UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DECEMBER 21, 2000
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Date of Report (Date of earliest event reported)
SECURITY CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 1-7921 13-3003070
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
THREE PICKWICK PLAZA, SUITE 310, GREENWICH, CT 06930
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(Address of principal executive offices)
(203) 625-0770
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(Registrant's telephone number, including area code)
FORMER ADDRESS: ONE PICKWICK PLAZA, SUITE 310, GREENWICH, CT 06930
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(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 21, 2000, Security Capital Corporation ("Security
Capital") completed its acquisition of Health Power, Inc., a Delaware
corporation ("Health Power"). Such acquisition was effected on such date through
the merger (the "Merger") of HP Acquisition Corp., a Delaware corporation ("HP
Acquisition") with and into Health Power, as the surviving corporation of the
Merger, pursuant to an Agreement and Plan of Merger dated as of June 8, 2000,
among Security Capital, HP Acquisition and Health Power, as amended by a First
Amendment to Agreement and Plan of Merger dated as of August 14, 2000, and a
Second Amendment to Agreement and Plan of Merger dated as of August 23, 2000
(the "Plan of Merger"). At the effective time of the Merger (the "Effective
Time"), which occurred upon the filing of a certificate of merger with the
Secretary of State of the State of Delaware, each of the 3,888,460 shares of
common stock, par value $.01 per share, of Health Power that was issued and
outstanding immediately prior to the Effective Time was converted into the right
to receive $6.94 in cash, for a total consideration payable to Health Power's
former stockholders of $26,985,913 (the "Consideration to Stockholders"). Such
amount was determined, in accordance with the Plan of Merger, by deducting from
the total purchase price payable by the acquiring parties of $36,250,000, (i)
outstanding indebtedness of Health Power as of the Effective Time, (ii) amounts
payable for the termination of all stock options of Health Power outstanding
immediately prior to the Effective Time, (iii) the amount payable to Dr. Bernard
F. Master (Health Power's Chairman prior to the Effective Time) to terminate his
employment agreement with Health Power, (iv) the amounts payable to the members
of the CMI Executive Team (as defined below) to terminate certain change in
control agreements between Health Power and such persons, and (v) the expenses
of Health Power incurred in connection with the Merger.
Health Power, through its operating subsidiaries, CompManagement,
Inc., CompManagement Health Systems, Inc., M&N Enterprises, Inc. and M&N Risk
Management, Inc. (collectively referred to with Health Power as the
"Companies"), provides cost containment and medical management services related
to workers' and unemployment compensation to employers in Ohio, Indiana,
Kentucky, Pennsylvania, West Virginia and Washington. Each of Robert J. Bossart,
Jonathan R Wagner, Richard T. Kurth, Randy E. Jones, Daniel R. Sullivan and Paul
A. Miller (collectively, the "CMI Executive Team") were directors and/or
executive officers of one or more of the Companies prior to the Effective Time.
Effective as of the Effective Time, each of the members of the CMI Executive
Team entered into a new five-year employment agreement with the Companies and WC
Holdings, Inc., a Delaware corporation which is a wholly-owned subsidiary of
Security Capital ("WC Holdings"), and continued to serve as directors and/or
executive officers of the Companies.
Prior to the Effective Time, and as a condition to Security
Capital's obligation to proceed with the Merger, the members of the CMI
Executive Team made equity investments in HP Acquisition totaling $2,000,000 in
exchange, collectively, for a 20% ownership interest in HP Acquisition
(collectively, the "CMI Executive Team Equity Investment"). Concurrently
therewith, Security Capital, through WC Holdings, Inc., made a total equity
investment of $8,000,000 in HP Acquisition in exchange for an 80% ownership
interest therein (the "SCC Equity Investment"). In
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accordance with the Plan of Merger, each share of HP Acquisition common stock
which was issued and outstanding as of the Effective Time was converted into one
share of Health Power common stock. Accordingly, the respective percentage
ownership interests of Security Capital and the members of the CMI Executive
Team in HP Acquisition were maintained with respect to Health Power. Immediately
following the Effective Time, each of the members of the CMI Executive Team and
one other executive employee received options to purchase additional shares of
common stock of Health Power equal, in the aggregate, to 5% of the outstanding
common stock prior to the grant of such options. The members of the CMI
Executive Team, Security Capital, Health Power, and WC Holdings entered into a
Stockholders' Agreement pursuant to which such members will be permitted, on a
periodic basis, to exchange a portion of their Health Power shares and options
for shares of the Class A Common Stock of Security Capital, with certain
registration rights also being granted in respect of any such Security Capital
shares so acquired, subject, however, to various restrictions and limitations,
including those imposed under the Loan Agreements (as defined below). Pursuant
to such agreement, the members of the CMI Executive Team also agreed to certain
restrictions on transfers of Health Power shares owned by them, as well as "drag
along" rights for Security Capital's benefit.
The total amount of funds necessary to consummate the Merger, and in
particular, to pay the Consideration to Stockholders, to make the payments to
terminate Health Power's outstanding stock options, to make the contract
termination payments to Dr. Master and the CMI Executive Team, to pay Health
Power's transaction expenses and to pay Security Capital's transaction expenses
was approximately $35,000,000. Such funds were provided through (i) the SCC
Equity Investment, (ii) the CMI Executive Team Equity Investment, and (iii) a
$17,000,000 term loan and an $8,000,000 revolving loan (collectively, the
"Senior Indebtedness") from Bank One, N.A. ("Bank One"), made pursuant to a Loan
Agreement (the "Loan Agreement") among each of the Companies, as borrowers, WC
Holdings, as guarantor, and Bank One, as lender. The SCC Equity Investment was
partially financed by a $6,000,000 loan (the "Subordinated Indebtedness") from
Banc One Mezzanine Corporation, a Delaware corporation ("Banc One Mezzanine") to
WC Holdings pursuant to a Note Purchase Agreement (the "Note Purchase Agreement"
and collectively referred to with the Loan Agreement as the "Loan Agreements")
among WC Holdings, as borrower, each of the Companies, as guarantors, and Banc
One Mezzanine, as purchaser.
The Subordinated Indebtedness is secured by a first priority
security interest in WC Holding's capital stock interest in Health Power, WC
Holding's interest in any payments made by Security Capital pursuant to the
Capital Contribution Agreement (as defined below) and WC Holding's right and
interest in a life insurance policy insuring one of its executive officers, as
required by the Note Purchase Agreement (the "First Priority Banc One Mezzanine
Collateral"), and a second priority security interest in substantially all other
assets of WC Holdings and the Companies. The Senior Indebtedness is secured by a
first priority security interest in substantially all of the assets of the
Companies and WC Holdings, excluding the First Priority Banc One Mezzanine
Collateral. The Subordinated Indebtedness has been expressly subordinated to the
Senior Indebtedness pursuant to an Intercreditor and Subordination Agreement
among the Companies, WC Holdings, Bank One and Banc One Mezzanine. In connection
with, and as a condition to Banc One Mezzanine's obligation
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to consummate the Subordinated Indebtedness, Security Capital entered into a
Capital Contribution Agreement in favor of Banc One Mezzanine pursuant to which
it agreed, in the event of noncompliance by WC Holdings with its obligations
under the Note Purchase Agreement, to pay directly to Banc One Mezzanine (for
the account of WC Holdings) such amounts in cash money as are sufficient to
cause WC Holdings to be in compliance, provided that the maximum amount that
Security Capital could be required to pay under the Capital Contribution
Agreement is $2,000,000 in the aggregate.
The Companies and WC Holdings became parties to a Tax Allocation
Agreement with Security Capital whereby the designated "Schedule A Subsidiary
Group", consisting of WC Holdings and the Companies, will compute its separate
consolidated federal income tax liability as if it had filed a separate tax
return, and pay such amount to Security Capital, subject to the terms of such
agreement. Security Capital also agreed to provide management advisory services
to the Companies in the areas of corporate development, strategic planning,
corporate finance and related matters, and general business policies, pursuant
to a Management Advisory Services Agreement in return for a fee equal to 5% of
EBITA, as such term is defined in the Loan Agreement. Security Capital entered
into a Fourth Amendment to Advisory Services Agreement with Capital Partners,
Inc. ("Capital Partners"), pursuant to which Capital Partners agreed to assist
Security Capital in providing such management advisory services in return for an
increase in the annual advisory fee payable to Capital Partners equal to 5% of
EBITA, as so defined. Payments of the management fee under the Management
Advisory Services Agreement and payments under the Tax Allocation Agreement are
subject to certain provisions of the Loan Agreements which could restrict or
prohibit the making of such payments in certain circumstances.
WC Holdings agreed to provided management consulting services to the
Companies in the areas of banking, insurance, risk management and other senior
management matters, pursuant to a Management Consulting Agreement in return for
an annual fee equivalent to the amounts due and payable by WC Holdings to Banc
One Mezzanine under the Note Purchase Agreement during each applicable year. CMI
also adopted a deferred compensation plan authorizing the grant of deferred
compensation awards to key employees, officers and directors of CMI in an amount
not to exceed, in the aggregate, 25% of the payments due under the Note Purchase
Agreement, and granted awards to the members of the CMI Executive Team, up to
the maximum amount authorized, on a proportionate basis with their respective
ownership interests in Health Power as of the Effective Time. Pursuant to the
plan, and as required by the Loan Agreements, no award under the plan shall
become payable until all obligations in respect of the Senior Indebtedness and
the Subordinated Indebtedness have been paid in full.
Prior to the Effective Time, the common stock of Health Power was
registered under Section 12(g) the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and traded on the OTC Bulletin Board under the symbol
HPWR. On December 21, 2000, Health Power filed with the Securities and Exchange
Commission on Form 15 a certification and notice of termination of registration
under the Exchange Act, pursuant to which Health Power's duty to file reports
under
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Section 13 and 15(d) of the Exchange Act will be terminated, absent a denial by
the Securities and Exchange Commission (which is not anticipated).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The following report of independent accountants and audited
financial statements and notes thereto of Health Power and its subsidiaries are
incorporated herein by reference to Item 8 of Health Power's Annual Report on
Form 10-K filed by Health Power with the Securities and Exchange Commission (the
"SEC") pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") for the fiscal year of Health Power ended
December 31, 1999:
(i) Report of PricewaterhouseCoopers LLP dated March 28, 2000;
(ii) Consolidated Balance Sheets as of December 31, 1999 and 1998;
(iii) Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997;
(iv) Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997; and
(v) Notes to Consolidated Financial Statements - December 31,
1999, 1998 and 1997.
The following unaudited financial statements and notes thereto of
Health Power and its subsidiaries are incorporated herein by reference to Item 1
of Health Power's Quarterly Report on Form 10-Q filed by Health Power with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act for the quarterly period
ending September 30, 2000:
(i) Consolidated Balance Sheet as of September 30, 2000;
(ii) Consolidated Statements of Operations for the nine months
ended September 30, 2000 and September 30, 1999;
(iii) Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and September 30, 1999; and
(iv) Notes to the Consolidated Financial Statements.
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(b) Pro Forma Financial Information
Security Capital believes that it is impracticable to provide any of
the required pro forma financial information at the time of filing of this
Report on Form 8-K. The required pro forma financial information will be filed
by amendment as soon as practicable and, in any event, not later than 60 days
after the date on which this Form 8-K must be filed.
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of June 8, 2000, among
Security Capital Corporation ("Security Capital"), HP Acquisition
Corp. ("HP Acquisition") and Health Power, Inc. ("Health Power"),
incorporated herein by reference to Exhibit 2 to the Report on Form
8-K dated June 15, 2000, filed by Health Power with the Securities
and Exchange Commission.*
2.2 First Amendment to Agreement and Plan of Merger, dated as of August
14, 2000, among Security Capital, HP Acquisition and Health Power,
incorporated herein by reference to Exhibit 2-A to the Report on
Form 8-K dated August 25, 2000, filed by Health Power with the
Securities and Exchange Commission (the "August 25, 2000 8-K").
2.3 Second Amendment to Agreement and Plan of Merger, dated as of August
23, 2000, among Security Capital, HP Acquisition and Health Power,
incorporated herein by reference to Exhibit 2-B to the August 25,
2000 8-K.
4.1 Stockholders' Agreement dated as of December 21, 2000, by and among
Security Capital, WC Holdings, Inc. ("WC Holdings"), HP Acquisition,
Health Power, CompManagement, Inc. ("CMI"), CompManagement Health
Systems, Inc. ("CHS"), M&N Enterprises, Inc. ("M&NE"), M&N Risk
Management, Inc. ("M&NRM") (CMI, CHS, M&NE and M&NRM being
collectively referred to with Health Power as the "Companies"),
Robert J. Bossart, Jonathan R Wagner, Richard T. Kurth, Randy E.
Jones, Daniel R. Sullivan and Paul A. Miller.
99.1 Loan Agreement dated as of December 21, 2000, among each of the
Companies, as borrowers, WC Holdings, as guarantor, and Bank One,
N.A. ("Bank One"), as lender.
99.2 Note Purchase Agreement dated as of December 21, 2000, among WC
Holdings, as borrower, each of the Companies, as a guarantor, and
Banc One Mezzanine Corporation ("Banc One Mezzanine"), as purchaser.
99.3 Intercreditor and Subordination Agreement dated as of December 21,
2000, among the Companies, WC Holdings, Bank One and Banc One
Mezzanine.
99.4 Capital Contribution Agreement dated as of December 21, 2000,
between Security Capital and Banc One Mezzanine.
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99.5 Tax Allocation Agreement dated as of December 21, 2000, among
Security Capital, WC Holdings and each of the Companies.
99.6 Management Advisory Services Agreement dated as of December 21,
2000, among each of the Companies and Security Capital.
99.7 Fourth Amendment to Advisory Services Agreement dated as of December
21, 2000 between Security Capital and Capital Partners, Inc.
99.8 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Robert J. Bossart.
99.9 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Jonathan R. Wagner.
99.10 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Richard T. Kurth.
99.11 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Randy E. Jones.
99.12 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Daniel R. Sullivan.
99.13 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Paul A. Miller.
99.14 Management Consulting Agreement dated as of December 21, 2000, among
WC Holdings and each of the Companies.
99.15 CompManagement, Inc. Deferred Compensation Plan adopted December 21,
2000.
99.16 Press Release issued by Security Capital on December 21, 2000.
*Schedules and exhibits to the Agreement and Plan of Merger have not been
filed because Security Capital does not believe that they contain information
material to an investment decision which is not otherwise disclosed in the
agreement. A list is attached to the agreement (as incorporated herein by
reference) briefly identifying the contents of the omitted schedules and
exhibits. Security Capital hereby agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon its
request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECURITY CAPITAL CORPORATION
Date: January 4, 2001 By:/s/ BRIAN D. FITZGERALD
Name: Brian D. Fitzgerald
Title: Chairman
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT
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2.1 Agreement and Plan of Merger, dated as of June 8, 2000, among
Security Capital Corporation ("Security Capital"), HP Acquisition
Corp. ("HP Acquisition") and Health Power, Inc. ("Health Power"),
incorporated herein by reference to Exhibit 2 to the Report on Form
8-K dated June 15, 2000, filed by Health Power with the Securities
and Exchange Commission.*
2.2 First Amendment to Agreement and Plan of Merger, dated as of August
14, 2000, among Security Capital, HP Acquisition and Health Power,
incorporated herein by reference to Exhibit 2-A to the Report on
Form 8-K dated August 25, 2000, filed by Health Power with the
Securities and Exchange Commission (the "August 25, 2000 8-K").
2.3 Second Amendment to Agreement and Plan of Merger, dated as of August
23, 2000, among Security Capital, HP Acquisition and Health Power,
incorporated herein by reference to Exhibit 2-B to the August 25,
2000 8-K.
4.1 Stockholders' Agreement dated as of December 21, 2000, by and among
Security Capital, WC Holdings, Inc. ("WC Holdings"), HP Acquisition,
Health Power, CompManagement, Inc. ("CMI"), CompManagement Health
Systems, Inc. ("CHS"), M&N Enterprises, Inc. ("M&NE"), M&N Risk
Management, Inc. ("M&NRM") (CMI, CHS, M&NE and M&NRM being
collectively referred to with Health Power as the "Companies"),
Robert J. Bossart, Jonathan R Wagner, Richard T. Kurth, Randy E.
Jones, Daniel R. Sullivan and Paul A. Miller.
99.1 Loan Agreement dated as of December 21, 2000, among each of the
Companies, as borrowers, WC Holdings, as guarantor, and Bank One,
N.A. ("Bank One"), as lender.
99.2 Note Purchase Agreement dated as of December 21, 2000, among WC
Holdings, as borrower, each of the Companies, as a guarantor, and
Banc One Mezzanine Corporation ("Banc One Mezzanine"), as purchaser.
99.3 Intercreditor and Subordination Agreement dated as of December 21,
2000, among the Companies, WC Holdings, Bank One and Banc One
Mezzanine.
99.4 Capital Contribution Agreement dated as of December 21, 2000,
between Security Capital and Banc One Mezzanine.
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99.5 Tax Allocation Agreement dated as of December 21, 2000, among
Security Capital WC Holdings and each of the Companies.
99.6 Management Advisory Services Agreement dated as of December 21,
2000, among each of the Companies and Security Capital.
99.7 Fourth Amendment to Advisory Services Agreement dated as of December
21, 2000 between Security Capital and Capital Partners, Inc.
99.8 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Robert J. Bossart.
99.9 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Jonathan R. Wagner.
99.10 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Richard T. Kurth.
99.11 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Randy E. Jones.
99.12 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Daniel R. Sullivan.
99.13 Employment Agreement effective as of December 21, 2000, among WC
Holdings, Health Power, CMI, CHS and Paul A. Miller.
99.14 Management Consulting Agreement dated as of December 21, 2000, among
WC Holdings and each of the Companies.
99.15 CompManagement, Inc. Deferred Compensation Plan adopted December 21,
2000.
99.16 Press Release issued by Security Capital on December 21, 2000.
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