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:
May 1, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 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
Thursday, June 11, 1998, 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; (ii) a proposal to amend the Company's Restated
Certificate of Incorporation to eliminate certain anti-takeover provisions
therein by deleting Article Twelfth therefrom; and (iii) 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, 1997 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
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
Thursday, June 11, 1998, 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;
(2) To vote on a proposal to amend the Company's Restated Certificate of
Incorporation to eliminate certain anti-takeover provisions therein
by deleting Article Twelfth therefrom; and
(3) 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 28, 1998 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 1, 1998
==============================================================================
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
==============================================================================
PROXY STATEMENT
SECURITY CAPITAL CORPORATION
1111 North Loop West, Suite 400
Houston, Texas 77008
(713) 880-7100
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 Thursday, June 11, 1998, 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, 1997 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 6, 1998.
The close of business on April 28, 1998 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 28, 1998, there were
551 shares of the Common Stock and 5,306,490 shares of the Class A Common Stock,
for a total of 5,307,041 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.
The proposal to amend the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") requires the affirmative vote of the
holders of eighty percent (80%) of the shares of Common Equity issued and
outstanding as of the record date, voting as a single class. Holders of Common
Equity may vote in favor of or against such proposal to amend the Certificate of
Incorporation or they may abstain. Abstentions and broker non-votes, if any, on
such proposal will be counted for purposes of
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determining the presence or absence of a quorum on such proposal and will have
the same effect as a vote against such proposal.
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 AND FOR THE
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO DELETE ARTICLE TWELFTH
THEREFROM. 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.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table and the notes thereto set forth information, as of
April 28, 1998, 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.
Amount of Beneficial Ownership
As of April 28, 1998
------------------------------------------------------
Percentage
Class A of
Name and Address Common Percentage Common Percentage Common
of Beneficial Owner Stock of Class Stock of Class Equity
- ------------------- ----- -------- ----- -------- ------
Brian D. Fitzgerald 128 34.1% 4,012,942 75.6% 75.6%
One Pickwick Plaza
Suite 310, Greenwich
CT 06830(1)(2)
FGS, Inc. 128 34.1% 3,846,997 72.5% 72.5%
1105 North Market St.
Suite 1300, Wilmington,
DE 19894(1)(2)
Capital Partners, Inc. -- -- 3,346,324 63.1% 63.1%
One Pickwick Plaza
Suite 310, Greenwich,
CT 06830(1)(2)
CP Acquisition, -- -- 3,319,308 62.6% 62.6%
L.P. No. 1
1105 North Market St.
Suite 1300, Wilmington,
DE 19894(1)(2)
FGS Partners, L.P. -- -- 3,319,308 62.6% 62.6%
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 Execu 129 34.4% 4,110,883 77.5% 77.5%
tive Officers as a Group
(5 persons)
* Less than one percent
(FOOTNOTES ON FOLLOWING PAGE)
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- -----------------
(1) The following related entities are generally referred to as "Capital
Partners": (a) CP Inc., a Connecticut corporation, 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) 13 related Delaware limited
partnerships, known collectively as "Capital Partners II," as follows: (i)
CP Acquisition; (ii) CP Acquisition, L.P. No. 2; (iii) CP Acquisition,
L.P. No. 3; (iv) CP Acquisition, L.P. No. 4A; (v) CP Acquisition, L.P. No.
4B; (vi) CP Acquisition, L.P. No. 5A; (vii) CP Acquisition, L.P. No. 5B;
(viii) CP Acquisition, L.P. No. 6A; (ix) CP Acquisition, L.P. No. 6B; (x)
CP Acquisition, L.P. No. 7A; (xi) CP Acquisition, L.P. No. 7B; (xii) CP
Acquisition, L.P. No. 8A; and (xiii) 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 the
general partner, are the general partners of the 13 related partnerships.
Brian D. Fitzgerald owns of record 138,929 shares of the Class A Common
Stock. CP Inc. owns of record 27,016 shares of the Class A Common Stock,
CP Acquisition owns of record 3,319,308 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 138,929 shares of the
Class A Common Stock owned of record by him, the 27,016 shares of the
Class A Common Stock owned of record by CP Inc., the 3,319,308 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 the Class A Common Stock and the Common Stock and the 650
shares of the Class A Preferred 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.
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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.
DIRECTOR PRINCIPAL OCCUPATIONS DURING THE LAST
NAME AGE SINCE FIVE YEARS; OTHER DIRECTORSHIPS
- ---- --- ----- -------------------------------
William T. Bozarth 57 1988 Vice President and Controller of
Travelers Group Inc., a diversified
financial services company, since
November 1991; 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 sub sidiaries or
affiliates of the Company; and,
previously, a Partner of Arthur
Andersen & Co., New York, New York,
public accountants.
Brian D. Fitzgerald 53 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 Delaware 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.
Mr. Fitzgerald is a director of
Artecon, Inc., a publicly-traded
manufacturer and seller of high
performance data storage systems.
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DIRECTOR PRINCIPAL OCCUPATIONS DURING THE LAST
NAME AGE SINCE FIVE YEARS; OTHER DIRECTORSHIPS
- ---- --- ----- -------------------------------
A. George Gebauer 65 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 59 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOUR NOMINEES
FOR DIRECTORS.
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MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held one meeting and acted by written consent
four times during the year ended December 31, 1997. 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, 1997.
The Board of Directors has an Audit Committee and a Stock Option
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 during the
fiscal year ended December 31, 1997.
The Stock Option Committee is composed of Messrs. Fitzgerald and Gebauer
and administers the Security Capital Corporation 1982 Incentive Stock Option
Plan. The Stock Option Committee did not meet during the fiscal year ended
December 31, 1997. The 1982 Incentive Stock Option Plan terminated by its terms
on January 25, 1992, and all previously issued options have terminated according
to their terms. The Board of Directors does not have a nominating committee,
compensation committee or any committee performing similar functions.
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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 the two other executive officers of the Company for services
rendered to the Company during the fiscal years ended December 31, 1997,
September 30, 1996 and September 30,1995 and for the three month transition
period from October 1 through December 31, 1996.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS COMPENSATION
- --------------------------- ------ ------ ----- ------------
A. George Gebauer Fiscal Year 1997 (1) (1) (1)
President and Secretary Fiscal Year 1996 (1) (1) (1)
Fiscal Year 1995 (1) (1) (1)
Three-Month Period
from 10/1-12/31/96 (1) (1) (1)
Brian D. Fitzgerald Fiscal Year 1997 (1) (1) (1)
Chairman of the Board Fiscal Year 1996 (1) (1) (1)
Fiscal Year 1995 (1) (1) (1)
Three-Month Period
from 10/1-12/31/96 (1) (1) (1)
Larry M. Karren Fiscal Year 1997 $ 78,500 $16,064 $1,872
Vice President(2) and Fiscal Year 1996 $121,250 $15,997 $5,237
Treasurer Fiscal Year 1995 $110,000 $26,204 $3,938
Three-Month Period
from 10/1-12/31/96 $ 31,250 $14,234 $ 923
- ---------------------------
(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. The
annual fee for such services pursuant to the Advisory Agreement is $325,000
(due in quarterly installments in advance) plus certain out-of-pocket costs
(which do not include rent and utilities of CP Inc. and compensation of CP
Inc. employees), subject to adjustment, as described below).
Such fee is subject to appropriate adjustment should the scope of operations
of the Company change, whether from an acquisition or otherwise. For
example, when the Company acquired the assets of Possible Dreams, Ltd. and
Columbia National Corporation, the Advisory Agreement was amended
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to increase the annual fee from $150,000 to $325,000. In addition, upon the
acquisition of the assets of Pumpkin, Ltd. d/b/a Pumpkin Masters, Inc. it
was amended to increase the fee 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). During the period from October 1, 1996 through December 31, 1996,
CP Inc. was paid a fee of $81,300 and was reimbursed for expenses incurred
by it of approximately $5,300. During fiscal 1997, CP Inc. was paid a fee of
$375,000 and was reimbursed for expenses incurred by it of approximately
$25,400. 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) Includes $309 of insurance premiums for fiscal year 1997 and $142 for the
three month period from October 1, 1996 to December 31, 1996 paid by the
Company on a term life insurance policy for the benefit of Mr. Karren and
approximately $1,563 for fiscal year 1997 and $781 for the three month
period from October 1, 1996 to December 31, 1996 of Company contributions
for the account of Mr. Karren under a Section 401(k) plan.
2. OPTION/SAR GRANTS IN PERIOD FROM OCTOBER 1, 1996 THROUGH DECEMBER 31,
1997
No Options or SARs were granted to any executive officer of the Company
during the period from October 1, 1996 through December 31, 1997.
3. AGGREGATED OPTION/SAR EXERCISES IN PERIOD FROM OCTOBER 1, 1996 THROUGH
DECEMBER 31, 1997
No Options or SARs were exercised by any executive officer of the
Company during the period from October 1, 1996 through December 31, 1997 and the
only Options held by an executive officer, being for 2,250 shares and held by
Larry M. Karren, expired unexercised on December 31, 1997.
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 October 1, 1996 through December 31, 1997.
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.
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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, the Exchange Agreement provides that the
Company will use its best efforts to cause a proposal to amend the Certificate
of Incorporation to delete Article Twelfth (which contains certain anti-takeover
provisions, including higher voting requirements for certain business
combinations) therefrom to be submitted to the Company's stockholders at the
Annual Meeting.
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. The annual
fee for such services pursuant to the Advisory Agreement was $150,000 (due in
quarterly installments in advance) plus certain out-of-pocket costs (which do
not include rent and utilities of CP Inc. and compensation of CP Inc. employees)
prior to the acquisition of the assets of Possible Dreams, Ltd. and Columbia
National Corporation. In connection with such acquisition, the Advisory
Agreement was amended to increase the annual fee to $325,000. In addition, upon
the acquisition of Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., the Advisory
Agreement was further amended to increase the fee 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). 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 (Grace Santacqua) in their respective capacities as such. During the
period from October 1, 1996 through December 31, 1996, CP Inc. was paid $81,300
in fees and reimbursed
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for expenses incurred by it of approximately $5,300. During fiscal 1997, CP Inc.
was paid $375,000 in fees and reimbursed for expenses incurred by it of
approximately $25,400. 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.
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, 1998.
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 1,000 leads on companies
which are or might be for sale. Of these, perhaps 100 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.
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PROPOSAL 2 - PROPOSED AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Article Twelfth of the Certificate of Incorporation ("Article Twelfth")
sets forth certain anti-takeover provisions whereby certain business
combinations and other transactions between the Company and beneficial owners of
10% or more of the voting power of the Company's then outstanding capital stock
must either meet certain minimum price and procedural requirements or be
approved by a majority of the Company's Continuing Directors (i.e., directors
who are unaffiliated with any person who is an Interested Stockholder (as
defined below) and who were directors prior to the time such person became an
Interested Stockholder, and any successors to such directors) or by the holders
of 80% of the Voting Stock (as therein defined). The text of Article Twelfth is
set forth in Appendix A to this Proxy Statement, and this discussion of such
provision is qualified in its entirety by reference to such Appendix.
As noted above, in connection with the Exchange Agreement, the Company
agreed to use its best efforts to cause a proposal to amend the Certificate of
Incorporation to delete Article Twelfth therefrom to be submitted to the
Company's stockholders at the Annual Meeting. The Exchange Agreement (including
the proposal to amend the Certificate of Incorporation to delete Article Twelfth
therefrom) was approved by Messrs. Bozarth and Gochberg, who are unaffiliated
with any Interested Stockholder and who qualified as Continuing Directors for
purposes of the Exchange. See "Certain Relationships and Related Transactions."
Consistent with the terms of the Exchange Agreement, by unanimous written
consent dated March 5, 1998, the members of the Board of Directors of the
Company (including Messrs. Bozarth and Gochberg) approved and adopted an
amendment (the "Business Combination Amendment") to the Certificate of
Incorporation deleting Article Twelfth therefrom and directed that the Business
Combination Amendment be submitted to the Company's stockholders for their
adoption and approval at the Annual Meeting.
Article Twelfth was adopted in February 1985 in light of circumstances
then affecting the Company. While the Board of Directors believes that the
adoption of Article Twelfth at that time was appropriate, it has recognized that
the current situation regarding the Company has changed substantially; among
other things, the business of the Company has significantly changed and the
price of the Company's publicly-traded Common Equity has substantially
decreased. In addition, the composition of the Company's stockholder base has
markedly changed, with the Company's Chairman of the Board, Brian D. Fitzgerald,
currently controlling 75.6% of the Common Equity issued and outstanding. In
addition, the Certificate of Incorporation contains restrictions that generally
prohibit, subject to certain exceptions, any person from acquiring (other than
from the Company) any Class A Common Stock or rights to acquire the same if the
person was, or would become, a holder of 4.75% or more of the fair market value
of the Company's Common Equity. These transfer restrictions may discourage the
accumulations of large blocks of the Company's voting stock, thus making less
likely the development of situations in which the procedural protections
afforded by Article Twelfth were originally thought to be beneficial. Lastly, in
connection with the Exchange Agreement, Mr. Fitzgerald agreed that, for a
five-year period following the Exchange Date, neither he nor any entity
controlled by him would propose or effect any Rule 13e-3 transaction (i.e., a
"going private" transaction). Accordingly, any possible threat to the
Company from such a proposal or transaction that may have been mitigated by
Article Twelfth has been eliminated for such five-year period.
-13-
Article Twelfth requires the approval of holders of 80% of the voting
power of the outstanding capital stock of the Company entitled to vote generally
in the election of directors as a condition for mergers, certain other business
combinations and similar transactions by the Company involving any holder of
more than 10% of such voting power (an "Interested Stockholder") unless either
(i) the transaction is approved by at least a majority of the members of the
Board who are unaffiliated with the Interested Stockholder and were directors
before the Interested Stockholder became an Interested Stockholder or (ii)
certain minimum price, form of consideration and procedural requirements are
met.
In order for the Business Combination Amendment to be adopted, it is
necessary that the holders of 80% of the shares of Common Equity issued and
outstanding as of the record date, voting as a single class, vote in favor of
the approval and adoption of the Business Combination Amendment. SINCE APPROVAL
BY THE HOLDERS OF A SUPERMAJORITY OF THE ISSUED AND OUTSTANDING COMMON EQUITY,
AND NOT MERELY BY THE HOLDERS OF A MAJORITY OF THOSE SHARES, REPRESENTED IN
PERSON OR BY PROXY AT THE ANNUAL MEETING AND ENTITLED TO VOTE THEREON IS
REQUIRED FOR APPROVAL AND ADOPTION OF THE BUSINESS COMBINATION AMENDMENT,
FAILURE TO VOTE ON THIS PROPOSAL (INCLUDING BY WAY OF ABSTENTION) WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THIS PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION OF
THE BUSINESS COMBINATION AMENDMENT.
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, 1998. 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.
-14-
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, 1998 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.
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 1, 1998
-15-
APPENDIX A
ARTICLE TWELFTH
CERTAIN BUSINESS COMBINATIONS
Section 1. Vote for Certain Business Combinations.
A. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or this Certificate of Incorporation, and
except as otherwise expressly provided in Section 2 of this Article Twelfth:
(i) any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with (a) any Interested Stockholder (as hereinafter
defined) or (b) any other person (as hereinafter defined) (whether or not
itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
(ii) any plan of exchange for all outstanding shares of the Corporation
or any Subsidiary or for any class of shares of the Corporation or any
Subsidiary with (a) any Interested Stockholder or (b) any other person
(whether or not itself an Interested Stockholder) which is, or after such
plan of exchange would be, an Affiliate of an Interested Stockholder; or
(iii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any Interested Stockholder of any
assets of the Corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of 10% or more of the total assets of the
Corporation and its Subsidiaries on a consolidated basis; or
(iv) the issuance or transfer by the Corporation of any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any Affiliate
of any Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market Value of
10% or more of the total assets of the Corporation and its Subsidiaries on a
consolidated basis; or
(v) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or
(vi) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Stockholder or any Affiliate
of any Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class (it being understood that
for purposes of this Article Twelfth, each share of the Voting Stock shall
have the number of votes granted to it pursuant to this Certificate of
Incorporation). Such affirmative vote shall be required notwithstanding the
fact that no vote may be required, or that a lesser percentage vote may be
specified, by law, this Certificate of Incorporation, any resolution or
resolutions of the Board of Directors or in any agreement with any national
securities exchange or otherwise.
B. Definition of "Business Combination." The term "Business Combination" as
used in this Article Twelfth shall mean any transaction which is referred to in
any one or more of clauses (i) through (vi) of paragraph A of this Section 1.
Section 2. When Higher Vote is Not Required. The provisions of Section 1 of this
Article Twelfth shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such affirmative vote as is
required by law and any other provision of this Certificate of Incorporation, if
all of the conditions specified in either of the following paragraphs A and B
are met:
A. Approval by Continuing Directors. The Business Combination shall have
been approved by a majority of the Continuing Directors (as hereinafter
defined), it being understood that this condition shall not be capable of
satisfaction unless there is at least one Continuing Director.
B. Price, Form of Consideration and Procedural Requirements. All of the
following conditions shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least equal
to the sum of:
(a) the greater of (1) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any shares of
Common Stock acquired by it, or beneficially owned by it, that were
acquired within the two-year period immediately prior to the date of the
first public announcement of the proposed Business Combination (the
"Announcement Date") or in the transaction in which it became an
Interested Stockholder, whichever is higher or (2) the Fair Market Value
per share of Common Stock on the day after the Announcement Date or on
the date on which the Interested Stockholder became an Interested
Stockholder (such latter date is referred to in this Article Twelfth as
the "Determination Date"), whichever is higher; and
(b) interest on the per share price calculated at the rate for 90-day
United States Treasury obligations in effect on the Determination Date,
compounded annually from that date until the Business Combination is
consummated, less the per share amount of cash dividends payable to
holders of record on record dates occurring in the interim, up to the
amount of such interest.
-2-
Shares acquired or paid for by an Affiliate of the Interested Stockholder
shall be deemed to have been acquired or paid for at the same time by the
Interested Stockholder.
(ii) The aggregate amount of the cash and the Fair Market Value as of the
date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of shares of any other class
of outstanding Voting Stock (other than Institutional Voting Stock, as
hereinafter defined) shall be at least equal to the sum of the following (it
being intended that the requirements of this paragraph B(ii) shall be
required to be met with respect to every class of outstanding Voting Stock,
other than Institutional Voting Stock, whether or not the Interested
Stockholder had previously acquired or become beneficial owner of any shares
of a particular class of Voting Stock):
(a) the greatest of (1) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any shares of such
class of Voting Stock acquired by it, or beneficially owned by it that
were acquired, within the two-year period immediately prior to the day
after the Announcement Date or in the transaction in which it became an
Interested Stockholder, whichever is higher, (2) (if applicable) the
highest preferential amount per share to which the holders of shares of
such class of Voting Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, or
(3) the Fair Market Value per share of such class of Voting Stock on the
day after the Announcement Date or on the Determination Date, whichever
is higher; and
(b) interest on the per share price calculated at the rate for 90-day
United States Treasury obligations in effect on the Determination Date,
compounded annually from that date until the Business Combination is
consummated, less the per share amount of cash dividends payable to
holders of record on record dates occurring in the interim, up to the
amount of such interest.
(iii) The consideration to be received by holders of a particular class
of outstanding Voting Stock (including Common Stock) shall be in cash or in
the same form as was previously paid for shares of such class of Voting
Stock acquired or beneficially owned by the Interested Stockholder. If the
Interested Stockholder has paid for shares of a class of Voting Stock with
varying forms of consideration, the form of consideration for such class of
Voting Stock shall be either cash or the form used to acquire the largest
number of shares of such class of Voting Stock beneficially owned or
previously acquired by it.
(iv) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (a)
except as approved by a majority of the Continuing Directors, there shall
have been no failure to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on then outstanding
shares of Preferred Stock, if any; (b) there shall have been (1) no
reduction in the annual rate of dividends paid on the Common Stock (except
as necessary to reflect any subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors, and (2) an increase in
such annual rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the failure so to increase
such annual rate is approved by a majority of the Continuing Directors; and
(c) such
-3-
Interested Stockholder shall not have become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested Stockholder.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by the Corporation, whether
in anticipation of or in connection with such Business Combination or
otherwise.
(vi) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
public stockholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act, rules
or regulations or subsequent provisions).
The requirements of subparagraphs (ii) and (iii) above shall not apply to
any class of Voting Stock (other than Common Stock) hereinafter authorized if
the provision creating or authorizing such class so provides and such provision
has been approved by a majority of the Continuing Directors.
Section 3. Certain Definitions. For the purposes of this Article Twelfth:
A. A "person" shall mean any individual, firm, corporation or other entity.
B. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of more than 10% of
the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the
then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933 (or any subsequent
provisions replacing such Act).
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
-4-
(ii) which such person or any of its Affiliates or Associates has (a) the
right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
D. For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph B of this Section 3, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of paragraph C of this Section 3 but shall not include any other
shares of Voting Stock which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1985.
F. "Subsidiary" means any corporation of which a majority of any class of
equity security, or a majority of the voting power of the then outstanding
shares of capital stock of such corporation entitled to vote generally in the
election of directors, is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph B of this Section 3, the term "Subsidiary"
shall mean only a corporation of which a majority of the voting power of the
then outstanding shares of capital stock of such corporation entitled to vote
generally in the election of directors is owned, directly or indirectly, by the
Corporation.
G. "Continuing Director" means any member of the Board of Directors of the
Corporation (the "Board") who is not, and has not been within five years of the
Determination Date, affiliated with or a nominee of the Interested Stockholder
and who was a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director who is not, and has not been within five years of the Determination
Date, affiliated with or a nominee of the Interested Stockholder and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the Board.
H. "Fair Market Value" means: (i) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on such Exchange, on the
principal United States securities exchange on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing sale price
or bid quotation, whichever is reported in the financial press, with respect to
a share of such stock during the 30-day period preceding the date in question on
the National Association of Securities Dealers, Inc. Automated Quotation System
or any comparable system then in use, or if no such quotations are available,
the fair market value on the date in question of a share of such stock as
determined by a
-5-
majority of the Continuing Directors; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined by a majority of the Continuing Directors.
I. "Institutional Voting Stock" shall mean any class of Voting Stock which
was issued to and continues to be held solely by one or more insurance
companies, pension funds, commercial banks, savings banks or similar financial
institutions or institutional investors.
J. In the event of any Business Combination in which the Corporation
survives, the phrase "other than cash consideration to be received" as used in
paragraphs B(i) and B(ii) of Section 2 of this Article Twelfth shall include the
shares of Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
K. References to a "class of Voting Stock" shall include any separate series
of a class.
Section 4. Certain Powers of the Continuing Directors. A majority of the
Continuing Directors of the Corporation shall have the power and duty to
determine for the purposes of this Article Twelfth, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine
compliance with this Article Twelfth, including, without limitation, (A) whether
a person is an Interested Stockholder, (B) the number of shares of Voting Stock
beneficially owned by any person, (C) whether a person is an Affiliate or
Associate of another, (D) whether a class of Voting Stock is Institutional
Voting Stock, (E) whether a transaction or a series of transactions constitutes
a Business Combination, (F) whether the requirements of Section 2 of this
Article Twelfth have been met and (G) whether the assets which are the subject
of any Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or any Subsidiary in any
Business Combination have or has, an aggregate Fair Market Value of 10% or more
of the total assets of the Corporation and its Subsidiaries on a consolidated
basis. Any such determination made in good faith shall be binding and conclusive
on all parties for all purposes of this Article Twelfth.
Section 5. No Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article Twelfth shall be construed to relieve any
Interests Stockholder from any fiduciary obligation imposed by law.
Section 6. Amendment, Repeal, etc. Notwithstanding any other provision of this
Certificate of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage vote may be specified by law,
this Certificate of Incorporation or the By-Laws of the Corporation), and in
addition to any affirmative vote of holders of any class of capital stock of the
Corporation or any series of any such class then outstanding which is required
by law or by or pursuant to this Certificate of Incorporation, the affirmative
vote of the holders of 80% or more of the voting power of the shares of the then
outstanding Voting Stock, voting together as a single class, shall be required
to alter, amend, repeal or adopt any provision inconsistent with this Article
Twelfth entitled "Certain Business Combinations."
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SECURITY CAPITAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - JUNE 11, 1998
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 Thursday, June 11, 1998, 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 AND IN FAVOR OF THE PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE CERTAIN ANTITAKEOVER
PROVISIONS THEREFROM.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
(Continued and to be signed on reverse side)
PLEASE MARK BOX [X] IN BLUE OR BLACK INK.
1. Election of Directors: FOR all nominees listed below [ ]
WITHHOLD AUTHORITY to vote [ ]
for all nominees listed below
EXCEPTIONS [ ]
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.)
2. Amendment of the
Restated Certificate of
Incorporation to Delete
Article Twelfth
Therefrom: FOR [ ] AGAINST [ ] ABSTAIN [ ]
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: ________________________________ , 1998
______________________________________________
Signature
______________________________________________
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.