $150,000 payable at the time of the
director's death. The Primark Corporation Supplemental Death Benefit and
Retirement Income Plan also provides that a non-employee director can elect to
receive either (i) a supplemental retirement benefit of $15,000 annually
(payable in monthly installments) for each of the ten years following such
director's retirement at age 65 or older, or (ii) a post-retirement death
benefit of $150,000 payable to such director's surviving spouse upon the death
of the director if such death occurs after the director's retirement on or after
attaining age 65. No benefits are to be payable under the plan unless the
director has been a member of the Company's Board of Directors for at least five
years. Additionally, a non-employee director leaving the Board after a change of
control would be entitled to receive a cash payment of $150,000. A non-employee
director receiving this payment would not be entitled to receive any other
payments under the Primark Corporation Supplemental Death Benefit and Retirement
Income Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors ("Committee") is
composed entirely of non-employee directors. The three directors comprising the
Committee are Mr. Kevin J. Bradley, Chairman, Mr. Steven Lazarus and Ms.
Patricia McGinnis.
Mr. Lazarus, a director of the Company and a member of the Committee, is
the Chief Executive Officer of HealthQual Systems Corporation ("HealthQual").
HealthQual is controlled by ARCH and one of its affiliates. On May 2, 1991, the
Company entered into a Secured Convertible Note Purchase Agreement with
HealthQual pursuant to which the Company made a loan to HealthQual in the
aggregate principal amount of $250,000, bearing interest at the rate of ten
percent per annum. Such loan was due and payable on May 1, 1996 and has not been
repaid. Pursuant to a Plan of Liquidation and Dissolution, HealthQual was
dissolved on February 1, 1996. The Company expects to receive only a nominal
payment on its loan in connection with the liquidation of HealthQual. Mr.
Lazarus has disqualified himself from taking part in any action with respect to
HealthQual by the Board of Directors of the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee ("Committee") establishes the salaries and other
direct compensation payable to the executive officers of the Company and has
oversight responsibility for administering certain incentive plans applicable to
such employees. In this connection, the Committee regularly reviews the
Company's executive compensation programs and policies; establishes the
Company's strategic compensation objectives; and monitors and evaluates the
design and effectiveness of the Company's executive compensation programs. The
Committee believes that executive compensation should not be based strictly on
mechanical formulas, statistical data or the like, since the rigid application
of such quantitative performance measures would eliminate important qualitative
factors critical to long-term strategic performance. Instead, it is the
Committee's view that the discretion to apply business judgments is critical to
executive compensation programs that relate compensation to performance.
Accordingly, no assigned weight is given to the factors reviewed by the
Committee with regard to compensation adjustment for executive officers and the
chief executive officer of the Company. All members of the Committee are
non-employee directors of the Company. A
10
14
nationally-recognized, independent compensation consulting firm was retained by
the Company in 1996 to assist it in the development of a compensation package
for Mr. Joseph E. Kasputys. See "Approval of the Kasputys Employment and Related
Agreements on pages 18 to 25 for a discussion of the compensation package.
Through the assistance of such compensation consulting firm, competitive
salary levels comparable to other well-managed companies and a salary structure
reflecting internal equity among employees are set as the cornerstones of the
Company's compensation policies. In addition to the foregoing, the compensation
program for executive officers has been designed to:
- reward the achievement of strategic business initiatives and goals
- align a portion of compensation with the Company's overall corporate
performance
- attract and retain talented executives who are critical to the Company's
long-term growth and success
- align the interests of executive officers with the long-term interests
of shareholders
The Committee seeks to align total compensation for the Company's executive
officers with corporate performance, and for this reason a significant portion
of executive compensation is variable. The key elements of the Company's direct
compensation to executive officers consist of base salary, an annual incentive
and a long-term incentive as further discussed below.
Base Salary
Generally, base salaries of executive officers first entering the position
are above the average starting salaries for such officers at comparable
companies reflecting the high standards the Company sets in recruiting and
promoting officers. Adjustments are considered to account for individual
experience, internal equity and external market comparisons. Increases to base
salary are determined by a subjective analysis which takes into account Company
performance in the general sense, a perception of the executive's individual
performance during the annual evaluation period, future potential and
competitive compensation conditions. Moreover, current market data and
compensation trends for comparable companies are taken into account. With
respect to the measurement of an executive officer's individual performance,
consideration is given to such officer's scope of responsibility, his or her
demonstrated contribution and commitment to achieving the Company's strategic
objectives and direction, both individually and as a member of a management
team, the day-to-day effectiveness of each executive in managing the Company's
business and in providing leadership to the Company's and its subsidiaries'
personnel, and the executive's sustained performance over a period of time. For
fiscal year 1996, the Committee gave particular consideration to job
responsibilities, including the continued need for certain executive officers to
fulfill critical functions at subsidiaries by providing direct operational and
administrative support; management's individual efforts and contributions in
operating the consolidated Company as a global entity in a competitive worldwide
market; strategic decisions implemented by individual executive management in
addressing corporate needs and goals; and the need to retain the executive
officer's talent to manage and build the Company's various lines-of-businesses
in a rapidly changing marketplace.
11
15
The key performance measurements relied upon by the Committee in
determining the chief executive officer's compensation for 1996 was its
assessment of the chief executive officer's ability and dedication to enhancing
the long-term value of the Company by continuing to provide the leadership and
vision that he has provided throughout his tenure as chief executive officer. In
addition to the factors described above, the Committee also considered the
following in determining the chief executive officer's 1996 compensation: the
complexity, variation, integration and expansion of the lines-of-businesses of
the Company; the establishment of a global identity for the consolidated
Company; the development of an integrated product line linking the Company's
subsidiaries throughout the United States and worldwide; the extent to which
strategic business plan goals were met; his contribution in achieving long-term
financial and non-financial objectives; his responsiveness to a rapidly changing
marketplace; and the level of compensation paid to chief executives with
comparable levels of experience, responsibilities and qualifications.
Annual Incentive
In general, the Company's annual incentive plan is comprised of a cash
bonus plan. Payment to executive officers under such plan in 1996 was measured
by the Company's achievement of certain pre-determined net income goals. The net
income goals for the Company and its subsidiaries are recommended to the
Committee by senior management on the basis of a corporate plan. Based on the
plan prepared by each subsidiary, the corporate plan is reviewed and approved by
the Board of Directors. The net income goals are subject to adjustment for
acquisitions, dispositions or other significant events not contemplated by the
corporate plan. If the net income goals are met, awards to executive officers
range from 22.5 percent to 60 percent of salary. The amount of bonus may
increase or decrease depending upon the extent by which actual results vary from
the net income goals, provided, however, that except for the chief executive
officer, no executive officer participating in the annual incentive plan may
receive bonus payments totaling more than 150% of the target bonus amount.
For Mr. Holt, the amount of bonus payable to him is based on the extent to
which objective performance goals have been achieved. Such performance goals are
based on selected subsidiary financial goals, individual goals and corporate
goals. The amount of bonus payable to Mr. Herenstein is dependent upon the
achievement of certain specified corporate net income goals as well as the
achievement of defined quantitative goals relating to sales and marketing
criteria and discretionary factors. If Messrs. Holt and Herenstein meet their
respective specified goals, each of them is eligible to receive an annual bonus
of 40 percent of his respective salary. The amount of bonus may increase or
decrease depending upon the extent by which actual results vary from the
specified goals. In no event, however, will Mr. Holt's bonus for any year be
less than $100,000 or greater than 100 percent of his salary nor will Mr.
Herenstein's bonus be less than $75,000 or greater than 80 percent of his
salary.
12
16
The bonus amount payable to the chief executive officer of the Company is
determined and calculated in the same manner as described above with respect to
the Company's cash bonus plan, except that in no event shall such bonus be
greater than $1,000,000 or be less than $120,000 per year ("Annual Guaranteed
Bonus").
Long-Term Incentive
The grant of stock options is the principal long-term program utilized by
the Company to attract and retain talented executive officers and to strengthen
the mutuality of interest between such officers and shareholders of the Company.
Generally, stock options are granted at 100 percent of the fair market value of
the Common Stock on the date of grant to ensure that executives are rewarded
only for appreciation in the price of such stock. While all executive officers
are eligible to receive stock options, participation in each annual grant, as
well as the size of the grant, is determined through a subjective analysis of
individual performance, corporate performance in the general sense, a perception
of an executive officer's future potential and competitive practices. In
accordance with the Committee's philosophy on executive compensation and with
consideration of the foregoing factors, options were granted to the chief
executive officer and other executive officers at levels consistent with past
practices.
Conclusion
The Committee believes that the Company's executive compensation programs
closely align each executive's total compensation with individual and corporate
performance and shareholder returns, while providing a balanced compensation mix
between base pay and incentives that is market and performance driven. With
respect to the provisions of the Internal Revenue Code of 1986, as amended
("Code") limiting the deductibility of executive compensation in excess of $1
million, the Company has not adopted a policy that requires the Committee to
qualify executive compensation for deductibility under the Code. The Committee
believes that the tax impact of any compensation arrangement should not be the
dispositive factor in such determination but may be considered in light of
overall compensation philosophy. Accordingly, although the Committee intends to
establish executive officer compensation programs that maximize tax deductions,
it will do so only when such actions are consistent with its compensation
philosophy and the best interests of the Company and its shareholders.
Consistent with the foregoing philosophy, the Committee does consider the net
cost to the Company in making compensation decisions.
Compensation Committee
Kevin J. Bradley, Chairman Steven Lazarus Patricia McGinnis
13
17
PERFORMANCE GRAPHS
Set forth below are two line graphs comparing the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return of the Standard & Poor's ("S&P") 500 Index and the S&P High Technology
Composite Index.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG PRIMARK CORPORATION, S&P 500 INDEX AND
S&P HIGH TECHNOLOGY COMPOSITE INDEX(1)
DURING THE TENURE OF THE COMPANY'S
CHIEF EXECUTIVE OFFICER(2)
AS OF DECEMBER 31 OF RESPECTIVE YEAR
[LINE CHART]
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PRIMARK CORPORATION 100 162 232 162 260 361 275 321 734 606
S&P 500 INDEX 100 117 154 146 194 209 230 233 321 395
S&P HIGH TECHNOLOGY COMPOSITE INDEX 100 102 100 102 117 122 150 174 251 356
<FN>
- - ---------------
(1) Assumes that the value of the investment in Primark Common Stock and each
index was $100 on December 31, 1987 and that all dividends were reinvested.
(2) Prior to May 1988, Primark was a public utility holding company since it
owned all of the issued and outstanding common stock of Michigan
Consolidated Gas Company ("MichCon"). In May 1988, the Company distributed
to its shareholders approximately 95 percent of the outstanding common stock
of MichCon and, thereafter, sold the remaining five percent of such shares.
For purposes of this Performance Graph and in accordance with the SEC's
interpretations, the spin off of MichCon by the Company has been treated as
a special dividend and is reflected in the Performance Graph in accordance
with the rules adopted by S&P for special dividends, with the value of such
dividends assumed to be reinvested in the Company's Common Stock.
14
18
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG PRIMARK CORPORATION, S&P 500 INDEX AND
S&P HIGH TECHNOLOGY COMPOSITE INDEX(1)
AS OF DECEMBER 31 OF RESPECTIVE YEAR
[LINE CHART]
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
PRIMARK CORPORATION 100 139 106 124 282 233
S&P 500 INDEX 100 108 118 120 165 203
S&P HIGH TECHNOLOGY COMPOSITE INDEX 100 104 128 149 215 305
- - ---------------
<FN>
(1) Assumes that the value of the investment in Primark Common Stock and each
index was $100 on December 31, 1991 and that all dividends were reinvested.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
During 1996, Mr. Kasputys served as Chairman, President and Chief Executive
Officer of the Company pursuant to an employment agreement entered into with the
Company as of February 21, 1992, as amended. Mr. Kasputys has entered into a new
employment agreement with the Company which replaces the earlier employment
agreement, subject to shareholder approval at the Annual Meeting. See "Approval
of Kasputys Employment and Related Agreements" on pages 18 to 25 for a
description of the material differences between the old and new agreements.
The Company and TASC have entered into the Holt Employment Agreement
pursuant to which Mr. Holt is employed as President and Chief Executive Officer
of TASC until December 31, 1998 at a minimum annual salary of $400,000. Subject
to the attainment of selected subsidiary financial goals, individual goals and
corporate goals, Mr. Holt may earn an annual bonus of up to 40 percent of his
annual salary, provided, however, that in no event may Mr. Holt receive an
annual bonus greater than 100 percent of his annual salary nor less than
$100,000. If Mr. Holt's employment with TASC is terminated other than for
"cause" (as defined in the Holt Employment Agreement), TASC is obligated under
the Holt Employment Agreement to make a lump sum cash payment to him equal to
two times the amount of his then annual salary plus, if such termination occurs
during 1997 or 1998, an additional cash payment based upon the growth in EVA
commencing in 1996 for the number of full calendar years during which Mr. Holt
was actually employed by TASC. He would also be entitled to a lump sum cash
payment of $150,000 from the Company in lieu of receiving any supplemental
15
19
death and retirement benefits from the Company and all stock options would
become immediately exercisable. In the event Mr. Holt's employment with TASC is
terminated for cause or if Mr. Holt voluntarily terminates his employment with
TASC, he is not entitled to severance pay other than the $150,000 referred to in
the immediately preceding sentence. If Mr. Holt's employment terminates other
than by reason of death, disability or involuntary termination without cause,
the options granted to him in connection with the employment agreement will
terminate. Mr. Holt is entitled to participate in any TASC plan relating to
pension, profit sharing, group life insurance, medical coverage, education or
other retirement or employee benefits that TASC has adopted or may adopt for the
benefit of its executive officers. He is also entitled to be provided with an
automobile for business use or an automobile allowance in lieu thereof,
financial planning assistance up to $5,000 annually and a lump sum cash payment
of $200,000 to help offset certain expenses associated with the Holt Employment
Agreement. Under the Holt Employment Agreement, Mr. Holt is subject to certain
non-compete and nondisclosure provisions for the periods stated therein
following the termination of the Holt Employment Agreement. See "Long-Term
Incentive Plan -- Awards in Last Fiscal Year" on page 9 for a discussion of Mr.
Holt's long-term incentive arrangement.
The Company has entered into an employment agreement with Mr. Herenstein
pursuant to which Mr. Herenstein is employed as Senior Vice President of
Marketing of the Company until June 30, 1998 at an annual salary of $325,000.
Subject to the attainment of Company performance goals, Mr. Herenstein may earn
a bonus of up to 40 percent of his annual salary, provided, however, that in no
event may Mr. Herenstein receive a bonus greater than 80 percent of his annual
salary nor less than $75,000. Mr. Herenstein is not entitled to participate in
any plan of the Company relating to pension, profit sharing, group life
insurance, medical, disability or dental coverage, education or other retirement
or employee benefits adopted by the Company for the benefit of its executive
officers or employees. Mr. Herenstein is entitled to: participate in stock-based
plans of the Company, including the Savings Plan; receive financial planning
assistance up to $3,000 annually; coverage under the Company's life insurance
policy in an amount equal to 2 times his salary; and the provision of a leased
automobile. Pursuant to the terms of his employment agreement, Mr. Herenstein is
deemed to have exercised as of September 30, 1996 all value appreciation rights
that were granted to him under the Primark Information Services UK Limited And
Affiliates Long-Term Incentive Plan while he was an executive officer of a
Primark subsidiary. He received in 1997 a $274,120 payment from such exercise.
If Mr. Herenstein's employment with the Company is terminated without cause (as
defined in the employment agreement), the Company is obligated to make a lump
sum cash payment equal to the sum of his then monthly salary times 18 months and
all stock options would become immediately exercisable if such termination of
employment arises from death or disability of Mr. Herenstein. In the event Mr.
Herenstein's employment with the Company is terminated for cause because of the
performance of services in a materially unsatisfactory manner, the Company shall
pay to Mr. Herenstein a lump sum amount equal to the greater of (i) the sum of
his then monthly salary times the number of months remaining under the
employment agreement, or (ii) the sum of his then monthly salary times 18
months. Notwithstanding the foregoing, the Company will not be obligated to make
a severance payment to Mr. Herenstein if his employment with the Company is
terminated for cause other than as set forth in the immediately preceding
sentence. Mr. Herenstein is subject to certain non-compete, nonsolicitation and
nondisclosure provisions for the periods stated therein during the term of his
employment agreement and for the periods stated thereafter.
Messrs. Curran and Kargula receive certain non-contributory supplemental
death and retirement benefits. The pre-retirement death benefit payable to the
executive's surviving spouse will equal, per annum, 50 percent of the
executive's final salary until such time as the executive
16
20
would have reached age 65; thereafter, payments will equal, per annum, 20
percent of such salary until the executive would have reached age 75. At
retirement the executive may elect to receive (i) supplemental retirement income
equal to 20 percent of such executive's final salary for each of the first ten
years following retirement; or (ii) other available post retirement benefits
which are actuarially equivalent to the foregoing ten-year payment option.
Although the supplemental death and retirement benefits are paid solely from
general corporate assets, it is expected that such costs would be recovered over
time through Company-owned life insurance on the participants.
Each of the executive officers named in the Summary Compensation Table,
other than Mr. Herenstein, has entered into a separate change of control
agreement. In the event of a change of control of the Company, the change of
control agreements provide that the Company will pay to the executive an amount
generally equal to three times the average annual compensation paid to such
executive during the preceding five years if the executive's employment is
terminated by the Company without cause within three years after a change of
control. The change of control agreements may be unilaterally rescinded or
amended by the Board of Directors of the Company without the consent of the
executive prior to a change of control or events potentially leading to a change
of control. Mr. Herenstein's employment agreement contains a change of control
provision pursuant to which Mr. Herenstein will be entitled to receive a lump
sum payment equal to the product of his then monthly salary times the number of
months remaining under the employment agreement if his employment with the
Company is terminated for specified reasons within one year following the sale
of 60 percent or more of the Common Stock of the Company.
APPROVAL OF AMENDMENT TO ARTICLE III OF ARTICLES OF INCORPORATION
INCREASING NUMBER OF AUTHORIZED SHARES OF COMMON STOCK (ITEM 2)
As set forth in Article III of the Company's Articles of Incorporation, as
amended (the "Articles"), the capital stock which the Company has authority to
issue currently consists of 65,000,000 shares of common stock, stated value $.02
per share, and 4,000,000 shares of preferred stock, par value $1.00 per share.
On February 25, 1997, the Board of Directors adopted resolutions recommending an
amendment to Article III of the Articles to increase the number of authorized
shares of Common Stock from 65,000,000 shares to 100,000,000 shares (the
"Amendment"). The Board also directed that the Amendment be submitted to
shareholders for action at the Annual Meeting.
Of the 65,000,000 presently authorized shares of Common Stock 27,067,951
shares of Common Stock were issued and outstanding on January 1, 1997 and
approximately 5,351,697 shares are issuable under the Company's stock option and
employee benefit plans. In addition, 27,067,951 and 5,351,697 shares of Common
Stock are issuable pursuant to the Company's Rights Agreement ("Rights
Agreement") with respect to outstanding Shares and Shares issuable under the
Company's stock option and employee benefit plans, respectively. Accordingly,
160,704 shares of authorized but unissued shares of Common Stock remain
available for future issuance, without taking into account shares of Company
Common Stock which the Company may issue to satisfy certain contingent pay-out
obligations incurred in connection with the acquisition of the Yankee Group
Research, Inc. ("Yankee Group"). None of the 4,000,000 presently authorized
shares of preferred stock is currently outstanding.
If the Amendment is approved by the shareholders of the Company, the
additional 35,000,000 shares of Common Stock so authorized will be available for
issuance by the Board of Directors without further shareholder authorization
unless required by the laws of the State of Michigan or by the rules of the
NYSE. A principal purpose for increasing the number of authorized shares of
17
21
Common Stock is to afford the Company flexibility in considering and acting
promptly upon opportunities for acquisitions and raising additional capital,
without the delay and expense of obtaining shareholder approval. The increase in
the number of authorized shares of Common Stock also is needed to fully
implement the proposed 2,000,000 share increase in the number of shares of
Common Stock issuable under the 1992 Primark Corporation Employee Stock Purchase
Plan (the "1992 Stock Purchase Plan") and the grant to Mr. Kasputys of an option
for 1,000,000 Shares as part of his employment arrangement. See "Approval of an
Amendment Increasing the Number of Shares Reserved for Issuance Under the
Primark Corporation 1992 Employee Stock Purchase Plan" and "Approval of Kasputys
Employment and Related Agreements." Except for shares of Common Stock which may
be issued under the Company's stock option and other employee benefit programs,
the Rights Agreement, and contingent pay-out obligations in connection with the
acquisition of the Yankee Group, the Company has no current plans, arrangements
or understandings, whether written or oral, to issue any additional shares of
Common Stock at this time. The additional authorized shares of Common Stock
would also be available for issuance from time to time for general corporate
purposes without further shareholder authorization unless required by the rules
of the NYSE. The additional authorized shares of Common Stock would be part of
the Company's existing class of Common Stock and, if and when issued, would have
the same rights and privileges as the shares of Common Stock presently
outstanding. The holders of the Company's Common Stock do not have preemptive
rights.
REQUIRED VOTE
Adoption of the Amendment by the shareholders will require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote thereon. If adopted by the shareholders, the Amendment will
become effective automatically upon filing of a certificate of amendment with
the Michigan Department of Consumer and Industry Services, Corporation,
Securities and Land Development Bureau.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
AMENDMENT INCREASING THE AUTHORIZED COMMON STOCK TO 100,000,000 SHARES.
APPROVAL OF KASPUTYS EMPLOYMENT AND RELATED AGREEMENTS (ITEM 3)
The Company previously entered into an employment agreement with Mr.
Kasputys dated as of February 21, 1992, as amended (the "Old Employment
Agreement"). On January 7, 1997 and February 25, 1997, the Board approved
certain modifications to the Old Employment Agreement as set forth in a revised
employment agreement, as amended (the "New Employment Agreement"), as well as a
non-qualified stock option agreement (the "Stock Option Agreement") and a
registration rights agreement (the "Registration Rights Agreement"), each
between the Company and Mr. Kasputys and dated as of January 7, 1997, and the
Committee approved the grant of an option to Mr. Kasputys under the Stock Option
Agreement on that date. These agreements are subject to shareholder approval at
the Annual Meeting. The following is a brief summary of the objectives of the
three agreements, their material terms and the principal differences between the
New Employment Agreement and the Old Employment Agreement.
Given the complexity, global presence and growth of the Company, together
with the key role that Mr. Kasputys has played in the development of the Company
over the past ten years, the Board desires to retain his services as Chairman,
President and Chief Executive Officer of the Company for at least the next five
years. This will allow time for further growth of the Company, while
strengthening and expanding its management team. In particular, the Board
desires that
18
22
Mr. Kasputys develop several members of management who are capable to serve as
successors at such time as the need may arise.
Commencing in the third quarter of 1996, members of both the Nominating and
Compensation Committees of the Board entered into discussions with Mr. Kasputys
regarding a new employment contract to expire December 31, 2001, together with
related incentives. The Board was assisted in this effort by an
internationally-recognized compensation consulting firm.
In developing new terms and conditions for the employment of Mr. Kasputys,
the Board gave consideration to a number of relevant facts and circumstances.
First, Mr. Kasputys is eligible to retire from the Company at age 62 on August
12, 1998, and the Board desires to encourage him to remain in his current
position with the Company well beyond such date, particularly since the
employment agreements of certain executive officers of the Company expire in
1998. (See "Employment Agreements and Other Arrangements" commencing on page 15
hereof). Second, Mr. Kasputys was granted 1,018,220 stock options on January 12,
1988, which will either be exercised or expire on January 12, 1998. These
options will no longer provide an incentive when either of these events occur,
which will be within the next nine months. Third, there is considerable work to
be done in the future to implement the strategies for the Company that have been
adopted by the Board, and the Board believes Mr. Kasputys, because of his
experience, insight and capabilities, is the best qualified individual to
provide the leadership and direction necessary to carry out these actions.
Fourth, to provide the maximum incentive to increase the price of the Company's
Common Stock, the Board provided a stock option grant with 50 percent of the
options granted having an exercise price from 125 percent to 150 percent of the
fair market value of the Company's Common Stock on the date of grant. Finally,
the Board reviewed the competitive compensation levels for chief executive
officers in similar situations with the tenure, experience and performance of
Mr. Kasputys.
Employment Agreement
Pursuant to the terms of the New Employment Agreement, Mr. Kasputys is to
continue to be employed as the Chairman, President and Chief Executive Officer
of the Company. The term of his employment has been extended for three years and
ends on December 31, 2001. Under the Old Employment Agreement, the term of his
employment was to end on December 31, 1998. Mr. Kasputys' annual salary under
the New Employment Agreement was established at his current annual salary level
of $602,000, subject to increase from time to time as determined by the Board.
Mr. Kasputys is also eligible to receive an annual bonus of up to 60 percent of
his annual salary in effect at the beginning of the year, provided that
performance goals set by the Committee are met. The amount of the bonus will
increase or decrease depending on the amount by which the actual financial
results of the Company vary from the performance goals, subject to a $120,000
minimum and a $1,000,000 maximum annual bonus. No bonus in excess of the minimum
bonus amount will be paid under the New Employment Agreement unless and until
the Committee shall have certified in writing that the performance goals have
been attained. The Committee has determined that the performance goal will be
based on the Company's annual net income. Under the Old Employment Agreement,
Mr. Kasputys' current annual salary of $602,000 was subject to similar
adjustments. He was also entitled to an annual bonus of 60 percent of his annual
salary (with the same $120,000 minimum bonus), provided that pre-specified
financial performance goals established by the Board were met.
In addition to his salary and bonus under the New Employment Agreement, the
Committee granted to Mr. Kasputys a stock option for 1,000,000 shares of Company
Common Stock pursuant
19
23
to the terms and conditions set forth in the Stock Option Agreement and Mr.
Kasputys has certain rights under the Registration Rights Agreement, both of
which are discussed below. Under the Old Employment Agreement, Mr. Kasputys was
granted an option to purchase 250,000 Shares, at an option price of $11.625 per
share, which option became fully vested and exercisable on February 20, 1995.
Both the Old and New Employment Agreements entitle Mr. Kasputys to
participate in retirement and other employee benefit plans, insurance and fringe
benefits provided by the Company, including the use of an automobile for
business purposes and up to $10,000 annually as reimbursement for expenses
incurred in obtaining tax and estate planning assistance. Both agreements
entitle Mr. Kasputys to annual retirement compensation for life in an amount
equal to 55 percent of the salary (excluding his bonus but including all amounts
paid under the Company's defined benefit plan) payable to him during the final
year prior to the date he retires at age 62 or later. If Mr. Kasputys
predeceases his spouse at the time of his retirement or thereafter, his spouse
is entitled to 60 percent of Mr. Kasputys' annual retirement compensation as
calculated in the preceding sentence. If Mr. Kasputys dies prior to his
retirement, his spouse is entitled to payments equal to 50 percent of his final
salary until such time as Mr. Kasputys would have become 65, and annual payments
of 33 percent (20 percent under the Old Employment Agreement) of such salary
thereafter for life. Under the New Employment Agreement, in the event Mr.
Kasputys is terminated prior to retirement at age 62 for cause or voluntarily
terminates his employment, the retirement obligations described in this
paragraph also terminate; and if Mr. Kasputys is terminated without cause prior
to age 62, he is entitled to reduced retirement compensation calculated by
reducing the full retirement compensation amount by 2 percent for each full year
not worked by Mr. Kasputys prior to age 62. Under the Old Employment Agreement,
all retirement compensation terminated if Mr. Kasputys was terminated with or
without cause or if Mr. Kasputys voluntarily terminated his employment during
the term of the agreement.
Under both the Old and New Employment Agreements, the Board may terminate
Mr. Kasputys' employment at any time with or without cause. However, termination
by the Board other than termination for "cause" (as defined) by a two-thirds
vote of all of the members of the Board shall not prejudice Mr. Kasputys' right
to compensation or other benefits under the Employment Agreements and all
options granted to Mr. Kasputys shall be exercisable in accordance with the
terms of their governing documents. Termination other than termination for cause
by a two-thirds vote of all of the members of the Board would result in
liability for liquidated damages in an amount equal to two times the amount of
Mr. Kasputys' annual salary and the bonus paid to him in the year prior to
termination (on a pro-rated basis) as well as health, life and disability
insurance for a period of two years in the same amounts provided prior to
termination. These liquidated damages are not reduced by any compensation which
Mr. Kasputys may receive from another employer after termination of his
employment with the Company. Mr. Kasputys has no right to receive compensation
or other benefits for any period after termination for cause.
Both the Old and New Employment Agreements provide that, during the term of
employment, Mr. Kasputys is prohibited from having any other paid employment or
providing services to any other company other than service as a member of the
board of directors of unaffiliated companies if approved by the Board; provided,
however, that this prohibition does not apply with respect to Lifeline Systems,
Inc. and The Hitachi Foundation where Mr. Kasputys currently serves as Director
and Trustee, respectively.
The New Employment Agreement provides that, for a period of 12 months
following termination of his employment, Mr. Kasputys is prohibited from
soliciting business from any person that was a
20
24
customer of the Company or any of its subsidiaries at any time within one year
preceding the termination date, inducing or attempting to induce any customer to
reduce its business with the Company or any of its subsidiaries or soliciting or
attempting to solicit any employees of the Company or any of its subsidiaries to
leave the employ of the Company or any of its subsidiaries. In addition, for a
period of one year following termination of employment, Mr. Kasputys must keep
confidential and not disclose the trade secrets or confidential information or
knowledge relating to the business of the Company or any of its subsidiaries.
The Old Employment Agreement did not contain such restrictions.
The New Employment Agreement is subject to shareholder approval. The Old
Employment Agreement was not subject to shareholder approval and, as a result,
was not approved by the shareholders.
Stock Option Agreement
Pursuant to the New Employment Agreement, the Committee granted to Mr.
Kasputys, subject to shareholder approval, an option (the "Option") to purchase
1,000,000 Shares as follows: 500,000 Shares at $24.25 per share, which price is
not less than the closing price of the Shares on the NYSE on the date of grant;
250,000 Shares at $30.313 per share, which price is not less than 125 percent of
the closing price of the Shares on the NYSE on the date of grant; and 250,000
Shares at $36.375 per share, which price is not less than 150 percent of the
closing price of the Shares on the NYSE on the date of grant. The market price
of the Shares on the date of grant, January 7, 1997, was $24.25 per share. The
Option is evidenced by the Stock Option Agreement. The Option will become
exercisable as follows: the first 500,000 Shares referred to above become
exercisable on or after the second anniversary of the date of grant; the next
250,000 Shares referred to above become exercisable on or after the third
anniversary of the date of grant, and the final 250,000 Shares referred to above
become exercisable on or after the fourth anniversary of the date of grant;
provided, however, that the Option becomes fully exercisable in the sole
discretion of the Committee in the event the Board designates a successor as
chief executive officer of the Company or upon any transaction which results in
any person or entity owning 80 percent or more of the combined voting power of
all classes of stock of the Company.
In addition, the Option will become fully exercisable upon a "change of
control" as defined in the Change of Control Compensation Agreement dated April
30, 1987 (the "Change of Control Agreement") between the Company and Mr.
Kasputys and, in such event, Mr. Kasputys may elect to have the Option cashed
out based on the greater of the highest price per share paid or offered in any
transaction related to a "change of control" of the Company or the highest price
per share paid in any transaction reported on the exchange on which the Shares
are traded, at any time during the preceding 60-day period. A "change of
control" shall be deemed to have occurred: (i) upon consummation of any
consolidation or merger of the Company if the Company is not the surviving
corporation or pursuant to which the Shares are converted into cash, securities
or other property, other than a merger where the holders of the Shares
immediately prior to the merger have the same proportionate ownership
immediately after the merger; (ii) upon consummation of any sale, lease,
exchange or transfer of all or substantially all of the assets of the Company;
(iii) upon the approval by shareholders of a plan or proposal for the
liquidation or dissolution of the Company; (iv) in the event any Person (as
defined in the Securities Exchange Act of 1934) becomes the beneficial owner of
30 percent or more of the outstanding Shares; or (v) in the event that, during
any calendar year, the individuals who constituted the entire Board at the
beginning of such year shall cease for any reason to constitute a majority
unless the election, or nomination for election by shareholders,
21
25
of each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the year.
In this regard, the Company has in the past engaged, and may in the future
engage, in acquisitions and dispositions, and discussions regarding such
transactions, intended to enhance shareholder value. Such discussions or
transactions could involve a "change of control" of the Company. In addition,
the Option will become fully exercisable in the event of termination of Mr.
Kasputys' employment without cause, in which case Mr. Kasputys will be entitled
to exercise the Option for 90 days following such termination. See "Employment
Agreements and Other Arrangements" for a description of the additional amounts
payable to Mr. Kasputys under the Change of Control Agreement in the event his
employment is terminated by the Company without cause following a change of
control. The Change of Control Agreement is unaffected by the New Employment
Agreement and related agreements.
In the event of Mr. Kasputys' death while employed or within three years
following his retirement from the Company at age 62 or older, the Option will
continue to be exercisable only until the later of one year after the date of
death and three years after Mr. Kasputys' retirement from the Company at age 62
or older, but only to the extent it had become exercisable before termination of
employment. In the event of termination due to disability, the Option will
continue to be exercisable for one year after the date of such termination, but
only to the extent it had become exercisable before termination of employment.
If Mr. Kasputys' employment terminates by reason of retirement at age 62 or
older, the Option will continue to be exercisable for three years after the date
of such termination, but only to the extent it had become exercisable before
termination of employment. Regardless, in each case, the Option cannot be
exercised after the original expiration date of the Option.
Under the Stock Option Agreement, Mr. Kasputys is permitted to borrow funds
from the Company to exercise the Option. The maximum amount he can borrow is the
lesser of 80 percent of the fair market value of the Shares at the time of
exercise or 100 percent of the option price. Mr. Kasputys must pledge the Shares
he purchases through exercise of the Option to secure the loan and must increase
the amount of collateral (or pay down the loan) so that the outstanding balance
of the loan is not more than 90 percent of the value of the collateral at any
time. The term of the loan may not exceed three years. The loan will bear
interest at the lowest rate so as not to require imputation of interest income
under federal income tax laws. The loan will become payable in full upon
termination of Mr. Kasputys' employment other than by reason of death,
disability or retirement. The loan will be payable on the 90th day following an
involuntary termination of Mr. Kasputys' employment by the Company without
cause.
To cover income taxes payable to the extent Mr. Kasputys realizes ordinary
income in connection with the exercise of the Option, the Stock Option Agreement
provides that the Company may withhold amounts needed to cover such taxes from
payments otherwise due and owing to Mr. Kasputys. In addition, upon demand, Mr.
Kasputys must promptly pay to the Company any additional amounts as may be
necessary to satisfy the Company's withholding tax obligation. Unless otherwise
prohibited by the Committee, Mr. Kasputys may satisfy his withholding tax
obligation by: (i) tendering payment in cash; (ii) authorizing the Company to
withhold from the Shares otherwise issuable upon exercise of the Option that
number of Shares having a fair market value, as of the date the withholding tax
obligation arises, less than or equal to the amount of the withholding tax
obligation; or (iii) delivering to the Company other Shares owned by Mr.
Kasputys having a fair market value, as of the date the withholding tax
obligation arises, less than or equal to the amount of the withholding tax
obligation. Any tender of Shares to satisfy withholding tax obligations is
irrevocable by Mr. Kasputys.
22
26
Upon payment of the exercise price of the Option, the Company must deliver
to Mr. Kasputys a certificate or certificates for the Shares being purchased;
provided, however, that certificates for Shares paid for by delivery of a
promissory note will be retained by the Company as security for the payment of
the promissory note. In the event the balance of principal and interest owing
under the promissory note on the last business day of any month exceeds 90
percent of the fair market value of the pledged Shares, the Company will notify
Mr. Kasputys that an additional amount is due and payable within seven days so
as to reduce the balance owing under the promissory note to 80 percent of the
fair market value of the pledged Shares; provided, however, that Mr. Kasputys
may instead pledge additional Shares in partial or total satisfaction of such
additional amount. Any such additionally pledged Shares will be valued at the
closing price of the Shares on the NYSE on the business day immediately prior to
the day the Company receives the Shares. Any dividends on pledged Shares will be
paid to the Company and applied against unpaid interest and principal.
The Option is not transferable other than by reason of death. At March 31,
1997, the market value of the 1,000,000 Shares subject to the Option granted to
Mr. Kasputys was $23,750,000 based upon a closing sales price of the Shares on
the NYSE on that date of $23.75 per share.
Pursuant to recently implemented Financial Accounting Standards Board
Statement No. 123, the Company will be required to recognize compensation
expense over the vesting period in an amount equal to the aggregate increase, if
any, in the fair market value of the Shares subject to the Option and the Option
exercise price between the date of grant and the date the Stock Option Agreement
is approved by shareholders. At March 31, 1997, the fair market value of the
Shares was $23.75 per share. Assuming the shareholders had approved the Stock
Option Agreement on that date, the Company would not have had to recognize any
compensation expense since the per share fair market value was less than the
exercise price. If the stock price increases to above the exercise price as of
the Annual Meeting, the Company will be required to recognize compensation
expense over the Option vesting period in an amount representing the difference
between the per share fair market value and the Option exercise price times the
number of Shares.
The grant of the Option will not be a taxable event for Mr. Kasputys or the
Company. Upon exercising the Option, Mr. Kasputys will recognize ordinary income
in an amount equal to the difference between the exercise price and the fair
market value of the Shares on the date of exercise. If the Company complies with
applicable reporting requirements, it will be entitled to a business expense
deduction in the same amount as Mr. Kasputys recognizes ordinary income,
assuming that the Option satisfies the applicable requirements under Code
Section 162(m) (summarized below) and subject to disallowance to the extent that
the vesting or exercise of the Option constitutes an "excess parachute payment"
to Mr. Kasputys under the provisions of the Code relating to "golden parachute
payments." Upon a subsequent sale or exchange of Shares acquired pursuant to the
exercise of the Option, Mr. Kasputys will have taxable gain or loss, measured by
the difference between the amount realized on the disposition and the tax basis
of the Shares (generally, the amount paid for the Shares plus the amount treated
as ordinary income at the time the Option was exercised). If Mr. Kasputys
surrenders Shares in payment of part or all of the exercise price for the
Option, no gain or loss will be recognized with respect to the Shares
surrendered. The basis of the Shares surrendered will be treated as the
substituted tax basis for an equivalent number of Option Shares received and the
new Shares will be treated as having been held for the same holding period as
had expired with respect to the transferred Shares. The difference between the
aggregate Option exercise price and the aggregate fair market value of the
23
27
Shares received pursuant to the exercise of the Option will be taxed as ordinary
income. Mr. Kasputys' basis in the additional Shares will be equal to the amount
included in his income.
Registration Rights Agreement
The Registration Rights Agreement provides that, at any time after the
issuance of Shares to Mr. Kasputys pursuant to the exercise of the Option, Mr.
Kasputys may make a one-time request that the Company register such Shares under
the Securities Act of 1933, as amended. The Company may delay filing of a
registration statement for a reasonable period of time, not to exceed 90 days,
if it determines in good faith that registration at such time would adversely
affect a material financing, acquisition, disposition of assets or stock, merger
or other comparable transaction or would require the Company to make public
disclosure of information, the public disclosure of which would have a material
adverse effect upon the Company. The Company is required to file a registration
statement as soon as reasonably practicable after a request but in no event
later than the later of (i) 90 days after such request, and (ii) 15 days after
the end of the above-mentioned 90-day period in which the Company can delay
filing.
The Company must use its reasonable efforts to have the filing declared
effective by the SEC as soon as reasonably practicable after the filing of a
registration statement and to keep such registration effective until the earlier
of (i) the date on which all Shares registered thereunder have been disposed of,
and (ii) two years following the effective date of the registration statement.
The Company agrees to pay all registration expenses whether or not the
registration statement becomes effective.
The Registration Rights Agreement also provides that, in the event the
Company decides to register additional Shares for sale to the public, the
Company is required to include in such registration the Shares to be issued to
Mr. Kasputys pursuant to the exercise of the Option, provided that Mr. Kasputys
makes a written request to that effect at least 30 days prior to such
registration.
Reasons for Obtaining Shareholder Approval
The Board has approved the New Employment Agreement, Stock Option Agreement
and Registration Rights Agreement subject to shareholder approval. The Company
is submitting the New Employment Agreement, Stock Option Agreement and
Registration Rights Agreement for shareholder approval at the Annual Meeting (i)
in an effort to obtain a federal income tax deduction under Section 162(m) of
the Code for the full amount includable in Mr. Kasputys' income as a result of
his exercise of the Option and for bonuses (other than the minimum bonus) paid
for years after 1998, and (ii) in order to comply with the share listing
requirements of the NYSE.
Under certain amendments to the Code that became effective for fiscal years
from 1994 forward and applicable Treasury regulations, no deduction is allowed
for annual compensation in excess of $1 million paid by a publicly traded
corporation to its chief executive officer and the four other most highly
compensated officers. Under those provisions, there is no limitation on the
deductibility of "qualified performance-based compensation." To satisfy this
definition: (i) the compensation must be paid solely on account of the
attainment of one or more pre-established, objective performance goals; (ii) the
performance goals under which compensation is paid must be established by a
compensation committee having the authority to establish and administer
performance goals and comprised solely of two or more directors who qualify as
"outside directors" for purposes of the exception; (iii) the material terms
under which the compensation is to be paid must be disclosed to and subsequently
approved by shareholders of the corporation before payment is made in a
24
28
separate vote; and (iv) the compensation committee must certify in writing
before payment of the compensation that the performance goals and any other
material terms were in fact satisfied.
Under applicable Treasury regulations, in the case of compensation
attributable to stock options, the performance goal requirement (summarized in
(i) above) is deemed satisfied, and the certification requirement (summarized in
(iv) above) is inapplicable, if: (i) the grant or award is made by a
compensation committee satisfying the above requirements; (ii) the plan under
which the option is granted states the maximum number of shares with respect to
which options may be granted during a specified time period to an employee; and
(iii) under the terms of the option, the amount of compensation is based solely
on an increase in the value of the stock after the date of grant. The Company
believes that the Stock Option Agreement satisfies these requirements.
According to this regulation, a director is an "outside director" if he or
she is not a current employee of the corporation; is not a former employee who
receives compensation for prior services (other than under a qualified
retirement plan); has not been an officer of the corporation; and does not
receive, directly or indirectly (including amounts, other than certain de
minimus remuneration, paid to an entity by which the director is employed or
self-employed or in which the director has at least a five percent ownership
interest), remuneration from the corporation in any capacity other than as a
director.
No tax authority or court has ruled on the applicability of Section 162(m)
to the bonus or the Option, and any determination of the deductibility of Mr.
Kasputys' compensation would ultimately be made by the Internal Revenue Service
or a court having final jurisdiction with respect to the matter. There can be no
assurance that such amounts will be deductible for federal income tax purposes.
The Company retains the right and obligation to issue Shares, pay the bonuses
and otherwise satisfy its obligations under the Option and the New Employment
Agreement regardless of any final determination as to the applicability of
Section 162(m) of the Code.
The Company has in the past used stock options as an important device to
motivate and reward its executive officers as well as the executive officers of
its subsidiaries, and believes that equity incentives represented by stock
options enhance its ability to attract and retain key personnel. The Committee
and the Board have determined that it is in the best interests of the Company to
provide a compensation arrangement for Mr. Kasputys that rewards him for gains
in the value of the Company and for gains in shareholder wealth. The Company
believes that the arrangements outlined in the above-discussed agreements are
appropriate in light of Mr. Kasputys' level of responsibility, importance to the
Company and past levels of compensation.
Effect of Non-Approval
In the event that the shareholders do not approve the New Employment
Agreement, Stock Option Agreement and Registration Rights Agreement, these
agreements will be of no further force and effect, the Option granted pursuant
to such documents will be canceled without becoming exercisable, and the Old
Employment Agreement will continue to operate in full force and effect through
the term thereof.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Shares present or
represented and entitled to vote at the Annual Meeting of Shareholders is
required for approval of the New Employment Agreement, Stock Option Agreement
and Registration Rights Agreement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS SHAREHOLDER APPROVAL OF THE
NEW EMPLOYMENT AGREEMENT, STOCK OPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT.
25
29
APPROVAL OF AN AMENDMENT TO THE PRIMARK CORPORATION 1992 STOCK OPTION PLAN
LIMITING THE MAXIMUM NUMBER OF SHARES SUBJECT TO OPTION THAT MAY BE GRANTED TO
ANY PARTICIPANT IN THE PLAN IN ANY CALENDAR YEAR (ITEM 4)
On February 21, 1992, the Board of Directors adopted, subject to
shareholder approval, a stock option plan for key employees of the Company and
its subsidiaries (the "1992 Stock Option Plan"). The 1992 Stock Option Plan was
approved by the shareholders at the 1992 Annual Meeting. The 1992 Stock Option
Plan is designed to assist the Company and its subsidiaries to retain the
services of and to motivate selected personnel to acquire a proprietary interest
in the Company and thus share in its growth and success.
The Board of Directors has voted, subject to shareholder approval at the
Annual Meeting, to amend the 1992 Stock Option Plan to specify that options
covering no more than 100,000 shares of the Common Stock of the Company may be
granted to any officer or other employee during any calendar year (subject to
adjustment upon the occurrence of a stock split, reclassification, stock
dividend and the like as provided in the 1992 Stock Option Plan).
The limitation on the maximum number of shares of Common Stock that may be
granted to any employee in a calendar year is a consequence of certain
amendments to the Code that became effective for fiscal years from 1994 forward
under which no deduction is allowed for annual compensation in excess of $1
million paid by a publicly traded corporation to its chief executive officer and
the four other most highly compensated officers. Under those provisions, there
is no limitation on the deductibility of "qualified performance-based
compensation." To satisfy this definition: (i) the compensation must be paid
solely on account of the attainment of one or more pre-established, objective
performance goals; (ii) the performance goals under which compensation is paid
must be established by a compensation committee comprised solely of two or more
directors who qualify as "outside directors" for purposes of the exception;
(iii) the material terms under which the compensation is to be paid must be
disclosed to and subsequently approved by shareholders of the corporation before
payment is made in a separate vote; and (iv) the compensation committee must
certify in writing before payment of the compensation that the performance goals
and any other material terms were in fact satisfied.
Under Treasury Regulation 1.162-27(e), in the case of compensation
attributable to stock options, the performance goal requirement (summarized in
(i) above) is deemed satisfied, and the certification requirement (summarized in
(iv) above) is inapplicable, if: (i) the grant or award is made by a
compensation committee satisfying the above requirements; (ii) the plan under
which the option is granted states the maximum number of shares with respect to
which options may be granted during a specified time period to an employee; and
(iii) under the terms of the option, the amount of compensation is based solely
on an increase in the value of the stock after the date of grant. Because the
transition rule will not be available to the 1992 Stock Option Plan after the
1997 Annual Meeting, the Board has amended the 1992 Stock Option Plan to satisfy
the above requirement that the option plan state the maximum number of shares
with respect to which options may be granted during a specified period to an
employee. In the event the proposed amendment to the 1992 Stock Option Plan is
not approved by the shareholders at the Annual Meeting, no option grants will be
made under the 1992 Stock Option Plan to anyone who is an executive officer of
the Company at the time of grant.
Description of the 1992 Stock Option Plan
The following summary describes the material provisions of the 1992 Stock
Option Plan and is qualified in its entirety by reference to the specific
provisions of the 1992 Stock Option Plan, a copy
26
30
of which is available upon request to: Primark Corporation, 1000 Winter Street,
Suite 4300, Waltham, Massachusetts 02154, Attention: Corporate Secretary.
Options Available for Grant. The 1992 Stock Option Plan provides for the
grant of "incentive stock options" and "non-qualified options." Incentive stock
options are generally subject to more favorable tax treatment to optionees than
non-qualified stock options. See "Federal Income Tax Consequences." No grant may
be made under the 1992 Stock Option Plan of a combination of incentive stock
options and non-qualified options to a single recipient where the right to
exercise one type of option would affect the recipient's right to exercise the
other type of option.
Shares Subject to the 1992 Stock Option Plan. Subject to adjustment by
reason of stock splits, reclassifications, stock dividends and the like as
provided in the 1992 Stock Option Plan, the number of shares of Common Stock
which may be subject to options granted under the 1992 Stock Option Plan in each
fiscal year may not be greater than 1.5 percent of the shares of Common Stock
that are issued and outstanding as of the first day of such year; provided,
however, that such number shall be increased in any such year by the number of
shares of Common Stock available for grant under the 1992 Stock Option Plan in
previous years but not covered by options in such year(s); and provided further
that the maximum number of incentive options that may be granted under the 1992
Stock Option Plan may not exceed options for more than 250,000 shares of Common
Stock, subject to adjustment as provided in the 1992 Stock Option Plan. The
proposed amendment would amend the 1992 Stock Option Plan to specify that
options covering no more than 100,000 shares of the Company's Common Stock may
be granted to any officer or other employee during any calendar year (subject to
adjustment upon the occurrence of a stock split, reclassification, stock
dividend and the like as provided in the 1992 Stock Option Plan). On January 1,
1997, 27,067,951 shares of Common Stock were outstanding; thus options covering
a total of 406,019 Shares will be available for grant in 1997. Shares
representing the unexercised portion of options granted under the 1992 Stock
Option Plan which expire or terminate without being exercised in full shall
again be available for issuance under the 1992 Stock Option Plan. Shares of
Common Stock may be authorized and unissued shares, treasury shares, or shares
purchased on the open market for purposes of the 1992 Stock Option Plan. The
closing price of the shares of the Company's Common Stock on the NYSE composite
tape on March 31, 1997 was $23.75 per share.
Administration and Eligibility. The 1992 Stock Option Plan is administered
by the Committee which is responsible for, among other things, the selection of
employees who will be granted options, the type of options granted, the number
of shares of Common Stock subject to any option granted, and the time period for
exercise of options. Options may be granted to officers and other key employees
of the Company and its subsidiaries whether or not they are also directors. At
January 1, 1997, there were approximately 5,938 officers and other key employees
of the Company and its subsidiaries eligible to participate in the 1992 Stock
Option Plan. The aggregate fair market value (determined on the date the option
is granted) of the shares of Common Stock with respect to which incentive stock
options are exercisable for the first time by any employee during any calendar
year under all such plans of the Company and its subsidiaries may not exceed
$100,000.
Terms of Option Agreements. Each option must be represented by an option
agreement which shall specify the type of option granted, the number of shares
of Common Stock subject to the option, the time during which the option is
exercisable and shall include the substance of all of the following:
The price per share at which each option may be exercised shall not be
less than the fair market value of a share of Common Stock subject to the
option on the date the option is
27
31
granted; however, in the case of a participant possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or any of its subsidiaries (a "10 percent optionee"), the option
price of incentive stock options shall not be less than 110 percent of the
fair market value of such stock on the date the option is granted.
The exercise price is payable at the time the option is exercised in
cash or by delivery of a promissory note to the Company in accordance with
the provisions of the 1992 Stock Option Plan. Such exercise price, as well
as tax withholding obligations, may also be satisfied, in whole or in part,
by the delivery to the Company of shares of Company Common Stock owned by
the optionee.
The maximum term of an incentive stock option granted to a "10 percent
optionee" is five years from the date it is granted, and in all other cases
the maximum term which may be established for any option is ten years from
its date of grant. The Committee may establish that options granted under
the 1992 Stock Option Plan shall be exercisable commencing either as of the
date of grant or over a period of time not to exceed five years. An option
granted to an Officer (as that term is defined in the rules adopted under
the Securities Exchange Act of 1934) of the Company is not exercisable
during the first six months of its term, except that this limitation does
not apply in the event that death of the Officer occurs prior to the
expiration of the six-month period or in the event of any other termination
of employment unless within six months of such termination the Officer
disposed of the Company Common Stock.
Generally, following termination of employment, an optionee may
exercise options granted under the 1992 Stock Option Plan from three months
to three years thereafter depending upon the circumstances of the
termination. However, if the optionee's employment is terminated for cause,
any option granted to such participant shall immediately terminate. Options
are not transferable except by will or the laws of descent and distribution
and, during the lifetime of a recipient, only such recipient may exercise
the option.
The Committee has the authority to effect, with the consent of the
affected optionees, the cancellation of any or all outstanding options
granted under the 1992 Stock Option Plan and to grant in substitution
therefor new options covering the same or different numbers of Shares but
having an option price per Share not less than the fair market value per
Share on the new grant date.
Duration and Amendment of the 1992 Stock Option Plan. The Board may amend
the 1992 Stock Option Plan at any time; however, shareholder approval is
required for (i) any amendment which would reduce the option price below that
set forth in the 1992 Stock Option Plan; (ii) any amendment which would increase
the number of shares of Common Stock subject to the 1992 Stock Option Plan,
except amendments reflecting an increase relating to certain capital
adjustments; (iii) any material change in the requirements as to eligibility to
receive options; (iv) any increase in the maximum period during which options
may be exercised; (v) any extension of the term of the 1992 Stock Option Plan;
or (vi) any material increase in the benefits accruing to participants under the
1992 Stock Option Plan. The Board may terminate or suspend the 1992 Stock Option
Plan and, unless sooner terminated, it will terminate on March 2, 2002.
Federal Income Tax Consequences
Non-Qualified Options. Under current federal income tax law an optionee
who is granted non-qualified options will not realize taxable income by reason
of such grant. Upon the exercise of a non-qualified option, the excess of the
fair market value on the date of exercise over the option price of
28
32
the Shares purchased will be treated as compensation and will be taxable to the
optionee at ordinary income tax rates. The Company generally will be entitled to
a deduction in the amount of such taxable income realized by the optionee as
long as it complies with applicable reporting requirements.
If an optionee surrenders shares of Common Stock in payment of part or all
of the exercise price for non-qualified options, no gain or loss will be
recognized with respect to the shares surrendered (regardless of whether the
surrendered shares were acquired pursuant to the exercise of an incentive
option) and the optionee will be treated as receiving an equivalent number of
shares pursuant to the exercise of the option in a nontaxable exchange. The
basis of the shares of Common Stock surrendered will be treated as the
substituted tax basis for an equivalent number of option shares received and the
new shares will be treated as having been held for the same holding period as
had elapsed with respect to the surrendered shares. However, the fair market
value of any shares received in excess of the number of shares surrendered
(i.e., the difference between the aggregate option exercise price and the
aggregate fair market value of the shares received pursuant to the exercise of
the option) will be taxed as ordinary income. The optionee's basis in the
additional shares will be equal to the amount included in the optionee's income.
Incentive Stock Options. Under current federal income tax law, an optionee
who is granted incentive stock options will not realize taxable income by reason
of the grant or the exercise of an incentive stock option (except that the
difference between the fair market value of the stock at the time of exercise
and the option exercise price paid by the optionee will be includable in the
optionee's income for alternative minimum tax purposes). If an optionee
exercises an incentive stock option and does not dispose of the shares of Common
Stock within two years of the date the option was granted or within one year of
the date the shares were transferred to the optionee, any gain realized upon
disposition will be taxable to the optionee as a long-term capital gain, and the
Company will not be entitled to any deduction. However, if the optionee disposes
of the stock prior to satisfying the applicable holding period requirements (a
"disqualifying disposition"), the difference between the option exercise price
and the lesser of (i) the amount received upon disposition of the shares, and
(ii) the fair market value of the shares on the date of exercise of the option
will be treated as compensation income to the optionee that is taxable at
ordinary income tax rates. Any gain recognized in excess of the ordinary income
recognized by an optionee on a disqualifying disposition will be capital gain.
If upon disposition of shares acquired pursuant to an incentive stock option an
optionee receives less than the exercise price paid for such shares, the
optionee will recognize a capital loss. The Company generally will be entitled
to a deduction in the amount of ordinary income recognized by an optionee as the
result of a disqualifying disposition.
If an optionee surrenders shares of Common Stock in payment of part or all
of the exercise price for incentive options, the exchange of shares will be
treated as a nontaxable exchange (except that the treatment will not apply if
the optionee had acquired the shares being surrendered pursuant to the exercise
of an incentive option and had not satisfied certain holding requirements). If
the exercise is treated as a tax free exchange, the optionee will have no
taxable income from the exchange and the basis of the shares surrendered will be
treated as the substituted basis for the shares received. The shares surrendered
will be treated as exchanged for an equivalent number of new shares, which will
take the tax basis of the surrendered shares, and the additional option shares
will have a zero basis. These rules will not apply if the optionee surrenders
shares received pursuant to the exercise of an incentive option (or another
statutory option), as to which the optionee has not satisfied the applicable
holding period requirement. In that case, the exchange will be treated as a
taxable disqualifying disposition of the surrendered shares, as described above.
29
33
Participation in the 1992 Stock Option Plan
The grant of stock options to eligible employees under the 1992 Stock
Option Plan is subject to the discretion of the Committee.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast at the Annual Meeting
will be required to approve the amendment to the 1992 Stock Option Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
PROPOSED AMENDMENT TO THE 1992 STOCK OPTION PLAN.
APPROVAL OF AN AMENDMENT INCREASING THE NUMBER OF SHARES RESERVED FOR ISSUANCE
UNDER THE PRIMARK CORPORATION 1992 EMPLOYEE STOCK PURCHASE PLAN (ITEM 5)
The Company's 1992 Employee Stock Purchase Plan was adopted by the Board of
Directors in February 1992 and approved by the shareholders at the 1992 Annual
Meeting. A total of 1,000,000 shares of Common Stock of the Company were
initially issuable thereunder. As of January 1, 1997, a total of 729,479 Shares
have been purchased under the 1992 Employee Stock Purchase Plan and 270,521
Shares remain available for purchase. The 1992 Employee Stock Purchase Plan is
intended to encourage stock ownership by eligible employees of the Company and
its participating subsidiaries by providing such employees with an incentive to
purchase stock so as to share in the fortunes of the Company.
On February 25, 1997, the Board of Directors approved an amendment to the
1992 Employee Stock Purchase Plan to increase the aggregate number of shares of
Common Stock authorized for issuance thereunder by 2,000,000 shares, bringing
the total number of shares of Common Stock available for issuance under the 1992
Employee Stock Purchase Plan to 3,000,000 shares. The Board considers the
increase in shares necessary to fund the 1992 Employee Stock Purchase Plan over
the next several years. As of January 1, 1997, approximately 3,944 employees of
the Company and its participating subsidiaries were eligible to participate in
the 1992 Employee Stock Purchase Plan and approximately 22 percent of the
eligible employees were participating in the 1992 Employee Stock Purchase Plan.
The 1992 Employee Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Sections 421 and 423 of the
Code. For Internal Revenue purposes, any increase in the aggregate number of
shares which may be issued under an employee stock purchase plan (other than an
increase merely reflecting a change in capitalization such as a stock dividend
or stock split-up) is treated as the adoption of a new plan requiring approval
of the shareholders within 12 months of such adoption. The purpose of this item
is to seek shareholder approval of the 2,000,000 share increase in the total
number of shares of Common Stock available for issuance under the 1992 Employee
Stock Purchase Plan. The 1992 Employee Stock Purchase Plan, as previously
amended and as it is proposed to be amended to increase the shares reserved for
issuance thereunder, is hereafter referred to as the "Purchase Plan."
Purchase Plan
The following summary describes the material provisions of the Purchase
Plan and is qualified in its entirety by reference to the specific provisions of
the Purchase Plan, a copy of which is available upon request to: Primark
Corporation, 1000 Winter Street, Suite 4300, Waltham, Massachusetts 02154,
Attention: Corporate Secretary.
30
34
Eligibility. Any employee of the Company or its participating subsidiaries
who is customarily employed for at least 20 hours per week and who has completed
six months continuous employment with the Company or any of its participating
subsidiaries is eligible to participate in the Purchase Plan. Generally,
eligible employees become participants in the Purchase Plan by delivering a
written authorization for a payroll deduction to the Company or to a
participating subsidiary prior to the commencement of the offering period in
which the employee desires to participate. Notwithstanding the foregoing, in no
event may an employee who owns five percent or more of the combined voting power
or value of all classes of stock of the Company participate in the Purchase
Plan.
Administration. The Purchase Plan is administered by the Committee.
Members of the Committee are not eligible to participate in the Purchase Plan.
Offering Periods. The Purchase Plan is implemented by two offerings during
each twelve month period of the Purchase Plan. Each offering is of six months
duration.
Purchase Price. The purchase price at which shares are sold to
participants in the Purchase Plan is the lesser of (i) 85 percent of the average
market price of the Company's Common Stock on the first business day of the
offering period, or (ii) 85 percent of the average market price of the Company's
Common Stock on the last business day of the offering period.
Payment of Purchase Price. The purchase price of the Shares to be acquired
under the Purchase Plan is accumulated by payroll deductions over the applicable
six month offering period. The deductions under the Purchase Plan may not exceed
ten percent of a participant's regular salary paid during an offering period. A
participant, generally, may not alter his or her rate of payroll deduction for
the offering period after the commencement of an offering period. Payroll
deductions for a participant commence on the first pay day following the
offering date and continue to the end of the offering unless sooner terminated
as provided in the Purchase Plan. No interest is paid on payroll deductions
received or held by the Company under the Purchase Plan. All payroll deductions
made by a participant are credited to his or her account under the Purchase Plan
and are deposited with the general funds of the Company. All payroll deductions
received or held by the Company under the Purchase Plan may be used by the
Company for any corporate purposes.
The number of Shares which may be purchased by each participant under the
Purchase Plan is that number of full shares which the accumulated payroll
deductions in the participant's account at the end of the offering period will
purchase at the applicable purchase price.
Notwithstanding the foregoing, no participant may purchase under the
Purchase Plan more than $25,000 worth of Common Stock in any calendar year, or
5,000 shares of Common Stock during any offering period.
Withdrawal. While each employee who participates in the Purchase Plan is
required to sign an agreement authorizing payroll deductions, a participant may
withdraw from the Purchase Plan, in whole but not in part, at any time prior to
the last business day of each offering period by delivering a withdrawal notice
to the Company or participating subsidiary, as the case may be, and thereafter
the entire balance of his or her deductions not theretofore used to purchase
Shares under the Purchase Plan will be promptly refunded.
A participant who withdraws from the Purchase Plan must file a new
authorization at least ten days before the commencement of an offering period in
order to re-enter the Purchase Plan. Following a withdrawal from the Purchase
Plan by an officer of the Company, such officer may not participate again in the
Purchase Plan for at least six months from the date of withdrawal. Officers of
31
35
the Company must hold Shares purchased under the Purchase Plan for six months
from the date the Shares are purchased by such persons under the Purchase Plan.
Issuance of Shares of Common Stock. A participant receives statements of
ownership for Shares purchased under the Purchase Plan, or may elect to receive
stock certificates instead of statements of ownership. Pursuant to certain
amendments to the Purchase Plan adopted by the Board, stock certificates,
however, are not furnished for Shares purchased during offering periods
commencing on or after August 1, 1995 until at least two years have elapsed from
the date of purchase of such Shares, unless the participant's employment with
the Company or a participating subsidiary is terminated by the Company or by
such subsidiary or a hardship has occurred requiring a sale or transfer of the
Shares prior to the expiration of the two-year period. Shares purchased under
the Purchase Plan are issued only in the name of the participant, or if his or
her authorization so specifies, in the name of the participant and another
person of legal age as joint tenants with rights of survivorship.
Nonassignability. No rights of a participant under the Purchase Plan may
be transferred or assigned to, or availed of by, any other person.
Amendment and Termination of the Purchase Plan. The Purchase Plan may be
terminated at any time by the Board. The Board also reserves the right to amend
the Purchase Plan from time to time, except with respect to the following
matter, which shall require the affirmative vote of a majority of the votes cast
at a duly held meeting of the Company's shareholders: any increase in the
aggregate number of shares which may be issued under the Purchase Plan (other
than an increase merely reflecting a change in capitalization such as a stock
dividend or stock split-up). A participant's rights under the Purchase Plan will
terminate when he or she ceases to be an employee because of retirement,
resignation, lay-off, discharge, death, leave of absence, or for any other
reason. A withdrawal notice will be considered as having been received from the
participant on the day his or her employment ceases, and all payroll deductions
not used to purchase Shares will be refunded.
If a participant's payroll deductions are interrupted by any legal process,
a withdrawal notice will be considered as having been received from him or her
on the day the interruption occurs.
Limitations on Sale or Transfer of Stock Purchased Under the Purchase
Plan. Shares of stock purchased under the Purchase Plan during the offering
periods commencing on or after August 1, 1995 must be held for at least two
years from the date of purchase, unless the participant's employment with the
Company or a participating subsidiary is terminated by the Company or such
subsidiary or a hardship occurs requiring an earlier sale or transfer. Persons
who have experienced a hardship and wish to sell or transfer their Shares prior
to the expiration of the two-year period must notify the General Counsel of the
Company in writing of their intention to sell or transfer and the nature of the
hardship. If there is a reasonable basis for believing that a hardship does not
exist, the General Counsel may withhold his consent. If consent is granted, the
Company may, at its option, purchase the Shares at the market price for the
Shares at closing on the last trading day preceding receipt of the notification
of intent to transfer.
Capital Changes. In the event of any change in the Company's
capitalization, such as a stock split or stock dividend, which results in an
increase or decrease in the number of outstanding shares of Common Stock of the
Company, appropriate adjustments shall be made in the Shares, and purchase price
thereof, subject to purchase under the Purchase Plan.
32
36
Federal Income Tax Information
The Purchase Plan and the right of the employees to make purchases
thereunder are intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, an employee generally will not recognize
income as a result of participation in the Purchase Plan prior to the date of
disposition of shares acquired under the Purchase Plan or the employee's death.
If the shares are disposed of more than two years after their purchase under the
Purchase Plan (the "required holding period") or in the event of the employee's
death, the employee will recognize compensation income equal to the lesser of
(i) the excess, if any, of the fair market value of the shares on the date of
disposition or the employee's death over the amount the employee paid for the
shares, or (ii) 15 percent of the fair market value of the shares as of the
first day of the applicable offering period. In addition, an employee will
recognize capital gain equal to the excess, if any, of the proceeds from the
disposition over the sum of the purchase price by the employee for the shares
and the amount of ordinary income the employee recognizes. If the proceeds from
disposition of the shares are less than their purchase price paid by the
employee, the employee will be entitled to a long-term capital loss. No
deduction for federal income taxes will be allowed to the Company upon an
employee's death or upon the disposition of shares after the required holding
period.
If shares acquired under the Purchase Plan are held less than the required
holding period, the excess, if any, of the fair market value of the shares at
the time of purchase under the Purchase Plan over the price the employee paid
for the shares will be treated as ordinary income to the employee at the time of
disposition of the shares. In addition, the employee will recognize capital gain
equal to the excess, if any, of the proceeds from sale over the fair market
value of the shares at the time of purchase by the employee. If the proceeds
from disposition of the shares are less than the fair market value of the shares
on the date of purchase by the employee, the employee will recognize a capital
loss equal to the amount of such difference. The Company will be entitled to a
deduction for federal income tax purposes equal to the amount of ordinary income
an employee recognizes upon disposition of the shares.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the income tax laws of any
municipality, state or foreign country in which a participant may reside.
Participation in the Purchase Plan
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her respective
determination as to the level of payroll deductions. Accordingly, future
purchases under the Purchase Plan are not determinable.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast at the Annual Meeting
will be required to approve the proposed increase in the number of shares of
Common Stock reserved for issuance under the Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER THE PURCHASE PLAN.
33
37
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (ITEM 6)
Subject to ratification by the shareholders, the Board has selected
Deloitte & Touche LLP as independent auditors to audit the financial statements
of the Company and its subsidiaries for the year ending December 31, 1997.
Deloitte & Touche LLP has served as the Company's auditors since 1986. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting of
Shareholders and will have an opportunity to make a statement and respond to
appropriate questions. If the appointment is not ratified, the Board will
appoint another firm as the independent auditors for the year ending December
31, 1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE RATIFICATION OF DELOITTE
& TOUCHE LLP AS INDEPENDENT AUDITORS, TO AUDIT THE FINANCIAL STATEMENTS OF THE
COMPANY AND ITS SUBSIDIARIES FOR THE YEAR ENDING DECEMBER 31, 1997.
COST OF SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by the Company and the
solicitation will be made by use of the mails, personally or by telephone or
telegraph by officers, directors and regular employees of the Company and its
subsidiaries who will not be additionally compensated therefore. The firm of
McCormick & Pryor Ltd. has been retained to assist with the solicitation of
broker and nominee Proxies at a cost of approximately $7,500. The Company will
also reimburse banks, brokers, nominees and other fiduciaries for reasonable
expenses incurred by them in forwarding the Proxy material to the beneficial
owners of Shares.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company's Proxy
Statement and form of Proxy relating to the Company's 1998 Annual Meeting of
Shareholders must be received by the Secretary of the Company at 1000 Winter
Street, Suite 4300, Waltham, Massachusetts 02154, not later than December 11,
1997. Nothing in this paragraph shall be deemed to require the Company to
include in its Proxy Statement and form of Proxy for such meeting any
shareholder proposal that does not meet the requirements of the SEC in effect at
the time.
34
38
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
MAY 28, 1997
AND
PROXY STATEMENT
[PRIMARK LOGO]
2600-PS-97
39
[PRIMARK LOGO]
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, MA 02154.1248
Tel 617.466.6611
Fax 617.890.6187
April 10, 1997
Participant in the Primark Corporation
Savings and Stock Ownership Plan
RE: PRIMARK ANNUAL MEETING - 1997
Dear Participant:
This is to advise you of your right under the Primark Corporation Savings and
Stock Ownership Plan to direct the Trustee to vote your interest in the Common
Stock of Primark Corporation held by the Trustee under the plan at this year's
Annual Meeting of Shareholders. Shareholders of record at the close of business
on March 31, 1997 will be entitled to vote at the meeting. Any shares for which
the Trustee has not received instructions from Savings and Stock Ownership Plan
members will be voted in the same proportion as directed shares of Primark
Corporation Common Stock under the plan are voted. Thus, it is important that
you send your instruction to the Trustee promptly.
Enclosed is a copy of Primark's Annual Report for the year 1996, the notice of
the annual meeting which is to be held on May 28, 1997, and the related proxy
material. YOU MAY EXERCISE YOUR RIGHT TO VOTE BY SPECIFYING YOUR CHOICES ON THE
ENCLOSED VOTING AUTHORIZATION CARD AND SIGNING, DATING, AND RETURNING IT IN THE
ENCLOSED ENVELOPE. THE TRUSTEE WILL COMPLY WITH YOUR INSTRUCTIONS AND TREAT THEM
IN COMPLETE CONFIDENCE.
Very truly yours,
Primark Corporation, as Plan Sponsor
By: /s/ Joseph E. Kasputys
Enclosures
40
[Tasc Logo] SHAPING things to come.
TASC
55 Walkers Brook Drive
Reading, MA 01867.3297
Tel 617.942.2000
Fax 617.942.7100
www.tasc.com
April 10, 1997
Participant in the TASC Profit
Sharing and Stock Ownership Plan
RE: PRIMARK ANNUAL MEETING - 1997
Dear Participant:
This is to advise you of your right under the TASC Profit Sharing and Stock
Ownership Plan to direct the Trustee to vote your interest in the Common Stock
of Primark Corporation held by the Trustee under the plan at this year's Annual
Meeting of Shareholders. Shareholders of record at the close of business on
March 31, 1997 will be entitled to vote at the meeting. Any shares for which the
Trustee has not received instructions from TASC Profit Sharing and Stock
Ownership Plan members will be voted in the same proportion as directed shares
of Primark Corporation Common Stock under the plan are voted. Thus, it is
important that you send your instruction to the Trustee promptly.
Enclosed is a copy of Primark's Annual Report for the year 1996, the notice of
the annual meeting which is to be held on May 28, 1997, and the related proxy
material. YOU MAY EXERCISE YOUR RIGHT TO VOTE BY SPECIFYING YOUR CHOICES ON THE
ENCLOSED VOTING AUTHORIZATION CARD AND SIGNING, DATING, AND RETURNING IT IN THE
ENCLOSED ENVELOPE. THE TRUSTEE WILL COMPLY WITH YOUR INSTRUCTIONS AND TREAT THEM
IN COMPLETE CONFIDENCE.
Very truly yours,
TASC, Inc., as Plan Sponsor
By: /s/ Joseph E. Kasputys
Enclosures
41
DETACH HERE
PRIMARK CORPORATION
1000 Winter Street, Suite 4300
P Waltham, Massachusetts 02154
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O The signatory(ies) hereto appoint Joseph E. Kasputys, Michael R. Kargula
and Stephen H. Curran, and each of them, as Proxies, with the power of
X substitution, to vote all shares of Common Stock of Primark Corporation
held of record by the signatory(ies) on March 31, 1997, at the 1997 Annual
Y Meeting of Shareholders to be held on May 28, 1997, or any adjournments
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF DIRECTORS AND "FOR" THE PROPOSALS. PLEASE MARK, SIGN, DATE
AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
42
DETACH HERE
|X| Please mark
votes as in
this example.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE 2. TO APPROVE AN AMENDMENT TO THE | | | | | |
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTORS AND COMPANY'S ARTICLES OF INCOR-
"FOR" PROPOSALS 2-6. PORATION to increase the authorized
1. Election of Directors: shares of Common Stock from 65,000,000
Nominees: Kevin J. Bradley, John C. Holt, Joseph E. Kasputys, to 100,000,000.
Steven Lazarus, Patricia McGinnis, Jonathan Newcomb, and FOR AGAINST ABSTAIN
Constance K. Weaver. 3. TO APPROVE A NEW EMPLOYMENT | | | | | |
FOR WITHHELD AND RELATED AGREEMENTS WITH
| | | | MR. JOSEPH E. KASPUTYS.
FOR AGAINST ABSTAIN
4. TO APPROVE AN AMENDMENT TO THE | | | | | |
1992 STOCK OPTION PLAN to limit the
number of shares subject to option that
may be granted to any participant in any
year.
FOR AGAINST ABSTAIN
| | MARK HERE | | 5. TO APPROVE AN INCRESE IN THE | | | | | |
--------------------------------------- FOR ADDRESS SHARES OF COMPANY COMMON
For all nominees except as noted above CHANGE AND STOCK RESERVED FOR ISSUANCE
NOTE BELOW UNDER THE 1992 EMPLOYEE STOCK
PURCHASE PLAN from 1,000,000 to
3,000,000.
FOR AGAINST ABSTAIN
6. TO RATIFY THE SELECTION OF | | | | | |
DELOITTE & TOUCHE LLP as inde-
pendent auditors for the year ending
December 31, 1997.
7. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Note: Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, personal representative,
trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
Signature: Date Signature: Date
----------------------------------- -------------- ----------------------------------- ---------
43
DETACH HERE
PRIMARK CORPORATION
1000 Winter Street, Suite 4300
Waltham, Massachusetts 02154
THIS VOTING AUTHORIZATION IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
I hereby acknowledge receipt of the proxy soliciting material relative to
the Annual Meeting of Shareholders of Primark Corporation called for May 28,
1997. As to my interest in the Common Stock of Primark Corporation held by
Fidelity Management Trust Company as Trustee under the Primark Corporation
Savings and Stock Ownership Plan, I hereby instruct the Trustee to vote in
accordance with the directions on this card.
THIS VOTING AUTHORIZATION WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS VOTING AUTHORIZATION WILL
BE VOTED IN THE SAME PROPORTION AS DIRECTED SHARES OF PRIMARK CORPORATION COMMON
STOCK UNDER THE PLAN ARE VOTED WITH RESPECT TO THE ELECTION OF DIRECTORS AND
WITH RESPECT TO THE PROPOSALS. PLEASE MARK, SIGN, DATE AND RETURN THE VOTING
AUTHORIZATION CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
44
DETACH HERE
|X| Please mark
votes as in
this example.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE 2. TO APPROVE AN AMENDMENT TO THE | | | | | |
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTORS AND COMPANY'S ARTICLES OF INCOR-
"FOR" PROPOSALS 2-6. PORATION to increase the authorized
1. Election of Directors: shares of Common Stock from 65,000,000
Nominees: Kevin J. Bradley, John C. Holt, Joseph E. Kasputys, to 100,000,000.
Steven Lazarus, Patricia McGinnis, Jonathan Newcomb, and FOR AGAINST ABSTAIN
Constance K. Weaver. 3. TO APPROVE A NEW EMPLOYMENT | | | | | |
FOR WITHHELD AND RELATED AGREEMENTS WITH
| | | | MR. JOSEPH E. KASPUTYS.
FOR AGAINST ABSTAIN
4. TO APPROVE AN AMENDMENT TO THE | | | | | |
1992 STOCK OPTION PLAN to limit the
number of shares subject to option that
may be granted to any participant in any
year.
FOR AGAINST ABSTAIN
| | MARK HERE | | 5. TO APPROVE AN INCREASE IN THE | | | | | |
--------------------------------------- FOR ADDRESS SHARES OF COMPANY COMMON
For all nominees except as noted above CHANGE AND STOCK RESERVED FOR ISSUANCE
NOTE BELOW UNDER THE 1992 EMPLOYEE STOCK
PURCHASE PLAN from 1,000,000 to
3,000,000.
FOR AGAINST ABSTAIN
6. TO RATIFY THE SELECTION OF | | | | | |
DELOITTE & TOUCHE LLP as inde-
pendent auditors for the year ending
December 31, 1997.
7. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Signature: Date
----------------------------------- --------------
45
DETACH HERE
PRIMARK CORPORATION
1000 Winter Street, Suite 4300
Waltham, Massachusetts 02154
THIS VOTING AUTHORIZATION IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
I hereby acknowledge receipt of the proxy soliciting material relative to
the Annual Meeting of Shareholders of Primark Corporation called for May 28,
1997. As to my interest in the Common Stock of Primark Corporation held by
Fidelity Management Trust Company as Trustee under the TASC, Inc. Profit
Sharing and Stock Ownership Plan, I hereby instruct the Trustee to vote in
accordance with the directions on this card.
THIS VOTING AUTHORIZATION WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS VOTING AUTHORIZATION WILL
BE VOTED IN THE SAME PROPORTION AS DIRECTED SHARES OF PRIMARK CORPORATION COMMON
STOCK UNDER THE PLAN ARE VOTED WITH RESPECT TO THE ELECTION OF DIRECTORS AND
WITH RESPECT TO THE PROPOSALS. PLEASE MARK, SIGN, DATE AND RETURN THE VOTING
AUTHORIZATION CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
46
DETACH HERE
|X| Please mark
votes as in
this example.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE 2. TO APPROVE AN AMENDMENT TO THE | | | | | |
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTORS AND COMPANY'S ARTICLES OF INCOR-
"FOR" PROPOSALS 2-6. PORATION to increase the authorized
1. Election of Directors: shares of Common Stock from 65,000,000
Nominees: Kevin J. Bradley, John C. Holt, Joseph E. Kasputys, to 100,000,000.
Steven Lazarus, Patricia McGinnis, Jonathan Newcomb, and FOR AGAINST ABSTAIN
Constance K. Weaver. 3. TO APPROVE A NEW EMPLOYMENT | | | | | |
FOR WITHHELD AND RELATED AGREEMENTS WITH
| | | | MR. JOSEPH E. KASPUTYS.
FOR AGAINST ABSTAIN
4. TO APPROVE AN AMENDMENT TO THE | | | | | |
1992 STOCK OPTION PLAN to limit the
number of shares subject to option that
may be granted to any participant in any
year.
FOR AGAINST ABSTAIN
| | MARK HERE | | 5. TO APPROVE AN INCREASE IN THE | | | | | |
--------------------------------------- FOR ADDRESS SHARES OF COMPANY COMMON
For all nominees except as noted above CHANGE AND STOCK RESERVED FOR ISSUANCE
NOTE BELOW UNDER THE 1992 EMPLOYEE STOCK
PURCHASE PLAN from 1,000,000 to
3,000,000.
FOR AGAINST ABSTAIN
6. TO RATIFY THE SELECTION OF | | | | | |
DELOITTE & TOUCHE LLP as inde-
pendent auditors for the year ending
December 31, 1997.
7. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Signature: Date
----------------------------------- --------------