SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SECURITY CAPITAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
<PAGE>
May 3, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual
Meeting of Stockholders of Security Capital Corporation (the
"Company"), which will be held in Conference Room 45A, 45th
Floor, 101 Park Avenue, New York, New York, on Tuesday, June
22, 1999, commencing at 10:00 a.m. (local time). We look
forward to greeting as many of our stockholders as are able to
be with us.
At the meeting, you will be asked to consider and vote
upon (i) the election of four directors; and (ii) such other
business as may properly come before the meeting and any
adjournment thereof.
We hope you will find it convenient to attend the meeting
in person. WHETHER OR NOT YOU EXPECT TO ATTEND, TO ASSURE YOUR
REPRESENTATION AT THE MEETING AND THE PRESENCE OF A QUORUM,
PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED
PROXY, for which a return envelope is provided. No postage
need be affixed to the Proxy if it is mailed in the United
States.
The Company's Annual Report for the fiscal year ended
December 31, 1998 is being mailed to you together with the
enclosed proxy materials.
Sincerely,
Brian D. Fitzgerald
CHAIRMAN OF THE BOARD OF DIRECTORS
A. George Gebauer
PRESIDENT
<PAGE>
SECURITY CAPITAL CORPORATION
1111 NORTH LOOP WEST, SUITE 400
HOUSTON, TEXAS 77008
(713) 880-7100
------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Annual Meeting") of Security Capital
Corporation (the "Company") will be held in Conference Room
45A, 45th Floor, 101 Park Avenue, New York, New York, on
Tuesday, June 22, 1999, commencing at 10:00 a.m. (local time),
for the following purposes:
(1) To elect four directors to hold office until the
next annual meeting and until their successors
are duly elected and qualified; and
(2) To transact such other business as may properly
come before the Annual Meeting and any
adjournment thereof.
Only holders of record of the Common Stock or the Class A
Common Stock of the Company at the close of business on April
26, 1999 are entitled to notice of and to vote at the Annual
Meeting and any adjournment thereof.
By Order of the Board of Directors,
A. GEORGE GEBAUER
SECRETARY
May 3, 1999
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE>
SECURITY CAPITAL CORPORATION
1111 NORTH LOOP WEST, SUITE 400
HOUSTON, TEXAS 77008
(713) 880-7100
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is being furnished in connection with the solicitation
of Proxies by and on behalf of the Board of Directors of Security Capital
Corporation (the "Company") to be used at the Annual Meeting of Stockholders
to be held on Tuesday, June 22, 1999, and any adjournment thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting. The Company's Annual Report for the fiscal year ended December 31, 1998
accompanies this Proxy Statement. This Proxy Statement and accompanying
materials are expected to be first sent or given to stockholders of the Company
on May 10, 1999.
The close of business on April 26, 1999 has been fixed as the record date
for the determination of the stockholders entitled to notice of and to vote at
the Annual Meeting. Only holders of record as of that date of shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock"), and of
the Company's Class A Common Stock, $.01 par value per share (the "Class A
Common Stock"), are entitled to notice of and to vote at the Annual Meeting.
The Common Stock and the Class A Common Stock are sometimes collectively
referred to herein as the "Common Equity."
Each share of the Common Stock or the Class A Common Stock entitles the
holder thereof to one vote per share on each matter presented to the
stockholders for approval at the Annual Meeting. On April 26, 1999, there were
380 shares of the Common Stock and 6,442,309 shares of the Class A Common Stock,
for a total of 6,442,689 shares of the Common Equity, outstanding and entitled
to vote.
Execution of a Proxy by a stockholder will not affect such stockholder's
right to attend the Annual Meeting and to vote in person. Any stockholder who
executes a Proxy has a right to revoke it at any time before it is voted by
advising A. George Gebauer, Secretary of the Company, in writing of such
revocation, by executing a later-dated Proxy which is presented to the Company
at or prior to the Annual Meeting, or by appearing at the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not in and of itself
constitute revocation of a Proxy. The Board of Directors has retained D.F. King
& Co., Inc. to assist in the solicitation of Proxies.
Assuming a quorum, the four nominees receiving a plurality of the votes
cast at the Annual Meeting for the election of directors by holders of record as
of the record date of shares of the outstanding Common Equity, voting as a
single class, will be elected as directors. With regard to the election of
directors, votes may be cast in favor or withheld; votes that are withheld will
be counted for purposes of determining the presence or absence of a quorum on
the election of directors, but will have no other effect.
UNLESS SPECIFIED OTHERWISE, THE PROXIES WILL BE VOTED FOR THE ELECTION OF
ALL THE NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY UNTIL THE NEXT ANNUAL
MEETING AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED. IN THE
DISCRETION OF THE PROXY HOLDERS, THE PROXIES WILL ALSO BE VOTED FOR OR AGAINST
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. MANAGEMENT IS
NOT AWARE OF ANY OTHER MATTERS TO BE PRESENTED FOR ACTION AT THE ANNUAL MEETING.
The principal executive offices of the Company are located at 1111 North
Loop West, Suite 400, Houston, Texas 77008, and the Company's telephone number
there is (713) 880-7100.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table and the notes thereto set forth information, as of
April 26, 1999, with respect to the beneficial ownership of shares of each class
of equity securities of the Company by the only persons known to the Company to
have beneficial ownership of more than 5% of such class, by each director of the
Company, by each executive officer of the Company and by the directors and
executive officers of the Company as a group. Except as otherwise indicated,
each person is believed to exercise sole voting and dispositive power over the
shares reported.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
AS OF APRIL 26, 1999
-------------------------------------------------------------
PERCENTAGE
CLASS A OF
NAME AND ADDRESS COMMON PERCENTAGE COMMON PERCENTAGE COMMON
OF BENEFICIAL OWNER STOCK OF CLASS STOCK OF CLASS EQUITY
- ------------------------------------- ------ ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Brian D. Fitzgerald.................. 128 34.1% 5,223,243 81.1% 81.1%
One Pickwick Plaza
Suite 310, Greenwich
CT 06830(1)(2)
FGS, Inc............................. 128 34.1% 4,983,361 77.4% 77.4%
1105 North Market St.
Suite 1300, Wilmington,
DE 19894(1)(2)
Capital Partners, Inc................ -- -- 4,455,672 69.2% 69.2%
One Pickwick Plaza
Suite 310, Greenwich,
CT 06830(1)(2)
CP Acquisition, L.P. No. 1........... -- -- 4,455,672 69.2% 69.2%
1105 North Market St.
Suite 1300, Wilmington,
DE 19894(1)(2)
FGS Partners, L.P.................... -- -- 4,455,672 69.2% 69.2%
One Pickwick Plaza
Suite 310, Greenwich,
CT 06830(1)(2)
William T. Bozarth................... -- -- -- -- --
A. George Gebauer(1)(2).............. -- -- 89,198 1.7% 1.7%
Thomas J. Gochberg................... 1 * 8,709 * *
Larry M. Karren...................... -- -- 34 * *
All Directors and Executive Officers
as a Group (5 persons)............. 129 34.4% 5,321,184 82.6% 82.6%
</TABLE>
- ------------
* Less than one percent
(1) The following related entities are generally referred to as "Capital
Partners": (a) Capital Partners, Inc., a Connecticut corporation ("CP
Inc."), of which Brian D. Fitzgerald is the sole stockholder and director,
and A. George Gebauer is an officer; (b) Fitzgerald and Partners, a Delaware
general partnership ("F&P"), of which Messrs. Fitzgerald and Gebauer are
partners; (c) Capital Partners I, L.P., a New York limited partnership, of
which CP Inc. and F&P are the general partners; and (d) 11 related Delaware
limited partnerships, known collectively as "Capital Partners II," as
follows: (i) CP Acquisition, L.P. No. 1 ("CP Acquisition"); (ii) CP
Acquisition, L.P. No. 4A; (iii) CP Acquisition, L.P. No. 4B; (iv) CP
Acquisition, L.P. No. 5A; (v) CP Acquisition, L.P. No. 5B; (vi) CP
Acquisition, L.P. No. 6A; (vii) CP Acquisition, L.P. No. 6B; (viii) CP
Acquisition, L.P. No. 7A; (ix) CP Acquisition, L.P. No. 7B; (x) CP
Acquisition, L.P. No. 8A; and (xi) CP Acquisition, L.P. No. 8B. CP Inc.,
FGS, Inc. a Delaware corporation ("FGS"), of which Mr. Fitzgerald is the
controlling stockholder, president, treasurer and a director, and FGS
Partners, L.P., a Connecticut limited partnership, of which CP Inc. is
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
2
<PAGE>
the general partner, are the general partners of the 11 related
partnerships.
Brian D. Fitzgerald owns of record 239,882 shares of the Class A Common
Stock. CP Acquisition owns of record 4,455,672 shares of the Class A Common
Stock and FGS owns of record 527,689 shares of the Class A Common Stock and
128 shares of the Common Stock.
(2) Mr. Fitzgerald may be deemed to own beneficially the 239,882 shares of the
Class A Common Stock owned of record by him, the 4,455,672 shares of the
Class A Common Stock owned of record by CP Acquisition and the 527,689
shares of the Class A Common Stock and the 128 shares of the Common Stock
owned of record by FGS. Mr. Fitzgerald has shared authority to vote and
dispose of the FGS-owned shares of the Class A Common Stock and the Common
Stock and disclaims beneficial ownership of such FGS-owned shares for all
other purposes. Mr. Gebauer is also a stockholder, officer and director of
FGS and an officer of CP Inc., but he disclaims beneficial ownership of
shares of the Class A Common Stock and the Common Stock owned of record by
such corporations for any purpose. The ownership noted above excludes the
82,453 shares of Class A Common Stock owned by the Fitzgerald Trust (of
which Mr. Fitzgerald's brother is sole trustee and Mr. Fitzgerald's minor
children are sole beneficiaries), as to which beneficial ownership is
disclaimed for all purposes.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Four directors are to be elected to hold office until the next annual
meeting and until their successors are duly elected and qualified. The names of
the four nominees for election as directors for whom votes will be cast pursuant
to the Proxies solicited hereby are set forth below. All of the nominees listed
below are expected to serve as directors if they are elected. If any nominee
should decline or be unable to accept such nomination or to serve as a director
(an event which the Board of Directors does not now expect), the Board of
Directors reserves the right to nominate another person or to vote to reduce the
size of the Board of Directors. In the event another person is nominated, the
Proxy holders intend to vote the shares to which the Proxy relates for the
election of the person nominated by the Board of Directors. There is no
cumulative voting for directors.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATIONS DURING THE LAST
NAME AGE SINCE FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------ --- -------- -------------------------------------
<S> <C> <C> <C>
William T. Bozarth............ 58 1988 Deputy Controller of Citigroup, Inc.
since October 1998; Vice President
and Controller of Travelers Group
Inc., a diversified financial
services company, from November 1991
until October 1998; Senior Vice
President and Chief Financial Officer
of Gulf Insurance Group, a property
and casualty insurance company, since
September 1990; Executive Vice
President of the Company from March
1989 until January 1990; Senior Vice
President of the Company from August
1984 until March 1989; a former
director or officer of various
present and former subsidiaries or
affiliates of the Company; and,
previously, a Partner of Arthur
Andersen & Co., New York, New York,
public accountants.
Brian D. Fitzgerald........... 54 1990 Chairman of the Board of the Company
since January 1990; President,
Treasurer and a director of FGS since
March 1989; and a partner, general
partner, stockholder, officer and/or
director of various Capital Partners
entities for more than five years.
Mr. Fitzgerald was a director of
Bryant Universal Roofing, Inc.
("Bryant"), a privately-held Dela-
ware corporation that on May 17, 1996
filed a petition for bankruptcy under
Chapter 11 of the U.S. Bankruptcy
Code in the United States Bankruptcy
Court for the District of Arizona.
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATIONS DURING THE LAST
NAME AGE SINCE FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------ --- -------- -------------------------------------
<S> <C> <C> <C>
A. George Gebauer............. 66 1990 President of the Company since
January 1990 and Secretary of the
Company since February 1994; Vice
President, Secretary and a director
of FGS since March 1989; and a
partner, general partner,
stockholder, officer and/or director
of various Capital Partners entities
for more than five years. Mr. Gebauer
was formerly a director and executive
officer of Alpha Modular Systems,
Inc., a privately-held California
corporation which had an involuntary
petition under Chapter 7 of the U.S.
Bankruptcy Code filed against it on
March 18, 1994 by certain of its
creditors in the United States
Bankruptcy Court for the Central
District of California, San
Bernardino division. Mr. Gebauer also
was a director of Bryant, a
privately-held Delaware corporation
that on May 17, 1996 filed a petition
for bankruptcy under Chapter 11 of
the U.S. Bankruptcy Code in United
States Bankruptcy Court for the
District of Arizona.
Thomas J. Gochberg............ 60 1979 President of TJG Holdings, Inc., a
New York corporation which is the
general partner of various real
estate investment entities, since
July 1991; President and Chief
Executive Officer of the Company from
its inception in November 1979 until
January 1990; a former director or
officer of various present and former
subsidiaries or affiliates of the
Company; and a director of Smith
Barney, Inc., New York, New York, an
investment banking holding company,
from February 1979 until March 1984.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOUR
NOMINEES FOR DIRECTORS.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held two meetings and acted by written consent three
times during the year ended December 31, 1998. In addition, a special committee
of the Board of Directors met once during the year ended December 31, 1998. Each
of the directors attended at least 75% of the aggregate number of meetings of
the Board and all committees on which such director served that were held during
the fiscal year ended December 31, 1998.
The Board of Directors has an Audit Committee. The Audit Committee, which
is presently composed of Messrs. Gebauer, Gochberg and Bozarth, selects the
independent auditors, consults with such auditors and with management with
regard to the adequacy of the Company's internal accounting controls, considers
any non-audit functions to be performed by the independent auditors and carries
out such activities related to the financial statements of the Company as the
Board of Directors shall from time to time request. The Audit Committee acted by
written consent once with respect to the fiscal year ended December 31, 1998.
4
<PAGE>
EXECUTIVE COMPENSATION
1. SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth certain information
about the cash and non-cash compensation earned by or awarded to the chief
executive officer of the Company, A. George Gebauer, President and Secretary of
the Company, and to Brian D. Fitzgerald, the Chairman of the Board of the
Company, for services rendered to the Company during the fiscal years ended
December 31, 1998, December 31, 1997 and September 30, 1996 and for the three
month period from October 1 through December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS COMPENSATION
- ------------------------------------- ------------------------ ------ ------- -------------
<S> <C> <C> <C> <C>
A. George Gebauer ................... Fiscal Year 1998 (1) (1) (1)
President and Secretary Fiscal Year 1997 (1) (1) (1)
Fiscal Year 1996 (1) (1) (1)
Three-Month Period
from 10/1-12/31/96 (1) (1) (1)
Brian D. Fitzgerald ................. Fiscal Year 1998 (1) (1) (1)
Chairman of the Board Fiscal Year 1997 (1) (1) (1)
Fiscal Year 1996 (1) (1) (1)
Three-Month Period
from 10/1-12/31/96 (1) (1) (1)
</TABLE>
- ------------
(1) Messrs. Fitzgerald and Gebauer receive no compensation for their services as
officers of the Company. CP Inc., a corporation controlled by Mr. Fitzgerald
and for which Mr. Gebauer serves as an officer, is paid a management fee
pursuant to an Advisory Services Agreement, dated as of April 27, 1990 and
effective as of January 26, 1990 (the "Advisory Agreement"), between the
Company and CP Inc. Pursuant to the Advisory Agreement, CP Inc. provides
certain advisory services to the Company in the areas of investments,
general administration, corporate development, strategic planning,
stockholder relations, financial matters and general business policy. Upon
the acquisition of the assets of Pumpkin, Ltd. d/b/a Pumpkin Masters, Inc.
the Advisory Agreement was amended to increase the annual fee for such
services by an amount equal to the greater of $100,000 and 5% of the annual
EBITDA of Pumpkin (calculated as provided in the Asset Purchase Agreement,
dated as of June 27, 1997, effecting such purchase). The Advisory Agreement
was further amended in connection with the acquisition of Primrose School
Franchising Company, Metrocorp Properties, Inc. and The Jewel I, Inc. d/b/a
Primrose Country Day School (collectively, the "Primrose Companies") on
April 6, 1999 to increase the fee to the greater of $250,000 or 5% of the
Primrose Companies' annual EBITDA (as defined in the Stock Purchase
Agreement, dated as of April 6, 1999, effecting such purchase). During the
period from October 1, 1996 through December 31, 1996, CP Inc. was paid a
fee of $81,300. During fiscal 1997, CP Inc. was paid a fee of $375,000. In
addition, for additional services rendered in connection with the Company's
acquisition of Pumpkin, CP Inc. was paid an investment banking fee of
$120,000. CP Inc. was also reimbursed for approximately $6,700 of legal and
other expenses incurred by it on behalf of the Company in connection with a
prospective acquisition that failed to close. See "Certain Relationships
and Related Transactions."
2. OPTION/SAR GRANTS IN LAST FISCAL YEAR
No Options or SARs were granted to any executive officer of the Company
during the period from January 1, 1998 through December 31, 1998.
3. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
No Options or SARs were exercised by any executive officer of the Company
during the period from January 1, 1998 through December 31, 1998.
5
<PAGE>
4. LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS IN LAST FISCAL YEAR
No LTIP Awards were made to any executive officer of the Company during
period from January 1, 1998 through December 31, 1998.
5. COMPENSATION OF DIRECTORS
William T. Bozarth and Thomas J. Gochberg, who are not employees or
officers of the Company, receive an annual fee of $5,000 plus reasonable
expenses in connection with attendance at meetings of the Board of Directors or
any committee thereof, but do not receive any separate fee for attendance at
meetings. Messrs. Fitzgerald and Gebauer do not receive any annual fee, or any
fees for attendance at meetings.
6. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The Company does not have a Compensation Committee. Messrs. Gebauer and
Fitzgerald, directors and executive officers of the Company who receive no
salary or bonus, participate in any deliberations of the Board of Directors
concerning executive officer compensation.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Larry M. Karren, Vice President and Treasurer of the Company, is the only
executive officer who receives any compensation from the Company for service as
an officer of the Company. When the Company sold its interest in Foster
Insurance Services, Inc. in 1997, the Company and Mr. Karren agreed that, as a
result of his reduction in his duties resulting from the sale, he would be paid
a salary of $3,200 per month and would not be eligible for an annual bonus.
Other than with respect to Mr. Karren, the Board of Directors has not formulated
any specific policies with respect to compensation of its executive officers.
THE BOARD OF DIRECTORS
William T. Bozarth
Brian D. Fitzgerald
A. George Gebauer
Thomas J. Gochberg
6
<PAGE>
PERFORMANCE GRAPH
The performance graph below shows a comparison of the cumulative total
return, on a dividend reinvestment basis, measured at each fiscal year end and
calendar year end for the last five years assuming $100 invested on September
30, 1994 in the Class A Common Stock, the Company's selected peer group and the
Nasdaq Market Index. The selected peer group consists of Department 56 Inc.,
Enesco Group Inc. and Russ Berrie & Co. Inc. These companies are seasonal
products companies and are considered by the Company's management to be
competitors of the Company. The returns of each peer group company have been
weighted according to its stock market capitalization for purposes of arriving
at a peer group average.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SECURITY CAPITAL CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
9/94 12/94 9/95 12/95 9/96 12/96 12/97 12/98
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITY CAPITAL ........... 100.00 100.00 133.30 100.00 225.00 282.30 200.00 275.00
CUSTOMER SELECTED STOCK LIST 100.00 98.08 110.30 94.18 83.68 83.56 100.30 106.50
NASDAQ MARKET .............. 100.00 97.99 122.90 121.90 140.80 147.40 180.40 254.40
</TABLE>
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXCHANGE AGREEMENT; EXCHANGE OF CLASS A PREFERRED STOCK FOR CLASS A COMMON STOCK
In late 1997, CP Inc., on behalf of the holders of all the outstanding
shares of the Class A Preferred Stock, proposed that the Company consider an
exchange of all of the outstanding shares of the Class A Preferred Stock, and
all accrued dividends thereon, for shares of the Class A Common Stock, at an
exchange price per share equal to $4.00 (the "Exchange"). In light of the
affiliations of Mr. Fitzgerald and Mr. Gebauer to CP Inc., the Company's Board
of Directors established a Special Committee composed of Messrs. Bozarth and
Gochberg to review, analyze and negotiate the proposed Exchange or other
possible transaction. After reviewing and considering information about the
Class A Preferred Stock and the accrued dividends thereon, including the
historical trading prices of the Class A Common Stock, the impact of the
Exchange on the Company's financial condition and results of operations, the
potential uses of the cash to be saved by the Company as a result of the
Exchange and the terms and provisions of the Exchange Agreement (as defined
below), including Mr. Fitzgerald's undertaking described in the next paragraph,
the Special Committee approved the Exchange on January 5, 1998.
The Exchange was effective as of December 31, 1997 (the "Exchange Date")
pursuant to an Exchange Agreement among the Company, each holder of Class A
Preferred Stock and Mr. Fitzgerald (the "Exchange Agreement"). As of the
Exchange Date, 30,000 shares of Class A Preferred Stock were outstanding and
such shares had an aggregate liquidation preference of $3,000,000, exclusive of
accrued dividends thereon of $1,987,500. Accordingly, in accordance with the
Exchange Agreement, such shares of Class A Preferred Stock were exchanged for
1,246,875 shares of Class A Common Stock. The Exchange Agreement also includes
an undertaking from Mr. Fitzgerald to the effect that neither he nor any entity
controlled by him, during the five-year period following the Exchange Date, will
propose or effect any Rule 13e-3 transaction (i.e., a "going private"
transaction) within the meaning of Rule 13e-3 under the Securities Exchange Act
of 1934, as amended. In addition, pursuant to agreements made in the Exchange
Agreement, the Company amended its Amended and Restated Certificate of
Incorporation to delete Article Twelfth (which contains certain anti-takeover
provisions, including higher voting requirements for certain business
combinations) therefrom.
ADVISORY SERVICES AGREEMENT; ACQUISITION CRITERIA AND PROCEDURES
On April 27, 1990, effective as of January 26, 1990, the Company entered
into the Advisory Agreement with CP Inc., an entity controlled by Mr. Fitzgerald
and for which Mr. Gebauer serves as an officer. Pursuant to the Advisory
Agreement, CP Inc. provides certain advisory services in the areas of
investments, general administration, corporate development, strategic planning,
stockholder relations, financial matters and general business policy. Upon the
acquisition of Pumpkin, the Advisory Agreement was amended to increase the
annual fee for such services by an amount equal to the greater of $100,000 and
5% of the annual EBITDA of Pumpkin (calculated as provided in the Asset Purchase
Agreement, dated as of June 27, 1997, effecting such purchase). The Advisory
Agreement was further amended in connection with the acquisition of the Primrose
Companies on April 6, 1999 to increase the fee to the greater of $250,000 or 5%
of the Primrose Companies' annual EBITDA (as defined in the Stock Purchase
Agreement, dated as of April 6, 1999, effecting such purchase). Such fee is
subject to appropriate adjustment should the scope of operations of the Company
change again, whether from an acquisition or otherwise. In this regard, CP Inc.
would likely be paid an annual fee for ongoing advisory services following an
acquisition of no more than 4% to 5% of the acquired company's annual operating
profit. Pursuant to the Advisory Agreement and otherwise, no compensation is
paid to the current Chairman of the Board (Mr. Fitzgerald), President and
Secretary (Mr. Gebauer) and Assistant Secretary (Joan E. Wolff) in their
respective capacities as such. During fiscal 1998, CP Inc. was paid $425,000 in
fees and reimbursed for expenses incurred by it of approximately $19,700. In
addition, in 1998, the Company paid approximately $84,500 in expenses, and
reimbursed approximately $17,600 of expenses incurred by CP Inc. on behalf of
the Company in connection with prospective acquisitions.
8
<PAGE>
The initial term of the Advisory Agreement was for one year commencing on
January 26, 1990; thereafter, the agreement will be automatically extended for
additional one-year periods unless either party gives 30 days' written notice to
the other of its intention to terminate. The Advisory Agreement was
automatically renewed for a one-year period commencing January 26, 1999.
The Advisory Agreement confirms that, from time to time, CP Inc. may
present acquisition opportunities to the Company that it believes may be
appropriate for the Company, but that CP Inc. is under no obligation to present
any or all acquisition candidates of which it is aware to the Company except for
insurance agency businesses. If the Company or any of its subsidiaries completes
any acquisition which was presented by CP Inc., the Company is obligated to pay
CP Inc. an investment banking fee at the usual and customary rate for
transactions of such size and complexity. This fee is likely to be in the range
of 1% to 1 1/2% of the aggregate purchase price for the acquisition.
While enterprises proposed for acquisition may be in any line of business,
to date the acquisitions in which CP Inc. and its affiliates have participated
have been primarily in the manufacturing, distribution and service fields.
Consistent with the investment strategies and principles utilized by CP Inc.,
the Company currently intends in general to focus upon, as potential targets,
established companies of medium size with histories of earnings and cash flow
stability, favorable earnings growth prospects, good management and strong
competitive positions. It is currently the Company's plan that acquisitions will
be undertaken directly or by one or more subsidiaries of the Company, with
financing achieved through equity contributed by the Company and debt and
subordinated debt raised at the subsidiary or parent level. It may be necessary
to issue preferred stock, common equity or warrants or options to purchase
common equity of the Company or of the acquired entity to one or more lenders in
order to obtain the financing. In some instances, it may be possible to obtain
financing from the sellers of the acquired entity in the form of subordinated
notes or earn-outs. Such sellers may also receive shares of common equity or
warrants or options to purchase the same of the Company or the acquired entity.
Typically, certain members of management of the acquired entity will be granted
incentives (usually equity-based) to remain with the acquired entity following
the acquisition. The companies targeted usually will have annual operating
profits of $3,000,000 to $10,000,000. Consequently, purchase prices should range
from approximately $10,000,000 to $75,000,000. Under such acquisition strategy,
significant uncertainties involving product life cycles, volatile market demand,
organization changes and other major turnaround aspects will generally
disqualify a prospect. The acquisition criteria set forth above are only
guidelines and may change from time to time in response to market conditions,
the Company's financial condition and results of operations and other factors.
In connection with its acquisition activities on behalf of the Company,
other portfolio companies and for its own account, CP Inc. maintains ongoing
relationships with hundreds of merger and acquisition intermediary firms,
ranging from large investment banks and accounting firms to small business
brokerages. In a typical year, CP Inc. receives over 500 leads on companies
which are or might be for sale. Of these, perhaps 50 are sufficiently close to
the Company's acquisition criteria set forth above to merit further
consideration.
CP Inc. may decide at some future date to present one of its portfolio
companies to the Company for possible acquisition. Any such acquisition would be
submitted to the Company's independent directors for their approval.
PRIVATE PLACEMENT OF CLASS A COMMON STOCK
In January 1999, CP Acquisition offered to purchase in a private placement
shares of the Class A Common Stock at a price per share equal to $4.00 in
connection with the financing by the Company of its purchase of the Primrose
Companies. In light of the affiliations of Mr. Fitzgerald and Mr. Gebauer to CP
Acquisition, the Company's Board of Directors established a Special Committee
composed of Messrs. Bozarth and Gochberg to review, analyze and negotiate the
proposed sale of shares of the Class A Common Stock. After reviewing and
considering information on the acquisition of the Primrose Companies and the
financing options available to the Company in connection with such acquisition,
the Special Committee agreed that acquiring the Primrose Companies was in the
best interest of the Company. After further
9
<PAGE>
discussions and negotiations with CP Acquisition, the Committee determined to
approve a sale of 1,136,364 shares of the Class A Common Stock at a price of
$4.40 per share to CP Acquisition in connection with the Company's financing of
the acquisition of the Primrose Companies. The sale was effected on April 6,
1999.
INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
selected Deloitte & Touche as independent auditors of the Company for the fiscal
year ending December 31, 1999. One or more representatives of Deloitte & Touche,
which has served as the Company's independent auditors since October 22, 1990,
are expected to be available by telephone at the Annual Meeting to respond to
appropriate questions. They will have an opportunity to make a statement if they
so desire.
In addition to performing customary audit services, Deloitte & Touche will
assist the Company with the preparation of its Federal and state income tax
returns, for which it will charge the Company its customary billing rates.
Material non-audit services will be approved by the Audit Committee prior to the
rendering of such services after due consideration of the effect of the
performance thereof on the independence of the auditors.
EXPENSES OF SOLICITATION
The total cost of the Proxy solicitation will be borne by the Company. In
addition to the mails, Proxies may be solicited by directors and officers of the
Company by personal interviews, telephone and telegraph. The Company has
retained D.F. King & Co., Inc., New York, New York, to assist in the
solicitation of Proxies for a fee estimated to be $1,500 plus reimbursement of
out-of-pocket expenses. It is anticipated that banks, brokerage houses and other
custodians, nominees and fiduciaries will forward soliciting material to the
beneficial owners of shares of Common Equity entitled to vote at the Annual
Meeting and that such persons will be reimbursed for their out-of-pocket
expenses incurred in this connection.
STOCKHOLDER PROPOSALS
Stockholders are hereby notified that, if they intend to submit proposals
for inclusion in the Company's Proxy Statement and Proxy for its 1999 Annual
Meeting of Stockholders, such proposals must be received by the Company no later
than December 31, 1999 and must otherwise be in compliance with applicable
Securities and Exchange Commission regulations.
MISCELLANEOUS
The Board of Directors knows of no other business to be presented at the
Annual Meeting. If, however, other matters properly do come before the Annual
Meeting, it is intended that the Proxies in the accompanying form will be voted
thereon in accordance with the judgment of the person or persons holding such
Proxies.
10
<PAGE>
STOCKHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. PROMPT RESPONSE WILL GREATLY FACILITATE
ARRANGEMENTS FOR THE ANNUAL MEETING, AND YOUR COOPERATION WILL BE APPRECIATED.
By Order of the Board of Directors,
A. GEORGE GEBAUER
SECRETARY
Houston, Texas
May 3, 1999
11
<PAGE>
SECURITY CAPITAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 22, 1999
The undersigned hereby appoints Brian D. Fitzgerald and A. George Gebauer,
and each of them, proxies, with full power of substitution, to appear on behalf
of the undersigned and to vote all shares of Common Stock (par value $.01) and
Class A Common Stock (par value $.01) of Security Capital Corporation (the
"Company") that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held in Conference Room 45A, 45th Floor, 101
Park Avenue, New York, New York on Tuesday, June 22, 1999, commencing at 10:00
a.m. (local time), and at any adjournment thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
LISTED NOMINEES AS DIRECTORS.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
PLEASE MARK BOX [X] in blue or black ink.
<TABLE>
<S> <C> <C> <C>
1. Election of FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote [ ] EXCEPTIONS [ ]
Directors: for all nominees listed below
</TABLE>
Nominees: WILLIAM T. BOZARTH, BRIAN D. FITZGERALD, A. GEORGE GEBAUER, THOMAS J.
GOCHBERG
(Instructions: To withhold authority to vote for any nominee, mark the
"Exceptions" box and write that nominee's name in the space provided below.)
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT
THEREOF.
Please sign exactly as your name appears on
the left. When signing as an attorney,
executor, administrator, trustee or
guardian, please give your full title. If
shares are held jointly, each holder should
sign.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE
ANNUAL MEETING [ ]
Dated: ______________________________, 1999
___________________________________________
Signature
___________________________________________
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
