The Advisory Services Agreement with Capital Partners also provides for the payment of investment banking fees to Capital Partners for acquisition opportunities presented to the Company at usual and customary rates for transactions of similar size and complexity. Capital Partners is under no obligation to present to the Company any or all acquisition candidates of which it becomes aware. Furthermore, the Company is under no obligation to utilize Capital Partners for investment banking services. The payment of an investment banking fee to Capital Partners requires the approval of the Audit Committee, the Compensation Committee and the full Board of Directors. We paid Capital Partners an investment banking fee of $240 in 2005 in connection with the Caronia acquisition and an investment banking fee of $150 in 2003 in connection with the Octagon acquisition. The investment banking fees were capitalized as part of the acquisition costs of these acquisitions.
In September 2005, Primrose entered into a five-year $1,000 loan (the “Primrose Term Loan”). The proceeds from the Primrose Term Loan were used to partially fund a special dividend to Primrose stockholders of $3,453. As a 98.5% stockholder of Primrose, we received $3,400 of the dividend, and the minority stockholders received $53. A special one-time cash payment of $240 was made to certain employees to compensate them for the dilution in the value of their options to purchase Primrose common stock resulting from the payment of the dividend. The Primrose Term Loan was repaid in full during the fourth quarter of 2005.
The Credit Agreement bears interest at variable rates. To mitigate its exposure to changes in variable rates, WC uses interest rate swaps to effectively convert a portion (based on the “notional value” of the swap) of variable rate debt to fixed rate debt. During 2005, WC had two outstanding interest rate swaps. One swap had a notional value of $10,000 under which WC paid a fixed rate of 3.44% and received a variable rate based on one-month LIBOR. The other swap had a notional value of $8,500 under which WC paid a fixed rate of 5.85% and received a variable rate based one-month LIBOR. On December 22, 2005, the interest rate swap with a notional value of $8,500 expired and the Company elected not to replace the expired swap with a new interest rate swap.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Security Capital Corporation and subsidiaries as of December 31, 2005 and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements, taken as a whole, presents fairly in all material respects the information set forth therein.
Property and equipment are stated at cost. Depreciation is provided over the estimated useful life of the assets using the straight-line method. Estimated useful lives are three to five years for computer equipment and software and three to seven years for furniture and fixtures. Leasehold improvements are depreciated over the shorter of the estimated life of the improvement or the lease term. Property and equipment, net of accumulated depreciation, at December 31, 2005 and 2004 were as follows:
The following unaudited selected financial data present the pro forma combined results of the Company and Caronia for the years ended December 31, 2005 and 2004 as if the Caronia acquisition had taken place on January 1, 2004. The pro forma amounts give effect to the amortization of intangibles, increased interest expense and the related income tax and minority interest effects. This pro forma information does not necessarily reflect the results of operations if the business had been managed by the Company during these periods and is not indicative of results that may be obtained in the future. The results of Caronia are reflected in our consolidated statements of income as of the acquisition date.
In December 2000, WC entered into an interest rate swap agreement with a notional value of $8,500, which effectively converted $8,500 of variable rate debt to fixed rate debt. Under the terms of the swap, WC paid a fixed rate of 5.85% and received a variable rate based on one-month LIBOR. The swap was not designated as a hedge for financial accounting purposes; therefore, changes in its fair value were recorded through earnings. This swap expired December 22, 2005 and management decided not to replace the swap.