<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996 -------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ------------------
Commission file number 0-24412
---------------------------------------------
MACC Private Equities Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 42-1421406
- ------------------------------------------------ -------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
101 Second Street S.E., Suite 800, Cedar Rapids, Iowa 52401
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(319) 363-8249
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Please indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
------ -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At March 31, 1996, the registrant had issued and outstanding 994,813
shares of common stock.
Page 1 of 31
Exhibit Index appears at page 14
<PAGE> 2
MACC PRIVATE EQUITIES INC.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
- ------- -------------------- ----
Condensed Consolidated Balance
Sheets (Unaudited) at March 31,
1996, and September 30, 1995. . . . . . . . 3
Condensed Consolidated Statements of
Operations (Unaudited) for the three
months ended March 31, 1996, the
six months ended March 31, 1996, the
one and one-half months ended March
31, 1995, the one and one-half months
ended February 15, 1995, and the four
and one-half months ended February 15,
1995. . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements
of Cash Flows (Unaudited) for the six
months ended March 31, 1996, the one and
one-half months ended March 31, 1995,
and the four and one-half months ended
February 15, 1995 . . . . . . . . . . . . . 5
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . 10
Item 1. Legal Proceedings . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . 10
Item 4. Submission of Matters to a
Vote of Securityholders . . . . . . . . . . 11
Item 6. Exhibits and Reports on
Form 8-K. . . . . . . . . . . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . 13
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . 14
-2-
<PAGE> 3
PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MACC PRIVATE EQUITIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- ------------
<S> <C> <C>
Assets
Loans and investments in
portfolio securities at market
or fair value, cost of $11,727,483 $ 12,266,294 12,315,330
U.S. treasury bills, at cost
which approximates market 10,982,634 10,047,197
Cash and cash equivalents 2,516,297 1,808,430
Receivables:
Dividends and interest 175,792 264,526
Investment securities sold 683,010 1,858,436
Other assets, net 643,526 700,466
Deferred income taxes 1,115,000 1,012,000
------------ ----------
Total assets $ 28,382,553 28,006,385
============ =========
Liabilities and stockholders'
equity
Liabilities:
Debentures payable net
of discount $ 10,232,410 10,228,647
Accrued interest 258,824 259,662
Accounts payable and other
liabilities 282,547 335,955
------------ ----------
Total liabilities 10,773,781 10,824,264
Stockholders' equity:
Common stock, $.01 par value;
2,000,000 shares authorized;
994,813 shares issued and
outstanding 996,539 in 1995
(See Note 2) 9,948 9,965
Additional paid-in-capital 15,739,348 15,379,348
Net investment (loss) income (174,107) 103,653
Net realized gain on investments 1,504,101 1,102,697
Unrealized appreciation on investments 529,482 586,458
------------ ----------
Total stockholders' equity 17,608,772 17,182,121
------------ ----------
Total liabilities and
stockholders' equity $ 28,382,553 28,006,385
------------ ----------
Net assets per share $ 17.70 17.24
===== =====
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE> 4
MACC PRIVATE EQUITIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
MACC Private MACC Private MACC Private MorAmerica MorAmerica
Equities Inc. Equities Inc. Equities Inc. Financial Corp. Financial Corp.
(Successor Co. (Successor Co. (Successor Co. (Predecessor Co. (Predecessor Co.
See Note 1) See Note 1) See Note 1) See Note 1) See Note 1)
For the three For the Six For the one For the one For the four
Months ended Months Ended and one-half and one-half and one-half
March 31, March 31, months ended months ended months ended
1996 1996 March 31, 1995 February 15, 1995 February 15, 1995
------------ ---------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest $ 313,512 641,004 139,385 118,050 253,737
Dividends 24,071 70,581 8,534 139,870 195,205
Gain on sale of
assets 0 0 3,916 0 0
Other 8,025 10,207 368 2,450 7,303
--------- -------- -------- --------- ---------
Total income 345,608 721,792 152,203 260,370 456,245
--------- -------- -------- --------- ---------
Operating expenses:
Interest 220,961 441,805 110,393 109,511 328,532
Management fees 156,440 313,957 76,197 63,375 217,844
Professional fees 103,358 172,440 33,272 40,971 106,742
Other operating
expenses 28,677 77,585 18,010 46,695 74,811
Change in provision
for doubtful accounts (3,227) (6,235) --- --- ---
--------- -------- -------- --------- ---------
Total operating
expenses 506,209 999,552 237,872 260,552 727,929
--------- -------- -------- --------- ---------
Investment expense, net (160,601) (277,760) (85,669) (182) (271,684)
--------- -------- -------- --------- ---------
Realized and unrealized
gain on investments:
Net realized gain on
investments 157,638 658,404 0 2,174,239 4,514,338
Net change in
unrealized
appreciation on
investments 123,538 (56,976) (193,955) (705,062) (948,191)
--------- -------- -------- --------- ---------
Net gain (loss) on
investments before
income taxes 281,176 601,428 (193,955) 1,469,177 3,566,147
Income taxes (12,000) (257,000) --- --- ---
--------- -------- -------- --------- ---------
Net gain (loss) on
investments 269,176 344,428 (193,955) 1,469,177 3,566,147
Net change in net
assets from operations
before reorganization
items 108,575 66,668 (279,624) 1,468,995 3,294,463
Reorganization items:
Professional fees --- --- --- 55,169 97,946
Adjustment to allowance
on notes receivable --- --- --- (286,006) (286,006)
Fresh-start adjustment
to debentures payable --- --- --- (65,848) (65,848)
--------- -------- -------- --------- ---------
0 0 0 (296,685) (253,908)
--------- -------- -------- --------- ---------
Net change in net
assets from
operations $ 108,575 66,668 (279,624) 1,765,680 3,548,371
========= ======== ======== ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE> 5
MACC PRIVATE EQUITIES INC. AND
SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF
CASH FLOWS
<TABLE>
<CAPTION>
MACC Private MACC Private MorAmerica
Equities Inc. Equities Inc. Financial Corp.
(Successor Co.- (Successor Co.- (Predecessor Co.-
See note 1) See note 1) See note 1)
For the For the one For the four
six months and one-half and one-half
ended months ended months ended
March 31, 1996 March 31, 1995 February 15, 1995
-------------- -------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
(Increase) decrease in net
assets from operations $ 66,668 (279,624) 3,482,523
---------- ---------- ----------
Adjustments to reconcile the increase
(decrease) in net assets from
operations to net cash provided by
(used in) operating activities:
Change in provision for
doubtful accounts (6,235) --- (286,006)
Net realized and unrealized
gain on investments (601,428) 193,955 (3,566,147)
Deferred income taxes 257,000 --- ---
Other 10,858 (1,260) 5,321
Change in assets and liabilities:
Decrease in receivables 1,254,831 --- ---
(Increase) decrease in other assets (142,858) 11,223 (342,083)
(Decrease) increase in accrued interest,
accounts payable, and other
liabilities (54,263) (452,235) 405,387
---------- ---------- ----------
Total adjustments 717,905 (248,317) (3,783,528)
---------- ---------- ----------
Net cash provided by (used in)
operating activities: 784,573 (527,941) (301,005)
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from disposition of and
payments on loans and investments
in portfolio securities 2,935,672 15,930 10,375,352
Purchases of loans and investments
in portfolio securities (2,076,941) (1,217,532) (1,186,542)
Proceeds from disposition of other
investments 7,838,653 0 100,000
Purchases of other investments (7,157,383) (2,549,165) (4,940,974)
---------- ---------- ----------
Net cash provided by (used in)
investing activities 1,540,001 (3,750,767) 4,347,836
---------- ---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt --- --- (607,669)
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents 2,324,574 (4,278,708) 3,439,162
Cash and cash equivalents at
beginning of period 6,255,803 9,937,308 6,498,146
---------- ---------- ----------
Cash and cash equivalents at
end of period $ 8,580,377 5,658,600 9,937,308
=========== ========== ==========
Supplemental disclosures of cash
flow information:
Cash paid during the period
for interest $ 438,881 66,132 373,271
========== =========== ==========
Cash paid during the period
for income taxes $ --- 20,000 ---
========== =========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE> 6
MACC PRIVATE EQUITIES INC.
Notes to Condensed Consolidated Financial Statements
March 31, 1996, September 30, 1995, March 31, 1995, and February 15, 1995
(1) Basis of Presentation
The accompanying condensed consolidated financial statements, which
include the accounts of MACC Private Equities Inc. and its wholly-owned
subsidiaries MorAmerica Capital Corporation and MorAmerica Realty Services,
Inc. (the "Company"), after February 15, 1995 (the "Successor Company"), and
MorAmerica Financial Corporation and subsidiaries prior to February 15, 1995
(the "Predecessor Company"), have been prepared in accordance with generally
accepted accounting principles for investment companies. All significant
intercompany accounts and transactions have been eliminated in consolidation.
On February 15, 1995, the Company consummated a Plan of Reorganization
(the "Plan") as confirmed by the United States Bankruptcy Court for the
Northern District of Iowa on December 28, 1993. Under terms of the Plan,
MorAmerica Financial Corporation and its subsidiaries, exclusive of MorAmerica
Capital Corporation and MorAmerica Realty Services, Inc., merged into the
Company, a business development company regulated by the Securities and
Exchange Commission. As of February 15, 1995, the Company adopted fresh-start
reporting in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, Financial Reporting by Entities in
Reorganization under the Bankruptcy Code. Since the financial statements on a
fresh-start basis are not comparable with those of the Predecessor Company, the
Company has presented the financial statements required for Form 10-Q reporting
on a predecessor-successor company basis.
The financial statements included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and instructions to Form 10-Q and Article 6 of Regulation S-X. The
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto of MACC Private Equities Inc. and
Subsidiaries (Successor Company) as of and for the year ended September 30,
1995. The information reflects all adjustments consisting of normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods. The results
of the interim period reported are not necessarily indicative of results to be
expected for the year.
-6-
<PAGE> 7
(2) Common Stock
During the quarter ended March 31, 1996, the Company retired 1,726
shares of common stock held in its own name as a result of the reorganization.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended March 31, 1996, Compared to Second
Quarter and Six Months Ended March 31, 1995.
[The results of operations for the one and one-half months ended March
31, 1995, have been combined with the results of operations for the one and
one-half months, and the four and one-half months, ended February 15, 1995, for
purposes of discussing the results of operations for the the prior year second
quarter and six-month period, respectively.]
During the current year, second quarter total income of $345,608
decreased approximately 16% over total income of $412,573 for the prior year
period. The major decrease in the current year period as compared to the prior
year period resulted from a decrease in dividend income from $148,404 in the
prior year period to $24,071 in the current year second quarter. This decrease
was due to extraordinary one-time distributions paid in 1995 to the general
partners of one portfolio company prior to its restructuring as a corporation
and its public offering. These dividends totaled $103,176. Interest income
increased from $257,435 in the prior year second quarter to $313,512 in the
current year second quarter, or 22%.
For the current year six-month period, total income of $721,792
increased 19% over total income of $608,448 in the prior year six-month period.
For the current year six-month period as compared to the prior year six-month
period, interest income increased substantially while dividend income decreased
due to the extraordinary distributions received in the second quarter of fiscal
year 1995.
Total operating expenses for the second quarter and six-month period of
the current year total $506,209 and $999,552, respectively, an increase of
approximately 2% and 3%, respectively, as compared to total operating expenses
for the prior year second quarter of $498,424 and six-month period of $965,801.
The major reasons for the slight increase in operating expenses are an increase
in management fees due to an increase in assets under management during the
current year
-7-
<PAGE> 8
periods as compared to the prior year periods, and an increase in professional
fees incurred during the current year second quarter in connection with the
Company's first Annual Meeting of Shareholders as a public company.
Net gain on investments before income taxes of $281,176 for the current
year second quarter and $601,428 for the current year six-month period as
compared to $1,275,222 and $3,372,192 in the prior year periods represent
decreases of 78% and 82%, respectively. Management does not attempt to
maintain a comparable level of realized gains from year to year or quarter to
quarter but instead attempts to maximize total investment portfolio
appreciation through realizing gains in the disposition of securities and
investing in new portfolio investments.
INCOME TAXES
During the current year second quarter and six-month period the Company
utilized a portion of its deferred tax assets relating to net operating loss
carryforwards at the fresh-start date. Under fresh-start reporting, such
utilization resulted in charges to operations of $12,000 and $257,000 in the
current year second quarter and six-month period, respectively, for the
reduction in deferred tax assets. During the current year second quarter and
six-month period, respectively, the Company recorded increases of $38,000 and
$360,000 in deferred tax assets based upon its projection of future taxable
income. The $38,000 and $360,000 increases in deferred tax assets resulted in
corresponding increases in paid-in capital for the current year second quarter
and six-month period, respectively, under fresh-start reporting.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company's U.S. treasury bills, cash and cash
equivalents totaled $13,498,931. In addition, the Company entered into an
Agreement (the "Agreement"), dated May 13, 1996, with Zions Bankcorporation
("Zions"). The Agreement provides for Zions' purchase of 20,000 shares of the
Company's Common Stock at a price equal to the current net asset value per
share of $17.70 announced through issuance of this quarterly report. The
purchase will be closed within two days of issuance of this quarterly report,
and no later than May 17, 1996. Accordingly, the Company will receive an
additional approximately $354,000 at the closing of the Agreement. For further
discussion of the Agreement, please see "PART II. -- ITEM 2. CHANGES IN
SECURITIES."
The Company, through its wholly-owned subsidiary, MorAmerica Capital
Corporation, from time to time may seek to procure additional capital through
the Small Business
-8-
<PAGE> 9
Investment Company ("SBIC") capital program to provide a portion of its future
investment requirements. At present there is availability of capital through
the SBIC program and the Company anticipates there will be capital available in
future periods. The Company does not now need additional capital to meet its
investment goals.
The Company believes that its liquid assets as of March 31, 1996, and
cash to be received upon closing of the Agreement will provide adequate funds
for the Company's anticipated cash requirements over the next twelve months,
including investment activities, operating expenses and the repurchase of up to
five percent of the outstanding shares of the Company's common stock from
holders of fewer than 100 shares each. It is anticipated that this repurchase
will be completed prior to the end of the fiscal year on September 30, 1996.
PORTFOLIO ACTIVITY
During the three months ended March 31, 1996, the Company invested
$1,395,924 in three portfolio companies, consisting of $1,385,370 invested in
two new portfolio companies and $10,554 invested in follow-on investments in
one existing portfolio company. For the six months ended March 31, 1996, the
Company made total investments of $2,076,942 in eight portfolio companies,
consisting of $1,743,970 invested in two new portfolio companies and $332,972
invested in follow-on investments in six existing portfolio companies. The
Company's investment level objectives for the current fiscal year call for
total new and follow-on investments of $7,000,000.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Company's outstanding common stock
is determined quarterly, as soon as practicable after and as of the end of each
calendar quarter, by dividing the value of total assets minus total liabilities
by the total number of shares outstanding at the date as of which the
determination is made.
In calculating the value of total assets, securities that are traded in
the over-the-counter market or on a stock exchange are valued in accordance
with the current valuation policies of the Small Business Administration
("SBA"). Under SBA regulations, publicly traded equity securities are valued
by taking the average of the closing prices (or bid prices in the case of
over-the-counter equity securities) for the valuation date and the preceding
two days. This policy differs from the Securities and Exchange Commission's
guidelines which utilize only a one day price measurement. The Company's use
of SBA valuation procedures did not result in a material variance as of March
31, 1996, from valuations using the Securities and Exchange Commission's
guidelines.
-9-
<PAGE> 10
All other investments are valued at fair value as determined in good
faith by the Board of Directors. The Board of Directors has determined that
all other investments will be valued initially at cost, but such valuation will
be subject to semi-annual adjustments if the Board of Directors determines in
good faith that cost no longer represents fair value.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company's wholly-owned subsidiary MorAmerica Realty Services, Inc.
("MRS") is the defendant in a lawsuit filed in the Circuit Court of Tippecanoe
County, Indiana, Seabolt v. MorAmerica Realty Services, Inc. d/b/a University
Inn and University Inn. On April 29, 1996, MRS and the plaintiff executed a
written stipulated settlement with regard to all claims of the plaintiff
against MRS. The settlement provides for cash payments by MRS in the total
amount of $187,500. A provision for estimated loss of $200,000 had been
recorded at September 30, 1995.
ITEM 2. CHANGES IN SECURITIES.
On April 30, 1996, the Company entered into an Agreement (the
"Agreement") with Zions Bancorporation ("Zions"), a bank holding company
organized under the laws of the State of Utah. Prior to the closing of the
Agreement, Zions and its affiliates had purchased approximately 4.9% of the
issued and outstanding shares of the Company's common stock on the open market.
Pursuant to the Agreement, the Company will issue 20,000 shares of the
Company's common stock to Zions not later than May 17, 1996, at a price equal
to current net asset value per share as of March 31, 1996 as announced through
issuance of this quarterly report, an aggregate price of approximately
$354,000. No underwriting discounts or commissions will be incurred in
connection with the sale. Based upon the Company's compliance with all terms
and conditions of Rule 506 under the Securities Act of 1933 (the "Securities
Act"), as amended, the offer and sale of the common stock will be exempt from
registration under the Securities Act by Section 4(2) and/or Rule 506
thereunder.
In order to comply with federal regulations applicable to permissable
investments by banks and bank holding companies and to maximize the Company's
ability to leverage the capital of its wholly-owned subsidiary, MorAmerica
Capital Corporation ("MorAmerica Capital"), the Agreement requires the Company
to contribute approximately $2.5 Million in capital to MorAmerica Capital. In
addition, the Company agreed not to make any
-10-
<PAGE> 11
investments other than in MorAmerica Capital and other debt and equity
investments of the kind and amount eligible for investment by a national bank.
Since its election to be treated as a business development company, the
Company's practice has been to make all portfolio investments through
MorAmerica Capital, and accordingly, the Company believes that the provisions
of the Agreement described above will have no material effect on the Company's
investment activities.
The Agreement also requires the Company to use its best efforts to cause
a nominee of Zions to serve on the Company's Board of Directors commencing on
the date of the Company's Annual Meeting of Shareholders to be held during
February, 1997. The Agreement further provides that, without the prior
approval of the Company's Board of Directors, Zions shall not purchase more
than 25% of the issued and outstanding shares of the Company's common stock.
Please see "EXHIBIT (10) -- MATERIAL CONTRACTS -- AGREEMENT DATED MAY 13, 1996,
BETWEEN THE COMPANY AND ZIONS BANKCORPORATION."
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There are no items to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.
On February 27, 1996, the Company's 1996 Annual Meeting of Shareholders
(the "Meeting") was held in Cedar Rapids, Iowa. A quorum of 639,110 shares, or
approximately 64.1% of issued and outstanding shares as of December 29, 1995,
were represented in person or by proxy at the Meeting. The shareholders
considered three proposals at the Meeting.
With respect to the first proposal, by a vote of 618,266 shares in favor
of and 20,844 shares against, the shareholders elected three directors to serve
until the 1999 Annual Meeting of Shareholders or until their respective
successors shall be elected and qualified. These directors and the votes cast
in favor of and withheld with respect to each are as follows:
Director For Withheld
-------- --- -------
Paul M. Bass, Jr. 616,551 22,559
David R. Schroder 611,883 27,227
Robert A. Comey 615,239 23,871
With regard to the second proposal, the shareholders voted to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company
for Fiscal Year 1996 by a
-11-
<PAGE> 12
vote of 614,350 in favor of ratification and 5,794 against ratification, with
18,966 shares abstaining.
The third proposal, to approve for a one-year period the policy and
practice of the Company of issuing shares of common stock of the Company at a
price less than net asset value per share, did not receive the vote required
for approval by the shareholders. With respect to this third proposal, the
shareholders voted 414,005 in favor of the proposal and 106,247 against the
proposal, with 63,408 and 55,450 abstentions and broker nonvotes, respectively.
ITEM 5. OTHER INFORMATION.
There are no items to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(10) Material Contracts --
Agreement dated May 13, 1996,
between the Company and Zions
Bancorporation.
(27) Financial Data Schedule
No other exhibits are applicable.
(b) Reports on Form 8-K
On February 9, 1996, the Company filed a Report on Form 8-K disclosing
that the primary trading market for the Company's common stock had
advanced from the Nasdaq SmallCap Market to the Nasdaq National Market.
[Remainder of this page intentionally left blank]
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MACC PRIVATE EQUITIES INC.
Date: May 15, 1996 By: /s/ David R. Schroder
---------------- ----------------------
David R. Schroder,
President
Date: May 15, 1996 By: /s/ Robert A. Comey
---------------- ---------------------
Robert A. Comey,
Treasurer
-13-
<PAGE> 14
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
(10) Material Contracts --
Agreement dated May 13, 1996,
between the Company and Zions
Bancorporation 15
(27) Financial Data Schedule 29
<PAGE> 1
Exhibit (10)
Material contracts -- Agreement
dated May 13, 1996, between
the Company and Zions Bancorporation
<PAGE> 2
AGREEMENT
AGREEMENT between Zions Bancorporation, a Utah corporation ("Investor"), and
MACC Private Equities Inc., a Delaware corporation ("Parent"), dated as of May
13, 1996.
Recitals
A. Investor is a bank holding company registered with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956, as amended (the "BHC Act"). As of the date hereof, Investor (together
with one or more affiliates of Investor) owns 49,065 shares of the issued and
outstanding common stock $0.01 par value (the "Common Stock") of Parent.
Pursuant to the BHC Act, bank holding companies in general are prohibited from
acquiring the voting shares of any nonbanking company in excess of 5% of that
company's outstanding voting shares. Under the BHC Act there is an exception
from this prohibition to permit bank holding companies to acquire shares which
"are of the kinds and amounts eligible for investment" by national banks (BHC
Act Section 4(c)(6)). Subject to certain limitations, national banks are
permitted to invest in small business investment companies within the meaning
of the Small Business Investment Act of 1958, as amended (the "SBI Act").
B. As of the date hereof, (i) there are issued and outstanding 994,813
shares of Common Stock, (ii) Parent owns all of the issued and outstanding
stock of MorAmerica
<PAGE> 3
Capital Corporation, an Iowa corporation (the "SBIC"), which is a small
business investment company under the SBI Act and (iii) the only activity in
which Parent is engaged is acting as a business development company,
principally through the ownership and management of the SBIC.
C. Investor is willing to acquire the Shares of Parent pursuant to this
Agreement, resulting in its ownership of more than 5% of the issued and
outstanding Common Stock of Parent, based upon the representations, warranties
and agreements of Parent set forth in this Agreement.
D. Parent is willing to sell the Shares of Parent pursuant to this
Agreement, based upon the representations, warranties and agreements of
Investor set forth in this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Purchase of Shares. Subject to the terms and conditions
contained herein, Investor hereby agrees to purchase (the "Purchase") from
Parent, and Parent agrees to sell to Investor, 20,000 shares (the "Shares") of
Common Stock for a cash price (the "Purchase Price") per share equal to the net
assets per share of the Common Stock as of March 31, 1996 as reported in
Parent's Form 10-Q for the period ended as of that date ("Book Value").
-2-
<PAGE> 4
Section 2. Conduct Pending the Purchase. During the period from March 31,
1996 to the time of the Purchase, Parent shall (i) conduct its business in the
usual, regular and ordinary course consistent with past practice and (ii) not
adjust, split, combine or reclassify the Common Stock; make, declare or pay any
dividend or make any other distribution on, or, except for a price less than
Book Value, directly or indirectly redeem, purchase or otherwise acquire any
shares of Common Stock; or grant any person any right to acquire Common Stock
for less than Book Value.
Section 3. Representations and Warranties.
(a) Investor represents and warrants that (i) the information with
respect to it set forth in the recitals is true and correct, (ii) the execution
and delivery of this Agreement have been duly and validly authorized by all
necessary corporate action on its part, (iii) this Agreement represents the
valid and legally binding obligation of Investor, enforceable against Investor
in accordance with its terms, (iv) Investor is an "accredited investor" as
defined in Regulation D under the Securities Act of 1933, as amended (an
"Accredited Investor"), and (v) subject to the terms of Section 14 hereof,
Investor is acquiring the Shares for investment and not with a view to their
distribution.
(b) Parent represents and warrants that (i) the information with respect to
it and the SBIC set forth in the recitals is true and correct, (ii) the
execution and
-3-
<PAGE> 5
delivery of this Agreement have been duly and validly authorized by all
necessary corporate action on its part, (iii) this Agreement represents the
valid and legally binding obligation of Parent, enforceable against Parent in
accordance with its terms, (iv) Parent's audited consolidated financial
statements as of September 30, 1995 and for the year then ended, a copy of
which has been delivered to Investor, fairly present the financial position and
results of operation of Parent as of and for the year then ended, (v) other
than as disclosed in Parent's Forms 10-Q for the periods ended December 31,
1995 and March 31, 1996, copies of which have been delivered to Investor, since
September 30, 1995, there has not been any change in the business, assets,
financial condition or results of operations of Parent or the SBIC that,
individually, or in the aggregate, would have a material adverse effect on
Parent and the SBIC, taken as a whole, (vi) upon payment of the Purchase Price,
the Shares will be voting Common Stock, duly authorized, validly issued, fully
paid and nonassessable, and (vii) the issuance of the Shares is exempt from
registration under the Securities Act of 1933 and the registration or
qualification, if required, of the Shares pursuant to applicable state
securities laws has been obtained.
Section 4. Parent Covenants. In consideration of Investor's purchase of
the Shares at a price substantially
-4-
<PAGE> 6
in excess of their market price, and to induce Investor to acquire the Shares,
which will cause Investor to own more than 5% of the outstanding Common Stock,
and so long as Investor owns more than 5% of the Common Stock, Parent agrees
that it will not (a) engage in any activities other than holding (i) the equity
securities of the SBIC, (ii) any other equity security of the kinds and amounts
eligible for investment by a national bank, and (iii) short term investments in
short term treasury bills, insured certificates of deposit in principal amounts
not to exceed $100,000, U.S. government agency securities backed by the full
faith and credit of the federal government with maturities not to exceed one
year, commercial paper rated no less than A-1 or P-1 or any equivalent rating,
high quality repurchase contracts relating to government backed securities, and
money market funds investing primarily in short term U.S. government securities
(collectively, "Permitted Investments"), which term shall include, following
the transfer of Parent's Common Stock contemplated by Section 14 hereof, (iv)
any other investments of the kinds and amounts eligible for investment by
national banks pursuant to 12 C.F.R. Section 1, and (v) any loan or debt
instrument which could be originated or purchased by a national bank, in each
case so long as such are consistent with applicable regulatory requirements;
and (b) make any investment other than in the SBIC and the short term
-5-
<PAGE> 7
investments specified in clause (iii), except upon giving not less than 30
days' prior notice to Investor. If Investor notifies Parent during such 30-day
period that the proposed investment is not a Permitted Investment, Parent
agrees that it will not make such investment.
Section 5. Investor Covenants. Investor agrees that nothing herein shall
preclude Parent from entering into an agreement to merge or consolidate with an
entity engaged in activities which are not limited to the holding of Permitted
Investments; provided, however, that Parent shall not consummate such merger or
consolidation without giving Investor at least 90 days' prior notice.
Section 6. Closing. Subject to the terms and conditions contained herein,
Investor agrees to deliver the Purchase Price for the Shares to Parent not
later than 1:00 p.m. (Central daylight time) on the second business day after
filing of Parent's Form 10-Q for the period ended March 31, 1996, which must be
filed, at the latest, on May 15, 1996 (the "Closing Date") by wire transfer in
immediately available funds to such account as Parent shall specify, against
delivery to Investor of one or more certificates representing the Shares, which
certificates shall be registered in the name of Investor or Investor's nominee.
Section 7. Conditions. (a) The obligation of Investor to purchase
the Shares is subject to (i) the
-6-
<PAGE> 8
accuracy of the representations and warranties on the part of Parent contained
herein as of the Closing Date, (ii) the contribution by Parent to the SBIC,
subsequent to March 31, 1996 and on or before the Closing Date, of all cash,
short term investments and other investments of Parent other than the cash and
short term investments in the amount reasonably estimated by Parent to be
necessary (x) for 24 months operating expenses, (y) to purchase up to 50,000
shares of Common Stock from holders of less than 100 such shares pursuant to
its previously announced odd-lot purchase program and (z) to fund settlement of
pending personal injury litigation against a subsidiary; provided, that the
amount of such contribution to the SBIC shall be not less than $2,500,000,
(iii) evidence that assets not permitted to be held directly by Parent pursuant
to Section 4(i)-(iii) have been contributed to the SBIC and (iv) the
performance by Parent in all material respects of its obligations contained
herein, which accuracy, contribution and performance shall be confirmed by an
officer's certificate of Parent dated the Closing Date.
(b) The obligation of Parent to issue and sell the Shares is subject to the
accuracy of the representations and warranties on the part of Investor
contained herein as of the Closing Date, which shall be confirmed by an
officer's certificate of Investor dated the Closing Date.
-7-
<PAGE> 9
Section 8. Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, or by registered or certified mail, postage prepaid,
to the persons at the addresses or facsimile numbers set forth below (or at
such other address or facsimile number as may be provided hereunder), and shall
be deemed to have been delivered as of the date so delivered if by hand or by
facsimile (in either case with confirmation of receipt) or the date so received
if by mail:
If to Investor:
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Attention: W. David Hemingway
Facsimile: (801) 524-4659
If to Parent:
MACC Private Equities, Inc.
101 Second Street S.E., Suite 800
Cedar Rapids, Iowa 52401
Facsimile: 319-363-9683
Attention: Paul M. Bass, Jr., Chairman
With a copy to:
David E. Gardels, Esq.
Dixon, Dixon & Jessup Ltd., LLP
Suite 1800
One First National Center
Omaha, Nebraska 68102-1504
Facsimile: (402) 345-3341
-8-
<PAGE> 10
Section 9. Specific Performance. Parent acknowledges and agrees that the
failure of Parent to fulfill any of its covenants and agreements contained
herein will cause irreparable injury to Investor for which damages, even if
available, will not be an adequate remedy. Accordingly, Parent hereby consents
to the issuance of injunctive relief by any court of competent jurisdiction to
compel performance of Parent's obligations and to the granting by any such
court of the remedy of specific performance by the Parent of its obligations
hereunder.
Section 10. Limit on Investment. Investor agrees that, without the prior
approval of Parent's board of directors, it will not purchase any Common Stock
if, after giving effect to such purchase, Investor would own in excess of 25%
of Parent's outstanding Common Stock. Parent agrees to use its reasonable best
efforts to cause a nominee of Investor to serve on Parent's board of directors
commencing with the annual meeting to be held in 1997.
Section 11. Governing Law. This Agreement shall in all respects be
governed by, and construed in accordance with, the laws of the State of
Delaware.
Section 12. Arbitration. Any dispute, controversy or claim arising out of
or based upon the terms of this Agreement or any transaction contemplated
herein shall be settled exclusively and finally by binding arbitration in Salt
Lake City, Utah. Upon written demand
-9-
<PAGE> 11
for arbitration by any party hereto, the parties to the dispute shall confer
and attempt in good faith to agree upon one arbitrator to be selected from
panels maintained by the American Arbitration Association (or any successor
organization). If the parties have not agreed upon an arbitrator within 30
days after receipt of such written demand, each party to the dispute shall
appoint one arbitrator and those two arbitrators shall agree upon a third
arbitrator. The binding arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (or any
successor organization) and shall be binding upon the parties. Judgment upon
an arbitration award may be entered in any court having jurisdiction. The
Federal Arbitration Act shall apply to the construction, interpretation and
enforcement of this arbitration provision.
Section 13. Termination; Survival. On or before the Closing Date, this
Agreement may be terminated by the mutual consent of both parties. After the
Closing Date, this Agreement may be terminated by mutual consent of the parties
or by either party upon 30 days' prior notice to the other; provided, that no
such termination by one party shall be effective unless and until Investor owns
5% or less of the Common Stock. The representations and warranties and
agreements of the parties set forth herein shall survive the Closing Date.
-10-
<PAGE> 12
Section 14. Transfer to Bank. Investor will use its reasonable efforts to
obtain necessary regulatory approval or non-objection to transfer Parent's
Common Stock to Investor's wholly-owned subsidiary, Zions First National Bank,
a national banking association ("Bank"), or an operating subsidiary of Bank and
will complete such transfer within a reasonable time after such approval or
non-objection. Promptly after the execution of this Agreement, Bank expects to
file an appropriate notice with the Office of the Comptroller of the Currency
to permit such transfer. Parent agrees that (a) Investor may transfer its
ownership in the Common Stock to Bank (or an operating subsidiary thereof), and
(b) following such transfer, Bank shall be, and shall be deemed to be,
substituted for Investor hereunder without any further action by the parties
hereto (except that Bank shall notify Parent promptly after such transfer
occurs). Investor represents, warrants and agrees that Bank or any such
operating subsidiary is, or at the time of acquisition of the Shares will be,
an Accredited Investor, and that the acquisition by Bank or any such operating
subsidiary of the Shares will be for investment and not with a view to their
distribution.
Section 15. Miscellaneous.
(a) This Agreement may be amended only by a writing executed by the parties
hereto.
-11-
<PAGE> 13
(b) This Agreement may be executed in counterparts, each of which shall be
an original, with the same effect as if the signatures had been on the same
instrument.
(c) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that, subject to the provisions of Section 14 hereof, neither party may
assign or otherwise transfer any of its rights or duties under this Agreement
without the prior written consent of the other party.
-12-
<PAGE> 14
IN WITNESS WHEREOF, Investor and Parent have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
ZIONS BANCORPORATION
By: Gary L. Anderson
---------------------------
Gary L. Anderson
Senior Vice President
MACC PRIVATE EQUITIES INC.
By: Paul M. Bass, Jr.
---------------------------
Paul M. Bass, Jr.
Chairman
-13-
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 11,727,483
<INVESTMENTS-AT-VALUE> 10,982,634
<RECEIVABLES> 858,802
<ASSETS-OTHER> 643,526
<OTHER-ITEMS-ASSETS> 4,170,108
<TOTAL-ASSETS> 28,382,553
<PAYABLE-FOR-SECURITIES> 258,824
<SENIOR-LONG-TERM-DEBT> 10,232,410
<OTHER-ITEMS-LIABILITIES> 282,547
<TOTAL-LIABILITIES> 10,773,781
<SENIOR-EQUITY> 9,948
<PAID-IN-CAPITAL-COMMON> 15,739,348
<SHARES-COMMON-STOCK> 994,813
<SHARES-COMMON-PRIOR> 996,539
<ACCUMULATED-NII-CURRENT> (174,107)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,504,101
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 529,482
<NET-ASSETS> 17,608,772
<DIVIDEND-INCOME> 70,581
<INTEREST-INCOME> 641,004
<OTHER-INCOME> 10,207
<EXPENSES-NET> 999,552
<NET-INVESTMENT-INCOME> (277,760)
<REALIZED-GAINS-CURRENT> 401,404
<APPREC-INCREASE-CURRENT> (56,976)
<NET-CHANGE-FROM-OPS> 66,668
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 426,651
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
