SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BANDO McGLOCKLIN CAPITAL CORPORATION
(Name of Registrant as Specified in its Charter)
BANDO McGLOCKLIN CAPITAL CORPORATION
(Name of person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
____________________________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 17, 1996
____________________________________________________________________
To the Shareholders of Bando McGlocklin Capital Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of Bando McGlocklin Capital Corporation (the "Company") will be held on
Tuesday, December 17, 1996, at 4:00 P.M., local time, in the Superior Room
of the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin
53202, for the following purposes:
1. To elect seven (7) directors for the ensuing year, two
(2) of whom will be elected by holders of the Preferred Stock;
2. To ratify the selection of auditors for the fiscal
year ending June 30, 1997;
3. To approve resolutions that will permit the Company and its
wholly-owned subsidiary Bando McGlocklin Small Business Investment
Corporation ("BMSBIC") to deregister as investment companies as
defined by the Investment Company Act of 1940 (the "1940 Act");
4. To approve a resolution that will permit the Company and
BMSBIC to rescind their fundamental investment policies;
5. To approve resolutions that will amend the articles of
incorporation of the Company to eliminate all provisions relating to
the 1940 Act including the Preferred Stock leverage restrictions; and
6. To consider and act upon any other business that may
properly be brought before the Annual Meeting or any adjournment or
postponement thereof.
The close of business on November 5, 1996, has been fixed as the
record date for the determination of shareholders entitled to receive
notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof.
A proxy and proxy statement are enclosed herewith.
By Order of the Board of Directors
BANDO McGLOCKLIN CAPITAL CORPORATION
Jon McGlocklin
Secretary
November 15, 1996
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE ANNUAL
MEETING, PLEASE DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD
OF DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS, AND RETURN IMMEDIATELY.
<PAGE>
BANDO McGLOCKLIN CAPITAL CORPORATION
P. O. Box 190
Pewaukee, Wisconsin 53072-0190
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 17, 1996
This proxy statement is being furnished to shareholders by the
Board of Directors (the "Board") of Bando McGlocklin Capital Corporation
(the "Company") beginning on or about November 15, 1996, in connection
with a solicitation of proxies by the Board for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held on Tuesday, December 17,
1996, at 4:00 P.M., local time, in the Superior Room of the Milwaukee
Athletic Club, 758 North Broadway, Milwaukee, Wisconsin 53202, and all
adjournments or postponements thereof for the purposes set forth in the
attached Notice of Annual Meeting of Shareholders.
Execution of a proxy given in response to this solicitation will
not affect a shareholder's right to attend the Annual Meeting and to vote
in person. Presence at the Annual Meeting of 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.
A proxy, in the enclosed form, which is properly executed, duly
returned to the Company and not revoked will be voted in accordance with
the instructions contained in the proxy. The shares represented by
executed but unmarked proxies will be voted FOR the persons nominated for
election as directors, FOR the ratification of the Company's selection of
auditors for the fiscal year ending June 30, 1997, FOR the resolutions to
permit the Company and its wholly-owned subsidiary Bando McGlocklin Small
Business Investment Corporation ("BMSBIC") to deregister as investment
companies, FOR the resolution to permit the Company and BMSBIC to rescind
their fundamental investment policies, FOR the resolutions to amend the
articles of incorporation of the Company to eliminate all provisions
relating to the 1940 Act including the Preferred Stock leverage
restrictions, and on such other business or matters which may properly
come before the Annual Meeting in accordance with the best judgment of the
persons named as proxies in the enclosed form of proxy. Other than the
election of directors, the ratification of the selection of auditors, the
resolutions to permit the Company and BMSBIC to deregister as investment
companies, the resolution to permit the Company and BMSBIC to rescind
their fundamental investment policies and the resolutions to permit the
Company to amend its articles of incorporation, the Board has no knowledge
of any matters to be presented for action by the shareholders at the
Annual Meeting.
Only holders of record of the Company's Common Stock, 6-2/3 cents
par value (the "Common Stock"), and Series A Adjustable Rate Cumulative
Preferred Stock, $.01 par value (the "Preferred Stock"), at the close of
business on November 5, 1996, are entitled to vote at the Annual Meeting
and at any adjournment or postponement thereof. Holders of Preferred
Stock are entitled to vote, as a separate voting class, for the election
of two (2) directors of the Company, and on the Deregistration Proposal,
the Fundamental Policy Proposal, the Preferred Stock Issuance Amendment,
the Repurchase Amendment, the Leverage Amendment and the Preferred Stock
Voting Amendment (as defined below). In addition, holders of Preferred
Stock are entitled to vote with holders of Common Stock, as one voting
class, for the election of the remaining five (5) directors of the Company
and the ratification of auditors. On October 9, 1996, the Company had
outstanding and entitled to vote 3,689,094 shares of Common Stock and
674,791 shares of Preferred Stock. The record holder of each outstanding
share is entitled to one vote.
1. ELECTION OF DIRECTORS
At the Annual Meeting, the holders of Preferred Stock will
elect, voting as a separate class, two (2) directors of the Company to
hold office until the next annual meeting and until their successors are
duly elected and qualified. Unless the holders of Preferred Stock
otherwise specify, the shares represented by the proxies received for the
election of two (2) directors will be voted in favor of the election as
directors of Messrs. Cooper and Geraldson. The holders of the Common
Stock and the Preferred Stock will elect, voting as one class, five (5)
directors of the Company to hold office until the next annual meeting and
until their successors are duly elected and qualified. Unless the
shareholders otherwise specify, the shares represented by the proxies
received for the election of five (5) directors will be voted in favor of
the election as directors of the five (5) remaining persons named as
nominees herein. Proxies of holders of Common Stock cannot be voted for
more than five (5) persons and proxies of holders of Preferred Stock
cannot be voted for more than seven (7) persons. The Board has no reason
to believe that any of the listed nominees will be unable or unwilling to
serve as a director if elected. However, in the event that any of the
nominees should be unable or for good cause unwilling to serve, the shares
represented by proxies received will be voted for substitute nominees
selected by the Board. Directors will be elected by a plurality of the
votes cast at the Annual Meeting (assuming a quorum for each vote is
present). Consequently, any shares not voted at the Annual Meeting,
whether due to abstentions, broker non-votes or otherwise, will have no
impact on the election of directors. Votes will be tabulated by
inspectors of election appointed by the Board.
The following table sets forth the nominees for election as
directors of the Company. Except as otherwise noted, each nominee has
engaged in the principal occupation or employment and held the offices
shown for more than the past five years. The table provides information
as of October 9, 1996, as to the age, principal occupation, background for
the last five years and period of service as a director for each person.
Principal Occupation; Office, if any,
Director Held in the
Name Since Age Company; Other Directorships
George R. Schonath* 1980 55 Chairman of the Board and Chief
Executive Officer of the Company;
Chairman of the Board and a Director
of Schonath, Kestly, Bando &
McGlocklin, Inc. (a management
company for real estate investment
trusts) ("SKBM, Inc.").
Jon McGlocklin* 1980 53 President and Secretary of the
Company since November 1991;
Executive Vice President and
Secretary of the Company from
September 1980 to November 1991;
broadcaster for the Milwaukee Bucks
Basketball Club; Executive Vice
President, Secretary and a Director
of SKBM, Inc.
Salvatore L. Bando* 1980 52 Senior Vice President-Director of
Baseball Operations of the Milwaukee
Brewers Baseball Club since November
1991; President and Treasurer of the
Company from September 1980 to
November 1991.
Robert A. Cooper 1987 69 Senior Vice President of Dain
Bosworth Incorporated (a securities
brokerage firm) since September 1988;
Executive Vice President and a
Director of Milwaukee Financial
Group, Inc. (a financial services
holding company) from its
incorporation in 1986 until its
acquisition by Dain Bosworth
Incorporated in September 1988;
Chairman of the Board of The
Milwaukee Company (a securities
brokerage firm and the principal
subsidiary of Milwaukee Financial
Group, Inc.) from 1978 to September
1988.
Peter A. Fischer 1983 53 Director and from 1981 to 1989 the
President and Chief Executive Officer
of Medalist Industries, Inc. (a
manufacturer of industrial and
consumer products); Director of Gehl
Company (a manufacturer and
distributor of agricultural and light
industrial and construction
equipment).
David A. Geraldson 1983 65 President since 1993 and prior
thereto Secretary and Treasurer of
Precision Gears, Inc. (a manufacturer
of gears, splined shafts, speed
reducers and worm gear winches).
Albert O. Nicholas 1995 65 Director and President since 1967 of
Nicholas Company, Inc., a registered
investment advisor; and President of
six registered investment companies
of which Nicholas Company, Inc. is
the investment advisor.
* Messrs. Schonath, McGlocklin and Bando are "interested
persons" of the Company within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940. Messrs. Schonath and
McGlocklin are deemed "interested persons" by virtue of their
being executive officers of the Company and by virtue of their
stock ownership. Mr. Bando is an "interested person" by
virtue of his stock ownership.
THE BOARD RECOMMENDS THE NOMINEES FOR ELECTION AS DIRECTORS AND URGES THE
HOLDERS OF PREFERRED STOCK TO VOTE "FOR" MESSRS. COOPER AND GERALDSON AND
URGES EACH SHAREHOLDER TO VOTE "FOR" ALL OF THE FIVE (5) REMAINING
NOMINEES. SHARES REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED "FOR" ALL APPROPRIATE NOMINEES.
BOARD OF DIRECTORS
The Board has standing Compensation and Audit Committees, but
does not have a nominating committee. The Compensation Committee, which
presently consists of Messrs. Bando, Fischer, Geraldson and Cooper, held
one meeting in the fiscal year ended June 30, 1996. The Compensation
Committee advises the Board on matters relating to the compensation of
officers of the Company, including the grant of stock options under the
Company's 1987, 1990 and 1993 Incentive Stock Option Plans. The Audit
Committee, which presently consists of Messrs. Cooper, Geraldson and
Nicholas, held one (1) meeting in the fiscal year ended June 30, 1996.
The Audit Committee reviews with the Company's independent auditors the
plan and scope of their audit, findings and conclusions of their auditing
engagement, the Company's procedures for internal auditing, the adequacy
of the Company's system of internal controls and the accounting principles
and policies of the Company; evaluates the independence of the independent
auditors and the quality of the professional services provided by the
independent auditors; and recommends to the Board the engagement,
continuation or discharge of the independent auditors.
The Board held five (5) meetings in the fiscal year ended
June 30, 1996. Each director attended at least 75% of the aggregate of
(a) the total number of meetings of the Board and (b) the total number of
meetings held by all committees of the Board on which he served.
Directors who are not officers of the Company are paid an annual
retainer fee of $5,000 plus a $750 fee for each meeting of the Board or a
committee attended. Directors who are officers of the Company receive no
fees for services as directors.
EXECUTIVE OFFICERS
The only persons currently serving as executive officers of the
Company are Messrs. Schonath and McGlocklin. The executive officers of
the Company are elected annually by the Board at its first meeting held
after each annual meeting of the shareholders. Each officer holds his
office until his successor is duly elected or until his prior death,
resignation or removal.
EXECUTIVE COMPENSATION
Cash and Benefit Plan Compensation
The following table sets forth certain information concerning
compensation paid by the Company during the fiscal year ended June 30,
1996, to each executive officer whose aggregate compensation exceeded
$60,000 and to each director. The Company has only two executive
officers.
Pension or
Retirement Total Com-
Benefits Accrued pensation
Aggregate During Fiscal From Company
Name of Person Compensation Year Ended Paid to
and Position from Company June 30, 1996(1) Directors
George R. Schonath
Chairman of the
Board, Chief
Executive Officer
and Director $388,701 $15,000 $403,701
Jon McGlocklin
President,
Secretary
and Director 205,235 15,000 220,235
Salvatore L. Bando
Director 0 0 9,500
Robert A. Cooper
Director 0 0 10,250
Peter A. Fischer
Director 0 0 8,750
David A. Geraldson
Director 0 0 10,250
Albert O. Nicholas
Director 0 0 4,750
_______________
(1) Consists of Company contributions under the Company's 401(k) profit
sharing plan and money purchase plan. The plans cover all of the
Company's employees and are intended to provide for their retirement.
Contributions by the Company to the 401(k) plan are paid in cash and
are dependent both upon the Company's earnings and upon decisions
made by the Compensation Committee of the Board. The Company is
obligated to make contributions to its money purchase plan in amounts
equal to 5% of each participant's total cash compensation. Company
contributions under the plans vest 20% for each year starting with
the employee's second year of credited service. As of June 30, 1996,
the total amount that has been contributed by the Company for Messrs.
Schonath and McGlocklin is $213,149 and $152,432, respectively.
1987, 1990 and 1993 Incentive Stock Option Plans
The Company has in effect the Bando McGlocklin Capital Corporation
1987 Incentive Stock Option Plan (the "1987 Plan"), the Bando McGlocklin
Capital Corporation 1990 Incentive Stock Option Plan (the "1990 Plan") and
the Bando McGlocklin Capital Corporation 1993 Incentive Stock Option Plan
(the "1993 Plan") under which the Compensation Committee of the Board may
grant options to purchase shares of Common Stock to key management
employees of the Company.
On September 3, 1987, options to purchase 50,000 shares of Common
Stock were granted to each of Messrs. Schonath and McGlocklin. The
exercise price of these options is $6.50 per share, which was the fair
market value of a share of Common Stock on the date the options were
granted. All options under the 1987 Plan are incentive stock options as
defined in the Internal Revenue Code of 1986, as amended (the "Code").
Pursuant to the 1987 Plan, each optionee may exercise 25% of the options
in the first year subsequent to their grant and an additional 25% in each
of the following three years. All options must be exercised within ten
years of the date of grant. During the year ended June 30, 1996, Mr.
McGlocklin exercised options for 10,000 shares under the 1987 Plan. At
June 30, 1996, there were no shares of Common Stock for which options were
available to be granted under the 1987 Plan.
On November 27, 1990, options to purchase 57,200 and 36,400 shares
of Common Stock were granted to Messrs. Schonath and McGlocklin,
respectively, under the 1990 Plan. The exercise price of these options is
$8.00 per share, which was the fair market value of a share of Common
Stock on the date the options were granted. All options granted under the
1990 Plan are incentive stock options as defined in the Code. Pursuant to
the 1990 Plan, each optionee may exercise 10% of the options in the first
calendar year subsequent to their grant and an additional 10% in each of
the following nine calendar years. All options must be exercised within
ten years of the date of grant. On August 13, 1993, the Compensation
Committee of the Board granted additional options to purchase 41,720
shares of Common Stock to Mr. Schonath under the 1990 Plan. The exercise
price of these options is $13.25 per share, which was the fair market
value of a share of Common Stock on the date the options were granted. At
June 30, 1996, there were 13,430 shares of Common Stock for which options
were available to be granted under the 1990 Plan. During the year ended
June 30, 1996, Mr. Schonath exercised options for 5,720 shares under the
1990 Plan.
On August 22, 1994, options to purchase 10,000 shares of Common Stock
were granted to each of Messrs. Schonath and McGlocklin under the 1993
Plan. The exercise price for these options is $14.50 per share, which was
the fair market value of a share of Common Stock on the date the options
were granted. Mr. McGlocklin may exercise 10% of the options in each
calendar year subsequent to their grant. Mr. Schonath may not exercise
any options for the first six calendar years after their grant and may
thereafter exercise such options in each of the four subsequent calendar
years according to the following percentages: 30.84% in 2001; 30.84% in
2002; 30.84% in 2003; and 7.48% in 2004. All options granted under the
1993 Plan are incentive stock options as defined in the Code. All options
must be exercised within ten years of the date of grant. At June 30,
1996, there were 10,000 shares of Common Stock for which options were
available to be granted under the 1993 Plan.
The Company has in effect a dividend equivalent bonus plan pursuant
to which the Company pays a quarterly bonus to participants in the 1987
Plan, the 1990 Plan and the 1993 Plan. The amount of the quarterly bonus
for each participant is equal to the quarterly dividend that the
participant would have received had he owned the shares of Common Stock
subject to exercisable options less the interest expense that he would
have incurred had he borrowed the option exercise price pursuant to a loan
bearing interest at a rate floating with the prime rate. During the
fiscal year ended June 30, 1996, the Company did not pay a dividend
equivalent bonus to any employees.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of October 9, 1996, the
number of shares of Common Stock beneficially owned by each nominee for
the Board and each executive officer named in the compensation table,
indicating in each case whether the person has sole power to vote and
dispose of such shares of Common Stock or whether the person shares such
power. The number of shares beneficially owned by the executive officers
and directors of the Company as a group is also set forth. No executive
officer or director of the Company beneficially owns any shares of
Preferred Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
Name of Individual Sole Shared Percent
or Identity of Group Power Power Aggregate of Class
<S> <C> <C> <C> <C>
George R. Schonath
Chairman of the Board, Chief
Executive Officer and
Director 148,306(1)(2) 196,117(1)(3)(4)(5) 344,423 9.3%(9)
Jon McGlocklin
President, Secretary and
Director 70,094(1)(6) 207,765(4)(5)(7)(8) 277,859 7.5%(9)
Salvatore L. Bando
Director 57,490(1) 204,331(4)(7)(8) 261,821 7.1%
Robert A. Cooper
Director 9,000 1,000(8) 10,000 *
Peter A. Fischer
Director 13,202 12,969(1)(8)(13) 26,171 *
David A. Geraldson
Director 11,044 50,701(8)(10) 61,745 1.7%
Albert O. Nicholas
Director 75,000 50,000(11) 125,000 3.4%
All executive officers and
directors as a group
(7 persons) 384,136 416,688 800,824 21.5%(12)
_______________
*Less than one percent
(1) Includes shares held by custodial accounts for minor children.
(2) Includes options to acquire 14,064 shares, which options are
exercisable within 60 days of October 9, 1996.
(3) Includes a total of 26,780 shares held by the Company's 401(k) profit
sharing plan. Louis A. Maier, III, and Mr. Schonath act as co-
trustees for the 401(k) profit sharing plan.
(4) Includes a total of 146,097 shares held by BMS Investment
Corporation, a Wisconsin corporation, all of the outstanding capital
stock of which is owned by Messrs. Bando and McGlocklin and by
custodial accounts for the minor children of Mr. Schonath.
(5) Includes 7,619 shares held in trust and 6,382 shares held in
custodial accounts for the children of Mr. Schonath for which Mr.
McGlocklin acts as trustee or custodian.
(6) Includes options to acquire 32,716 shares for Mr. McGlocklin, which
options are exercisable within 60 days of October 9, 1996.
(7) Includes shares held by the Company's 401(k) profit sharing plan on
behalf of this individual only.
(8) Includes shares held jointly with or by spouse and/or by minor
children.
(9) Assumes the exercise of the options held by this optionee.
(10) Includes a total of 43,619 shares owned by the Precision Gears, Inc.
profit sharing plan for which Mr. Geraldson acts as a co-trustee.
(11) Includes 50,000 shares held by the Nicholas Equity Income Fund, Inc.
(the "Fund"), of which Mr. Nicholas disclaims beneficial ownership.
Mr. Nicholas is President of the Fund and of Nicholas Company, Inc.,
the investment adviser for the Fund.
(12) Assumes the exercise of all options which were currently exercisable
as of or exercisable within 60 days of October 9, 1996.
(13) Includes shares held by a Keough plan on behalf of this individual.
</TABLE>
Beneficial ownership of shares is reported in the foregoing
table and footnotes in accordance with the beneficial ownership rules
promulgated by the Securities and Exchange Commission. Except as set
forth above, management of the Company is aware of no other person who
beneficially owned more than 5% of the outstanding Common Stock or
Preferred Stock at October 9, 1996.
2. AUDITORS
Management will propose the adoption of a resolution ratifying
the Board's decision to retain Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending June 30, 1997. The
Company retained Price Waterhouse LLP as its independent auditors for the
fiscal year ended June 30, 1996. Representatives of Price Waterhouse LLP
are expected to be present at the Annual Meeting with the opportunity to
make a statement if they so desire. Such representatives are also
expected to be available to respond to appropriate questions.
Vote Required
The affirmative vote of the holders of a majority of the shares
of Common Stock and Preferred Stock, voting together, represented and
voting at the Annual Meeting (assuming that a quorum is present) is
required to ratify the selection of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending June 30, 1997. Any shares
not voted at the Annual Meeting (whether as a result of broker non-votes
or otherwise) will have no impact on the vote. Shares of Common Stock and
Preferred Stock as to which holders abstain from voting will have no
impact on the vote.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF AUDITORS. SHARES OF COMMON STOCK AND PREFERRED STOCK
REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED "FOR" THE RATIFICATION OF THE SELECTION OF AUDITORS.
3. DEREGISTRATION AS INVESTMENT COMPANIES
The Company currently conducts most of its business through
BMSBIC, which is registered as a Small Business Investment Company
("SBIC") under the Small Business Investment Act of 1958 and as an
investment company under the 1940 Act. As an SBIC, BMSBIC is subject to
the supervision and regulation of the United States Small Business
Administration ("SBA").
The Company's primary purpose in registering BMSBIC as an SBIC
was to allow it to borrow from the SBA. However, due to changes in SBA
regulations, it has become impracticable for BMSBIC to borrow from the
SBA. BMSBIC's SBIC license currently provides little benefit to BMSBIC
and restricts its operations. Therefore, the Board intends to surrender
BMSBIC's license as an SBIC and no longer have BMSBIC do business as an
SBIC.
Once it is no longer an SBIC, however, BMSBIC would be in
immediate violation of the leverage restrictions of the 1940 Act because
it would no longer be able to rely on an exemption from such restrictions
provided to SBICs, and, in addition, would not be able to meet the
leverage restrictions of the 1940 Act in the future. Therefore, the Board
has proposed that the Company and BMSBIC each deregister as investment
companies under the 1940 Act (the "Deregistration Proposal").
The Board has determined that it is in the best interests of the
Company and its shareholders to deregister the Company and BMSBIC as
investment companies. The Board met six times, on April 24, 1996, June 3,
1996, June 12, 1996, July 18, 1996, August 1, 1996 and September 9, 1996,
to consider the Deregistration Proposal. In addition, the independent
directors of the Company met separately on June 6, 1996 and during several
meetings of the full Board to consider the Deregistration Proposal. In
its deliberations, the Board considered the advantage of forming the Bank
(discussed below) as a source of funds and the disadvantages of the
Company and BMSBIC being 1940 Act companies, in particular the difficulty
of managing operating companies (rather than pooled investment entities)
in compliance with the 1940 Act, as favoring the deregistration of the
Company and BMSBIC. The Board considered the leverage restrictions of
Section 18 of the 1940 Act, the conflict of interests provisions of
Section 17 of the 1940 Act and the restrictive incentive compensation
provisions of Section 17 of the 1940 Act as the primary disadvantages of
operating as 1940 Act companies, particularly in the context of organizing
and operating the Bank.
The Board believes that deregistering the Company and BMSBIC
from the 1940 Act will afford significant benefits. For example, the
Company and BMSBIC will no longer be subject to the bookkeeping, record
keeping and other compliance provisions of the 1940 Act. The Board
believes that deregistering from the 1940 Act will give greater
flexibility to the Company's and BMSBIC's dealings with the Bank
(discussed below) and will also give the Bank greater flexibility in
fashioning compensation and incentive programs for its employees.
Proposed Operations After Deregistration
After deregistration, the Board has proposed that the Company
and BMSBIC operate as real estate investment trusts ("REITs") pursuant to
Section 856 of the Code. The Board believes that both the Company and
BMSBIC will qualify as REITs, thereby preserving for the Company and its
shareholders the favorable pass-through treatment for federal income tax
purposes afforded to regulated investment companies. The Company and
BMSBIC will each continue primarily to make loans to small businesses
secured by real estate mortgages, and will have greater flexibility in
making such loans and operating their businesses since BMSBIC will not be
an SBIC licensed by the SBA and neither the Company nor BMSBIC will be
registered investment companies.
After it is no longer a registered investment company, the
Company intends to acquire 90.9% of the non-voting stock (approximately
90% of the total equity) of a new Wisconsin-chartered bank (the "Bank"),
which will be located in Pewaukee, Wisconsin. George R. Schonath,
Chairman of the Board and Chief Executive Officer of the Company, will own
all of the voting common stock of the Bank (approximately one percent of
the total equity) and the remaining non-voting stock (approximately nine
percent of the total equity) will be held by a limited partnership
controlled by Mr. Schonath (the "Limited Partnership"). In addition, it
is anticipated that the Bank will grant Mr. Schonath a warrant to purchase
such number of additional shares of non-voting stock as will enable him
and the Limited Partnership to own 20% of the total equity of the Bank,
assuming that the warrant was exercised immediately upon its grant. The
warrant will have a warrant exercise price of 110% of the initial purchase
price of the Bank stock, expire in five (5) years from date of grant and
be transferable. The Company and Mr. Schonath will each pay the same
price per share for their initial purchase of interests in the Bank. The
Company must acquire non-voting common stock in order to qualify as a REIT
because a REIT cannot own more than 10% of the voting securities of
another company.
The Board has determined that the advantages of deregistering
from the 1940 Act and qualifying for REIT status offset the disadvantages
of holding non-voting stock in the Bank. While the Company will not have
voting rights in the Bank, it will have all of the same economic rights as
the holder of voting stock, such as the right to dividends, other
distributions and proceeds upon liquidation and dissolution of the Bank.
The non-voting stock will remain non-voting so long as held by the Company
but will automatically become voting stock upon the sale or distribution
of BMSBIC stock by the Company or the sale of Bank stock in a public
offering, distribution of Bank stock to the shareholders of the Company or
the sale of the Bank to a third party. Thus, the voting stock owned by
Mr. Schonath will be diluted upon the conversion of the Company's non-
voting stock to voting stock in any of such circumstances. It is
anticipated that after the Company and BMSBIC are deregistered from the
1940 Act, the Company and Mr. Schonath will execute an agreement (the
"Shareholders' Agreement") whereby the Company will be granted a right of
first refusal to purchase or cause the purchase of the voting stock in the
event that Mr. Schonath seeks to sell or otherwise transfer such stock.
The Shareholders' Agreement will also contain certain buy-sell provisions
relating to the voting stock and the non-voting stock held by the Limited
Partnership in the event of Mr. Schonath's death, disability or
termination of employment. Under current law, if the Company purchases
the voting stock, it will no longer be entitled to REIT status under the
Code and instead will be taxed as a corporation.
After deregistration, it is anticipated that Mr. Schonath will
be granted a one percent interest in Bando McGlocklin Investment
Corporation, currently a wholly-owned subsidiary of the Company ("BMIC"),
which will represent 100% of the voting stock of BMIC. The Company will
own 100% of the non-voting stock in BMIC, representing 99% of the total
equity in BMIC. It is planned that BMSBIC's 51% ownership in two
companies which it acquired as part of loan workouts with such companies
will be transferred to BMIC. The grant of the voting stock interest in
BMIC to Mr. Schonath is necessary to allow the Company to retain its 51%
interest in each of such companies, while at the same time qualifying for
REIT status.
When the Company deregisters under the 1940 Act, it will
continue to be a publicly-held company and will continue to be subject to
the reporting and other requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act"). The Company believes that compliance
with the requirements of the 1934 Act will provide sufficient protection
to its shareholders to make continued registration under the 1940 Act
unnecessary.
Regulatory Effects of Deregistration as an Investment Company.
The 1940 Act regulates the activities of registered investment
companies and will no longer apply to the Company and BMSBIC if they
deregister as investment companies. Among other things, the 1940 Act
prohibits the Company and BMSBIC from changing the nature of their
business or their fundamental investment policies without prior approval
of a majority of the Company's outstanding voting securities; regulates
the composition of the Board by (1) prohibiting investment bankers and
securities broker-dealers from constituting more than a minority of the
directors; (2) limiting the number of "interested persons" (as defined by
the 1940 Act) who may be directors to 60% or less of the total number of
directors; and (3) preventing officers, directors or employees of any one
bank from constituting more than a minority of the directors; prohibits
most transactions between the Company and BMSBIC, and their affiliated
persons, including directors and officers, unless such transactions fall
within certain exemptions permitted by the 1940 Act or are first approved
by the SEC; regulates the capital structure of the Company and BMSBIC by
restricting the issuance of senior securities; restricts the issuance of
stock options, rights and warrants; prohibits voting trusts; prohibits the
Company and BMSBIC from having as officers, directors or employees persons
who have been found guilty of certain securities law or other violations;
and requires shareholder ratification of the selection of the Company's
independent accountants.
If the SEC issues orders (the "Deregistration Orders") that the
Company and BMSBIC are not "investment companies" under the 1940 Act, the
Company and BMSBIC will no longer be subject to the regulatory provisions
of the 1940 Act summarized above. In the event the SEC rejects the
applications for the Deregistration Orders, the Company and BMSBIC would
continue to be "investment companies" under the 1940 Act.
Tax Consequences of Ceasing to be an Investment Company.
Currently, the Company qualifies and has elected to be treated
as a regulated investment company under Subchapter M ("Subchapter M") of
the Code. So long as the Company continues to qualify for treatment as a
regulated investment company it will generally be taxed as a pass through
entity that passes through income to its shareholders by allowing the
Company to deduct the amount of dividends paid to its shareholders in
computing its taxable income. As a result, the Company's distributed net
income can be passed through to its shareholders free of tax at the
corporate level. In addition, the character of the Company's long term
capital gain income can be maintained and passed through to the
shareholders of the Company. Dividends paid to shareholders from the
Company's taxable income and distributions to shareholders of the
Company's net capital gains are taxable to shareholders as ordinary income
and capital gains, respectively.
As discussed above, the Board has proposed that the Company and
BMSBIC operate as REITs. The Board believes that both the Company and
BMSBIC will qualify as REITs under Section 856 of the Code, which
generally will preserve the favorable pass through treatment for Federal
income tax purposes that the Company currently enjoys as a regulated
investment company. So long as the Company continues to qualify for
treatment as a REIT, it generally will be taxed as a pass through entity
that passes through income to the shareholders of the Company by allowing
the Company to deduct the amount of dividends paid in computing its
taxable income. Consequently, the Company's distributed net income can be
passed through to its shareholders free of tax at the corporate level. In
addition, the character of the Company's long-term capital gain income can
be maintained and passed through to the shareholders of the Company.
Dividends paid to shareholders from the Company's taxable income and
distributions to shareholders of the Company's net capital gains are
taxable to shareholders as ordinary income and long-term capital gains,
respectively.
There is no assurance that the Company or BMSBIC will qualify
for REIT status, or if they so qualify, that they will maintain their REIT
status. In the event that either of them fail to qualify for or maintain
their REIT status, such companies will be required to pay corporate income
tax, thereby resulting in a reduction in the dividends payable by the
Company in the approximate amount of the corporate income taxes paid by
the Company and BMSBIC.
Regulation As A Bank Holding Company
After the Company acquires its interest in the Bank, the Company
will be required to register as a bank holding company under the Bank
Holding Company Act, as amended (the "BHCA"), and will be subject to
regulation by the Federal Reserve Board. In accordance with Federal
Reserve policy, the Company will be expected to act as a source of
financial strength to the Bank and to commit resources to support the Bank
in circumstances where the Company might not do so absent such policy.
Under the BHCA, the Company will be subject to periodic examination by the
Federal Reserve Board and will be required to file periodic reports of its
operations and such additional information as the Federal Reserve Board
may require.
Investments and Activities. Under the BHCA, a bank holding
company must obtain Federal Reserve Board approval before: (i) acquiring,
directly or indirectly, ownership or control of any voting shares of
another bank or bank holding company if, after such acquisition, it would
own or control more than 5% of such shares (unless it already owns or
controls the majority of such shares); (ii) acquiring all or substantially
all of the assets of another bank or bank holding company; or (iii)
merging or consolidating with another bank holding company.
The BHCA generally prohibits the Company from acquiring direct
or indirect ownership or control of more than 5% of the voting shares of
any company that is not a bank and from engaging in any business other
than that of banking, managing and controlling banks or furnishing
services to banks and their subsidiaries. Notwithstanding this general
prohibition, however, the BHCA provides that bank holding companies may
engage in, and may own shares of companies engaged in, certain businesses
found by the Federal Reserve Board to be "so closely related to banking .
. . as to be a proper incident thereto." Under current regulations of the
Federal Reserve Board, the Company and its non-bank subsidiaries are
permitted to engage in, among other activities, such banking-related
businesses as the operation of a thrift, sales and consumer finance,
equipment leasing, and mortgage banking and brokerage. The BHCA does not
place territorial restrictions on the activities of non-bank subsidiaries
of bank holding companies.
Capital Requirements. The Federal Reserve Board uses capital
adequacy guidelines in its examination and regulation of bank holding
companies. If capital falls below minimum guideline levels, a bank
holding company may, among other things, be denied approval to acquire or
establish additional banks or non-bank businesses.
The Federal Reserve Board's capital guidelines establish the
following minimum regulatory capital requirements for bank holding
companies: a risk-based requirement expressed as a percentage of total
risk-weighted assets, and a leverage requirement expressed as a percentage
of total assets. The risk-based requirement consists of a minimum ratio
of total capital to total risk-weighted assets of 8%, of which at least
one-half must be Tier 1 capital (which consists principally of
stockholders' equity). The leverage requirement consists of a minimum
ratio of Tier 1 capital to total assets of 3% for the most highly rated
companies, with minimum requirements of 4% to 5% for all others.
The risk-based and leverage standards presently used by the
Federal Reserve Board are minimum requirements, and higher capital levels
may be required if warranted by the particular circumstances or risk
profiles of individual banking organizations. Further, any banking
organization experiencing or anticipating significant growth would be
expected to maintain capital ratios, including tangible capital positions
(i.e., Tier 1 capital less all intangible assets), well above the minimum
levels. The Federal Reserve Board's regulations provide that the
foregoing capital requirements will generally be applied on a bank-only
(rather than a consolidated) basis in the case of a bank holding company
with less than $150 million in total consolidated assets, such as the
Company.
Dividends. The Federal Reserve Board has issued a policy
statement on the payment of cash dividends by bank holding companies. In
the policy statement, the Federal Reserve Board expressed its view that a
bank holding company experiencing earnings weaknesses should not pay cash
dividends exceeding its net income or which could only be funded in ways
that weakened the bank holding company's financial health, such as by
borrowing. Additionally, the Federal Reserve Board possesses enforcement
powers over bank holding companies and their non-bank subsidiaries to
prevent or remedy actions that represent unsafe or unsound practices or
violations of applicable statutes and regulations. Among these powers is
the ability to proscribe the payment of dividends by banks and bank
holding companies. If the Federal Reserve Board were to limit the payment
of dividends, the Company and BMSBIC would likely fail to meet the income
distribution requirements necessary to maintain REIT status, thereby
requiring that such companies pay corporate income taxes on their
earnings. In such event, the dividends payable by the Company would be
reduced by the greater of (i) the approximate amount of the corporate
income taxes paid by the Company and BMSBIC, or (ii) the amount of
dividends prohibited by the Federal Reserve Board.
Vote Required
A condition to the Order issued by the SEC (the "Order")
authorizing the creation of the Company's holding company structure,
Condition 2, requires that any change in the nature of BMSBIC's business
such that BMSBIC ceases to be an investment company must be approved by
the shareholders of the Company. Therefore, the proposal to deregister
the Company and BMSBIC as investment companies will be considered as
separate proposals at the Annual Meeting, labeled 3(i) and 3(ii),
respectively, on the enclosed Proxy.
The affirmative vote of the holders of a majority of the shares
of Preferred Stock voting as a separate group and the affirmative vote of
holders of the lesser of: (a) 67% of the Common Stock and Preferred
Stock, voting together, present or represented at the Annual Meeting
(assuming that holders of more than 50% of the outstanding shares of
Common Stock and Preferred Stock as of the record date for the Annual
Meeting are present or represented at the Annual Meeting); and (b) a
majority of the outstanding shares of Common Stock and Preferred Stock,
voting together, is required to approve the Deregistration Proposal. Any
shares of Common Stock and Preferred Stock not voted, whether as a result
of abstentions, broker non-votes or otherwise, will have the effect of a
vote against the Deregistration Proposal. Votes will be tabulated by
inspectors of election appointed by the Board.
Approval of the Deregistration Proposal is conditioned upon the
issuance of the Deregistration Orders. In the event the Deregistration
Orders are not issued, the Company and BMSBIC will not be deregistered as
investment companies.
THE BOARD RECOMMENDS A VOTE "FOR" THE DEREGISTRATION PROPOSAL.
SHARES OF COMMON STOCK AND PREFERRED STOCK REPRESENTED AT THE ANNUAL
MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" THE
DEREGISTRATION PROPOSAL.
4. RESCIND FUNDAMENTAL INVESTMENT POLICIES
The Company's fundamental investment policies govern the
Company's activities as a registered investment company. The Company's
current fundamental investment policies: (i) permit the Company to
operate as a non-diversified closed-end management investment company;
(ii) permit the Company to issue senior securities to the extent allowed
under the 1940 Act; (iii) prohibit the Company from effecting short sales,
purchasing securities on margin (other than shares of Common Stock or
Preferred Stock) or writing put and call options (other than pursuant to
stock option plans for directors, officers and employees of the Company or
its subsidiaries and other than for transactions effected by the Company
for the purpose of managing interest rate risk); (iv) permit the Company
to borrow money to the extent allowed under the 1940 Act; (v) permit the
Company both to engage in the business of purchasing or selling real
estate and to purchase or sell real estate mortgage loans; and (vi) permit
the Company to make loans to the extent permitted under applicable law.
Condition 2 to the Order requires the fundamental investment
policies of the Company and BMSBIC be identical. Assuming the
Deregistration Proposal is approved by the shareholders of the Company and
the SEC issues the Deregistration Orders, neither the Company nor BMSBIC
will be registered investment companies under the 1940 Act and, therefore,
will not be required to maintain fundamental investment policies.
Accordingly, the Board has unanimously approved and recommends that
shareholders approve a proposal to rescind the fundamental investment
policies of the Company and BMSBIC in their entirety (the "Fundamental
Policy Proposal").
The fundamental investment policies of the Company and BMSBIC,
as currently in effect, are set forth as Exhibit A to this Proxy
Statement.
Vote Required
The affirmative vote of the holders of a majority of the shares
of the Preferred Stock, voting as a separate group, and the affirmative
vote of holders of the lesser of: (a) 67% of the Common Stock and
Preferred Stock, voting together, present or represented at the Annual
Meeting (assuming that holders of more than 50% of the outstanding shares
of Common Stock and Preferred Stock as of the record date for the Annual
Meeting are present or represented at the Annual Meeting); and (b) a
majority of the outstanding shares of Common Stock and Preferred Stock,
voting together, is required to approve the Fundamental Policy Proposal.
Any shares of Common Stock and Preferred Stock not voted, whether as a
result of abstentions, broker non-votes or otherwise, will have the effect
of a vote against the Fundamental Policy Proposal. Votes will be
tabulated by inspectors of election appointed by the Board.
Approval of the Fundamental Policy Proposal is conditioned upon
the approval of the Deregistration Proposal by the shareholders of the
Company and upon the issuance of the Deregistration Orders. In the event
that the Deregistration Proposal is not approved or the Deregistration
Orders are not issued, the fundamental investment policies of the Company
and BMSBIC will not be rescinded.
THE BOARD RECOMMENDS A VOTE "FOR" THE FUNDAMENTAL POLICY
PROPOSAL. SHARES OF COMMON STOCK AND PREFERRED STOCK REPRESENTED AT THE
ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" THE
FUNDAMENTAL POLICY PROPOSAL.
5. AMEND ARTICLES OF INCORPORATION.
The Board has unanimously approved and recommends that the
shareholders approve amendments to the Company's Articles of Incorporation
which: (i) eliminate 1940 Act restrictions on future issuances of
preferred stock (the "Preferred Stock Issuance Amendment"), (ii) eliminate
1940 Act restrictions on the acquisition of Common Stock or Preferred
Stock by the Company (the "Repurchase Amendment"), (iii) eliminate certain
Preferred Stock voting rights required under the 1940 Act (the "Preferred
Stock Voting Amendment") and (iv) eliminate the Preferred Stock leverage
restrictions required by the 1940 Act (the "Leverage Amendment"). Article
VIII of the Articles of Incorporation, as proposed to be amended by the
Preferred Stock Issuance Amendment, the Leverage Amendment, and the
Preferred Stock Voting Amendment, is set forth as Exhibit B to this Proxy
Statement. Article IX of the Articles of Incorporation, as proposed to be
amended by the Repurchase Amendment, is set forth as Exhibit C to this
Proxy Statement.
A summary description of each of the proposed amendments is set
forth below. The following discussion is not intended to be complete and
any reference to the proposed amendments is qualified in its entirety by
reference to the complete text of the proposed amendments set forth in
Exhibits B and C. Shareholders are urged to review carefully the text of
each of the proposed amendments.
5(i) Preferred Stock Issuance Amendment
Article VIII of the Company's Articles of Incorporation
authorizes the Board to establish and designate from time to time one or
more series of preferred stock (in addition to the Preferred Stock
currently outstanding, which was previously created pursuant to this
authority) without further authorization of the Company's shareholders,
subject to any applicable limitations under the 1940 Act and Wisconsin
law. If the Deregistration Proposal is approved by the shareholders of
the Company and the Deregistration Orders are issued, the Company will no
longer be subject to the 1940 Act. However, Article VIII would continue
to subject future issuances of preferred stock by the Company to the
restrictions of the 1940 Act even though the Company would no longer be an
investment company. Accordingly, the Board has unanimously approved and
recommends that shareholders approve the Preferred Stock Issuance
Amendment, which would eliminate the 1940 Act restrictions from future
issuances of preferred stock (assuming the Company is deregistered as an
investment company). The Preferred Stock Issuance Amendment would only
affect shares of any new series of preferred stock that may be created in
the future.
The Company's Articles of Incorporation incorporate certain 1940
Act restrictions relating to the Company's capital structure. As a
condition to the formation of its current holding company structure, the
Company obtained the Order clarifying these 1940 Act restrictions. One of
the conditions to the Order prohibits the Company and BMSBIC from issuing
any senior security except certain senior securities representing
indebtedness, and prohibits the Company from issuing more than one class
of senior security which is a stock. The Preferred Stock Issuance
Amendment will, if adopted, eliminate these restrictions from the Articles
of Incorporation.
In addition, the Articles of Incorporation incorporate certain
1940 Act restrictions relating to the issuance of preferred stock. Under
the 1940 Act as clarified by the Order, to issue shares of preferred stock
the Company, both on a parent company only and on a consolidated basis, is
required to have an asset coverage ratio of at least 200%. This asset
coverage ratio is determined by calculating the ratio between (a) the
Company's total assets, less all liabilities and indebtedness not
represented by senior securities, and (b) the total amount of the
Company's senior securities representing indebtedness plus the aggregate
of the involuntary liquidation preference of all shares of preferred stock
outstanding. The Preferred Stock Issuance Amendment will, if adopted,
allow the Board to issue shares of preferred stock (of either Preferred
Stock or any new series of preferred stock) without regard to the asset
coverage ratio.
The Articles of Incorporation also incorporate certain 1940 Act
voting requirements. The 1940 Act requires that, except as described
below, the Common Stock and preferred stock have equal voting rights of
one vote per share and vote together as a single class. In elections of
directors, however, the 1940 Act requires that the holders of preferred
stock, as a separate class, have the right to elect two directors and that
the remaining directors generally be elected by the holders of Common
Stock and preferred stock voting together as a single class. During any
period in which the Company has not paid dividends then due and payable on
the preferred stock in an amount equal to two full years' dividends, the
holders of preferred stock (including the Preferred Stock), voting as a
single class, would be entitled to elect the smallest number of additional
directors as would be necessary to assure that a majority of the directors
had been elected by the holders of preferred stock. No changes are being
made to this provision. Therefore, the holders of preferred stock
(including the Preferred Stock) will continue to have such voting rights.
5(ii) Repurchase Amendment
Article IX of the Company's Articles of Incorporation authorizes
the Company to repurchase shares of Common Stock and Preferred Stock
subject to any applicable limitations under Wisconsin law and the 1940
Act. If the Deregistration Proposal is approved by the shareholders of
the Company and the Deregistration Orders are issued, the Company will no
longer be subject to the 1940 Act. However, Article IX would continue to
subject future repurchases of the Company's stock to the restrictions of
the 1940 Act even though the Company were no longer an investment company.
Accordingly, the Board has unanimously approved and recommends that
shareholders approve the Repurchase Amendment.
The reacquisition of shares of either Common Stock or Preferred
Stock is currently subject to the limitations imposed by the 1940 Act and
Wisconsin law. Section 23(c) of the 1940 Act permits closed-end
investment companies, such as the Company, to repurchase shares on a
securities exchange or NASDAQ if within the previous 6 months the
investment company had informed shareholders of such intention by letter
or report to shareholders. This restriction would be eliminated by the
Repurchase Amendment.
Under Wisconsin law, corporations may repurchase shares unless
if, after giving effect to the repurchase, (a) the corporation would not
be able to pay its debts as they become due in the ordinary course of
business, or (b) the corporation's total assets would be less than the sum
of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of repurchase, to satisfy the
preferential rights of preferred shareholders upon dissolution. This
restriction arising under Wisconsin law would not be changed by the
Repurchase Amendment.
5(iii) Preferred Stock Voting Amendment
The Company's Articles of Incorporation incorporate provisions
of the 1940 Act that provide for a class vote to approve the adoption of
any plan of reorganization adversely affecting the holders of Preferred
Stock or any action requiring a vote of security holders under Section
13(a) of the 1940 Act, including changes in the Company's
subclassification as a closed-end investment company, deviations from the
Company's fundamental investment policies and changes in the Company's
business that cause the Company to no longer be an investment company.
The Preferred Stock Voting Amendment will, if approved by shareholders,
eliminate these voting provisions.
The Preferred Stock Voting Amendment generally will have little
effect on the voting rights of the Company's shareholders. An operating
company, such as the Company after deregistration (assuming the
Deregistration Proposal is approved and the Deregistration Orders are
issued), would not be affected by Section 13(a) of the 1940 Act because
the actions specified in such section apply only to investment companies.
In addition, the holders of the Preferred Stock and Common Stock will
continue to have the right to vote as a separate class in such instances
as prescribed by Wisconsin law, including with respect to certain
amendments of the Company's Articles of Incorporation, such as amendments
which effect a reclassification or exchange of the Preferred Stock; or a
change, in a manner prejudicial to the holders of outstanding shares of
Preferred Stock, in the designation, rights, preferences or limitations of
all or a part of such shares.
5(iv) Leverage Amendment
Article VIII of the Company's Articles of Incorporation
currently provides that the Company may not declare dividends or other
distributions on the Common Stock (other than a dividend paid in Common
Stock) or purchase any shares of Common Stock or Preferred Stock
(including redemptions of Preferred Stock), if at the time of the
declaration or purchase (and after giving effect thereto), the asset
coverage ratio would be less than 200%. The asset coverage ratio is
determined in accordance with the provisions of the 1940 Act by
calculating the ratio between (a) the Company's total assets, less all
liabilities and indebtedness not represented by senior securities, and (b)
the total amount of Company's senior securities representing indebtedness
plus the aggregate of the involuntary liquidation preference of all shares
of Preferred Stock outstanding. The asset coverage ratio must be met both
on a parent company only and on a consolidated basis. In determining
whether the Company on a consolidated basis has the asset coverage
required by Article VIII, any borrowings of BMSBIC are treated as
indebtedness not represented by senior securities. The Company's asset
coverage ratio was 210% as of September 30, 1996.
These leverage restrictions were incorporated from the 1940 Act
and, unless the Leverage Amendment is adopted, will continue in force if
the Company deregisters from the 1940 Act and is no longer a registered
investment company. As discussed above, once BMSBIC is no longer an SBIC,
the Company would be in immediate violation of these leverage restrictions
and would not be able to comply with these leverage restrictions in the
future. The Leverage Amendment will, if adopted, eliminate these
restrictions from the Articles of Incorporation. The Board has
unanimously approved and recommends that shareholders approve the Leverage
Amendment.
The foregoing limitations on dividends and distributions could,
under certain circumstances, impair the Company's ability to make such
distributions, and, as a consequence, result in the Company failing to
qualify as a REIT or regulated investment company for Federal income tax
purposes. This would result in a corporate level tax being imposed on the
Company's taxable income as well as distributions to shareholders being
subject to taxation.
These leverage restrictions could also restrict the ability of
the Company to redeem shares of Preferred Stock, which shares are subject
to mandatory redemption on July 1, 2008, and optional redemption during
certain periods between July 1, 2001 and June 30, 2008. If the Leverage
Amendment is not adopted and the Company did not have sufficient assets on
the redemption date to redeem the Preferred Stock without violating the
asset coverage ratio, then: (i) in the case of a mandatory redemption, no
shares of Preferred Stock would be redeemed until the Company had
sufficient assets to redeem all of the Preferred Stock without violating
the asset coverage ratio and (ii) in the case of an optional redemption,
the Company would redeem shares of Preferred Stock to the extent it had
sufficient assets to redeem such shares without violating the asset
coverage ratio and would select the shares to be redeemed by lot, on a pro
rata basis, or by such other method as the Board deems fair and equitable.
In no such situation, however, would the Company be able to redeem shares
of Preferred Stock if such redemption causes the Company to violate the
asset coverage ratio.
Vote Required
The affirmative vote of the holders of a majority of the shares
of Preferred Stock voting as a separate group and the affirmative vote of
the holders of a majority of the shares of Common Stock and Preferred
Stock voting together at the Annual Meeting (assuming a quorum is present)
is required to approve the Preferred Stock Issuance Amendment, the
Repurchase Amendment, the Preferred Stock Voting Amendment and the
Leverage Amendment. Assuming the existence of a quorum, any shares of
Common Stock or Preferred Stock not voted at the Annual Meeting, whether
due to abstentions, broker non-votes, or otherwise, will have no impact on
the Preferred Stock Issuance Amendment, the Repurchase Amendment, the
Preferred Stock Voting Amendment or the Leverage Amendment.
Approval of the Preferred Stock Issuance Amendment, the
Repurchase Amendment, the Preferred Stock Voting Amendment and the
Leverage Amendment is conditioned upon the approval of the Deregistration
Proposal by the shareholders of the Company and upon the issuance of the
Deregistration Orders. In the event that the Deregistration Proposal is
not approved or the Deregistration Orders are not issued, the Articles of
Incorporation of the Company will not be amended.
THE BOARD RECOMMENDS A VOTE "FOR" THE PREFERRED STOCK ISSUANCE
AMENDMENT, THE REPURCHASE AMENDMENT, THE PREFERRED STOCK VOTING AMENDMENT
AND THE LEVERAGE AMENDMENT. SHARES OF COMMON STOCK AND PREFERRED STOCK
REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED "FOR" THE PREFERRED STOCK ISSUANCE AMENDMENT, THE REPURCHASE
AMENDMENT, THE PREFERRED STOCK VOTING AMENDMENT AND THE LEVERAGE
AMENDMENT.
SHAREHOLDER PROPOSALS
Proposals that shareholders of the Company intend to present at
the 1997 Annual Meeting and have included in the Company's proxy statement
must be received by the Company no later than July 1, 1997.
MISCELLANEOUS
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 and
regular employees of the Company. It is not anticipated that anyone will
be specially engaged to solicit proxies or that special compensation will
be paid for that purpose. The Company may reimburse brokers and other
nominees for their expenses in communicating with the persons for whom
they hold Common Stock or Preferred Stock.
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors to file reports of
ownership and changes in ownership with the SEC and furnish copies of such
reports to the Company. Based solely on a review of the copies of such
forms furnished to the Company, or written representations that no Form 5
was required to be filed, the Company believes that all of its executive
officers and directors have complied with the Section 16(a) filing
requirements on a timely basis.
Receipt at the Annual Meeting of reports from management of the
Company will not constitute approval or disapproval of any matters
referred to in such reports.
By Order of the Board of Directors
BANDO McGLOCKLIN CAPITAL CORPORATION
Jon McGlocklin
Secretary
November 15, 1996
<PAGE>
EXHIBIT A
PROPOSED AMENDMENTS TO
THE FUNDAMENTAL INVESTMENT POLICIES OF
BANDO McGLOCKLIN CAPITAL CORPORATION AND
BANDO McGLOCKLIN SMALL BUSINESS INVESTMENT CORPORATION
Proposed additions are between forward slashes. Proposed
deletions are bracketed.
__________________________
[(a) The Company is permitted to operate as a non-diversified
closed-end management investment company.
(b) The Company is permitted to issue the maximum amount of
senior securities allowed under the 1940 Act.
(c) The Company is not permitted to effect short sales,
purchase securities on margin (other than shares of Common Stock or
Preferred Stock) or write put and call options (other than pursuant
to stock option plans for directors, officers and employees of the
Company or its subsidiaries and other than for transactions effected
by the Company for the purpose of managing interest rate risk).
(d) The Company is permitted to borrow the maximum amount of
money allowed under the 1940 Act.
(e) The Company is not permitted to engage in the business of
underwriting the securities of other issuers.
(f) The Company is prohibited from concentrating more than 25%
of the value of its assets, determined at the time an investment is
made, exclusive of U.S. government securities, in securities issued
by companies primarily engaged in the same industry.
(g) The Company is permitted to engage in the business of
purchasing or selling real estate. The Company also is permitted to
purchase or sell real estate mortgage loans.
(h) The Company is not permitted to engage in the purchase or
sale of commodities or commodity contracts except financial futures.
(i) The Company is permitted to make loans to the extent
permitted under applicable law.]
<PAGE>
EXHIBIT B
PROPOSED AMENDMENTS TO ARTICLE VIII OF
THE ARTICLES OF INCORPORATION OF
BANDO McGLOCKLIN CAPITAL CORPORATION
Proposed additions are between forward slashes. Proposed
deletions are bracketed.
__________________________
AUTHORIZED SHARES
The aggregate number of shares which the corporation shall have
authority to issue shall be eighteen million (18,000,000), consisting
of: (i) fifteen million (15,000,000) shares of a class designated as
"Common Stock," with a par value of 6 cents per share; and (ii)
three million (3,000,000) shares of a class designated as "Preferred
Stock," with a par value of $.01 per share.
The designation, relative rights, preferences and limitations of
each class and the authority of the Board of Directors of the
corporation to establish and to designate series of Preferred Stock
and to fix variations in the relative rights, preferences and
limitations as between such series, shall be as set forth herein.
A. Preferred Stock
(1) Series and Variations Between Series. [Subject to any
applicable limitations under the Investment Company Act of 1940 (such
Act as amended from time to time is referred to herein as the "1940
Act"), t] /T/he Board of Directors of the corporation is authorized
to the full extent permitted under the Wisconsin Business Corporation
Law to provide for the issuance of Preferred Stock in series, each of
such series to be distinctively designed, and to have such redemption
rights, dividend rights, rights on dissolution or distribution of
assets, conversion or exchange rights, voting powers, designations,
preferences and relative participating, optional or other special
rights, if any, and such qualifications, limitations or restrictions
thereof as shall be provided by the Board of Directors of the
corporation consistent with the provisions of this Article VIII.
(2) Dividends. Before any dividends shall be paid or set apart
for payment upon shares of Common Stock, the holders of each series
of Preferred Stock shall be entitled to receive dividends at the rate
(which may be fixed or variable) and at such times as specified in
the particular series. The holders of shares of Preferred Stock
shall have no rights to participate with the holders of shares of
Common Stock in any distribution of dividends in excess of the
preferential dividends, if any, fixed for such Preferred Stock.
(3) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
corporation, the holders of shares of each series of Preferred Stock
shall be entitled to receive out of the assets of the corporation in
money or money's worth the preferential amount, if any, specified in
the particular series for each share at the time outstanding together
with all accrued but unpaid dividends thereon, before any of such
assets shall be paid or distributed to the holders of shares of
Common Stock. The holders of shares of Preferred Stock shall have no
rights to participate with the holders of shares of Common Stock in
the assets of the corporation available for distribution to
shareholders in excess of the preferential amount, if any, fixed for
such Preferred Stock.
(4) Voting Rights. The holders of Preferred Stock shall have
only such voting rights as are fixed for shares of each such series
by the Board of Directors pursuant to this paragraph A or are
provided, to the extent applicable, by the Wisconsin Business
Corporation Law [or the 1940 Act].
(5) Series A Preferred Stock.
(a) Designation. The corporation is authorized to issue a
series of Preferred Stock which is hereby designated Adjustable Rate
Cumulative Preferred Stock, Series A (the "Series A Preferred
Stock"). The number of shares of Series A Preferred Stock shall be
limited to 690,000. The stated value and liquidation preference (the
"Liquidation Preference") of the Series A Preferred Stock shall be
$25.00 per share.
(b) Dividends.
1. With respect to each dividend period, holders of
Series A Preferred Stock shall be entitled to receive when, as
and if declared by the corporation's Board of Directors, out of
funds legally available therefor, cumulative dividends payable
on shares of the Series A Preferred Stock at the Applicable Rate
(as defined in paragraph (b)2. below) in respect of the
Liquidation Preference. All dividends described in this
paragraph (b)1. shall be payable quarterly in cash on the
January 1, April 1, July 1 and October 1 of each year (each of
such dates being a "Dividend Payment Date"), commencing January
1, 1994, except that if the day that otherwise would be the
Dividend Payment Date is not a Business Day (as defined below),
then the Dividend Payment Date shall be the next succeeding
Business Day. Such dividends shall be paid to the holders of
record at the close of business on the December 15, March 15,
June 15 and September 15 next preceding the applicable Dividend
Payment Date. Each of such quarterly dividends shall be fully
cumulative and shall accrue (whether or not declared), without
interest, from the first day of each quarterly dividend period
(hereinafter referred to as a "Quarterly Dividend Period"),
except that with respect to the initial Quarterly Dividend
Period (the "Initial Quarterly Dividend Period"), such dividend
shall accrue from the date of the original issuance of the
shares of Series A Preferred Stock. The amount of dividends
payable on shares of Series A Preferred Stock for each full
Quarterly Dividend Period shall be computed by dividing by four
(and rounding to the nearest penny) the product of the
Applicable Rate (as defined in paragraph (b)2. below) for such
Quarterly Dividend Period and the Liquidation Preference.
Dividends payable on the Series A Preferred Stock for the
Initial Quarterly Dividend Period and any period less than a
full quarterly period shall be computed on the basis of a 360-
day year of twelve 30-day months and the actual number of days
elapsed in the period for which the dividend is payable. As
used herein, "Business Day" means a day which is not a Saturday,
Sunday or other day on which national banks chartered under the
laws of the United States are authorized or obligated by law to
close. Dividends in arrears for any past Quarterly Dividend
Period may be declared and paid at any time, without reference
to the regular Dividend Payment Date, to the holders of record
at the close of business on a date, not exceeding 15 days prior
to the payment date therefor, as may be fixed by the Board of
Directors of the corporation. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend
payment on the Series A Preferred Stock that may be in arrears.
2. The "Applicable Rate" for any Quarterly Dividend
Period, which Quarterly Dividend Periods shall commence on the
January 1, April 1, July 1 and October 1 of each year (except
for the Initial Quarterly Dividend Period which shall commence
on the date that shares of Series A Preferred Stock are first
issued and shall end on and include December 31, 1993), shall be
determined as follows: (A) for the Initial Quarterly Dividend
Period and for each Quarterly Dividend Period thereafter,
through the Quarterly Dividend Period ending June 30, 1998, the
Applicable Rate per annum shall be equal to 7-5/8%; (B) for the
Quarterly Dividend Periods commencing on July 1, 1998 and ending
on June 30, 2003, the Applicable Rate per annum shall be equal
to the Five Year Treasury Rate (as defined herein) as of June 1,
1998 plus 300 basis points; and (C) for the Quarterly Dividend
Periods commencing on July 1, 2003 and ending June 30, 2008, the
Applicable Rate per annum shall be equal to the Five Year
Treasury Rate as of June 1, 2003 plus 300 basis points. In the
event that June 1, 1998 or June 1, 2003 is not a Business Day,
then the Five Year Treasury Rate shall be determined as of the
next succeeding Business Day. For purposes of determining the
Applicable Rate, the "Five Year Treasury Rate" shall mean: the
Treasury constant maturity rate as of the applicable date on
five-year U.S. government securities as published by the Federal
Reserve Board. If the Federal Reserve Board does not publish
such a rate for the applicable date, then the Five Year Treasury
Rate shall mean the Treasury constant maturity rate as of the
applicable date on five-year U.S. government securities as
published by any Federal Reserve Bank or by any U.S. government
department or agency selected by the corporation. If the
corporation determines in good faith that such rate is not
published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. government department or agency, the Five
Year Treasury Rate shall mean the arithmetic average (rounded as
a percentage to two decimal points) of the per annum average
yields to maturity based upon the closing bids on the applicable
date for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities with a final maturity
date not less than three years nor more than seven years from
the date of each quotation as quoted by each of three U.S.
government securities dealers of recognized national standing
selected by the corporation.
3. The mathematical accuracy of each calculation of
the Applicable Rate, as adjusted, shall be confirmed in writing
by the corporation's independent public accountants. The
corporation will cause notice of the Applicable Rate, as
adjusted, to be mailed to the holders of shares of the Series A
Preferred Stock as soon as is practicable following the
confirmation of such adjustment.
4. In the event that the amount legally available
for the payment of dividends by the corporation shall be
insufficient for the payment of the entire amount of dividends
payable in any Quarterly Dividend Period with respect to the
Series A Preferred Stock, the amount legally available therefor
(after taking into account dividends payable on any other series
of Preferred Stock of the corporation which may then be
outstanding) shall be allocated for the payment of dividends
with respect to Series A Preferred Stock pro rata based upon the
Liquidation Preference of the outstanding shares.
5. a. Holders of shares of Series A Preferred
Stock shall be entitled to receive the dividends provided for in
paragraph (b)1. hereof in preference to and in priority over any
dividends upon any shares of Common Stock. Holders of shares of
Series A Preferred Stock shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of full
cumulative dividends, as provided herein, on the Series A
Preferred Stock.
b. [For so long as any shares of Series A
Preferred Stock are outstanding, the corporation shall not
declare any dividend (except a dividend payable in Common Stock)
or other distribution on the Common Stock, or purchase any
Common Stock, unless the corporation at the time of the
declaration of any such dividend or distribution or at the time
of such purchase, as the case may be, and after giving effect
thereto, satisfies the 1940 Act Preferred Stock Asset Coverage
(as defined herein). As used herein, the "1940 Act Preferred
Stock Asset Coverage" means asset coverage, as defined in
Section 18 of the Investment Company Act of 1940, as amended
from time to time, and including the rules and regulations
promulgated thereunder (the "1940 Act"), of at least 200% with
respect to all outstanding senior securities of the corporation
which are stock, including all outstanding shares of Series A
Preferred Stock (or such other asset coverage as may in the
future be specified in or under the 1940 Act as the minimum
asset coverage for senior securities which are stock of a
closed-end investment company as a condition of paying dividends
on its common stock).
c.] No fractional shares of Series A Preferred
Stock shall be issued.
(c) Liquidation Preference.
1. In the event of any voluntary liquidation, dissolution
or winding up of the affairs of the corporation, the holders of
shares of Series A Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the corporation available for
distribution to its shareholders an amount in cash equal to the
Liquidation Preference, plus an amount in cash equal to all accrued
but unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up before any payment shall be made or any
assets distributed to the holders of any shares of Common Stock.
After such payment, the holders of Series A Preferred Stock will be
entitled to no other payments in respect of their shares of Series A
Preferred Stock. If the assets of the corporation are not sufficient
to pay in full the liquidation payments payable to the holders of
outstanding shares of Series A Preferred Stock, then the holders of
all such shares (along with the holders of any other series of
Preferred Stock of the corporation that may then be outstanding and
entitled to a preferential amount upon liquidation) shall share
ratably in such distribution of assets in proportion to the amount
which would be payable on such distribution if the amounts to which
the holders of outstanding shares of Series A Preferred Stock are
entitled were paid in full.
2. For the purposes of this paragraph (c), a
consolidation or merger of the corporation with or into any other
corporation or corporations or a sale, lease or conveyance, whether
for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of the corporation shall
not be deemed or construed to be a liquidation or winding up of the
corporation.
(d) Redemption.
1. Mandatory Redemption. On July 1, 2008, to the extent
the corporation shall have legally available funds therefor and to
the extent otherwise permitted under [the 1940 Act and ]the Wisconsin
Business Corporation Law, the corporation shall redeem the remaining
outstanding shares of Series A Preferred Stock, at a redemption price
of $25.00 per share, together with accrued and unpaid dividends
thereon to June 30, 2008, in cash without interest. If, for any
reason, the corporation shall fail to discharge its mandatory
redemption obligation pursuant to this paragraph (d)1., such
mandatory redemption obligation shall be discharged as soon as
corporation is able to discharge such obligation. Dividends shall
continue to accrue and be payable at the Applicable Rate in effect on
June 30, 2008 on any mandatory redemption obligation that has not
been discharged by the corporation pursuant to this paragraph (d)1.
2. Optional Redemption. The Series A Preferred Stock is
not redeemable on or before June 30, 2001. Thereafter, to the extent
permitted under the 1940 Act and the Wisconsin Business Corporation
Law, the Series A Preferred Stock is redeemable at the option of the
corporation on any Dividend Payment Date with respect to the optional
redemption periods set forth below, in whole or in part, at a
redemption price of $25.00 per share, together with accrued and
unpaid dividends thereon to the date fixed for redemption:
Optional Redemption Periods
July 1, 2001 - June 30, 2003
July 1, 2006 - June 30, 2008
The redemption price, including any accrued and unpaid dividends,
shall be payable in cash without interest out of legally available
funds therefor.
3. Procedures for Redemption. The following procedures
shall govern the mandatory and optional redemption of shares of
Series A Preferred Stock:
a. Notice of a mandatory or optional redemption of
shares of Series A Preferred Stock shall be given by first class
mail, postage prepaid, mailed not less than 30 days nor more
than 60 days prior to the redemption date, to each holder of
record of the shares to be redeemed at such holder's address as
the same appears on the stock register of the corporation;
provided however, that no failure to give such notice nor any
defect therein shall affect the validity of the proceeding for
the redemption of any shares of Series A Preferred Stock to be
redeemed, except as to the holder to whom the corporation has
failed to give said notice or except as to the holder whose
notice was defective. Each such notice shall state: (i) the
redemption date, (ii) with respect to an optional redemption,
the total number of shares of Series A Preferred Stock to be
redeemed and the number of shares of Series A Preferred Stock to
be redeemed from such holder; (iii) the redemption price; (iv)
the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue upon
such redemption. With respect to any redemption of fewer than
all the outstanding shares of Series A Preferred Stock in
connection with an optional redemption, the number of shares to
be redeemed shall be determined by the Board of Directors of the
corporation and the shares to be redeemed shall be selected
either by lot, on a pro rata basis or by such other method as
the Board of Directors of the corporation shall deem fair and
equitable.
b. Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the
corporation in providing money for the payment of the redemption
price of the shares called for redemption) dividends on the
shares of Series A Preferred Stock so called for redemption
shall cease to accrue, and said shares shall no longer be deemed
outstanding and shall have the status of authorized but unissued
shares of Series A Preferred Stock and all right of the holders
thereof as shareholders of the corporation (except the right to
receive from the corporation the redemption price) shall cease.
Upon surrender in accordance with said notice of the
certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the
corporation shall so require and the notice shall so state),
such shares shall be redeemed by the corporation at the
redemption price as aforesaid. If fewer than all the shares
represented by any such certificate are redeemed in connection
with an optional redemption, a new certificate shall be issued
representing the unredeemed shares without cost to the holder
thereof.
(e) Voting Rights.
1. General. Except as otherwise provided by law or by
the Articles of Incorporation of the corporation, each holder of
Series A Preferred Stock shall be entitled to one vote for each share
held on each matter submitted to a vote of shareholders of the
corporation, and the holders of outstanding shares of Series A
Preferred Stock shall vote together with the holders of outstanding
shares of capital stock of the corporation as a single class.
Notwithstanding the preceding sentence, at the first annual meeting
of shareholders, of the corporation following the issuance of the
Series A Preferred Stock and for so long as any shares of Series A
Preferred Stock remain outstanding, the holders of outstanding shares
of Preferred Stock, including shares of Series A Preferred Stock,
represented in person or by proxy, shall be entitled as a class, and
to the exclusion of the holders of all other securities and classes
of capital stock of the corporation, to elect two directors and shall
thereafter be so entitled to elect any successors from time to time
to the two directors so elected at any meeting of shareholders at
which successors to such directors are elected. Subject to this
paragraph (e)1., the holders of outstanding shares of capital stock
of the corporation (including holders of outstanding shares of
Preferred Stock), voting as a single class, shall elect the balance
of the directors. At any time that the right of the holders of
Preferred Stock (including the Series A Preferred Stock) to elect two
directors as provided in paragraph (e)1. shall cease (including any
time that there are no longer any shares of Preferred Stock
outstanding), the terms of said two directors then in office will
expire and terminate.
2. Right to Elect Majority of Board of Directors. During
any period in which the condition described below shall exist (such
period being referred to herein as a "Voting Period"), the number of
directors constituting the Board of Directors of the corporation
shall be automatically increased by the smallest number that, when
added to the two directors elected exclusively by the holders of
shares of Preferred Stock (including shares of Series A Preferred
Stock), would constitute a majority of the Board of Directors as so
increased by such smallest number; and the holders of shares of
Preferred Stock (including shares of Series A Preferred Stock) shall
be entitled, voting as a class (to the exclusion of the holders of
all other classes of capital stock of the corporation), to elect such
smallest number of additional directors, together with the two
directors that such holders are in any event entitled to elect. A
Voting Period shall commence if at any time accumulated dividends
(whether or not earned or declared, and whether or not funds are then
legally available in an amount sufficient therefor) on any
outstanding shares of Preferred Stock, including shares of Series A
Preferred Stock, equal to at least two full years' dividends shall be
due and unpaid and sufficient cash or specified securities shall not
have been deposited with the dividend disbursement agent for the
payment of such accumulated dividends. Upon the termination of a
Voting Period, the voting rights described in this paragraph (e)2.
shall cease, subject always, however, to the revesting of such voting
rights in the holders of shares of Preferred Stock (including shares
of Series A Preferred Stock) upon the further occurrence of any of
the events described in this paragraph (e)2. Upon cessation of the
Voting Period, the terms of the additional directors then in office
and elected by the holders of shares of Preferred Stock (including
shares of Series A Preferred Stock) as a result of such Voting Period
(exclusive of the two directors elected pursuant to paragraph (e)1.
hereof) will expire and terminate. Thereafter, the remaining
directors shall constitute the directors of the corporation.
[3. Right to Vote with Respect to Certain Other Matters.
In addition to any class voting rights that may be accorded holders
of shares of Preferred Stock (including shares of Series A Preferred
Stock) under the Wisconsin Business Corporation Law or otherwise, the
affirmative vote of the holders of a majority of the outstanding
shares of Preferred Stock (including shares of Series A Preferred
Stock), voting together as a single class, will be required to
approve (A) any plan or reorganization adversely affecting such
shares or (B) any action requiring a vote of security holders under
Section 13(a) of the 1940 Act.]
(f) Except as expressly set forth herein, the holders of the
Series A Preferred Stock shall have no other rights other than those
provided by law.
B. Common Stock.
(1) Dividends. Subject to the provisions of this Article VIII,
the Board of Directors of the corporation may, in its sole discretion, out
of funds legally available for the payment of dividends and at such times
and in such manner as determined by the Board of Directors, declare and
pay dividends on the Common Stock.
(2) Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation, after there
shall have been paid to or set aside for the holders of shares of
Preferred Stock the full preferential amounts, if any, to which they are
entitled, the holders of outstanding shares of Common Stock shall be
entitled to receive pro rata, according to the number of shares held by
each, the remaining assets of the corporation available for distribution.
(3) Voting Rights. Except as otherwise provided by the Wisconsin
Business Corporation Law [or the 1940 Act], and except as may be
determined by the Board of Directors with respect to the Preferred Stock
pursuant to paragraph A of this Article VIII, only the holders of Common
Stock shall be entitled to vote for the election of directors of the
corporation and for all other corporate purposes. Upon any such vote the
holders of Common Stock shall, except as otherwise provided by law, be
entitled to one vote for each share of Common Stock held by them
respectively.
<PAGE>
EXHIBIT C
PROPOSED AMENDMENTS TO ARTICLE IX OF
THE ARTICLES OF INCORPORATION OF
BANDO McGLOCKLIN CAPITAL CORPORATION
Proposed Additions are between forward slashes. Proposed
deletions are bracketed.
__________________________
ACQUISITION OF SHARES
Subject to applicable limitations under the Wisconsin Business
Corporation Law [and the 1940 Act], the corporation may, upon
authorization of the Board of Directors, purchase or otherwise
acquire outstanding shares of its capital stock.
<PAGE>
PREFERRED STOCK
BANDO McGLOCKLIN
CAPITAL CORPORATION
P. O. Box 190
Pewaukee, WI 53072-0190
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints George R. Schonath and
Jon McGlocklin, and each of them as Proxies with the
power of substitution (to act jointly or if only one
acts then by that one) and hereby authorizes them to
PROXY represent and to vote as designated below all of the
shares of Preferred Stock of Bando McGlocklin Capital
Corporation held of record by the undersigned on
November 5, 1996 at the annual meeting of shareholders
to be held on December 17, 1996 or any adjournment or
postponement thereof.
1. ELECTION [_] FOR all nominees listed [_] WITHHOLD AUTHORITY
OF DIRECTORS below (except as marked to vote for all
to the contrary below) nominees listed
below
(i) Directors elected by holders of Preferred Stock and Common Stock
voting together:
S. Bando, P. Fischer, J. McGlocklin, A. Nicholas and G. Schonath
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
(ii) Directors elected by holders of Preferred Stock Voting as a
separate class:
R. Cooper and D. Geraldson
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
2. Proposal to ratify the appointment of Price Waterhouse LLP as the
independent public accountants for the corporation:
[_] FOR [_] AGAINST [_] ABSTAIN
3. Proposal to deregister the corporation and Bando McGlocklin Small
Business Investment Corporation ("BMSBIC") as investment
companies:
(i) to deregister the (ii) To deregister BMSBIC as
corporation as an investment an investment company
company
[_] FOR [_] AGAINST [_] ABSTAIN [_]FOR [_]AGAINST [_]ABSTAIN
4. Proposal to permit the corporation and BMSBIC to rescind their
fundamental investment policies:
[_] FOR [_] AGAINST [_] ABSTAIN
(continued on reverse side)
<PAGE>
PROXY NO. NO. OF SHARES
5. Proposal to approve and adopt amendments to the articles of
incorporation of the corporation:
(i) To eliminate 1940 Act (ii) To eliminate 1940 Act
restrictions on future restrictions on the
issuances of Preferred acquisition of shares by
Stock. the corporation.
[_]FOR [_]AGAINST [_]ABSTAIN [_]FOR [_]AGAINST [_]ABSTAIN
(iii) To eliminate certain (iv) To eliminate the
Preferred Stock voting Preferred Stock leverage
rights required under the restrictions.
1940 Act.
[_]FOR [_]AGAINST [_]ABSTAIN [_]FOR [_]AGAINST [_]ABSTAIN
6. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the annual meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this
proxy will be voted "FOR" Proposals 1(i), 1(ii), 2, 3(i), 3(ii), 4, and
5(i) through 5(iv).
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by the President or
other authorized officer. If a partnership,
please sign in partnership name by an authorized
person.
DATED: _________________________________, 1996
_________________________________________________
Signature
_________________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
COMMON STOCK
BANDO McGLOCKLIN
CAPITAL CORPORATION
P. O. Box 190
Pewaukee, WI 53072-0190
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints George R. Schonath and
Jon McGlocklin, and each of them as Proxies with the
power of substitution (to act jointly or if only one
acts then by that one) and hereby authorizes them to
represent and to vote as designated below all of the
PROXY shares of Common Stock of Bando McGlocklin Capital
Corporation held of record by the undersigned on
November 5, 1996 at the annual meeting of shareholders
to be held on December 17, 1996 or any adjournment or
postponement thereof.
1. ELECTION OF [_] FOR all nominees listed [_] WITHHOLD AUTHORITY
DIRECTORS below (except as marked to vote for all
to the contrary below) nominees listed below
S. Bando, P. Fischer, J. McGlocklin, A. Nicholas and G. Schonath
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
2. Proposal to ratify the appointment of Price Waterhouse LLP as the
independent public accountants for the corporation:
[_] FOR [_] AGAINST [_] ABSTAIN
3. Proposal to deregister the corporation and Bando McGlocklin Small
Business Investment Corporation ("BMSBIC") as investment companies:
(i) To deregister the corporation (ii) To deregister BMSBIC as an
as an investment company investment company
[_] FOR [_] AGAINST [_] ABSTAIN [_] FOR [_] AGAINST [_] ABSTAIN
4. Proposal to permit the corporation and BMSBIC to rescind their
fundamental investment policies:
[_] FOR [_] AGAINST [_] ABSTAIN
(continued on reverse side)
<PAGE>
5. Proposal to approve and adopt amendments to the articles of
incorporation of the corporation:
(i) To eliminate 1940 Act (ii) To eliminate 1940 Act
restrictions on future restrictions on the
issuances of Preferred Stock. acquisition of shares by
the corporation.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] FOR [_] AGAINST [_] ABSTAIN
(iii) To eliminate certain
Preferred Stock voting (iv) To eliminate the Preferred
rights required under the Stock leverage restrictions.
1940 Act.
[_] FOR [_] AGAINST [_] ABSTAIN [_] FOR [_] AGAINST [_] ABSTAIN
6. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the annual meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this
proxy will be voted "FOR" Proposals 1, 2, 3(i), 3(ii), 4 and 5(i)
through 5(iv).
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by the President or
other authorized officer. If a partnership,
please sign in partnership name by an authorized
person.
DATED: ____________________________________, 1996
_________________________________________________
Signature
_________________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
