UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6237
THE ZIEGLER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1148883
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 North Main Street, West Bend, Wisconsin 53095
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 334-5521
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( X )
AGGREGATE MARKET VALUE OF VOTING STOCK HELD
BY NON-AFFILIATES OF THE REGISTRANT:
$47,529,683 based on the average of the bid and asked prices
of such stock ($19.4375 per share) on February 28, 1997
Number of shares outstanding of registrant's classes of common stock, as of
February 28, 1997:
Class Shares Outstanding
Common Stock, 2,445,257
$1.00 Par Value
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Annual Report to Shareholders for the year ended
December 31, 1996 are incorporated by reference into Part II of this
Report.
2. Portions of the annual Proxy Statement prepared for the 1997 Annual
Meeting of Shareholders are incorporated by reference into Parts I and
III.
<PAGE>
FORM 10-K
THE ZIEGLER COMPANIES, INC.
PART I
Item 1. Business
(a) The Ziegler Companies, Inc. (the "Company") is a holding company
which owns seven operating subsidiary companies. Six of the companies are
engaged in financially oriented businesses and the other company is engaged
in recycling, reclaiming and disposing of industrial chemicals and solvents
and providing pollution abatement services. The Company's principal
executive offices are at 215 North Main Street, West Bend, Wisconsin 53095
and its telephone number is (414) 334-5521. There was no material change
in the nature of the business done by The Ziegler Companies, Inc. and its
subsidiaries during 1996, except that the Company sold its equipment
leasing subsidiary, Ziegler Leasing Corporation, in December 1996. The
sale is described below in this Part I.
The Company's subsidiaries include an investment banking and
brokerage firm, B. C. Ziegler and Company. Ziegler Financing Corporation
provides construction and interim loan services to churches and others, and
Federal Housing Administration loan origination in conjunction with
investment banking activities. Ziegler Thrift Trading, Inc. is a discount
brokerage firm. Ziegler Asset Management, Inc. provides money management
services to individuals and institutions. First Church Financing
Corporation was organized to issue mortgage-backed bonds collateralized by
first mortgages on church buildings and properties. Ziegler Collateralized
Securities, Inc. was organized to issue bonds collateralized by pools of
equipment leases and other debt instruments. WRR Environmental Services
Co., Inc. recycles, reclaims and disposes of industrial chemicals and
solvents and provides clean-up services with respect to sites with
environmental damage.
(b) The Company's operations are conducted through four industry
segments, namely, (1) broker-dealer, (2) hazardous waste management, (3)
real estate financing and (4) corporate and other. The industry segments
are each served by a separate subsidiary or group of subsidiaries;
therefore, all expenses and assets can be directly identified with segment
revenues. Inter-company revenues consist primarily of interest income
earned on loans between subsidiaries, management and other administrative
fees charged between subsidiaries, intercompany security execution charges,
and dividends received by the Company from subsidiaries. All other
significant revenues are derived from transactions with unaffiliated
parties in the United States.
Revenues, net of intercompany transactions, Income Before Taxes,
and Assets of each segment are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
REVENUES
(net of intercompany transactions)
Broker-Dealer $ 41,168 $ 37,680 $ 30,324
Hazardous Waste Management 4,130 3,846 3,132
Real Estate Financing 199 295 328
Corporate and Other 3,819 3,121 2,667
$ 49,316 $ 44,942 $ 36,451
INCOME BEFORE TAXES
Broker-Dealer $ 2,584 $ 3,625 $ 686
Hazardous Waste Management 1,508 1,417 869
Real Estate Financing 21 122 (69)
Corporate and Other 672 106 431
$ 4,785 $ 5,270 $ 1,917
ASSETS
Broker-Dealer $ 74,714 $ 54,260 $ 57,255
Hazardous Waste Management 7,343 6,783 4,610
Real Estate Financing 2,367 4,439 5,174
Corporate and Other 56,733 60,947 54,063
$141,157 $126,429 $121,102
</TABLE>
BROKER-DEALER
B. C. Ziegler and Company ("BCZCO")
BCZCO is the broker-dealer subsidiary of the Company. BCZCO conducts
full service retail brokerage services through 23 retail offices, performs
investment banking for churches, private schools and other nonprofit
entities, conducts trading and institutional sales of preferred stocks, and
sells insurance products through its independent agency. The Ziegler
Securities Division ("ZSD") of BCZCO finances healthcare and senior living
providers through underwriting and wholesale distribution of securities,
especially municipal securities, and provides merger and acquisition
consulting and banking, strategic consulting, structuring agent services
for special products, used to manage financial risks, and merchant banking.
BCZCO intends to continue these underwriting and sales activities.
Total revenues of BCZCO in 1996 were $33,278,000 as compared with
$32,039,000 in 1995. Net income in 1996 was $696,000 as compared with 1995
net income of $1,555,000.
BCZCO began operations as an insurance agency in 1902 and at the present
time maintains direct agency contracts with 24 insurance companies offering
diversified lines of coverage, including life, property, casualty and
fidelity insurance.
BCZCO underwrote its first publicly offered security issue in 1913 for a
church in West Bend, Wisconsin. Since then, it has concentrated on
providing investment banking services to nonprofit corporations, with
particular emphasis on health care providers, senior living communities and
churches.
During 1996, Ziegler Securities managed 12 new issues of tax-exempt and
taxable healthcare debt securities totaling $419 million. During 1996,
Ziegler Securities also managed 46 issues for long-term care and retirement
facilities totaling $750 million. For purposes of comparison, during 1995,
Ziegler Securities managed 14 issues of tax-exempt and taxable healthcare
debt securities totaling $452,755,000. Ziegler Securities also managed 38
issues for long-term care and retirement facilities totaling $442,790,000
in 1995.
BCZCO underwrote and sold 20 bond issues for various churches, private
schools and other non-profit institutions, totaling approximately
$71,871,000 in 1996 compared to 23 issues totaling approximately
$67,408,000 in 1995.
As of December 31, 1996, BCZCO had 23 retail brokerage offices located
throughout the United States which play a vital role in the distribution of
the taxable and tax-exempt issues underwritten by BCZCO, as well as provide
revenues from the sale of other securities and financial products. These
other financial products include mutual funds, common and preferred stocks,
unit investment trusts, deferred annuities and insurance products.
Securities are sold by BCZCO as a broker-dealer to individuals, financial
institutions and other dealers. In addition, BCZCO maintains a limited
secondary market for debt securities it has underwritten as an
accommodation to its investor clientele.
BCZCO continues to underwrite and offer a variety of investment products
and continues to develop new investment products.
BCZCO also sponsors and acts as the primary distributor for the
Principal Preservation Portfolios, Inc. family of mutual funds. This open-
end diversified investment company offers eight distinct mutual fund
portfolios having total net assets approximating $380,000,000 as of
December 31, 1996.
Ziegler Mortgage Securities, Inc. II ("ZMSI-II"), in its eleventh year
of operation, issued two series of "AAA" rated bonds in the total amount of
$6,224,000 during 1996. These series were underwritten and distributed by
BCZCO. BCZCO owns a portion of the capital stock of ZMSI-II, and acts as
underwriter for the offerings of bonds by it. ZMSI-II bonds are rated
"AAA" by Standard & Poor's Corporation and are backed by Government
National Mortgage Association ("GNMA") certificates, Federal National
Mortgage Association ("FNMA") certificates or by a combination of GNMA and
FNMA certificates. The GNMA certificates are fully modified pass-through
mortgage certificates backed by a pool of Federal Housing Authority ("FHA")
loans or Veterans Administration ("VA") loans, and provide for payment of
principal and interest and other proceeds of the mortgage loans to the
registered holder of the GNMA certificates. Such payments are guaranteed
by GNMA, which guarantee is supported by the full faith and credit of the
United States. The FNMA certificates represent interests in pools of loans
backed by mortgages on one to four family residences. The mortgage loans
may be conventional mortgage loans or mortgage loans insured by the FHA or
guaranteed by the VA. Payment of principal and interest and other proceeds
from the mortgage loans will be made to the registered holders of the FNMA
certificates. FNMA certificates are guaranteed solely by the FNMA and are
not backed by the full faith and credit of the United States.
In 1996, BCZCO underwrote and sold one series of lease-backed bonds for
Ziegler Collateralized Securities, Inc. ("ZCSI") in the total amount of
$5,000,000. The bonds were collateralized by pools of equipment leases and
other debt instruments organized and sold to ZCSI by Ziegler Leasing
Corporation, formerly a sister company. As noted in the description of
ZCSI's business in a following section of this Form 10-K, it is not
anticipated that ZCSI will issue bonds in the future.
BCZCO is one of the nation's oldest health care underwriters. BCZCO
experiences competition in most potential taxable health care bond
underwritings due in part to the fact that debt financing for health care
providers can also be accomplished by bank borrowing or by mortgage
financing with institutional lenders. Competition in the underwriting of
tax-exempt issues is from other major investment bankers and, in certain
instances, from commercial banks. This competition for underwriting volume
over the past several years has caused a general decline in the level of
compensation paid for investment banking services in connection with the
healthcare market. In addition, certain capital needs of healthcare
providers cannot be financed through the issuance of tax-exempt bonds,
because of tax and other laws which restrict the purposes for which bond
proceeds may be used.
It is anticipated that significant changes in the manner in which health
care is delivered in the United States will occur over the next several
years, probably because of competitive forces in the marketplace rather
than government mandates. There can be no guarantee of the continuing
availability of health care, long-term care and corporate debt issues in
adequate volume for BCZCO and other competitive investment bankers and
underwriters. The availability of suitable underwritings for BCZCO is
related to a variety of factors, among which are the general level of
interest rates, the need for replacing or upgrading facilities, the
development of new medical technology, changes in government programs and
private contracts relating to reimbursement of health care providers,
consolidation and integration within the health care industry, and the
demographic characteristics of the United States' population.
BCZCO is a broker-dealer registered with the Securities and Exchange
Commission and with the securities regulatory bodies of 50 states and the
District of Columbia. It is a member of the National Association of
Securities Dealers, Inc. ("NASD") and the Securities Investor Protection
Corporation ("SIPC"). It is subject to the rules and regulations
established and administered by these various regulatory and self-
regulatory agencies. Failure to comply with any of these rules and
regulations could result in censure, fines, suspension or expulsion.
Suspension could be imposed for varying periods of time and could have a
materially adverse effect upon BCZCO for at least the period of suspension.
Expulsion would effectively preclude it from engaging in the securities
business. The various rules and regulations to which it is subject govern
such matters as sales methods, recordkeeping requirements, net capital
requirements, relationships between brokers and relationships between
broker-dealers and the public.
Under the Securities Act of 1933 and other applicable Federal and state
securities laws and regulations, an underwriter is subject to substantial
potential liability for material misstatements or omissions in the
prospectus used to describe each issue of securities being underwritten and
offered to the public. In an event occurring subsequent to the close of
1996, BCZCO reached a provisional settlement of class action litigation
related to the underwriting of municipal and taxable bonds for the
construction of a senior living facility in 1989. See Part I, Item 3,
Legal Proceedings in this Form 10-K.
Underwriting involves substantial economic risk. An underwriter may
incur losses if it is unable to resell the securities it has committed to
purchase, or if it is forced to liquidate all or part of its commitment at
less than the purchase price. Ziegler Securities also acts as remarketing
agent with respect to variable rate municipal obligations with investor put
options. The aggregate principal amount of bonds as to which Ziegler
Securities is remarketing agent is approximately $1,073,330,000. As a
general matter, bonds which are not successfully remarketed by Ziegler
Securities can be paid at par through a liquidity facility maintained by
the borrower, at Ziegler Securities' demand. However, remarketing often
involves a temporary holding of such bonds by Ziegler Securities for its
own account, with the resulting market risk. Ziegler Securities finances
its cash needs for remarketing activity through the Company's capital and
bank credit lines.
The securities industry in general is presently experiencing increased
litigation from customers related to compliance with laws and industry
rules related to the sales of securities.
BCZCO includes an independent insurance agency, which is subject to
various rules and regulations which are generally imposed at the state
level.
Ziegler Thrift Trading, Inc. ("ZTT")
ZTT is a discount brokerage firm organized in the State of Minnesota.
ZTT executes orders for both listed and over-the-counter market securities.
Since ZTT has no research department and no salesmen, ZTT's commission
charges are approximately 50% to 70% less than those of regular brokerage
firms. The minimum commission charge is $34.50.
Investors use ZTT to trade stocks, mutual funds, bonds and options. ZTT
provides a wide range of services to its customers, including a dividend
reinvestment program, automated bank settlement, free safekeeping, cashless
stock option services, and investment consulting.
ZTT is registered with the Securities and Exchange Commission and is a
member of the National Association of Securities Dealers, Inc. and the
Securities Investor Protection Corporation. It is licensed as a broker-
dealer in 42 states and the District of Columbia. The company is
headquartered in downtown Minneapolis and has three branch offices in St.
Paul, Minnesota, and two branch offices in the suburban Chicago area.
In 1996 ZTT's gross revenues were $5,440,000 and net income was $824,000
compared to net income of $677,000 in 1995 on gross revenues of $4,434,000.
HAZARDOUS WASTE MANAGEMENT
WRR Environmental Services Co., Inc. ("WRR")
WRR was founded in 1970 and owns and operates a licensed hazardous waste
treatment and waste solvent recycling facility located in Eau Claire,
Wisconsin. WRR recycles spent industrial solvents for re-use and blends
waste solvents for use as alternative energy sources for businesses in EPA
permitted liquid injection incinerators and cement kilns. WRR also offers
several other services such as processing nonhazardous chemicals for
manufacturing firms, remediation of polluted industrial sites, emergency
spill response, and processing dry cleaner filters.
WRR obtains raw materials for its recycling operations directly from the
primary users of chemicals and solvents. Virgin chemicals are purchased
and blended with certain of WRR's reclaimed blended products, or are sold
as new products. WRR is not dependent on a single supplier or a few
suppliers for its raw materials.
WRR is regulated by the United States Environmental Protection Agency
("EPA") and the Wisconsin Department of Natural Resources ("DNR"). On
September 30, 1988 WRR obtained a final hazardous waste operating permit
from the EPA making it the first fully licensed treatment, storage and
disposal facility in the State of Wisconsin.
In 1983, WRR's Eau Claire facility was placed on the National Priority
List of sites regulated by the Superfund Act ("CERCLA") because shallow
well testing of ground water directly underneath the plant site disclosed
traces of contaminants. WRR is subject to a DNR consent order for further
testing and surface water control related to the contaminants. Although
still subject to the consent order and to remedial action under the federal
Research, Conservation, and Recovery Act ("RCRA"), WRR was removed from the
National Priority List effective February 5, 1993.
In addition, WRR has disposed of wastes at other sites which have been
placed on the National Priority List and at sites which may be added to the
List. Under CERCLA any party that disposed of waste at any facility that
requires remediation may be held jointly and severally liable for a portion
of, or the entire cost of, such remediation. In some cases, EPA will
expend funds to remedy a site, and then seek reimbursement from those
parties who disposed of wastes at the site. The total reserve of WRR on
account of potential liability for remediation of environmentally damaged
sites at December 31, 1996 was $743,000. See the section of this filing
entitled "Environmental Matters" for additional information.
In 1995, through a wholly-owned subsidiary named WRR Northwest
Enterprises Co., Inc., WRR purchased the assets of a company located
adjacent to WRR's plant. WRR's subsidiary has continued the business lines
formerly operated by the selling company, namely the installation,
servicing and sale of truck equipment. The purchase was made, in part, to
provide WRR with control over neighboring commercial real estate.
WRR's gross margin in 1996 was $4,013,000 as compared to $3,762,000 in
1995. Net income was $948,000 in 1996, compared to $918,000 in 1995.
REAL ESTATE FINANCING
Ziegler Financing Corporation ("ZFC")
ZFC is engaged in the business of making construction and interim loans
to selected churches, primarily those whose capital needs are too small to
justify an underwriting through BCZCO. ZFC also conducts Federal Housing
Administration ("FHA") loan origination activities for housing
developments. ZFC earned net income in 1996 of $12,000, compared to net
income of $74,000 in 1995. Total revenues were $286,000 in 1996 compared
to $327,000 in 1995. At the end of 1996, there were no loans, notes and
related accrued interest outstanding from unrelated entities.
The results of future operations of ZFC will depend upon the demand for
suitable loans at profitable yields, and the size and volume of FHA loan
origination activity.
ZFC generates revenues from its FHA mortgage loan origination activities
by retaining a portion of the fees charged in connection with the
origination, placement and funding of loans insured by the FHA. In 1996,
ZFC originated one FHA insured mortgage loan, which loan was funded through
the underwriting of tax-exempt bonds by ZSD for the project owner. ZFC
intends to depend upon referrals from ZSD for substantially all of its FHA
mortgage loan origination activity in the near future.
The acquisition of construction and interim loans is highly competitive
in that commercial banks, savings and loan associations, mortgage bankers,
real estate trusts, and other construction lenders are aggressively seeking
high quality loans. In addition to competitive conditions, yields depend
to a large extent upon the type of property securing the loans, the term of
the loan, the credit of borrowers, the reputation of the builder, the
condition of the money market at the time the loan is acquired, and other
factors. ZFC has obtained substantially all of its funds for investment in
construction and interim loans through the sale of short-term notes by the
Company. These notes have maturities of nine months or less and have a
shorter term, in most cases, than the loans made by ZFC. The volume of
direct construction and interim loans by ZFC is expected to remain at
relatively low levels as the Company focuses on other aspects of its
business.
CORPORATE AND OTHER
The Ziegler Companies, Inc. ("ZCO")
In 1994, ZCO purchased a one third equity interest in Heartland Capital
Company L.L.C. ("HCC"), a Wisconsin limited liability company which is in
the business of making construction loans to finance the construction or
rehabilitation of affordable housing projects. The total subscription
price paid to date by ZCO is $825,000. The return on the investment
recognized by ZCO for 1996 was approximately $283,000. The return on this
investment of ZCO is dependent upon various factors, including the demand
for affordable housing, the ability of HCC to maintain a spread between
HCC's cost of funds and the interest rates charged to developers, and the
successful management of the risk of default by developers on the loans
made by HCC. The volume of HCC's lending activities has lagged original
projections, due in major part to competition from major commercial banks
and others.
ZCO purchased automobile installment loans from an originating company
in 1994, 1995 and 1996, and holds such loans until the aggregate amount of
the installment loans is sufficient for a third party to purchase the loans
in bulk for the purpose of securitizing them. The total amount of such
loans held by the Company was $2,117,000 at December 31, 1995 and
$1,660,000 at December 31, 1996.
In addition, ZCO advanced to the company which originates the
installment loans a total of $2,126,000 to fund certain liquidity reserves
required under various installment loan purchase facilities such as the ZCO
facility mentioned above. This loan from ZCO is secured by a first
priority security interest in the liquidity reserve accounts themselves.
The balances on the Company's outstanding advances to the originating
company were $1,420,000 at December 31, 1995 and $1,579,000 at December 31,
1996.
Ziegler Asset Management, Inc. ("ZAMI")
This subsidiary was organized in June of 1991 to provide money
management services to individuals and institutional accounts. Asset
growth continued in two primary areas during 1996: equity and balanced
portfolios. The equity management style uses a quality growth strategy for
individuals, foundations, endowments and 401(k) plans. The fixed-income
management style focuses on quality short- and intermediate-term portfolios
for a broad array of institutional clients. As of December 31, 1996, ZAMI
had approximately $900 million of assets under management. ZAMI realized
net income of $202,000 in 1996, compared to $48,000 in 1995.
In 1995, ZAMI underwent changes in key management personnel, and in
early 1996 replaced BCZCO as investment adviser for certain mutual funds of
Principal Preservation Portfolios, Inc.
Ziegler Collateralized Securities, Inc. ("ZCSI")
This subsidiary was organized in August of 1991 for the purpose of
issuing bonds collateralized by pools of leases and other debt instruments
packaged and sold to ZCSI by Ziegler Leasing Corporation. In 1996 one
series of bonds was issued by ZCSI totaling $5,000,000. In accordance with
a written management agreement, management fees that were paid to Ziegler
Leasing Corporation were limited to the amounts which prevented ZCSI from
incurring a loss. As a result, ZCSI had no net income in 1996, 1995 or
1994. The parent company, The Ziegler Companies, Inc., will assume the
management servicing responsibilities in 1997. The Company has
discontinued its operations in the area of equipment leasing as the result
of the sale of Ziegler Leasing Corporation on December 20, 1996. ZCSI does
not anticipate the issuance of any further bonds.
First Church Financing Corporation ("FCFC")
This subsidiary was incorporated on May 3, 1990 for the purpose of
issuing mortgage-backed bonds collateralized by a pool of notes secured by
first mortgages on church buildings and properties. The notes and
mortgages in the pool typically originate from church financings which are
too small in principal amount to support a separate public offering of
bonds. There were no new series of bonds issued by FCFC in 1996.
DISPOSITION OF MATERIAL AMOUNT OF ASSETS
On December 20, 1996, the Company sold its wholly-owned subsidiary,
Ziegler Leasing Corporation, to General Electric Capital Corporation. The
sale was described in Form 8-K filed by the Company on January 6, 1997.
The Company received $17,070,202 as the purchase price in cash at closing,
which is subject to post closing adjustments. Ziegler Leasing Corporation,
at and prior to the time of its sale, was engaged in the business of lease
financing of equipment. As described in Form 8-K filed on January 6, 1997,
Ziegler Leasing Corporation's operations were material to the Company in
terms of both the amount of assets and revenues.
GENERAL
None of the Company's businesses are subject to governmental
renegotiation of profits; none are dependent on a single customer or a few
customers nor are any of them dependent on a single supplier of raw
materials or a few suppliers of raw materials. In no case are patents,
trademarks, licenses or franchises important nor are any of the businesses
seasonal. None of the businesses engage in significant operations outside
the United States.
ENVIRONMENTAL MATTERS
Compliance with Federal, state and local laws and regulations which have
been enacted or adopted relating to the protection of the environment have
had no material effect upon the capital expenditures, earnings and
competitive position of the registrant and its financial services
subsidiaries.
WRR is strictly regulated by the EPA and the DNR, and holds certain
licenses to handle and process hazardous wastes. The revocation of such
licenses could have a material adverse effect on WRR's operations. More
stringent future regulations enacted by these agencies regarding the
control of air and water pollution as well as waste disposal sites could
result in increased operating costs and capital expenditures.
WRR is subject to a consent order of the Wisconsin Department of Natural
Resources for further testing and surface water control, and to remedial
action under the federal Research, Conservation and Recovery Act ("RCRA"),
of contaminants in ground water underneath the plant site.
WRR has disposed of wastes at other recycling sites which may be added
to the National Priority List, and may be required to share in the cost of
the clean-up of these sites. As of December 31, 1996, WRR had been
identified as a potentially responsible party ("PRP") in connection with
three sites. For the first site, a reserve of $128,000 was established
based on WRR's review of documents, its knowledge of the site and its
experience with the clean-up of similar sites. No engineering studies have
yet been done to arrive at a more reliable cost estimate. Payments on this
site are expected to occur over the next five years. The estimated cost of
cleaning up a second site is between $10,000,000 and $30,000,000 based on
preliminary estimates from various consulting firms. Based on the
identification of other PRPs and the present interim allocation schedule,
WRR would be responsible for costs ranging from $500,000 to $1,800,000. In
accordance with Financial Accounting Standards Board Interpretation No.
14, "Reasonable Estimation of the Amount of a Loss," WRR established a
reserve of $500,000 to cover its share of the clean-up costs of this second
site. Payments on this site are expected to occur over the next five
years. In June 1994, WRR was notified by the United States Environmental
Protection Agency ("EPA") that WRR is a PRP at a third site to which WRR
delivered materials from 1982 to 1985. WRR's review of the remediation
investigation and feasibility study, and other materials prepared by EPA on
account of this site, indicates that WRR has valid defenses to any action
by EPA to collect remediation costs. The EPA's estimate of WRR's
proportionate share of anticipated remediation costs at this third site
approximates $200,000. No reserve has been established for this third
site.
While WRR is jointly and severally liable on all three sites, management
is not aware of circumstances which could lead to non-performance by the
other PRP's when viewed as a group. No potential insurance recoveries have
been accrued in the financial statements. The reserve for accrued loss
contingencies totaled $743,000 and $717,000 at December 31, 1996 and 1995,
respectively, which covers the costs related to the specific sites
identified above and other ongoing environmental matters. It is reasonably
possible that WRR's estimates of its liability related to the clean-up of
these sites may change materially in the near term.
EMPLOYEES
As of March 1, 1997, 472 persons were employed full time and 95 persons
were employed part time by the Company and its subsidiaries.
EXECUTIVE OFFICERS OF THE COMPANY
Information regarding the executive officers of the Company, which is
not part of the Company's March 14, 1997 Proxy Statement is as follows:
Name Age Office
P. D. Ziegler 47 President and Chief Executive Officer
D. A. Carlson, Jr. 50 President, Chief Executive Officer and
Treasurer of Ziegler Securities, a
division of B. C. Ziegler and Company
G. G. Maclay, Jr. 49 President and Chief Executive Officer of
Ziegler Asset Management, Inc.
S. C. O'Meara 47 Senior Vice President and General Counsel
L. R. Van Horn 43 Senior Vice President - Finance
The term of office of each officer is one year or until his successor is
elected and qualified. There is no arrangement or understanding between
any officer and any other person pursuant to which he was elected as an
officer.
Mr. Peter D. Ziegler was elected President of The Ziegler Company, Inc.
and B. C. Ziegler and Company on April 21, 1986, and became Chief Executive
Officer of both companies on January 1, 1990. He previously served as
Executive Vice President since January 1, 1985. He is presently a director
of West Bend Mutual Insurance Company, West Bend, Wisconsin and Trustmark
Insurance Company, Lake Forest, Illinois. Mr. Ziegler is a first cousin of
Mr. B. C. Ziegler III, a Director of the Company.
Mr. Donald A. Carlson, Jr. was elected President and Chief Executive
Officer of Ziegler Securities, a division of B. C. Ziegler and Company on
November 30, 1987. He also serves in the capacity of Senior Vice President
of B. C. Ziegler and Company.
Mr. Geoffrey G. Maclay, Jr. began employment with the Company on January
22, 1996. He currently is President and Chief Executive Officer of Ziegler
Asset Management, Inc.
Mr. S. Charles O'Meara began employment with the Company and B. C.
Ziegler and Company as Senior Vice President and General Counsel on January
15, 1993.
Mr. Lynn R. Van Horn was elected Senior Vice President - Finance of the
Company and B. C. Ziegler and Company on March 19, 1990. He joined B. C.
Ziegler and Company as Director of Finance on May 1, 1984 and was elected
Vice President - Finance on March 25, 1985.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
Except for the historical information contained in this Annual Report on
Form 10-K, certain matters discussed herein, including (without limitation)
under Part I, Item 1, "Business -- Environmental Matters," Item 3, "Legal
Proceedings" and under Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," are forward
looking statements that involve risks and uncertainties, including (without
limitation) the effect of economic and market conditions, such as demand
for investment banking services in the markets served by the Company,
pricing of services, environmental matters, and competition in the
financial services industry. The forward looking statements and statements
based on the Company's beliefs contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" represent the
Company's attempt to measure activity in, and to analyze the many factors
affecting, the markets for its products and the markets for the raw
materials from which its products are made. There can be no assurance
that: (i) the Company has correctly measured or identified all of the
factors affecting these markets or the extent of their likely impact; (ii)
the publicly available information with respect to these factors on which
the Company's analysis is based is complete or accurate or (iii) the
Company's analysis is correct.
Item 2. Properties
B. C. Ziegler and Company owns an office building located at 215
North Main Street in West Bend, Wisconsin 53095 which serves as the home
office for the Company and all subsidiaries except WRR Environmental
Services Co., Inc., Ziegler Thrift Trading, Inc. and the Ziegler Securities
Division of B. C. Ziegler and Company. This three-story building has
approximately 77,000 square feet of space.
B. C. Ziegler and Company also owns two buildings located at 237-
239 and 241-243 North Main Street, West Bend, Wisconsin 53095. These
buildings contain four residential rental units and four rental units for
businesses. The business rental units are currently leased to businesses
which are not affiliated with The Ziegler Companies, Inc. or any of its
subsidiaries.
B. C. Ziegler and Company rents commercial space for its various
retail brokerage offices under leases with terms that are typically three
years or less.
Ziegler Securities Division occupies leased premises at One South
Wacker Drive, Suite 3080, Chicago, Illinois 60606; 55 Brendon Way, Suite
500, Indianapolis, Indiana 46077; 767 Third Avenue, Suite 2900, New York,
New York 10017; 111 Second Avenue, N.E., Suite 915, St. Petersburg, Florida
33701; 1850 Mt. Diablo Boulevard, Suite 640, Walnut Creek, California
94596; and 1350 I Street, N.W., Suite 850, Washington, D.C. 20005.
Ziegler Thrift Trading, Inc. occupies leased premises at 733
Marquette Avenue, Suite 106, Minneapolis, Minnesota 55402; 332 Minnesota
Street, Suite N-201, St. Paul, Minnesota 55101; Building 224-2S-34, 3M
Center Building, St. Paul, Minnesota 55144 and 670 McKnight Road North,
Eastern Heights Bank Building, St. Paul, Minnesota 55119, 21 West Van
Buren, Naperville, Illinois 60540; and 10526 West Cermak, Westchester,
Illinois 60154.
All branch offices of B. C. Ziegler and Company, Ziegler
Securities and Ziegler Thrift Trading, Inc. are located in leased premises
with varying terms from one to ten years.
Ziegler Collateralized Securities, Inc. had, as of December 31,
1996, investments in leased equipment of $7,508,000.
WRR Environmental Services Co., Inc. owns an office building and
recycling plant located at 5200 State Road 93, Eau Claire, Wisconsin 54701
which is the sole operating plant for WRR. The office building and plant
buildings are located on approximately nine acres of land southeast of the
city of Eau Claire. In 1994, WRR purchased an additional 19 acres of land
in the vicinity of its operating plant. In 1995, through its wholly-owned
subsidiary, WRR Northwest Enterprises Co., Inc., WRR purchased an
approximately six acre site with improvements located at 5100 Highway 93
South, Eau Claire, Wisconsin, for use as a manufacturing, sales and service
facility for truck equipment.
The Company owns one small parcel of partially-improved land in
West Bend, Wisconsin, aggregating about 16 acres, which has been held for
long-term investment.
B. C. Ziegler and Company owns approximately 40 acres of
unimproved land in West Bend, Wisconsin, which is held for future use as
the potential site of the Company's home office.
Item 3. Legal Proceedings
In an event occurring subsequent to 1996, BCZCO entered into a
provisional settlement of then threatened class action litigation against
it. The provisional settlement is contingent upon judicial certification
of the plaintiff class, and court approval of the settlement. The amount
of the provisional settlement is $1.4 million, which the Company intends to
charge against its first quarter earnings for 1997. The litigation
contains allegations of underwriter's liability, related to the
underwriting by BCZCO in 1989 of $11,680,000 of taxable and tax-exempt
bonds to finance the construction of a senior living facility. The
facility achieved only partial occupancy, and payment on the bonds was
defaulted, resulting in a partial loss of principal and interest by the
bondholders. A complaint was filed in the action on March 21, 1997, in the
Circuit Court of Racine, Wisconsin.
WRR is either a party defendant or a potentially responsible party
in three proceedings related to environmental remediation of waste disposal
sites in Eau Claire, Wisconsin, Griffith, Indiana, and Zionsville, Indiana.
See caption "Environmental Matters" above.
Other than as mentioned above, neither the Company nor any of its
subsidiaries are party to material litigation, other than ordinary routine
litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal
year 1996 to a vote of security holders.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters
Information about the range of bid and asked quotations for the
Company's common stock on the American Stock Exchange for each quarter
during the Company's 1996 and 1995 fiscal years and information about the
cash dividends paid on the Company's common stock for each quarter during
1996 and 1995 may be found on page 36 of the Company's 1996 Annual Report
to Shareholders. Such information is incorporated herein by reference as
if fully set forth herein.
Item 6. Selected Financial Data
Information about the Company's operating revenue, net income,
earnings per share of common stock, cash dividends per share declared,
total assets, long-term obligations, short-term notes payable,
shareholders' equity and book value per share for the fiscal years 1992
through 1996 may be found on page 33 of the Company's 1996 Annual Report to
Shareholders. Such information is incorporated herein by reference as if
fully set forth herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information about the Company's analysis of financial conditions
and results of operations for the fiscal years 1996, 1995 and 1994 may be
found on pages 27 through 32 of the Company's 1996 Annual Report to
Shareholders. All of the foregoing information is incorporated herein by
reference as if fully set forth herein.
Item 8. Financial Statements and Supplementary Data
The Company's consolidated financial statements containing
consolidated balance sheets for the fiscal years 1996 and 1995 may be found
on page 11 of the Company's 1996 Annual Report to Shareholders;
consolidated statements of income for the fiscal years 1996, 1995 and 1994
and consolidated statements of cash flows for the fiscal years 1996, 1995
and 1994 may be found on pages 12 and 14 through 15 of the Company's 1996
Annual Report to Shareholders; consolidated statements of stockholders'
equity for 1996, 1995 and 1994 may be found on page 13 of the Company's
1996 Annual Report to Shareholders. The consolidated notes to financial
statements, together with the report of Arthur Andersen LLP, may be found
on pages 16 through 26 of the Company's 1996 Annual Report to Shareholders.
Such consolidated financial statements and report of Arthur Andersen LLP
are incorporated herein by reference, see Exhibit 13 at page 27.
Item 9. Changes and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no reportable events during the fiscal years 1996
or 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information about the Company's directors and those persons
nominated to become directors may be found on pages 3, 4, and 5 of the
Company's March 14, 1997 Proxy Statement. Such information is incorporated
by reference as if fully set forth herein.
Information regarding the executive officers, which is not a part
of the Company's Proxy Statement, is set forth in Part I above.
Item 11. Executive Compensation
Information required under Item 11 about the compensation paid by
the Company to its Chief Executive Officer and other executive officers of
the Company may be found in the Company's March 14, 1997 Proxy Statement,
which information is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning principal securities holders and securities
holdings of management which may be found on pages 2 and 3 of the Company's
March 14, 1997 Proxy Statement is incorporated by reference as if fully set
forth herein.
Item 13. Certain Relationship and Related Transactions
There have been no transactions since the beginning of fiscal year
1996, or any currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to
be party in which the amount exceeds $60,000 and in which any director,
executive officer, any nominee for election as a director, any security
holder owning of record or beneficially more than 5% of the Common Stock of
the Company, or any member of the immediate family of any of the foregoing
persons had or will have a direct material interest.
PART IV
Item 14(a). Exhibits, Financial Statement Schedules, and Reports on Form
8-K
1. Financial Statements
The following financial statements are incorporated herein
by reference in Part II, Page 15 at Item 8 above.
(i) Consolidated balance sheets - December 31, 1996 and 1995.
(ii) Consolidated statements of income - years ended December 31,
1996, 1995 and 1994.
(iii) Consolidated statements of cash flows - years ended December
31, 1996, 1995 and 1994.
(iv) Consolidated statements of stockholders' equity - years
ended December 31, 1996, 1995 and 1994.
(v) Consolidated notes to financial statements - December 31,
1996 and 1995.
(vi) Report of Independent Public Accountants.
2. Supplementary Data and Financial Statement Schedule
The following financial statement schedule in response to
this Item 14(a) is submitted as a separate section of this report:
Report of Independent Public Accountants on Supplemental
Schedule.
SCHEDULE II - Valuation and Qualifying Accounts.
Report of Independent Public Accountants on and Financial
Statements of Ziegler Mortgage Securities, Inc. II (Commission
file number: 33-92454).
3. Exhibits Required by Securities and Exchange Commission Regulation
S-K:
(3) a. Articles of Incorporation of the Company, previously
filed as Exhibit C to the Company's Proxy Statement
dated March 8, 1993.
b. By-Laws of the Company, previously filed as Exhibit D
of the Company's Proxy Statement dated March 8, 1993.
c. By-Laws of the Company, as amended on February 18,
1997 (changing number of directors from nine to eight;
see Article III, Section 3.02 of the By-Laws).
(4) Instruments Defining the Rights of Security Holders -
Indentures and Guaranty Agreement incorporated herein by
reference under item 10 below.
(9) Voting Trust Agreements - Not applicable pursuant to
Regulation S-K, Item 601.
(10) Material Contracts
a. Form of Indemnification Agreement incorporated by
reference to Exhibit A to the Notice of Special
Meeting and Proxy Statement on July 11, 1986.
b. Trust Indenture dated as of December 1, 1991 between
Ziegler Leasing Corporation and M&I First National
Bank as it relates to $10,000,000 principal amount of
Five-Year Extendable Notes, Series 1991 incorporated
by reference to Exhibit 4.1 to Registration Statement
on Form S-1, Commission File No. 33-43082.
c. Trust Indenture dated December 1, 1991 between Ziegler
Collateralized Securities, Inc. and M&I First National
Bank incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-3, filed September
11, 1991, Commission File No. 33-42723; First
Supplemental Indenture between Ziegler Collateralized
Securities, Inc. and M&I First National Bank, dated
December 1, 1991 incorporated by reference to Exhibit
4.1 to current report on Form 8-K for Ziegler
Collateralized Securities, Inc., dated December 12,
1991, Commission File No. 33-42723; Second
Supplemental Indenture between Ziegler Collateralized
Securities, Inc. and M&I First National Bank, dated
July 1, 1992 incorporated by reference to Exhibit 4.1
to current report on Form 8-K for Ziegler
Collateralized Securities, Inc., dated July 17, 1992,
Commission File No. 33-42723; Third Supplemental
Indenture between Ziegler Collateralized Securities,
Inc. and M&I First National Bank, dated June 1, 1993,
incorporated by reference to Exhibit 10(d) on the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995, filed March 22, 1996; Fourth
Supplemental Indenture between Ziegler Collateralized
Securities, Inc. and M&I First National Bank dated
July 15, 1993 incorporated by reference to Exhibit
4.1A of Amendment No. 3 to Ziegler Collateralized
Securities, Inc. Form S-3 Registration Statement,
filed July 20, 1993, Commission File No. 33-42723;
Fifth Supplemental Indenture between Ziegler
Collateralized Securities, Inc. and M&I First National
Bank, dated December 1, 1993, incorporated by
reference to Exhibit 10(e) on the Company's Annual
Report on Form 10-K for the year ended Decemnber 31,
1995, filed March 22, 1996; Sixth Supplemental
Indenture, between Ziegler Collateralized Securities,
Inc. and M&I First National Bank, dated October 1,
1994, incorporated by reference to Exhibit 10(f) on
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, filed March 22, 1996; Seventh
Supplemental Indenture between Ziegler Collateralized
Securities, Inc. and M&I First National Bank, dated as
of July 15, 1993, incorporated by reference to Exhibit
4.1A of Amendment No. 4 to Ziegler Collateralized
Securities, Inc. Form S-3 Registration Statement,
filed August 31, 1995, Commission File No. 33-42723.
d. Eighth Supplemental Indenture, between Ziegler
Collateralized Securities, Inc. and M&I First National
Bank, dated September 1, 1995.
e. Ninth Supplemental Indenture, between Ziegler
Collateralized Securities, Inc. and M&I First National
Bank, dated May 1, 1996, filed electronically on May
28, 1996, Accession Number 0000898531-96-00098.
f. Guaranty Agreement between The Ziegler Company, Inc.
and M&I First National Bank dated December 1, 1991
incorporated by reference to Exhibit 4.4 to the
Registration Statement on Form S-3, Commission File
No. 33-42723.
g. $10,000,000 Credit Agreement between Ziegler Leasing
Corporation and First Wisconsin National Bank of
Milwaukee, dated May 15, 1991 incorporated by
reference to Item 14(a)3.(10)e of Part IV of the
Company's 1993 Form 10-K.
h. $5,000,000 Term Loan Agreement between Ziegler Leasing
Corporation and M&I Marshall & Ilsley Bank, dated
December 28, 1992 incorporated by reference to Item
14(a)3.(10)e of Part IV of the Company's 1992 Form 10-
K.
Executive Compensation Plan and Arrangements
i. Nonstatutory Stock Option Agreement referred to in
portions of the Company's March 8, 1996 Proxy
Statement, which information is incorporated by
reference in Item 11 of Part III of this Form 10-K.
j. 1993 Employees' Stock Incentive Plan incorporated by
reference from the March 8, 1993 Proxy Statement.
(11) Statement Re Computation of Per Share Earnings.
(12) Statements Re Computation of Ratios - Not applicable
pursuant to Regulation S-K, Item 601.
(13) 1996 Annual Report to Shareholders.
(18) Letter Re Change in Accounting Principles - Not applicable.
(19) Previously Unfiled Document - Not applicable.
(22) Subsidiaries of the Company.
(23) Published Report Regarding Matters Submitted to Vote of
Security Holders - Not applicable.
(24) Consent of Independent Certified Public Accountants.
(25) Power of Attorney - Not applicable.
(27) Financial Data Schedule
(28) Additional Exhibits
a) March 14, 1997 Proxy Statement.
(29) Information from reports furnished to state insurance
regulatory authorities - Not applicable.
Item 14(b). Reports on Form 8-K
A report on Form 8-K was filed on November 1, 1996
announcing the Company's intention to sell its Ziegler Leasing
Corporation subsidiary to a major financial services company.
A report on Form 8-K was filed on January 6, 1997 announcing
the sale of its Ziegler Leasing Corporation subsidiary as of
December 20, 1996.
A report on Form 8-K was filed on February 24, 1997
announcing the Company's intention to acquire Milwaukee-based
Glaisner, Schilffarth, Grande & Schnoll, Ltd., a financial
services holding company, and its broker-dealer and investment
adviser subsidiary, GS2 Securities, Inc.
A report on Form 8-K was filed on March 21, 1997 indicating
that the Company has been made a party to a lawsuit involving the
underwriting of two bond issues in May of 1989. Although
admitting no liability with respect to the matters alleged in the
lawsuit, the Company has reached a provisional settlement with
attorneys who expect to represent a class of former bondholders.
The settlement is in the amount of $1,400,000, and is conditioned
upon judicial certification of a class of bondholders as
plaintiffs, and judicial approval of the settlement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
THE ZIEGLER COMPANIES, INC.
March 26, 1997 By: /s/ Janine R. Yovanovich
Janine R. Yovanovich
Corporate Secretary
Pursuant to the requirements of the Securities and Exchange Act of 1934,
as amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
March 26, 1997 /s/ Peter D. Ziegler
Peter D. Ziegler
President and Chief Executive Officer,
Director
March 26, 1997 John C. Frueh
John C. Frueh, Director
March 26, 1997 /s/ John R. Green
John R. Green, Director
March 26, 1997 /s/ Peter R. Kellogg
Peter R. Kellogg, Director
March 26, 1997 /s/ Patrick D. J. Kenny
Patrick D. J. Kenny, Director
March 26, 1997 /s/ Stephen A. Roell
Stephen A. Roell, Director
March , 1997
Frederick J. Wenzel, Director
March 26, 1997 /s/ Bernard C. Ziegler III
Bernard C. Ziegler III, Director
March 26, 1997 /s/ Lynn R. Van Horn
Lynn R. Van Horn
Senior Vice President - Finance
March 26, 1997 /s/ Jeffrey C. Vredenbregt
Jeffrey C. Vredenbregt
Vice President, Treasurer and Controller
INDEX TO EXHIBITS
Exhibit No.: Page
3(a). Articles of Incorporation n/a
3(b). By-Laws n/a
3(c). By-Laws, as amended on February 18, 1997 23
4. Instruments Defining the Rights of Security Holders n/a
9. Voting Trust Agreements n/a
10(a). Indemnification Agreement n/a
10(b). Ziegler Leasing Corporation Trust Indenture n/a
10(c). Ziegler Collateralized Securities, Inc. Trust Indenture n/a
10(d) Ziegler Collateralized Securities, Inc.
Eighth Supplemental Indenture 24
10(e) Ziegler Collateralized Securities, Inc.
Ninth Supplemental Indenture 25
10(f). Guaranty Agreement n/a
10(g). Ziegler Leasing Corporation Credit Agreement n/a
10(h). Ziegler Leasing Corporation Term Agreement n/a
10(i). Nonstatutory Stock Option Agreement n/a
10(j). 1993 Employees' Stock Incentive Plan n/a
11. Computation of Net Income per Common Share 26
12. Statements Re Computation of Ratios n/a
13. 1996 Annual Report to Shareholders of the Company 27
18. Letter Re Change in Accounting Principles n/a
19. Previously Unfiled Document n/a
22. Subsidiaries of the Company 28
23. Published Report Regarding Matters Submitted to Vote of
Security Holders n/a
24. Consent of Arthur Andersen LLP, Independent Public
Accountants 29
25. Power of Attorney n/a
27. Financial Data Schedule 30
28. Proxy Statement of the Company, March 14, 1997 31
29. Information From Reports Furnished to State Insurance
Regulatory Authorities n/a
<PAGE>
EXHIBIT 3(c)
AMENDED BY-LAWS
(attached at the end of this Form 10-K)
EXHIBIT 10(d)
EIGHTH SUPPLEMENTAL INDENTURE
ZIEGLER COLLATERALIZED SECURITIES, INC.
(attached at the end of this Form 10-K)
EXHIBIT 10(e)
NINTH SUPPLEMENTAL INDENTURE
ZIEGLER COLLATERALIZED SECURITIES, INC.
(attached at the end of this Form 10-K)
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
COMPUTATION OF NET INCOME PER COMMON SHARE
Year Ended December 31
1996 1995 1994
<S> <C> <C> <C>
Weighted Average Shares Outstanding
Before Adjustments 2,387,972 2,375,528 2,385,920
Incremented Shares Related to
Restricted Common Stock (1) 11,519 16,440 2,666
Weighted Average Shares Outstanding 2,399,491 2,391,968 2,388,586
Income From Continuing Operations 2,974,714 3,327,941 1,241,378
Income from Discontinued Operations 669,973 716,380 763,678
Net Income $3,644,687 $4,044,321 $2,005,056
Earnings Per Share From
Continuing Operations $1.24 $1.39 $ .52
Earnings Per Share From
Discontinued Operations $ .28 $ .30 $ .32
Net Income Per Share $1.52 $1.69 $ .84
</TABLE>
(1) Calculation is based on the treasury stock method using average
market price.
<PAGE>
EXHIBIT 13
1996 ANNUAL REPORT TO SHAREHOLDERS OF THE COMPANY
(attached at the end of this Form 10-K0
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF THE COMPANY
Percentage of
Subsidiaries of the Registrant Subsidiary Voting Stock Owned
The Ziegler Companies, Inc. Incorporated by Registrant
B. C. Ziegler and Company Wisconsin 100%
Ziegler Financing Corporation Wisconsin 100%
Ziegler Thrift Trading, Inc. Minnesota 100%
Ziegler Asset Management, Inc. Wisconsin 100%
Ziegler Collateralized Securities, Inc. Wisconsin 100%
First Church Financing Corporation Wisconsin 100%
WRR Environmental Services Co., Inc. Wisconsin 100%
The Registrant and all of the above subsidiaries are included in the
accompanying consolidated financial statements. WRR Environmental
Services Co., Inc. owns all of the common stock of WRR Northwest
Enterprises Co., Inc., whose operations are described above in this Form
10-K under the heading "Hazardous Waste Management" in Part I, Item 1.
<PAGE>
EXHIBIT 24
CONSENT OF ARTHUR ANDERSEN LLP
INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Annual Report on Form 10-K of The Ziegler Companies,
Inc. of our report dated February 26, 1997, included in the 1996 Annual
Report to Shareholders of The Ziegler Companies, Inc.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-39543) of The Ziegler Companies, Inc. and
related Prospectus pertaining to The Ziegler Company, Inc.'s 1989
Employees' Stock Purchase Plan and in the Registration Statement (Form S-8
No. 33-74636) of The Ziegler Companies, Inc. and related Prospectus
pertaining to The Ziegler Company, Inc. 1993 Employees' Stock Incentive
Plan, of our report dated February 26, 1997, with respect to the financial
statements of The Ziegler Companies, Inc. incorporated by reference in the
Annual Report (Form 10-K) for the year ended December 31, 1996.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-42723) of Ziegler Collateralized Securities,
Inc. and related Prospectus of our report dated February 26, 1997, with
respect to the financial statements of The Ziegler Companies, Inc.
incorporated by reference in this Annual Report (Form 10-K) for the year
ended December 31, 1996.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
March 27, 1997.
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
(attached at the end of this Form 10-K)
EXHIBIT 28
PROXY STATEMENT
March 14, 1997
(attached at the end of this Form 10-K)
<PAGE>
THE ZIEGLER COMPANIES, INC.
SUPPLEMENTAL SCHEDULE TO
THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996, 1995 AND 1994
Report of independent public accountants on supplemental schedule
SCHEDULE II Valuation and Qualifying Accounts
Report of independent public accountants and financial statements of
Ziegler Mortgage Securities, Inc. II (Commission file number: 33-28290,
33-21324, 33-10076, 33-1726 on Form 10-K [33-28290]).
All other schedules are not submitted because they are not applicable or
not required or because the required information is included in the
financial statements as incorporated by reference or notes thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To the Board of Directors of
The Ziegler Companies, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in The Ziegler Companies, Inc. Annual
Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 26, 1997. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole.
The schedule on page 34 is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 26, 1997.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
THE ZIEGLER COMPANIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Additions
Charged to
Balance at Additions Other Balance at
December 31, Charged to Accounts Deductions December 31,
Description 1995 Expense (Note 3) (Note 1) 1996
<S> <C> <C> <C> <C> <C>
Reserve for loan
losses (Note 2) $1,508,967 $415,369 $(33,710) $(1,627,774) $ 262,852
</TABLE>
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Additions Other Balance at
December 31, Charged to Accounts Deductions December 31,
Description 1994 Expense (Note 3) (Note 1) 1995
<S> <C> <C> <C> <C> <C>
Reserve for loan
losses (Note 2) $1,051,619 $219,405 $624,964 $ (387,018) $1,508,970
</TABLE>
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Additions Other Balance at
December 31, Charged to Accounts Deductions December 31,
Description 1993 Expense (Note 3) (Note 1) 1994
<S> <C> <C> <C> <C> <C>
Reserve for loan
losses (Note 2) $2,519,931 $335,685 $711,729 $(2,515,726) $1,051,619
</TABLE>
NOTES:
(1)These deductions represent charge-offs for the purpose for which the reserve
was established.
(2)The reserve is offset against the corresponding assets in the balance sheet.
(3)The additions represent adjustments to prior charge-offs.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Ziegler Mortgage Securities, Inc. II:
We have audited the accompanying balance sheets of ZIEGLER MORTGAGE
SECURITIES, INC. II (a Wisconsin corporation) as of December 31, 1996 and
1995, and the related statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Ziegler
Mortgage Securities, Inc. II as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 7, 1997.
<PAGE>
<TABLE>
<CAPTION>
ZIEGLER MORTGAGE SECURITIES, INC. II
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
1996 1995
<S> <C> <C>
ASSETS
Cash $ 74,291 $ 83,353
Money market investments, at cost,
which approximates market 456,228 341,861
Total cash and cash equivalents 530,519 425,214
Cash and investments held by trustee, at cost,
which approximates market 3,347,344 4,207,178
Accrued interest receivable 707,253 855,783
Mortgage Certificates, held by trustee (net of
purchase discount of $2,795,809 and $3,425,237,
respectively) 98,182,510 116,345,952
Deferred issuance costs 2,758,864 3,378,116
Total assets $105,526,490 $125,212,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued interest payable $ 2,948,545 $ 3,716,958
Mortgage Certificate-Backed Bonds payable 101,047,000 119,908,000
Payable to B. C. Ziegler and Company 10,945 67,285
Total liabilities 104,006,490 123,692,243
Stockholders' Equity:
Preferred Stock, $.10 par value, non-voting,
$9.00 non-cumulative dividend,
$100 redemption price;
200,000 shares authorized,
15,000 shares issued and
outstanding, respectively 1,500,000 1,500,000
Common stock, $1 par value,
56,000 shares authorized,
20,000 shares issued and outstanding 20,000 20,000
Retained earnings - -
Total stockholders' equity 1,520,000 1,520,000
Total liabilities and stockholders' equity $105,526,490 $125,212,243
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ZIEGLER MORTGAGE SECURITIES, INC. II
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Interest income $ 9,635,812 $ 10,395,747 $ 10,129,823
Gain on sale of mortgage certificates 747,579 228,031 1,014,811
Total revenues 10,383,391 10,623,778 11,144,634
Expenses:
Interest expense 9,158,478 9,764,637 9,654,473
Amortization of deferred issuance costs 805,971 359,513 1,111,631
Management fee 216,365 349,925 158,801
General and administrative 202,577 149,703 219,729
Total expenses 10,383,391 10,623,778 11,144,634
Income before income taxes - - -
Provision for income taxes - - -
Net income $ - $ - $ -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ZIEGLER MORTGAGE SECURITIES, INC. II
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Common Stock Preferred Stock Total
Number Number Stock-
of of Retained holders'
Shares Amount Shares Amount Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 20,000 $20,000 20,000 $2,000,000 $ - $2,020,000
Redemption of
preferred stock - - (5,000) (500,000) - (500,000)
Net income - - - - - -
Balance at
December 31, 1994 20,000 20,000 15,000 1,500,000 - 1,520,000
Net income - - - - - -
Balance at
December 31, 1995 20,000 20,000 15,000 1,500,000 - 1,520,000
Net income - - - - - -
Balance at
December 31, 1996 20,000 $20,000 15,000 $1,500,000 $ - $1,520,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ZIEGLER MORTGAGE SECURITIES, INC. II
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ - $ - $ -
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Gain on sale of Mortgage Certificates (747,579) (228,031) (1,014,811)
Discount accretion on
Mortgage Certificates (113,051) (123,337) (116,878)
Amortization of deferred issuance costs 805,971 359,513 1,111,631
Change in assets and liabilities:
Decrease (Increase) in -
Funds held by trustee 859,834 (64,595) 20,874,119
Accrued interest receivable 148,530 (11,708) 119,467
Increase (Decrease) in -
Payable to B. C. Ziegler and Company (56,340) (172,912) (26,943)
Accrued interest payable (768,413) 103,030 (1,430,566)
Net cash provided by (used in)
operating activities 128,952 (138,040) 19,516,019
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired through merger - - 55,249
Sale and redemption of
Mortgage Certificates 25,062,114 8,011,228 33,126,215
Purchase of Mortgage Certificates (6,038,041) (10,604,175) (20,681,090)
Net cash provided by (used in)
investing activities 19,024,073 (2,592,947) 12,500,374
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Mortgage
Certificate-Backed Bonds $ 6,037,280 $10,597,250 $20,749,705
Principal payments on
Mortgage Certificate-Backed Bonds (25,085,000) (8,035,000) (52,154,000)
Redemption of preferred stock - - (500,000)
Net cash provided by (used in)
financing activities (19,047,720) 2,562,250 (31,904,295)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 105,305 (168,737) 112,098
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 425,214 593,951 481,853
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 530,519 $ 425,214 $ 593,951
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid during the year $ 9,926,891 $ 9,661,607 $11,085,000
Income taxes paid during the year $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING ACTIVITIES:
Assets acquired through merger,
primarily Mortgage Certificates $ - $ - $ 2,096,000
Liabilities assumed through merger,
primarily Mortgage Certificate-
Backed Bonds $ - $ - $ 2,151,000
</TABLE>
<PAGE>
ZIEGLER MORTGAGE SECURITIES, INC. II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) Organization -
Ziegler Mortgage Securities, Inc. II (the "Company") is a limited
purpose finance company. The Company was organized to facilitate the
financing of mortgage loans. The common stock of the Company is
owned equally by The Ziegler Companies, Inc. and James G. Pouros.
(2) Summary of Significant Accounting Policies -
Mortgage Certificates are carried at par value less unamortized
purchase discount. The purchase discount on the Mortgage
Certificates is amortized over the life of the related outstanding
Mortgage Certificate- Backed Bonds (the "Bonds") using the bonds
outstanding method which approximates the effective interest rate
method. The market values of the Mortgage Certificates at December
31, 1996 and 1995 were approximately $103,022,000 and $124,478,000,
respectively.
Deferred bond issuance costs consist of underwriting discounts and
other expenses of issuance and distribution. Such costs are
amortized over the life of the outstanding Bonds using the bonds
outstanding method which approximates the effective interest rate
method.
Cash equivalents are defined as unrestricted short-term investments
maturing within three months of the date of purchase.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
(3) Mortgage Certificates -
The Mortgage Certificates consist of GNMA Certificates (comprising
89% of the portfolio as of December 31, 1996) guaranteed by the
Government National Mortgage Association ("GNMA") and/or Guaranteed
Mortgage Pass-Through Certificates (comprising 11% of the portfolio)
issued by the Federal National Mortgage Association ("FNMA")
(collectively the "Mortgage Certificates"). The full and timely
payment of the principal and interest on the GNMA Certificates is
guaranteed by GNMA. The GNMA guaranty is backed by the full faith
and credit of the United States government. FNMA guarantees the
payment of principal and interest on the FNMA Certificates but the
FNMA guaranty is not backed by the full faith and credit of the
United States government.
Principal and interest payments received from the Mortgage
Certificates are controlled by the trustee. These funds are utilized
to meet the semiannual interest payments on the Bonds, to reduce the
outstanding principal balance of the Bonds and to pay certain
operating expenses of the Company.
(4) Mortgage Certificate-Backed Bonds Payable -
Bonds outstanding at December 31, 1996, consist of the following:
<TABLE>
<CAPTION>
Outstanding
Principal
Original Amounts
Date of Stated Principal at
Series Rate Bonds Maturity Amounts 12/31/96
<S> <C> <C> <C> <C> <C>
10 8.90% 10/1/86 10/1/21 $ 8,200,000 $ 2,324,000
16 9.00% 5/1/87 1/1/22 4,500,000 2,261,000
19 9.15% 6/1/87 5/1/22 5,750,000 3,771,000
20 9.00% 7/1/87 6/1/22 5,418,000 3,470,000
21 9.00% 7/1/87 6/1/22 5,266,000 4,833,000
24 9.20% 10/1/87 2/1/22 5,237,000 4,243,000
33 9.10% 4/1/88 10/15/21 7,054,000 3,619,000
34 9.35% 6/1/88 5/15/23 4,163,000 3,304,000
39 9.40% 8/1/88 8/15/23 5,780,000 3,774,000
40 9.50% 9/1/88 9/15/23 6,800,000 1,605,000
41 9.30% 10/1/88 10/15/23 4,655,000 4,108,000
42 9.20% 10/1/88 10/15/23 4,000,000 3,530,000
47 9.75% 5/1/89 2/15/24 3,744,000 1,690,000
49 8.45% 7/1/89 7/15/22 2,740,000 2,584,000
52 9.35% 5/1/90 5/15/20 3,000,000 401,000
55 9.00% 9/1/90 10/01/20 3,244,000 507,000
61 8.00% 9/1/91 11/15/19 3,390,000 1,337,000
62 7.25% 2/1/92 4/15/22 2,925,000 1,347,000
63 7.60% 5/1/92 5/15/22 3,400,000 1,244,000
64 7.40% 6/1/92 6/15/22 3,300,000 1,394,000
65 7.00% 1/1/93 1/15/28 3,029,000 2,957,000
66 7.00% 1/1/93 1/15/28 3,000,000 2,925,000
68 6.25% 4/1/93 5/01/23 3,000,000 2,440,000
69 6.00% 5/1/93 5/01/23 3,022,000 2,457,000
70 6.00% 3/1/94 11/15/28 3,390,000 3,325,000
71 7.00% 4/1/94 9/20/23 3,015,000 2,476,000
72 7.00% 4/1/94 10/15/23 2,897,000 2,827,000
73 7.00% 4/1/94 4/15/24 3,130,000 2,985,000
74 7.10% 5/1/94 2/15/24 3,145,000 3,072,000
75 7.10% 6/1/94 2/15/24 3,290,000 3,203,000
76 7.35% 9/1/94 9/15/29 2,535,000 2,498,000
77 8.00% 2/1/95 10/15/29 3,066,000 3,031,000
78 7.50% 4/1/95 9/15/29 2,597,000 2,573,000
79 6.75% 6/1/95 6/15/22 2,622,000 2,579,000
80 7.00% 9/1/95 7/15/23 2,640,000 2,607,000
81 7.00% 4/1/96 5/15/28 3,237,000 3,237,000
82 7.25% 6/1/96 9/15/30 2,987,000 2,984,000
143,168,000 99,522,000
</TABLE>
<TABLE>
<CAPTION>
American Mortgage Securities, Inc.
Mortgage Certificate-Backed Bonds
<C> <C> <C> <C> <C> <C>
5 7.35% 3/1/92 3/01/22 3,000,000 1,525,000
$146,168,000 $101,047,000
</TABLE>
The stated maturities are the dates on which Bonds will be fully paid
assuming no prepayments are received on the Mortgage Certificates
which serve as collateral for the Bonds and no Bonds are called. The
stated maturities of the Bonds will be shortened by prepayments on
the Mortgage Certificates and by any Bond calls.
The Bonds can be redeemed each month without premium under the
following circumstances:
The Company must call the Bonds, to the extent funds are
available, commencing in the twelfth month following the
original issuance of each series or commencing at such time as
the aggregate balance in the redemption fund, as defined in the
prospectus, for each series that reaches $100,000; whichever
occurs first.
The Bonds of any series may be redeemed in whole by the Company
after the third anniversary of the original issuance and,
commencing with Series 16 bonds, at any time as the outstanding
principal amount of such series is less than 10% of the
aggregate principal amount of such series originally issued.
Bondholders can present their Bonds for redemption each month
commencing with the second calendar month following the month
in which each series is originally issued. The Company will
redeem such Bonds to the extent funds are available.
The market values in the secondary bond market of the Bonds
outstanding as of December 31, 1996 and 1995, approximated
$101,173,000 and $120,264,000, respectively.
(5) Related Parties -
B. C. Ziegler and Company, a wholly-owned subsidiary of The Ziegler
Companies, Inc. which owns 50% of the Company's outstanding stock, is
the sole underwriter for the Bonds issued by the Company. In its
capacity as underwriter, B. C. Ziegler and Company received a fee for
its services equal to a percent of the Bonds offered by the Company.
B. C. Ziegler and Company provided management and administrative
services to the Company for which, pursuant to a management agreement
with the Company, they were entitled to receive a management fee not
to exceed .375% of the aggregate outstanding principal amount of
bonds issued by the Company at the last day of the month preceding
each semiannual payment date. Any calculated management fee is
retroactively reduced to such amount (not less than zero) as will
prevent the Company from suffering a loss for each fiscal year.
As of December 31, 1996 and 1995, the Company owed B. C. Ziegler and
Company $10,945 and $67,285, respectively, for accrued management
fees.
During 1994, the Company redeemed 5,000 shares of the preferred stock
from B. C. Ziegler and Company, the sole owner of the Company's
preferred stock, for $500,000.
(6) Merger -
Effective December 30, 1994, the Company merged with American
Mortgage Securities, Inc. ("AMSI"), another limited purpose finance
company organized to facilitate the financing of mortgage loans.
Prior to the merger, AMSI was owned 50% by The Ziegler Companies,
Inc. and 50% by Mr. James G. Pouros. The Company was the surviving
corporation and assumed all the assets and liabilities of AMSI at
year end 1994.
BYLAWS
OF
ZIEGLER WISCONSIN, INC.
(a Wisconsin corporation)
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may have
such principal and other business offices, either within or without the
State of Wisconsin, as the Board of Directors may designate or as the
business of the corporation may require from time to time.
1.02. Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of the
registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the corporation shall be identical to such registered
office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders
shall be held on the third Monday in April of each year, or at such other
time and date within thirty days before or after such date as may be fixed
by or under the authority of the Board of Directors, for the purpose of
electing directors and for the transaction of such other business as may
come before the meeting. If the day fixed for the annual meeting shall be
a legal holiday in the State of Wisconsin, such meeting shall be held on
the next succeeding business day.
2.02 Special Meetings. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by the Wisconsin
Business Corporation Law, may be called by the Board of Directors, the
President or the Secretary. The corporation shall call a special meeting
of shareholders in the event that the holders of at least 10% of all of the
votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting sign, date and deliver to the corporation one or
more written demands for the meeting describing one or more purposes for
which it is to be held. The corporation shall give notice of such a
special meeting within thirty days after the date that the demand is
delivered to the corporation.
2.03 Place of Meeting. The Board of Directors may designate
any place, either within or without the State of Wisconsin, as the place of
meeting for any annual or special meeting of shareholders. If no
designation is made, the place of meeting shall be the principal office of
the corporation. Any meeting may be adjourned to reconvene at any place
designated by vote of the shares represented thereat.
2.04 Notice of Meeting. Written notice stating the date, time
and place of any meeting of shareholders and, in case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered
not less than ten days nor more than sixty days before the date of the
meeting (unless a different time is provided by the Wisconsin Business
Corporation Law or the articles of incorporation), either personally or by
mail, by or at the direction of the President or the Secretary, to each
shareholder of record entitled to vote at such meeting and to such other
persons as required by the Wisconsin Business Corporation Law. If mailed,
such notice shall be deemed to be effective when deposited in the United
States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the corporation, with postage thereon
prepaid. If an annual or special meeting of shareholders is adjourned to a
different date, time or place, the corporation shall not be required to
give notice of the new date, time or place if the new date, time or place
is announced at the meeting before adjournment; provided, however, that if
a new record date for an adjourned meeting is or must be fixed, the
corporation shall give notice of the adjourned meeting to persons who are
shareholders as of the new record date.
2.05 Waiver of Notice. A shareholder may waive any notice
required by the Wisconsin Business Corporation Law, the articles of
incorporation or these bylaws before or after the date and time stated in
the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, contain the same information that would have been
required in the notice under applicable provisions of the Wisconsin
Business Corporation Law (except that the time and place of meeting need
not be stated) and be delivered to the corporation for inclusion in the
corporate records. A shareholder's attendance at a meeting, in person or
by proxy, waives objection to all of the following: (a) lack of notice or
defective notice of the meeting, unless the shareholder at the beginning of
the meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (b) consideration of a particular
matter at the meeting that is not within the purpose described in the
meeting notice, unless the shareholder objects to considering the matter
when it is presented.
2.06 Fixing of Record Date. The Board of Directors may fix in
advance a date as the record date for the purpose of determining
shareholders entitled to notice of and to vote at any meeting of
shareholders, shareholders entitled to demand a special meeting as
contemplated by Section 2.02 hereof, shareholders entitled to take any
other action, or shareholders for any other purpose. Such record date
shall not be more than seventy days prior to the date of which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is fixed by the Board of Directors or by the
Wisconsin Business Corporation Law for the determination of shareholders
entitled to notice of and to vote at a meeting of shareholders, the record
date shall be the close of business on the day before the first notice is
given to shareholders. If no record date is fixed by the Board of
Directors or by the Wisconsin Business Corporation Law for the
determination of shareholders entitled to demand a special meeting as
contemplated in Section 2.02 hereof, the record date shall be the date that
the first shareholder signs the demand. Except as provided by the
Wisconsin Business Corporation Law for a court-ordered adjournment, a
determination of shareholders entitled to notice of and to vote at a
meeting of shareholders is effective for any adjournment of such meeting
unless the Board of Directors fixes a new record date, which it shall do if
the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting. The record date for determining shareholders
entitled to a distribution (other than a distribution involving a purchase,
redemption or other acquisition of the corporation's shares) or a share
dividend is the date on which the Board of Directors authorized the
distribution or share dividend, as the case may be, unless the Board of
Directors fixes a different record date.
2.07. Shareholders' List for Meetings. After a record date for
a special or annual meeting of shareholders has been fixed, the corporation
shall prepare a list of the names of all of the shareholders entitled to
notice of the meeting. The list shall be arranged by class or series of
shares, if any, and show the address of and number of shares held by each
shareholder. Such list shall be available for inspection by any
shareholder, beginning two business days after notice of the meeting is
given for which the list was prepared and continuing to the date of the
meeting, at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting will be held. A
shareholder or his or her agent may, on written demand, inspect and,
subject to the limitations imposed by the Wisconsin Business Corporation
Law, copy the list, during regular business hours and at his or her
expense, during the period that it is available for inspection pursuant to
this Section 2.07. The corporation shall make the shareholders' list
available at the meeting and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any
adjournment thereof. Refusal or failure to prepare or make available the
shareholders' list shall not affect the validity of any action taken at a
meeting of shareholders.
2.08 Quorum and Voting Requirements. Shares entitled to vote
as a separate voting group may take action on a matter at a meeting only if
a quorum of those shares exists with respect to that matter. If the
corporation has only one class of stock outstanding, such class shall
constitute a separate voting group for purposes of this Section 2.08.
Except as otherwise provided in the articles of incorporation, any bylaw
adopted under authority granted in the articles of incorporation, or the
Wisconsin Business Corporation Law, a majority of the votes entitled to be
cast on the matter shall constitute a quorum of the voting group for action
on that matter. Once a share is represented for any purpose at a meeting,
other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes
of determining whether a quorum exists for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or must be
set for the adjourned meeting. If a quorum exists, except in the case of
the election of directors, action on a matter shall be approved if the
votes cast within the voting group favoring the action exceed the votes
cast opposing the action, unless the articles of incorporation, any bylaw
adopted under authority granted in the articles of incorporation, or the
Wisconsin Business Corporation Law requires a greater number of affirmative
votes. Unless otherwise provided in the articles of incorporation,
directors shall be elected by a plurality of the votes cast by the shares
entitled to vote in the election of directors at a meeting at which a
quorum is present. For purposes of this Section 2.08, "plurality" means
that the individuals with the largest number of votes are elected as
directors up to the maximum number of directors to be chosen at the
meeting. Though less than a quorum of the outstanding votes of a voting
group are represented at a meeting, a majority of the votes so represented
may adjourn the meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting
as originally notified.
2.09 Conduct of Meeting. The President and in his or her
absence, a Vice President in the order provided under Section 4.07 hereof,
and in their absence, any person chosen by the shareholders present shall
call the meeting of the shareholders to order and shall act as chairperson
of the meeting, and the Secretary of the corporation shall act as secretary
of all meetings of the shareholders, but, in the absence of the Secretary,
the presiding officer may appoint any other person to act as secretary of
the meeting.
2.10 Proxies. At all meetings of shareholders, a shareholder
may vote his or her shares in person or by proxy. A shareholder may
appoint a proxy to vote or otherwise act for the shareholder by signing an
appointment form, either personally or by his or her attorney-in-fact. An
appointment of a proxy is effective when received by the Secretary or other
officer or agent of the corporation authorized to tabulate votes. An
appointment is valid for eleven months from the date of its signing unless
a different period is expressly provided in the appointment form.
2.11 Voting of Shares. Except as provided in the articles of
incorporation or in the Wisconsin Business Corporation Law, each
outstanding share, regardless of class, is entitled to one vote on each
matter voted on at a meeting of shareholders.
2.12 Action without Meeting. Any action required or permitted
by the articles of incorporation or these bylaws or any provision of the
Wisconsin Business Corporation Law to be taken at a meeting of the
shareholders may be taken without a meeting and without action by the Board
of Directors if a written consent or consents, describing the action so
taken, is signed by all of the shareholders entitled to vote with respect
to the subject matter thereof and delivered to the corporation for
inclusion in the corporate records.
2.13. Acceptance of Instruments Showing Shareholder Action. If
the name signed on a vote, consent, waiver or proxy appointment corresponds
to the name of a shareholder, the corporation, if acting in good faith, may
accept the vote, consent, waiver or proxy appointment and give it effect as
the act of a shareholder. If the name signed on a vote, waiver or proxy
appointment does not correspond to the name of a shareholder, the
corporation, if acting in good faith, may accept the vote, consent, waiver
or proxy appointment and give it effect as the act of the shareholder if
any of the following apply:
(a) The shareholder is an entity and the name signed purposes
to be that of an officer or agent of the entity.
(b) The name purports to be that of a personal
representative, administrator, executor, guardian or conservator
representing the shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation is presented with respect to
the vote, consent, waiver or proxy appointment.
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation is presented with
respect to the vote, consent, waiver or proxy appointment.
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder is presented with respect
to the vote, consent, waiver or proxy appointment.
(e) Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at lease one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners.
The corporation may reject a vote, consent, waiver or proxy
appointment if the Secretary or other officer or agent of the corporation
who is authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation managed under the direction of, the Board of Directors. The
number of directors of the corporation shall be nine.
3.02 Tenure and Qualifications. The directors shall be divided
into three classes to consist of three members in each of two classes, and
two members in the remaining class. The term of one class shall expire at
each annual meeting. At each annual meeting, the number of directors equal
to the number of the class whose term expires at the time of such meeting
shall be elected to hold office until the third succeeding annual meeting.
Each director shall hold office for the term for which he is elected and
until his or her successor shall have been elected and, if necessary,
qualified, or until there is a decrease in the number of directors which
takes effect after the expiration of his or her term, or until his or her
prior death, resignation or removal. A director may be removed by the
shareholders only at a meeting called for the purpose of removing the
director, and the meeting notice shall state that the purpose, or one of
the purposes, of the meeting is removal of the director. A director may be
removed from office with or without cause if the number of votes cast to
remove the director exceeds the number of votes cast not to remove such
director. A director may resign at any time by delivering written notice
which complies with the Wisconsin Business Corporation Law to the Board of
Directors, to the President or to the corporation. A director's
resignation is effective when the notice is delivered unless the notice
specifies a later effective date. Directors need not be residents of the
State of Wisconsin or shareholders of the corporation.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately
after the annual meeting of shareholders and each adjourned session
thereof. The place of such regular meeting shall be the same as the place
of the meeting of shareholders which precedes it, or such other suitable
place as may be announced at such meeting of shareholders. The Board of
Directors may provide, by resolution, the date, time and place, either
within or without the State of Wisconsin, for the holding of additional
regular meetings of the Board of Directors without other notice than such
resolution.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President, Secretary or
any two directors. The President or Secretary may fix any place, either
within or without the State of Wisconsin, as the place for holding any
special meeting of the Board of Directors, and if no other place is fixed
the place of the meeting shall be the principal office of the corporation
in the State of Wisconsin.
3.05. Notice; Waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 3.03) shall
be given by written notice delivered in person, by telegraph, teletype,
facsimile or other form of wire or wireless communication, not less than
twenty-four hours prior to the meeting or by mail or private carrier, to
each director at his business address or at such other address as such
director shall have designated in writing filed with the Secretary, not
less than forty-eight hours prior to the meeting. The notice need not
describe the purpose of the meeting of the Board of Directors or the
business to be transacted at such meeting. If mailed, such notice shall be
deemed to be effective when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice is given by telegram,
such notice shall be deemed to be effective when the telegram is delivered
to the telegraph company. If notice is given by private carrier, such
notice shall be deemed to be effective when delivered to the private
carrier. Whenever any notice whatever is required to be given to any
director of the corporation under the articles of incorporation or these
bylaws or any provision of the Wisconsin Business Corporation Law, a waiver
thereof in writing, signed at any time, whether before or after the date
and time of meeting, by the director entitled to such notice shall be
deemed equivalent to the giving of such notice. The corporation shall
retain any such waiver as part of the permanent corporate records. A
director's attendance at or participation in a meeting waives any required
notice to him or her of the meeting unless the director at the beginning of
the meeting or promptly upon his or her arrival objects to holding the
meeting or transaction business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
3.06. Quorum. Except as otherwise provided by the Wisconsin
Business Corporation Law or by the articles of incorporation or these
bylaws, a majority of the number of directors specified in Section 3.01 of
these bylaws shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors. Except as otherwise provided by the
Wisconsin Business Corporation Law or by the articles of incorporation or
by these bylaws, a quorum of any committee of the Board of Directors
created pursuant to Section 3.12 hereof shall consist of a majority of the
number of directors appointed to serve on the committee. A majority of the
directors present (though less than such quorum) may adjourn any meeting of
the Board of Directors or any committee thereof, as the case may be, from
time to time without further notice.
3.07. Manner of Acting. The affirmative vote of a majority of
the directors present at a meeting of the Board of Directors or a committee
thereof at which a quorum is present shall be the act of the Board of
Directors or such committee, as the case may be, unless the Wisconsin
Business Corporation Law, the articles of incorporation or these bylaws
require the vote of a greater number of directors.
3.08. Conduct of Meetings. The Chairman of the Board and in
his or her absence, the President, and in their absence, a Vice President
in the order provided under Section 4.07, and in their absence, any
director chosen by the directors present, shall call meetings of the Board
of Directors to order and shall act as chairperson of the meeting. The
Secretary of the corporation shall act as secretary of all meetings of the
Board of Directors but in the absence of the Secretary, the presiding
officer may appoint any other person present to act as secretary of the
meeting. Minutes of any regular or special meeting of the Board of
Directors shall be prepared and distributed to each director.
3.09. Vacancies. Except as provided below, any vacancy
occurring in the Board of Directors, including a vacancy resulting from an
increase in the number of directors, may be filled by any of the following:
(a) the shareholders; (b) the Board of Directors; or (c) if the directors
remaining in office constitute fewer than a quorum of the Board of
Directors, the directors, by the affirmative vote of a majority of all
directors remaining in office. If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of
that voting group may vote to fill the vacancy if it is filled by the
shareholders, and only the remaining directors elected by that voting group
may vote to fill the vacancy if it is filled by the directors. A vacancy
that will occur at a specific later date, because of a resignation
effective at a later date or otherwise, may be filled before the vacancy
occurs, but the new director may not take office until the vacancy occurs.
3.10. Compensation. The Board of Directors, irrespective of
any personal interest of any of its members, may establish reasonable
compensation of all directors for services to the corporation as directors
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority to
an appropriate committee to provide for reasonable pensions, disability or
death benefits, and other benefits or payments, to directors, officers and
employees and to their estates, families, dependents or beneficiaries on
account of prior services rendered by such directors, officers and
employees to the corporation.
3.11. Presumption of Assent. A director who is present and is
announced as present at a meeting of the Board of Directors or any
committee thereof created in accordance with Section 3.12 hereof, when
corporate action is taken, assents to the action taken unless any of the
following occurs: (a) the director objects at the beginning of the meeting
or promptly upon his or her arrival to holding the meeting or transacting
business at the meeting; (b) the director dissents or abstains from an
action taken and minutes of the meeting are prepared that show the
director's dissent or abstention from the action taken; (c) the director
delivers written notice that complies with the Wisconsin Business
Corporation Law of his or her dissent or abstention to the presiding
officer of the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting; or (d) the director dissents
or abstains from an action taken, minutes of the meeting are prepared that
fail to show the director's dissent or abstention from the action taken,
and the director delivers to the corporation a written notice of that
failure that complies with the Wisconsin Business Corporation Law promptly
after receiving the minutes. Such right of dissent or abstention shall not
apply to a director who votes in favor of the action taken.
3.12 Committees. The Board of Directors by resolution adopted
by the affirmative vote of a majority of all of the directors then in
office may create one or more committees, appoint members of the Board of
Directors to serve on the committees and designate other members of the
Board of Directors to serve as alternates. Each committee shall have two
or more members who shall, unless otherwise provided by the Board of
Directors serve at the pleasure of the Board of Directors. A committee may
be authorized to exercise the authority of the Board of Directors, except
that a committee may not do any of the following: (a) authorize
distributions; (b) approve or propose to shareholders action that the
Wisconsin Business Corporation Law requires to be approved by shareholders;
(c) fill vacancies on the Board of Directors or, unless the Board of
Directors provides by resolution that vacancies on a committee shall be
filled by the affirmative vote of the remaining committee members, on any
Board committee; (d) amend the corporation's articles of incorporation; (e)
adopt, amend or repeal bylaws; (f) approve a plan of merger not requiring
shareholder approval; (g) authorize or approve reacquisition of shares,
except according to a formula or method prescribed by the Board of
Directors; and (h) authorize or approve the issuance or sale or contract
for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee to do so within limits
prescribed by the Board of Directors. Unless otherwise provided by the
Board of Directors in creating the committee, a committee may employ
counsel, accountants and other consultants to assist in the exercise of its
authority.
3.13. Telephonic Meetings. Except as herein provided and
notwithstanding any place set forth in the notice of the meeting or these
bylaws, members of the Board of Directors (and any committees thereof
created pursuant to Section 3.12 hereof) may participate in regular or
special meetings by, or through the use of, any means of communication by
which all participants may simultaneously hear each other, such as by
conference telephone. If a meeting is conducted by such means, then at the
commencement of such meeting the presiding officer shall inform the
participating directors that a meeting is taking place at which official
business may be transacted. Any participant in a meeting by such means
shall be deemed present in person at such meeting. Notwithstanding the
foregoing, no action may be taken at any meeting held by such means on any
particular matter which the presiding officer determines, in his or her
sole discretion, to be inappropriate under the circumstances for action at
a meeting held by such means. Such determination shall be made and
announced in advance of such meeting.
3.14. Action Without Meeting. Any action required or permitted
by the Wisconsin Business Corporation Law to be taken at a meeting of the
Board of Directors or a committee thereof created pursuant to Section 3.12
hereof may be taken without a meeting if the action is taken by all members
of the Board or of the committee. The action shall be evidenced by one or
more written consents describing the action taken, signed by each director
or committee member and retained by the corporation. Such action shall be
effective when the last director or committee member signs the consent,
unless the consent specifies a different effective date.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corporation shall
be a Chairman of the Board, a President and Chief Executive Officer, the
number of Vice Presidents as authorized from time to time by the Board of
Directors, a Secretary, and a Treasurer, each of whom shall be elected by
the Board of Directors. Such other officers and assistant officers as may
be deemed necessary may be elected or appointed by the Board of Directors.
The Board of Directors may also authorize any duly appointed officer to
appoint one or more officers or assistant officers. Any two or more
offices may be held by the same person. The Chairman of the Board and any
Vice Chairman of the Board shall be chosen from among the Board of
Directors. The Chairman of the Board shall, when present, preside at all
meetings of the shareholders and, in the absence of the Chairman of the
Board, the Vice Chairman of the Board, when present, shall preside at such
meetings. The Chairman of the Board and any Vice Chairman of the Board
shall perform such duties as may from time to time be prescribed by the
Board of Directors.
4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election shall
be held as soon thereafter as is practicable. Each officer shall hold
office until his or her successor shall have been duly elected or until his
or her prior death, resignation or removal.
4.03. Removal. The Board of Directors may remove any officer
and, unless restricted by the Board of Directors or these bylaws, an
officer may remove any officer or assistant officer appointed by that
officer, at any time, with or without cause and notwithstanding the
contract rights, if any, of the officer removed. The appointment of an
officer does not of itself create contract rights.
4.04. Resignation. An officer may resign at any time by
delivering notice to the corporation that complies with the Wisconsin
Business Corporation Law. The resignation shall be effective when the
notice is delivered, unless the notice specifies a later effective date and
the corporation accepts the later effective date.
4.05. Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be filled
by the Board of Directors for the unexpired portion of the term. If a
resignation of an officer is effective at a later date as contemplated by
Section 4.04 hereof, the Board of Directors may fill the pending vacancy
before the effective date if the Board provides that the successor may not
take office until the effective date.
4.06. Chairman of the Board. The Chairman of the Board shall,
when present, preside at all meetings of the Board of Directors and shall
perform such other duties as may be prescribed by the Board of Directors
from time to time.
4.07. President and Chief Executive Officer. The President and
Chief Executive Officer (herein referred to as the "President") shall be
the principal executive officer of the corporation and, subject to the
direction of the Board of Directors, shall in general supervise and control
all of the business and affairs of the corporation. The President shall,
when present, preside at meetings of the shareholders. He or she shall
have authority, subject to such rules as may be prescribed by the Board of
Directors, to appoint such agents and employees of the corporation as he or
she shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them. Such agents and employees
shall hold office at the discretion of the President. He or she shall have
authority to sign, execute and acknowledge, on behalf of the corporation,
all deeds, mortgages, bonds, stock certificates, contracts, leases, reports
and all other documents or instruments necessary or proper to be executed
in the course of the corporation's regular business, or which shall be
authorized by resolution of the Board of Directors; and, except as
otherwise provided by law or the Board of Directors, he or she may
authorize any Vice President or other officer or agent of the corporation
to sign, execute and acknowledge such documents or instruments in his or
her place and stead. In general he or she shall perform all duties
incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
4.08. The Vice Presidents. In the absence of the President or
in the event of the President's death, inability or refusal to act, or in
the event for any reason it shall be impracticable for the President to act
personally, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the Board of
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice President may sign, with the Secretary or
Assistant Secretary, certificates for shares of the corporation; and shall
perform such other duties and have such authority as from time to time may
be delegated or assigned to him or her by the President or by the Board of
Directors. The execution of any instrument of the corporation by any Vice
President shall be conclusive evidence, as to third parties, of his or her
authority to act in the stead of the President.
4.09. The Secretary. The Secretary shall: (a) keep minutes of
the meetings of the shareholders and of the Board of Directors (and of
committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (b) see that all
notices are duly given in accordance with the provisions of these bylaws or
as required by the Wisconsin Business Corporation Law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the
seal of the corporation is affixed to all documents the execution of which
on behalf of the corporation under its seal is duly authorized; (d)
maintain a record of the shareholders of the corporation, in a form that
permits preparation of a list of the names and addresses of all
shareholders, by class or series of shares and showing the number and class
or series of shares held by each shareholders; (e) sign with the President,
or a Vice President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office
of Secretary and have such other duties and exercise such authority as from
time to time may be delegated or assigned by the President or by the Board
of Directors.
4.10. The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the
corporation; (b) maintain appropriate account records; (c) receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositaries as shall be selected in
accordance with the provisions of Section 5.04; and (d) in general perform
all of the duties incident to the office of Treasurer and have such other
duties and exercise such other authority as from time to time may be
delegated or assigned by the President or by the Board of Directors. If
required by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his or her duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
4.11. Assistant Secretaries and Assistant Treasurer. There
shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors may from time to time authorize. The Assistant
Secretaries may sign with the President or a Vice President certificates
for shares of the corporation the issuance of which shall have been
authorized by a resolution of the Board of Directors. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give
bonds for the faithful discharge of their duties in such sums and with such
sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties
and have such authority as shall from time to time be delegated or assigned
to them by the Secretary of the Treasurer, respectively, or by the
President or the Board of Directors.
4.12. Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint, or to authorize any duly
appointed officer of the corporation to appoint, any person to act as
assistant to any officer, or as agent for the corporation in his or her
stead, or to perform the duties of such officer whenever for any reason it
is impracticable for such officer to act personally, and such assistant or
acting officer or other agent so appointed by the Board of Directors or an
authorized officer shall have the power to perform all the duties of the
office to which he or she is so appointed to be an assistant, or as to
which he or she is so appointed to act, except as such power may be
otherwise defined or restricted by the board of Directors or the appointing
officer.
4.13. Salaries. The salaries of the principal officers shall
be fixed from time to time by the Board of Directors or by a duly
authorized committee thereof, and no officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a
director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
or deliver any instrument in the name of and on behalf of the corporation,
and such authorization may be general or confined to specific instances.
In the absence of other designation, all deeds, mortgages and instruments
of assignment or pledge made by the corporation shall be executed in the
name of the corporation by the President or one of the Vice Presidents and
by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer; the Secretary or an Assistant Secretary, when necessary or
required, shall affix the corporate seal, if any, thereto; and when so
executed no other party to such instrument or any third party shall be
required to make any inquiry into the authority of the signing officer or
officers.
5.02. Loans. No indebtedness for borrowed money shall be
contracted on behalf of the corporation and no evidences of such
indebtedness shall be issued in its name unless authorized by or under the
authority of a resolution of the Board of Directors. Such authorization
may be general or confined to specific instances.
5.03. Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall
from time to time be determined by or under the authority of a resolution
of the Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as may be
selected by or under the authority of a resolution of the Board of
Directors.
5.05. Voting of Securities Owned by this Corporation. Subject
always to the specific directions of the Board of Directors, (a) any shares
or other securities issued by any other corporation and owned or controlled
by this corporation may be voted at any meeting of security holders of such
other corporation by the President of this corporation if he or she be
present, or in his or her absence by any Vice President of this corporation
who may be present, and (b) whenever, in the judgment of the President, or
in his or her absence, of any Vice President, it is desirable for this
corporation to execute a proxy or written consent in respect to any shares
or other securities issued by any other corporation and owned by this
corporation, such proxy or consent shall be executed in the name of this
corporation by the President or one of the Vice Presidents of this
corporation, without necessity of any authorization by the Board of
Directors, affixation of corporate seal, if any, or countersignature or
attestation by another officer. Any person or persons designated in the
manner above stated as the proxy or proxies of this corporation shall have
full right, power and authority to vote the shares or other securities
issued by such other corporation and owned by this corporation the same as
such shares or other securities might be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES; TRANSFER OF SHARES
6.01. Certificates for Shares. Certificates representing
shares of the corporation shall be in such form, consistent with the
Wisconsin Business Corporation Law, as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary. All certificates
for shares shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on
the stock transfer books of the corporation. All certificates surrendered
to the corporation for transfer shall be canceled and no new certificate
shall be issued until the former certificate for a like number of shares
shall have been surrendered and canceled, except as provided in Section
6.06.
6.02. Facsimile Signatures and Seal. The seal of the
corporation, if any, on any certificates for shares may be a facsimile.
The signature of the President or Vice President and the Secretary or
Assistant Secretary upon a certificate may be facsimiles if the certificate
is manually signed on behalf of a transfer agent, or a registrar, other
than the corporation itself or an employee of the corporation.
6.03. Signature by Former Officers. The validity of a share
certificate is not affected if a person who signed the certificate (either
manually or in facsimile) no longer holds office when the certificate is
issued.
6.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the corporation may
treat the registered owner of such shares as the person exclusively
entitled to vote, to receive notifications and otherwise to have an
exercise all the rights and power of an owner. Where a certificate for
shares is presented to the corporation with a request to register for
transfer, the corporation shall not be liable to the owner or any other
person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements, and (b)
the corporation had no duty to inquire into adverse claims or has
discharged any such duty. The corporation may require reasonable assurance
that such endorsements are genuine and effective and compliance with such
other regulations as may be prescribed by or under the authority of the
Board of Directors.
6.05. Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation of
any restriction imposed by the corporation upon the transfer of such
shares.
6.06. Lost, Destroyed or Stolen Certificates. Where the owner
claims that certificates for shares have been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a)
so requests before the corporation has notice that such shares have been
acquired by a bona fide purchaser, (b) files with the corporation a
sufficient indemnity bond if required by the Board of Directors or any
principal officer, and (c) satisfies such other reasonable requirements as
may be prescribed by or under the authority of the Board of Directors.
6.07. Consideration for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible
or intangible property or benefit to the corporation, including cash,
promissory notes, services performed, contracts for services to be
performed or other securities of the corporation. Before the corporation
issues shares, the Board of Directors shall determine that the
consideration received or to be received for the shares to be issued is
adequate. The determination of the Board of Directors is conclusive
insofar as the adequacy of consideration for this issuance of shares
relates to whether the shares are validly issued, fully paid and
nonassessable. The corporation may place in escrow shares issued in whole
or in part for a contract for future services or benefits, a promissory
note, or other property to be issued in the future, or make other
arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until
the services are performed, the benefits or property are received or the
promissory note is paid. If the services are not performed, the benefits
or property are not received or the promissory note is not paid, the
corporation may cancel, in whole or in part, the shares escrowed or
restricted and the distributions credited.
6.08. Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the corporation.
ARTICLE VII. SEAL
7.01. The Board of Directors may provide for a corporate seal
for the corporation.
ARTICLE VIII. INDEMNIFICATION
8.01. Certain Definitions. All capitalized terms used in this
Article VIII and not otherwise hereinafter defined in this Section 8.01
shall have the meaning set forth in Section 180.0850 of the Statute. The
following capitalized terms (including any plural forms thereof) used in
this Article VIII shall be defined as follows:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with, the Corporation.
(b) "Authority" shall mean the entity selected by the
Director or Officer to determine his or her right to indemnification
pursuant to Section 8.04.
(c) "Board" shall mean the entire then elected and serving
Board of Directors of the Corporation, including all members thereof who
are Parties to the subject Proceeding or any related Proceeding.
(d) "Breach of Duty" shall mean the Director or Officer
breached or failed to perform his or her duties to the Corporation and his
or her breach of or failure to perform those duties is determined, in
accordance with Section 8.04, to constitute misconduct under Section
180.0851(2)(a)1, 2, 3 or 4 of the Statute.
(e) "Corporation," as used herein and as defined in the
Statute and incorporated by reference into the definitions of certain other
capitalized terms used herein, shall mean this corporation, including,
without limitation, any successor corporation or entity to this corporation
by way of merger, consolidation or acquisition of all or substantially all
of the capital stock or assets of this corporation.
(f) "Director or Officer" shall have the meaning set forth in
the Statute; provided, that, for purposes of this Article VIII, it shall be
conclusively presumed that any Director or Officer serving as a director,
officer, partner, trustee, member of any governing or decision-making
committee, employee or agent of an Affiliate shall be so serving at the
request of the Corporation.
(g) "Disinterested Quorum" shall mean a quorum of the Board
who are not Parties to the subject Proceeding or any related Proceeding.
(h) "Party" shall have the meaning set forth in the Statute;
provided that, for purposes of this Article VIII, the term "Party" shall
also include any Director or Officer or employee of the Corporation who is
or was a witness in a Proceeding at a time when he or she has not otherwise
been formally named a Party thereto.
(i) "Proceeding" shall have the meaning set forth in the
Statute; provided, that, in accordance with Section 180.0859 of the Statute
and for purposes of this Article VIII, the term "Proceeding" shall also
include all Proceedings (i) brought under (in whole or in part) the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, their respective state counterparts, and/or any rule or regulation
promulgated under any of the foregoing; (ii) brought before an Authority or
otherwise to enforce rights hereunder; (iii) an appeal from a Proceeding;
and (iv) any Proceeding in which the Director or Officer is a plaintiff or
petitioner because he or she is a Director or Officer; provided, however,
that any such Proceeding under this subsection (iv) must be authorized by a
majority vote of a Disinterested Quorum.
(j) "Statute" shall mean Sections 180.0850 through 180.0859,
inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the
Wisconsin Statutes, as the same shall then be in effect, including any
amendments thereto, but, in the case of any such amendment, only to the
extent such amendment permits or requires the Corporation to provide
broader indemnification rights than the Statute permitted or required the
Corporation to provide prior to such amendment.
8.02. Mandatory Indemnification of Directors and Officers. To
the fullest extent permitted or required by the Statute, the Corporation
shall indemnify a Director or Officer against all Liabilities incurred by
or on behalf of such Director or Officer in connection with a Proceeding in
which the Director or Officer is a Party because he or she is a Director or
Officer.
8.03. Procedure Requirements.
(a) A Director or Officer who seeks indemnification under
Section 8.02 shall make a written request therefor to the Corporation.
Subject to Section 8.03(b), within sixty days of the Corporation's receipt
of such request, the Corporation shall pay or reimburse the Director or
Officer for the entire amount of Liabilities incurred by the Director or
Officer in connection with the subject Proceeding (net of any Expenses
previously advanced pursuant to Section 8.05).
(b) No indemnification shall be required to be paid by the
Corporation pursuant to Section 8.02 if, within such sixty-day period, (i)
a Disinterested Quorum, by a majority vote thereof, determines that the
Director or Officer requesting indemnification engaged in misconduct
constituting a Breach of Duty or (ii) a Disinterested Quorum cannot be
obtained.
(c) In either case of nonpayment pursuant to Section 8.03(b),
the Board shall immediately authorize by resolution that an Authority, as
provided in Section 8.04, determine whether the Director's or Officer's
conduct constituted a Breach of Duty and, therefore, whether
indemnification should be denied hereunder.
(d) (i) If the Board does not authorize an Authority to
determine the Director's or Officer's right to indemnification hereunder
within such sixty-day period and/or (ii) if indemnification of the
requested amount of Liabilities is paid by the Corporation, then it shall
be conclusively presumed for all purposes that a Disinterested Quorum has
affirmatively determined that the Director or Officer did not engage in
misconduct constituting a Breach of Duty and, in the case of subsection (i)
above (but not subsection (ii)), indemnification by the Corporation of the
requested amount of Liabilities shall be paid to the Director or Officer
immediately.
8.04. Determination of Indemnification.
(a) If the Board authorizes an Authority to determine a
Director's or Officer's right to indemnification pursuant to Section 8.03,
then the Director or Officer requesting indemnification shall have the
absolute discretionary authority to select one of the following as such
Authority:
(i) An independent legal counsel; provided, that such counsel
shall be mutually selected by such Director or Officer and by a majority
vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be
obtained, then by a majority of the Board;
(ii) A panel of three arbitrators selected from the panels of
arbitrators of the American Arbitration Association in Wisconsin; provided,
that (A) one arbitrator shall be selected by such Director or Officer, the
second arbitrator shall be selected by a majority vote of a Disinterested
Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority
vote of the Board, and the third arbitrator shall be selected by the two
previously selected arbitrators, and (B) in all other respects (other than
this Article VIII), such panel shall be governed by the American
Arbitration Association's then existing Commercial Arbitration Rules; or
(iii) A court pursuant to and in accordance with Section
180.0854 of the Statute.
(b) In any such determination by the selected Authority there
shall exist a rebuttable presumption that the Director's or Officer's
conduct did not constitute a Breach of Duty and that indemnification
against the requested amount of Liabilities is required. The burden of
rebutting such a presumption by clear and convincing evidence shall be on
the Corporation or such other party asserting that such indemnification
should not be allowed.
(c) The Authority shall make its determination within sixty
days of being selected and shall submit a written opinion of its conclusion
simultaneously to both the Corporation and the Director or Officer.
(d) If the Authority determines that indemnification is
required hereunder, the Corporation shall pay the entire requested amount
of Liabilities (net of any Expenses previously advanced pursuant to Section
8.05), including interest thereon at a reasonable rate, as determined by
the Authority, within ten days of receipt of the Authority's opinion;
provided, that, if it is determined by the Authority that a Director or
Officer is entitled to indemnification against Liabilities' incurred in
connection with some claims, issues or matters, but not as to other claims,
issues or matters, involved in the subject Proceeding, the Corporation
shall be required to pay (as set forth above) only the amount of such
requested Liabilities as the Authority shall deem appropriate in light of
all of the circumstances of such Proceeding.
(e) The determination by the Authority that indemnification
is required hereunder shall be binding upon the Corporation regardless of
any prior determination that the Director or Officer engaged in a Breach of
Duty.
(f) All Expenses incurred in the determination process under
this Section 8.04 by either the Corporation or the Director or Officer,
including, without limitation, all Expenses of the selected Authority,
shall be paid by the Corporation.
8.05. Mandatory Allowance of Expenses.
(a) The Corporation shall pay or reimburse from time to time
or at any time, within ten days after the receipt of the Director's or
Officer's written request therefor, the reasonable Expenses of the Director
or Officer as such Expenses are incurred; provided, the following
conditions are satisfied:
(i) The Director or Officer furnishes to the Corporation an
executed written certificate affirming his or her good faith belief that he
or she has not engaged in misconduct which constitutes a Breach of Duty;
and
(ii) The Director or Officer furnishes to the Corporation an
unsecured executed written agreement to repay any advances made under this
Section 8.05 if it is ultimately determined by an Authority that he or she
is not entitled to be indemnified by the Corporation for such Expenses
pursuant to Section 8.04.
(b) If the Director or Officer must repay any previously
advanced Expenses pursuant to this Section 8.05, such Director or Officer
shall not be required to pay interest on such amounts.
8.06. Indemnification and Allowance of Expenses of Certain
Others.
(a) The Board may, in its sole and absolute discretion as it
deems appropriate, pursuant to a majority vote thereof, indemnify a
director or officer of an Affiliate (who is not otherwise serving as a
Director or Officer) against all Liabilities, and shall advance the
reasonable Expenses, incurred by such director or officer in a Proceeding
to the same extent hereunder as if such director or officer incurred such
Liabilities because he or she was a Director or Officer, if such director
or officer is a Party thereto because he or she is or was a director or
officer of the Affiliate.
(b) The Corporation shall indemnify an employee who is not a
Director or Officer, to the extent he or she has been successful on the
merits or otherwise in defense of a Proceeding, for all reasonable Expenses
incurred in the Proceeding if the employee was a Party because he or she
was an employee of the Corporation.
(c) The Board may, in its sole and absolute discretion as it
deems appropriate pursuant to a majority vote thereof, indemnify (to the
extent not otherwise provided in Section 8.06(b) hereof) against
Liabilities incurred by, and/or provide for the allowance of reasonable
Expenses of, an employee or authorized agent of the Corporation acting
within the scope of his or her duties as such and who is not otherwise a
Director or Officer.
8.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of a Director or Officer or any individual who is or
was an employee or authorized agent of the Corporation against any
Liability asserted against or incurred by such individual in his or her
capacity as such or arising from his or her status as such, regardless of
whether the Corporation is required or permitted to indemnify against any
such Liability under this Article VIII.
8.08. Notice to the Corporation. A Director, Officer or
employee shall promptly notify the Corporation in writing when he or she
has actual knowledge of a Proceeding which may result in a claim of
indemnification against Liabilities or allowance of Expenses hereunder, but
the failure to do so shall not relieve the Corporation of any liability to
the Director, Officer or employee hereunder unless the Corporation shall
have been irreparably prejudiced by such failure (as determined, in the
case of Directors or Officers only, by an Authority selected pursuant to
Section 8.04(a)).
8.09. Severability. If any provision of this Article VIII
shall be deemed invalid or inoperative, or if a court of competent
jurisdiction determines that any of the provisions of this Article VIII
contravene public policy, this Article VIII shall be construed so that the
remaining provisions shall not be affected, but shall remain in full force
and effect, and any such provisions which are invalid or inoperative or
which contravene public policy shall be deemed, without further action or
deed by or on behalf of the Corporation, to be modified, amended and/or
limited, but only to the extent necessary to render the same valid and
enforceable; it being understood that it is the Corporation's intention to
provide the Directors and Officers with the broadest possible protection
against personal liability allowable under the Statute.
8.10 Nonexclusivity of Article VIII. The rights of a Director,
Officer or employee (or any other person) granted under this Article VIII
shall not be deemed exclusive of any other rights to indemnification
against Liabilities or allowance of Expenses which the Director, Officer or
employee (or such other person) may be entitled to under any written
agreement, Board resolution, vote of shareholders of the Corporation or
otherwise, including, without limitation, under the Statute. Nothing
contained in this Article VIII shall be deemed to limit the Corporation's
obligations to indemnify against Liabilities or allow Expenses to a
Director, Officer or employee under the Statute.
8.11 Contractual Nature of Article VIII; Repeal or Limitation
of Rights. This Article VIII shall be deemed to be a contract between the
Corporation and each Director, Officer and employee of the Corporation and
any repeal or other limitation of this Article VIII or any repeal or
limitation of the Statute or any other applicable law shall not limit any
rights of indemnification against Liabilities or allowance of Expenses then
existing or arising out of events, acts or omissions occurring prior to
such repeal or limitation, including, without limitation, the right to
indemnification against Liabilities or allowance of Expenses for
Proceedings commenced after such repeal or limitation to enforce this
Article VIII with regard to acts, omissions or events arising prior to such
repeal or limitation.
ARTICLE IX. AMENDMENTS
9.01. By Shareholders. These bylaws may be amended or repealed
and new bylaws may be adopted by the shareholders at any annual or special
meeting of the shareholders at which a quorum is in attendance.
9.02. By Directors. Except as otherwise provided by the
Wisconsin Business Corporation Law or the articles of incorporation, these
bylaws may also be amended or repealed and new bylaws may be adopted by the
Board of Directors by affirmative vote of a majority of the number of
directors present at any meeting at which a quorum is in attendance;
provided, however, that the shareholders in adopting, amending or repealing
a particular bylaw may provide therein that the Board of Directors may not
amend, repeal or readopt that bylaw.
9.03. Implied Amendments. Any action taken or authorized by
the shareholders or by the Board of Directors which would be inconsistent
with the bylaws then in effect but which is taken or authorized by
affirmative vote of not less than the number of shares or the number of
directors required to amend the bylaws so that the bylaws would be
consistent with such action shall be given the same effect as though the
bylaws had been temporarily amended or suspended so far, but only so far,
as is necessary to permit the specific action so taken or authorized.
ZIEGLER COLLATERALIZED SECURITIES, INC.,
Issuer
and
M&I FIRST NATIONAL BANK,
Trustee
EIGHTH SUPPLEMENTAL INDENTURE
Dated as of September 1, 1995
to
INDENTURE
Dated as of December 1, 1991, as amended
CREATING $7,200,000 PRINCIPAL AMOUNT
COLLATERALIZED BONDS, SERIES 6
<PAGE>
EIGHTH SUPPLEMENTAL INDENTURE, dated as of September 1, 1995, between
ZIEGLER COLLATERALIZED SECURITIES, INC., a Wisconsin corporation (together with
its successors as provided in the Indenture referred to below, the "Issuer"),
and M&I FIRST NATIONAL BANK, a national banking association with its principal
office located in West Bend, Wisconsin (together with its successor as provided
in the Indenture referred to below, the "Trustee"), as trustee under an
Indenture dated as of December 1, 1991, as amended (the "Indenture").
PRELIMINARY STATEMENT
Section 10.01 of the Indenture provides, among other things, that the
Issuer, when authorized by its Board of Directors, and the Trustee may at any
time and from time to time enter into an indenture supplemental to the
Indenture to authorize a new Series of Bonds, and to specify certain terms of
each such new Series of Bonds. The Board of Directors of the Issuer has duly
authorized the execution and delivery of this Eighth Supplemental Indenture and
the creation of a new Series of Bonds with an aggregate principal amount of
$7,200,000 to be known as the Collateralized Bonds, Series 6 (the "Series 6
Bonds"), and the Issuer and the Trustee are executing and delivering this
Eighth Supplemental Indenture in order to provide for, among other things, the
Series 6 Bonds.
ARTICLE ONE
The Series 6 Bonds
GRANTING CLAUSES
The Issuer hereby grants to the Trustee, in trust as provided in the
Indenture, for the exclusive benefit of the Holders of the Series 6 Bonds, all
of the Issuer's right, title and interest in and to (a) the Pooled Assets
described in Schedule A to this Eighth Supplemental Indenture, which the Issuer
is delivering to the Trustee herewith, (b) the Equipment leased and/or financed
pursuant to the Pooled Assets described in Schedule A subject to any option of
the respective Lessors/Debtors thereunder to purchase or prepay the principal
on such Equipment, (c) the Principal and Interest Payment Account for the
Series 6 Bonds, and (d) all proceeds, of every kind and nature whatsoever,
including, without limitation, proceeds of proceeds, and the conversion,
voluntary or involuntary, of any of the foregoing into cash or other liquidated
property, to secure the Series 6 Bonds equally and ratably without prejudice,
priority or distinction between any Series 6 Bond and any other Series 6 Bond
by reason of difference in time of issuance or otherwise, and to secure the
payment of the principal of, and interest on, the Series 6 Bonds in accordance
with their terms, all of the sums payable under the Indenture of this Eighth
Supplemental Indenture with respect to the Series 6 Bonds and compliance with
the provisions of the Indenture and this Eighth Supplemental Indenture with
respect to the Series 6 Bonds, all as provided in the Indenture and this Eighth
Supplemental Indenture.
Section 1. Designation.
The Series 6 Bonds shall be designated as Collateralized Bonds,
Series 6.
Section 2. Form of Series 6 Bonds.
The Series 6 Bonds shall be in substantially the following form:
[FORM OF FACE OF BOND]
$________ No. ________
ZIEGLER COLLATERALIZED SECURITIES, INC.
____% COLLATERALIZED BOND, SERIES 6
Stated First Interest Interest Payable Issue
Maturity Payment Date on the 1st Day of Date CUSIP
Ziegler Collateralized Securities, Inc., a corporation duly organized
and existing under the laws of the State of Wisconsin (herein referred to as
the "Issuer"), for value received, hereby promises to pay to
____________________ or registered assigns, the principal sum of
____________________ Dollars on or prior to the date set forth above (the
"Stated Maturity") and to pay interest on the unpaid portion of said principal
sum from the date hereof, through the day immediately preceding the date on
which such principal sum becomes due and payable, on the 1st day of the months
set forth above in each year, and to pay interest on any overdue principal and
on overdue interest, at the rate per annum specified in the title of this Bond.
The first such payment of interest will be made on the first interest
payment date set forth above. Except as herein otherwise provided with respect
to interest payable on the date the principal of this Bond becomes due and
payable (whether at Stated Maturity, by redemption or otherwise), interest on
this Bond shall be payable on each Semiannual Payment Date through the day
immediately preceding each such Semiannual Payment Date. The interest so
payable on any Semiannual Payment Date, and any redemption of Bonds that may
be made on any Redemption Date, will, as provided in the Indenture referred to
on the reverse hereof, be paid to the Person in whose name this Bond (or one
or more Predecessor Bonds) is registered on the Regular Record Date for such
Semiannual Payment Date or Redemption Date, which shall be the close of
business on the fifteenth day of the calendar month preceding that in which
such Semiannual Payment Date or Redemption Date occurs (whether or not a
Business Day). Any such redemption not made on the Redemption Date or interest
not so punctually paid or duly provided for (excluding interest the payment of
which is deferred pursuant to the proviso set forth in the first paragraph of
this Bond) shall forthwith cease to be payable to the registered Holder on the
Regular Record Date, and may be paid to the Person in whose name this Bond (or
one or more Predecessor Bonds) is registered on a Special Record Date for the
payment of such defaulted redemption proceeds and interest to be fixed by the
Trustee, notice whereof shall be given to Bondholders not less than 10 days
prior to such Special Record Date, or may be paid, at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Bonds may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
The principal of and interest on this Bond are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the office or agency of the
Issuer designated for such purpose in the United States of America; provided
that interest may be paid, at the option of the Issuer, by check mailed to the
Person entitled thereto at his address as it appears on the Bond Register.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which shall have the same effect as though fully set
forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, ZIEGLER COLLATERALIZED SECURITIES, INC. has
caused this instrument to be signed, manually or in facsimile, by its President
or a Vice President and by its Secretary or an Assistant Secretary and a
facsimile of its corporate seal to be imprinted hereon.
Dated: September 1, 1995
ZIEGLER COLLATERALIZED SECURITIES, INC.
[SEAL]
By:
Lynn R. Van Horn, President
Attest:
Janine R. Schmidt, Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Series 6 Bonds referred to in the within-mentioned
Indenture.
M&I FIRST NATIONAL BANK, Trustee
Authorized Officer
[FORM OF REVERSE OF BOND]
COLLATERALIZED BOND
This Bond is one of a duly authorized issue of Bonds of the Issuer,
designated as its Collateralized Bonds (herein called the "Bonds"), issued and
to be issued in one or more Series, and is part of the Series 6 Bonds
designated on the face hereof (herein called the "Bonds of this Series 6"), all
issued and to be issued under an Indenture dated as of December 1, 1991, as
amended (herein called the "Indenture"), between the Issuer and M&I First
National Bank (the "Trustee"), which term includes any successor Trustee under
the Indenture, to which Indenture and all indentures supplemental thereto
(including the indenture supplemental thereto which authorized the Bonds of
this Series 6) reference is hereby made for a statement of the respective
rights thereunder of the Issuer, the Trustee and the Holders of the Bonds, and
the terms upon which the Bonds are, and are to be, authenticated and delivered.
All terms used in this Bond which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
As provided in the Indenture, the Bonds are issuable in Series which
may vary as in the Indenture provided or permitted. All Bonds of each Series
are equally and ratably secured to the extent provided by the supplemental
indenture authorizing such Series. This Bond is one of the Bonds of Series 6
specified in its title.
If no Event of Default as defined in the Indenture shall have
occurred and be then continuing, the Issuer, at its option, may redeem the
Outstanding Bonds of this Series 6 in whole or in part, and if in part, by lot
in such manner as may be determined by the Trustee, on or after March 1, 1998
at a Redemption Price equal to 100% of the principal amount of the Bonds to be
redeemed (plus interest accrued and unpaid on such Bonds to but not including
the Redemption Date).
The Bonds of this Series 6 are subject to Mandatory Redemption at any
time in whole or in part, and if in part, by lot in such manner as may be
determined by the Trustee at a Redemption Price equal to 100% of the principal
amount of the Bonds to be redeemed (plus interest accrued and unpaid on such
Bonds to but not including the Redemption Date) to the extent of any proceeds
received by the Issuer as a result of the purchase of any Defaulted Pooled
Asset by the Servicer therefor or the Guarantor as soon as practicable
following the receipt of such proceeds by the Issuer.
The Bonds of this Series 6 are subject to Mandatory Redemption in
whole or in part, and if in part, by lot in such manner as may be determined
by the Trustee at the Redemption Prices (expressed as percentages of the
principal amount of the Bonds of this Series 6 to be redeemed) as set forth
below (plus interest accrued and unpaid on such Bonds to, but not including,
the Redemption Date) to the extent of any proceeds received by the Issuer as
a result of the early termination of any Pooled Asset and the purchase of the
related Equipment by the Lessee or Debtor thereunder as soon as practicable
following the receipt of such proceeds by the Issuer.
Redemption Period Redemption Price
Prior to September 19, 1997 101%
On or after September 19, 1997 100%
If an Event of Default as defined in the Indenture shall occur and
be continuing, the principal of all the Bonds, or of all the Bonds of any
Series, may become or be declared due and payable in the manner and with the
effect provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, upon surrender of this Bond for registration of
transfer at the office or agency of the Issuer in the United States of America,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the Holder hereof
or his attorney duly authorized in writing, and thereupon one or more new Bonds
of the same Series and maturity, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
Prior to the due presentment for registration of transfer of this
Bond, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Bond is registered as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Bond be overdue, and neither the Issuer, the Trustee nor
any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of a majority in aggregate
principal amount of Bonds at the time Outstanding (as defined in the
Indenture), in case Outstanding Bonds of all Series are to be affected, or with
the consent of the Holders of a majority in aggregate principal amount of the
Bonds at the time Outstanding of each Series to be affected, in case one or
more, but less than all, of the Series of Bonds then Outstanding are to be
affected. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Bonds at the time
Outstanding, and of Bonds at the time Outstanding of each Series to be affected
in case one or more, but less than all, such Series are to be affected, on
behalf of the Holders of all the Bonds, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Bond shall be conclusive and binding upon such Holder and upon all future
Holders of this Bond and of any Bond issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of
such consent or waiver is made upon this Bond.
The term "Issuer" as used in this Bond includes any successor under
the Indenture.
The Bonds are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof, as provided in the
Indenture and subject to certain limitations therein set forth. The Bonds are
exchangeable for a like aggregate principal amount of Bonds of the same Series
and maturity of a different authorized denomination, as requested by the Holder
surrendering same.
No reference herein to the Indenture and no provision of this Bond
or of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and interest on this
Bond at the times, place and rate, and in the coin or currency, herein
prescribed.
Section 3. Aggregate Principal Amount.
The aggregate principal amount of Series 6 Bonds that may be
authenticated and delivered under the Indenture and this Eighth Supplemental
Indenture is limited to $7,200,000 except for Bonds authenticated and delivered
upon registration of, transfer of, or in exchange for, or in lieu of, other
Series 6 Bonds pursuant to Sections 3.04, 3.05, 3.06, 10.06 or 12.04 of the
Indenture.
Section 4. Maturity and Interest Rates.
The Series 6 Bonds shall mature and shall bear interest as follows:
Stated Maturity Amount Interest Rate
September 1, 1996 $1,400,000 6.00%
March 1, 1997 $ 795,000 6.25%
September 1, 1997 $ 795,000 6.25%
March 1, 1998 $ 810,000 6.50%
September 1, 1998 $ 810,000 6.50%
March 1, 1999 $ 808,000 6.75%
September 1, 1999 $ 807,000 6.75%
March 1, 2000 $ 433,000 7.00%
September 1, 2000 $ 432,000 7.00%
March 1, 2001 $ 110,000 7.00%
Section 5. Semiannual Payment Dates.
With respect to the Series 6 Bonds, the term Semiannual Payment Dates
shall mean September 1 and March 1.
Section 6. Redemption of Series 6 Bonds.
The Series 6 Bonds shall be subject to mandatory and optional
redemption prior to maturity, to the extent specifically set forth in the form
of Series 6 Bond set forth in this Eighth Supplemental Indenture.
Section 7. Representations and Warranties.
The Issuer hereby makes the following representations and warranties
with respect to the Pooled Assets set forth on Schedule A hereto, in each case
to the best of its knowledge:
a. The information set forth in the Schedule of Pooled
Assets is true and correct in all material respects at the date or
dates respecting which such information is furnished;
b. Each Pooled Asset by its terms permits the Lessor/Debtor
to assign such Pooled Asset and its rights and interests thereunder
without the consent of the Lessee/Debtor thereunder;
c. As of the date of execution and delivery of this
Supplemental Indenture, each Pooled Asset is in full force and effect
and the Issuer has granted to the Trustee as security for the Bonds
a security interest in the Issuer's right, title and interest in and
to such Pooled Asset and the related Equipment which security
interest has been perfected by filing pursuant to the Uniform
Commercial Code of Wisconsin and with respect to each item of the
Equipment, a filing pursuant to the Uniform Commercial Code of the
jurisdiction where such item of Equipment is located and where the
principal place of business of the Lessee/Debtor under the related
Pooled Asset is located, provided that in general no fixture filings
have been made with respect to the Equipment;
d. The Issuer acquired the Pooled Assets in good faith,
without notice of any adverse claim;
e. As of the date of execution and delivery of this
Supplemental Indenture, the Issuer is the sole legal owner of each
Pooled Asset free and clear of all liens, security interests and
other encumbrances (except for a security interest which secures the
Series 6 Bonds or indebtedness of the Issuer which is subordinate to
the prior payment of principal and interest on the Series 6 Bonds and
which is subordinate to the security interest securing the Series 6
Bonds (a "Subordinate Security Interest")) and the Issuer or the
Lessee or Debtor under such Pooled Asset is the sole owner of the
related Equipment, and immediately upon the transfer and assignment
herein contemplated (and assuming that the Trustee complies with its
obligations under the Indenture and this Supplemental Indenture and
has not in its individual capacity taken any action to grant any
interest in any Pooled Asset to any other Person), except for a
Subordinate Security Interest, the Trustee shall have good title to,
and will be the sole legal owner of, each Pooled Asset free and clear
of all liens, security interests and other encumbrances and will have
a valid perfected security interest in the Issuer's right, title and
interest to the related Equipment;
f. As of the date of execution and delivery of this
Supplemental Indenture, the terms of each Pooled Asset have not been
waived, altered or modified in any material respect, except by
written instruments included in the Pooled Asset File;
g. As of the date of execution and delivery of this
Supplemental Indenture, insurance policies are in effect which
provide coverage against loss of or damage to each item of Equipment
in an amount at least equal to the full insurable value thereof; and
h. The aggregate scheduled rental payments under the Pooled
Assets securing Series 6 Bonds during the six-month periods ending on
each Supplemental Payment Date for Bonds of such Series to and
including the final Stated Maturity of the Series 6 Bonds after
deducting all Servicer's fees and Trustee's fees respecting such
Pooled Assets and Series 6 Bonds accruing during such period equal or
exceed the principal of and interest on the Series 6 Bonds which are
due and payable on such Semiannual Payment Date.
It is understood and agreed that the representations and warranties set forth
in this Supplemental Indenture (with respect to representations and warranties
which are as of a particular date, in each case as of such date) shall survive
delivery of the respective Pooled Asset Files to the Trustee and shall continue
throughout the terms of the Indenture and this Supplemental Indenture.
Section 8. Ratio of Net Investment in Pooled Assets to Outstanding
Principal Amount of Series 6 Bonds.
The Issuer covenants and agrees that so long as any Series 6 Bonds
are Outstanding, the Issuer's aggregate net investment (determined in
accordance with generally accepted accounting principles) in the Pooled Assets
securing the Series 6 Bonds together with any cash held by the Trustee as
collateral for the Series 6 Bonds (excluding cash held in an amount equal to
the then accrued but unpaid interest on the Series 6 Bonds) shall at all times
be in an amount not less than 110% of the aggregate principal amount of the
Series 6 Bonds then Outstanding.
ARTICLE TWO
Miscellaneous
Section 1. Terms Defined in the Indenture.
All terms used in this Eighth Supplemental Indenture which are
defined in the Indenture, either directly or by reference therein, have the
meanings assigned to them therein, except to the extent such terms are defined
in this Eighth Indenture or the context clearly requires otherwise.
Section 2. Ratification of Indenture.
As supplemented and amended by this Eighth Supplemental Indenture,
the Indenture as previously amended is in all respects ratified and confirmed
and the Indenture as previously amended and as so supplemented by this Eighth
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
Section 3. Counterparts.
This Eighth Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Eighth Supplemental Indenture to be duly executed by their respective officers
thereunto duly authorized and their respective seals duly attested to be
hereunto affixed all as of the day and year first above written.
ZIEGLER COLLATERALIZED SECURITIES, INC.
[SEAL]
By /s/ Lynn R. Van Horn
Lynn R. Van Horn, President
Attest:
/s/ Janine R. Schmidt
Janine R. Schmidt, Secretary
M&I FIRST NATIONAL BANK
West Bend, Wisconsin,
as Trustee
[SEAL]
By /s/ R. T. Stephenson
Title Executive Vice President
Attest:
/s/ M. L. Hron
Title Vice President
Acknowledgement of Ziegler Collateralized Securities, Inc.
STATE OF WISCONSIN )
) SS.
COUNTY OF WASHINGTON )
On this 18th day of September, 1995, before me, a Notary Public in
and for said county, the undersigned officer, personally appeared L. R. Van
Horn and J. R. Schmidt, severally acknowledged themselves to be the President
and Secretary, respectively, of ZIEGLER COLLATERALIZED SECURITIES, INC., a
Wisconsin corporation, and that they, as such officers, being authorized so to
do, executed the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by themselves as such President and
Secretary, respectively.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Rusty L. Dankert
Notary Public, Washington County, Wisconsin
[NOTARIAL SEAL] My Commissionexpires: 6/29/97
Acknowledgement of M&I First National Bank
STATE OF WISCONSIN )
) SS.
COUNTY OF WASHINGTON )
On this 18th day of September, 1995, before me, a Notary Public in
and for said county, appeared R. T. Stephenson and M. F. Hron of M&I FIRST
NATIONAL BANK, West Bend, Wisconsin, Trustee, to me personally known, who being
by me duly sworn, did say that they are the Executive Vice President and Vice
President, respectively, of M&I FIRST NATIONAL BANK, West Bend, Wisconsin, and
that the seal affixed to said instrument is the corporate seal of the said
Association and that said instrument was signed and sealed on behalf of the
said Association by authority of its Board of Directors, and that the said R.
T. Stephenson and M. F. Hron acknowledged said instrument to be the free act
and deed of said Association.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Roseann Zautcke
Notary Public, Washington County, Wisconsin
[NOTARIAL SEAL] My Commissionexpires Sept. 1, 1996
APPENDIX A
DESCRIPTION OF POOLED ASSETS
SECURING
SERIES 6 BONDS
<TABLE>
<CAPTION>
OPTION TO
PURCHASE
AGGREGATE
PURCHASE EQUIPMENT
PAYMENTS
PRICE OR PREPAY
FROM DATE
(ISSUER'S DEBT PRIOR
DESCRIPTION OF PURCHASE
INITIAL NET TO END OF
DATE OF OF TYPE OF MONTHLY TO
END OF INVESTMENT) CONTRACT
LESSEE CONTRACT EQUIPMENT CONTRACT (3)<F8>
PAYMENT CONTRACT OF CONTRACT TERM (1)<F6>
- ------- --------- ---------- ------------ ---------- ----------- -----------
- ---------
<S> <C> <C> <C> <C>
<C> <C> <C>
Information Storage 10/1/94 Various Test and L $4,958.14
$178,493.04 $168,496.77 None(2)
Devices, Inc. Manufacturing
San Jose, CA Equipment
Information Storage 1/1/95 Various Test and L $3,994.24
$155,775.36 $142,936.67 None(2)
Devices, Inc. Manufacturing
San Jose, CA Equipment
Information Storage 7/1/95 Manufacturing L $2,170.64
$97,678.80 $84,707.68 None
Devices, Inc. Equipment
San Jose, CA
Cardiology Consultants, P.A. 5/1/95 2 Sopha DST Gamma L $13,623.34
$912,763.78 $693,688.81 None
d/b/a Cardiac Diagnostic Cameras
Center
Newark, DE
Cardiology Associates of 11/1/95 Miscellaneous Medical L $2,061.06
$109,236.18 $90,866.55 None
Lubbock, P.A. and Office
Lubbock, TX Equipment
Cardiology Consultants, P.A. 5/1/95 2 Sopha DS-7 Gamma L $8,596.66
$507,202.94 $398,941.61 None
d/b/a Cardiac Diagnostic Cameras
Center
Newark, DE
Information Storage 10/1/95 2-142A Memory Test L $2,207.20
$88,288.00 $77,942.78 None
Devices, Inc. Systems
San Jose, CA
Information Storage 1/1/96 3-142A Memory Test L $3,312.52
$142,438.36 $124,524.41 None
Devices, Inc. Systems
San Jose, CA
West Bend Clinic, S.C. 7/1/95 Acuson 128 XP-10 L $2,306.91
$131,493.87 $105,949.60 None
West Bend, WI Ultrasound System
Providence Medical Center 7/1/95 Datascope Monitoring L $1,353.85
$77,169.45 $61,956.60 None
Wayne, NE Equipment
Cardiology Associates of 8/1/95 Miscellaneous Medical L $17,096.69
$991,608.02 $808,965.64 None
Lubbock, P.A. and Office Equipment
Lubbock, TX
The Parish of Saint Elizabeth 10/20/94 Modular Building L $1,665.00
$138,195.00 $102,892.19 None
of Hungary, The Catholic
Diocese of Miami, Florida
Pompano Beach, FL
Broadlawns Medical Center 10/20/94 Philips BV29 Mobile C-Arm L $2,191.86
$107,401.14 $89,543.37 None
Des Moines, IA
Radiologists, P.C. 3/20/95 ATL Ultramark HDI 3000 L $4,172.70
$175,253.40 $147,953.41 None
Kansas City, MO Ultrasound System
Kings Medical of Wisconsin, 6/20/95 Philips Gyroscan T5 L $11,286.37
$643,323.09 $514,910.30 None
Limited Liability Company
Hudson, OH
Kings Medical Company 6/20/95 Warranty and Leaseholds L $10,391.04
$592,289.28 $474,063.31 None
Hudson, OH
Cascade Microtech, Inc. 6/20/95 Furniture, Fixtures L $1,980,71
$112,900.47 $96,744.29 None(2)
Beaverton, OR and Equipment
City of Harriman Tennessee 9/15/94 SAI Computer System NR(A) $5,546.12
$260,667.64 $216,787.18 N/A
d/b/a Harriman City Hospital
Harriman, TN
Meditek Palms, Inc. 4/1/95 Impact 1.0 Tesla MRI NR(B) $16,895.66
$963,052.62 $794,537.46 N/A
Miami, FL
Bothwell Regional 7/1/95 Sopha DST XL Gamma NR(C) $9,651.00
$550,107.00 $464,210.00 N/A
Health Center Camera
Sedalia, MO
Cardiovascular Associates 12/1/94 Sopha DST Gamma NR(D) Variable
$330,956.00 $280,659.58 N/A
of North Alabama, P.C. Camera
Birmingham, AL
St. Agnes Hospital of 9/1/94 Varian Clinic 2100 NR(E) $19,397.23
$911,669.81 $795,360.19 N/A
Fond du Lac Linear Accelerator and
Fond du Lac, WI Simulator
Lima Memorial Hospital 8/1/94 Philips SR 7000 CT NR(F) $15,197.13
$699,067.98 $608,740.06 N/A
Lima, OH System
Simpson General Hospital 6/5/95 ATL HDI 9 Ultramark NR(G) $2,925.00
$157,950.00 $134,428.91 N/A
Mendenhall, MS Ultrasound System
Mission Packaging, Inc. 3/10/95 Plastic Molding Assembly NR(H) $18,029.60
$955,568.80 $794,373.01 N/A
Tigard, OR Equipment
Plants In Design, Inc. 3/10/95 Containers and Pull Units NR(I) $5,914.38
$313,462.14 $260,583.92 N/A
Miami, FL
St. Mary's Hospital 2/20/95 Toshiba Powerpace NR(J) $3,221.37
$132,076.17 $116,678.70 N/A
Nebraska City, NE Upgrade for SSA-2700
Kershaw County Memorial 3/20/95 IMED IV Pumps NR(K) $2,156.08
$116,428.32 $99,090.42 N/A
Hospital
Camden, SC
$9,705,351.18$8,058,258.07
(1)<F6>Except as otherwise indicated in note (2), lessee has option to purchase
leased equipment for $1.00 at end of lease term.
(2)<F7>Lessee required to purchase leased equipment for bargain purchase price
(10% of original equipment cost) at end of lease term.
(3)<F8>L = Lease; NR = Non-Recourse loan; PMSA = Purchase Money Security
Agreement loan.
</TABLE>
For Footnotes (A) through (K) describing the Non-Recourse loan instruments in
further detail, please see Schedule I attached hereto.
SCHEDULE I
(A) Non-Recourse Installment Note of Chesterfield Financial Corp. to the order
of Ziegler Leasing Corporation, dated September 15, 1994
(Agreement #00408-00-00001)
(B) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated April 1, 1995
(Agreement #10340-00-00001)
(C) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated July 1, 1994
(Agreement #00378-00-00003)
(D) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated December 1, 1994
(Agreement #10361-00-00004)
(E) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated September 1, 1994
(Agreement #00298-00-00007)
(F) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated August 1, 1994
(Agreement #00292-00-00001)
(G) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated June 5, 1995
(Agreement #00410-00-00001)
(H) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated March 10, 1995
(Agreement #10364-00-00001)
(I) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated March 10, 1995
(Agreement #10357-00-00002)
(J) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated February 20, 1995
(Agreement #00301-00-00002)
(K) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated March 20, 1995
(Agreement #00396-00-00002)
ZIEGLER COLLATERALIZED SECURITIES, INC.,
Issuer
and
M&I FIRST NATIONAL BANK,
Trustee
NINTH SUPPLEMENTAL INDENTURE
Dated as of May 1, 1996
to
INDENTURE
Dated as of December 1, 1991, as amended
CREATING $5,000,000 PRINCIPAL AMOUNT
COLLATERALIZED BONDS, SERIES 7
NINTH SUPPLEMENTAL INDENTURE, dated as of May 1, 1996, between ZIEGLER
COLLATERALIZED SECURITIES, INC., a Wisconsin corporation (together with its
successors as provided in the Indenture referred to below, the "Issuer"), and
M&I FIRST NATIONAL BANK, a national banking association with its principal
office located in West Bend, Wisconsin (together with its successor as provided
in the Indenture referred to below, the "Trustee"), as trustee under an
Indenture dated as of December 1, 1991, as amended (the "Indenture").
PRELIMINARY STATEMENT
Section 10.01 of the Indenture provides, among other things, that the
Issuer, when authorized by its Board of Directors, and the Trustee may at any
time and from time to time enter into an indenture supplemental to the
Indenture to authorize a new Series of Bonds, and to specify certain terms of
each such new Series of Bonds. The Board of Directors of the Issuer has duly
authorized the execution and delivery of this Ninth Supplemental Indenture and
the creation of a new Series of Bonds with an aggregate principal amount of
$5,000,000 to be known as the Collateralized Bonds, Series 7 (the "Series 7
Bonds"), and the Issuer and the Trustee are executing and delivering this Ninth
Supplemental Indenture in order to provide for, among other things, the Series
7 Bonds.
ARTICLE ONE
The Series 7 Bonds
GRANTING CLAUSES
The Issuer hereby grants to the Trustee, in trust as provided in the
Indenture, for the exclusive benefit of the Holders of the Series 7 Bonds, all
of the Issuer's right, title and interest in and to (a) the Pooled Assets
described in Schedule A to this Ninth Supplemental Indenture, which the Issuer
is delivering to the Trustee herewith, (b) the Equipment leased and/or financed
pursuant to the Pooled Assets described in Schedule A subject to any option of
the respective Lessors/Debtors thereunder to purchase or prepay the principal
on such Equipment, (c) the Principal and Interest Payment Account for the
Series 7 Bonds, and (d) all proceeds, of every kind and nature whatsoever,
including, without limitation, proceeds of proceeds, and the conversion,
voluntary or involuntary, of any of the foregoing into cash or other liquidated
property, to secure the Series 7 Bonds equally and ratably without prejudice,
priority or distinction between any Series 7 Bond and any other Series 7 Bond
by reason of difference in time of issuance or otherwise, and to secure the
payment of the principal of, and interest on, the Series 7 Bonds in accordance
with their terms, all of the sums payable under the Indenture of this Ninth
Supplemental Indenture with respect to the Series 7 Bonds and compliance with
the provisions of the Indenture and this Ninth Supplemental Indenture with
respect to the Series 7 Bonds, all as provided in the Indenture and this Ninth
Supplemental Indenture.
Section 1. Designation.
The Series 7 Bonds shall be designated as Collateralized Bonds,
Series 7.
Section 2. Form of Series 7 Bonds.
The Series 7 Bonds shall be in substantially the following form:
[FORM OF FACE OF BOND]
$________ No. ________
ZIEGLER COLLATERALIZED SECURITIES, INC.
____% COLLATERALIZED BOND, SERIES 7
Stated First Interest Interest Payable Issue
Maturity Payment Date on the 1st Day of Date CUSIP
Ziegler Collateralized Securities, Inc., a corporation duly organized
and existing under the laws of the State of Wisconsin (herein referred to as
the "Issuer"), for value received, hereby promises to pay to
____________________ or registered assigns, the principal sum of
____________________ Dollars on or prior to the date set forth above (the
"Stated Maturity") and to pay interest on the unpaid portion of said principal
sum from the date hereof, through the day immediately preceding the date on
which such principal sum becomes due and payable, on the 1st day of the months
set forth above in each year, and to pay interest on any overdue principal and
on overdue interest, at the rate per annum specified in the title of this Bond.
The first such payment of interest will be made on the first interest
payment date set forth above. Except as herein otherwise provided with respect
to interest payable on the date the principal of this Bond becomes due and
payable (whether at Stated Maturity, by redemption or otherwise), interest on
this Bond shall be payable on each Semiannual Payment Date through the day
immediately preceding each such Semiannual Payment Date. The interest so
payable on any Semiannual Payment Date, and any redemption of Bonds that may
be made on any Redemption Date, will, as provided in the Indenture referred to
on the reverse hereof, be paid to the Person in whose name this Bond (or one
or more Predecessor Bonds) is registered on the Regular Record Date for such
Semiannual Payment Date or Redemption Date, which shall be the close of
business on the fifteenth day of the calendar month preceding that in which
such Semiannual Payment Date or Redemption Date occurs (whether or not a
Business Day). Any such redemption not made on the Redemption Date or interest
not so punctually paid or duly provided for (excluding interest the payment of
which is deferred pursuant to the proviso set forth in the first paragraph of
this Bond) shall forthwith cease to be payable to the registered Holder on the
Regular Record Date, and may be paid to the Person in whose name this Bond (or
one or more Predecessor Bonds) is registered on a Special Record Date for the
payment of such defaulted redemption proceeds and interest to be fixed by the
Trustee, notice whereof shall be given to Bondholders not less than 10 days
prior to such Special Record Date, or may be paid, at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Bonds may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
The principal of and interest on this Bond are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the office or agency of the
Issuer designated for such purpose in the United States of America; provided
that interest may be paid, at the option of the Issuer, by check mailed to the
Person entitled thereto at his address as it appears on the Bond Register.
Reference is made to the further provisions of this Bond set forth
on the reverse hereof, which shall have the same effect as though fully set
forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, ZIEGLER COLLATERALIZED SECURITIES, INC. has
caused this instrument to be signed, manually or in facsimile, by its President
or a Vice President and by its Secretary or an Assistant Secretary and a
facsimile of its corporate seal to be imprinted hereon.
Dated: May 1, 1996
ZIEGLER COLLATERALIZED SECURITIES, INC.
[SEAL]
By:
Lynn R. Van Horn, President
Attest:
Janine R. Schmidt, Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Series 7 Bonds referred to in the within-mentioned
Indenture.
M&I FIRST NATIONAL BANK, Trustee
Authorized Officer
[FORM OF REVERSE OF BOND]
COLLATERALIZED BOND
This Bond is one of a duly authorized issue of Bonds of the Issuer,
designated as its Collateralized Bonds (herein called the "Bonds"), issued and
to be issued in one or more Series, and is part of the Series 7 Bonds
designated on the face hereof (herein called the "Bonds of this Series 7"), all
issued and to be issued under an Indenture dated as of December 1, 1991, as
amended (herein called the "Indenture"), between the Issuer and M&I First
National Bank (the "Trustee"), which term includes any successor Trustee under
the Indenture, to which Indenture and all indentures supplemental thereto
(including the indenture supplemental thereto which authorized the Bonds of
this Series 7) reference is hereby made for a statement of the respective
rights thereunder of the Issuer, the Trustee and the Holders of the Bonds, and
the terms upon which the Bonds are, and are to be, authenticated and delivered.
All terms used in this Bond which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
As provided in the Indenture, the Bonds are issuable in Series which
may vary as in the Indenture provided or permitted. All Bonds of each Series
are equally and ratably secured to the extent provided by the supplemental
indenture authorizing such Series. This Bond is one of the Bonds of Series 7
specified in its title.
If no Event of Default as defined in the Indenture shall have
occurred and be then continuing, the Issuer, at its option, may redeem the
Outstanding Bonds of this Series 7 in whole or in part, and if in part, by lot
in such manner as may be determined by the Trustee, on or after November 1,
1998 at a Redemption Price equal to 100% of the principal amount of the Bonds
to be redeemed (plus interest accrued and unpaid on such Bonds to but not
including the Redemption Date).
The Bonds of this Series 7 are subject to Mandatory Redemption at any
time in whole or in part, and if in part, by lot in such manner as may be
determined by the Trustee at a Redemption Price equal to 100% of the principal
amount of the Bonds to be redeemed (plus interest accrued and unpaid on such
Bonds to but not including the Redemption Date) to the extent of any proceeds
received by the Issuer as a result of the purchase of any Defaulted Pooled
Asset by the Servicer therefor or the Guarantor as soon as practicable
following the receipt of such proceeds by the Issuer.
The Bonds of this Series 7 are subject to Mandatory Redemption in
whole or in part, and if in part, by lot in such manner as may be determined
by the Trustee at the Redemption Prices (expressed as percentages of the
principal amount of the Bonds of this Series 7 to be redeemed) as set forth
below (plus interest accrued and unpaid on such Bonds to, but not including,
the Redemption Date) to the extent of any proceeds received by the Issuer as
a result of the early termination of any Pooled Asset and the purchase of the
related Equipment by the Lessee or Debtor thereunder as soon as practicable
following the receipt of such proceeds by the Issuer.
Redemption Period Redemption Price
Prior to May 31, 1998 101%
On or after May 31, 1998 100%
If an Event of Default as defined in the Indenture shall occur and
be continuing, the principal of all the Bonds, or of all the Bonds of any
Series, may become or be declared due and payable in the manner and with the
effect provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, upon surrender of this Bond for registration of
transfer at the office or agency of the Issuer in the United States of America,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the Holder hereof
or his attorney duly authorized in writing, and thereupon one or more new Bonds
of the same Series and maturity, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
Prior to the due presentment for registration of transfer of this
Bond, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Bond is registered as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Bond be overdue, and neither the Issuer, the Trustee nor
any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of a majority in aggregate
principal amount of Bonds at the time Outstanding (as defined in the
Indenture), in case Outstanding Bonds of all Series are to be affected, or with
the consent of the Holders of a majority in aggregate principal amount of the
Bonds at the time Outstanding of each Series to be affected, in case one or
more, but less than all, of the Series of Bonds then Outstanding are to be
affected. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Bonds at the time
Outstanding, and of Bonds at the time Outstanding of each Series to be affected
in case one or more, but less than all, such Series are to be affected, on
behalf of the Holders of all the Bonds, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Bond shall be conclusive and binding upon such Holder and upon all future
Holders of this Bond and of any Bond issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of
such consent or waiver is made upon this Bond.
The term "Issuer" as used in this Bond includes any successor under
the Indenture.
The Bonds are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof, as provided in the
Indenture and subject to certain limitations therein set forth. The Bonds are
exchangeable for a like aggregate principal amount of Bonds of the same Series
and maturity of a different authorized denomination, as requested by the Holder
surrendering same.
No reference herein to the Indenture and no provision of this Bond
or of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and interest on this
Bond at the times, place and rate, and in the coin or currency, herein
prescribed.
Section 3. Aggregate Principal Amount.
The aggregate principal amount of Series 7 Bonds that may be
authenticated and delivered under the Indenture and this Ninth Supplemental
Indenture is limited to $5,000,000 except for Bonds authenticated and delivered
upon registration of, transfer of, or in exchange for, or in lieu of, other
Series 7 Bonds pursuant to Sections 3.04, 3.05, 3.06, 10.06 or 12.04 of the
Indenture.
Section 4. Maturity and Interest Rates.
The Series 7 Bonds shall mature and shall bear interest as follows:
Stated Maturity Amount Interest Rate
May 1, 1997 $ 910,000 6.00%
November 1, 1997 $ 640,000 6.25%
May 1, 1998 $ 635,000 6.25%
November 1, 1998 $ 570,000 6.50%
May 1, 1999 $ 570,000 6.50%
November 1, 1999 $ 600,000 6.75%
May 1, 2000 $ 600,000 7.00%
November 1, 2000 $ 475,000 7.00%
Section 5. Semiannual Payment Dates.
With respect to the Series 7 Bonds, the term Semiannual Payment Dates
shall mean May 1 and November 1.
Section 6. Redemption of Series 7 Bonds.
The Series 7 Bonds shall be subject to mandatory and optional
redemption prior to maturity, to the extent specifically set forth in the form
of Series 7 Bond set forth in this Ninth Supplemental Indenture.
Section 7. Representations and Warranties.
The Issuer hereby makes the following representations and warranties
with respect to the Pooled Assets set forth on Schedule A hereto, in each case
to the best of its knowledge:
a. The information set forth in the Schedule of Pooled
Assets is true and correct in all material respects at the date or
dates respecting which such information is furnished;
b. Each Pooled Asset by its terms permits the Lessor/Debtor
to assign such Pooled Asset and its rights and interests thereunder
without the consent of the Lessee/Debtor thereunder;
c. As of the date of execution and delivery of this
Supplemental Indenture, each Pooled Asset is in full force and effect
and the Issuer has granted to the Trustee as security for the Bonds
a security interest in the Issuer's right, title and interest in and
to such Pooled Asset and the related Equipment which security
interest has been perfected by filing pursuant to the Uniform
Commercial Code of Wisconsin and with respect to each item of the
Equipment, a filing pursuant to the Uniform Commercial Code of the
jurisdiction where such item of Equipment is located and where the
principal place of business of the Lessee/Debtor under the related
Pooled Asset is located, provided that in general no fixture filings
have been made with respect to the Equipment;
d. The Issuer acquired the Pooled Assets in good faith,
without notice of any adverse claim;
e. As of the date of execution and delivery of this
Supplemental Indenture, the Issuer is the sole legal owner of each
Pooled Asset free and clear of all liens, security interests and
other encumbrances (except for a security interest which secures the
Series 7 Bonds or indebtedness of the Issuer which is subordinate to
the prior payment of principal and interest on the Series 7 Bonds and
which is subordinate to the security interest securing the Series 7
Bonds (a "Subordinate Security Interest")) and the Issuer or the
Lessee or Debtor under such Pooled Asset is the sole owner of the
related Equipment, and immediately upon the transfer and assignment
herein contemplated (and assuming that the Trustee complies with its
obligations under the Indenture and this Supplemental Indenture and
has not in its individual capacity taken any action to grant any
interest in any Pooled Asset to any other Person), except for a
Subordinate Security Interest, the Trustee shall have good title to,
and will be the sole legal owner of, each Pooled Asset free and clear
of all liens, security interests and other encumbrances and will have
a valid perfected security interest in the Issuer's right, title and
interest to the related Equipment;
f. As of the date of execution and delivery of this
Supplemental Indenture, the terms of each Pooled Asset have not been
waived, altered or modified in any material respect, except by
written instruments included in the Pooled Asset File;
g. As of the date of execution and delivery of this
Supplemental Indenture, insurance policies are in effect which
provide coverage against loss of or damage to each item of Equipment
in an amount at least equal to the full insurable value thereof; and
h. The aggregate scheduled rental payments under the Pooled
Assets securing Series 7 Bonds during the six-month periods ending on
each Supplemental Payment Date for Bonds of such Series to and
including the final Stated Maturity of the Series 7 Bonds after
deducting all Servicer's fees and Trustee's fees respecting such
Pooled Assets and Series 7 Bonds accruing during such period equal or
exceed the principal of and interest on the Series 7 Bonds which are
due and payable on such Semiannual Payment Date.
It is understood and agreed that the representations and warranties set forth
in this Supplemental Indenture (with respect to representations and warranties
which are as of a particular date, in each case as of such date) shall survive
delivery of the respective Pooled Asset Files to the Trustee and shall continue
throughout the terms of the Indenture and this Supplemental Indenture.
Section 8. Ratio of Net Investment in Pooled Assets to Outstanding
Principal Amount of Series 7 Bonds.
The Issuer covenants and agrees that so long as any Series 7 Bonds
are Outstanding, the Issuer's aggregate net investment (determined in
accordance with generally accepted accounting principles) in the Pooled Assets
securing the Series 7 Bonds together with any cash held by the Trustee as
collateral for the Series 7 Bonds (excluding cash held in an amount equal to
the then accrued but unpaid interest on the Series 7 Bonds) shall at all times
be in an amount not less than 115% of the aggregate principal amount of the
Series 7 Bonds then Outstanding.
ARTICLE TWO
Miscellaneous
Section 1. Terms Defined in the Indenture.
All terms used in this Ninth Supplemental Indenture which are defined
in the Indenture, either directly or by reference therein, have the meanings
assigned to them therein, except to the extent such terms are defined in this
Ninth Indenture or the context clearly requires otherwise.
Section 2. Ratification of Indenture.
As supplemented and amended by this Ninth Supplemental Indenture, the
Indenture as previously amended is in all respects ratified and confirmed and
the Indenture as previously amended and as so supplemented by this Ninth
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
Section 3. Counterparts.
This Ninth Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Ninth
Supplemental Indenture to be duly executed by their respective officers
thereunto duly authorized and their respective seals duly attested to be
hereunto affixed all as of the day and year first above written.
ZIEGLER COLLATERALIZED SECURITIES, INC.
[SEAL]
By: /s/ Lynn R. Van Horn
Lynn R. Van Horn, President
Attest:
/s/ Janine R. Schmidt
Janine R. Schmidt, Secretary
M&I FIRST NATIONAL BANK
West Bend, Wisconsin,
as Trustee
[SEAL]
By /s/ Roger T. Stephenson
Title Executive Vice President
Attest:
/s/ M. L. Hron
Title Vice President
Acknowledgement of Ziegler Collateralized Securities, Inc.
STATE OF WISCONSIN )
) SS.
COUNTY OF WASHINGTON )
On this _____ day of May, 1996, before me, a Notary Public in and for
said county, the undersigned officer, personally appeared L. R. Van Horn and
J. R. Schmidt, severally acknowledged themselves to be the President and
Secretary, respectively, of ZIEGLER COLLATERALIZED SECURITIES, INC., a
Wisconsin corporation, and that they, as such officers, being authorized so to
do, executed the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by themselves as such President and
Secretary, respectively.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Notary Public, Washington County, Wisconsin
[NOTARIAL SEAL] My Commission expires:
Acknowledgement of M&I First National Bank
STATE OF WISCONSIN )
) SS.
COUNTY OF WASHINGTON )
On this ______ day of May, 1996, before me, a Notary Public in and
for said county, appeared R. T. Stephenson and M. F. Hron of M&I FIRST NATIONAL
BANK, West Bend, Wisconsin, Trustee, to me personally known, who being by me
duly sworn, did say that they are the Executive Vice President and Vice
President, respectively, of M&I FIRST NATIONAL BANK, West Bend, Wisconsin, and
that the seal affixed to said instrument is the corporate seal of the said
Association and that said instrument was signed and sealed on behalf of the
said Association by authority of its Board of Directors, and that the said R.
T. Stephenson and M. F. Hron acknowledged said instrument to be the free act
and deed of said Association.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Notary Public, Washington County, Wisconsin
[NOTARIAL SEAL] My Commission expires:
APPENDIX A
DESCRIPTION OF POOLED ASSETS
SECURING
SERIES 7 BONDS
<TABLE>
<CAPTION>
OPTION TO
PURCHASE
AGGREGATE
PURCHASE EQUIPMENT
PAYMENTS
PRICE OR PREPAY
FROM DATE
(ISSUER'S DEBT PRIOR
DESCRIPTION OF PURCHASE
INITIAL NET TO END OF
DATE OF OF TYPE OF MONTHLY TO
END OF INVESTMENT) CONTRACT
LESSEE CONTRACT EQUIPMENT CONTRACT (3)<F8>
PAYMENT CONTRACT OF CONTRACT TERM (1)<F6>
- ------- --------- ---------- ------------ ---------- ----------- -----------
- ---------
<S> <C> <C> <C> <C>
<C> <C> <C>
Cardiology Associates of 8/1/95 Miscellaneous Medical L $3,865.77
$193,288.50 $162,450.69 None
Lubbock, P.A. and Office
Lubbock, TX Equipment
Cardiology Associates of 1/1/96 Miscellaneous Medical L $5,886.25
$323,743.75 $265,048.30 None
Lubbock, P.A. and Office
Lubbock, TX Equipment
Cardiology Associates of 11/1/95 Miscellaneous Medical L $2,061.06
$109,236.18 $90,866.55 None
Lubbock, P.A. and Office
Lubbock, TX Equipment
Cardiology Consultants, P.A. 5/1/95 2 Sopha DS-7 Gamma L $8,596.66
$507,202.94 $398,941.61 None
d/b/a Cardiac Diagnostic Cameras
Center
Newark, DE
Information Storage 10/1/95 2-142A Memory Test L $2,207.20
$88,288.00 $77,942.78 None
Devices, Inc. Systems
San Jose, CA
Information Storage 1/1/96 3-142A Memory Test L $3,312.52
$142,438.36 $124,524.41 None
Devices, Inc. Systems
San Jose, CA
Information Storage 1/1/96 2-142A Memory Test L $3,625.02
$155,875.86 $136,846.26 None
Devices, Inc. Systems
San Jose, CA
Information Storage 4/1/96 3-142A Memory Test L $3,597.58
$165,488.68 $144,750.80 None
Devices, Inc. Systems
San Jose, CA
St. Francis Medical 12/1/95 Datex AS/3 Monitoring L $3,342.98
$180,520.92 $151,875.17 None
Center West System
Ewa Beach, HI
Bradley County 3/1/96 Miscellaneous Medical L $9,741.33
$555,255.81 $469,898.33 None
Memorial Hospital Equipment
Cleveland, TN
Community Memorial 12/10/95 Hewlett Packard Sonos L $3,688.00
$199,152.00 $158,904.31 None
Hospital of Menomonee Model 2500
Falls, Inc.
Menomonee Falls, WI
Fayetteville Diagnostic 1/10/96 Hewlett Packard Computer L $11,774.29
$647,585.95 $540,337.09 None
Clinic Networking System
Fayetteville, AR
Gage's Fertilizer & Grain, Inc.9/10/95 Fertilizer Applicator L $24,812.27
$74,436.81 $78,896.41 None(2)<F7>
Stanberry, MO (semi-annual)
Kings Medical of Wisconsin, 1/20/96 Philips T5-3 Upgrade L $3,132.13
$150,342.24 $124,070.77 None
Limited Liability Company
Hudson, OH
Universal Standard Medical 9/1/95 Hitachi Model 7 Analyzer NR(A) $2,326.00
$113,974.00 $95,700.89 None
Laboratories, Inc.
Southfield, MI
Universal Standard Medical 3/1/96 Computer Equipment NR(B) $3,007.98
$93,247.38 $84,585.66 None
Laboratories, Inc.
Southfield, MI
Universal Standard Medical 2/20/96 Miscellaneous Equipment NR(C) $2,692.00
$145,368.00 $121,864.74 None
Laboratories, Inc.
Southfield, MI
Universal Standard Medical 9/20/95 Freedom Business NR(D) $2,228.00
$98,032.00 $83,422.64 None
Laboratories, Inc. Machines
Southfield, MI
Universal Standard Medical 11/20/95 Tyler Freezer and NR(E) $2,464.00
$115,808.00 $98,488.16 None
Laboratories, Inc. Cooler
Southfield, MI
Universal Standard Medical 1/20/96 Miscellaneous Equipment NR(F) $2,317.00
$122,801.00 $103,270.82 None
Laboratories, Inc.
Southfield, MI
St. Agnes Hospital of 12/1/94 Hewlett Packard NR(G) $6,033.50
$253,407.00 $223,219.52 None
Fond du Lac Information
Fond du Lac, WI System
St. Agnes Hospital of 9/10/95 Hewlett Packard NR(H) $3,931.89
$200,526.39 $172,132.18 None
Fond du Lac Sonos
Fond du Lac, WI Model 2500
Radiologists, P.C. 12/1/95 Philips Diagnost 76 NR(I) $5,003.24
$270,174.96 $227,480.63 None
Kansas City, MO System
Radiologists, P.C. 10/20/95 ATL HDL 3000 NR(J) $3,016.42
$156,853.84 $132,871.43 None
Kansas City, MO Ultrasound
Pinnacle Imaging Associates 11/1/95 Siements 42SP MRI NR(K) $11,164.30
$591,707.90 $494,481.41 None
d/b/a Pinnacle
Imaging Center
Duluth, GA
Welborn Clinic 9/1/95 ATL Ultramark NR(L) $2,702.00
$137,802.00 $117,088.10 None
Evansville, IN 9 Upgrade
Cardiology Associates of 9/10/95 Vision DST Gamma NR(M) $7,371.11
$375,926.61 $317,797.43 None
Corpus Christi Camera
Corpus Christi, TX
Hertzler Clinic, P.A. 12/20/95 Vision FX40 Gamma NR(N) $5,264.39
$347,449.74 $282,158.87 None
Halstead, KS Camera
Columbia Hospital 5/20/95 Gryroscan T5 System NR(O) $21,996.31
$483,918.82 $452,917.27 None
Milwaukee, WI and 2T5 Upgrade
Medical Associates 3/20/96 2 Philips Horiz NR(P) $3,670.12
$209,196.84 $174,546.02 None
Clinton, IA Diagnost
------------- ------------
$7,209,050.48$6,107,379.25
------------- ------------
------------- ------------
(1)<F6>Except as otherwise indicated in note (2), lessee has option to purchase
leased equipment for $1.00 at end of lease term.
(2)<F7>Lessee required to purchase leased equipment for bargain purchase price
(10% of original equipment cost) at end of lease term.
(3)<F8>L = Lease; NR = Non-Recourse loan
</TABLE>
For Footnotes (A) through (P) describing the Non-Recourse loan instruments in
further detail, please see Schedule I attached hereto.
SCHEDULE I
(A) Non-Recourse Installment Note of Leasing Association Barrington to the
order of Ziegler Leasing Corporation, dated September 1, 1995
(Agreement #10385-00-00002)
(B) Non-Recourse Installment Note of Leasing Association Barrington to the
order of Ziegler Leasing Corporation, dated March 1, 1996
(Agreement #10385-00-00008)
(C) Non-Recourse Installment Note of Leasing Association Barrington to the
order of Ziegler Leasing Corporation, dated February 20, 1996
(Agreement #10385-00-00006)
(D) Non-Recourse Installment Note of Leasing Association Barrington to the
order of Ziegler Leasing Corporation, dated September 20, 1995
(Agreement #10385-00-00001)
(E) Non-Recourse Installment Note of Leasing Association Barrington to the
order of Ziegler Leasing Corporation, dated November 20, 1995
(Agreement #10385-00-00003)
(F) Non-Recourse Installment Note of Leasing Association Barrington to the
order of Ziegler Leasing Corporation, dated January 1, 1996
(Agreement #10385-00-00004)
(G) Non-Recourse Installment Note of Ziegler Leasing Corporation to the
order of Ziegler Collateralized Securities, Inc., dated December 1,
1994 (Agreement #00298-00-00006)
(H) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated September 10, 1995
(Agreement #00298-00-00008)
(I) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated December 1, 1995
(Agreement #10132-00-00039)
(J) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated October 20, 1995
(Agreement #10132-00-00040)
(K) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated November 1, 1995
(Agreement #10367-00-00001)
(L) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated September 1, 1995
(Agreement #10293-00-00012)
(M) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated September 10, 1995
(Agreement #10267-00-00002)
(N) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated December 20, 1995
(Agreement #10387-00-00001)
(O) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated May 20, 1995
(Agreement #00231-00-00005)
(P) Non-Recourse Installment Note of Ziegler Leasing Corporation to the order
of Ziegler Collateralized Securities, Inc., dated March 20, 1996
(Agreement #10386-00-00001)
ZCO ANNUAL REPORT FOR FISCAL YEAR 1996
THE ZIEGLER COMPANIES, INC.
1996 ANNUAL REPORT
Table of Contents
Financial Highlights
Letter to Shareholders
Overview of The Ziegler Companies, Inc.
Summary of Operations
Directors and Executive Officers
Investor Information
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1996 1995
<S> <C> <C>
Total Revenues $49,317,000 $44,942,000
Income from Continuing Operations
Before Income Taxes 4,785,000 5,270,000
Income from Continuing Operations 2,975,000 3,328,000
Income from Discontinued Operations 670,000 716,000
Net Income 3,645,000 4,044,000
Per Share
Income from Continuing Operations $1.24 $1.39
Income from Discontinued Operations $ .28 $ .30
Net Income $1.52 $1.69
Dividends Declared $ .82 $ .87
Average Common Shares Outstanding 2,399,491 2,391,968
Number of Common Shareholders 509 537
</TABLE>
Corporate Creed
We believe in the American free enterprise system. We shall consistently
treat our clients, employees, shareholders and community with honesty,
dignity, fairness and respect. We will conduct our business with the
highest ethical standards.
<PAGE>
Letter to Shareholders
Dear Shareholders:
The financial results of 1996 for The Ziegler Companies, Inc. did not
mirror the robust earnings level of the securities industry. However, the
numbers do reflect our investment in numerous strategic initiatives that
were begun or achieved in 1996. These investments affected 1996 results,
but they should provide for improved financial results in years to come.
In 1996, earnings per share were $1.52 versus $1.69 in 1995. Net
income for the year was $3,645,000 compared with $4,044,000 in 1995. On
December 20, 1996, the sale of Ziegler Leasing Corporation was consummated.
Net income from this discontinued operation for the year ended December 31,
1996, totaled $670,000 or 28 cents per share compared with $716,000 or 30
cents per share in 1995.
For the year ended December 31, 1996, revenues from continuing
operations were $49,317,000 compared to $44,942,000 for 1995. Net income
from continuing operations for 1996 was $2,975,000 or $1.24 per share
compared with $3,328,000 or $1.39 per share in 1995.
Cash dividends declared in 1996 were 82 cents compared to 87 cents in
1995. Included in 1996's declared dividend was a 30 cent extra dividend
declared in the fourth quarter. 1996 marked the 45th consecutive year that
cash dividends have been paid on your Company's common shares. Your
Directors will continue to review dividend policy on a quarterly basis.
Important factors in that review include the maintenance of a conservative
level of capital to operate the business, investment opportunities and
return on equity. With the sale of Ziegler Leasing Corporation, your
management has stepped up its review of investment opportunities and
sharpened the focus on our core securities business.
The sale of Ziegler Leasing Corporation (ZLC) in 1996 was a strategic
move. The synergy of cross-selling investment banking services with
equipment leasing services to common healthcare clients waned in recent
years. What was once a strong niche business with attractive rates of
return on capital employed has become much more of a commodity business as
numerous, substantially larger financial institutions entered the market.
With a higher cost of capital, ZLC was having difficulty growing its
portfolio. Consequently, profitability declined in each of the last four
years.
The sale of ZLC to General Electric Capital Corporation (GECC) was
completed on December 20, 1996. Gross cash proceeds from the sale of ZLC's
stock approximated $17,000,000. The after-tax proceeds were about
$11,000,000, which approximated book value of ZLC's stock at the time of
sale. For 25 years, ZLC was an important part of the Ziegler family of
operating companies. It contributed significantly to the financial results
of The Ziegler Companies, Inc. and always upheld the integrity of our name
with a high level of business ethics. GECC has inherited a group of quality
employees, who I believe will have a greater opportunity to succeed under
the GECC umbrella with its lower cost of capital. All of us at ZCO extend
our gratitude to the former employees of ZLC for their service to our
company and extend best wishes for the future.
The financial markets treated the securities industry with mixed
results in 1996. On the heels of the S&P 500 Index being up 37.6% in 1995,
almost no one expected the S&P to add another 23.0% in 1996. Those firms
that have significant exposure to the equity markets through their trading,
distribution, market making and investment banking operations enjoyed record
operating results. In contrast, the fixed income markets were not so
generous. After interest rates moved up sharply in the first half of the
year and then sideways in the third quarter, bond prices rallied in the
fourth quarter. However, the rally didn't save bond investors from what
was, aside from 1994, the poorest bond market performance since 1987. New
issuance of long-term municipal bonds in 1996 increased for the first time
since 1993. Municipal bond issuance at $183 billion in 1996 was up 14% from
1995, but still fell short of the peak years of 1992 and 1993.
B.C. Ziegler and Company (BCZCO) did not share in the increase of earnings
experienced by the securities industry. BCZCO results were down in 1996
relative to 1995, primarily as a result of substantial investments made in
the Ziegler Securities division as discussed below and a continuing
concentration in the fixed income markets.
Retail Division
- Our retail division recorded a very strong year with revenues
and profits up substantially and right on budget.
- A restructured compensation package for investment
brokers, along with our first full year of being "full
service" to our clients, helped create the motivation to
better serve clients.
- New services introduced included "Ziegler Connect" an
electronic funds transfer system, a new portfolio-based
client statement and an automatic dividend reinvestment
plan.
Ziegler Securities Division
- Revenues were down slightly and operating profit down
significantly as a result of investments in new people and an
expansion of investment banking practices. An office was opened
in New York City to house additional healthcare investment
bankers and broaden our Senior Living Finance practice to
provide services to for-profit organizations as well.
- Senior Living Finance Group had a great year,
substantially increasing its profit contribution as a
result of underwriting 46 deals totalling $750,000,000 for
a 28% market share of the not-for-profit senior living
industry, twice that of our nearest competitor.
- ZCO committed $5,000,000 to capitalize the formation of a
mezzanine fund targeting the assisted living industry.
- Significantly increased our merger and acquisition
activity in the Healthcare Group as we continue to broaden
our value-added services.
Institutional Finance Division
- Profitability was flat compared to 1995. This Division's major
challenge continues to be creating products and services that
will generate profitable growth in the face of heightened bank
competition. Eugene H. Rudnicki, who heads this division, will
retire in the first quarter of 1997 after 30 years of service.
Gene rejuvenated our church underwriting activity in the early
1980s and is the father of our successful Ziegler Mortgage
Securities, Inc. II (ZMSI) product. Gene, I know all your
fellow employees wish you a healthy retirement. David A.
Schlosser, a 10-year BCZCO veteran has assumed leadership of
this division.
Principal Preservation Portfolios (PPP)
- Our family of mutual funds, Principal Preservation Portfolios,
Inc. (PPP), ended 1996 with $386,000,000 of assets, up from
$320,000,000 at the end of 1995, primarily as a result of
increased money market assets. BCZCO is PPP's principal
underwriter and Ziegler Asset Management, Inc. provides PPP with
investment advice. PPP's asset growth has not kept pace with
the torrid growth experienced by the mutual fund industry, but
with the excellent investment performance achieved by PPP again
in 1996, it is well-positioned for growth in 1997. PPP's equity
index funds continue to receive increased investor funds. The
S&P 100 Plus Portfolio now has a 10-year track record, which
aids in marketing. PPP's recent entrant, the PSE Tech 100 Index
Portfolio, introduced in June of 1996, is the only broad-based
technology index fund available to retail investors. During
1996, Robert J. Tuszynski was elected president and CEO of the
Principal Preservation family of mutual funds.
Independent Insurance Agency
- The agency experienced slightly increased profitability as the
result of the writing of new business and excellent retention of
old business in the face of continued soft insurance markets.
Preferred Stock Division
- In its second year as an operating division, it posted slightly
lower earnings in 1996. However, the return on invested capital
was very acceptable. We continue to utilize this division's
expertise in selling more preferred product through our retail
division. The explosion of new products in this market sector,
along with threatened legislative limitations, provides
continuing challenges and opportunities.
The operating results of the last few years that we have achieved at
BCZCO, the largest operating subsidiary of The Ziegler Companies, Inc.,
certainly are not at a level with which management or the Board of Directors
is satisfied. This is particularly evident with the securities industry
posting strong results. We have to continually step back and look at where
we've been and the progress we're making toward our strategic goals.
Our legacy has been one of a bond house that served the healthcare and
institutional markets. We service that market as well as any firm on the
Street, evidenced by our strong market positions in these arenas. Our
investment banking and retail divisions were built to provide debt capital
to these markets. These markets changed and we didn't change quickly
enough. Margins in the underwriting business have been on a long, steady
slide. A revolution is taking place in the healthcare markets as both
consolidations and integrations accelerate in the delivery system. Our
retail division does a great job of distributing fixed-income product
originated by our investment banking operations, but supply is
unpredictable, margins are declining, and our clients are looking for a
broader product offering including equities.
We continue to implement many strategies that are "recreating"
Ziegler. The section following this letter highlights our competitive
strategies. Sometimes the implementation process doesn't go as smoothly as
planned and the results don't come as quickly as we like. It is time
consuming and expensive to recruit people, retrain people, open offices,
start new businesses, invest in new technology, and introduce new products
and services. Quite frankly, it's often more difficult than I imagined.
However, I'm continually encouraged and optimistic about our future because
we have cogent strategies, we have strong managers who share our vision of
success, and we have been able to recruit talent that is necessary for the
execution of our plans.
We are constantly mindful of the necessity to balance the cost
(investments) of implementing our plans with the timeliness of return on
those investments. Predictability in the securities business has always
been elusive. Given the magnitude of the changes we have been implementing,
I ask the shareholders to take the long-term view and share our vision of
where we are headed.
Ziegler Thrift Trading, Inc. (ZTT) posted record everything in 1996 - record
ticket volume, revenues, new accounts, stock option financing, mutual fund
sales, and most importantly, record profits. ZTT operating results
benefited from record volume on the exchanges and OTC; along with a strong
customer service orientation, both contributed to strong operating results.
ZTT's 1997 strategies address a rapidly changing environment for discounted
brokerage services. Electronic trading, new office locations and
adjustments to ticket commissions are key issues being addressed. Darrell
P. Frank was named president and CEO of ZTT in April of 1996.
Ziegler Asset Management, Inc. (ZAMI) recorded improved operating results
during 1996. Assets under management crossed the $900,000,000 mark, fueled
by another fine year of absolute and relative investment performance in both
ZAMI's fixed income and equity accounts. It's very gratifying to see many
of the other Ziegler operating entities successfully cross-sell ZAMI's
services. During 1996, we continued to build infrastructure at ZAMI to
provide a solid foundation for growth and profitability. Marketing and
sales are the strategic thrust in 1997. Geoffrey G. Maclay Jr. joined ZAMI
in January of 1996 as its president and CEO.
WRR Environmental Services Co., Inc. (WRR) registered another record year of
revenues and profits. These results were particularly meaningful because
many of WRR's competitors have struggled to maintain profitability during
this period of prolonged industry surplus capacity. These results are a
tribute to management, in that they have positioned WRR in the right niches
and they've controlled expenses.
Our People. In March of this year, my father, R. Douglas Ziegler, will
relinquish his Chairmanship and retire from your Board of Directors under
its mandatory retirement policy based on age. Although my objectivity as
his son may be questioned, I believe all fellow employees, Directors and
clients who have been associated with Dad since he came to the Ziegler
Companies in 1973 would agree that he always led by example. He has never
wavered as a role model with his work ethic. He has always put personal and
corporate integrity above all else. While he was often disappointed with
operating results, under his watch, you always knew he put shareholders'
interests ahead of his own. During his entire career he made the time to be
heavily involved in civic affairs, as well as charitable organizations.
Fortunately, Dad will continue to do what he enjoys and does so well, manage
client accounts as a vice president of ZAMI.
Steven A. Roell was elected to your Board of Directors at the April
1996 Annual Meeting. Steve brings with him a corporate perspective as chief
financial officer of Johnson Controls, Inc., Wisconsin's largest publicly
held company and is a valuable addition to your Board. He also served as a
director of Principal Preservation Portfolios, our family of mutual funds
for three years.
On The Legislative Front. Year-end 1996 saw a series of major decisions by
federal bank regulators to greatly expand the securities activities of
banks. New Comptroller of the Currency (OCC) regulations will allow
national banks to conduct extensive securities and insurance activities in
"operating subsidiaries," while the Federal Reserve more than doubled the
amount of securities that can be underwritten by Section 20 affiliates of
bank holding companies. These actions further break down the regulatory
barriers to banks entering the securities underwriting business.
Unfortunately, the OCC actions tilt the market in favor of the banks. We
continue to support broad-based comprehensive legislation to modernize the
financial services industry, as opposed to this piecemeal approach.
The robust stock markets of recent years bring forth the common
misconception that the only emotions at work on Wall Street are fear and
greed. At Ziegler, we work hard every day at our goal of making trust and
integrity the words our employees and clients associate with the securities
industry. We must always remember - trust is hard earned and easily lost.
We at Ziegler all take great pride in being associated with a firm
that serves such vital functions in American society and does so with this
same trust and integrity. We pledge to maintain our focus on these values
as we make our transition. On behalf of the Board of Directors, I wish to
thank our shareholders, employees and clients for their continued support
and patience as we continue to reinvent Ziegler.
Sincerely,
Peter D. Ziegler
President & CEO
<PAGE>
The Ziegler Companies, Inc.
B. C. ZIEGLER AND COMPANY
Peter D. Ziegler, President and CEO
Ziegler Securities Division
(Healthcare Finance)
Business Activity -
Strategic consulting, merger and acquisition, and investment
banking services to hospitals, physician organization,
healthcare systems and medical office developers
1996 Highlights -
Ranked fifth nationally in senior-managed healthcare
financings
Opened New York investment banking office
Significantly increased merger and acquisition engagements
Competitive Strategies -
Broaden corporate finance capabilities in serving healthcare
clients
Implement merchant banking practice for emerging healthcare
organizations
Ziegler Securities Division
(Senior Living Finance)
Business Activity -
Investment banking services and merchant banking investments
to continuing care retirement communities, nursing homes and
assisted living facilities
1996 Highlights -
Ranked first in senior-managed senior living financings with
a 27.2% market share
Completed 46 financings with par value over $747 million
Senior managed a $142 million financing, the largest
composite tax-exempt financing for a senior living
system provider
Created mezzanine fund for financing assisted living
projects
Competitive Strategies -
Remain the leader in financing not-for-profit senior living
facilities
Provide equity placement and make principal investments to
assisted living facilities
Ziegler Securities Division
(Special Products)
Business Activity -
Adviser and structuring agent on asset and liability
management techniques to healthcare and senior living
organizations
1996 Highlights -
Completed 45 structured financing transactions including
investment agreements, forward purchase contracts, swaps,
interest rate caps, and other proprietary investment
management techniques
Competitive Strategies -
Implement principal trading strategies to broaden structured
financing applications
Institutional Finance
Business Activity -
Debt financing to churches, independent schools and other
nonprofit organizations nationwide for new construction,
land/facilities purchase and refinancing of debt
1996 Highlights -
Solely managed 20 issues in 1996, with par value of $72
million
Introduced internet site for church and school financings
topics at www.hnet.net/-churchloan
Competitive Strategies -
Aggressively market to private Christian schools due to the
deterioration of public schools nationwide
Seek joint venture opportunities with national banks
Retail Division
Business Activity -
Full-service retail distribution of investment securities
and services through 23 retail offices serving investors
nationwide
1996 Highlights -
Improved client communications with new portfolio statement
Created "ZieglerConnect", one of the most comprehensive sets
of electronic funds transfer services in retail
brokerage industry
Expanded equity services, added free dividend reinvestment
Record mutual fund and IRA sales
Competitive Strategies -
Provide high level of individual client service
Expand equity services, managed products
Introduce fee-based Custom Asset Plan accounts
Expand presence in primary marketplace
Deliver unique, personalized investment broker support
Sponsor of Principal Preservation Portfolios
Business Activity -
Niche family of mutual funds, distributed through investment
brokers, banks and financial planners
Asset base in excess of $380 million
1996 Highlights -
Created the only technology index fund in the country
Captured half of all assets going into double tax-free
Wisconsin funds
Nationally recognized performance for all equity portfolios
Competitive Strategies -
Increase fund assets through acquisition or joint alliances
Expand western states distribution of technology index fund
Increase profitability and growth through unique niche
positioning
Preferred Stock Division
Business Activity -
Institutional sales and trading of nonconvertible preferred
stock to client base of major domestic institutional
investors and broker/dealers
1996 Highlights -
Continued prominence as one of the largest domestic trading
operations dedicated exclusively to preferred stock
Second consecutive year of strong earnings
Earnings derived from primarily riskless trading strategy
Competitive Strategies -
Maintain strong market position in a niche market
Maintain low overhead operations
Further expand distribution to BCZCO retail
Expand institutional distribution for tax-advantaged
preferred stock
Independent Insurance Agency
Business Activity -
Independent agency providing complete insurance programs for
individuals, families and businesses, primarily in
southeastern Wisconsin
1996 Highlights -
Maintained high retention standards
Upgraded automation to continue client service at a high
level
Competitive Strategies -
Offer diverse insurance company representation, with a
distinguishing value-added service approach
ZIEGLER THRIFT TRADING, INC.
Darrell P. Frank, President and CEO
Business Activity -
Quick, efficient order execution and clearing for all types
of securities at discounted commission rates
Cashless stock option financing
Free mutual fund consulting
1996 Highlights -
Record trades, new accounts, revenues, earnings, stock
option financing
Enhanced interface with banks
Internet page now available at www.ziegler-thrift.com
New president
Competitive Strategies -
Offer PC, internet and touch-tone trading 24 hours a day
Add value-enhancing services and commission schedule updates
Expand office locations
Introduce margin accounts
Introduce a new customer-friendly statement
ZIEGLER ASSET MANAGEMENT, INC.
Geoffrey G. Maclay Jr., President and CEO
Business Activity -
Investment adviser to individual retail and institutional
portfolios: clients include high net worth
individuals; corporate, governmental, charitable and
non-profit organizations; mutual funds
Qualified retirement plans for corporate accounts
1996 Highlights -
Continued strong asset growth
Manage in excess of $900 million
Expansion into new markets
Excellent equity and fixed-income investment management
performance
Competitive Strategies -
Expand brand identity in newly defined target markets
Leverage sales through existing Ziegler distribution
channels
Employ information technology to support growth objectives
Consistent focus on core investment styles
WRR ENVIRONMENTAL SERVICES CO., INC.
James L. Hager, President and CEO
Business Activity -
Waste management, chemical processing, laboratory services,
waste transportation services, emergency response; site
remediation and restoration
1996 Highlights -
Record profits in 1996
Became the only certified vendor of reclaimed solvents for
3M
Competitive Strategies -
Offer full range of value-added services to meet all
environmental needs of clients
Provide special chemical processing, custom solvent drying
and household hazardous waste collection programs
National distributor networking
<PAGE>
Consolidated Financial Statements
Table of Contents
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Management's Discussion and Analysis
<PAGE>
1996 Summary of Operations
A holding company with seven principal subsidiaries, The Ziegler Companies,
Inc. ("ZCO") provides a wide range of financial services for businesses,
institutions and individuals. B. C. Ziegler and Company ("BCZCO"), Ziegler
Financing Corporation ("ZFC"), Ziegler Thrift Trading, Inc. ("ZTT"), Ziegler
Asset Management, Inc. ("ZAMI"), Ziegler Collateralized Securities, Inc.
("ZCSI"), and First Church Financing Corporation ("FCFC") are financial
services companies; WRR Environmental Services Co., Inc. ("WRR") recycles,
reclaims and disposes of industrial chemicals and solvents and provides
pollution abatement services.
Operational results for ZCO and its subsidiaries are as follows:
B. C. Ziegler and Company, including Ziegler Securities: BCZCO is one of
the nation's leading investment banking firms specializing in underwriting
and marketing tax-exempt and taxable debt securities for hospitals, clinics,
medical office developers, other healthcare related entities, churches and
private schools. In addition, BCZCO is the nation's leading underwriter for
nonprofit senior living facilities. Ziegler Securities, a division
headquartered in Chicago, is a major operating division of BCZCO and is
responsible for all healthcare, senior living and municipal finance
activities of BCZCO.
In addition to traditional underwriting services offered to its clients,
Ziegler Securities also provides financial advisory and consulting services
to healthcare clients through the Ziegler Healthcare Affiliates division.
Other financial services offered through Ziegler Securities include agency
purchases of special products and complex securities for financial risk
management, capital restructurings, and interest rate management strategies.
During 1996, Ziegler Securities senior managed 58 debt issues, totalling
$1,169.4 million for its healthcare clients. These financings included bond
issues for hospitals, physician groups and senior living facilities.
Ziegler Securities ranked fifth among all underwriters for tax-exempt
healthcare issues. In addition to its bond underwriting volume, the firm
was engaged on ten healthcare merger and acquisition transactions.
The institutional finance group of BCZCO, which performs underwriting in
connection with offerings of taxable bonds for non-profit institutions,
brought 20 bond issues to market in 1996 on behalf of churches, private
schools and other non-profit institutions. The offerings had a total
principal amount of $71,871,000.
BCZCO provides full-service retail investment brokerage services through 23
offices nationwide. Individual investors are the focus of the retail
division's products and services. Solicited equity services, which are
based on high quality, independent research, continue to grow since their
introduction in 1995. Managed products and services such as mutual funds
and variable annuities also continue to gain popularity with individual
investors. The retail division's noted fixed-income services include the
distribution of taxable and tax-exempt securities underwritten through the
firm's investment banking area.
In December 1994, BCZCO acquired an existing preferred stock trading
operation comprising five seasoned professionals: two traders and three
salespeople. The preferred stock division of BCZCO is dedicated exclusively
to the sale and trading of nonconvertible preferred stocks. A substantial
portion of its client base is represented by institutional investors and
other broker/dealers; however, distribution through BCZCO's retail division
is expanding. As one of the largest operations of its kind in the country,
the Preferred Stock Division is able to maintain a strong presence in this
niche market. During its first two years as a division of BCZCO, the
preferred stock division has generated consistently strong earnings.
BCZCO serves as principal underwriter, and provides certain other support
functions, for Principal Preservation Portfolios, Inc., an open-end
investment company. This family of mutual funds had total assets of
approximately $380,000,000 at December 31, 1996, as compared with total
assets of approximately $320,000,000 at December 31, 1995. Principal
Preservation Portfolios, Inc. introduced the PSE Tech 100 Index Portfolio in
1996, and as of the date of this report, it is the only indexed mutual fund
based upon a technology index (the Pacific Stock Exchange Tech 100 Index).
Currently, this portfolio has net assets of approximately $7,000,000.
BCZCO has owned and operated a general independent insurance agency since
its founding in 1902. Offices are located in West Bend and Milwaukee,
Wisconsin. The agency maintains direct agency contracts with 24 insurance
companies. Diversified coverages including, but not limited to, life,
health, property, casualty and fidelity insurance are available for personal
and business insurance customer needs.
In 1996, total BCZCO revenues were $33,278,000, compared to $32,039,000 in
1995, a 4% increase. Total expenses were $32,387,000 in 1996, compared to
$29,592,000 in 1995, a 9% increase. The resulting net income was $696,000
in 1996, compared to $1,555,000 in 1995.
Ziegler Thrift Trading, Inc.: Headquartered in Minneapolis, this subsidiary
is Minnesota's oldest discount brokerage firm. In addition to the
headquarters and downtown skyway office, ZTT has three branch offices in St.
Paul, two of which are located in lobbies of a major financial institution,
and two branch offices in the western Chicago suburbs of Naperville and
Westchester. Investors use ZTT to trade stocks, mutual funds, bonds and
options, with a commission savings of up to 70% of commissions charged by
full commission firms. ZTT provides a wide range of services to its
customers, including a dividend reinvestment program, automated bank
settlement, free safekeeping, cashless stock option services, and investment
consulting. Net income was $824,000 in 1996 compared to $677,000 in 1995.
Ziegler Asset Management, Inc.: ZAMI is the investment adviser or money
management entity in the Ziegler family of companies. Entering the industry
in mid-1991, ZAMI has shown rapid growth, from $48,000,000 in assets under
management in 1991 to $900,000,000 in assets under management at the end of
1996. Asset growth continues in two primary areas: equity and balanced
portfolios. The equity management style uses a quality growth strategy for
individuals, foundations, endowments and 401(k) plans. The fixed-income
management style focuses on quality short- and intermediate-term portfolios
covering a broad array of institutional clients. ZAMI is becoming a
profitable, market-driven company following its early period of rapid growth
and infrastructure development.
WRR Environmental Services Co., Inc.: ZCO's only non-financial business
operates a recycling, custom chemical processing, and chemical waste
treatment facility in Eau Claire, Wisconsin. At WRR, waste chemicals and
spent solvents are converted into recycled products which may again be used
by industrial concerns. In addition to hazardous waste management and
custom chemical processing, WRR also offers parts washer service through its
AIS Division, emergency response spill cleanup service, laboratory services
and off-site remediation cleanup services. Net income increased from
$918,000 in 1995 to $948,000 in 1996.
Ziegler Financing Corporation: The subsidiary's policy of limited interim
lending activities continued in 1996. Total revenues were $286,000 in 1996,
compared to $327,000 in 1995.
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of
December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash $ 6,012,977$ 4,226,163
Short-term investments 26,240,446 10,330,017
Bonds due and called as of January 1, 1997 and 1996,
respectively 10,843,295 3,472,297
Total cash and cash equivalents 43,096,718 18,028,477
Securities inventory 34,920,458 28,151,740
Accounts receivable -
Securities sales 8,434,547 3,434,916
Other 4,709,368 3,835,367
Investment in and receivables from affiliates 2,775,607 2,638,456
Investment in leases 7,507,948 8,818,566
Notes receivable 23,204,541 30,739,485
Land, buildings and equipment, at cost, net of
accumulated depreciation of $14,766,286 and
$14,258,223, respectively 7,165,857 6,959,937
Deferred income tax benefit 1,106,198 1,301,000
Other assets 8,235,257 11,201,610
Net assets from discontinued operations - 11,319,762
Total assets $141,156,499$126,429,316
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term notes payable $ 13,245,639$ 18,394,420
Payable to customers 6,478,455 2,567,092
Payable to broker-dealers 370,791 409,425
Accounts payable 2,629,014 3,114,864
Dividends payable 1,049,740 1,167,207
Accrued income taxes payable 6,361,958 643,170
Notes payable to banks 22,469,310 12,449,951
Bonds payable 25,011,498 27,403,990
Other liabilities and deferred items 9,320,894 8,037,199
Total liabilities 86,937,299 74,187,318
Commitments
Stockholders' equity -
Common stock, $1 par, 7,500,000 shares
authorized, 3,544,030 shares issued 3,544,030 3,544,030
Additional paid-in capital 5,962,229 5,968,737
Retained earnings 62,305,397 60,659,742
Treasury stock, at cost, 1,102,773 and
1,112,348 shares, respectively (17,062,908)(17,229,903)
Unearned compensation (529,548) (700,608)
Total stockholders' equity 54,219,200 52,241,998
Total liabilities and stockholders' equity $141,156,499$126,429,316
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Investment banking and commission
income $33,633,401 $30,642,641 $23,702,142
Investment management fees 2,842,490 2,399,034 2,183,194
Interest and dividends 4,379,040 3,731,837 3,740,248
Gross profit on chemical products
(29%, 28% and 29% of net sales,
respectively) 4,013,413 3,762,466 3,086,816
Insurance agency 970,422 951,085 985,320
Other 3,478,183 3,454,548 2,754,100
49,316,949 44,941,611 36,451,820
Expenses:
Employee compensation and benefits 24,842,807 21,518,372 17,813,515
Commissions and clearing fees 988,234 820,472 728,472
Communications 2,708,823 2,525,861 2,358,177
Occupancy and equipment 4,484,307 4,178,086 3,719,606
Promotional 2,304,034 1,855,067 1,994,853
Professional and regulatory 679,804 793,122 1,051,409
Interest 2,996,573 2,768,241 2,395,827
Other operating expenses 5,527,753 5,212,249 4,473,283
44,532,335 39,671,470 34,535,142
Income from continuing operations
before income taxes 4,784,614 5,270,141 1,916,678
Provision for income taxes 1,809,900 1,942,200 675,300
Income from continuing operations 2,974,714 3,327,941 1,241,378
Discontinued operations:
Income from operations of discontinued
leasing subsidiary (less applicable
income taxes of $306,000, $350,000 and
$442,000, respectively) 729,973 716,380 763,678
Loss on disposal of leasing subsidiary
(less applicable income taxes) (60,000) - -
Income from discontinued operations 669,973 716,380 763,678
Net income $ 3,644,687 $ 4,044,321 $ 2,005,056
Net income per share of common stock:
Continuing operations $1.24 $1.39 $ .52
Discontinued operations .28 .30 .32
Net income per share of common stock $1.52 $1.69 $ .84
Weighted average number of
common shares outstanding 2,399,491 2,391,968 2,388,586
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Unearned
Common Paid-In Retained Treasury Compen-
For the Years Ended Stock Capital Earnings Stock sation Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 $3,544,030 $5,882,390$58,483,066$(17,957,631)$ -$49,951,855
Net income - - 2,005,056 - - 2,005,056
Dividends declared ($ .72 per share) - -(1,753,546) - -(1,753,546)
Proceeds from exercise of stock options - (6,335) - 70,428 - 64,093
Cost of treasury stock purchased
(200 shares) - - - (3,400) - (3,400)
Restricted stock grants - 154,510 - 693,803 (848,313) -
Amortization of unearned compensation - - - - 115,964 115,964
BALANCE, December 31, 1994 3,544,030 6,030,56558,734,576 (17,196,800) (732,349)50,380,022
Net income - - 4,044,321 - - 4,044,321
Dividends declared ($ .87 per share) - -(2,119,155) - -(2,119,155)
Proceeds from exercise of stock options - (32,613) - 143,170 - 110,557
Cost of treasury stock purchased
(24,241 shares) - - - (374,475) - (374,475)
Restricted stock grants - (29,215) - 198,202 (168,987) -
Amortization of unearned compensation - - - - 200,728 200,728
BALANCE, December 31, 1995 3,544,030 5,968,73760,659,742 (17,229,903) (700,608)52,241,998
Net income - - 3,644,687 - - 3,644,687
Dividends declared ($ .82 per share) - -(1,999,032) - -(1,999,032)
Proceeds from exercise of stock options - (6,508) - 166,995 - 160,487
Amortization of unearned compensation - - - - 171,060 171,060
BALANCE, December 31, 1996 $3,544,030 $5,962,229$62,305,397$(17,062,908)$(529,548)$54,219,200
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,644,687$ 4,044,321$ 2,005,056
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 1,501,520 1,436,308 1,444,618
Provision for losses 99,191 152,341 149,550
Loss (gain) on sale of equipment (2,845) 32,771 (18,605)
Unrealized loss (gain) on securities
inventory 290,491 (437,351) 206,643
Compensation expense related to
restricted stock grants 171,060 200,728 115,964
Deferred income taxes 210,000 (142,000) 281,800
Pre-tax gain on sale of discontinued
operations (5,925,000) - -
Change in assets and liabilities:
Decrease (Increase) in -
Accounts receivable - security sales(4,999,631) 1,818,789 1,886,096
Accounts receivable - other (1,137,499) (635,647) (1,083,805)
Securities inventory (7,059,209) (4,911,305) (5,129,866)
Other assets 2,938,101 (1,154,358) 2,782,059
Discontinued operations - noncash
charges and working capital changes 274,560 (416,379) 386,322
Increase (Decrease) in -
Payable to customers and broker-dealers3,872,729(4,117,698) 4,178,849
Accounts payable (485,850) 480,682 424,939
Income taxes payable 5,703,590 643,170 (432,707)
Other liabilities 1,146,771 818,005 859,063
Net cash provided by (used in)
operating activities 242,666 (2,187,623) 8,055,976
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from -
Decrease in investment in affiliates - - 505,000
Proceeds received on sale of equipment 33,329 27,313 20,656
Principal payments received under leases3,191,407 4,115,461 3,855,482
Proceeds from sale of leased equipment 840,653 923,161 253,694
Payments received on notes receivable 52,806,868 54,380,159 51,748,930
Payments for -
Investment in and loans to affiliates - - (890,379)
Purchase of assets to be leased (2,887,898) (3,481,132) (3,816,884)
Issuance of new notes receivable (45,124,525)(58,433,036)(57,182,876)
Capital expenditures (1,386,809) (881,931) (1,834,890)
Acquisition of business assets - (1,868,058) -
Proceeds from sale of discontinued
operations 17,070,202 - -
Net cash provided by (used in)
investing activities 24,543,227 (5,218,063) (7,341,267)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from -
Issuance of short-term notes payable 80,329,000 94,452,000 103,861,000
Issuance of notes payable to banks 10,726,000 1,171,745 1,451,175
Exercise of employee stock options 160,487 110,557 64,092
Issuance of bonds payable 4,875,000 11,074,080 9,152,760
Payments for -
Principal payments of short-term notes
payable (85,590,000)(95,778,000)(103,363,000)
Principal payments of notes payable
to banks (706,640) (542,297) -
Repayments of bonds payable (7,395,000) (5,627,000) (4,982,000)
Purchase of treasury stock - (374,476) (3,400)
Cash dividends paid (2,116,499) (1,755,974) (2,570,237)
Net cash provided by financing
activities 282,348 2,730,635 3,610,390
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 25,068,241 (4,675,051) 4,325,099
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 18,028,477 22,703,528 18,378,429
CASH AND CASH EQUIVALENTS
AT END OF YEAR $43,096,718 $18,028,477$ 22,703,528
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the year $ 3,195,888 $ 2,629,771$ 2,186,614
Income taxes paid during the year $ 1,722,439 $ 662,460$ 1,032,828
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES:
Granting of restricted stock from
treasury stock $ - $ 168,987$ 848,313
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies -
Principles of consolidation -
The consolidated financial statements of The Ziegler Companies, Inc. and
subsidiaries (the "Company") include the accounts of The Ziegler
Companies, Inc. and its wholly-owned subsidiaries, B. C. Ziegler and
Company ("BCZ"), Ziegler Thrift Trading, Inc. ("ZTT"), Ziegler Financing
Corporation ("ZFC"), Ziegler Asset Management, Inc. ("ZAMI"), Ziegler
Collateralized Securities, Inc. ("ZCSI"), WRR Environmental Services
Co., Inc. ("WRR") and First Church Financing Corporation ("FCFC"). All
significant intercompany balances and transactions have been eliminated
in consolidation.
The Company, through its financial services subsidiaries, provides a
wide range of financial services for businesses, institutions and
individuals. WRR recycles, reclaims and disposes of industrial
chemicals and solvents and provides pollution abatement services.
The Company has a 50% interest in Ziegler Mortgage Securities, Inc. II
("ZMSI II"), an unconsolidated entity accounted for by the equity
method.
The Company has a 33% interest in Heartland Capital Company, LLC
("HCC"), a company which provides construction loans to low-income
housing developments. HCC is an unconsolidated entity accounted for by
the equity method.
Securities -
Security transactions are recorded on a settlement date basis which is
not materially different from a trade date basis. Investment banking
revenue is recorded net of directly related expenses.
Short-term investments consist of commercial paper, variable rate demand
notes, money market investments, equities and U.S. government and U.S.
government agency securities purchased under agreements to resell.
Securities purchased under agreements to resell are treated as financing
transactions and are carried at the amounts at which the securities will
be subsequently resold as specified in the respective agreements. Other
short-term investments are carried at approximate market. The reported
value of the securities inventory is carried at approximate market.
At December 31, 1996 and 1995, there were unrealized gains totaling
approximately $61,000 and $388,000, respectively, on short-term
investments and securities inventory.
Depreciation -
Depreciation is computed on buildings and equipment on a straight-line
basis. The buildings are depreciated over 20 to 40 years and equipment
over 3 to 10 years.
Income taxes -
The provision for income taxes is the estimated amount of income taxes
payable, both currently and in the future, on consolidated pre-tax
earnings for the year at current federal and state tax rates. Deferred
income taxes have been provided for those transactions which are
accounted for in different periods for financial reporting purposes than
for income tax purposes.
Net Income Per Share of Common Stock -
Net income per share of common stock is calculated based on the weighted
average number of common shares outstanding, including restricted common
stock, using the treasury stock method.
Cash Equivalents -
Cash equivalents are defined as short-term investments maturing within
three months of the date of purchase.
Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Reclassification -
Certain prior year amounts have been reclassified to conform with
current year presentation.
(2) Discontinued Operations -
During 1996, the Company disposed of its lease financing segment,
primarily Ziegler Leasing Corporation ("ZLC"). Effective December 20,
1996, the common stock of ZLC was sold to General Electric Capital
Corporation for cash of approximately $17,000,000. The sale resulted in
a loss of approximately $60,000 after taxes. Net assets of discontinued
operations at December 31, 1996 and 1995, have been segregated in the
Consolidated Balance Sheets. Summary operating results of discontinued
operations, excluding the above loss, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenues $9,412,000$10,484,000 $10,845,000
Income before income taxes$1,036,000$ 1,066,000 $ 1,206,000
Provision for income taxes$ 306,000$ 350,000 $ 442,000
Income from discontinued
operations $ 730,000$ 716,000 $ 764,000
</TABLE>
(3) Securities Inventory -
Securities inventory at December 31, 1996 and 1995, consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Municipal bond issues $18,619,321 $20,351,886
Corporate bond issues 358,571 2,230,918
Institutional bond issues 13,357,676 2,589,739
Preferred stock 1,768,185 1,263,826
Other 816,705 1,715,371
$34,920,458 $28,151,740
</TABLE>
Municipal bond issues consist primarily of revenue bonds issued by state
and local governmental authorities related to healthcare facilities.
Corporate bond issues consist primarily of bonds issued by for-profit
corporations. Institutional bond issues consist primarily of bonds
issued by not-for-profit hospitals, geriatric care facilities and
churches.
Included in municipal and institutional bond issues at December 31,
1996, are approximately $8,435,000 of bonds from one issuer in Virginia
and $11,482,000 of bonds from one issuer in Arizona. These bonds were
substantially sold subsequent to year-end. Included in municipal bond
issues at December 31, 1995, are approximately $12,580,000 of bonds from
one issuer in Texas. These bonds were sold in 1996.
(4) Investment in ZMSI II -
Condensed financial information of ZMSI II as of December 31, 1996 and
1995, and for the three-year period ended December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Mortgage Certificates, net of
unamortized discount of $2,795,809
and $3,425,237, respectively $ 98,182,510$116,345,952
Deferred bond issuance costs 2,758,864 3,378,116
Cash and cash equivalents, primarily
held by trustee 3,877,863 4,632,392
Accrued interest receivable 707,253 855,783
Total assets $105,526,490$125,212,243
Mortgage Certificate-Backed Bonds
payable $101,047,000$119,908,000
Accrued interest payable 2,948,545 3,716,958
Due to BCZ 10,945 67,285
Total liabilities 104,006,490 123,692,243
Stockholders' equity ($1,510,000 held
by the Company) 1,520,000 1,520,000
Total liabilities and
stockholders' equity $105,526,490$125,212,243
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Income, primarily interest$10,383,391$10,623,778$11,144,634
Expenses -
Interest expense 9,158,47 9,764,637 9,654,473
Amortization of bond
issuance costs 805,971 359,513 1,111,631
Management fee earned
by BCZ 216,365 349,925 158,801
General and administrative
expense 202,577 149,703 219,729
Total expenses 10,383,391 10,623,778 11,144,634
Net income $ - $ - $ -
</TABLE>
The Mortgage Certificate-Backed Bonds are collateralized by the Mortgage
Certificates, which consist of Government National Mortgage Association
certificates and Federal National Mortgage Association certificates.
(5) Ziegler Collateralized Securities, Inc. -
ZCSI holds an investment portfolio of financing leases. The terms of
these equipment contracts generally range from one to seven years.
Approximately 77% of the investment in leases is concentrated in the
healthcare industry. Investment in leases consisted of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Lease contracts receivable $ 8,423,851 $ 9,782,684
Estimated residual value 171,155 327,652
Deferred initial direct costs 113,516 185,994
Less -
Unearned income (1,148,906) (1,477,764)
Allowance for losses (51,668) -
Investment in leases $ 7,507,948 $ 8,818,566
</TABLE>
The following is a summary of scheduled payments to be received on the
lease contracts:
<TABLE>
<S> <C>
1997 $3,055,358
1998 2,593,952
1999 1,608,381
2000 1,026,162
2001 128,343
Thereafter 11,655
$8,423,851
</TABLE>
Condensed financial information of ZCSI as of December 31, 1996 and
1995, and for the three-year period ended December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Investment in leases $ 7,507,948 $ 8,818,566
Notes receivable 7,046,152 6,865,720
Other assets 2,773,088 2,614,081
Total assets $17,327,188 $18,298,367
Bonds payable $14,302,000 $15,070,000
Other liabilities, primarily a
subordinated note to Company 3,015,188 3,218,367
Total liabilities 17,317,188 18,288,367
Stockholder's equity 10,000 10,000
Total liabilities and
stockholder's equity $17,327,188 $18,298,367
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Lease income $ 870,055 $ 877,242 $ 993,566
Other income,
primarily interest 766,897 519,381 248,845
Total income 1,636,952 1,396,623 1,242,411
Interest expense 1,172,770 988,358 763,019
Amortization of bond
issuance costs 180,157 131,821 134,232
Administrative fees to ZLC 93,847 126,722 211,901
Amortization of initial
direct cost 114,764 133,621 124,471
Other expenses 75,414 16,101 8,788
Total expenses 1,636,952 1,396,623 1,242,411
Net income $ - $ - $ -
</TABLE>
In accordance with a written agreement with ZLC, which provides
management and administrative services to ZCSI, management fees paid to
ZLC were limited to the amount which prevented ZCSI from incurring a
loss.
An analysis of each outstanding bond series as of December 31, 1996 and
for the year then ended is as follows:
<TABLE>
<CAPTION>
Collateral Lease/ Bond Other
Bonds Value Note Interest Related Excess
Series # Outstanding at Cost Income Expense Expensesof Income
<S> <C> <C> <C> <C> <C> <C>
2 $ 265,000 $ 303,136 $ 48,232 $ 28,843$ 8,140 $11,249
3 $ 98,000 $ 237,200 $ 45,894 $ 26,929$ 9,700 $ 9,265
4 $ 826,000 $ 938,666 $146,653 $ 83,196$ 23,135 $40,322
5 $2,952,000 $3,841,813 $405,005 $249,596$ 83,685 $71,724
6 $5,161,000 $5,820,841 $616,194 $406,804$120,368 $89,022
7 $5,000,000 $5,784,824 $313,834 $189,080$ 56,382 $68,372
</TABLE>
(6) Short-Term Notes Payable, Lines of Credit, Notes Payable to Banks and
Bonds Payable -
The Company finances the operations of certain subsidiaries by issuing
commercial paper (short-term notes payable). During 1996, 1995 and
1994, it had average outstanding balances of approximately $16,333,000,
$19,882,000 and $20,856,000, respectively. Maximum borrowings based on
month-end outstanding balances for those same years were approximately
$18,597,000, $21,590,000 and $21,707,000, respectively. During 1996,
1995 and 1994, the weighted average interest rates incurred were 6.3%,
6.8%, and 4.8%, respectively, based on month-end outstanding balances.
The average discount rates on short-term notes payable outstanding as of
December 31, 1996 and 1995, were 6.22% and 6.75%, respectively.
The Company had lines of credit as of December 31, 1996 and 1995,
totaling $28,000,000 and $26,000,000, respectively. In accordance with
normal banking practice, these lines may be withdrawn at the discretion
of the lenders. In connection with certain of these bank lines, the
Company is required to maintain, as compensating balances, average
collected funds, which at December 31, 1996 and 1995, approximated
$380,000. There are no legal restrictions on the withdrawal of these
funds. Interest expense incurred in connection with borrowings against
its lines of credit was not material in 1996, 1995 or 1994. One of the
bank lines for $3,000,000 is shared with the family of mutual funds
sponsored by BCZ. All borrowings under this line of credit by the funds
are guaranteed by BCZ. The family of mutual funds had no borrowings
outstanding at December 31, 1996 or 1995.
BCZ periodically obtains short-term borrowings for specific
underwritings under broker loan facilities at the market rate of
interest to broker-dealers, payable on demand and fully collateralized
by the securities held in inventory. Such amounts are generally
outstanding for periods of less than two weeks and total interest
expense in connection with such borrowings was not material in 1996,
1995 or 1994.
BCZ serves as the remarketing agent on certain variable-rate municipal
bonds that can be tendered back to the respective issuers, generally
upon seven days advance notice, by the holders. To assist it in
carrying out its remarketing duties, BCZ has obtained $125,000,000 of
borrowing capacity to allow it to finance the purchase of tendered bonds
it elects to purchase into its own inventory. This loan facility is
restricted to financing only variable-rate, municipal bonds and each
financing must be approved by the lender, in advance. The financings
are done at the greater of i) the lender's prime rate less one-quarter
percent, or ii) the federal funds borrowing rate plus one percent, are
payable on demand and are fully collateralized by the variable-rate,
municipal bonds. Such amounts are generally outstanding for periods of
less than two weeks and total interest expense in connection with such
borrowings was not material in either 1996 or 1995. There were no such
borrowings outstanding at December 31, 1996 or 1995.
Notes payable to banks consisted of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revolving credit agreement for the lesser
of $500,000 or 60% of qualified accounts
receivable; bearing interest at prime
plus .5%; agreement terminates May 30,
1997; collateralized by accounts
receivable of WRR $ 500,000 $ -
Secured promissory note; bearing interest
at 8%; interest-only payments due
monthly; principal payable in six equal
monthly payments of $116,624 commencing
May, 1996; collateralized by inventory - 699,746
Secured promissory note; bearing interest
at 8%; due in monthly principal and
interest installments of approximately
$2,900 through September, 2002 with a
final payment of approximately $286,000
due October, 2002; collateralized by
land and buildings 341,310 348,205
Borrowings under secured broker loan
facilities 10,000,000 -
Borrowings under unsecured lines of
credit 11,628,000 11,402,000
$22,469,310 $12,449,951
</TABLE>
The revolving credit agreement contains several financial covenants, one
of which was not met during 1996. The Company has obtained a letter
from the bank waiving compliance with that covenant in 1996.
Bonds payable at December 31, 1996 and 1995, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
First Church Financing Corporation
Mortgage-Backed Bonds:
Series 1 - due March, 2008;
interest at 8.25% $ 2,883,000 $ 3,479,000
Series 2 - due August, 2009;
interest at 8.75% 3,345,000 4,195,000
Series 3 - due December, 2010;
interest at 8.00% 4,077,000 4,223,000
Waste Research and Reclamation Co., Inc.,
Small Business Pollution Control Revenue
Bonds, due in monthly principal and
interest installments of approximately
$6,000, through December 1, 2004, bearing
interest at 7.5% 404,498 436,990
Ziegler Collateralized Securities, Inc.,
Collateralized Bonds; collateralized by
equipment leases and other financing
agreements; guaranteed by The Ziegler
Companies, Inc.:
Series 1 - due serially through
June, 1996; interest ranging from
6.00% to 7.75% - 217,000
Series 2 - due serially through
July, 1997; interest ranging from
5.00% to 7.00% 265,000 902,000
Series 3 - due serially through
June, 1998; interest ranging from
5.00% to 6.75% 98,000 850,000
Series 4 - due serially through
December, 1998; interest ranging from
4.75% to 6.50% 826,000 1,701,000
Series 5 - due serially through
October, 2001; interest ranging from
6.25% to 7.75% 2,952,000 4,200,000
Series 6 - due serially through
March, 2001; interest ranging from
6.00% to 7.00% 5,161,000 7,200,000
Series 7 - due serially through
November, 2000 interest ranging from
6.00% to 7.00% 5,000,000 -
$25,011,498 $27,403,990
</TABLE>
Annual amounts due on notes payable to banks and bonds payable for the
next five years are:
<TABLE>
<CAPTION>
<S> <C>
1997 $27,314,119
1998 4,119,793
1999 3,069,523
2000 1,973,313
2001 236,169
Thereafter 10,767,891
$47,480,808
</TABLE>
(7) Related Party Transactions -
BCZ sponsors the Principal Preservation Portfolios, Inc. family of
mutual funds. Certain BCZ officers and directors also serve as officers
or directors of the funds. BCZ performs investment advisory services,
transfer agency services, depository services and administrative
services for the funds. ZAMI also provides investment advisory services
to the funds. Fees for services earned from the funds approximated
$2,360,000, $2,253,000 and $2,009,000 in 1996, 1995 and 1994,
respectively.
BCZ serves as Manager of ZMSI II pursuant to a written agreement. BCZ
also advances funds to ZMSI II and owns $1,500,000 of $9 non-cumulative,
non-voting preferred stock in ZMSI II. See Note 4 for the ZMSI II
intercompany balances with The Ziegler Companies, Inc. and BCZ for the
years ended December 31, 1996 and 1995.
(8) Retirement Plans -
The Company has contributory profit sharing plans for substantially all
full-time employees. BCZ and ZTT have plans which provide for a
guaranteed company match equal to 50% of employee contributions and a
discretionary annual company contribution up to 6% of defined
compensation for each year. The annual company contributions are at the
discretion of the boards of directors. WRR has a plan that provides a
company match equal to 100% of employee contributions up to a maximum
match of 1.43% of defined compensation. WRR also provides a company
contribution equal to 3.88% of defined compensation. Retirement plan
expense of the Company and subsidiaries was $1,281,000, $1,159,000 and
$820,000 in 1996, 1995 and 1994, respectively.
(9) Provision for Income Taxes -
The provision for income taxes for the years ended December 31, 1996,
1995 and 1994, consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current federal $1,276,600 $1,611,600 $280,600
Current state 323,300 472,600 112,900
Deferred provision
(benefit) 210,000 (142,000) 281,800
Total $1,809,900 $1,942,200 $675,300
</TABLE>
The following are reconciliations of the statutory federal income tax
rates for 1996, 1995 and 1994 to the effective income tax rates:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory Federal income
tax rate 34.0% 34.0% 34.0%
State taxes on income,
net of related Federal
income tax benefit 5.2% 5.2% 5.2%
Federal tax-exempt interest
income (5.6%) (2.9%) (8.1%)
Additional taxes provided
(used) 2.5% (.9%) (.5%)
Other, net 1.7% 1.5% 4.6%
Effective income tax rate 37.8% 36.9% 35.2%
</TABLE>
The tax effects of temporary differences that give rise to significant
elements of the deferred tax assets and deferred tax liabilities at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Accrued loss contingencies $ (288,970) $ (273,530)
Allowance for uncollectible
accounts (282,398) (627,404)
Compensation (443,593) (364,197)
Other (307,818) (297,181)
Total deferred tax assets (1,322,779) (1,562,312)
Deferred tax liabilities:
Fixed assets (primarily due to
depreciation) 68,124 72,055
Other 148,457 189,257
Total deferred tax liabilities 216,581 261,312
Net deferred tax assets $1,106,198 $1,301,000
</TABLE>
(10)Other Assets -
In 1993, the Company entered into a loan for $4,610,000 with an
organization which was experiencing difficulties making required debt
service payments on an outstanding bond issue underwritten by BCZ. The
loan was due on demand, was interest free and required weekly principal
payments totaling $7,000. The loan proceeds were used to redeem the
organization's outstanding bond issue in full. The loan was secured by
first mortgages on the underlying real estate. The loan was recorded at
cost, net of an allowance for possible losses, totaling approximately
$2,991,000 at December 31, 1995 and is included in Other Assets on the
Consolidated Balance Sheet. This loan was paid in full by the
organization during 1996.
(11)Preferred Stock -
The Company is authorized to issue 500,000 shares of preferred stock, $1
par value, which is undesignated as to series.
(12)Stock-Based Compensation Plans -
The Company has established the 1993 Employees' Stock Incentive Plan
(the "1993 Plan") for certain officers and key employees. Stock
options, stock appreciation rights and restricted stock may be granted
under the 1993 Plan. A total of 200,000 shares are issuable under the
1993 Plan. The Company also established the 1989 Employees' Stock
Purchase Plan (the "1989 Plan") for substantially all full-time
employees. Options to purchase stock may be granted under the 1989
Plan. A total of 150,000 shares are issuable under the 1989 Plan.
Under both the 1993 Plan and the 1989 Plan, options or shares granted
under either plan that expire, terminate or are canceled are again
available for future granting. The Company accounts for these Plans
under APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
which uses the intrinsic value method. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
which establishes a fair-value based method of accounting for stock
options and similar awards, allows the Company to continue to use the
intrinsic value method under APB Opinion No. 25. The effect of using
the fair-value based method is not significant.
On December 29, 1993, the Board of Directors granted options to purchase
54,500 shares of Company stock under the 1993 Plan. The options are
exercisable through December 28, 2003 at a price of $16.625 per share.
Options for a total of 4,000 shares were exercised during 1996 and none
were exercised in 1995 or 1994. A total of 2,000 options were forfeited
in 1995. There were no forfeitures in 1996 or 1994. A total of 48,500
shares remain outstanding at December 31, 1996 and are currently
exercisable.
On January 26, 1994, the Company issued an aggregate of 49,000 shares of
restricted common stock of the Company to certain key employees under
the 1993 Plan. Each employee's ownership of shares is subject to full
or partial forfeiture in accordance with a vesting schedule in the event
that the employee's employment with the Company terminates for any
reason before January 26, 2003. All shares remain nonvested at December
31, 1996. The market value of the restricted stock, when issued, was
$17.3125 per share. The total value at issuance is being amortized and
recorded as compensation over the period of vesting. Total compensation
cost recognized in income for the January 26, 1994, issue of restricted
stock was $127,000 in both 1996 and 1995 and $116,000 in 1994. The
shares are considered as outstanding, but may not be transferred by the
recipients until vested.
On January 27, 1995, the Company issued an aggregate of 11,313 shares of
restricted common stock of the Company to certain key employees under
the 1993 Plan. Each employee's ownership of shares is subject to full
or partial forfeiture in accordance with a vesting schedule in the event
that the employee's employment with the Company terminates for any
reason before January 27, 2000. A total of 2,183 shares vested in 1996
and are no longer restricted. In 1995, 401 of these shares were
forfeited. The market value of the restricted stock, when issued, was
$14.9375 per share. The total value at issuance is being amortized and
recorded as compensation over the period of vesting. Total compensation
cost recognized in income for the January 27, 1995, issue of restricted
stock was $74,000 in 1996 and $68,000 in 1995. The shares are
considered as outstanding, but may not be transferred by the recipients
until vested. There are a total of 8,729 nonvested shares at December
31, 1996.
On May 1, 1993, the Board of Directors granted options to purchase
80,960 shares under the 1989 Plan. The May 1, 1993 options still
outstanding expired on April 30, 1995. On May 1, 1995, the Board of
Directors granted options to purchase 104,200 shares.
A summary of activity relating to the common stock options under the
1989 Plan is presented in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
(Number of Shares)
<S> <C> <C> <C>
Outstanding at beginning of year 97,015 71,387 77,882
Exercised (3,875) (7,467) (3,535)
Forfeited (9,670) (7,270) (2,960)
Expired - (63,835) -
Granted - 104,200 -
Outstanding at end of year 83,470 97,015 71,387
</TABLE>
All outstanding options are currently exercisable through April 30,
1997, at 85% of the market value on the date of exercise. The shares
were exercised at prices averaging $15.67 per share in 1996, $13.38 per
share during 1995, and $14.65 per share in 1994. A total of 32,795
shares have been purchased since the inception of the 1989 Plan. Under
the 1989 Plan, 33,735 shares are available for future granting at 85% of
the market value on the date of exercise.
The effect of outstanding stock options on net income per share is not
significant.
(13)Net Capital Requirements and Customer Reserve Accounts -
As registered broker-dealers, BCZ and ZTT are subject to the
requirements of Rule 15c3-1 (the "net capital rule") under the
Securities Exchange Act of 1934. The basic concept of the rule is
liquidity, requiring a broker-dealer to have sufficient liquid assets at
all times to cover current indebtedness. Specifically, the rule
prohibits a broker-dealer from permitting "aggregate indebtedness" to
exceed 15 times "net capital" (15 to 1) as those terms are defined.
Approximate net capital data as of December 31, 1996, is as follows:
<TABLE>
<CAPTION>
BCZ ZTT
<S> <C> <C>
Aggregate indebtedness $24,046,000 $3,491,000
Net capital $16,608,000 $1,571,000
Ratio of aggregate indebtedness
to net capital 1.45 to 1 2.2 to 1
Required net capital $ 1,603,000 $ 250,000
</TABLE>
In accordance with Securities and Exchange Commission Rule 15c3-3, BCZ
and ZTT maintain separate bank accounts for the exclusive benefit of
customers. The amounts maintained in these accounts are determined by
periodic computations required under the rule, which allows the
companies to maintain the computed amounts in cash or qualified
securities. As of December 31, 1996 and 1995, there were approximately
$4,473,000 and $4,937,000, respectively, in the customer reserve
accounts.
(14)Segment Information -
Information about the Company's operations by major industry segment is
as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Income (Loss) Total Depreciation
Revenues Before Taxes Assets Expense
<S> <C> <C> <C> <C>
Broker-dealer $41,168,130 $2,583,962 $ 74,713,756 $ 694,077
Hazardous waste
management 4,130,346 1,507,940 7,343,046 450,826
Real estate
financing 199,303 20,550 2,366,665 -
Corporate and
other 3,819,170 672,162 56,733,032 -
Consolidated $49,316,949 $4,784,614 $141,156,499 $1,144,903
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
Income Total Depreciation
Revenues Before Taxes Assets Expense
<S> <C> <C> <C> <C>
Broker-dealer $37,679,955 $3,625,194 $ 54,259,872$ 684,541
Hazardous waste
management 3,845,915 1,416,689 6,783,467 409,174
Real estate
financing 295,117 122,420 4,438,944 -
Corporate and
other 3,120,624 105,838 60,947,033 -
Consolidated $44,941,611 $5,270,141 $126,429,316 $1,093,715
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
Income Total Depreciation
Revenues Before Taxes Assets Expense
<S> <C> <C> <C> <C>
Broker-dealer $30,324,226$ 686,115 $ 57,255,350$ 675,699
Hazardous waste
management 3,131,960 868,648 4,609,741 343,945
Real estate
financing 328,164 (69,471) 5,173,727 -
Corporate and
other 2,667,470 431,386 54,063,382 -
Consolidated $36,451,820 $1,916,678 $121,102,200 $1,019,644
</TABLE>
The industry segments above are each a separate company or group of
companies; therefore, all expenses and assets can be directly identified
with segment revenues. Intercompany revenues consist of interest income
earned by the Company on loans to subsidiaries and dividends from
subsidiaries. Substantially all other revenues are derived from
transactions with unaffiliated parties in the United States.
(15) Commitments and Contingent Liabilities -
In the normal course of business, BCZ enters into firm underwriting
commitments for the purchase of debt issues. These commitments require
BCZ to purchase debt issues at a specified price. To manage the
off-balance sheet credit and market risk exposure related to these
commitments, BCZ pre-sells the issues to its customers. BCZ had no such
commitments outstanding at December 31, 1996 or 1995.
The Company leases office space under noncancellable lease agreements
which allow for annual adjustments to the minimum lease payments to
reflect increases in actual operating costs. BCZ leases computer
equipment under noncancellable agreements. Minimum lease payments for
office space and computer equipment which extend through 2003, are:
<TABLE>
<S> <C>
1997 $1,672,000
1998 1,100,000
1999 992,000
2000 883,000
2001 807,000
2002 and after 302,000
</TABLE>
Rental expense for 1996, 1995 and 1994 was $2,382,000, $2,293,000 and
$1,912,000, respectively.
The Company anticipates that it will be made a party to a contemplated
class action lawsuit arising from the default of a bond issue, totaling
$11,680,000, BCZ previously underwrote. At this time, however, no
lawsuit has been filed. The Company denies any wrongdoing or liability
related to this matter. In the event that a lawsuit is filed against
the Company, the Company will assert defenses to the claims, and the
lawsuit will be vigorously defended. The amount of any liabilities or
other costs that may be incurred in connection with this matter
currently cannot be reasonably estimated but could be material. The
Company has not accrued for any potential losses related to this matter.
WRR is subject to a consent order of the Wisconsin Department of Natural
Resources for further testing and surface water control, and to remedial
action under the federal Research, Conservation and Recovery Act
("RCRA"), of contaminants in ground water underneath the plant site.
WRR has disposed of wastes at other recycling sites which may be added
to the National Priority List, and may be required to share in the cost
of the clean-up of these sites. As of December 31, 1996, WRR had been
identified as a potentially responsible party ("PRP") in connection with
three sites. For the first site, a reserve of $128,000 was established
based on WRR's review of documents, its knowledge of the site and its
experience with the clean-up of similar sites. No engineering studies
have yet been done to arrive at a more reliable cost estimate. Payments
on this site are expected to occur over the next five years. The
estimated cost of cleaning up a second site is between $10,000,000 and
$30,000,000 based on preliminary estimates from various consulting
firms. Based on the identification of other PRPs and the present
interim allocation schedule, WRR would be responsible for costs ranging
from $500,000 to $1,800,000. In accordance with Financial Accounting
Standards Board Interpretation No. 14, "Reasonable Estimation of the
Amount of a Loss," WRR established a reserve of $500,000 to cover its
share of the clean-up costs of this second site. Payments on this site
are expected to occur over the next five years. In June 1994, WRR was
notified by the United States Environmental Protection Agency ("EPA")
that WRR is a PRP at a third site to which WRR delivered materials from
1982 to 1985. WRR's review of the remediation investigation and
feasibility study, and other materials prepared by EPA on account of
this site, indicates that WRR has valid defenses to any action by EPA to
collect remediation costs. The EPA's estimate of WRR's proportionate
share of anticipated remediation costs at this third site approximates
$200,000. No reserve has been established for this third site.
While WRR is jointly and severally liable on all three sites, management
is not aware of circumstances which could lead to non-performance by the
other PRP's when viewed as a group. No potential insurance recoveries
have been accrued in the financial statements. The reserve for accrued
loss contingencies totaled $742,702 and $716,914 at December 31, 1996
and 1995, respectively, which covers the costs related to the specific
sites identified above and other ongoing environmental matters. It is
reasonably possible that WRR's estimates of its liability related to the
clean-up of these sites may change materially in the near term.
Beginning in 1997, the Company will be required to adopt Statement of
Position 96-1, "Environmental Remediation Liabilities" ("SOP 96-1").
SOP 96-1 provides authoritative guidance on the accrual of environmental
remediation liabilities. The implementation of SOP 96-1 is not expected
to have a material impact on the Company's financial statements.
(16) Fair Value of Financial Instruments -
Financial Accounting Standard No. 107, "Disclosure about Fair Value of
Financial Instruments" requires that the Company disclose the fair value
of financial instruments for both assets and liabilities for which it is
practicable to estimate that value. Where readily available, quoted
market prices were utilized by the Company. If quoted market prices
were not available, fair values were based on estimates using present
value or other valuation techniques. These techniques were
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. The calculated fair value
estimates, therefore, cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. Statement No. 107 excludes
certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The book values, estimated fair values and the methods and assumptions
used to estimate the fair value of the financial instruments of the
Company are reflected below as of December 31, 1996 and 1995.
Cash and cash equivalents -
The carrying values of cash and cash equivalents approximate the fair
values for those amounts.
Securities inventory -
The carrying value of securities inventory approximates the fair value
based on quoted market prices. See Note 1 for additional information.
Notes receivable -
The carrying value of notes receivable approximates the fair value based
on a discounted cash flow analysis. The discount rates were based on
the Company's current loan rates.
Short-term notes payable -
The carrying value of short-term notes payable approximates the fair
value which was determined based on current market rates offered on
notes with similar terms and maturities.
Notes payable to banks -
The carrying value of notes payable to banks approximates the fair value
which was determined based on current market rates offered on notes with
similar terms and maturities.
Bonds payable -
The carrying value of bonds payable approximates the fair value which
was determined based on current market rates offered on bonds with
similar terms and maturities.
<PAGE>
Report of Independent Public Accountants
To the Stockholders and the Board of Directors of
The Ziegler Companies, Inc.:
We have audited the accompanying consolidated balance sheets of THE ZIEGLER
COMPANIES, INC. (a Wisconsin corporation) and subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Ziegler Companies,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 26, 1997.
<PAGE>
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Results of Operations (Comparison of Years 1996, 1995 and 1994)
The "Company," consisting of The Ziegler Companies, Inc. and its
subsidiaries, is a financial services company whose predominant activity is
investment banking, primarily the underwriting and marketing of debt
securities for the healthcare industry, nonprofit senior living providers,
and for churches and private schools. The Company's other financial service
activities include full-service and reduced-commission brokerage services,
investment management and advisory services, interim lending to investment
banking clients, and Federal Housing Administration loan origination in
conjunction with investment banking activities. The nonfinancial services
of the Company are pollution abatement, as well as the recycling, reclaiming
and disposing of chemical wastes. The Company has discontinued its
operations in the area of equipment leasing services to the healthcare
industry and commercial/industrial customers as the result of the sale of
its leasing subsidiary, Ziegler Leasing Corporation, on December 20, 1996.
Total revenues from continuing operations of the Company in 1996 were
$49,317,000 compared to $44,942,000 in 1995, an increase of $4,375,000 or
10%. The revenues from continuing operations for 1995 reflected an increase
of $8,490,000 or 23% over revenues from continuing operations of $36,452,000
in 1994. Expenses of continuing operations of the Company in 1996 were
$44,532,000 compared to $39,672,000 in 1995, an increase of $4,860,000 or
12%. The expenses of continuing operations in 1995 reflected an increase of
$5,137,000 or 15% over expenses of continuing operations of $34,535,000 in
1994. The provisions for income taxes related to continuing operations were
$1,810,000 in 1996, $1,942,000 in 1995, and $675,000 in 1994. The statutory
federal income tax rates applicable to the Company were 34% in each of the
three years. Net income from continuing operations of the Company in 1996
was $2,975,000 compared to $3,328,000 in 1995, a decrease of $353,000 or
11%. The net income from continuing operations in 1995 reflected an
increase of $2,087,000 or 168% from net income from continuing operations of
$1,241,000 in 1994. Net income from discontinued operations, which is net
of applicable income taxes, was $670,000 in 1996, $716,000 in 1995, and
$764,000 in 1994. Earnings per share from continuing operations were $1.24,
$1.39, and $ .52 in 1996, 1995, and 1994, respectively. Total earnings per
share from continuing and discontinued operations were $1.52, $1.69, and
$ .84 in 1996, 1995, and 1994, respectively. Weighted average shares
outstanding did not change significantly during the three-year period. The
changes in revenues, operating expenses, and net income from continuing
operations were primarily a reflection of factors related to investment
banking and broker-dealer activities, as well as changes in the Company's
nonfinancial services company, WRR Environmental Services Co., Inc. These
factors, as well as the impact of other factors, are explained more fully in
the information that follows.
Investment Banking and Broker-Dealer Activities
B. C. Ziegler and Company ("BCZCO"), the investment banking and broker-
dealer subsidiary of the Company, had total revenues of $33,278,000 in 1996
compared to $32,039,000 in 1995, an increase of $1,239,000 or 4%. Revenues
from investment banking and commission income increased $1,987,000 or 7% to
$28,715,000. An increase in commissions from mutual funds sales was the
reason for most of the increase. Revenues from underwriting activities and
related fees also contributed to the increase. A slight decline in trading
profits included in investment banking and commission income offset the
above increases. Other revenues decreased $906,000 primarily due to a
reduction in management fee income due to the transfer of investment
advisory business to Ziegler Asset Management, Inc., an affiliated entity.
Interest and dividend income increased $139,000 while insurance agency
revenues did not change significantly.
Total expenses of BCZCO were $32,387,000 in 1996 compared to $29,592,000 in
1995, an increase of $2,795,000 or 9%. Employee compensation and benefits
increased $2,387,000 in 1996 to $21,327,000. The increase was primarily due
to incentive and commission-based compensation expense associated with
higher sales volumes and a changed commission structure, as well as an
increase in investment banking-related personnel and office locations.
Promotional expenses increased $299,000 as overall marketing activities
increased. Occupancy and equipment expenses increased $193,000 as the
result of increased office locations and expenses for technology. The
increases in total expenses in 1996 offset the increase in total revenues
resulting in a decline of $859,000 in net income to $696,000 in 1996 from
$1,555,000 in 1995, a decrease of 55%.
BCZCO total revenues in 1995 of $32,039,000 increased $6,252,000 or 24% from
revenues of $25,787,000 in 1994. Revenues from investment banking and
commission income increased $6,122,000 or 30% to $26,728,000. Underwriting
and related fee revenues contributed $5,314,000 to these increases after
being affected by the industry-wide downturn in underwriting volumes that
occurred in 1994. Trading profits, included in investment banking and
commission income, increased $900,000 in 1995 primarily due to the addition
of the preferred stock trading division in December 1994. Commission income
from nonunderwritten product sales declined only slightly between 1995 and
1994. Fee income included in other revenues increased $384,000 primarily
due to an increase in investment advisory and management fees. Interest
income declined $220,000 due to a decrease in interest rates and insurance
agency revenues declined slightly.
BCZCO total expenses in 1995 of $29,592,000 increased $3,693,000 or 14% from
expenses of $25,899,000 in 1994. Employee compensation and benefits
increased $3,183,000 in 1995 to $18,940,000. The increase was primarily due
to incentive and commission-based compensation associated with the increase
in sales volumes in 1995 over 1994 and an increase in sales and sales
support personnel. Occupancy and equipment costs increased $389,000 due to
an increase in technology-related expenses and an overall increase in office
lease and equipment expenses. Other expenses increased $210,000 as the
result of increases in overall administration expenses. Promotional
expenses decreased $211,000 as the result of the implementation of a more
targeted approach to marketing activities. Other expenses did not vary
significantly and generally increased with inflation. The recovery in
revenues in 1995 more than offset increased expenses and resulted in net
income of $1,555,000 in 1995 compared to $3,000 in 1994.
Ziegler Thrift Trading, Inc. ("ZTT"), the reduced-commission brokerage
service of the Company, had total revenues in 1996 of $5,440,000 compared to
$4,434,000 in 1995, an increase of $1,006,000 or 23%. Commission income,
the primary source of revenues, increased $944,000 to $4,968,000 in 1996
which is also a 23% increase. The increase in commission income is due to a
19% increase in trading volume and a 4% increase in average commissions
received on each trade. The balance of the increase in total revenues is
due to increases in fee-based income associated with handling, IRA and stock
option trading fees. Total expenses of ZTT in 1996 were $4,110,000 compared
to $3,341,000 in 1995, an increase of $769,000 or 23%. Employee
compensation and benefits increased $404,000 in 1996 to $2,222,000 primarily
as the result of added sales locations in Illinois and additional sales
support personnel. The balance of the increase in expenses is primarily due
to increased promotion and communication costs associated with added
advertising and added office locations, respectively. The resulting net
income in 1996 was $824,000 compared to $677,000 in 1995, an increase of
$147,000 or 22%.
ZTT total revenues in 1995 of $4,434,000 increased $960,000 or 28% from
revenues of $3,474,000 in 1994. Commission income increased $775,000 or 24%
to $4,024,000 in 1995. The increase in commission income was due to an 18%
increase in trading volume and a 5% increase in the average commission
earned per trade. Approximately $134,000 of 1995 commission income came
from the operations of a discount brokerage operation in Illinois which was
purchased by ZTT in September 1995. The purchase price was approximately
$507,000. The assets acquired included all customer accounts serviced by
two sales offices in Illinois. A $132,000 increase in fees earned on ZTT's
stock option financing program and increases in other fee-based services
also contributed to the increased revenues in 1995. ZTT total expenses in
1995 of $3,341,000 increased $491,000 or 17% over expenses of $2,850,000 in
1994. Employee compensation and benefits increased $378,000 or 26% to
$1,818,000. The addition of the Illinois office locations and increases in
commission-based compensation expense are the primary reasons for the
increase in employee compensation and benefits. The balance of the
increased expenses is primarily due to increased advertising included in
promotional expense and increased interest expense associated with the stock
option financing program. The increase in both revenues and expenses
resulted in net income of $677,000 in 1995 compared to $382,000 in 1994, an
increase of $295,000 or 77%.
Ziegler Asset Management, Inc. ("ZAMI"), the money management services
subsidiary of the Company, had total revenues of $2,888,000 in 1996 compared
to $1,479,000 in 1995, an increase of $1,409,000 or 95%. This increase is
primarily due to increases in management fee income associated with the
transfer of investment advisory services to ZAMI from BCZCO, which was a
significant factor in the increase of assets under management to
approximately $900,000,000 at the end of 1996 from $587,000,000 at the end
of 1995. Total expenses of ZAMI were $2,524,000 in 1996 compared to
$1,393,000 in 1995, an increase of $1,131,000 or 81%. Employee compensation
and benefits increased $422,000 or 51% to $1,249,000 due to the additional
personnel associated with the increased level of assets under management.
Other expenses also increased $424,000 due to the reimbursement of
management fees by ZAMI under expense reimbursement agreements with money
market and mutual funds whose assets ZAMI manages, some of which relates to
the transfer of services noted earlier. The balance of the increase in
expenses is primarily related to increased promotional expenses and a
$145,000 increase in fees paid to sub-advisors in 1996. The resulting net
income for ZAMI in 1996 was $202,000 compared to $48,000 in 1995, an
increase of $154,000.
ZAMI total revenues in 1995 of $1,479,000 increased $96,000 or 7% over
revenues of $1,383,000 in 1994. An increase in assets under management to
$587,000,000 is the primary reason for the increase in revenues. ZAMI total
expenses in 1995 of $1,393,000 increased $184,000 or 15% over expenses of
$1,209,000 in 1995. The primary reasons for the increase in expenses are
the increase of $347,000 associated primarily with the adding of a new
office devoted to fixed-income management services in mid-1994, and $155,000
of expenses associated with the reimbursement of management fees.
Offsetting these increases is a reduction in fees paid to subadvisors
approximating $252,000 and a reduction in other salaries and wages. Net
income for ZAMI was $48,000 in 1995 compared to $97,000 in 1994, a decrease
of $49,000 or 51%.
Other Services and Activities
WRR Environmental Services Co., Inc. ("WRR") is in the business of providing
pollution abatement services and recycling, reclaiming and disposing of
chemical wastes. WRR is also engaged in the sale, installation and
servicing of truck equipment through a wholly-owned subsidiary that
purchased the land, buildings, equipment and certain inventories of a
company located adjacent to WRR in October 1995. Total gross revenues in
1996 were $13,957,000 compared to $13,502,000 in 1995, an increase of
$455,000 or 3%. The increase in gross revenues is due to an increase in
truck servicing subsidiary revenues of $1,385,000 reflecting a full year of
operations. This increase is offset by a decrease in WRR revenues primarily
due to a reduction in remediation services. The total gross margin for WRR
and its subsidiary was $4,013,000 in 1996 compared to $3,762,000 in 1995, an
increase of $251,000 or 7%. The gross margin percentage in 1996 was 29%
compared to 28% in 1995. These increases are a reflection of the higher
sales volumes and a change in the mix of sales at WRR to higher margin
services. Total expenses of WRR in 1996 were $2,622,000 compared to
$2,429,000 in 1995, an increase of $193,000 or 8%. Expenses associated with
the truck servicing subsidiary increased $272,000 reflecting a full year of
operations. This increase was offset by a reduction in sales and marketing
expenses at WRR. The resulting net income for WRR in 1996 was $948,000
compared to $918,000 in 1995, an increase of $30,000 or 3%.
Total gross revenues were $13,502,000 in 1995 compared to $10,648,000 in
1994, an increase of $2,854,000 or 27%. WRR had increased revenues due
primarily to $799,000 of sales generated by the acquired business, an
increase of $1,391,000 in revenues from waste remediation services, and an
increase of $695,000 in revenues generated by waste disposal services. The
1995 sales mix resulted in a gross margin percentage of 28% in 1995 compared
to 29% in 1994. Total dollars of gross margin were $3,762,000 in 1995
compared to $3,087,000 in 1994, an increase of $675,000 or 22%. Total
expenses of WRR were $2,429,000 in 1995 compared to $2,218,000 in 1994, an
increase of $211,000 or 10%. The increase in expenses is due to personnel
and promotional costs associated with increased marketing and sales
activities, increased transportation costs associated with higher levels of
business activity, and increased expenses associated with tax compliance and
insurance audits. Net income for WRR was $918,000 in 1995 compared to
$529,000 in 1994, an increase of $389,000 or 74%.
Ziegler Financing Corporation ("ZFC") provides construction financing and
interim lending primarily to investment banking clients and is also
qualified to originate loans for the Federal Housing Administration (FHA).
Total revenues of ZFC in 1996 were $286,000 compared to $327,000 in 1995, a
decrease of $41,000 or 13%. The decrease is primarily due to a lower level
of lending activity and is reflected in a decreased level of interest
income. In 1994 and 1995, ZFC had accumulated loans for church construction
projects for sale to First Church Financing Corporation ("FCFC"), an
affiliated company. No such loans occurred in 1996. The decrease in
interest income was partially offset by $105,000 of income related to the
closing of an FHA mortgage in 1996. Total expenses of ZFC in 1996 were
$266,000 compared to $204,000 in 1995, an increase of $62,000 or 30%. The
increase is primarily related to the increased expenses associated with the
FHA mortgage origination activities. These expenses which included expenses
for employees, occupancy, equipment, and communication costs were $179,000
during 1996. This increase in administrative costs was offset by a decrease
in interest expense of $214,000 associated with the decrease in borrowing
costs related to a reduced church loan portfolio. Also contributing to the
difference in expenses is approximately $86,000 of a previously established
provision for losses transferred out of expenses. The resulting net income
for ZFC in 1996 was $12,000 compared to $74,000 in 1995, a decrease of
$62,000.
ZFC total revenues in 1995 of $327,000 decreased $37,000 or 10% from
revenues of $364,000 in 1994. A fluctuating level of loans associated with
the demand for interim lending is the reason behind the revenue decrease
between years. As noted above, in past years ZFC has accumulated loans for
church construction projects and sold them to FCFC. A portfolio of loans
was sold to FCFC in both 1995 and 1994. Total expenses of ZFC were $204,000
in 1995 compared to $433,000 in 1994, a decrease of $229,000 or 53%. The
decrease in expenses is due to a $186,000 difference in ZFC's provision for
losses and decreasing interest expense on borrowed funds. Also contributing
to the difference was a $100,000 provision for losses recorded in 1994
relating to an investment in two residual ownership interests totaling
$170,000, the values of which have been impaired. In 1995, approximately
$86,000 of a previously established provision for losses was transferred out
of expenses when the corresponding loan was sold to the Company. ZFC had
net income of $74,000 in 1995 compared to a net loss of $42,000 in 1994.
First Church Financing Corporation ("FCFC") was organized for the purpose of
issuing mortgage-backed bonds collateralized by first mortgages on church
buildings and properties. FCFC currently has three series of bonds
outstanding. The second and third series were issued in 1994 and 1995,
respectively. Revenues in FCFC consist primarily of interest income on
church loans. Total revenues in 1996 were $1,113,000 compared to $852,000
in 1995, an increase of $261,000 or 31%. The increase in revenues is due to
the interest income on the church loans supporting the third series of
bonds. The third series of bonds totaled $4,223,000; was issued in December
1995, and was outstanding for the full year in 1996 with only small
reductions for loan amortization. Expenses for FCFC in 1996 were $1,048,000
compared to $799,000 in 1995, an increase of $249,000 or 31%. The expenses,
which consist primarily of interest expense on bonds, increased in 1996 due
to the added interest expense on the bonds in the third series outstanding
for the entire year after their issue in December 1995. The resulting net
income for FCFC in 1996 was $40,000 compared to $32,000 in 1995, an increase
of $8,000 or 25%.
FCFC total revenues in 1995 of $852,000 increased $241,000 or 39% over
revenues of $611,000 in 1994. The increased revenues are directly related
to the timing of the bond issues and the interest received on the church
loans that are associated with the bond issues and are purchased by FCFC at
the time of issue of the bonds. Total expenses of FCFC were $799,000 in
1995 compared to $578,000 in 1994, an increase of $221,000 or 38%. Expenses
reflect primarily interest on the bonds outstanding and the increase is a
reflection of the timing of the bond issues and the amount of bonds
outstanding during all or part of each of the years. Net income for FCFC
was $32,000 in 1995 compared to $20,000 in 1994, an increase of $12,000 or
60%.
Ziegler Collateralized Securities, Inc. ("ZCSI") facilitated the financing
of equipment leases and sales by securitizing equipment leases or notes
supporting equipment leases or sales, and offering the resulting securities
to the public. ZCSI purchased the leases and notes from Ziegler Leasing
Corporation, which also acted as manager and lease servicer since ZCSI has
no employees. At December 31, 1996, ZCSI had six series of bonds
outstanding totaling $14,302,000, one of which was issued in May 1996 for
$5,000,000. ZCSI had revenues in 1996 of $1,637,000 compared to $1,397,000
in 1995, an increase of $240,000 or 17%. ZCSI revenues consist almost
entirely of leasing income and note interest income. The increase in
revenues is due to the purchase of leases and notes for the bond issue in
1996 and a bond issue of $7,200,000 in September 1995. Expenses of ZCSI
consist primarily of interest expense, amortized bond issue costs,
management and servicing fees and initial direct cost expense. Management
and servicing fees were paid to ZLC and are limited to an amount that would
prevent ZCSI from incurring a loss. Such fees were $94,000 in 1996 compared
to $127,000 in 1995. The parent company, The Ziegler Companies, Inc., will
assume the management and service responsibilities in 1997. Expenses
equaled revenues in both 1996 and 1995. Investment in leases and notes
receivable were $7,508,000 and $7,046,000, respectively, at December 31,
1996.
ZCSI revenues in 1995 of $1,397,000 increased $155,000 or 12% over revenues
of $1,242,000 in 1994. The increase in revenues is due to the purchase of
leases and notes for bond issues that occurred in 1995 and 1994. Expenses
equaled revenues in both 1995 and 1994. Management and servicing fees paid
to ZLC were $127,000 in 1995 and $212,000 in 1994. Investment in leases and
notes receivable were $8,819,000 and $6,866,000, respectively, at December
31, 1995.
The Ziegler Companies, Inc. ("ZCO") is the parent company of the
subsidiaries and also engages in limited investing and financing activities.
Total revenues from continuing operations of ZCO in 1996 were $1,169,000
compared to $991,000 in 1995, an increase of $178,000 or 18%. A $115,000
increase in interest income related to a credit facility established by ZCO
for a corporation that generates automobile loans for retail customers is
the primary reason for the increase in revenues. The balance outstanding on
this credit facility at December 31, 1996 was $3,330,000. The balance of
the increase in revenues is due to increased investment income and
increased income from an equity investment in a company that provides
construction loans to low-income housing developments. Total expenses of
ZCO were $554,000 in 1996 compared to $930,000 in 1995, a decrease of
$376,000 or 40%. The reversal of $336,000 of a previously established loss
reserve related to an interest free loan made in 1993 to a church
experiencing difficulties making required debt service payments on a bond
issue originally underwritten by BCZCO is the primary reason for the
decrease in expenses. The loan was repaid by the church in 1996. The
decrease in expenses caused by the loss reversal was partially offset by the
establishment of a general loss reserve for lease and note receivables in
ZCSI, formerly the responsibility of ZLC, an increase in interest expense
and additional expenses related to the sale of ZLC. The resulting net
income from continuing operations of ZCO in 1996 was $261,000 compared to
$33,000 in 1995.
Total ZCO revenues in 1995 of $991,000 increased $132,000 or 15% over
revenues of $859,000 in 1994. Revenues totaling $225,000 from the equity
investment in a company that provides construction loans to low-income
housing developments, combined with trading gains on company investments,
were the primary causes of the increased revenues. Offsetting these
increases was a $192,000 decrease in interest income related to the credit
facility established by the Company for a corporation that generates
automobile loans for retail customers. The balance outstanding on this
credit facility at December 31, 1995, was $3,828,000. ZCO expenses were
$930,000 in 1995 compared to $452,000 in 1994, an increase of $478,000 or
106%. A $120,000 increase in interest expense to support a higher level of
funds advanced during the year, combined with the transfer to the Company of
$336,000 of provision for losses associated with the purchase, at book
value, of a loan from ZFC, were the primary reasons for the increase. Net
income for the Company was $33,000 in 1995 compared to $263,000 in 1994.
Liquidity and Capital Resources
The Company's primary activities involve investment banking, retail and
institutional securities brokerage, other financial services and
environmental services. Capital expenditures for assets were relatively
insignificant during the year ended December 31, 1996. Land, buildings and
equipment, net of related depreciation and amortization, was 5% of total
Company assets.
The Company has a continuing requirement for cash to finance its activities.
A primary source of cash has been and continues to be the issuance of short-
term notes of the Company. These notes vary in maturities up to 270 days.
In 1996, a total of $80,329,000 of notes was issued and $85,590,000 was
repaid. In 1995, a total of $94,452,000 of notes was issued and $95,778,000
was repaid. In 1994, a total of $103,861,000 of notes was issued and
$103,363,000 was repaid. The total balance of short-term notes outstanding,
without regard to interest discounts, was $13,292,000 as of December 31,
1996, compared to $18,553,000 as of December 31, 1995, and $19,879,000 as of
December 31, 1994. This source of additional cash was used primarily to
finance leasing and lending activity. The discontinuation of leasing
activities may have an impact on the issuance of short-term notes; however,
short-term notes remain an important source of cash for lending activities
and for intercompany lending from the parent for short-term liquidity
purposes.
In 1993, ZFC entered into a loan for $4,610,000 with an organization which
was experiencing difficulties making required debt service payments on an
outstanding bond issue underwritten by BCZCO. The loan was due on demand,
was interest free and required weekly principal payments totaling $7,000.
The loan proceeds were used to redeem the organization's outstanding bond
issue in full. This loan was transferred to ZCO at book value in 1995 and
was paid in 1996. The loan is included in Other Assets on the 1995 balance
sheet.
ZCSI issued bonds to the public as a source of cash. During 1996, ZCSI
issued $5,000,000 of bonds to the public and redeemed $4,565,000 of bonds
which matured, and $1,203,000 of bonds which were called. During 1995, ZCSI
issued $7,200,000 of bonds to the public, and redeemed $4,335,000 of bonds
which matured, and $317,000 of bonds which were called. During 1994, ZCSI
issued $5,000,000 of bonds and redeemed $4,354,000 of bonds which matured.
Total bonds outstanding at December 31, 1996, 1995, and 1994 were
$14,302,000, $15,070,000, and $12,522,000, respectively. The bonds are due
serially from January 1997 to October 2001. The bonds were used to finance
the purchase of lease obligations and lease financing notes and will mature
in a pattern approximating the maturities of the lease obligations and lease
financing notes that serve as collateral.
FCFC issues bonds to the public as a source of cash. Mandatory redemption
on the bonds is made from principal payments received on the mortgage loans
which serve as collateral for the bonds. Principal payments on the mortgage
loans are received in regular installments over 15-year amortization
schedules through 2010. During 1996, FCFC did not issue any bonds to the
public and redeemed $1,592,000 of bonds which were called. During 1995,
FCFC issued $4,223,000 of bonds to the public and redeemed $940,000 of bonds
which were called. During 1994, FCFC issued $4,456,000 of bonds to the
public and redeemed $329,000 of bonds which were called. Total bonds
outstanding at December 31, 1996, 1995 and 1994, were $10,305,000,
$11,897,000, and $8,614,000, respectively.
WRR has bonds outstanding at a face value of $415,000. The bonds mature
serially each December through the year 2004. The bonds were issued in 1980
to finance continuing operations.
BCZCO finances most activities from its own resources and also relies upon
unsecured lines of credit available through banking relationships and
intercompany borrowing, if necessary. Any utilization of these lines of
credit is generally repaid in less than 30 days. BCZCO also has broker loan
and other collateralized arrangements available through banking
relationships.
The Company's cash and cash equivalent position allows a certain flexibility
in its financial activities. In order to maximize income, available cash is
invested in short-term investments such as money market funds and reverse
repurchase agreements at very short maturities in accordance with the
Company's liquidity requirements.
The Company received approximately $17,000,000 as the purchase price in cash
at the closing of the sale of Ziegler Leasing Corporation. That amount is
subject to post-closing adjustments. The proceeds will be reduced by the
federal tax liability associated with the sale of approximately $5,985,000.
The net proceeds of approximately $11,000,000 are anticipated to be
reinvested in securities related activities.
In a matter occurring subsequent to 1996, the Company signed a letter of
intent on February 24, 1997 to purchase Glaisner, Schilffarth, Grande &
Schnoll, Ltd., a Milwaukee-based financial services holding company,
together with its broker-dealer subsidiary, GS2 Securities, Inc. Total
consideration, payable in Company common stock and cash, will be $2,750,000
at closing, with future contingent payments of up to $1,000,000 possible
based on financial performance after the purchase. The acquisition, which
is expected to close on April 1, 1997, will expand the securities related
services of the Company, including among others institutional brokerage,
research, investment banking services and investment advisor selection and
monitoring for high net worth individuals and institutions.
<PAGE>
Five-Year Summary of Financial Data
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating
Revenues $ 49,316,949$ 44,941,611$ 36,451,820$ 39,668,351 $ 36,342,426
Income from
Continuing
Operations $ 2,974,714$ 3,327,941$ 1,241,378$ 3,455,466 $ 3,667,005
Income from
Discontinued
Operations $ 669,973$ 716,380$ 763,678$ 1,075,558 $ 1,419,529
Net Income $ 3,644,687$ 4,044,321$ 2,005,056$ 4,531,024 $ 5,086,534
Income from
Continuing
Operations Per
Common Share $1.24 $1.39 $ .52 $1.45 $1.45
Income from
Discontinued
Operations Per
Common Share $ .28 $ .30 $ .32 $ .45 $ .56
Net Income Per
Common Share $1.52 $1.69 $ .84 $1.90 $2.01
Cash Dividends
Declared Per
Share of
Common Stock $ .82 $ .87 $ .72 $1.07 $ .97
Total Assets $141,156,499$126,429,316$152,440,207$110,266,350 $ 92,617,274
Long-Term
Obligations $ 20,642,689$ 22,869,304$ 17,174,242$ 12,698,244 $ 5,798,023
Short-Term
Notes Payable$ 13,245,639$ 18,394,420$ 19,728,501$ 19,322,467 $ 17,708,751
End of Year
Shareholders'
Equity $ 54,219,200$ 52,241,998$ 50,380,022$ 49,951,855 $ 47,890,830
Book Value
Per Share $22.21 $21.48 $20.68 $20.96 $20.14
</TABLE>
Quarterly Consolidated Results of Operations for 1996 and 1995
<TABLE>
<CAPTION>
1996 Quarter Ended March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Revenues $ 9,996,000 $10,576,000 $12,363,000 $16,382,000
Expenses 9,989,000 9,978,000 11,165,000 13,400,000
Income From
Continuing
Operations 49,000 401,000 774,000 1,751,000
Income (Loss) From
Discontinued
Operations 133,000 (66,000) 339,000 264,000
Net Income 182,000 335,000 1,113,000 2,015,000
Earnings Per Share
from Continuing
Operations $ .02 $ .17 $ .32 $ .73
Earnings (Loss)
Per Share
from Discontinued
Operations $ .06 $(.03) $ .14 $ .11
Net Income Per Share $ .08 $ .14 $ .46 $ .84
</TABLE>
<TABLE>
<CAPTION>
1995 Quarter Ended March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Revenues $ 8,781,000 $10,298,000 $10,091,000 $15,772,000
Expenses 8,931,000 9,381,000 9,196,000 12,164,000
Income (Loss) From
Continuing
Operations (52,000) 585,000 590,000 2,205,000
Income From
Discontinued
Operations 71,000 187,000 186,000 272,000
Net Income 19,000 772,000 776,000 2,477,000
Earnings (Loss)
Per Share
from Continuing
Operations $(.02) $ .24 $ .25 $ .92
Earnings Per Share from
Discontinued Operations $ .03 $ .08 $ .07 $ .12
Net Income Per Share $ .01 $ .32 $ .32 $1.04
</TABLE>
<PAGE>
Directors and Executive Officers
DIRECTORS
J. C. Frueh
President, Aegis Group, Inc., Pittsburgh, Pennsylvania; Acquisition and
Management of Manufacturing and Distribution Companies
J. R. Green
Partner, Green, Manning & Bunch, Denver, Colorado; a Private Investment
Banking Firm
P. R. Kellogg
Chief Executive Officer and Senior Partner, Spear, Leeds & Kellogg;
Specialist Firm on the New York Stock Exchange
P. D. J. Kenny
Director of University Facilities - Mercer University, Macon, Georgia
S. A. Roell
Vice President and Chief Financial Officer, Johnson Controls, Inc.,
Milwaukee, Wisconsin
F. J. Wenzel
Executive Director and Advisor to the President, Marshfield Clinic,
Marshfield, Wisconsin; Executive Vice President, Medical Group Management
Association, Englewood, Colorado
B. C. Ziegler III
President, Ziegler/Limbach, Inc., West Bend, Wisconsin; Business
Development, Management and Consulting
P. D. Ziegler
President and Chief Executive Officer
R. D. Ziegler
Chairman of the Board
(Resignation effective March 17, 1997)
B. C. Ziegler
Director Emeritus
EXECUTIVE OFFICERS
R. D. Ziegler
Chairman of the Board
(Resignation effective March 17, 1997)
P. D. Ziegler
President and Chief Executive Officer
S. C. O'Meara
Senior Vice President and General Counsel
L. R. Van Horn
Senior Vice President - Finance
J. C. Vredenbregt
Vice President, Treasurer and Controller
J. R. Yovanovich
Corporate Secretary
<PAGE>
OFFICERS AND
SUBSIDIARIES
B. C. Ziegler
and Company
R. D. Ziegler
Chairman
(Resignation effective
March 17, 1997)
P. D. Ziegler
President and Chief
Executive Officer
D. A. Carlson, Jr.
Senior Vice President
M. P. Doyle
Senior Vice President-
Retail Operations
N. L. Fuerbringer
Senior Vice President-
Administration
S. C. O'Meara
Senior Vice President
and General Counsel
D. A. Schlosser
Senior Vice President
R. N. Spears
Senior Vice President
R. J. Tuszynski
Senior Vice President
L. R. Van Horn
Senior Vice President-
Finance
J. C. Wagner
Senior Vice President-
Retail Sales
G. Aman
Vice President -
Insurance
M. A. Baumgartner
Vice President
J. L. Brendemuehl
Vice President -
Managed Products
J. M. Bushman
Vice President -
Recruiting and
Training Coordinator
J. H. Downer
Vice President-
MIS Director
D. P. Frank
Vice President -
Director of Strategic
Planning and Change
S. K. Hittman
Vice President-
Personnel
R. J. Johnson
Vice President-
Compliance
M. L. McBain
Vice President -
Equity Securities
L. C. Rosenheimer
Vice President - Bond
Sales Control
T. S. Ross
Vice President
D. A. Schlosser
Vice President
C. G. Stevens
Vice President -
Marketing Director
R. C. Strzok
Vice President -
Administration
J. C. Vredenbregt
Vice President,
Treasurer and
Controller
B. J. Bronson
Assistant Vice
President
H. C. Delcore
Assistant Vice
President
J. Ferrara, Jr.
Assistant Vice
President - Mutual
Funds
D. J. Hauser
Assistant Vice
President
S. A. Hron
Assistant Vice
President
D. J. Pawlak
Assistant Vice
President
B. A. Rahlf
Assistant Vice
President
S. D. Rolfs
Assistant Vice
President
J. R. Yovanovich
Corporate Secretary
K. A. Lochen
Assistant Secretary
Senior Vice Presidents
- - Sales:
R. R. Poggenburg
First Vice Presidents
- - Sales:
A. G. Frey
J. V. Noordyk
R. D. Ping
Regional Vice
President- Sales:
W. G. Morse
Vice Presidents -
Sales:
S. C. Bass
D. S. Bast
W. L. Bruss
R. A. Conn
J. O. Conwell
M. S. Donahoe
T. J. Doyle
R. W. Eggebrecht
S. A. Isaacson
G. R. Knutson
J. A. Kramer
S. S. Manfrin
P. D. O'Brien
T. P. Sancomb
D. J. Schoenwetter
C. D. Schrader
M. W. Severson
S. D. Steinke
W. R. Uebele
G. M. Wilson
Assistant Vice
Presidents - Sales:
J. F. Cape
W. T. Epping
T. J. Fitzgerald
W. F. Gould
N. E. Harris
J. D. Klanderman
P. J. Krause
W. J. Langley
L. D. Martin
D. L. Peterson
R. J. Ratterman
M. B. Seiser
R. R. Sims
A. A. Struebing
T. M. Turner
P. D. Voss
Ziegler Securities
Division
P. D. Ziegler
Chairman
D. A. Carlson, Jr.
President, Chief
Executive Officer and
Treasurer
J. M. Annett
Senior Vice President
and National Director
of Senior Living
Finance
M. A. Baumgartner
Senior Vice President
M. P. McDaniel
Senior Vice President
J. J. O'Keefe
Senior Vice President
D. M. Rognerud
Senior Vice President
J. B. Sterns
Senior Vice President
and National Director
of Healthcare Finance
T. L. Brod
Vice President
M. O. Faragasso
Vice President
F. A. Healy III
Vice President
D. J. Hermann
Vice President
T. S. Howard
Vice President
M. J. Kane
Vice President
D. M. Kolzow
Vice President -
Operations
D. A. Korey
Vice President
J. LeBuhn
Vice President
R. K. Price
Vice President
R. J. Scanlon
Vice President
T. J. Sheehan
Vice President and
Co-Director of Special
Products Group
S. D. Smith
Vice President and
Co-Director of Special
Products Group
E. K. Eng
Assistant Vice
President
J. M. Garza
Assistant Vice
President -
Information Systems
and Services
T. H. Meyers
Assistant Vice
President
J. C. Vredenbregt
Assistant Treasurer
Ziegler Financing
Corporation
S. C. O'Meara
President and General
Counsel
J. M. Annett
Vice President
M. O. Faragasso
Vice President
R. K. Price
Vice President
T. S. Ross
Vice President
L. R. Van Horn
Vice President and
Treasurer
J. R. Wyatt
Vice President
P. D. Ziegler
Vice President
J. R. Yovanovich
Corporate Secretary
J. C. Vredenbregt
Assistant Treasurer
Ziegler Thrift
Trading, Inc.
P. D. Ziegler
Chairman
D. P. Frank
President and Chief
Executive Officer
R. L. Kangrga
Vice President and
Assistant Secretary
M. W. Stefano
Vice President and
Treasurer
L. R. Van Horn
Vice President
J. R. Yovanovich
Corporate Secretary
J. C. Vredenbregt
Assistant Treasurer
WRR Environmental
Services Co., Inc.
J. L. Hager
President and Chief
Executive Officer
B. I. Heath
Senior Vice President
J. Y. Lee
Vice President -
Quality Control
D. M. Reali
Secretary - Treasurer
First Church Financing
Corporation
D. A. Schlosser
President
L. R. Van Horn
Secretary and
Treasurer
J. R. Yovanovich
Assistant Secretary
Ziegler Asset
Management, Inc.
G. G. Maclay, Jr.
President and Chief
Executive Officer
M. J. Dion
Vice President -
Portfolio Manager and
Chief Investment
Officer
J. Ferrara, Jr.
Vice President -
Portfolio Manager and
Analyst
W. E. Hansen
Vice President
D. L. Lauterbach
Vice President
R. F. Patek
Vice President -
Portfolio Manager
T. P. Sancomb
Vice President
R. J. Tuszynski
Vice President
D. R. Wyatt
Vice President -
Retirement Plan
Services
J. R. Wyatt
Vice President
R. D. Ziegler
Vice President
J. R. Yovanovich
Corporate Secretary
L. R. Van Horn
Treasurer
Ziegler Collateralized
Securities, Inc.
L. R. Van Horn
President
P. D. Ziegler
Vice President
J. R. Yovanovich
Corporate Secretary
J. C. Vredenbregt
Treasurer
<PAGE>
On March 17, 1997, R. Douglas Ziegler, 70, will retire as chairman of the
company his father founded in 1902, The Ziegler Companies, Inc.
Mr. Ziegler joined the company as president and CEO in 1973, following a
distinguished career with the West Bend Company and its successor, Dart
Industries, Inc. He was a director, corporate vice president and president
of its Consumer Products Group until December 31, 1972.
He was elected chairman of the board of The Ziegler Companies, Inc. in 1986
and relinquished his CEO position January 1, 1990. He continued as a
director of Dart Industries, Inc. until 1980. During his career, he served
as a director of a number of major corporations and charitable
organizations, including Globe Union; Johnson Controls, Inc.; Firstar
Corporation; Wisconsin Electric Power Company; Dart Industries, Inc.;
Western Publishing Company; Mattel, Inc.; and the Blood Center of
Southeastern Wisconsin.
In 1991, Mr. Ziegler's affinity for money management led him to help
establish and build Ziegler Asset Management, Inc., which manages the
portfolios of individuals, institutions and several of the Principal
Preservation mutual funds.
Following his retirement as chairman of the board, Mr. Ziegler will remain a
director of Principal Preservation Portfolios, and a vice president of
Ziegler Asset Management, for which he will continue to manage individual
and institutional portfolios.
<PAGE>
DIVISION AND SUBSIDIARY OFFICES
B. C. Ziegler and Company
Corporate Headquarters
215 North Main Street
West Bend, Wisconsin 53095-3348
(414) 334-5521
Investment Offices
Denver, Colorado
Orlando, Florida
Arlington Heights, Illinois
Rockford, Illinois
Springfield, Illinois
Indianapolis, Indiana
West Des Moines, Iowa
Minneapolis, Minnesota
St. Louis, Missouri
Portland, Oregon
Appleton, Wisconsin
Fond du Lac, Wisconsin
Fort Atkinson, Wisconsin
Green Bay, Wisconsin
Kenosha, Wisconsin
LaCrosse, Wisconsin
Madison, Wisconsin
Milwaukee, Wisconsin
Mequon, Wisconsin
Sheboygan, Wisconsin
Wausau, Wisconsin
West Bend, Wisconsin
Insurance Offices
West Bend, Wisconsin
Milwaukee, Wisconsin
Preferred Stock Division
1001 West Glen Oaks Lane, Suite 101
Mequon, Wisconsin 53092-3365
(414) 241-7200
Ziegler Securities Division
Division Headquarters
One South Wacker Drive
Suite 3080
Chicago, Illinois 60606-4617
(312) 263-0110
Division Offices
Walnut Creek, California
St. Petersburg, Florida
Indianapolis, Indiana
New York, New York
Washington, D.C.
West Bend, Wisconsin<PAGE>
Ziegler Capital Company
767 Third Avenue
Suite 2900
New York, New York 10017-2023
(212) 328-4150
Ziegler Healthcare Affiliates
One South Wacker Drive
Suite 3080
Chicago, Illinois 60606-4617
(312) 263-0110
Ziegler Thrift Trading, Inc.
Corporate Headquarters
733 Marquette Avenue
Suite 106
Minneapolis, Minnesota 55402-2340
(612) 333-4206
Investment Offices
Minneapolis, Minnesota
St. Paul, Minnesota
Naperville, Illinois
Westchester, Illinois
Ziegler Investment Services
670 McKnight Road North
Eastern Heights Bank Building
St. Paul, Minnesota 55119-4140
(612) 736-7974
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095-3348
(414) 334-5521
Fixed Income Division
100 East Wisconsin Avenue
Suite 1850
Milwaukee, Wisconsin 53202-4107
(414) 271-0464
WRR Environmental Services Co., Inc.
5200 State Road 93
Eau Claire, WI 54701-9808
(715) 834-9624
WRR Northwest Enterprises, Inc.
5100 State Road 93
Eau Claire, Wisconsin 54701-9808
(715) 834-8426<PAGE>
Investor Information
Corporate Offices
215 North Main Street
West Bend, Wisconsin 53095-3348
Annual Meeting
The annual meeting of shareholders will be held at 10:00 a.m., April 21,
1997 at the West Bend Inn, 2520 West Washington Street, West Bend,
Wisconsin.
Copies of the Form 10-K covering the fiscal year 1996 are available upon
request. Form 10-K is the Company's annual report filed with the Securities
and Exchange Commission, Washington, D.C. Shareholders wishing to receive a
copy, please write to:
The Ziegler Companies, Inc.
Attention: Janine R. Yovanovich
215 North Main Street
West Bend, Wisconsin 53095-3348
Market
The Ziegler Companies, Inc. common stock trades on the American Stock
Exchange. The range of bid and asked quotations during 1996 and 1995 was as
follows:
1996 Bid Asked 1995 Bid Asked
1st Quarter High 19-3/4 20 1st Quarter High 15-1/4 15-1/2
Low 16-3/8 16-5/8 Low 14-3/4 15
2nd Quarter High 19-3/4 20-1/8 2nd Quarter High 15 15-3/4
Low 18-1/4 19-1/4 Low 14-5/8 15
3rd Quarter High 18-1/4 19-1/4 3rd Quarter High 16-3/8 16-5/8
Low 17-1/8 17-3/8 Low 14-5/8 15
4th Quarter High 18-1/2 18-7/8 4th Quarter High 16-7/8 17-1/8
Low 17-1/8 17-1/2 Low 16-1/8 16-1/2
Cash Dividends
Cash Dividends during 1996 and 1995 were paid as follows:
<TABLE>
<CAPTION>
Per Share 1996 1995
<S> <C> <C>
January $ .13 $ .13
Extra cash dividend .35 .20
April .13 .13
July .13 .13
October .13 .13
Total $ .87 $ .72
</TABLE>
Holders of record on January 6, 1997, were paid a regular cash dividend of
13 cents per share plus an extra cash dividend of 30 cents per share on
January 17, 1997.
Transfer Agent and Registrar
Firstar Trust Company
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Compensation Committee
John R. Green, Chairman
Stephen A. Roell
Frederick J. Wenzel
Audit Committee
John C. Frueh, Chairman
Peter R. Kellogg
Patrick D. J. Kenny
Bernard C. Ziegler III
AMEX Symbol
ZCO
THE ZIEGLER COMPANIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Monday, April 21, 1997
TO THE SHAREHOLDERS OF THE ZIEGLER COMPANIES, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of The
Ziegler Companies, Inc., will be held on Monday, April 21, 1997 at 10:00
A.M. (Central Daylight Time) at the West Bend Inn, 2520 West Washington
Street, West Bend, Wisconsin, for the following purposes:
1. To elect two directors for a term of three years.
2. To vote on a proposal to ratify the retention of Arthur
Andersen LLP as auditors for 1997.
3. To transact any other business which may properly come
before the meeting, or any adjournments thereof.
Shareholders of record at the close of business on February 28, 1997 will be
entitled to vote at the meeting and any adjournments thereof. If you plan
to attend the meeting in person, and you are a shareholder whose shares are
not registered in your own name, please bring to the meeting either (i) the
original of the voting form sent to you by your broker with this Notice of
Annual Meeting and Proxy Statement, or (ii) other written evidence of your
beneficial ownership of shares on the record date, signed by a
representative of the record owner.
A PROXY AND PROXY STATEMENT ARE ENCLOSED HEREWITH.
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR
REPRESENTATION AT THIS MEETING, PLEASE FILL IN THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS AND
RETURN IMMEDIATELY. SHAREHOLDERS WHO EXECUTE
PROXIES RETAIN THE RIGHT TO REVOKE THEM AT ANY TIME
BEFORE THEY ARE VOTED.
By Order of the Board of Directors,
/s/ Janine R. Yovanovich
Janine R. Yovanovich
Corporate Secretary
March 14, 1997
215 North Main Street
West Bend, Wisconsin 53095
<PAGE>
THE ZIEGLER COMPANIES, INC.
215 North Main Street
West Bend, Wisconsin 53095
March 14, 1997
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, MONDAY, APRIL 21, 1997
This proxy statement is being mailed to the shareholders of The Ziegler
Companies, Inc. (the "Company") on March 14, 1997, in connection with the
solicitation by the Board of Directors of the Company of proxies for use at
the annual meeting of the shareholders to be held at the West Bend Inn, 2520
West Washington Street, West Bend, Wisconsin, at 10:00 A.M., (Central
Daylight Time) on Monday, April 21, 1997, and at any adjournments of such
meeting.
Execution of a proxy given in response to this solicitation will not affect
a shareholder's right to attend the meeting and to vote in person. Presence
at the meeting by a shareholder who has signed a proxy does not in itself
revoke a proxy. Any shareholder giving a proxy may revoke it at any time
before it is exercised by giving notice thereof to the Company in writing or
in open meeting. Unless so revoked, the shares represented by proxies will
be voted at the meeting and at any adjournments thereof. Where a
shareholder specifies a choice by means of a ballot provided in the proxy,
the shares will be voted in accordance with such specification.
Only shareholders of record on February 28, 1997 are entitled to vote at the
meeting. As of that date, the Company's issued and outstanding voting
securities consisted of 2,445,257 shares of Common Stock, each having one
vote per share.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is a tabulation indicating those persons who, as of February
28, 1997, were known by the Company to be the beneficial owners of more than
5% of any class of the Company's voting securities. The following
information is based on reports on Schedule 13D filed with the Securities
and Exchange Commission or other reliable information. To the best of the
Company's knowledge, all shareholdings represent shares actually owned and
do not include shares which the designated person has the right to acquire.
Amount and Nature
Title of Name and Address of Beneficial Percent
Class of Beneficial Owner Ownership of Class
Common Stock Peter R. Kellogg (1) 400,300 16.37%
$1.00 Par Value 120 Broadway
New York, New York
New West Investors, 183,500 7.50%
L.P. (2)
800 West State Street
Doylestown, Pennsylvania
(1) Mr. Peter R. Kellogg, Chief Executive Officer and Senior Partner, Spear,
Leeds & Kellogg, 120 Broadway, New York, New York, beneficially owns an
aggregate of 400,300 shares of the Company's common stock. Of those
shares, 100,300 shares were owned by Mr. Kellogg personally, and 150,000
shares were owned by I.A.T. Reinsurance Syndicate, Ltd. ("IAT"), a
Bermuda corporation of which Mr. Kellogg is the sole holder of voting
stock. In addition, Mr. Kellogg may be deemed to be the indirect
beneficial owner of 100,000 shares of common stock held by his wife, and
50,000 shares of common stock held by the Peter R. and Cynthia K.
Kellogg Foundation, by virtue of his shared disposition and voting
power. The aggregate number of shares of common stock, with respect to
which Mr. Kellogg may be deemed to be the beneficial owner is 400,300
shares.
(2) New West Investors, L.P. ("New West"), 800 West State Street,
Doylestown, Pennsylvania, filed Schedule 13D dated January 17, 1997 with
the Securities and Exchange Commission. Mr. Gerald J. Gagner is the
sole general partner of New West with voting and dispositive control
over the securities held in New West's investment portfolio. Mr. Gagner
may be considered to beneficially own the shares of Common Stock of the
Company that are owned of record by New West. None of the limited
partners of New West has any voting or dispositive control over such
securities. According to Schedule 13D filed by New West, the shares
were purchased for investment purposes only.
Set forth below is a tabulation indicating as of February 28, 1997, the
shares of equity securities of the Company beneficially owned by (i) each of
the executive officers of the Company, (ii) each director of the Company and
each nominee for director of the Company and (iii) by all directors and
executive officers of the Company as a group. Except as indicated below, no
such person owns in excess of 1% of the outstanding shares of any class of
the Company's equity securities. Except as indicated in the footnotes, each
person has sole voting and dispositive power with respect to the number of
shares indicated.
Amount and Nature
Title of Name of of Beneficial Percent
Class Beneficial Owner Ownership (3)(4) of Class
Common Stock Peter R. Kellogg (1) 400,300 16.37%
$1.00 Par Value R. Douglas Ziegler (1)(3) 104,604 4.27%
Bernard C. Ziegler III (2) 37,506 1.53%
Peter D. Ziegler (2)(3) 34,650 1.41%
Patrick D. J. Kenny (2) 18,018
S. Charles O'Meara (3) 15,270
Donald A. Carlson, Jr. (3) 11,543
Geoffrey G. Maclay, Jr. (3) 10,000
Lynn R. Van Horn (3) 8,770
Jeffrey C. Vredenbregt (3) 2,600
John R. Green 1,404
John C. Frueh 800
Frederick J. Wenzel 600
Stephen A. Roell 500
All directors and executive officers
as a group TOTAL 646,565
TOTAL PERCENT OF CLASS 23.59%
(1) Shares shown include an aggregate of 302,528 shares of common stock to
which all such nominees and directors disclaim beneficial ownership.
Such shares are beneficially owned in the amounts indicated: Mr.
Kellogg (300,000), and Mr. R. Douglas Ziegler (2,528).
(2) Shares shown include an aggregate of 37,664 shares of common stock which
are held in trusts of which nominees and directors are trustees or in
custodian accounts for minors as to which directors serve as custodians,
in the amount indicated: Mr. Peter D. Ziegler (5,200) (custodian, sole
voting and investment power) and (10,450) (co-trustee, shared voting and
investment power); Mr. Kenny (12,214) (co-trustee, shared voting and
investment power); and Mr. B. C. Ziegler III (9,800) (co-trustee, shared
voting and investment power). These nominees and directors disclaim
beneficial ownership of these shares other than sole or shared voting
and investment power as indicated.
(3) Includes shares of Common Stock which, as of February 28, 1997, were
subject to outstanding stock options exercisable within 60 days as
follows: Mr. O'Meara, 15,170 shares; Mr. Maclay, 10,000 shares; Mr. P.
D. Ziegler, 9,120 shares; Mr. Van Horn, 7,210 shares; Mr. Carlson, 2,340
shares, Mr. Vredenbregt, 1,710 shares; Mr. R. D. Ziegler, 500 shares;
and stock options for all directors and executive officers as a group,
46,050 shares.
(4) Except as otherwise indicated in the previous footnotes, all stock
ownership is direct.
ELECTION OF DIRECTORS
The Board of Directors consists of eight members, of whom two or three
members, as the case may be, are elected each year to serve for terms of
three years or until their successors are elected. It is intended that the
enclosed proxy will be voted for the election of Messrs. J. C. Frueh and J.
R. Green for terms expiring in 2000. Messrs. Frueh and Green are presently
directors and were elected by a vote of the shareholders. No one has been
nominated to fill the position being vacated by Mr. R. D. Ziegler, because
effective March 17, 1997, the Company's Bylaws have been amended to reduce
the number of directors from nine persons to eight persons. Mr. R. D.
Ziegler will retire from the Board of Directors on March 17, 1997 under the
Company's policy regarding mandatory retirement from the Board of Directors
upon attaining a specified age.
Directors are elected by a plurality of the votes cast by the Company's
shareholders at a meeting at which a quorum is present. "Plurality" means
that the individuals who receive the greatest number of votes cast are
elected as directors up to the maximum number of directors to be chosen at
the meeting. Consequently, any shares not voted (whether by abstention,
broker non-vote or otherwise) have no impact on the election of directors
except to the extent the failure to vote for an individual results in
another individual receiving a larger proportion of votes actually cast.
Under Wisconsin law, cumulative voting for directors is permitted, but is
not presently provided for in the Company's Articles of Incorporation.
Information with respect to such nominees and other directors is set forth
as follows:
<PAGE>
Director of Company
Name, Age, Principal Occupation or a Subsidiary Thereof
and Public Directorships (1) Continuously Since
Class of 1997 (Nominees)
(Term will expire in 2000)
John C. Frueh, Age 62 1976
President, Aegis Group, Inc., Pittsburgh,
Pennsylvania, a firm specializing in
acquisition and management of manufacturing
and distributing companies
John R. Green, age 52 1994
Partner, Green Manning & Bunch, Denver,
Colorado, a private investment banking firm
Class of 1998
(Term will expire in 1998)
Peter D. Ziegler, Age 47 1986
President and Chief Executive Officer
of the Company; Director, West Bend
Mutual Insurance Company, West Bend,
Wisconsin; Director, Trustmark Insurance
Company, Lake Forest, Illinois
Frederick J. Wenzel, Age 66 (1) 1993
Executive Director and Advisor to the
President, Marshfield Clinic, Marshfield,
Wisconsin, a multi-specialty medical clinic;
Executive Vice President, Medical Group
Management Association, Englewood, Colorado
Peter R. Kellogg, Age 54 1995
Chief Executive Officer and Senior Partner,
Spear, Leeds & Kellogg, a specialist firm
on the New York Stock Exchange;
Director, Interstate/Johnson Lane, Inc.
Class of 1999
(Term will expire in 1999)
Patrick D. J. Kenny, Age 56 (1) 1973
Director of University Facilities,
Mercer University, Macon, Georgia
Stephen A. Roell, Age 47 1996
Vice President and Chief Financial Officer,
Johnson Controls, Inc., Milwaukee, Wisconsin
Bernard C. Ziegler III, Age 47 1993
President, Ziegler/Limbach, Inc.,
West Bend, Wisconsin, a business development,
management and consulting firm
(1) Each of the nominees and directors has been in his principal occupation
for the past five years or longer with the following exceptions:
Mr. Wenzel was Executive Director of the Marshfield Clinic from
August 1976 to June 1993.
Mr. Kenny was a colonel in the United States Army until October 5,
1992, when he retired. He served as Senior Vice President,
Columbus, Georgia Chamber of Commerce from October 5, 1992 until
October 1, 1993 when he joined Mercer University.
Messrs. R. D. Ziegler, P. D. Ziegler (son of Mr. R. D. Ziegler), B. C.
Ziegler III (nephew of Mr. R. D. Ziegler) and trusts or custodian accounts
as to which either Mr. P. D. Ziegler or Mr. B. C. Ziegler III serve as co-
trustee or custodian own beneficially 7.12% of the outstanding common stock
of the Company.
EXECUTIVE COMPENSATION
The Summary Compensation Table on page 7 shows the compensation for the past
three years of the Company's Chief Executive Officer and the four most
highly compensated executive officers of the Company other than the Chief
Executive Officer who were serving as such during 1996, and whose
compensation exceeded $100,000.
The table on page 7 shows information concerning the exercise of stock
options during 1996 by each of the executive officers named in the Summary
Compensation Table and the fiscal year-end value of unexercised options held
by each such executive officer.
* * * * * * * *
Ziegler Growth Retirement Plan. All regular employees, including executive
officers, of B. C. Ziegler and Company and designated subsidiaries, who have
met certain length of service requirements are eligible to participate in
the Ziegler Growth Retirement Plan ("Growth Plan"). The Growth Plan
consists of two components, the 401(k) component and the profit sharing
component. Under the 401(k) component, participants may elect to contribute
from 1% to 6% of their monthly compensation (the "Participant's
Contribution"). Each Participant Contribution constitutes a salary
reduction which has the effect of reducing the participant's compensation
for Federal income tax purposes. B. C. Ziegler and Company contributes, on
behalf of each participant, an amount equal to 50% of each Participant's
Contribution. Under the profit sharing component, B. C. Ziegler and Company
makes an annual determination, based on its profitability, of the amount it
will contribute to the Growth Plan as a profit sharing contribution. Funds
contributed by the Company will be allocated ratably to each participant's
account in amounts up to 6% of the participant's annual compensation. For
1996, the Company's profit sharing contribution was 6% of eligible
compensation.
Amounts contributed, accrued or vested for the fiscal year 1996, under the
Growth Plan were $73,164 for all executive officers as a group and
$1,185,519 for all employees as a group.
* * * * * * * *
Incentive Stock Option Plan. On April 19, 1993, the shareholders of the
Company approved the adoption of The Ziegler Company, Inc. 1993 Employees'
Stock Incentive Plan ("1993 Plan"). Pursuant to the 1993 Plan, the Company
granted qualified statutory stock options for an aggregate of 54,500 shares
of the Common Stock of the Company to certain officers of the Company on
December 29, 1993. The option price for each share under the options
granted on December 29, 1993 is $16.625. The options expire on December 28,
2003, unless earlier terminated in connection with an employee's retirement,
death, disability, or separation from the Company. The right of an employee
to exercise an option is subject to a vesting schedule which provides that
one-third of the shares subject to the option vest on each of the first
three anniversaries of the grant.
Pursuant to the 1993 Employees' Stock Incentive Plan, on January 26, 1994,
the Company issued an aggregate of 49,000 shares of restricted Common Stock
of the Company to certain key employees in the Ziegler Securities Division
of B. C. Ziegler and Company. Also pursuant to the 1993 Employees' Stock
Incentive Plan, the Company issued an aggregate of 11,313 shares of
restricted Common Stock to certain key employees in the Ziegler Securities
Division on January 27, 1995. Under the restricted stock grants, an
employee's title to the shares of restricted Common Stock is subject to full
or partial forfeiture in accordance with a vesting schedule in the event
that the employee's employment with the Company terminates for any reason
before the restricted Common Stock is fully vested. The vesting schedule
for the restricted Common Stock issued in 1994 extends to 2003, and the
vesting schedule for the restricted Common Stock issued in 1995 extends to
2000. Pending vesting of the restricted shares of Common Stock, an employee
is entitled to vote the restricted shares and receive dividends on the
restricted shares. Employees may not transfer restricted shares until they
are vested.
On January 22, 1993, a nonstatutory option was granted to an executive
officer of the Company for 10,000 shares at a per share option price of
$15.125. The option has a duration of ten years from the date of its grant.
On January 26, 1996, a nonstatutory option was granted to an executive
officer of a subsidiary of the Company for 10,000 shares at a per share
option price of $18.570. The option has a duration of ten years from the
date of its grant.
On January 9, 1997, a nonstatutory stock option was granted to an officer of
a subsidiary of the Company for 5,000 shares at a per share option price of
$17.375. The option has a duration of ten years from the date of its grant.
* * * * * * * *
Employee Stock Purchase Plan. On February 10, 1989, the Board of Directors
adopted The Ziegler Company, Inc. 1989 Employees' Stock Purchase Plan (the
"1989 Plan"). The purpose of the 1989 Plan is to provide employees of the
Company and certain of its subsidiaries with the opportunity to purchase
shares of Common Stock and thereby share in the ownership of the Company.
150,000 shares of Common Stock, $1.00 par value may be issued under the 1989
Plan.
All full-time employees of the Company and any of its designated
subsidiaries who have been employed at least two years are eligible to
participate in the 1989 Plan. No employee may participate if he would own,
directly or indirectly, 5% or more of the total combined voting power or
value of all classes of Company stock.
On such dates as may be determined by the Company's Compensation Committee,
options to purchase 10 shares of Common Stock for each $1,000 or fraction
thereof of compensation earned in the calendar year immediately prior to the
grant of the option will be granted to eligible employees. The purchase
price per share shall not be less than 85% of the fair market value of the
Common Stock on the date of exercise. The Compensation Committee may
specify the maximum number of shares which may be purchased by an employee.
The term of any option shall be determined by the Compensation Committee,
but shall not exceed five years following the date of grant.
On March 20, 1995, the Board of Directors granted options effective May 1,
1995 to 251 eligible employees to purchase a total of 104,200 shares of the
Company's common stock at a purchase price equal to 85% of the fair market
value of the common stock on the date the options are exercised. On the
effective date of the grant of the options, the market price of the
Company's common stock was $14.88 per share. The options have a term of two
years after which the unexercised options will expire and the balance of the
unexercised shares will become available to be re-issued pursuant to
subsequent option grants. For 1995, P. D. Ziegler, S. C. O'Meara, and L. R.
Van Horn were each granted options to purchase shares of common stock in the
following amounts respectively: 2,120, 1,170, and 1,210. For 1995, all
present executive officers as a group were granted options to purchase 6,630
shares of common stock and all employees including executive officers as a
group were granted options to purchase 104,200 shares of common stock.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Securities
Underlying
Options/ Long-
Stock Term
Other Apprecia- Incen- All
Name Annual Restricted tion tive Other
and Compensa- Stock Rights Plan Compensa-
Principal Salary Bonus tion Award (SAR's) Payouts tion
Position Year ($) ($) ($)(1) ($) (#) ($) ($)(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
P. D. Ziegler 1996 200,000 None 2,920 None 9,120 None 14,487
President and 1995 171,600 50,000 None None 10,120 None 15,206
Chief Exec. Officer 1994 171,600 None 2,948 None 8,400 None 10,926
D. A. Carlson, Jr. 1996 151,215 100,000 None None 2,340 None 14,470
President, Chief Exec.
Officer and Treasurer,
Ziegler Securities
Division
G. G. Maclay, Jr. 1996 108,955 8,200 None None 10,000 None 50,660 (3)
President and Chief
Executive Officer,
Ziegler Asset Manage-
ment, Inc.
S. C. O'Meara 1996 108,160 22,500 None None 15,170 None 11,519
Sr. Vice President 1995 104,000 22,500 None None 15,170 None 10,472
and General Counsel 1994 104,000 7,500 None None 14,000 None 7,252
L. R. Van Horn 1996 97,344 27,500 None None 7,210 None 10,720
Sr. Vice President- 1995 93,600 27,500 1,794 None 7,210 None 9,825
Finance 1994 93,600 15,000 None None 6,780 None 8,851
</TABLE>
(1) Value realized upon exercise of stock options.
(2) Payments by B. C. Ziegler and Company under the Growth Plan (Mr. Ziegler,
$13,500; Mr. Carlson, $13,500; Mr. O'Meara, $10,747; and Mr. Van Horn,
$9,998 and premiums paid by the Company for term life insurance and long-
term disability insurance (Mr. Ziegler, $987; Mr. Carlson, $970; Mr.
O'Meara, $772; Mr. Van Horn, $722; and Mr. Maclay, $660).
(3) Includes special $50,000 bonus related to acceptance of employment with the
Company.
<PAGE>
<TABLE>
AGGREGATED OPTION/STOCK APPRECIATION RIGHT (SAR)
EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
Value of
Number of Unexercised
Securities In-the-Money
Underlying Options/SARs
Unexercised at
Options/SARs at December 31, 1996
December 31, 1996 ($)
Number of Value
Shares Acquired Realized
Name on Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
P.D. Ziegler 1,000 $ 2,920 9,120 / -0- $10,446 / $ -0-
D.A.Carlson, Jr. - $ - 2,340 / -0- $ 6,154 / $ -0-
G.G. Maclay, Jr. - $ - -0- / 10,000 $ -0- / $ -0-
S.C. O'Meara - $ - 15,170 / -0- $31,202 / $ -0-
L.R. Van Horn - $ - 7,210 / -0- $ 8,807 / $ -0-
</TABLE>
<PAGE>
<TABLE>
OPTIONS / SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
% of
Total
Options/SARs
Granted Market
to Exercise Price Potential Realizable Value
Options/ Employees or on at Assumed Annual Rates of
SARs in Base Date Stock Price Appreciation
Granted Fiscal Price of Expiration for Option Term
Name (#) Year ($/Sh) Grant Date 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G.G. Maclay, Jr. 10,000 100.0% $18.57 $18.57 01-26-06 $ -0- $116,800 $296,000
</TABLE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Stephen A. Roell, a director of the Company, and a member of its
Compensation Committee, serves as Vice President and Chief Financial Officer
of Johnson Controls, Inc., a corporation for which R. Douglas Ziegler serves
as director. Mr. R. Douglas Ziegler anticipates resigning as a director of
Johnson Controls, Inc. in November 1997 due to corporate policy regarding
director age limitations.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is responsible for establishing compensation of
the Company's executive officers. In making its determinations, the
Compensation Committee considered a variety of factors. Among the factors
considered are the following: (1) the financial performance of the Company
as a whole on both a long-term and short-term basis (including net income
and return on average shareholders' equity); (2) with respect to each
individual executive officer, the financial performance of that area of the
Company, if any, for which such executive is responsible, (3) the
compensation levels of executive officers in similar positions in similar
companies; (4) the Company's evaluation of the executive's overall job
performance; and (5) any other material information which the Compensation
Committee deems appropriate in the case of any particular individual. With
regard to any individual executive officer, the Compensation Committee may
weigh one or more of the above factors more heavily than the other factors.
The Committee annually considers discretionary bonuses for executive
officers as a short-term incentive.
In addition, the Company's profit sharing contribution, which had been 6% of
employees' eligible compensation for 1995, remained at 6% for 1996.
Mr. Peter D. Ziegler has been President of the Company since 1986 and Chief
Executive Officer of the Company since 1990. Mr. Ziegler's total
compensation for 1996 was adjusted downward from 1995's level based on net
income of the Company in 1996 being lower than in 1995, and the financial
performance of the Company relative to the performance of other regional
brokerage firms.
COMPENSATION COMMITTEE
John R. Green, Chairman
Stephen A. Roell
Frederick J. Wenzel
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the
Common Stock and assuming reinvestment of dividends, with the cumulative
total return of companies on the Standard & Poor's 500 Stock Index and on an
index compiled by the Company of publicly held regional brokerage firms.
The firms contained within the index of publicly held regional brokerage
firms are:
Advest Group Inc. McDonald & Company Investments
Alex Brown Inc. Morgan Keegan Inc.
First Albany Companies Inc. Piper Jaffray Companies Inc.
Inter-Regional Financial Group Raymond James Financial Corporation
Interstate/Johnson Lane Inc. Rodman & Renshaw Capital Group
Jefferies Group Inc. Scott & Stringfellow Financial
Kinnard Investments Inc. Stifel Financial Corporation
Legg Mason Inc.
<TABLE>
<CAPTION>
12-31-92 12-31-93 12-31-94 12-31-95 12-31-96
<S> <C> <C> <C> <C> <C>
Ziegler $ 64 $ 70 $ 66 $ 78 $ 84
S&P 500 $108 $119 $120 $165 $203
Regionals $118 $156 $119 $169 $237
</TABLE>
Assumes $100 invested on December 31, 1991.
<PAGE>
COMPENSATION OF DIRECTORS
Directors not employed by the Company received the following compensation in
1996 for their services: (a) $11,000 annual retainer, one half paid in
cash, the other half paid in shares of common stock of the Company; (b) $500
for each board meeting attended and (c) $500 for each committee meeting
attended. Directors may elect to defer all or part of compensation earned
following the date of such election. Deferred amounts, plus interest, are
paid in annual installments over a three year period beginning no later than
the year after retirement from the Board of Directors.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Board of Directors met
six times. Each director attended all of the meetings of the Board, with
the exception of Mr. P. R. Kellogg, who attended 66% of the Board meetings
held. Each director attended 75% or more of all meetings of committees of
the Board on which the director served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors during 1996 was composed of
John C. Frueh (Chairman), Peter R. Kellogg, Patrick D. J. Kenny and Bernard
C. Ziegler III, Directors who are not officers or employees of the Company.
The Committee met three times in 1996. The Audit Committee meets with the
independent auditors to review the plan for and results of the annual audit,
to review the range of audit fees, and to discuss financial reporting
policies and practices and the system of internal control. Non-audit
services and fees are also reviewed. The Committee meets with the internal
auditor to review its activities during the year and the planned activities
for the ensuing year. The Committee recommends the engagement of the
independent auditors to the Board of Directors.
The Compensation Committee of the Board of Directors during 1996 was
composed of John R. Green (Chairman), Stephen A. Roell and Frederick J.
Wenzel, Directors of the Company who are not officers or employees of the
Company. During 1996 the Compensation Committee met once and in doing so,
the Committee reviewed the overall compensation policy, approved the
Company's annual compensation program, and determined compensation for the
chief executive officer of the Company.
The Board of Directors does not have a Nominating Committee.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors will propose the adoption of a resolution approving
the Directors' decision to continue the employment of Arthur Andersen LLP as
auditors. If the shareholders fail to ratify such selection, the Board will
reconsider it. Representatives of Arthur Andersen LLP will be present at
the shareholders' meeting with the opportunity to make a statement if they
desire to do so, and to respond to appropriate questions. Arthur Andersen
LLP performed the following audit services for the Company during 1996:
audits of the annual consolidated financial statements of the Company and
its subsidiaries.
SHAREHOLDERS PROPOSALS
Proposals of shareholders intended to be presented at next year's annual
meeting must be received by the Company no later than November 14, 1997 for
inclusion in the Company's proxy materials.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of statements of beneficial ownership and of
changes therein furnished to the Company during and with respect to the 1996
calendar year and written representations made to the Company, the
management of the Company reports that during 1996, no director or officer
or beneficial owner of more than 10% of the Company's common stock failed to
file with the Securities and Exchange Commission on a timely basis reports
of beneficial ownership of the Company's securities required by Section
16(a) of the Securities and Exchange Act of 1934, as amended.
OTHER MATTERS
The matters referred to in the notice of meeting and in the proxy statement
are, as far as the Board of Directors now knows, the only matters which will
be presented for consideration at the meeting. If any other matters
properly come before the meeting, the persons named in the accompanying form
of proxy will vote on them in accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. The Company
expects to solicit proxies primarily by mail. Proxies may also be solicited
personally and by telephone by certain officers of the Company. It is not
anticipated that anyone will be specifically engaged to solicit proxies or
that special compensation will be paid for that purpose. The Company may
reimburse brokers or other nominees for their expenses in communicating with
the persons for whom they held stock of the Company.
The Company's 1996 Annual Report, although not a part of this proxy
statement, is enclosed.
By Order of the Board of Directors,
/s/ Janine R. Yovanovich
Janine R. Yovanovich
Corporate Secretary
<PAGE>
THE ZIEGLER COMPANIES, INC. - SHAREHOLDERS' PROXY
ANNUAL MEETING - APRIL 21, 1997 AND ADJOURNMENTS
The undersigned having received the Notice of Annual Meeting and Proxy
Statement dated March 14, 1997, and the Annual Report of 1996, hereby appoints
P. D. Ziegler and B. C. Ziegler III, and each of them, as proxy with power of
substitution, hereby revoking any previous proxies, to vote for the
undersigned at the Annual Meeting of Shareholders of The Ziegler Companies,
Inc. (the "Company") on April 21, 1997, and any adjournments thereof, as
follows:
1. GRANTING WITHHOLDING ABSTAIN authority to vote
in the election of John C. Frueh, and John R. Green.
2. FOR AGAINST ABSTAIN continued employment by the
Company of Arthur Andersen LLP, as auditors.
3. In their discretion, upon any other business which may come before
the meeting.
THE UNDERSIGNED MAY WITHHOLD AUTHORITY TO VOTE FOR ANY OF THE
INDIVIDUAL
NOMINEES NAMED ABOVE BY DRAWING A LINE THROUGH THE NOMINEE'S
NAME.
(Proxy continues on reverse side hereof where it is to be signed.)
PROXY NO. NO. OF SHARES
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED,
BUT IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR ALL NOMINEES
AND IN FAVOR OF PROPOSAL 2.
Signed:
Date: , 1997
Please sign exactly as name appears
hereon. If signed as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If shares are
held in two or more names, all persons so
named must sign. A proxy on behalf of a
corporation should be signed in its name
by a duly authorized officer.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY.
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from
The Ziegler Companies, Inc. and subsidiaries financial statements and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,012,977
<RECEIVABLES> 13,143,915
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 68,408,554<F2>
<PP&E> 7,165,857
<TOTAL-ASSETS> 141,156,499
<SHORT-TERM> 34,873,639<F3>
<PAYABLES> 10,528,000<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 25,852,808<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 50,675,170
<TOTAL-LIABILITY-AND-EQUITY> 141,156,499
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 4,379,040
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 33,633,401<F6>
<FEE-REVENUE> 6,320,673
<INTEREST-EXPENSE> 2,996,573
<COMPENSATION> 24,842,807
<INCOME-PRETAX> 4,784,614<F7>
<INCOME-PRE-EXTRAORDINARY> 2,974,714<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,644,687<F8>
<EPS-PRIMARY> 1.52<F8>
<EPS-DILUTED> 1.52<F8>
<FN>
<F1>Short-term investments includes some securities purchased under resale
agreements.
<F2>Financial instruments includes securities inventory, investment in leases,
notes receivable, and investment in and receivables from affiliates.
<F3>Includes short-term notes payable and unsecured notes payable to banks
under line of credit agreements.
<F4>Includes payable to customers, payable to broker-dealers, accounts
payable, and dividends payable.
<F5>Includes bonds payable and notes payable to banks other than line of
credit borrowings.
<F6>Revenue from investment banking activities also includes revenue from
trading activities and commissions.
<F7>Includes only income from continuing operations.
<F8>Income from continuing and discontinued operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from
The Ziegler Companies, Inc. and subsidiaries financial statements and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,226,163
<RECEIVABLES> 7,270,283
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 70,348,247<F2>
<PP&E> 6,959,937
<TOTAL-ASSETS> 126,429,316
<SHORT-TERM> 29,796,420<F3>
<PAYABLES> 7,258,588<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 28,451,941<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 48,697,969
<TOTAL-LIABILITY-AND-EQUITY> 126,429,316
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 3,731,837
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 30,642,641
<FEE-REVENUE> 5,853,582
<INTEREST-EXPENSE> 2,768,241
<COMPENSATION> 21,518,372
<INCOME-PRETAX> 5,270,141<F7>
<INCOME-PRE-EXTRAORDINARY> 3,327,941<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,044,321<F8>
<EPS-PRIMARY> 1.69<F8>
<EPS-DILUTED> 1.69<F8>
<FN>
<F1>Short-term investments includes some securities purchased under resale
agreements.
<F2>Financial instruments includes securities inventory, investment in leases,
notes receivable, and investment in and receivables from affiliates.
<F3>Includes short-term notes payable and unsecured notes payable to banks
under line of credit agreements.
<F4>Includes payable to customers, payable to broker-dealers, accounts payable,
and dividends payable.
<F5>Includes bonds payable and notes payable to banks other than line of
credit borrowings.
<F6>Revenue from investment banking activities also includes revenue from
trading activities and commissions.
<F7>Includes only income from continuing operations.
<F8>Income from continuing and discontinued operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from
The Ziegler Companies, Inc. and subsidiaries financial statements and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,159,921
<RECEIVABLES> 8,485,766
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 62,692,998<F2>
<PP&E> 6,642,938
<TOTAL-ASSETS> 121,102,202
<SHORT-TERM> 31,008,502<F3>
<PAYABLES> 10,532,423<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 21,645,744<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 46,835,992
<TOTAL-LIABILITY-AND-EQUITY> 121,102,202
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 3,740,248
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 23,702,142
<FEE-REVENUE> 4,937,294
<INTEREST-EXPENSE> 2,395,827
<COMPENSATION> 17,813,515
<INCOME-PRETAX> 1,916,678<F7>
<INCOME-PRE-EXTRAORDINARY> 1,241,378<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,005,056<F8>
<EPS-PRIMARY> .84<F8>
<EPS-DILUTED> .84<F8>
<FN>
<F1>Short-term investments includes some securities purchased under resale
agreements.
<F2>Financial instruments includes securities inventory, investment in leases,
notes receivable, and investment in and receivables from affiliates.
<F3>Includes short-term notes payable and unsecured notes payable to banks
under line of credit agreements.
<F4>Includes payable to customers, payable to broker-dealers, accounts payable,
and dividends payable.
<F5>Includes bonds payable and notes payable to banks other than line of credit
borrowings.
<F6>Revenue from investment banking activities also includes revenue from
trading activities and commissions.
<F7>Includes only income from continuing operations.
<F8>Income from continuing and discontinued operations.
</FN>
</TABLE>
