PROSPECTUS SUPPLEMENT DATED SEPTEMBER 15, 1995
(To Prospectus Dated August 31, 1995)
ZIEGLER COLLATERALIZED SECURITIES, INC.
$7,200,000 Collateralized Bonds Series 6,
Due Serially to March 1, 2001
Guaranteed by
THE ZIEGLER COMPANIES, INC.
Interest on the Series 6 Bonds is payable semiannually on the 1st day
of each March and September, commencing March 1, 1996, with respect to
interest accrued through the day immediately preceding each such
semiannual payment date. The Series 6 Bonds mature on the "Stated
Maturities" set forth herein, subject to earlier redemption by Ziegler
Collateralized Securities, Inc. (the "Issuer") under certain
circumstances. (See "Description of the Bonds - Mandatory Redemption of
Bonds" at page 11 and "Description of the Bonds - Redemption at Option of
Issuer" at page 12 of the Prospectus.)
MATURITY SCHEDULE AND INTEREST RATES
Stated Maturity Amount Rate
--------------- ------ -----
September 1, 1996 $ 1,400,000 6.00%
March 1, 1997 $ 795,000 6.25%
September 1, 1997 $ 795,000 6.25%
March 1, 1998 $ 810,000 6.50%
September 1, 1998 $ 810,000 6.50%
March 1, 1999 $ 808,000 6.75%
September 1, 1999 $ 807,000 6.75%
March 1, 2000 $ 433,000 7.00%
September 1, 2000 $ 432,000 7.00%
March 1, 2001 $ 110,000 7.00%
Payment of the principal and interest and redemption premium (if
any) on, the Series 6 Bonds will be unconditionally guaranteed by The
Ziegler Companies, Inc. (the "Guarantor"). The Series 6 Bonds will be
secured by equipment leases, purchase money security agreements or
non-recourse notes pledged with the Trustee under the Indenture ("Pooled
Assets") which are intended to provide funds sufficient to service the
required payments of principal and interest on the Series 6 Bonds.
The Series 6 Bonds have been assigned a rating of "BBB" by Duff &
Phelps, Inc. ("Duff & Phelps"). The rating of "BBB" is considered an
"Investment Grade" rating, which Duff & Phelps describes as follows:
"Below-average protection factors, but which are still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles."
There is no public market for the Series 6 Bonds, and there can be
no assurance that a secondary market for the Series 6 Bonds will develop
or, if it does develop, that it will provide Bondholders with liquidity of
investment or that it will continue for the life of the Series 6 Bonds.
The Underwriter, B.C. Ziegler and Company, has made no determination as to
whether, and there is no assurance that, it will participate in or develop
a secondary market for the Series 6 Bonds.
See "Risk Factors" at page 5 of the Prospectus for certain factors
to be considered by purchasers of the Series 6 Bonds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public(1) Commission(2) Issuer
Per Bond . . . . 100% 2.50% 97.50%
Total . . . . . . $7,200,000 $180,000 $7,020,000
(1) Plus accrued interest from September 1, 1995 and a handling charge
of $5.00 per transaction.
(2) Pursuant to the Underwriting Agreement between the Issuer and the
Underwriter with respect to the Series 6 Bonds, and subject to the
terms and conditions contained therein, B.C. Ziegler and Company has
agreed to purchase the Series 6 Bonds from the Issuer at a purchase
price equal to 97.50% of the principal amount thereof. The Issuer
has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933. See
"Underwriting" in this Prospectus Supplement.
The Series 6 Bonds are offered by the Underwriter as stated herein,
subject to receipt and acceptance by the Underwriter and subject to the
right to reject any order in whole or in part. It is expected that
delivery of the Series 6 Bonds will be made on or about September 19,
1995.
B. C. ZIEGLER AND COMPANY
This Prospectus Supplement does not contain complete information
regarding the offering of the Series 6 Bonds and should be used only in
conjunction with the annexed Prospectus.
<PAGE>
No person has been authorized to give any information or to make any
representations concerning this offering not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representations must not be relied upon. This Prospectus Supplement and
the Prospectus do not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the Series 6 Bonds offered hereby,
nor an offer of the Series 6 Bonds in any state or jurisdiction in which,
or to any person to whom, such offer would be unlawful. The delivery of
this Prospectus Supplement or the Prospectus at any time does not imply
that information herein or therein is correct as of any time subsequent to
the date of such information; however, if any material change occurs while
this Prospectus Supplement or the Prospectus is required by law to be
delivered, this Prospectus Supplement or the Prospectus will be amended or
supplemented accordingly.
TABLE OF CONTENTS
Prospectus Supplement
Page
____
Reports to Bondholders . . . . . . . . . . . 2
Summary of Certain Terms of the Series 6 Bonds 3
Description of the Pool . . . . . . . . . . . 4
Payment and Redemption of the Series 6 Bonds 4
Recent Developments . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . 6
Underwriting . . . . . . . . . . . . . . . . 6
Appendix A . . . . . . . . . . . . . . . . . A-1
Prospectus
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Guarantor - Financial Information . . . . . . . . . . . . . . . 9
Ziegler Collateralized Securities, Inc. . . . . . . . . . . . . . . 10
The Ziegler Companies, Inc. - The Guarantor . . . . . . . . . . . . 10
Description of the Bonds . . . . . . . . . . . . . . . . . . . . . 11
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . 13
Description of the Indenture . . . . . . . . . . . . . . . . . . . 15
Description of the Guaranty . . . . . . . . . . . . . . . . . . . . 16
Equipment Leasing and Financing . . . . . . . . . . . . . . . . . . 17
Description of the Pool . . . . . . . . . . . . . . . . . . . . . . 19
Certain Bankruptcy Considerations of Pooled Assets . . . . . . . . 23
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . 30
Additional Information . . . . . . . . . . . . . . . . . . . . . . 31
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SERIES OF BONDS OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
REPORTS TO BONDHOLDERS
THE ISSUER WILL FILE OR CAUSE TO BE FILED WITH THE COMMISSION SUCH
PERIODIC REPORTS AS ARE REQUIRED UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, AND THE RULES AND REGULATIONS OF THE COMMISSION
THEREUNDER. THE ISSUER DOES NOT INTEND TO SEND FINANCIAL REPORTS TO THE
BONDHOLDERS.
THE ISSUER'S PRINCIPAL EXECUTIVE OFFICES ARE LOCATED AT 215 NORTH
MAIN STREET, WEST BEND, WISCONSIN 53095. ITS TELEPHONE NUMBER IS (414)
334-5521.
SUMMARY OF CERTAIN TERMS OF THE SERIES 6 BONDS
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus Supplement
and in the Prospectus attached hereto, to the Indenture dated as of
December 1, 1991, as amended, and as supplemented by the Series 6
Supplemental Indenture dated as of September 1, 1995, between the Issuer
and the Trustee, copies of which have been, or will be, filed with the
Securities and Exchange Commission.
Securities Offered . . . $7,200,000 aggregate principal amount of
Collateralized Bonds, Series 6, due serially
to March 1, 2001, (the "Series 6 Bonds"). The
Series 6 Bonds will be issued as book-entry
Bonds in initial denominations of $1,000 or
integral multiples thereof. See "Description
of the Bonds - Book-Entry-Only System" in the
Prospectus at Page 12.
Interest Payments . . . . Payable semiannually on the 1st day of each
March and September, commencing March 1,
1996, with respect to interest accrued
through the day immediately preceding each
such semiannual payment date, to holders of
record on the 15th day of the immediately
preceding month.
Redemption Dates; Issuer's
Option to Redeem . . . . The Series 6 Bonds are subject to redemption
at option of Issuer in whole or in part on
any March 1 or September 1 on or after March
1, 1998,.
Mandatory Redemption
of Bonds . . . . . . . . The Series 6 Bonds are subject to mandatory
redemption at any time (i) without premium to
the extent of any cash deposit made by the
Issuer to the Trustee in connection with the
release of any Defaulted Pooled Assets
constituting part of the collateral pool for
the Series 6 Bonds or (ii) with a premium of
1% of the principal amount of the Series 6
Bonds redeemed prior to September 19, 1997
and without premium if redeemed on such date
or thereafter to the extent of proceeds
received by the Issuer from the early
termination of any of the Pooled Assets and
the purchase of the related equipment by the
lessee thereunder or its assignee, in each
case such redemption to occur as soon as
practicable following the receipt of such
proceeds.
Collateral . . . . . . . A. The entire interest of the Issuer in the
Pooled Assets with the aggregate amount
of the scheduled rentals and/or debt
payments payable thereunder in each
six-month period ending on a March 1 or
September 1 so long as the Series 6 Bonds
are outstanding, together with other
funds then held by the Trustee for
payment of principal of and interest on
the Bonds of such Series on such
Semiannual Payment Date (after deducting
all Servicer Fees and Trustee's Fees
accruing during such period), equal to or
greater than the aggregate amount of
principal and interest payable on the
Series 6 Bonds on such Semiannual Payment
date.
B. The Principal and Interest Payment
Account for the Series 6 Bonds in which
the Issuer will deposit on or before the
business day immediately preceding each
March 1 and September 1 an amount equal
to the aggregate amount of principal and
interest payable with respect to the
Series 6 Bonds on such Payment Date and
in which the Trustee will also deposit
(i) all payments, including insurance and
liquidation proceeds, on the Pooled
Assets securing the Series 6 Bonds
remitted to the Trustee, and (ii) amounts
received with respect to the sale of such
Pooled Assets upon termination or
liquidation of the Pool, and (iii)
amounts received in connection with the
release of any Defaulted Pooled Asset
securing the Series 6 Bonds by the
Guarantor or Ziegler Leasing Corporation
("ZLC") or upon early termination of any
such Pooled Asset and the sale of related
equipment.
C. All earnings on amounts on deposit in the
Principal and Interest Payment Account
for the Series 6 Bonds preceding a March
1 or September 1.
D. A perfected security interest in the
equipment subject to each Pooled Asset in
the Pool securing the Series 6 Bonds.
E. Proceeds of insurance against the loss or
theft of or damage to the equipment
subject to each Pooled Asset securing the
Series 6 Bonds.
The Pool . . . . . . . . The entire interest of the Issuer in Pooled
Assets with an aggregate amount (initial net
investment) of: $8,058,258.07.
DESCRIPTION OF THE POOL
The Pool securing the Series 6 Bonds shall initially consist of the
Pooled Assets, pledged to the Trustee pursuant to one or more assignments,
which are listed on Appendix A hereto. The Pooled Assets will consist of
Leases, Purchase Money Security Agreements and Non-Recourse Notes. The
Issuer's aggregate net investment in the Pooled Assets securing the Series
6 Bonds (determined in accordance with generally accepted accounting
principles), together with any cash collateral held by the Trustee (except
for an amount equal to any accrued interest on the Series 6 Bonds) will be
not less than 110% of the aggregate principal amount of the outstanding
Series Bonds.
Although the Issuer holds perfected security interests in the
equipment subject to the Pooled Assets pledged with the Trustee under the
Indenture, certain of such security interests may be secondary to other
security interests filed with respect to such equipment. Accordingly,
investors should be aware that there can be no assurance that, in the
event of default under a Pooled Asset, the Trustee will be able to realize
on such underlying equipment.
The following States account for 10% or more of the Pooled Assets in
the Pool securing the Series 6 Bonds (based on the Issuer's initial net
investment in the Pooled Assets): Ohio (20%), Florida (14%), Wisconsin
(11%), Oregon (11%) and Texas (10%). The following entities account for
10% or more of the Pooled Assets in the Pool securing the Series 6 Bonds
(based on the Issuer's initial net investment in the Pooled Assets):
Cardiology Associates of Lubbock P.A., Lubbock, Texas (10%), Meditek
Palms, Inc., Miami, Florida (10%), St. Agnes Hospital of Fond du Lac, Fond
du Lac, Wisconsin (10%) and Mission Packaging, Inc., Tigard, Oregon (10%).
PAYMENT AND REDEMPTION OF THE SERIES 6 BONDS
The Series 6 Bonds will mature serially in the amount and on the
dates set forth below and will bear interest from September 1, 1995 at the
respective interest rates set forth below:
Principal Amount Stated Maturity Interest Rate Per Annum
$1,400,000 September 1, 1996 6.00%
795,000 March 1, 1997 6.25%
795,000 September 1, 1997 6.25%
810,000 March 1, 1998 6.50%
810,000 September 1, 1998 6.50%
808,000 March 1, 1999 6.75%
807,000 September 1, 1999 6.75%
433,000 March 1, 2000 7.00%
432,000 September 1, 2000 7.00%
110,000 March 1, 2001 7.00%
Interest will be payable semiannually on the1st day of each March
and September, commencing March 1, 1996, with respect to interest accrued
through the day immediately preceding each such Semiannual Payment date.
(See "Description of the Bonds - Payments of Interest" in the Prospectus
at page 11.)
The Series 6 Bonds will be required to be redeemed (i) without
premium to the extent of any deposit made by the Issuer to the Trustee in
connection with the release of any Defaulted Pooled Assets or (ii) with a
premium of 1% of the principal amount of Series 6 Bonds redeemed prior to
September 19, 1997, and without premium on or after September 19, 1997 to
the extent of proceeds received by the Issuer from the early termination
of any of the Pooled Assets and the purchase of the related equipment by
the Lessee thereunder, in each case, as soon as practicable following the
receipt of such proceeds. See "Description of the Bonds - Mandatory
Redemption of Bonds" on page 11 of the Prospectus.
The Issuer may at its option redeem all or any part of the Series 6
Bonds on any March 1 or September 1 on or after March 1, 1998. See
"Description of the Bonds - Redemption at Option of Issuer" in the
Prospectus at page 12.
RECENT DEVELOPMENTS
Guarantor
The Guarantor has reported the following summary income data and the
six month(s) ended June 30, 1995.
Six Months Ended
June 30, 1995
(Unaudited)
Revenues . . . . . . . . . . . $24,302,072
Net Income . . . . . . . . . . $ 791,335
The Guarantor's ratio of earnings to fixed charges was 1.21 for the
six month(s) ended June 30, 1995 (unaudited). Such fixed charge coverage
ratio was calculated in accordance with Securities and Exchange Commission
practice and includes the proportionate share of earnings and fixed
charges of a special purpose corporation which is 50% owned by the
Guarantor. The earnings of this corporation consist almost entirely of
earnings on mortgage certificates guaranteed by the Government National
Mortgage Association or guaranteed mortgage pass-through certificates
issued by the Federal National Mortgage Association. The interest expense
of this corporation consists of interest on bonds backed by such mortgage
certificates. The ratio of earnings to fixed charges for this corporation
is 1.00. The ratio of earnings to fixed charges of the Guarantor excluding
the proportionate share of earnings and fixed charges of this corporation
was 1.37 for the six month(s) ended June 30, 1995.
The Guarantor's unaudited capitalization at June 30, 1995 was:
Amount As Adjusted (b)
Long-term Debt (excluding amounts
currently due) (a) . . . . . $29,187,029 $49,547,029
Common Stock Equity . . . . . . 50,443,651 50,443,651
----------- -----------
Total Capitalization . . . . . . $79,630,680 $99,990,680
_______________
(a) Excluding long-term indebtedness of corporation which is 50% owned
by the Guarantor.
(b) Adjusted to reflect the issuance of $20,360,000 of additional Bonds,
the principal amount of Bonds which may be issued in the future
under the Issuer's current Registration Statement.
The following table reflects the certain summary financial data for
ZLC for the six month(s) ended June 30, 1995:
Six Month(s) Ended
June 30, 1995
(Unaudited)
ZLC
Revenues . . . . . . . . . . . . $ 5,121,033
Expenses . . . . . . . . . . . . 4,613,888
Income Before Taxes . . . . . . 507,146
Net Income . . . . . . . . . . . 312,146
Total Assets . . . . . . . . . . $53,061,388
Total Liabilities . . . . . . . 41,999,286
Total Surplus (ZLC Net Worth) . 11,062,102
The following table sets forth the percentage of ZLC's Lease
portfolio by category of each user as of June 30, 1995.
Hospitals and Medical Centers 45.7%
Clinics, Laboratories and Physicians 29.3%
Commercial and Industrial Businesses 25.0%
______
100.0%
The average term of leases in ZLC's portfolio at June 30, 1995, was
approximately 54 months.
Set forth below is certain information concerning the bad debt
write-off experience on Leases held by ZLC for the six month(s) ended
June 30, 1995:
<TABLE>
<CAPTION>
Cost of Investment Reserve For % of % of Bad Debt % of % of
Equipment in Leases Bad Debts Cost Investment Write-Off Cost Investment
<S> <C> <C> <C> <C> <C> <C> <C>
$91,147,557 $46,051,492 $647,132 .710% 1.405% -0- 0% 0%
</TABLE>
During the last five years (1990-1994), the aggregate write-off was
attributable to Leases located in the following States: California
(79.3%), South Carolina (15%), Ohio (5.3%) and New York (.4%).
USE OF PROCEEDS
The net proceeds from the sale of the Series 6 Bonds together with
the proceeds of unsecured indebtedness incurred by the Issuer will be used
by the Issuer to pay the expenses of the offering of the Series 6 Bonds
and to purchase the Pooled Assets comprising the Pool for the Series 6
Bonds. Pooled Assets will be assigned and delivered to the Trustee, as
security for the Series 6 Bonds simultaneously with delivery of the Series
6 Bonds. The Issuer's unsecured indebtedness will be repaid from contract
payments received under the Pooled Assets which are in excess of the
amounts required from time to time to meet the debt service requirements
on the Series 6 Bonds. The net proceeds is determined by subtracting the
Issuer's expenses of issuance from the gross proceeds from the sale of the
Series 6 Bonds, calculated as follows:
Gross Proceeds from the Sale
of Series 6 Bonds . . . . . . . . . . . $7,200,000
Less Estimated Expenses of Issuance . . $ 180,000
----------
Estimated Net Proceeds . . . . . . . . . $7,020,000
==========
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement and the Terms Agreement respecting the Series 6 Bonds, the
Issuer has agreed to sell to B.C. Ziegler and Company (the "Underwriter"),
and the Underwriter has agreed to purchase, $7,200,000 in principal amount
of the Series 6 Bonds.
Under the terms and conditions of the Underwriting Agreement, the
Underwriter is committed to take and pay for all of the Series 6 Bonds, if
any are taken.
The Underwriter proposes to offer the Series 6 Bonds in part
directly to retail purchasers at the initial public offering prices set
forth on the cover page of this Prospectus Supplement, and in part to
certain securities dealers at such prices less a maximum concession of
1.5%. After the Series 6 Bonds are released for sale to the public, the
offering prices and other selling terms may from time to time be varied by
the representatives.
The offering price of the Series 6 Bonds and other selling terms
related thereto may not be varied until after the completion of the
distribution of the Series 6 Bonds.
The Issuer has agreed to indemnify the Underwriter against certain
liabilities including liabilities under the Securities Act of 1933, as
amended.
<TABLE>
APPENDIX A
Description of Pooled Assets
Securing
Series 6 Bonds
<CAPTION>
Option to
Purchase
Aggregate Purchase Equipment
Payments Price or Prepay
from Date (Issuer's Debt Prior
Description of Purchase Initial Net to End of
Date of of Type of Monthly to End of Investment) Contract
Lessee Contract Equipment Contract (3) Payment Contract of Contract Term (1)
<S> <C> <S> <C> <C> <C> <C> <C>
Information Storage 10/1/94 Various Test & L $4,958.14 $178,493.04 $168,496.77 None(2)
Devices, Inc. Manufacturing
San Jose, CA Equipment
Information Storage 1/1/95 Various Test & L $3,994.24 $155,775.36 $142,936.67 None(2)
Devices, Inc. Manufacturing
San Jose, CA Equipment
Information Storage 7/1/95 Manufacturing L $2,170.64 $97,678.80 $84,707.68 None
Devices, Inc. Equipment
San Jose, CA
Cardiology
Consultants, P.A. 5/1/95 2 Sopha DST L $13,623.34 $912,763.78 $693,688.81 None
d/b/a Cardiac Gamma Cameras
Diagnostic Center
Newark, DE
West Bend Clinic,
S.C. 7/1/95 Acuson 128 XP-10 L $2,306.91 $131,493.87 $105,949.60 None
West Bend, WI Ultrasound System
Providence Medical
Center 7/1/95 Datascope L $1,353.85 $77,169.45 $61,956.60 None
Wayne, NE Monitoring Equipment
Cardiology 8/1/95 Miscellaneous L $17,096.69 $991,608.02 $808,965.64 None
Associates of Medical and
Lubbock, P.A. Office Equipment
Lubbock, TX
The Parish of 10/20/94 Modular Building L $1,665.00 $138,195.00 $102,892.19 None
Saint Elizabeth
of Hungary, The
Catholic Diocese
of Miami, Florida
Pompano Beach, FL
Broadlawns Medical 10/20/94 Philips BV29 L $2,191.86 $107,401.14 $89,543.37 None
Center Mobile C-Arm
Des Moines, IA
Radiologists, PC 3/20/95 ATL Ultramark L $4,172.70 $175,253.40 $147,953.41 None
Kansas City, MO HDI 3000 Ultrasound
System
Kings Medical of 6/20/95 Philips Gyroscan T5 L $11,286.37 $643,323.09 $514,910.30 None
Wisconsin, Limited
Liability Company
Hudson, OH
Kings Medical 6/20/95 Warranty and L $10,391.04 $592,289.28 $474,063.31 None
Company Leaseholds
Hudson, OH
Cascade Microtech, 6/20/95 Furniture, Fixtures L $1,980.71 $112,900.47 $96,744.29 None(2)
Inc. and Equipment
Beaverton, OR
City of Harriman
Tennessee 9/15/94 SAI Computer System NR $5,546.12 $260,667.64 $216,787.18 N/A
d/b/a Harriman City
Hospital
Harriman, TN
Meditek Palms, Inc. 4/1/95 Impact 1.0 Tesla MRI NR $16,895.66 $963,052.62 $794,537.46 N/A
Miami, FL
Bothwell Regional 7/1/95 Sopha DST XL Gamma NR $9,651.00 $550,107.00 $464,210.00 N/A
Health Center Camera
Sedalia, MO
Cardiovascular 12/1/94 Sopha DST Gamma NR Variable $330,956.00 $280,659.58 N/A
Associates Camera
of North Alabama, P.C.
Birmingham, AL
St. Agnes Hospital 9/1/94 Varian Clinic 2100 NR $19,397.23 $911,669.81 $795,360.19 N/A
of Fond du Lac Linear Accelerator
Fond du Lac, WI and Simulator
Lima Memorial
Hospital 8/1/94 Philips SR 7000 CT NR $15,197.13 $699,067.98 $608,740.06 N/A
Lima, OH System
Simpson General
Hospital 6/5/95 ATL HDI 9 Ultramark NR $2,925.00 $157,950.00 $134,428.91 N/A
Mendenhall, MS Ultrasound System
Mission Packaging,
Inc. 3/10/95 Plastic Molding NR $18,029.60 $955,568.80 $794,373.01 N/A
Tigard, OR Assembly Equipment
Plants In Design,
Inc. 3/10/95 Containers and Pull NR $5,914.38 $313,462.14 $260,583.92 N/A
Miami, FL Units
St. Mary's Hospital 2/20/95 Toshiba Powerpace NR $3,221.37 $132,076.17 $116,678.70 N/A
Nebraska City, NE Upgrade for SSA-2700
Kershaw County
Memorial Hospital 3/20/95 IMED IV Pumps NR $2,156.08 $116,428.32 $99,090.42 N/A
Camden, SC
------------- ------------
$9,705,351.18 $8,058,258.07
============= =============
<FN>
(1) Except as otherwise indicated in note (2), lessee has option to purchase leased equipment for $1.00 at end of lease
term.
(2) Lessee required to purchase leased equipment for bargain purchase price (10% of original equipment cost) at end of lease
term.
(3) L = Lease; NR = Non-Recourse loan; PMSA = Purchase Money Security Agreement loan.
</TABLE>
<PAGE>
$40,000,000 PROSPECTUS
ZIEGLER COLLATERALIZED SECURITIES, INC.
COLLATERALIZED BONDS
Guaranteed By
THE ZIEGLER COMPANIES, INC.
Collateralized Bonds, in an aggregate principal amount of
$40,000,000 (the "Bonds") will be issued from time to time by Ziegler
Collateralized Securities, Inc., a Wisconsin corporation (the "Issuer")
and are offered hereby. Payment of the principal of and interest and
redemption premium (if any) on, the Bonds will be unconditionally
guaranteed by Ziegler Companies, Inc., a Wisconsin corporation (the
"Guarantee"). Each series of Bonds will be at all times secured by an
assignment by the Issuer of its interests in one or more separate security
pools consisting of (A) equipment leases (the "Leases"), (B) purchase
money security agreements ("Purchase Money Security Agreements") and/or
(C) non-recourse notes ("Non-Recourse Notes"), each secured by the
equipment subject to such instruments, originated or acquired by the
Ziegler Leasing Corporation ("ZLC") and sold to the Issuer, or with
respect to Non-Recourse Notes, originated by the Issuer, or originated by
ZLC and sold to the Issuer, all as more fully described herein. Leases,
Purchase Money Security Agreements and Non-Recourse Notes purchased by the
Issuer are hereinafter referred to collectively as "Pooled Assets". ZLC, a
corporation organized under Wisconsin law (the "Servicer", or "ZLC"), will
service and administer the Pooled Assets) and provide administrative
support to the Issuer. Various series of Bonds may bear interest at
different rates and have different payment and maturity dates.
Certain of the Bonds may be redeemed prior to maturity. The Issuer
will redeem a portion of the Bonds of a series to the extent of any cash
deposit made by the Issuer to the Trustee in connection with the release
of any Defaulted Pooled Asset (as hereinafter defined) or from the
proceeds received from the early termination of any Pooled Asset (and the
purchase of the related equipment by the lessee thereof ("Lessee") or its
assignee or the prepayment of principal on a Purchase Money Security
Agreement or Non-Recourse Note by a debtor thereunder ("Debtor")),
constituting a part of the collateral securing such series of Bonds
promptly following the receipt of such proceeds. In addition, the Issuer
may redeem any or all of the Bonds of any series on or after the second
anniversary of the original issuance thereof. (See "DESCRIPTION OF THE
BONDS - Redemption.") The Bonds are not subject to redemption or
repurchase at the option of the Bondholders.
No sales of Bonds may be consummated without delivery of a
Prospectus Supplement describing the specific terms of such Bonds and the
terms of offering thereof. Offers and sales of the Bonds of each series
will be made as described in the Prospectus Supplement for each series.
Duff & Phelps, Inc. ("Duff & Phelps") has assigned a rating of not
less than "BBB" to the Bonds. The rating of "BBB" is considered an
"investment grade" rating assigned to Bonds which Duff & Phelps describes
as follows: "Below-average protection factors, but which are still
considered sufficient for prudent investment. Considerable variability in
risk during economic cycles." The Bonds of each series will be
individually rated by Duff & Phelps. Each such rating will be "BBB" or
higher and will be specified in the Prospectus Supplement for that series.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization.
There is currently no secondary market for the Bonds and there can
be no assurance that a market will develop. The underwriter, B.C. Ziegler
and Company (the "Underwriter"), has made no determination as to whether,
and there is no assurance that, it will participate in or develop a
secondary market for the Bonds.
See "Risk Factors" beginning on page 5 herein for information as to
factors of importance to investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT
BE USED TO CONSUMMATE SALES OF BONDS UNLESS ACCOMPANIED BY A PROSPECTUS
SUPPLEMENT.
B. C. ZIEGLER AND COMPANY
The date of this Prospectus is August 31, 1995.
<PAGE>
AVAILABLE INFORMATION
The Guarantor is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith the Guarantor files, and will continue to file reports and other
information with the Securities and Exchange Commission (the Commission).
The Issuer, pursuant to Commission Staff Accounting Bulletin Topic 1-G and
a No-Action Letter of the Commission's Division of Corporation Finance to
the Issuer, dated August 11, 1992 is not required to file periodic reports
pursuant to Sections 13 and 15(d) of the Exchange Act. However, the
Guarantor's Exchange Act reports contain summarized financial information
regarding the Issuer, pursuant to Rule 1-02(aa) of Regulation S-X
promulgated under the Exchange Act. Information, as of particular dates,
concerning directors and officers, their remuneration, their security
holdings, the principal holders of securities of the Guarantor and any
material interest of such persons in transactions with the Guarantor, is
disclosed in proxy statements distributed to shareholders of the Guarantor
and filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the offices of the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Midwest Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
The Issuer and the Guarantor have filed with the Commission a
registration statement on Form S-3 (herein, together with all amendments
and exhibits, thereto referred to as the Registration Statement) under the
Securities Act of 1933, as amended (the "Act"). The Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is
hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Guarantor's Annual Report on Form 10-K for the year ended
December 31, 1994, as well as the Guarantor's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1995, and June 30, 1995 are
incorporated herein by reference.
All documents filed by the Guarantor and the Issuer pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of this offering
shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein or in
any other subsequently filed document, which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Issuer and the Guarantor undertake to provide without charge to
each person to whom a copy of this Prospectus has been delivered, on the
written or oral request of any such person, a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents.
Requests for such copies should be directed to S. Charles O'Meara,
Senior Vice President and General Counsel, The Ziegler Companies, Inc.,
215 North Main Street, West Bend, Wisconsin 53095, telephone number (414)
334-5521.
PROSPECTUS SUMMARY
The following is a summary of certain material contained in this
Prospectus. The summary is intended merely to highlight certain
information, and there is information in this Prospectus that is not
included in the summary. Prospective investors are therefore urged to
review the entire Prospectus carefully.
Security Offered . . . . $40,000,000 principal amount of
Collateralized Bonds (the "Bonds") of Ziegler
Collateralized Securities, Inc. (the
"Issuer"), issuable in Series (See
"Description of the Bonds"). Guaranty of The
Ziegler Companies, Inc. ("Guarantor") (See
"Description of the Guaranty").
Duff & Phelps' Rating . . A rating of not less than "BBB" has been
assigned to the Bonds. The specific rating
assigned to each series is specified in the
Prospectus Supplement describing the Bonds of
of such series. (See "Description of the
Bonds - Bond Rating").
Issuer . . . . . . . . . The Issuer is a wholly-owned subsidiary of
the Guarantor. B.C. Ziegler and Company
(hereinafter sometimes referred to as the
"Underwriter"), which will act as the
underwriter for the Bonds, and Ziegler
Leasing Corporation (hereinafter sometimes
referred to as "ZLC" or "Servicer"), from
which the Issuer will purchase the equipment
leases ("Leases"), purchase money security
agreements ("Purchase Money Security
Agreements") and non-recourse notes, secured
by assignments of Leases financed thereunder
("Non-Recourse Notes") (collectively "Pooled
Assets") which will secure the Bonds, are
wholly-owned subsidiaries of the Guarantor.
The Issuer does not have, nor is it expected
in the future to have, any significant assets
other than the Pooled Assets assigned as
security for specific series of securities
issued by it.
Guarantor . . . . . . . . The Ziegler Companies, Inc., West Bend,
Wisconsin.
Servicer . . . . . . . . Ziegler Leasing Corporation, West Bend,
Wisconsin.
Trustee . . . . . . . . . M&I First National Bank, West Bend, Wisconsin
(Trustee).
Interest Payments . . . . Interest on the Bonds will be payable on such
dates as shall be specified in the Prospectus
Supplement for each series (See "Description
of the Bonds - Payments of Interest").
Stated Maturity . . . . . The Bonds of each series shall mature on the
dates set forth on the cover page of the
Prospectus Supplement describing the Bonds of
such series.
Semiannual Payment Date . The first day of the months specified in the
Prospectus Supplement describing each series
of Bonds.
Payment Date . . . . . . Any Semiannual Payment Date or Redemption
Date.
Redemption Date . . . . . Any date on which the Bonds of any series may
be called for redemption as specified in the
Prospectus Supplement for such series of
Bonds.
Mandatory Redemption
of Bond . . . . . . . . The Bonds of each series are subject to
mandatory redemption (i) without premium to
the extent of any cash deposit made by the
Issuer to the Trustee in connection with the
release of any Defaulted Pooled Asset (as
hereinafter defined) constituting part of the
collateral pool for such series or (ii) with
a premium of 1% of the principal amount of
Bonds of such Series redeemed prior to the
second anniversary date of the original
issuance thereof and without premium
thereafter to the extent of proceeds received
by the Issuer from the early termination of
any of the Pooled Assets and the purchase of
the related equipment by the lessee thereof
("Lessee") or its assignee, in the case of a
Lease, or the prepayment of principal on the
Purchase Money Security Agreements or
Non-Recourse Notes by a debtor thereunder
("Debtor"), in each case such redemption to
occur as soon as practicable following the
receipt of such proceeds. (See "Description
of the Bonds - Mandatory Redemption of
Bonds.")
Issuer's Option to
Redeem . . . . . . . . . The Bonds of any series may be redeemed in
whole or in part by the Issuer, without
premium on or after the second anniversary of
the original issuance thereof. (See
"Description of the Bonds - Redemption at
Option of Issuer.")
Special Considerations . The Issuer does not have, nor is it expected
in the future to have, any significant assets
other than the Pooled Assets securing the
various series of Bonds. The Pooled Assets
securing each series of Bonds will serve as
collateral for that series of Bonds. The
obligations of the Guarantor under its
guaranty of the Bonds will be unsecured. (See
"Special Considerations.")
The Pool . . . . . . . . There will be a separate pool (the "Pool") of
Pooled Assets securing each series of Bonds
consisting of:
A. Pooled Assets . . Assignment to the Trustee of the entire
interest of the Issuer in the Pooled Assets
with the aggregate amount of the scheduled
rentals and/or debt payments payable
thereunder in each six- month period ending
on a Semiannual Payment Date (after deducting
all Servicer Fees and Trustee's Fees accruing
during such period) together with other funds
then held by the Trustee for payment of
principal and interest on the Bonds of such
Series on such Semiannual Payment Date, so
long as the Bonds of such Series are
outstanding being equal to or greater than
the aggregate amount of principal and
interest payable on the Bonds of such series
on such Semiannual Payment Date. (See
"Description of the Pool - General.")
B. Principal and
Interest Payment
Account . . . . . The Trustee will maintain a Principal and
Interest Payment Account for each series of
Bonds in which the Issuer will deposit on or
before the business day immediately preceding
each Payment Date an amount equal to the
aggregate amount of principal and interest
payable with respect to the Bonds of such
series on such Payment Date. The Trustee will
also deposit in the Principal and Interest
Payment Account (i) all payments of
principal, including insurance and
liquidation proceeds, on the Pooled Assets
remitted to the Trustee, and (ii) amounts
received with respect to the sale of the
Pooled Assets upon termination or liquidation
of the Pool, and (iii) amounts received upon
the purchase of any Defaulted Pooled Asset
(as hereinafter defined) by the Guarantor or
ZLC or upon early termination of any Pooled
Asset and the sale of related equipment.
C. Reinvestment
Earnings . . . . All amounts on deposit in the Principal and
Interest Payment Account prior to the
business day immediately preceding a Payment
Date will be invested and reinvested in
certain eligible investments, in either case
maturing not later than the business day
immediately preceding such Payment Date.
D. Leased or Financed
Equipment . . . . The Bonds will also be secured by a perfected
security interest in the equipment subject to
each Pooled Asset in the Pool securing the
Bonds of such series.
E. Insurance Policies The Indenture requires the Issuer to cause to
be maintained insurance against the loss or
theft of or damage to the equipment subject
to each Pooled Asset in an amount which is at
least equal to the full insurable value of
the equipment subject to each Pooled Asset.
(See "Description of the Bonds - Maintenance
of Insurance.")
RISK FACTORS
Investors should consider, among other things, the following factors
in connection with the purchase of the Bonds.
Limited Liquidity
The Bonds have no established trading market, and there can be no
assurance that a secondary market will develop or, if it does develop,
that it will provide Bondholders with liquidity of investment or will
continue for the life of the Bonds. The Underwriter has made no
determination as to whether, and there is no assurance that, it will
participate in or develop a secondary market for the Bonds. See cover of
this Prospectus. The Issuer does not intend to apply for the listing of
Bonds on any exchange or on the Nasdaq National Market. The market value
of the Bonds will fluctuate with changes in prevailing rates of interest.
Consequently, sale of Bonds by a Bondholder in any market which may
develop may be at a discount from their face amount or purchase price.
Limited Assets of Issuer; Security Interests in Underlying Equipment
The Issuer does not have, nor is it expected in the future to have,
any significant assets other than the Pooled Assets securing the various
series of Bonds. The Pooled Assets securing a series of Bonds will be held
by the Trustee as security only for the Bonds of such series. Although the
Issuer will hold a perfected security interest in the equipment underlying
the Pooled Assets, certain of such security interests may be secondary to
other security interests filed with respect to such equipment.
Accordingly, investors should be aware that there can be no assurance that
in the event of a default under a Pooled Asset the Trustee will be able to
realize on such underlying equipment. See "Ziegler Collateralized
Securities, Inc." and "Description of the Pool - General" herein.
Obligations of Guarantor
The Guarantor is essentially a holding company and has no material
assets other than the stock of and loans to its subsidiaries. The
Guarantor sells its commercial paper and loans the proceeds thereof to its
subsidiaries to finance their operations. The obligations of the Guarantor
under its guaranty of the Bonds (the "Guaranty") will be unsecured, will
be on a parity with the claims of other unsecured creditors of the
Guarantor and will be subordinate to the claims of creditors of the
Guarantor's subsidiaries with respect to the assets of such subsidiaries.
The Guarantor has not incurred any secured indebtedness. No subsidiary of
the Guarantor is a party to the Guaranty. See "The Ziegler Companies, Inc.
- The Guarantee" herein. See "Description of the Guaranty" herein.
No Government Guaranties
Neither the Bonds nor the Pooled Assets are insured or guaranteed in
whole or in part by the United States, any agency of or corporation
chartered by the United States, any other governmental agency or any other
person or entity except for the guaranty of the Bonds by the Guarantor.
See "Description of the Guaranty" herein.
Payment of Servicer's and Trustee's Fees
Pursuant to the Servicing Agreement (see "Servicer" herein), the
Servicer will be entitled to deduct and retain from the monthly rentals on
the Leases or monthly debt payments on the Purchase Money Security
Agreements or Non-Recourse Notes, as the case may be, in each Pool a
monthly fee equal to .04167% of the Issuer's total net investment in
Pooled Assets in the Pool (determined in accordance with generally
accepted accounting principles ("GAAP")) as of the last day of the
preceding month prior to paying such rental and/or debt payments to the
Issuer. The Servicer is also entitled pursuant to the Servicing Agreement
to deduct from rental and/or debt payments made to the Issuer the amount
of any insurance premiums advanced by the Servicer with respect to any
Pooled Asset. The Servicer also provides administrative support to the
Issuer for which it will receive a monthly administrative support fee not
exceeding .167% of the Issuer's total net investment in the Pooled Assets
determined in accordance with GAAP as of the last day of the preceding
month provided that the aggregate administrative support fee payable in
any calendar year shall not exceed an amount equal to the net revenues of
the Issuer before the payment of such administrative support fee. See
"Management - Administrative Support Fee" herein. Under the Indenture, the
Trustee is entitled to withdraw from the Principal and Interest Payment
Account, if not otherwise paid, moneys to pay its fees and disbursements
(currently estimated to be approximately $3,000 per year). The payment of
Servicer's and Trustee's Fees will be paid prior to any payment of
principal or interest to the Bondholders. Administrative Support Fees will
be paid semiannually to the extent of available funds.
Sale of Collateral; Interest Rate Fluctuations
In the event that a Pool is to be liquidated by the Trustee upon an
Event of Default (see "The Indenture - Events of Default"), there is no
assurance that the rental or debt payments under the Pooled Assets
securing a series of Bonds or investment income on the securities in which
the Principal and Interest Payment Account for such series may be invested
will be equal to the market rates for comparable Pooled Assets or
securities at the time of liquidation. Consequently, the Pooled Assets or
such securities could be liquidated at a discount from the face amount, in
which case the proceeds of liquidation of such Pooled Assets may be less
than the outstanding principal balance of the Bonds plus accrued interest.
In such event, the Issuer will be unable to pay in full the principal and
interest on the Bonds out of the proceeds of the Pool and the Bondholders
will have recourse only to any other assets held by the Issuer which are
not securing Bonds of any other series and the Guaranty. In such event, it
is unlikely that there would be any other assets of the Issuer from which
Bondholders could seek payment of their Bonds. The Trustee and, under
certain circumstances, the Bondholders may, however, seek recovery from
the Guarantor under the Guaranty without seeking recovery from the Issuer
or liquidating the Pool. See "Description of the Guaranty" herein.
Compensation of Underwriter and Issuer
B.C. Ziegler and Company (the "Underwriter") and the Issuer are each
wholly-owned subsidiaries of the Guarantor. The Prospectus Supplement will
set forth the proceeds to the Issuer, the price to the public and the
underwriting discount with respect to each offering of a Series of Bonds.
The Issuer will be compensated, in part, by the use of funds received as
payments on the Pooled Assets which make up the Pools, since payments on
the Pooled Assets will be received monthly, but principal of and interest
on the Bonds will be paid semiannually. The Underwriter may also receive
compensation from the Issuer in connection with the investment of such
funds and may be compensated by the Trustee or the Issuer for performing
certain clerical services relating to the Bonds and the Indenture. See
"Plan of Distribution" herein and "Underwriting" in the Prospectus
Supplement.
Duration of Investment
The Bonds of each series are subject to mandatory redemption (i)
without premium, to the extent of any cash deposit made by the Issuer to
the Trustee in connection with the release of any Pooled Asset
constituting part of the Pool securing such series of Bonds if the Lessee
or Debtor thereunder, as the case may be, has defaulted in making any
rental or debt payment thereunder and such default excluding any grace
period has continued uncured for 40 days (a "Defaulted Pooled Asset"), or
(ii) with a premium of 1% of the principal amount of Bonds of such Series
redeemed prior to the second anniversary date of the original issuance
thereof and without premium thereafter to the extent of proceeds received
by the Issuer from the early termination of any Pooled Asset and the
purchase of the related equipment by the Lessee or Debtor thereunder or
their assignees, in each case such redemption to occur as soon as
practicable following the receipt of such proceeds. See "Description of
the Bonds - Mandatory Redemption of Bonds."
For information respecting ZLC's historic experience with respect to
Leases under which there has been a payment default, see "SERVICER - Bad
Debt Write-Off Experience" herein. ZLC and the Issuer have only limited
experience in originating Purchase Money Security Agreements and
Non-Recourse Notes. However, because of the substantial similarity of the
credit risks associated with and manner of originating Leases, the Issuer
has no reason to believe that the historical figures presented herein with
respect to Leases would differ materially if ZLC and/or the Issuer, as the
case may be, were, during the periods indicated, in the business of
originating Purchase Money Security Agreements and/or Non-Recourse Notes.
During the period from January 1, 1985 through December 31, 1994, an
aggregate of 69 ZLC Leases were terminated prior to the end of their
respective Lease terms (exclusive of Leases terminated as a result of
default by the Lessee). On an average annual basis, early terminations
during this period represented less than 2% of the average aggregate
number of ZLC Leases outstanding at the end of each year. Of the Leases
that were subject to early termination, the average period during which
such Leases were in effect was 27 months; the average original term of
such Leases was 56 months. The most common reason for early Lease
termination was the desire of the Lessee to upgrade the equipment subject
to lease.
The Bonds of each series are also subject to redemption at the
option of the Issuer without premium in whole or in part in multiples of
$1,000 on any Redemption Date (i.e., a date provided in the Supplemental
Indenture for a Series of Bonds on which Bonds shall or may, at the option
of the Issuer, be redeemed) on or after the second anniversary date of the
original issuance of the Bonds of such series. The Underwriter, as the
sole initial participant in the book entry system pursuant to which the
Bonds will be held and administered, will choose by lot in $1,000 units
the Bonds to be redeemed in whole or in part. See "Description of the
Bonds - Redemption at Option of Issuer". No representation can be made as
to the manner in which other securities brokers and dealers participating
in this offering will choose Bonds for redemption. In electing to make
such a redemption the Issuer may take into account, among other factors,
the extent to which Lessees of equipment under the Leases in the Pool
securing such series have exercised their options, if any, to purchase
such equipment or the extent to which Debtors under the Purchased Money
Security Agreements or Non-Recourse Notes have exercised their options to
prepay the principal thereon, the extent to which rentals or debt payments
under such Pooled Assets may be higher than prevailing market rates,
whether the Issuer could sell the Pooled Assets at a premium and the
extent to which the interest on the Bonds of such series is higher than
prevailing interest rates. Neither the Issuer nor ZLC has had any historic
experience relative to the redemption of Bonds under the foregoing
circumstances, but such circumstances are merely indicative of
circumstances under which the Issuer might have an interest in exercising
its right to redeem Bonds. ZLC has in general sold Leases only to
diversify its portfolio and reduce concentration of Leases with respect to
particular Lessees and types of equipment. The Issuer makes no
representation and there can be no assurance as to whether the Bonds of a
series will be redeemed under the above described circumstances. There are
certain risks associated with equipment leasing and financing. See
"Equipment Leasing and Financing - Risk Associated With Equipment Leasing
and Financing."
Bankruptcy Considerations
Certain statutory provisions, including the United States Bankruptcy
Code and similar state bankruptcy and insolvency laws, may limit the
ability of the Servicer or the Trustee to liquidate a Defaulted Pooled
Asset, repossess and resell the equipment subject to a Pooled Asset or
obtain a deficiency judgment against the Lessee or Debtor, as the case may
be, under a Pooled Asset. In the event of the bankruptcy or reorganization
of any such Lessee or Debtor, the Servicer or the Issuer, various
provisions of such federal and state bankruptcy and insolvency laws may
interfere with, delay or eliminate the ability of the Trustee to enforce
its rights under the Pooled Assets.
The federal Bankruptcy Code also grants to the bankruptcy trustee or
the debtor-in-possession a right to elect to assume or reject any
unexpired Pooled Asset. Any rejection of such a Pooled Asset constitutes a
breach of such Pooled Asset, entitling the non-breaching party to a claim
for damages for breach of contract. Upon the bankruptcy of a Lessee or
Debtor, as the case may be, if the bankruptcy trustee or
debtor-in-possession elected to reject a Pooled Asset, the flow of
payments to the Issuer from the Pooled Asset and the Bondholders would
cease. See "Certain Bankruptcy Considerations of Equipment Leases and Debt
Instruments."
Risk Factors Associated With Equipment Leasing and Financing
There are certain risks associated with equipment leasing and
financing. See "Equipment Leasing and Financing - Risks Associated with
Equipment Leasing and Financing."
THE GUARANTOR
FINANCIAL INFORMATION
Year Ended December 31,
1992 1993 1994
CONSOLIDATED STATEMENT
OF INCOME DATA:
Revenues . . . . . . . . $48,306,068 $50,861,456 $48,473,925
Net Income . . . . . . . $ 5,086,534 $ 4,531,024 $ 2,005,056
Ratio of Earnings to Fixed Charges (Unaudited) (a)(b)
Year Ended December 31,
1991 1992 1993 1994
1.39 1.55 1.53 1.26
CONSOLIDATED CAPITALIZATION AT DECEMBER 31,1994 (UNAUDITED):
Amount As Adjusted (c)
Long-term Debt (excluding amounts
currently due) (d) . . . . . . $38,331,881 $ 58,691,881
Common Stock Equity . . . . . . . $50,380,022 $ 50,380,022
Total Capitalization . . . . . . $88,711,903 $109,071,903
_______________
(a) Fixed-charge coverage ratios are calculated in accordance with
Securities and Exchange Commission practice.
(b) Includes proportionate share of earnings and fixed charges of
special purpose corporations which are 50% owned by the Guarantor.
The earnings of these corporations consist almost entirely of
earnings on mortgage certificates guaranteed by the Government
National Mortgage Association or guaranteed mortgage pass-through
certificates issued by the Federal National Mortgage Association.
The interest expenses of these corporations consist of interest on
bonds backed by such mortgage certificates. The ratio of earnings to
fixed charges for these corporations is 1.00. The ratios of earnings
to fixed charges of the Guarantor excluding the proportionate share
of earnings and fixed charges of these corporations were 1991: 2.31;
1992: 2.55; 1993: 2.41 and 1994: 1.51.
(c) Adjusted to reflect the issuance of $20,360,000 of additional Bonds.
(d) Excluding long-term indebtedness of corporations which are 50% owned
by the Guarantor. See footnote (b) above.
ZIEGLER COLLATERALIZED SECURITIES, INC.
General
The Issuer was incorporated in the state of Wisconsin on August 27,
1991 and is a wholly-owned subsidiary of the Guarantor. The Issuer is
organized to facilitate the financing of Leases and purchases of equipment
pursuant to Purchase Money Security Agreements and Non-Recourse Notes. The
Issuer's principal office is located at 215 North Main Street, West Bend,
Wisconsin 53095. Its telephone number is (414) 334-5521.
The Issuer does not intend to engage in any business or investment
activities other than those described in its Articles of Incorporation.
Article 2 of its Articles of Incorporation provides that the purposes for
which the Issuer is formed are (i) to issue bonds secured by equipment
Leases and the equipment leased thereunder and/or debt instruments and the
equipment financed thereunder; (ii) to purchase or otherwise acquire, own,
hold, transfer, convey, assign, pledge, grant security interests in,
finance, refinance and otherwise deal with such collateral; (iii) to
invest and reinvest the payments received with respect to the collateral
and from any disposition or liquidation of the collateral; and (iv) to
engage in any activities incidental and necessary for such purposes.
Except as described in this Prospectus, the Issuer does not intend to
engage in any transactions with its directors, officers or principal
shareholders, to issue senior securities, to borrow money except for the
issuance of Bonds and additional securities for the purpose of acquiring
Leases, Purchase Money Security Agreements or Non-Recourse Notes to
collateralize Bonds or for the purpose of refinancing Bonds, to make loans
(other than as evidenced by Non-Recourse Notes to ZLC for inclusion in the
various Pools as described herein), to invest in the securities of other
issuers for the purpose of exercising control, to underwrite securities of
other issuers, to engage in the purchase and sale of investments, to offer
securities in exchange for property, to repurchase its own securities or
to make annual reports or other reports to Bondholders.
Nonconsolidation in Bankruptcy
The Issuer has taken steps in structuring the transaction
contemplated hereby that are intended to ensure that the voluntary or
involuntary application for relief by the Servicer or the Guarantor under
the United States Bankruptcy Code or any similar applicable state law will
not result in consolidation of the assets and liabilities of the Issuer
with those of the Servicer or the Guarantor. These steps include the
creation of the Issuer as a separate, limited-purpose subsidiary pursuant
to the Articles of Incorporation containing certain limitations (including
restrictions on the nature of the Issuer's business). The Issuer has
agreed not to file, and the Guarantor and Servicer have agreed not to
cause the filing of, a voluntary application for relief under any such
bankruptcy or insolvency law with respect to the Issuer until at least one
year plus one day after the payment in full of the Bonds.
The Issuer has received the advice of its counsel, Foley & Lardner,
Milwaukee, Wisconsin to the effect that (i) a court in balancing the
relevant factors should conclude that the assets and liabilities of the
Issuer should not be consolidated with the assets and liabilities of the
Servicer or the Guarantor in the event bankruptcy proceedings were
commenced under the federal Bankruptcy Code with respect to the Servicer
or the Guarantor, and (ii) in a bankruptcy proceeding involving the
Servicer, the trustee in bankruptcy (or the Servicer as
debtor-in-possession) should not prevail in an action to compel turnover
of the Pooled Assets to the bankruptcy estate on a theory that the
Purchase Agreement constitutes a secured financing rather than a true sale
of the Pooled Assets. If a filing were made under any state or federal
bankruptcy or insolvency law by or against the Issuer, or if an attempt
were made to litigate any of the foregoing issues, then delays in
distributions on the Bonds (and possible reductions in the amount of such
distributions) could occur.
THE ZIEGLER COMPANIES, INC. - THE GUARANTOR
The Guarantor is a holding company which owns eight subsidiary
companies. Seven of the companies are engaged in financially oriented
businesses, and the other company is engaged in recycling and reclaiming
chemical wastes. The Guarantor's principal executive offices are at 215
North Main Street, West Bend, Wisconsin 53095 and its telephone number is
(414) 334-5521.
The Guarantor's subsidiaries, in addition to the Issuer, include:
the Underwriter, an investment banking firm which, with its operating
division, Ziegler Securities, engages in underwriting and distributing
debt securities of hospitals and health care institutions, long-term care
facilities, municipal entities, churches and other corporations; ZLC,
which concentrates on leasing and other forms of equipment financing to
health care providers and other commercial enterprises; Ziegler Financing
Corporation, which limits construction and interim loan activity primarily
to health care providers and churches; Ziegler Thrift Trading, Inc., a
discount brokerage firm; Ziegler Asset Management, Inc., which provides
investment advisory services; First Church Financing Corporation, which
was organized to issue mortgage-backed bonds collateralized by first
mortgages on church buildings and properties; and WRR Environmental
Services Co., Inc. (formerly Waste Research and Reclamation Co., Inc.),
which provides pollution abatement services, and recycles and reclaims
chemical wastes.
DESCRIPTION OF THE BONDS
General
The Bonds offered hereby (the "Bonds") will be issued in an
aggregate principal amount of up to $40,000,000 and will be issued
pursuant to an Indenture dated as of October 1, 1991 (the "Indenture"),
between the Issuer and M&I First National Bank, West Bend, Wisconsin (the
"Trustee"), as supplemented by one or more supplemental indentures. Copies
of the Indenture and each supplemental indenture thereto have been, or
will be, filed as exhibits to the registration statement of which this
Prospectus forms a part, or as exhibits to the Guarantor's filings under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
following summaries describe certain provisions common to each series of
Bonds. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, the provisions of the
Indenture and the supplemental indentures thereto for each particular
series and the Prospectus Supplement to be prepared with respect to each
such series.
The Bonds are issuable in series and are unlimited in aggregate
principal amounts. Various series may bear interest at different rates and
have different interest payment and maturity dates. The Bonds will be
issued as book-entry Bonds in initial denominations of $1,000 or integral
multiples thereof. (Indenture Sections 3.02 and 3.10.) See
"Book-Entry-Only System." The Bonds of each series will be secured by a
Pool of Pooled Assets, which, during the period they secure such series of
Bonds, will not serve as security for any other series of Bonds. (See
"DESCRIPTION OF THE POOL").
Payment of interest on, and redemptions of any Series Bonds which
are not book-entry Bonds may be made at the corporate trust office of the
Trustee. However, the Issuer intends to make payments of interest and
redemptions of the Bonds by checks mailed to Bondholders. (Indenture
Sections 3.07, 11.02, 12.01 and 12.02.)
Bond Rating
Duff & Phelps has assigned a rating of not less than "BBB" to the
Bonds. The "BBB" rating is considered "investment grade." The Bonds of
each series will be individually rated by Duff & Phelps. Each such rating
will be "BBB" or higher and will be specified in the Prospectus Supplement
for that series.
A Duff & Phelps rating is not a recommendation to buy, sell or hold
the Bonds and is subject to revision or withdrawal at any time by the
rating organization. An investor may obtain further details with respect
to the rating of any series of Bonds from Duff & Phelps.
Payments of Interest
The Bonds of each series will bear interest payable semiannually, on
the dates and at the rates specified in the Prospectus Supplement for that
series. Interest on the Bonds accrued through the day immediately
preceding each Semiannual Payment Date will be payable to the persons in
whose names the Bonds are registered in the Bond Register at the close of
business on the Record Date (the 15th day of the immediately preceding
month) for such Semiannual Payment. See "Book-Entry-Only System" herein.
Mandatory Redemption of Bonds
The Bonds of each series will be required to be redeemed (i) without
premium to the extent of any cash deposit made by the Issuer to the
Trustee in connection with the release of Defaulted Pooled Assets or (ii)
with a premium of 1% of the principal amount of Bonds of such Series
redeemed prior to the second anniversary date of the original issuance
thereof and without premium thereafter to the extent of proceeds received
by the Issuer from the early termination of any Pooled Asset and the
purchase of the related equipment by the Lessee thereunder or the
prepayment of principal on any Purchase Money Security Agreement or
Non-Recourse Note by a Debtor, in each case, as soon as practicable
following the receipt of such proceeds. The Trustee is authorized under
the Indenture to release from the Pool for any Series of Bonds any
Defaulted Pooled Asset provided that the Issuer deposit with the Trustee
cash or its equivalent in an amount equal to the amount, if any, by which
100% of the aggregate principal amount of then Outstanding Bonds of the
Series secured by such pool (or such greater percentage of
collateralization as is specified in the supplemental indenture pursuant
to which such series of Bonds is issued) exceeds the Issuer's then net
investment in the remaining Pooled Assets in such collateral pool. A
"Defaulted Pooled Asset" is a Pooled Asset with respect to which there has
occurred and has remained uncured for a period of 30 days any default
(exclusive of grace periods) in payments under such Pooled Asset, whether
in the form of debt payments or rentals.
Redemption at Option of Issuer
In addition to the redemption described above, the Issuer may redeem
all or any part of the Bonds of any series, without premium, on any
Redemption Date on or after the second anniversary of the original
issuance thereof.
Redemption Price for Bonds
The redemption price for a Bond is 100% of the unpaid principal
amount thereof. In addition, interest accrued through the day immediately
preceding the applicable Redemption Date will be paid on the redeemed
Bonds.
No Listing of Bonds
The Issuer does not intend to apply for the listing of the Bonds on
any exchange or on the Nasdaq National Market.
Book-Entry-Only System
The Depository Trust Company ("DTC"), New York, New York, will act
as securities depository for the Bonds. The ownership of one
fully-registered Bond for each maturity of the Bonds of each series as set
forth on the cover page of each Prospectus Supplement, each in the
aggregate principal amount of such maturity, will be registered in the
name of Cede & Co., as nominee for DTC. DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act, as amended.
DTC was created to hold securities of its participants (the "DTC
Participants") and to facilitate the clearance and settlement of
securities transactions among DTC Participants in such securities through
electronic book-entry changes in accounts of the DTC Participants, thereby
eliminating the need of physical movement of securities certificates. DTC
Participants include the Underwriter, other securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own DTC. Access
to the DTC system is also available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly (the
"Indirect Participants").
The DTC Participants shall receive a credit balance in the records
of DTC. The ownership interest of each actual purchaser of each Bond (the
"Beneficial Owner") will be recorded through the records of the DTC
Participant. Beneficial Owners are expected to receive a written
confirmation of their purchase providing details of the Bond acquired.
Transfer of ownership interests in the Bonds will be accomplished by book
entries made by DTC and, in turn, by the DTC Participants who act on
behalf of the Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interest in the Bonds, except as
specifically provided in the Indenture.
DTC may determine to discontinue providing its service with respect
to the Bonds at any time by giving notice to the Issuer and discharging
its responsibilities with respect thereto under applicable law. Under such
circumstances, Bond certificates are required to be delivered as described
in the Indenture. The Beneficial Owner, upon registration of certificates
held in the Beneficial Owner's name, will become the registered owner of
the Bonds.
The Issuer may determine that continuation of the system of
book-entry transfers through DTC (or a successor securities depository) is
not in the best interests of the Beneficial Owners. In such event, Bond
certificates will be delivered as described in the Indenture.
Conveyance of notices and other communications by DTC to DTC
Participants, by DTC Participants to Indirect Participants, and by DTC
Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory and
regulatory requirements as may be in effect from time to time.
Principal and interest payments on the Bonds will be made to DTC or
its nominee, Cede & Co., as registered owner of the Bonds. Upon receipt of
moneys, DTC's current practice is to immediately credit the accounts of
the DTC Participants in accordance with their respective holdings shown on
the records of DTC. Payments by DTC Participants and Indirect Participants
to Beneficial Owners will be governed by standing instructions and
customary practices, as is now the case with municipal securities held for
the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such DTC Participant or Indirect
Participant and not of DTC or the Issuer, subject to any statutory and
regulatory requirements as may be in effect from time to time.
Maintenance of Insurance
Each Pooled Asset will require the Lessee or debtor with respect
thereto to procure, maintain and pay for (i) insurance against the loss or
theft of or damage to the leased or financed equipment, for an amount
specified in the Pooled Asset, naming ZLC or the Issuer, as the case may
be, and their respective assigns, as a loss payees, and (ii) public
liability and property damage insurance with minimum coverage, naming ZLC
or the Issuer, as the case may be, and their respective assigns as
additional insureds. All such insurance shall be in the form and amount
and with companies satisfactory to ZLC or the Issuer, as the case may be.
Each insurer shall agree by endorsement upon the policy or policies issued
by it or by independent instrument furnished to ZLC or the Issuer, as the
case may be, that it will give ZLC or the Issuer, as the case may be,
thirty (30) days' written notice before the policy in question shall be
materially altered or canceled. The proceeds of such insurance, at the
option of ZLC or the Issuer, as the case may be, shall be applied (i)
toward the replacement, restoration or repair of the equipment, or (ii)
toward payment of the obligations of the Lessee or Debtor hereunder.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material anticipated
Federal income tax consequences of the purchase, ownership and disposition
of the Bonds, and is based upon laws, regulations, rulings and decisions
now in effect, all of which are subject to change. This discussion is
based on current law including certain temporary and proposed Treasury
regulations, all of which is subject to changes that prospectively or
retrospectively could modify or effect adversely the tax consequences
summarized below. Prospective purchasers of Bonds should consult their own
tax advisors in determining the Federal, state, local and any other tax
consequences to them of the purchase, ownership and disposition of Bonds.
The discussion does not address all of the tax consequences relevant to a
particular Bondholder in light of that Bondholder's circumstances, and
some Bondholders may be subject to special rules and limitations not
discussed below.
The Issuer
The Issuer has been advised by its counsel Foley & Lardner,
Milwaukee, Wisconsin, that, although there are no regulations, published
rulings or judicial decisions involving the characterization for Federal
income tax purposes of securities with provisions substantially the same
as the Bonds, in its opinion the Bonds will be treated for Federal income
tax purposes as indebtedness of the Issuer and not as an ownership
interest in the Pooled Assets, or any equity interest in the Issuer or in
a separate association taxable as a corporation.
Taxation of Bondholders
General
The purchase of a Bond for cash will not be a taxable event to the
purchaser or the Issuer. The purchaser will take a basis in that Bond
initially equal to the amount paid therefor. In general, interest paid or
accrued and market discount on a Bond will be treated as ordinary income
to the Bondholder and principal payments on a Bond will be treated as a
return of capital to the extent of the Bondholder's basis in the Bond
allocable thereto. All such interest will be considered portfolio income
for purposes of the passive activity provisions in Section 469 of the
Code.
Original Issue Discount
The Bonds will not be issued with "original issue discount" within
the meaning of Section 1273(a) of the Code.
Market Discount
If a Bond is purchased other than at original issuance, a purchaser
of the Bond may be subject to the market discount rules of Sections 1276
through 1278 of the Code with respect to such Bond. Under these provisions
"market discount" is the amount by which the stated redemption price at
maturity of a Bond exceeds the basis of such bond immediately after its
acquisition by the taxpayer unless the amount of market discount is
treated as zero under a de minimis rule. Gain on the disposition of a Bond
with market discount will be treated as ordinary income to the extent it
does not exceed the accrued market discount on such Bond. The Code
provides that any principal payment (whether a scheduled payment or a
prepayment) with respect to a market discount bond acquired by a taxpayer,
will be treated as ordinary income to the extent that it does not exceed
the accrued market discount at the time of such payment. As an alternative
to the inclusion of market discount in income on the foregoing basis, the
holder may elect to include such market discount in income currently as it
accrues on all market discount instruments acquired by such holder in that
taxable year or thereafter.
Any purchaser of a Bond other than at original issue will need to
determine whether the Bond is a market discount bond, and if so, how to
treat the market discount for federal income tax purposes. The foregoing
discussion of the market discount rules is only a summary of these rules,
and any purchaser of a Bond at other than original issue should consult
with his own tax advisors regarding the specific application of the market
discount rules to the Bond.
Interest Expense
A purchaser of a Bond who incurs indebtedness properly allocable
thereto may be restricted as to the deductibility of interest paid or
accrued on such indebtedness if he holds that Bond for investment
purposes. Under Section 163(d) of the Code, a noncorporate taxpayer may
deduct interest on indebtedness properly allocable to investment property
only to the extent of net income from his investment property. Any excess
of such interest is carried forward to subsequent years as investment
interest paid or accrued by the taxpayer, and such interest may be
deducted to the extent of net investment income from such investment
property. In addition, any purchaser of a Bond may be required to defer
recognition of a portion of interest expense attributable to any
indebtedness incurred or continued to purchase or carry a Bond acquired
with market discount. The amount of this deferred interest expense in any
taxable year generally would not exceed the accrued market discount for
the year, and any such deferred expense generally is allowed as a
deduction not later than the year in which the related market discount is
recognized. If such purchaser elects to include market discount in his
income currently (see "Market Discount"), no deferral of deductibility of
interest under the market discount rules will be required.
Premium
A Bond purchased at a cost greater than its currently outstanding
principal amount is considered to be purchased at a premium. If the
purchaser holds such Bond as a "capital asset" within the meaning of
Section 1221 of the Code, the Bondholder may elect under Section 171 of
the Code to amortize such premium under the constant interest method. The
Code provides that amortizable bond premium will be treated as an offset
to interest income rather than a deductible interest expense, and requires
a reduction in basis for a Bond for which amortizable bond premium is
applied to reduce interest payments.
Sale or Exchange of Bonds
If a Bondholder sells or exchanges a Bond, the Bondholder will
recognize gain or loss equal to the difference, if any, between the amount
received and his adjusted basis in the Bond. The adjusted basis of a Bond
generally will equal the cost of the Bond to the seller, increased by any
market discount previously included in the seller's gross income with
respect to the Bond, and reduced by any payments in reduction of the
stated redemption price of the Bond that has previously been received by
the seller and by any amortized premium.
Except as described above with respect to market discount, any gain
or loss on the sale or exchange of a Bond realized by an investor who
holds the Bond as a "capital asset" within the meaning of Section 1221 of
the Code, will be capital gain or loss and will be long-term or short-term
depending on whether the Bond has been held for the long-term capital
holding period (under current rules, more than one year).
Backup Withholding
Payments made on the Bonds and proceeds from the sale of the Bonds
to or through certain brokers may be subject to a "backup" withholding tax
of 31% of "reportable payments" (including interest payments and under
certain circumstances, principal payments) unless, in general, the holder
of the Bond complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the
Code. Any amounts so withheld from distributions on the Bonds would be
refunded by the Internal Revenue Service or allowed as a credit against
the holder's federal income tax.
DESCRIPTION OF THE INDENTURE
The following summaries describe certain provisions of the Indenture
not described elsewhere in this Prospectus. The summaries do not purport
to be complete and are qualified in their entirety by reference to the
provisions of the Indenture. Where particular provisions or terms used in
the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such
summaries.
Events of Default
An Event of Default with respect to the Bonds is defined in the
Indenture as: default of 30 days in the payment of interest on any Bond
after such interest becomes due and payable; default in the payment of
principal of any Bond; and default in the performance of any other
covenant in the Indenture and the continuation of such default for a
period of 60 days after notice to the Issuer by the Trustee or to the
Issuer and the Trustee by the holders of at least 25% of the Bonds then
outstanding. In case an Event of Default with respect to the Bonds should
occur and be continuing, the Trustee or the holders of at least 25% in
principal amount of the Bonds then outstanding may declare the principal
of the Bonds to be due and payable. Such declaration may under certain
circumstances be rescinded by the holders of a majority in principal
amount of the Bonds then outstanding. (Indenture Sections 6.01 and 6.02.)
Without the consent of the holders of at least 80% of the
outstanding principal amount of the Bonds, the Trustee is prohibited from
liquidating the Pool unless the proceeds on liquidation would be
sufficient to pay the principal amount of and accrued interest on the
outstanding Bonds. In addition, if, following an Event of Default, the
Bonds have been declared to be due and payable, the Trustee may, in its
discretion, refrain from liquidating the Pool if such Pool is continuing
to provide sufficient funds for the payment of principal of and interest
on the Bonds as such principal and such principal and interest would have
come due if there had not been such a declaration. (Indenture Sections
6.04 and 6.05.)
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing,
the Trustee shall be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the
Bondholders, unless such Bondholders shall have offered to the Trustee
reasonable security or indemnity. (Indenture Section 7.03.) Subject to
such provisions for indemnification and certain limitations contained in
the Indenture, the holders of a majority in principal amount of the
outstanding Bonds shall have the right to direct the time, method and
place of conducting any proceeding or any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; and the holders
of a majority in principal amount of the outstanding Bonds may, in certain
cases, waive any default except a default in payment of principal of, or
interest on, the Bonds. (Indenture Sections 6.14 and 6.15.)
Statement as to Compliance
The Issuer will be required to file annually with the Trustee a
written statement of fulfillment of its obligations under the Indenture.
(Indenture Section 11.09.) Failure to file such a statement, or filing of
a false and/or misleading statement would constitute an Event of Default
if not corrected during a period of 60 days after notice to the Issuer by
the Trustee or notice to the Issuer and the Trustee by the holders of at
least 25% in principal amount of outstanding Bonds.
Modification of Indenture
With the consent of the holders of not less than a majority in
principal amount of all series outstanding under the Indenture or of the
outstanding Bonds, the Trustee and the Issuer may execute a supplemental
indenture to add provisions to, or change in any manner or eliminate any
provisions of, the Indenture with respect to all of the outstanding series
of Bonds or modify in any manner the rights of the holders of all of the
outstanding series of Bonds, provided that, without the consent of the
holder of each outstanding Bond affected, no such supplemental indenture
shall (i) change the maturity of the principal of, or interest on, any
Bond, or reduce the principal amount thereof or the rate of interest
thereon; (ii) adversely affect the rights of Bondholders with respect to
prepayments of principal or redemption of Bonds; (iii) reduce the
percentage of Bondholders whose consent is required for the authorization
of any supplemental indenture or for any waiver of compliance with certain
provisions of the Indenture or certain defaults thereunder or their
consequences; or (iv) modify any of the provisions of the Indenture with
respect to supplemental indentures with the consent of Bondholders, except
to increase the percentage of Bondholders whose consent is required for
any such action or to provide that other provisions of the Indenture
cannot be modified or waived without the consent of the holders of each
outstanding bond affected thereby. (Indenture Section 10.02).
Satisfaction and Discharge of the Indenture
The Indenture will be discharged upon the cancellation of all of the
outstanding Bonds or, with certain limitations, upon deposit with the
Trustee of funds sufficient for the payment or redemption thereof.
(Indenture Section 5.01.).
DESCRIPTION OF THE GUARANTY
The Guaranty will be entered into by the Guarantor with the Trustee
for the benefit of the holders of the Bonds, all of whom shall be entitled
to enforce performance and observance of the Guaranty to the same extent
provided for the enforcement of the remedies under the Indenture. Under
the Guaranty, the Guarantor unconditionally guarantees to the Trustee for
the benefit of the holders from time to time of the Bonds (i) the full and
prompt payment of the principal of and redemption premium, if any, on any
Bonds when and as the same shall become due, whether at the stated
maturity thereof, by acceleration, call for redemption or otherwise; and
(ii) the full and prompt payment of any interest on any Bonds when and as
the same shall become due.
The obligations of the Guarantor under the Guaranty will be absolute
and unconditional and will remain in full force and effect until the
entire principal of and interest on the Bonds, as well as all other
obligations, covenants or agreements of the Issuer or the Guarantor under
or arising out of the Indenture or the Guaranty, have been paid or
provided for, and such obligations will not be affected, modified or
impaired, except by a specific instrument modifying the Guaranty, upon the
happening of any event, other than such payment and whether or not the
Issuer has notice thereof or consents thereto.
No set-off, counterclaim, reduction or diminution of an obligation,
or any defense of any kind or nature which the Guarantor has or may have
against the Issuer will be available to the Guarantor against the Trustee.
The Guarantor will agree that during the term of the Guaranty it will
maintain its existence as a corporation and will not dispose of all or
substantially all its assets and will not consolidate with or merge into
another entity or permit another entity to consolidate with or merge into
it unless the surviving, resulting or transferee entity expressly assumes
all the obligations of the Guarantor under the Guaranty, and has a net
worth after the merger or consolidation at least equal to that of the
consolidated net worth of Guarantor and its subsidiaries prior thereto.
Neither the Bonds nor the Pooled Assets are insured or guaranteed in whole
or in part by the United States, any agency of or corporation chartered by
the United States, any other governmental agency or any other person or
entity except for the Guaranty of the Bonds by the Guarantor.
EQUIPMENT LEASING AND FINANCING
General
The leasing and financing of non-expendable moveable equipment to
health care providers, commercial and industrial companies is highly
competitive. Participants in the equipment leasing and financing industry
include (i) finance divisions of equipment suppliers, (ii) banks or their
affiliates or subsidiaries, (iii) leasing and finance companies such as
ZLC, and (iv) independently formed partnerships of individuals or
corporations operated for the specific purpose of leasing equipment. ZLC
is engaged in leasing and financing a wide variety of equipment primarily
to health care providers, including hospitals, medical centers, imaging
centers, clinics and doctor group practices under non-cancelable, full-pay
out Leases, and various debt instruments such as the Pooled Assets.
Equipment leased or financed by ZLC includes x-ray units, MRI and CF
scanners, nuclear cameras, catheterization labs, linear accelerators,
ultrasound units, monitoring systems, autoanalyzers and computers, along
with other mechanical and electromechanical equipment used for diagnostic,
therapeutic and service purposes. ZLC also Leases a wide range of general
production, service and hi-technology electronic equipment to commercial
and industrial companies.
Equipment Leasing
The Leases (including substantially all of the Leases currently in
the ZLC portfolio) are typically non-cancelable full-payout Leases under
which the aggregate of rentals due in the initial term equals the purchase
price of the equipment, the interest cost incurred by the Lessor
("Lessor") to fund part or all of the purchase price and a gross profit
attributable to funds invested from the Lessor's working capital. Lessors
may receive additional revenues through the sale or re-lease of the
equipment at the expiration of the initial Lease term under Leases in
which the Lease term is less than the useful life of the leased equipment.
At the end of the initial term of such leases, the Lessee may return the
equipment or is allowed to renew for an additional term at a then fair
rental value or to purchase the equipment at a predetermined price or its
then fair market value. It is not contemplated that Leases of this type
will form the major portion of the Pool securing the Bonds. Although some
Leases may include an option to purchase at a bargain purchase price
(i.e., substantially less than the fair market value of the equipment at
the time of purchase) or may be true Leases with a fair market value
purchase option (if any), it is anticipated that most of the Leases will
constitute financing Leases with a Lease term approximating the useful
life of the leased equipment with the Lessee having the option to purchase
the leased equipment at the expiration of the term of the Lease for a
nominal consideration. Leases may provide for an option to terminate the
Lease prior to the expiration of the term thereof upon purchase of the
leased equipment at a purchase price approximating the then unamortized
purchase price of the leased equipment, but generally the Leases will not
provide for an option to purchase prior to the expiration of the term of
the Lease. Appendix A to the Prospectus Supplement for each Series of
Bonds will indicate the existence and nature of purchase options.
Purchase Money Security Agreements
The Purchase Money Security Agreements which may be assigned by ZLC
for inclusion in a Pool are debt instruments entered into between ZLC and
a third-party commercial enterprise to finance the purchase of equipment
by such enterprise on a monthly installment basis over terms ranging
generally from twenty-four (24) to eighty-four (84) months. In all cases,
upon purchase of the equipment, the purchasing enterprise will hold title
to such equipment and ZLC will at all times during the term of the
Purchase Money Security Agreement maintain a perfected security interest
in such equipment. The purchaser may prepay the principal on the Purchase
Money Security Agreement during the term thereof only with the consent of
ZLC and pursuant to the payment of such penalty as ZLC may, in its
discretion, assess.
Non-Recourse Notes
Non-Recourse Notes represent obligations to repay principal and
interest on funds advanced by the Issuer to ZLC or by ZLC to certain
third-party leasing enterprises, in either case, to finance the purchase
of equipment which is then leased to various health care providers and
other commercial enterprises. The aggregate outstanding principal amount
of Non-Recourse Notes may not at any time exceed the present value of the
aggregate lease payments owed to ZLC with respect to such leased
equipment. Repayment of principal and interest on the Non-Recourse Notes
is made generally over terms ranging from twenty-four (24) to eighty-four
(84) months in the form of an assignment by the Lessor (ZLC or the
third-party Lessor) to ZLC or the Issuer, as the case may be, of all
rights, including rights to receive all rental payments due, under such
Lease. The scheduled Lease payments will be in amounts sufficient to pay
the principal and interest on the Non-Recourse Notes. The Issuer or ZLC,
as the case may be, will maintain a perfected security interest in the
equipment until the Non-Recourse Note is paid in full. Non-Recourse Notes
may be prepaid only to the extent and on such terms as the underlying
Leases may be terminated by the purchase of equipment thereunder prior to
the expiration of the term of such Lease.
ZLC Portfolio
The following table sets forth the percentage of ZLC's Lease
portfolio by category of end user at the dates indicated:
Year Ended December 31,
1992 1993 1994
Hospitals and Medical Centers 55.8% 53.8% 48.9%
Clinics, Laboratories and
Physicians 23.1% 24.5% 28.4%
Commercial and Industrial
Businesses 21.1% 21.7% 22.7%
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
ZLC does not place orders nor purchase equipment in advance of the
Lessee entering into a Lease with ZLC for that equipment. In addition, ZLC
or the Issuer, as the case may be, will not advance funds under
Non-Recourse Notes until an equipment Lease has been entered into between
a third-party Lessor or ZLC, as the case may be, and a commercial Lessee
(with the rental payments on such Lease, in amounts sufficient to pay the
principal and interest on the Non-Recourse Notes), and assigned to ZLC or
the Issuer, as the case may be.
Substantially all terms of Leases, Purchase Money Security
Agreements and Non-Recourse Notes will range from 24 to 84 months. The
average term of Leases in ZLC's portfolio at December 31, 1994 was
approximately 54 months.
Pooled Assets
Pooled Assets in the Pools securing the various Series of Bonds will
each be for terms of a stated number of years and will provide for fixed
periodic rental/debt payments during such terms. The scheduled rental/debt
payments in each Pool are intended to be sufficient to meet the debt
service requirements on the Series of Bonds secured by such Pool, and the
meeting of such debt service payments is not intended to be dependent upon
the sale or releasing of any leased or financed equipment.
Risks Associated with Equipment Leasing and Financing
Equipment leasing and financing involve credit risks essentially
comparable to those experienced by other businesses involving the
advancing of credit and will be impacted by numerous factors which may
affect the ability of individual Lessees or Debtors, as the case may be,
to generate sufficient revenues to pay capital and operating expenses.
These factors include general economic conditions which may vary from time
to time and from one geographic area to another and may have a varying
impact on different economic sectors and industries. It is anticipated
that a substantial portion of the Leases, Purchase Money Security
Agreements and Leases financed with Non-Recourse Notes will be entered
into with health care providers. The health care industry has historically
been subject to a high level of government regulation and revenues of
health care providers are heavily dependent upon government programs such
as Medicare and Medicaid.
The possible occurrence, in the future, of the following factors,
which do not constitute an all inclusive list may adversely affect the
health care industry and, therefore, the revenue base of health care
provider or Debtors under the Leases, Purchase Money Security Agreements
and/or Leases financed under Non-Recourse Notes, to an extent that cannot
be determined at this time:
A. The reduced demand for services provided by, or capable of being
provided by, members of the health care industry, as a result of
future scientific advances, changes in demographics or a decline in
the economic condition of the service area of the members of the
industry leasing from or financing equipment with ZLC.
B. Efforts by insurers, private employers and government agencies to
limit the cost of health care services by reducing the utilization
of services by such means as preventive medicine, improved
occupational health and safety, and negotiated discounted rates.
C. Cost increases resulting from, among other factors, increases in the
salaries, wages and fringe benefits of employees; increases in costs
associated with advances in medical technology or with inflation;
and competition, future legislation or other factors limiting the
ability of industry members to increase revenues to offset such
increased costs.
D. Future contract negotiations between public and private insurers and
health care providers, and other similar efforts to limit health
care costs and coverage.
E. Increased costs and expenses of insuring or otherwise protecting
itself against malpractice claims.
F. Future legislation and regulations affecting the industry's
tax-exempt status, governmental and commercial medical insurance,
and the health care industry generally.
G. The inability of potential Lessees or debtors to obtain governmental
approvals to undertake future projects necessary to remain
competitive as to rates, charges, quality and scope of care.
DESCRIPTION OF THE POOL
General
Each series of Bonds will be secured by an assignment to the Trustee
of the entire interest of the Issuer in the Pooled Assets with the
aggregate amount of the scheduled rentals or principal and interest
payments payable thereunder, as the case may be, during each six-month
period ending on a Semiannual Payment Date (after deduction of Servicing
Fees and Trustee's Fees accruing during such period) together with other
funds then held by the Trustee for payment of principal and interest on
the Bonds of such Series on such Semiannual Payment Date, so long as any
Bonds of such series outstanding are equal to or greater than the
aggregate amount of principal and interest payments on the Bonds of such
series on such Semiannual Payment Date. The Pooled Assets will consist of
Leases, Purchase Money Security Agreements and Non-Recourse Notes entered
into by health care providers and commercial enterprises which may be
originated by the Issuer in connection with the advancement of funds to
ZLC for the purchase of equipment which is then leased to third parties or
originated by ZLC or acquired by ZLC from third parties (lease brokers and
other leasing or financing companies). In the case of Pooled Assets
acquired by ZLC from third parties, ZLC will in each case perform its own
independent credit evaluation.
The Pool will include (i) the Pooled Assets, (ii) all amounts
deposited in the Principal and Interest Payment Account, (iii)
reinvestment earnings on amounts in the Principal and Interest Payment
Account (iv) payments received by the Trustee from the purchase by the
Guarantor or ZLC of Defaulted Pooled Assets, and (v) a perfected security
interest in equipment subject to the Pooled Assets. ZLC's current
portfolio of Pooled Assets includes Pooled Assets with Lessees/Debtors
located in 41 states and the District of Columbia. The states in which
there is currently the highest level of lease/financing activity as
measured by the percentage of total lease/financing income during 1994 and
total equipment cost as of December 31, 1994 is represented by Pooled
Assets with Lessees/Debtors located in the states are:
Percentage of Percentage of
Total Pooled Total Cost of Equipment
State Asset Income under Pooled Assets
Wisconsin 15.5% 15.4%
New York 15.0% 11.6%
Indiana 10.2% 11.1%
California 8.8% 9.6%
Pennsylvania 7.8% 7.4%
Kansas 5.3% 4.5%
Michigan 4.8% 5.2%
No other state accounts for 5% or more of such Pooled Assets
determined on either basis. The geographic distribution of the Pooled
Assets in the Pools will vary from Pool to Pool and may or may not
correspond to the geographic distribution of ZLC's existing Pooled Assets.
The Prospectus Supplement for each series of Bonds will identify those
states and Lessees/Debtors, if any, which account for 10% or more of the
Pooled Assets in the Pools securing such series of Bonds; provided that in
the case of Non-Recourse Notes the ultimate Lessee whose payment
obligations have been assigned to ZLC or the Issuer, as the case may be,
and the states in which such Lessees are located will be identified while
the identity and location of the Lessor obligated under such Non-Recourse
Note will be identified by a footnote thereto.
Although the Issuer holds perfected security interests in the
equipment underlying the Pooled Assets pledged with the Trustee under the
Indenture, certain of such security interests may be secondary to other
security interests filed with respect to such equipment. Accordingly,
investors should be aware that there can be no assurance that, in the
event of a default under a Pooled Asset, the Trustee will be able to
realize on such underlying equipment.
Acquisition Standards Relating to Pooled Assets
Pooled Assets purchased by the Issuer to secure any series of Bonds
are or will be for equipment leased or purchased by health care providers
or other commercial enterprises. The Pooled Assets will generally be
purchased from ZLC. Such Pooled Assets will be originated by the Issuer
(in the case of Non-Recourse Notes from ZLC) or ZLC or acquired by ZLC
from third parties and will be serviced by ZLC. It is possible, however,
that the Issuer may purchase Pooled Assets directly from other sources and
utilize the services of other servicers in connection with such Pooled
Assets. The Issuer's standards for determining which Pooled Assets will be
purchased will be based on underwriting criteria historically utilized by
ZLC.
ZLC has been primarily involved in the business of medical equipment
leasing and financing since 1971.
Prior to entering into a Lease, Purchase Money Security Agreement or
Non-Recourse Note with a Lessor or Debtor, as the case may be, ZLC
requires that all pertinent information needed to evaluate the Lessee or
Debtor be provided to ZLC. ZLC will compile that information into a
standardized report for review and evaluation by management of ZLC. Upon
favorable review by ZLC Management the report is forwarded to the Finance
Committee, a committee which reviews all unrated securities offerings
underwritten by the Underwriter, all ZLC Leases and financing arrangements
and all interim financing provided by Ziegler Financing Corporation.
The Finance Committee is comprised of various senior management of
the Guarantor and the Underwriter. Although certain members of the Finance
Committee are officers and directors of ZLC, no member of the Finance
Committee is actively engaged in the day-to-day operations of ZLC or is
subordinate to any such person. See "Summary of Transactions Between
Issuer and Related Entities."
The Finance Committee's principal role with respect to the Pooled
Assets is to review all prospective Pooled Assets with respect to credit
quality, appropriate equipment residual values and to determine the
appropriateness of the Lease or debt repayment rates.
The credit analysis of prospective Lessees/Debtors is conducted by ZLC
Management with particular attention to key financial ratios and
relationships of the prospective Lessee/Debtor:
(i) Relationship of long term debt to equity as it compares with
industry averages.
(ii) Trends and composition of revenues, operating income and
extraordinary income and charges.
(iii) Historical and prospective debt service coverage.
(iv) Contingent liabilities and legal claims and provisions
therefore.
(v) Working capital and composition of current assets and
liabilities.
(vi) Evaluation of any significant customers.
In addition, when the Finance Committee considers prospective new
Leases, Purchase Money Security Interests or Non-Recourse Notes (and the
Leases originated thereunder) for existing customers of ZLC, it reviews
information related to the total amount of business ZLC has written to
date with such Lessee/Debtor and the remaining exposure of such
Lessee/Debtor to both ZLC and its other obligors, and the payment history
of such Lessee/Debtor on Leases or debt originated by ZLC. The Finance
Committee uses this information in the approval process to ascertain that
Lessees/Debtors are current with payments on previous transactions, to
monitor ZLC's exposure levels, and to price new transactions based on
previous financing history.
Because of the wide variety of Lessees/Debtors and industry
variances with respect to financial performance, the Finance Committee
rates each prospective Lessee/Debtor according to its individual financial
statements, the structure of the Lease or debt transaction, the industry
in which such Lessee/Debtor operates, prior financings and the overall
risk ZLC underwrites with each such Lessee/Debtor.
All Leases or other financing arrangements approved or rejected by
the Finance Committee are so noted in writing and provided to the ZLC
sales person involved.
Furthermore, it is ZLC's policy to monitor Lessees/Debtors for early
identification of potential financial difficulty. ZLC's leasing and
financing activity is primarily based on repeat business. As a result,
monitoring the accounts of cur- rent Lessees/Debtors is an important part
of the approval process.
Pooled Assets
The Pooled Assets will be selected to comply with the
representations and warranties of the Issuer in the Indenture and ZLC with
respect to the Pooled Assets. (See "Representations and Warranties.")
Compliance with the representations and warranties in the Indenture is
intended to insure timely receipt of rental and/or debt payments on the
Pooled Assets.
Substitution of Pooled Assets
The Indenture provides that, subject to certain limitations, within
three months from the Closing Date of any series of Bonds, the Issuer may
(but is not obligated to) substitute Pooled Assets in place of defaulted
or defective Pooled Assets initially included in the Pool relating to such
series of Bonds, provided that (i) no more than 15% in principal amount of
the Pooled Assets originally included in the Pool ("Original Pooled
Assets") may be substituted for; (ii) only Original Pooled Assets may be
substituted for; and (iii) after giving effect to any substitution, the
aggregate of all payments to be received with respect to the Pooled Assets
equals or exceeds the aggregate principal and interest to be payable with
respect to the Bonds. Any substitute Pooled Assets will also be selected
to comply with the representations and warranties of the Issuer with
respect to the Pooled Assets in the Indenture.
Representations and Warranties
In the Indenture and each supplemental indenture thereto, the Issuer
will represent and warrant to the Trustee with respect to the Pooled
Assets securing each series of Bonds, among other things, that to the best
of its knowledge:
(i) The information set forth in the schedule of Pooled Assets
attached as an exhibit to such supplemental indenture is
true and correct in all material respects at the date or
dates respecting which such information is furnished.
(ii) As of the date of execution and delivery of each
supplemental indenture each Pooled Asset identified in the
schedule of Pooled Assets attached to such supplemental
indenture is in full force and effect, and the Issuer has
granted to the Trustee as security for the Bonds a security
interest in the Issuer's right, title and interest in and to
each Pooled Asset and the equipment subject to each Pooled
Asset in the Pool securing the Bonds which security interest
has been perfected by filing under the Uniform Commercial
Code as in effect in the State of Wisconsin and with respect
to each item of equipment in the jurisdiction where the
principal place of business of the Lessee/Debtor under such
Pooled Asset is located and in the jurisdiction in which the
equipment subject to such Pooled Asset is located, provided
that in general no fixture filings will be made with respect
to equipment.
(iii) The Issuer will own the Pooled Assets in good faith, without
notice of any adverse claim.
(iv) As of the date of execution and delivery of each
supplemental indenture, the Issuer will be the sole legal
owner of each Pooled Asset free and clear of all liens,
security interests and other encumbrances, and immediately
upon the transfer and assignment contemplated pursuant to
such supplemental indenture (and assuming that the Trustee
complies with its obligations under such supplemental
indenture and has not in its individual capacity taken any
action to grant any interest in any Pooled Asset to any
other person), the Trustee will have a perfected first
security interest in each Pooled Asset in the Pool created
by such supplemental indenture.
(v) As of the date of execution and delivery of each
supplemental indenture, the terms of each Pooled Asset will
not have been waived, altered or modified in any material
respect, except by written instruments included in the
documents delivered to the Trustee on the Closing Date.
(vi) As of the date of execution and delivery of each
supplemental indenture, insurance against the loss or theft
of or damage to the equipment subject to each Pooled Asset
in the Pool will be in effect and will provide coverage in
an amount at least equal to the full insurable value of the
equipment subject to each Pooled Asset in the Pool created
by such supplemental indenture.
Representations and Warranties of ZLC
ZLC, as Seller of the Pooled Assets, will represent to the Issuer
and the Trustee in the Purchase Agreement respecting the Pooled Assets
collateralizing each series of Bonds, described in an addendum to the
Purchase Agreement, that:
(i) The information pertaining to each Pooled Asset set forth in
Schedule A to an addendum to the Purchase Agreement (Annex A
to the Prospectus Supplement respecting such series of
Bonds) is true and correct in all material respects at the
date or dates respecting which such information is
furnished.
(ii) Each Pooled Asset permits the assignment thereof by ZLC and
of all of its rights and interests thereunder without the
consent of the Lessee/Debtor thereunder.
(iii) ZLC is the sole owner of each Pooled Asset free and clear of
any security interests or any ownership or participation
interests in favor of any other person.
(iv) No Pooled Asset (after giving effect to any grace period
therein) is more than 20 days delinquent or within the past
12 months has been more than 20 days delinquent, and within
the three-year period ending on the closing date for the
purchase of such Pooled Asset there have not been more than
two late payments (after giving effect to any grace period)
on such Pooled Asset.
(v) There are no offsets, defenses or counterclaims affecting
the obligation of the Lessee/Debtor to pay the unpaid rental
or debt payments under such Pooled Asset.
(vi) To the best of Seller's knowledge, the equipment subject to
each Pooled Asset is free of damage and in good repair.
(vii) Each Pooled Asset complies with applicable federal and state
laws, rules, regulations and other requirements pertaining
to usury.
(viii) An insurance policy is in full force and effect with respect
to the Equipment subject to each Pooled Asset providing
coverage against the loss or theft of or damage to such
equipment in an amount at least equal to the full insurable
value of such equipment and requires at least 10 days prior
notice to the Servicer of termination or cancellation; and
no such notice of cancellation has been received.
(ix) The terms of each Pooled Asset have not been waived, altered
or modified in any material respect, except by written
instruments delivered to the Issuer; no instrument which has
not been delivered to the Issuer or Trustee has been
executed which would effect any such waiver, alteration or
modification; and no agreement has been entered into for the
purpose of releasing the Lessee/Debtor under any such Pooled
Asset in whole or in part, from its obligations under such
Pooled Asset.
(x) Each Lease provides to the Lessee thereunder an option to
purchase the equipment leased thereunder only at the end of
the term thereof if all rental payments required by the
Leases have been paid in full unless otherwise indicated in
Schedule A to the addendum to the Purchase Agreement
relating to such Pooled Asset (Annex A to the Prospectus
Supplement for such Series of Bonds).
(xi) No Pooled Asset provides for a grace period of more than 15
days with respect to the period which must elapse after the
due date for a payment before the Lessor may exercise
remedies.
(xii) To the best of ZLC's knowledge, no material circumstance or
condition exists with respect to any Pooled Asset, equipment
subject to such Pooled Asset that can reasonably be expected
to cause such Pooled Asset to become delinquent.
In the event, with respect to a Pooled Asset, any of the
representations and warranties prove to be materially incorrect or
misleading, or any Pooled Asset is defective, and the misrepresentation,
defect or omission materially and adversely affects the interest of the
Bondholders, then after the expiration of certain cure periods and
assuming the Issuer is unable or chooses not to substitute for such Pooled
Asset (see "Substitution of Pooled Assets"), the Trustee may demand that
ZLC, and ZLC will be obligated to repurchase, the defective Pooled Asset
at a price equal to the outstanding principal balance of the sales price
for the equipment subject to such Pooled Asset plus due and unpaid rental
or debt payments.
The foregoing representations and warranties survive throughout the
term of the supplemental indenture for each series of Bonds.
CERTAIN BANKRUPTCY CONSIDERATIONS OF POOLED ASSETS
Certain statutory provisions, including the United States Bankruptcy
Code and similar state bankruptcy and insolvency laws, may limit the
ability of the Servicer or the Trustee to liquidate a Defaulted Pooled
Asset, repossess and resell the equipment related to a Pooled Asset or
obtain a deficiency judgment against the obligor under a Pooled Asset or
the lessee under a Lease assigned to Issuer in connection with the
Non-Recourse Notes (an "Assigned Lease"). In the event of the bankruptcy
or reorganization of any such obligor, any Lessee under an Assigned Lease,
the Servicer or the Issuer, various provisions of such federal and state
bankruptcy and insolvency laws may interfere with, delay or eliminate the
ability of the Trustee to enforce its rights under the Pooled Assets.
For example, although the bankruptcy of a Lessee would constitute an
event of default under a Lease or an Assigned Lease, the federal
Bankruptcy Code provides generally that rights and obligations under an
unexpired Lease may not be terminated or modified solely because of a
provision in the Lease that is conditioned upon the commencement of a case
in bankruptcy. In addition, in a bankruptcy of a Lessee under a Lease or
an Assigned Lease a bankruptcy court may prevent the Trustee from
repossessing the equipment subject to the Lease or the Assigned Lease,
and, as part of the rehabilitation plan for the Lessee, provide for
deferred payments to the Trustee under the Lease or the Assigned Lease in
an aggregate amount equal to the market value of the equipment at the time
of bankruptcy, leaving the Trustee as a general unsecured creditor for the
remainder of the amount due under the Lease or the Assigned Lease. A
bankruptcy court may also condition the continuation of a Lease or an
Assigned Lease on a reduction of the monthly payments due thereunder or a
change in the time of payment.
Similarly, in a bankruptcy of an obligor under a Purchase Money
Security Agreement or a Non-Recourse Note a bankruptcy court may prevent
the Trustee from repossessing the equipment related to the Purchase Money
Security Agreement or Non-Recourse Note and may, as part of the
rehabilitation plan for the obligor, reduce the total amount payable under
the Purchase Money Security Agreement or Non-Recourse Note or reduce the
monthly payments due thereunder or change the time of payment. If a
Defaulted Pooled Asset creates a deficiency in the funds available to the
Trustee to make a required payment on the Bonds, the Trustee will have
recourse to the Guaranty, and it will not ordinarily be necessary for the
Trustee to enforce the rights of the Issuer against the obligor under a
Pooled Asset. Nevertheless, if the Guarantor is unable to perform its
obligations under the Guaranty and as a result of the bankruptcy of an
obligor under a Pooled Asset the Trustee or the Servicer is prevented from
collecting scheduled and/or debt payments under such Pooled Asset, the
Bondholders could suffer a loss with respect to the Bonds.
The federal Bankruptcy Code also grants to the bankruptcy trustee or
the debtor-in-possession a right to elect to assume or reject any
unexpired Lease or Assigned Lease. Any rejection of such a Lease or
Assigned Lease constitutes a breach of such Lease or Assigned Lease,
entitling the non-breaching party to a claim for damages for breach of
contract. The net proceeds from any judgment against or settlement by, a
defaulting Lessee and from the disposition of the related equipment, would
be deposited by the Servicer or the Trustee into the Principal and
Interest Payment Account for the benefit of the Bondholders. Upon the
bankruptcy of a Lessee, if the bankruptcy trustee or debtor-in-possession
elected to reject a Lease or Assigned Lease, the flow of payments
thereunder to the Issuer and the Bondholders would cease. As noted above,
however, in such event the Trustee would have recourse to the Guaranty.
Similarly, upon the bankruptcy of the Issuer, if the bankruptcy trustee or
debtor-in-possession elected to reject a Lease or Assigned Lease, the flow
of Pooled Asset payments to the Issuer and the Bondholders would cease.
The Issuer, however, has been structured so that the filing of a
bankruptcy petition with respect to it is unlikely. See "Ziegler
Collateralized Securities, Inc. - Nonconsolidation in Bankruptcy."
State bankruptcy and insolvency laws may have similar effects on the
Trustee's ability to enforce its rights under a Pooled Asset. Such laws
may vary as to procedural requirements, protections afforded to the debtor
and remedies available to creditors, but they do not generally pose
materially different risks to the Bondholders than those created by the
provisions of the federal Bankruptcy Code described above. ZLC's current
portfolio of Leases is spread across 41 states and the District of
Columbia. Only 3 states, Wisconsin, New York and Indiana, represent 10% or
more of total Lease income to the portfolio. See "Description of the Pool
- General."
SERVICER
General
ZLC is a Wisconsin corporation with its principal office in West
Bend, Wisconsin. At December 31, 1994, ZLC had a net worth of $10,903,383.
The address of ZLC's principal office is 215 North Main Street, West Bend,
Wisconsin 53095, and its telephone number is (414) 334-5521.
ZLC's business consists primarily of leasing equipment to and financing
equipment for purchase by health care providers and other commercial
enterprises. ZLC has been in business since June 1971.
Servicing Standards
The Issuer and ZLC will enter into a Servicing Agreement whereby ZLC
will service the Pooled Assets. Under such arrangements, the Issuer will
require ZLC to service and administer the Pooled Assets on behalf of the
Trustee and in the best interests of the Bondholders (determined by the
Servicer within the exercise of its reasonable judgment) in accordance
with the terms of the Servicing Agreement and the Indenture and
supplemental indentures. To the extent consistent with the preceding
sentence, ZLC will be required to and intends to service and administer
the Pooled Assets giving due consideration to generally accepted Lease or
debt servicing and administering practice of prudent financing
institutions but without regard to any other relationship which ZLC or any
affiliate of ZLC may have with a Lease or debt instrument or any
compensation ZLC may expect to receive in connection with any particular
transaction (Servicing Agreement Section 3). In the event the Issuer
determines that ZLC is not acting in accordance with the foregoing
standard, the Issuer may take such action as is necessary to terminate the
Servicing Agreement and replace ZLC with a new servicer.
With respect to any Pooled Asset which comes into and continues in
default and as to which no satisfactory arrangements can be made for
collection of delinquent payment, ZLC will be required to furnish notice
of such default to the Issuer and the Trustee.
Regardless of the foregoing, ZLC will not be permitted to modify the
terms of a Pooled Asset in any way or take any of the following actions
without the Issuer's consent (or the Trustee's consent, if ZLC has
received notice of an Event of Default of the Issuer under the Indenture):
change the amount of rental or debt payments under the Pooled Asset;
forgive any rental or debt payment; extend the due date for rental or debt
payments in excess of six months; accelerate final payment of any Pooled
Asset; waive any other term of a Pooled Asset that would result in one of
the modifications mentioned in this sentence (Servicing Agreement Section
4).
Underwriting Standards
The Underwriting Standards for ZLC's Lease portfolio are
substantially the same as described under "DESCRIPTION OF THE POOL -
Acquisition Standards Relating to Pooled Assets."
Bad Debt Write-Off Experience
Set forth below is certain information concerning the bad debt
write-off experience on Leases held by ZLC for the years indicated.
<TABLE>
<CAPTION>
Cost of Investment In Reserve For % of % of Bad Debt % of % of
Year Equipment Leases (Net) Bad Debts Cost Investment Write-Offs Cost Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 92,014,382 45,553,062 587,132 0.638% 1.289% 119,159 0.1290% 0.262%
1993 88,688,689 46,714,974 586,291 0.661% 1.255% 227,600 0.2570% 0.487%
1992 96,114,653 51,004,587 650,000 0.676% 1.274% 407,089 0.4235% 0.798%
1991 94,961,120 51,965,733 620,718 0.654% 1.194% 41,085 0.0432% 0.079%
1990 94,607,825 48,429,138 484,976 0.513% 1.001% 1,373 0.0015% 0.003%
1989 87,141,844 43,134,875 347,948 0.399% 0.807% 44,143 0.0507% 0.102%
1988 77,403,143 35,113,397 332,131 0.429% 0.946% 27,289 0.0353% 0.078%
1987 83,818,570 31,495,109 299,420 0.357% 0.951% 0 0.0000% 0.000%
1986 77,243,772 19,489,850 178,566 0.231% 0.916% 0 0.0000% 0.000%
1985 71,504,946 16,299,595 154,566 0.216% 0.948% 16,792 0.0235% 0.103%
1984 63,500,973 15,791,334 147,358 0.232% 0.933% 14,905 0.0235% 0.094%
1983 58,411,082 15,523,095 138,263 0.237% 0.891% 2,815 0.0048% 0.018%
1982 49,356,857 14,127,110 141,078 0.286% 0.999% 0 0.0000% 0.000%
1981 36,661,186 14,545,840 141,078 0.385% 0.970% 6,213 0.0169% 0.043%
</TABLE>
Although ZLC will represent that all Leases that at any time secure
the Bonds will have been underwritten in accordance with ZLC's applicable
underwriting policies, there can be no assurance that the write-off
experience on such Leases will be comparable to that set forth above.
The write-off experience in each year was generally attributable to
one or two Leases. During the last five years (1990-1994) the aggregate
write-off was attributable to Lessees located in the following states:
California (79.3%), South Carolina (15%), Ohio (5.3%), and New York (.4%).
In the opinion of ZLC management, this write-off experience does not
provide a sufficient basis for projecting the future geographic
distribution of bad-debt write-offs.
Financial Information
The following table includes information derived from ZLC's audited
financial statements for each year in the three-year period ended December
31, 1994 and its balances as of December 31, 1994, 1993 and 1992. The
financial information in the following table has been prepared in
conformity with generally accepted accounting principles.
ZIEGLER LEASING CORPORATION
FOR THE YEAR 1994 1993 1992
Revenues . . . . . . . . $10,792,134 $10,850,434 $12,053,524
Expenses . . . . . . . . $ 9,586,455 $ 9,099,875 $ 9,776,996
Income Before Taxes . . $ 1,205,679 $ 1,750,559 $ 2,276,528
Net Income . . . . . . . $ 763,679 $ 1,075,559 $ 1,419,528
AT YEAR-END
Total Assets . . . . . . $52,959,557 $56,104,187 $57,830,538
Total Liabilities . . . $42,056,174 $44,814,483 $46,781,393
Total Surplus . . . . . $10,903,383 $11,289,704 $11,049,145
ZLC is a wholly-owned subsidiary of the Guarantor which also owns
all of the outstanding Common Stock of the Issuer. The Issuer does not
have or expect to engage in any business transactions with ZLC or any of
its affiliates except with respect to (i) the origination, acquisition and
servicing of Pooled Assets with respect to the Bonds offered hereby, (ii)
the management of the Issuer, (iii) the public offering of the Bonds
offered hereby, and (iv) the issuance of commercial paper and other
short-term debt instruments.
Other Considerations
American courts have traditionally applied "equitable" principles to
actions to enforce remedies in financing transactions which generally are
designed to relieve borrowers from the harsh or unfair effects of defaults
under financing documents. A court, in applying such principles, may have
the authority to alter the specific terms of a Pooled Asset to the extent
it feels is necessary to prevent or remedy an injustice, undue oppression
or overreaching. The exercise by a court of its equity powers will depend
on the individual circumstances of each case presented to it.
In addition, lenders have historically been subject to a variety of
restrictions which differ from state to state on the maximum permissible
rate of interest, financing and closing fees and prepayment charges that
may be contracted for and/or collected. Consequently, it is difficult to
determine definitely whether a particular Pooled Asset has been made in
compliance with all such applicable laws.
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Issuer are as follows:
Name Age Positions and Offices Held
L. R. Van Horn 42 Director and President
P.D. Ziegler 45 Director and Vice President
M. E. Sedlmeier 38 Director and Treasurer
J. R. Schmidt 35 Secretary
Mr. Van Horn has been Director and President of the Issuer since its
incorporation in 1991 and has also been Senior Vice President - Finance of
the Guarantor and the Underwriter since March 1990. He joined the
Underwriter as Director of Finance in May 1984 and was elected Vice
President - Finance in March 1985.
Mr. Ziegler has been Vice President of ZLC since 1991. Mr. Ziegler
has been Chief Executive Officer of the Guarantor and the Underwriter
since January 1990, having been President of both companies from April
1986 to January 1990, Executive Vice President of both companies from
January, 1985 to April 1986 and Chief Operating Officer from June 1984 to
January 1990.
Mr. Sedlmeier has been Director and Treasurer of the Issuer since
its incorporation in 1991 and has also been Chief Executive Officer since
April 1995 and President of ZLC since January 1994. Prior thereto, Mr.
Sedlmeier served as Chief Operating Officer since June 1991 and Executive
Vice President since February 1987 of ZLC, having previously served as
Assistant Vice President-Controller and in other executive capacities with
ZLC since 1982.
Ms. Schmidt has been Secretary of the Issuer since November 1992 and
has also been Secretary of the Guarantor, the Underwriter and certain
other affiliated corporations since November 1992. Prior to November 1992
and since 1986, Ms. Schmidt served as Executive Secretary to the General
Counsel of the Guarantor. Since 1980, Ms. Schmidt has served in a variety
of capacities for the Underwriter.
The Issuer has no salaried employees. All of the above-named
individuals are currently employees of the Underwriter. It is anticipated
that the officers and directors of the Issuer will devote less than 5% of
their total time worked per month to the affairs of the Issuer.
The directors and executive officers of the Issuer are required to
devote only so much of their time to the Issuer's affairs as is necessary
or required for the effective conduct and operation of the Issuer's
business. Since the Administrative Support Agreement provides that ZLC,
will assume principal responsibility for administering the day-to-day
operations of the Issuer and performing or supervising the performance of
such other administrative functions necessary in managing the Issuer as
may be agreed upon by ZLC and the Board of Directors of the Issuer, the
officers named above, in their capacities as such, will devote only a
small portion of their time to the affairs of the Issuer. However, since
the above officers are officers of ZLC, they will devote such portion of
their time to the affairs of ZLC as is required for the performance of the
duties of ZLC under the Servicing Agreement.
Executive Officers of ZLC
The following persons are the principal executive officers of ZLC:
Name Age Positions and Offices Held
M. E. Sedlmeier 38 President and Chief Executive Officer
S. C. O'Meara 45 Senior Vice President and General Counsel
P. D. Ziegler 46 Vice President
L. E. Johnson 45 Vice President-Sales and Marketing
R. F. Jones 49 Vice President-Sales
T. A. Norman 50 Vice President-Asset Management
K. A. Kalnins 28 Controller
D. M. Pieper 50 Assistant Vice President-Operations
L. R. Van Horn 42 Treasurer
J. C. Vredenbregt 41 Assistant Treasurer
J. R. Schmidt 35 Secretary
V. C. Van Vooren 64 Assistant Secretary
Biographical information for Messrs. Van Horn, Ziegler, Sedlmeier
and Ms. Schmidt is set forth above.
Mr. O'Meara has been Senior Vice President and General Counsel of
ZLC, the Guarantor and the Underwriter since January 1993. Prior thereto
and since 1982, Mr. O'Meara was a partner in the law firm of O'Meara,
Eckert, Pouros & Gonring, West Bend, Wisconsin.
Mr. Johnson has been Vice President-Sales and Marketing since July
1995. Prior thereto, Mr. Johnson served as Vice President-Marketing since
November 1993, Vice President-Sales since November 1992 and Sales Manager
since October 1991. Prior thereto, Mr. Johnson served as First Vice
President-Leasing for Valley Bank Corp., Madison, Wisconsin.
Mr. Jones has been Vice President-Sales since December 1993. Prior
thereto, Mr. Jones was Specialty Markets representative since February
1993. Prior to December 1992 and since May 1991, Mr. Jones served as Vice
President-Sales for Norwest Financial. Mr. Jones served as Sales Manager
of ZLC from January 1989 to May 1991. From 1970 to 1980, Mr. Jones held
positions in sales, marketing and management with Westinghouse Credit and
from 1980 to 1986 with BorgWarner Acceptance.
Mr. Norman has been Vice President-Asset Management of ZLC since
November 1992. Prior thereto and since 1986, Mr. Norman served as Asset
Manager of ZLC.
Mr. Kalnins has been Controller of ZLC since May 1995. Prior
thereto, and since July 1993 Mr. Kalnins was Tax Manager of the Guarantor.
Prior to July 1992 and since December 1989, Mr. Kalnins was a staff
accountant with Virchow, Krause and Company.
Ms. Pieper has been Assistant Vice President of ZLC since November
1992. Prior thereto and since October 1991, Ms. Pieper served as
Operations Manager of ZLC and prior thereto, since March 1981, Data
Controller with ZLC.
Mr. Vredenbregt has been Assistant Treasurer of ZLC and certain
other affiliated corporations since May 1987. Between May 1987 and May
1995, Mr. Vredenbregt was also Controller of ZLC. Prior to May 1987 Mr.
Vredenbregt served as Senior International Accountant for Bolens
Corporation, Port Washington, Wisconsin.
Mr. Van Vooren has been Assistant Secretary of ZLC since 1991 and
Treasurer and Senior Vice President of the Guarantor since January 1980.
He has been Senior Vice President - Corporate Finance and Treasurer of the
Underwriter since 1980. He currently heads the commercial paper department
of the Underwriter.
All of the above-named individuals are currently employees of the
Underwriter.
Summary of Transactions Between Issuer and Related Entities
In carrying out its proposed business plan and the transactions
described herein, the Issuer will enter into a number of contracts with
related entities - i.e., (i) with ZLC, Non-Recourse Notes representing
obligations of ZLC to repay principal and interest on funds advanced by
the Issuer to finance the purchase of equipment for leasing to third
parties, the Purchase Agreement and the addenda thereto pursuant to which
the Issuer will acquire the Pooled Assets (See "Description of the Pool"
herein), the Servicing Agreement pursuant to which ZLC will service the
Pooled Assets (see "Servicer" herein) and the Administrative Support
Agreement pursuant to which ZLC will administer the day-to-day operations
of the Issuer (See "Administrative Support Agreement" herein) and (ii)
with the Underwriter, the Underwriting Agreement (See "Plan of
Distribution" herein and "Underwriting" in the Prospectus Supplement). The
officers and directors of the Issuer are also officers of ZLC and the
Underwriter and are employees of the Underwriter and for this reason may
be viewed as having conflicting interests with respect to the
above-enumerated contracts and the consummation of the transactions
contemplated thereby, but in the opinion of the Issuer's management any
such conflicting interest would not materially affect the interests of the
Bondholders for the following reasons:
1. The Bonds are being unconditionally guaranteed by the Guarantor
which is the sole shareholder of the Issuer, ZLC and the Underwriter. Any
advantage accruing to any one of its subsidiaries in connection with these
contracts and transactions will ultimately benefit the Guarantor and any
allocation of benefits under these contracts or changes there-in will not
materially affect the credit of the Guarantor or its ability to satisfy
its obligations under the Guaranty.
2. All of the Pooled Assets will be reviewed by the Finance
Committee consisting of senior management of the Guarantor and the
Underwriter, and the same standards will be applied in approving the
Pooled Assets which will secure the various Series of Bonds as are applied
generally in approving Leases or other financing arrangements entered into
by ZLC. No person directly involved in the day-to-day operations of ZLC is
a member of the Finance Committee and no member of the Finance Committee
is subordinate to persons actively engaged in ZLC's operations. The final
decision to purchase particular Pooled Assets and include such Pooled
Assets in a Pool securing a particular Series of Bonds will be made by
officers of the Issuer a majority of whom are part of the senior
management of the Guarantor and the Underwriter and are not actively
engaged in the day-to-day operations of ZLC. It is contemplated that
substantially all of the Leases, with options to purchase at termination
of such Leases for a nominal purchase price which are obtained by ZLC, as
well as the Purchase Money Security Agreements and Non-Recourse Notes, all
of which satisfy the representations described under "Description of the
Pool - Representations and Warranties of ZLC", will be sold to the Issuer
and used to collateralize the Bonds. The inclusion of Pooled Assets in
particular Pools will depend primarily on questions of timing,
diversification (geographic, type of equipment and Lessee/Debtor) and pool
sizing, and not on the relative strength of the credit underlying
individual Leases or debt instruments.
3. As described under "Servicer - Servicing Standards" herein, the
powers of ZLC as Servicer are expressly limited by the Servicing
Agreement. Upon an Event of Default under the Indenture with respect to
any Series of Bonds, the Trustee will immediately succeed to the rights
and responsibilities of the Issuer under the Servicing Agreement with
respect to the Pooled Assets securing such Series of Bonds. The activities
of ZLC under the Administrative Support Agreement are subject to the
supervision of the Board of Directors of the Issuer, a majority of whom
are part of the senior management of the Guarantor and the Underwriter and
are not actively engaged in the day-to-day operations of ZLC.
4. The relative advantages or disadvantages to the Issuer of the
terms of the Underwriting Agreement and the Administrative Support
Agreement will also not have a material impact on the Bondholders since,
as noted under "Special Considerations - Limited Assets of Issuer", the
Issuer is not expected to have any significant assets other than the Pools
securing various Series of Bonds. It is anticipated that the Issuer will
essentially operate on a break-even basis. Accordingly, the payment of
interest and principal of any Series of Bonds will be dependent solely on
the Pooled Assets securing such Series of Bonds and the general credit of
the Guarantor.
5. The Finance Committee is comprised of various senior management
of the Guarantor and the Underwriter. Although P.D. Ziegler, S.C. O'Meara,
L.R. Van Horn and J.C. Vredenbregt who are members of the Finance
Committee are also officers and directors of ZLC, no member of the Finance
Committee is actively engaged in the day-to-day operations of ZLC or is
subordinate to any person actively engaged in the day-to-day operations of
ZLC. Although persons actively engaged in the business of ZLC may be
consulted by the Finance Committee in connection with its review of Pooled
Assets and the decision of the Finance Committee may be influenced by the
oral or written presentations of such persons, no person actively engaged
in the day-to-day operations of ZLC is in a position to control the
decision of any member of the Finance Committee.
The Administrative Support Agreement
The Issuer and ZLC are parties to an Administrative Support
Agreement, for administrative services with respect to the operations of
the Issuer. The Administrative Support Agreement provides that ZLC will
perform administrative support services for the Issuer for the term of one
year. Thereafter, the Administrative Support Agreement will be
automatically "extended for successive one-year periods unless any party
shall deliver a written notice of termination to the other party at least
60 days prior to the end of the renewal period. The Administrative Support
Agreement is nonassignable except by consent of the Issuer and ZLC. The
Administrative Support Agreement, or any extension thereof, may be
terminated by the Issuer, immediately, by a majority of the directors of
the Issuer or by vote of the holders of a majority of the outstanding
shares of common stock of the Issuer. No notice of termination has been
delivered by either party.
ZLC will at all times be subject to the supervision of the Board of
Directors of the Issuer and will have only such functions and authority as
the Issuer may delegate to it as the Issuer's agent. It is anticipated
that ZLC will be responsible for the accountings required under the
Indenture; will direct the Trustee as to the investment in certain
eligible investments of amounts at any time held by the Trustee; will be
responsible for the day-to-day operations of the Issuer; will serve as the
Issuer's consultant in connection with policy decisions to be made by the
Board of Directors; and will perform such other activities relating to the
assets of the Issuer as may be appropriate. ZLC will provide the executive
and administrative personnel, office space and services required in
rendering such services to the Issuer. The Administrative Support
Agreement provides that directors, officers, employees, agents or
affiliates of ZLC may serve as directors, officers, employees, agents,
nominees and signatories for the Issuer.
Administrative Support Fee
The Administrative Support Agreement provides that ZLC is entitled
to receive a monthly management fee (the "Administrative Support Fee")
equal to .167% of the total net investment in Pooled Assets of the Issuer
(determined in accordance with GAAP) as of the last day of the preceding
month, provided that the aggregate management fee payable in any calendar
year shall not exceed an amount equal to the net revenues of the Issuer
before the payment of such management fee. The Administrative Support Fee
is payable only to the extent funds are available therefor.
Expenses
Pursuant to the Administrative Support Agreement, ZLC pays
employment expenses of its personnel; rent and other office expenses
(except those relating to a separate office, if any, maintained by the
Issuer); and travel and miscellaneous administrative expenses of ZLC
incurred in connection with the Issuer's business. The Issuer will be
required to pay all of its expenses, namely: (a) the cost of borrowed
money; (b) all taxes applicable to the Issuer; (c) legal, audit,
accounting, underwriting, brokerage, listing, registration and other fees,
printing, engraving and other expenses and taxes incurred in connection
with the issuance, distribution, transfer and registration of the Issuer's
securities (except as otherwise agreed with respect to legal and
registration expenses relating to any series of Bonds; (d) fees and
expenses paid to the Trustee or to any advisers, consultants, managers,
including ZLC, and other agents employed directly by the Issuer; (e)
expenses relating to the acquisition of the Pools, including but not
limited to legal fees and other expenses of professional services; (f) the
expenses of modifying or dissolving the Issuer; (g) all insurance costs
incurred in connection with the Issuer; (h) expenses relating to payments
of dividends or interest or distributions in cash or any other form made
or caused to be made by the Board of Directors to holders of securities of
the Issuer; (i) expenses relating to communications to holders of
securities of the Issuer and of complying with the reporting and other
requirements of governmental bodies or agencies, including the cost of
printing and mailing certificates for securities and notices and reports
to holders of the Issuer's securities; (j) transfer agent's and
registrar's fees and charges; (k) expenses paid to directors and officers
of the Issuer and the cost of officer and director liability insurance;
(l) legal, accounting and auditing fees and expenses; and (m) expenses
relating to any office or office facilities maintained by the Issuer
separate from the office of ZLC.
Limits of ZLC's Responsibility
Pursuant to the Administrative Support Agreement, ZLC will not
assume responsibility other than to render the services called for
thereunder in good faith and will not be responsible for any action of the
Issuer in following or declining to follow any advice or recommendations
of ZLC, but ZLC shall nevertheless remain responsible for its own actions
as stated above. ZLC, its directors, officers, shareholders and employees
will not be liable to the Issuer, the Issuer's shareholders or others,
except by reason of misfeasance, bad faith or negligence. The Issuer has
agreed to indemnify ZLC and its affiliates with respect to all expenses,
losses, damages, liabilities, demand, charges and claims of any nature in
respect of acts or omissions performed or omitted by ZLC in good faith and
in accordance with the standard set forth in the Administrative Support
Agreement.
The foregoing description of the Administrative Support Agreement
does not purport to be complete but contains a summary of the material
provisions thereof. Reference is made to a copy of the Administrative
Support Agreement filed as an exhibit to the Registration Statement and
the foregoing summary is qualified in its entirety by such reference.
EXPERTS
The consolidated financial statements and schedules of the Guarantor
and subsidiaries as of December 31, 1994 and 1993, and for each of the
years in the three-year period ended December 31, 1994, (incorporated
herein by reference) in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports, with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
PLAN OF DISTRIBUTION
The Issuer will sell the Bonds offered hereby through B.C. Ziegler
and Company (the "Underwriter"). The Underwriter is a wholly-owned
subsidiary of the Guarantor which owns all of the issued and outstanding
common stock of the Issuer. (See "Ziegler Collateralized Securities, Inc.
- General.")
The Prospectus Supplement with respect to each series of Bonds will
set forth the terms of the offering of such series of Bonds including the
proceeds to, and their intended use by, the Issuer, and either the initial
public offering price, the discount to the Underwriter and any discounts
or concessions allowed or reallowed to certain dealers, or the method by
which the price at which the Underwriter will sell the Bonds will be
determined.
Except as otherwise described in the Prospectus Supplement with
respect to a series of Bonds, the Underwriter will be obligated to
purchase all of the Bonds of the series described in the Prospectus
Supplement with respect to such series if any of such Bonds are purchased.
The Bonds may be acquired by the Underwriter for its own account and may
be resold from time to time in one or more transactions, including
negotiated transactions at a final public offering price or at varying
prices determined at the time of sale.
The place and time of delivery for each series of bonds in respect
of which this Prospectus is delivered will be set forth in the related
Prospectus Supplement.
ADDITIONAL INFORMATION
Copies of the Registration Statement of which this Prospectus forms
a part and the exhibits thereto are on file at the offices of the
Securities and Exchange Commission in Washington, D.C., may be obtained at
rates prescribed by the Commission upon request to the Commission and may
be inspected, without charge, at the offices of the Commission.
LEGAL MATTERS
The validity of the Bonds offered hereby will be passed upon for the
Issuer and for the Underwriter by Foley & Lardner, Milwaukee, Wisconsin.
The material federal income tax consequences of the Bonds will be passed
upon for the Issuer by Foley & Lardner.
