<PAGE>
As filed with the Securities and Exchange Commission on October 26, 2000.
Registration No. 333-44458
Registration No. 333-44458-01
Registration No. 333-44458-02
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 2
to
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
IRWIN FINANCIAL CORPORATION
Indiana 35-1286807
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
IFC CAPITAL TRUST II
(Exact Name of Co-Registrants as Specified in Charters)
Delaware Applied for
(State of Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
IFC CAPITAL TRUST III
Delaware Applied for
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
500 Washington Street
Columbus, IN 47201
(812) 376-1020
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Co-
Registrants' Principal Executive Offices)
Ellen Z. Mufson
Vice President, Legal
500 Washington Street
Columbus, IN 47201
(812) 376-1020
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service for Co-Registrants)
Copies to:
Jennifer R. Evans, Esq. Thomas C. Erb, Esq.
Jennifer D. King, Esq. Tom W. Zook, Esq.
Vedder, Price, Kaufman & Kammholz Lewis, Rice & Fingersh, L.C.
222 North LaSalle Street, Suite 2600 500 N. Broadway, Suite 2000
Chicago, Illinois 60601 St. Louis, Missouri 63102-2147
(312) 609-7500 (314) 444-7600
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 26, 2000
PROSPECTUS
1,800,000 1,800,000
Preferred Securities Convertible Preferred
Securities
IFC CAPITAL TRUST II
IFC CAPITAL TRUST III
% Cumulative Trust
Preferred Securities % Cumulative
(Liquidation Amount $25 Convertible Trust
Per Preferred Security) Preferred Securities
(Liquidation Amount $25
Fully, irrevocably and Per Convertible Preferred
unconditionally Security)
guaranteed on a
subordinated basis,
Fully, irrevocably and
as described in this unconditionally
prospectus, by guaranteed on a
subordinated basis,
IRWIN FINANCIAL CORPORATION
as described in this
prospectus, by
-----------
IFC Capital Trust II is offering 1,800,000 preferred securities at $25 per
security and IFC Capital Trust III is offering 1,800,000 convertible preferred
securities at $25 per security. The preferred securities and the convertible
preferred securities are being offered and sold separately and not as units.
The preferred securities represent an indirect interest in our % junior
subordinated debentures. The debentures have the same payment terms as the
preferred securities and will be purchased by IFC Capital Trust II using the
proceeds from its offering of preferred securities. The preferred securities
are not convertible into shares of our common stock.
The convertible preferred securities represent an indirect interest in our
% convertible junior subordinated debentures. The convertible debentures
have the same payment terms as the convertible preferred securities and will be
purchased by IFC Capital Trust III using the proceeds from its offering of the
convertible preferred securities. The convertible preferred securities are
convertible into shares of our common stock as described in this prospectus.
Our common stock trades on the Nasdaq National Market under the symbol
"IRWN." The closing price as reported on Nasdaq on October 25, 2000, was
$14.75. The preferred securities and convertible preferred securities are
expected to be approved for inclusion on the Nasdaq National Market under the
symbols "IRWNO" and "IRWNN", respectively. Trading is expected to commence on
or before delivery of the securities.
-----------
Investing in the securities involves risks. See "Risk Factors" beginning on
page 16.
-----------
The securities offered by this prospectus are not savings accounts, deposits
or obligations of any bank and are not insured by the Bank Insurance Fund of
the Federal Deposit Insurance Corporation or any other governmental agency.
<TABLE>
<CAPTION>
Per Convertible
Per Preferred Preferred
Security Total Security Total
------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Public offering price..... $25.00 $45,000,000 $25.00 $45,000,000
Proceeds to the trust..... $25.00 $45,000,000 $25.00 $45,000,000
</TABLE>
This is a firm commitment underwriting. We will pay underwriting commissions
of $ per preferred security, or a total of $ , for arranging the
investment in our junior subordinated debentures and $ per convertible
preferred security, or a total of $ , for arranging the investment in our
convertible junior subordinated debentures. The underwriters have been granted
a 30-day option to purchase up to an additional 270,000 preferred securities
and an additional 270,000 convertible preferred securities to cover over-
allotments, if any.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal
offense.
Stifel, Nicolaus & Company
Incorporated
McDonald Investments Inc.
J.J.B. Hilliard, W.L. Lyons, Inc.
Howe Barnes Investments, Inc.
, 2000
<PAGE>
. 1981 . 1994 Start- . 1999 Start- . 1999 Start-
Acquisition up up up
. Originates, . Originates . Funding . Investor in
sells and and source for early stage
services services leasing companies
conforming prime- companies, in
first quality, brokers and financial
mortgage high loan- vendors services or
loans to-value financial
. National home equity services-
scope, loans related
emphasis on . National . North technology
borrowers scope, American . National
with emphasis on focus focus
special debt
needs consoli-
dation
. $10.0 products
billion
servicing . $1.3 . Lease . Three
portfolio billion portfolio portfolio
as of managed of $128.2 investments
September portfolio million as as of
30, 2000 as of of September
September September 30, 2000
. Headquarters 30, 2000 30, 2000
in
Indianapolis, . Headquarters . Headquarters . Headquarters
. Focuses on IN in San in in
commercial Ramon, CA Bellevue, Columbus,
and private WA IN
banking
needs of
small
businesses
and
business
owners
. Headquarters
in
Columbus,
IN
. Locations
in Indiana,
Michigan,
Missouri,
Nevada,
Utah and
Kentucky
. Founded in
1871
. Acquired
78%
ownership
interest in
Onset
Capital
Corporation,
a Canadian
equipment
leasing
company, in
July 2000
. Loan
portfolio . $3.0 . $601
of $1.0 billion in million in
billion as originations originations
of in the and
September first nine acquisitions
30, 2000 months of in the
2000 first nine
months of
2000
i
<PAGE>
SUMMARY
This summary highlights information contained in, or incorporated by
reference into, this prospectus. Because this is a summary, it may not contain
all of the information that is important to you. Therefore, you should also
read the more detailed information set forth in this prospectus, our financial
statements and the other information that is incorporated by reference into
this prospectus. Unless otherwise indicated, the information in this prospectus
assumes that the underwriters will not exercise their option to purchase
additional preferred securities and convertible preferred securities to cover
over-allotments.
Irwin Financial Corporation
Irwin Financial Corporation, headquartered in Columbus, Indiana, is a
diversified financial services company organized as an Indiana bank holding
company in May of 1972. Our major subsidiaries are Irwin Union Bank and Trust
Company, a commercial bank; Irwin Mortgage Corporation, a mortgage banking
company; Irwin Home Equity Corporation, a consumer home equity lending company;
Irwin Business Finance Corporation, an equipment leasing subsidiary; and Irwin
Ventures Incorporated, a venture capital company. Our strategy encourages a
diverse revenue stream and we focus on niches in financial services where we
believe we can optimize the productivity of our capital and where our
experience can provide a competitive advantage.
At September 30, 2000, Irwin had total assets of $2.2 billion and
shareholders' equity of $181 million. While continuing to grow our franchise,
over the five- and ten-year periods ending December 31, 1999, respectively:
. our return on average equity has averaged 21.47% and 21.31%;
. our earnings per share has compounded at an average annual growth rate of
14.45% and 24.48%;
. our book value per share has compounded at an average annual growth rate
of 14.58% and 18.55%;
. our annual net charge offs to average loans and leases averaged 0.40% and
0.44%; and
. our ratio of year-end allowance for loan and lease losses to total
average loans and leases averaged 1.46% and 1.44%.
We attribute the strong profitability reflected in these results primarily to
the following:
. We pursue complementary consumer and commercial finance niches through
our bank holding company structure;
. Our significant insider ownership, approximately 58% as of September 30,
2000, aligns management's interests with those of both creditors and
shareholders. While this concentrated ownership enables management to
control the outcome of all shareholder votes, we believe it also
heightens management's emphasis on creditworthy, profitable growth;
. Our management teams, both at the parent company and in each line of
business, have substantial tenure with Irwin and within the financial
services industry. Our financial performance over the past 10 years
reflects the success of strategies pursued by this core management team;
and
. Our product and geographic market diversification has allowed us to be
opportunistic in new ventures and has resulted in a relatively stable
revenue and earnings stream throughout various economic environments and
cycles.
1
<PAGE>
The following table summarizes Irwin's financial performance over the past
five years and the first nine months of 2000:
<TABLE>
<CAPTION>
At or For
Nine Months Ended At or For
September 30, Year Ended December 31,
---------------------- ----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income.............. $ 26,114 $ 25,296 $ 33,156 $ 30,503 $ 24,444 $ 22,428 $ 20,083
Earnings per share
(diluted).............. 1.23 1.15 1.51 1.38 1.08 0.98 0.88
Total assets............ 2,150,122 1,662,531 1,680,847 1,946,179 1,496,794 1,300,122 1,037,541
Total deposits.......... 1,320,164 875,933 870,318 1,009,211 719,596 640,153 563,999
Loans held for sale..... 490,690 511,007 508,997 936,788 528,739 446,898 378,658
Loans and leases, net... 1,105,117 660,572 724,869 547,103 602,281 526,175 407,904
Total shareholders'
equity................. 181,065 158,755 159,296 145,233 127,983 118,903 99,216
Return on average
assets................. 1.82% 2.04% 2.01% 1.85% 1.94% 1.95% 2.28%
Return on average
equity................. 20.88% 22.15% 21.51% 22.84% 19.80% 20.58% 22.60%
Net interest margin..... 5.33% 5.62% 5.36% 4.41% 4.95% 5.12% 4.93%
</TABLE>
Business Strategy
Our business strategy is to operate as an interrelated group of specialized
financial services companies which focus on selected markets where competitive
advantages are perceived and optimize the productivity of our capital base.
. Interrelated Group of Specialized Financial Services Companies. We are
organized into five principal lines of business: commercial banking,
mortgage banking, home equity lending, equipment leasing, and venture
capital. Each line of business has a separate management team who operate
their niche as a separate business unit responsible for performance goals
specific to that particular line of business. Our structure allows the
senior management team of each line of business to focus their efforts on
understanding their customers and meeting the needs of the markets they
serve. This structure also promotes accountability among managers of each
enterprise. At the same time, Irwin at the parent level works actively to
add value to our lines of business through interaction with the
management teams, capitalizing on interrelationships and providing
centralized services, and overall organizational decisions. In addition,
diversification among business lines makes our consolidated earnings less
susceptible to economic and interest rate fluctuations than more
traditional commercial banks. The following table shows our net income by
line of business for the past five years and the first nine months of
2000.
Net Income by Line of Business
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
---------------- -------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial banking...... $ 5,350 $ 5,392 $ 7,345 $ 6,509 $ 5,587 $ 4,254 $ 3,639
Mortgage banking........ 9,944 18,045 23,063 28,853 21,300 20,422 19,331
Home equity lending..... 10,515 8,886 12,606 (6,668) 1,710 (816) (3,220)
Equipment leasing....... (2,351) -- (843) -- -- -- --
Venture capital......... 4,077 724 656 -- -- -- --
Other (including parent,
medical equipment
leasing and
consolidating entries). (1,421) (7,751) (9,671) 1,809 (4,153) (1,432) 333
------- ------- ------- ------- ------- ------- -------
Total consolidated net
income................. $26,114 $25,296 $33,156 $30,503 $24,444 $22,428 $20,083
======= ======= ======= ======= ======= ======= =======
</TABLE>
2
<PAGE>
. Focus on Selected Markets Where Competitive Advantages Are Perceived.
When selecting markets to enter, we choose ones where we believe we have
or can establish a sustainable competitive advantage based upon a
dedication to customer service, responsive decision making and product
innovation. We seek to operate in businesses where our skills are
compatible with requirements for success and where we believe the parent
company can add value.
. Optimize the Productivity of Our Capital Base. We are highly regulated as
to the amount of assets to equity we can have on a consolidated holding
company basis and at Irwin Union Bank on a stand-alone basis. The amount
of our regulatory capital affects the amount of assets that can be
carried on our balance sheet. For this reason, our strategy is to balance
growth between:
. businesses that require us to carry assets on our balance sheet (and
are, therefore, capital-intensive such as Irwin Union Bank), and
. businesses that produce additional revenues and profits for us without
adding proportionately to our asset size (less capital-intensive
opportunities such as Irwin Mortgage).
We believe that, by optimizing the productivity of our capital, we can
produce a larger stream of revenues and profits from our capital base than
if we focused principally on asset growth.
The result of this strategy is that we derive a larger proportion of our
revenue from fee income than from net interest income. For the nine months
ended September 30, 2000, 72.82% of our total net revenues were derived
from non-interest income compared to 75.47% for the first nine months of
1999, and 27.18% of our total net revenues were derived from net interest
income during the first nine months of 2000 compared to 24.53% during the
first nine months of 1999. Historically, we have also optimized our
capital and enhanced our net interest margin by using Irwin Union Bank's
ability to generate funding through deposits to provide a lower cost of
funding than we could otherwise obtain through borrowings.
Major Lines of Business
Irwin Financial Corporation is a regulated bank holding company. We conduct
our commercial and consumer finance businesses through separate operating
subsidiaries. Under this ownership structure, our separate businesses hold and
fund the majority of their assets through the bank. This provides additional
liquidity and results in regulatory oversight of each of our lines of business.
. Commercial Banking. Irwin Union Bank is a full service commercial bank
offering a wide variety of services to individuals, businesses, and
institutional and governmental customers in selected markets. The bank
focuses on credit and credit-related products for small businesses and
business owners. In recent years, the bank has grown by selectively
opening new offices in markets outside of the bank's historical markets
in south-central Indiana. Irwin Union Bank currently has 20 banking
facilities in Indiana, located throughout nine counties, primarily in the
central and south-central portion of the state. The bank also has four
banking branches outside Indiana: three branches in Michigan--located in
Kalamazoo, established in June 1999; Grandville (near Grand Rapids),
established in October 1999; and Traverse City, established in May 2000--
and one branch in Carson City, Nevada, established in December 1999.
Irwin Union Bank also has loan production offices in Brentwood, Missouri
(near St. Louis), established in 1999, and Louisville, Kentucky and Salt
Lake City, Utah established in 2000. Offices in Las Vegas, Nevada and
Phoenix, Arizona, are expected to open in the fourth quarter, 2000. Under
its growth plan, Irwin Union Bank has targeted and expects to continue to
target economically strong metropolitan markets where we believe
customers have been negatively impacted by recent bank consolidation. In
markets management identifies as attractive opportunities, the bank works
to hire experienced bank officers who have strong local ties and who can
focus on providing personalized
3
<PAGE>
lending services to small businesses in that market. The bank's strategy
is to enter a new market only after recruiting a qualified leader. To
facilitate our banking expansion plans, we have applied to the Office of
Thrift Supervision to establish a federal savings bank subsidiary. The
federal savings bank charter would enable us to expand into markets beyond
where Irwin Union Bank is currently permitted to branch. The following
table shows selected financial data of our commercial banking line of
business.
Selected Financial Data--Commercial Banking Line of Business
<TABLE>
<CAPTION>
At or For
Nine Months Ended At or For
September 30, Year Ended December 31,
------------------ ------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- ------- -------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income.............. $ 5,350 $ 5,392 $ 7,345 $ 6,509 $ 5,587 $ 4,254 $ 3,639
Total assets............ 1,061,796 737,567 789,560 607,992 539,233 503,507 440,035
Total loans............. 974,539 650,380 720,493 514,950 410,272 336,580 310,083
Total deposits.......... 924,272 677,854 710,899 567,526 486,481 453,879 400,149
Nonperforming assets as
a percentage of total
assets................. 0.20% 0.35% 0.15% 0.31% 0.60% 0.76% 0.45%
Net charge-offs as a
percentage of loans.... 0.06% 0.07% 0.13% 0.11% 0.31% 0.33% 0.52%
</TABLE>
. Mortgage Banking. Irwin Mortgage originates, purchases and services
conventional and government agency backed (i.e., FHA and VA) residential
mortgage loans nationwide. Irwin Mortgage utilizes a niche strategy,
focusing on first-time homeowners. The majority of its mortgage
originations are either insured by an agency of the federal government
or, in the case of conventional mortgages, meet requirements for resale
to the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation. This niche has provided Irwin Mortgage with an
acceptable return on investment while focusing on loans with low credit
risk attributes. Irwin Mortgage sells mortgage loans to institutional and
private investors but may retain servicing rights to the loans that it
originates or purchases from correspondents. This balance between
mortgage loan originations and mortgage loan servicing provides an
economic hedge against interest rate changes. In rising interest rate
environments, the value of our mortgage servicing portfolio generally
increases as prepayment expectations decline, and in declining interest
rate environments, the value of our mortgage production franchise
generally increases.
In addition to the mortgage servicing portfolio shown on the balance
sheet, Irwin Mortgage has servicing assets valued at $69.7 million as of
September 30, 2000. These assets are not recorded on the balance sheet
because of provisions in generally accepted accounting principles in
effect at the time the assets were originated which have since changed.
As a complement to its primary niche, Irwin Mortgage also originates, to a
limited degree, non-prime first mortgage loans. This market is comprised
of borrowers who do not qualify for first mortgages that conform to
secondary market standards. These loans are sold on a non-recourse,
service-released basis to private investors.
Irwin Mortgage utilizes retail, wholesale, direct, and Internet channels
to originate and purchase mortgage loans. At September 30, 2000, Irwin
Mortgage operated 95 production and satellite offices in 28 states. Irwin
Mortgage is currently our largest contributor to revenue, comprising
48.23% of total revenues for the nine months ended September 30, 2000. The
mortgage banking line of business accounted for 69.38% of total revenues
for the same period in 1999. The following table shows selected financial
data of our mortgage banking line of business.
4
<PAGE>
Selected Financial Data--Mortgage Banking Line of Business
<TABLE>
<CAPTION>
At or For
Nine Months Ended At or For Year
September 30, Ended December 31,
---------------------- -----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income.............. $ 9,944 $ 18,045 $ 23,063 $ 28,853 $ 21,300 $ 20,422 $ 19,331
Total mortgage
originations........... 2,986,445 4,769,740 5,876,750 8,944,615 5,397,338 5,085,625 3,559,310
Owned first mortgage
servicing portfolio.... 9,963,018 10,462,423 10,488,112 11,242,470 10,713,549 10,810,988 10,301,914
</TABLE>
. Home Equity Lending. Irwin Home Equity, in conjunction with the bank,
originates and services home equity loans and lines of credit nationwide.
We either hold the loans in portfolio at the bank or sell them through
securitization transactions, and Irwin Home Equity continues to service
them. We generally recognize gain when we sell our loans through
securitization. The loans are marketed through direct mail and
telemarketing in 25 states and through Internet-based solicitations. We
target creditworthy, homeowning consumers who are active unsecured credit
card debt users. Target customers are pre-selected using proprietary
models based on several criteria including the customer's previous use of
credit. In 1997 and 1998, we significantly redesigned our product
offerings to better position Irwin Home Equity in the future. We
introduced new products with origination and prepayment fees and home
equity loans with 125% loan-to-value ratios. Over 60% of our current home
equity lending portfolio is protected with prepayment penalties. For the
nine months ended September 30, 2000, home equity loans with loan-to-
value ratios greater than 100% made up 58.1% of our loan originations
(including 25.3% from an acquired pool). We plan to continue in the near
term to originate a high level of loans in this line of business that
have high loan-to-value ratios. We also expect to continue to expand our
home equity lending line of business through the development of new
products, the extension of existing products to newly eligible customers,
and by the addition of brokers, correspondents and Internet sites.
The following table shows selected financial data of our home equity line
of business.
Selected Financial Data--Home Equity Lending Line of Business
<TABLE>
<CAPTION>
At or For
Nine Months Ended At or For
September 30, Year Ended December 31,
-------------------- -----------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- -------- -------- -------- -------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 21,318 $ 13,868 $ 18,852 $ 5,495 $ 7,129 $ 7,755 $ 1,828
Gain on sale of loans... 23,865 12,630 23,998 18,610 15,908 7,798 2,985
Fees.................... 5,081 3,530 4,907 3,323 2,145 710 13
Total net revenues...... 71,523 33,676 50,566 23,941 21,777 15,420 4,473
Total net income........ 10,515 8,886 12,606 (6,668) 1,710 (816) (3,220)
Loans and line of credit
volume................. 601,038 291,785 439,507 389,673 214,518 169,120 87,420
Total servicing
portfolio.............. 1,283,517 749,149 842,403 581,241 358,166 230,450 86,691
Weighted average yield
on lines of credit..... 14.23% 12.24% 12.72% 11.89% 12.96% 12.80% 13.61%
Weighted average yield
on loans............... 12.87% 12.05% 12.33% 11.86% 13.97% 14.08% -- %
</TABLE>
5
<PAGE>
. Equipment Leasing. Irwin Business Finance originates and services small
to medium-sized equipment leases and loans that to date have been held in
portfolio at the bank. The leasing company began operations in January
2000. We source equipment leasing transactions from an established
national network of brokers and vendors. We use a web-based e-commerce
system that provides for automated credit scoring, documentation and
portfolio management services. We recently acquired a 78% interest in
Onset Capital Corporation, a Canadian small ticket leasing company.
Onset's focus on vendor-based relationships should complement our
existing U.S.-based leasing business.
. Venture Capital. Irwin Ventures makes investments in early stage
companies in the financial services industry and related fields. In
August 1999, Irwin Ventures established Irwin Ventures Incorporated--
SBIC, which has received a Small Business Investment Company license. We
expect to provide Irwin Ventures' portfolio companies the benefit of our
management experience in the developing strategies and plans in the
financial services marketplace. In addition, contacts made through
venture activities are expected to benefit management of our other lines
of business through the sharing of technologies and market opportunities.
Our principal executive offices are located at 500 Washington Street, P.O.
Box 929, Columbus, Indiana 47202-0929. Our telephone number is (812) 376-1020.
IFC Capital Trusts II and III
Each trust is a newly formed financing subsidiary of Irwin. Upon issuance of
the preferred securities and convertible preferred securities offered by this
prospectus, the purchasers in this offering will own all of the issued and
outstanding preferred securities of IFC Capital Trust II, and all of the issued
and outstanding convertible preferred securities of IFC Capital Trust III. In
exchange for our capital contribution to each of the trusts, we will own all of
the common securities of each trust. Each trust exists exclusively for the
following purposes:
. issuing the preferred securities or convertible preferred securities, as
the case may be, to the public for cash;
. issuing the common securities to us;
. investing the proceeds from the sale of its preferred and common
securities in an equivalent amount of junior subordinated debentures for
IFC Capital Trust II and convertible junior subordinated debentures for
IFC Capital Trust III, to be issued by us; and
. engaging in activities that are incidental to those listed above, such as
receiving payments on the debentures and making distributions to security
holders, furnishing notices and other administrative tasks.
Each trust's address is 500 Washington Street, P.O. Box 929, Columbus,
Indiana 47202-0929, and the telephone number is (812) 376-1020.
6
<PAGE>
The Offering
Preferred Securities Convertible Preferred
Securities
The issuer.. IFC Capital Trust II. IFC Capital Trust III.
Securities
being
offered..... 1,800,000 preferred 1,800,000 convertible
securities, which represent preferred securities, which
preferred undivided interests represent preferred undivided
in the assets of the trust. interests in the assets of
Those assets will the trust. Those
consist solely of the assets will consist solely of
debentures and payments the convertible debentures
received on the debentures. and payments received on the
convertible debentures.
The trust will sell the
preferred securities to the The trust will sell the
public for cash. The trust convertible preferred
will use that cash to buy the securities to the public for
debentures from us. cash. The trust will use that
cash to buy the convertible
debentures from us.
Offering $25 per preferred security. $25 per convertible preferred
price....... security.
When
distributions
will be
paid to
you.........
If you purchase the preferred If you purchase the
securities, you are entitled convertible preferred
to receive cumulative cash securities, you are entitled
distributions at a % annual to receive cumulative cash
rate. Distributions will distributions at a % annual
accumulate from the date the rate. Distributions will
trust issues the preferred accumulate from the date the
securities and will be paid trust issues the convertible
quarterly on March 31, preferred securities and will
June 30, September 30 and be paid quarterly on March
December 31 of each year, 31, June 30, September 30 and
beginning December 31, 2000. December 31 of each year,
As long as the preferred beginning December 31, 2000.
securities are represented by As long as the convertible
a global security, the record preferred securities are
date for distributions on the represented by a global
preferred securities will be security, the record date for
the business day prior to the distributions on the
distribution date. We may convertible preferred
defer the payment of cash securities will be the
distributions, as described business day prior to the
below. distribution date. We may
defer the payment of cash
distributions, as described
below.
When the The convertible
securities debentures will mature and
must be the convertible preferred
redeemed.... securities must be redeemed
on September 30, 2030. We
The debentures will mature have the option, however, to
and the preferred securities shorten the maturity date to
must be redeemed on September a date not earlier than
30, 2030. We have the option, September 30, 2005 without
however, to shorten the the payment of any premium
maturity date to a date not amount, and to certain dates
earlier than September 30, between September 30, 2003
2005. We will not shorten the and
maturity date unless we have
received the prior approval
of the Board of Governors of
the Federal Reserve, if
required.
7
<PAGE>
Preferred Securities Convertible Preferred
(continued) Securities
(continued)
September 30, 2005 with the
payment of specific premium
amounts. We will not shorten
the maturity date unless we
have received the prior
approval of the Board of
Governors of the Federal
Reserve, if required.
Redemption
before
September
30, 2030 is The trust must redeem
possible.... the convertible preferred
securities when the
convertible debentures are
The trust must redeem the paid at maturity, or upon any
preferred securities when the earlier redemption of the
debentures are paid at convertible debentures to the
maturity, or upon any earlier extent the debentures are
redemption of the debentures redeemed. We may redeem all
to the extent the debentures or part of the convertible
are redeemed. We may redeem debentures at any time on or
all or part of the debentures after September 30, 2005
at any time on or after without the payment of any
September 30, 2005. premium amounts.
In addition, we may redeem, We may redeem all or part of
at any time, all of the the convertible debentures
debentures if: prior to September 30, 2005,
if we pay the following
redemption premium:
. there is a change in
existing laws or
regulations, or new
official administrative
or judicial
interpretation or
application of these
laws and regulations,
that causes the
interest we pay on the
debentures to no longer
be deductible by us for
federal income tax
purposes; or the trust
becomes subject to
federal income tax; or
the trust becomes or
will become subject to
other taxes or
governmental charges;
. on or after September
30, 2003 but before
September 30, 2004, we
pay a % premium
over the principal
amount to be redeemed;
and
. on or after September
30, 2004 but before
September 30, 2005, we
pay a % premium
over the principal
amount to be redeemed.
However, we may only use
these early redemption rights
when the fair market value of
our common stock is at least
125%
. there is a change in
existing laws or
regulations that
requires the trust to
register as an
investment company; or
. there is a change in of the conversion price of
the capital adequacy the convertible preferred
guidelines of the securities for a period of 20
Federal Reserve that consecutive trading days
results in the ending within five business
preferred securities days of the date of notice of
not being counted as redemption.
Tier 1 capital.
8
<PAGE>
Preferred Securities Convertible Preferred
(continued) Securities
(continued)
We may also redeem the
debentures at any time, and In addition, we may redeem
from time to time, in an all of the convertible
amount equal to the debentures, at any time,
liquidation amount of any without premium, if:
preferred securities we
purchase, plus a
proportionate amount of
common securities, but only
in exchange for a like amount
of the preferred securities
and common securities then
owned by us.
. there is a change in
existing laws or
regulations, or new
official administrative
or judicial
interpretation or
application of these
laws and regulations,
that causes the
interest we pay on the
convertible debentures
to no longer be
deductible by us for
federal income tax
purposes; or the trust
becomes subject to
federal income tax; or
the trust becomes or
will become subject to
certain other taxes or
governmental charges;
Redemption of the debentures
prior to maturity will be
subject to the prior approval
of the Federal Reserve, if
approval is then required. If
your preferred securities are
redeemed by the trust, you
will receive the liquidation
amount of $25 per preferred
security, plus any accrued
and unpaid distributions to
the date of redemption.
. there is a change in
existing laws or
regulations that
requires the trust to
register as an
investment company; or
. there is a change in
the capital adequacy
guidelines of the
Federal Reserve that
results in the
convertible preferred
securities not being
counted as Tier 1
capital.
We may also redeem the
convertible debentures at any
time, and from time to time,
without premium, in an amount
equal to the liquidation
amount of any convertible
preferred securities we
purchase, plus a
proportionate amount of
common securities, but only
in exchange for a like amount
of the convertible preferred
securities and common
securities then owned by us.
Redemption of the convertible
debentures prior to maturity
will be subject to the prior
approval of the Federal
Reserve, if approval is then
required. If your convertible
preferred securities are
redeemed by the trust, you
will receive the liquidation
9
<PAGE>
Preferred Securities Convertible Preferred
(continued) Securities
(continued)
amount of $25 per convertible
preferred security, plus any
accrued and unpaid
distributions to the date of
redemption, plus the
applicable premium, if any.
We have the
option to
extend the
interest
payment
period......
The trust will rely solely on The trust will rely solely on
payments made by us under the payments made by us under the
debentures to pay convertible debentures to pay
distributions on the distributions on the
preferred securities. As long convertible preferred
as we are not in default securities. As long as we are
under the indenture relating not in default under the
to the debentures, we may, at indenture relating to the
one or more times, defer convertible debentures, we
interest payments on the may, at one or more times,
debentures for up to 20 defer interest payments on
consecutive quarters, but not the convertible debentures
beyond September 30, 2030. If for up to 20 consecutive
we defer interest payments on quarters, but not beyond
the debentures: September 30, 2030. If we
defer interest payments on
the convertible debentures:
. the trust will also
defer distributions on
the preferred
securities;
. the trust will also
defer distributions on
the convertible
preferred securities;
. the distributions you
are entitled to will
accumulate; and
. the distributions you
are entitled to will
accumulate; and
. these accumulated
distributions will earn
interest at an annual
rate of %,
compounded quarterly,
until paid.
. these accumulated
distributions will earn
interest at an annual
rate of %,
compounded quarterly,
until paid.
At the end of any deferral
period, we will pay to the
trust all accrued and unpaid
interest under the
debentures. The trust will
then pay all accumulated and
unpaid distributions to you.
At the end of any deferral
period, we will pay to the
trust all accrued and unpaid
interest under the
convertible debentures. The
trust will then pay all
accumulated and unpaid
distributions to you.
You will
still be
taxed if
distributions
are
deferred....
If a deferral of payment If a deferral of payment
occurs, you will still be occurs, you will still be
required to recognize the required to recognize the
deferred amounts as income deferred amounts as income
for federal income tax for federal income tax
purposes in advance of purposes in advance of
receiving these amounts, even receiving these amounts, even
if you are a cash basis if you are a cash basis
taxpayer. taxpayer.
10
<PAGE>
Preferred Securities Convertible Preferred
(continued) Securities
(continued)
Our
guarantee
of payment.. Our obligations described in Our obligations described in
this prospectus, in the this prospectus, in the
aggregate, constitute a full, aggregate, constitute a full,
irrevocable and unconditional irrevocable and unconditional
guarantee on a subordinated guarantee on a subordinated
basis by us of the basis by us of the
obligations of the trust obligations of the trust
under the preferred under the convertible
securities. Under the preferred securities. Under
guarantee agreement, we the guarantee agreement, we
guarantee the trust will use guarantee the trust will use
its assets to pay the its assets to pay the
distributions on the distributions on the
preferred securities and the convertible preferred
liquidation amount upon securities and the
liquidation of the trust. liquidation amount upon
However, the guarantee does liquidation of the trust.
not apply when the trust does However, the guarantee does
not have sufficient funds to not apply when the trust does
make the payments. If we do not have sufficient funds to
not make payments on the make the payments. If we do
debentures, the trust will not make payments on the
not have sufficient funds to convertible debentures, the
make payments on the trust will not have
preferred securities. In this sufficient funds to make
event, your remedy is to payments on the convertible
institute a legal proceeding preferred securities. In this
directly against us for event, your remedy is to
enforcement of payments under institute a legal proceeding
the debentures. directly against us for
enforcement of payments under
the convertible debentures.
We may
distribute
the
debentures
directly to
you.........
We may, at any time, dissolve the
We may, at any time, dissolve trust and distribute the
the trust and distribute the convertible debentures to you,
debentures to you, subject to subject to the prior approval of
the prior approval of the the Federal Reserve, if required.
Federal Reserve, if required. If we distribute the convertible
If we distribute the debentures, we will use our best
debentures, we will use our efforts to list them on a
best efforts to list them on national securities exchange or
a national securities comparable automated quotation
exchange or comparable system.
automated quotation system.
How the
securities
will rank
in right of
payment.....
Our obligations under the Our obligations under the
preferred securities, convertible preferred securities,
debentures and guarantee are convertible debentures and
unsecured and will rank as guarantee are unsecured and will
follows with regard to right rank as follows with regard to
of payment: right of payment:
. the preferred . the convertible preferred
securities will rank securities will rank
equally with the common equally with the common
securities of the securities of the trust.
trust. The trust will The trust will pay
pay distributions on distributions on the
the preferred convertible preferred
securities and the securities and the common
common securities pro securities pro rata.
rata. However, if we However, if we default with
default with respect to respect to the convertible
the debentures, then no debentures, then no
distributions on the distributions on the common
common securities of
the trust or our
11
<PAGE>
Preferred Securities Convertible Preferred
Securities
(continued) securities of the trust or
our common stock will be
paid until all accumulated
and unpaid distributions on
the convertible preferred
securities have been paid;
(continued)
common stock will be
paid until all
accumulated and unpaid
distributions on the
preferred securities
have been paid;
. our obligations under the
convertible debentures and
the guarantee are unsecured
and generally will rank:
. our obligations under
the debentures and the
guarantee are unsecured
and generally will
rank:
. junior in priority to our
existing and future senior
and subordinated
indebtedness;
. junior in priority to
our existing and
future senior and
subordinated
indebtedness;
. equal to our
subordinated . junior in priority to our
debentures associated subordinated debentures
with the $50 million associated with the $50
of trust preferred million of trust preferred
securities that an securities that an
affiliated trust of affiliated trust of ours
ours currently has currently has outstanding;
outstanding; and and
. senior to the . junior in priority to the
convertible debentures debentures that we will be
that we will be issuing to IFC Capital
issuing to IFC Capital Trust II; and
Trust III; and
. because we are a holding
. because we are a company, the convertible
holding company, the debentures and the guarantee
debentures and the will effectively be
guarantee will subordinated to all
effectively be depositors' claims, as well
subordinated to all as existing and future
depositors' claims, as liabilities of our
well as existing and subsidiaries.
Voting future liabilities of
rights of our subsidiaries.
the
preferred
securities..
Except in limited Except in limited
circumstances, holders of the circumstances, holders of the
preferred securities will convertible preferred
have no voting rights. securities will have no
voting rights.
Proposed
Nasdaq
National
Market
symbol...... IRWNO. IRWNN.
You will
not receive
certificates.
The preferred securities will The convertible preferred
be represented by a global securities will be
security that will be represented by a global
deposited with and registered security that will be
in the name of The Depository deposited with and registered
Trust Company, New York, New in the name of The Depository
York, or its nominee. This Trust Company, New York, New
means that you will not York, or its nominee. This
receive a certificate for the means that you will not
preferred securities, and receive a certificate for the
your ownership interests will convertible preferred
be recorded through the DTC securities, and your
book-entry system. ownership interests will be
recorded through the DTC
book-entry system.
12
<PAGE>
Preferred Securities Convertible Preferred
(continued) Securities
(continued)
How the
proceeds of
this
offering
will be
used........ The trust will invest all of The trust will invest all of
the proceeds from the sale of the proceeds from the sale of
the preferred securities in the convertible preferred
the debentures. We estimate securities in the convertible
that the net proceeds to us debentures. We estimate that
from the sale of the the net proceeds to us from
debentures to the trust, the sale of the convertible
after deducting debentures to the
offering expenses and trust, after deducting
underwriting commissions, offering expenses and
will be approximately $ underwriting commissions,
million. The purpose of the will be approximately $
offering is to increase our million. The purpose of the
regulatory capital and offering is to increase our
support the growth and regulatory capital and
operations of our support the growth and
subsidiaries. operations of our
subsidiaries.
Conversion
into common
stock....... The preferred securities are
not convertible into our Each convertible preferred
common stock. security is convertible on or
after January 31, 2001, at
the option of the holder into
shares of our common stock,
at the initial conversion
ratio of shares of common
stock for each convertible
preferred security
(equivalent to an initial
conversion price of $ per
share of common stock),
subject to adjustment under
certain circumstances. The
last reported sales price of
our common stock on the
Nasdaq National Market on
October 25, 2000, was $14.75.
If you want to convert a
convertible preferred
security, the conversion
agent will exchange your
convertible preferred
security for the appropriate
principal amount of
convertible debentures held
by the trust and immediately
convert the convertible
debentures into shares of our
common stock. You will
receive cash in lieu of
fractional shares. However,
you will not receive cash or
additional shares of our
common stock to compensate
you for any accrued but
unpaid distributions on the
convertible preferred
security through the time of
conversion. These accrued
amounts will be forfeited.
Before purchasing the preferred securities or the convertible preferred
securities being offered, you should carefully consider the "Risk Factors"
beginning on page 16.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for, and as of the
end of, each of the years in the five-year period ended December 31, 1999, are
derived from our historical financial statements. Our consolidated financial
statements for the five years ended December 31, 1999 have been audited by
PricewaterhouseCoopers LLP, independent accountants. The summary data presented
below for the nine-month periods ended September 30, 2000 and 1999, are derived
from our unaudited financial statements. In our opinion, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of results as of or for the nine-month periods indicated have been included.
This information should be read in conjunction with "Recent Developments" in
this prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and the notes thereto incorporated by reference into this prospectus from our
Annual Report on Form 10-K for the fiscal year ended December 31, 1999. Results
for past periods are not necessarily indicative of results that may be expected
for any future period, and results for the nine-month period ended September
30, 2000, are not necessarily indicative of results that may be expected for
the entire year ending December 31, 2000.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- ----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income
Data:
Net interest income.... $ 63,873 $ 54,254 $ 71,819 $ 63,898 $ 54,859 $ 50,020 $ 37,320
Provision for loan and
lease losses.......... (3,610) (3,895) (4,443) (5,995) (6,238) (4,553) (3,198)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan and lease
losses................ 60,263 50,359 67,376 57,903 48,621 45,467 34,122
---------- ---------- ---------- ---------- ---------- ---------- ----------
Non-interest income:
Loan origination
fees................ 37,250 41,670 47,007 60,013 41,370 43,779 32,133
Gain on sales of
loans............... 58,115 74,994 68,851 75,201 39,210 34,248 21,006
Loan servicing fees.. 44,781 45,885 60,581 57,284 53,257 46,877 36,156
Amortization and
impairment of
servicing assets.... (23,044) (12,512) (15,702) (35,388) (16,355) (14,331) (4,865)
Gain on sale of
servicing assets.... 14,432 6,386 37,801 43,308 32,631 16,378 15,271
Trading gains
(losses)............ 10,123 (11,130) (8,296) 1,366 (1,961) -- --
Gain from sale of
leasing assets...... -- -- -- 5,241 -- -- --
Other................ 19,834 9,701 13,827 11,832 8,696 8,699 9,551
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total non-interest
income.............. 161,491 154,994 204,069 218,857 156,848 135,650 109,252
Non-interest expense... 174,720 159,326 214,111 221,206 158,818 143,829 110,925
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes................. 47,034 46,027 57,334 55,554 46,651 37,288 32,449
Provision for income
taxes................. 17,397 17,208 19,481 20,354 17,734 14,860 12,366
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before
distributions on
securities............ 29,637 28,819 37,853 35,200 28,917 22,428 20,083
Distribution on trust
preferred securities.. 3,523 3,523 4,697 4,697 4,473 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income available
to common
shareholders.......... $ 26,114 $ 25,296 $ 33,156 $ 30,503 $ 24,444 $ 22,428 $ 20,083
========== ========== ========== ========== ========== ========== ==========
Mortgage loan
originations.......... $2,986,445 $4,769,740 $5,876,750 $8,944,615 $5,397,338 $5,085,625 $3,559,310
Home equity loan
originations.......... 601,038 291,785 439,507 389,673 214,518 169,120 87,420
Common Share Data:
Net income per common
share:
Basic................ $ 1.24 $ 1.17 $ 1.54 $ 1.40 $ 1.10 $ 0.99 $ 0.89
Diluted.............. 1.23 1.15 1.51 1.38 1.08 0.98 0.88
Cash dividends per
common share.......... 0.18 0.15 0.20 0.16 0.14 0.12 0.11
Equity available to
common shareholders
(at end of period).... 8.55 7.42 7.55 6.70 5.82 5.23 4.38
Dividend payout ratio.. 14.46% 12.79% 12.93% 11.39% 12.74% 12.15% 12.36%
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------------- ---------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Consolidated
Financial Condition
Data (at end of
period):
Assets................ $2,150,122 $ 1,662,531 $ 1,680,847 $ 1,946,179 $ 1,496,794 $ 1,300,122 $ 1,037,541
Deposits.............. 1,320,164 875,933 870,318 1,009,211 719,596 640,153 563,999
Loans held for sale... 490,690 511,007 508,997 936,788 528,739 446,898 378,658
Loans and leases...... 1,117,746 669,375 733,424 556,991 611,093 533,050 412,524
Allowance for loan and
lease losses......... 12,629 8,803 8,555 9,888 8,812 6,875 5,033
Long-term debt........ 29,596 30,447 29,784 2,839 7,096 17,659 21,575
Redeemable preferred
securities........... 48,125 48,053 48,071 47,999 47,927 -- --
Shareholders' equity.. 181,065 158,755 159,296 145,233 127,983 118,903 99,216
Owned first mortgage
servicing portfolio.. 9,963,018 10,462,423 10,488,112 11,242,470 10,713,549 10,810,988 10,301,914
Managed home equity
portfolio............ 1,283,517 749,149 842,403 581,241 358,166 230,450 86,691
Selected Financial
Ratios:
Performance Ratios:
Net interest
margin(/1/)(/2/)(/3/). 5.33% 5.62% 5.36% 4.41% 4.95% 5.12% 4.93%
Non-interest income to
revenues(/4/)......... 71.66 74.07 73.97 77.40 74.09 73.06 74.54
Efficiency ratio(/5/).. 77.53 76.14 77.61 78.23 75.02 77.46 75.68
Return on average
assets(/1/)........... 1.82 2.04 2.01 1.85 1.94 1.95 2.28
Return on average
equity(/1/)........... 20.88 22.15 21.51 22.84 19.80 20.58 22.60
Average loan-to-average
deposit ratio......... 0.81 0.61 0.68 0.67 0.82 0.79 0.70
Average interest-
earning assets to
average interest-
bearing liabilities... 1.18 1.30 1.33 1.35 1.38 1.30 1.22
Asset Quality Ratios:
Non-performing loans
and leases to total
loans and leases...... 0.44% 0.81% 0.59% 2.13% 1.26% 1.35% 0.62%
Allowance for possible
loan and lease losses
to:
Total loans and leases. 1.13 1.32 1.17 1.78 1.45 1.29 1.22
Non-performing loans
and leases............ 252.88 162.03 198.72 84.28 114.72 95.81 197.14
Net charge-offs to
average loans and
leases(/1/)........... 0.15 0.22 0.27 0.33 0.46 0.36 0.57
Net home equity charge-
offs to managed home
equity portfolio(/1/). 0.62 0.39 0.36 0.37 0.29 0.02 --
Non-performing assets
to total assets (at
end of period)........ 0.37 0.53 0.48 0.78 0.64 0.72 0.27
Capital Ratios:
Average shareholders'
equity to average
assets................ 8.71% 9.23% 9.33% 8.09% 9.78% 9.46% 10.07%
Tier 1 capital ratio... 9.40 12.10 11.39 11.56 13.56 12.20 12.99
Tier 1 leverage ratio.. 12.01 12.60 12.77 10.51 12.06 9.84 10.57
Total risk-based
capital ratio......... 11.15 14.35 13.50 12.25 14.85 12.88 13.64
Ratio of earnings to
fixed charges(/6/):
Including deposit
interest.............. 1.66x 1.99x 1.88x 1.79x 1.86x 1.90x 2.14x
Excluding deposit
interest.............. 2.40 2.67 2.54 2.25 2.45 2.56 3.37
</TABLE>
-------
(1) Certain financial ratios for interim periods have been annualized.
(2) Net interest income divided by average interest-earning assets.
(3) Calculated on a tax-equivalent basis.
(4) Revenues consist of net interest income plus non-interest income.
(5) Non-interest expense divided by net-interest income plus non-interest
income.
(6) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus interest expense. Fixed
charges consist of interest expense plus distributions on preferred
securities.
15
<PAGE>
RISK FACTORS
An investment in the preferred securities and the convertible preferred
securities involves a number of risks. We urge you to read all of the
information contained in this prospectus. In addition, we urge you to consider
carefully the following factors in evaluating an investment in Irwin and the
trusts before you purchase any of the preferred securities or the convertible
preferred securities offered by this prospectus.
Because each trust will rely on the payments it receives on the debentures
it owns to fund all payments on the preferred securities or the convertible
preferred securities, and because each trust may distribute the debentures it
owns in exchange for the preferred securities that it issues, you are making an
investment decision that relates to the debentures being issued by us as well
as the preferred securities or the convertible preferred securities. You should
carefully review the information in this prospectus about the preferred
securities, the convertible preferred securities, the debentures, the
convertible debentures and the guarantees.
Because the convertible preferred securities are convertible into our common
stock as described in this prospectus, prospective purchasers of convertible
preferred securities are also making an investment decision with regard to our
common stock. For this reason, you should also carefully review the information
in this prospectus and in the documents incorporated by reference about our
business and our common stock.
Risks Related to an Investment in Irwin Financial Corporation
Our overall financial performance will likely depend more significantly on the
results of our different specialized financial services businesses than on our
commercial banking business.
We operate in diversified financial services businesses, and in recent years
the performance of our mortgage banking and home equity lending businesses have
had a larger effect on our consolidated results than our commercial banking
line of business. Our future earnings will also be affected by the performance
of our two newer businesses, Irwin Business Finance, which we started operating
at the beginning of 2000 and recently expanded, and Irwin Ventures which we
started in August 1999. We may reduce or exit current lines of business and
pursue other lines of business if we believe other financial service niches
offer us more attractive opportunities. We could be adversely affected by costs
associated with implementing this strategy and uncertainties involved in new
lines of business. There can be no assurance that we will be successful in
evaluating the risk/reward attributes of the financial service or product
niches we choose to pursue.
We may be adversely affected by interest rate changes.
We and our subsidiaries are subject to interest rate risk in all aspects of
our finance business, although interest rate sensitivity impacts our various
lines of business differently. Changes in interest rates will likely affect the
pricing of loans and deposits and the value that we can recognize on the sale
of mortgage and home equity loan originations or servicing portfolios. Interest
rates tend to have opposite effects on the loan production aspect and the
servicing aspect of these two lines of business. Changes in interest rates may
also expose us to write-downs in the carrying value of servicing assets and to
trading losses related to interest-only instruments that we often retain when
selling or securitizing home equity loans.
Like other banks and financial institutions, Irwin Union Bank and Irwin
Business Finance are principally dependent on earnings derived from net
interest income. Net interest income is the difference between interest earned
on loans and investments and the interest expense paid on other borrowings,
including deposits in the case of the bank. Our interest income and interest
expense are affected by general economic conditions and by the policies of
regulatory authorities, including the monetary policies of the Federal Reserve.
Although we have taken measures intended to manage the risks of operating in
a changing interest rate environment, we may not be able to effectively
mitigate interest rate sensitivity. In addition, there are costs
16
<PAGE>
associated with our risk management techniques, and these costs could be
substantial. Our strategies include, but are not limited to, modeling interest
rate scenarios, using financial hedging instruments, match-funding certain loan
assets, selling selected servicing rights and maintaining a strong loan
production operation to offset interest rate risk.
Our operations may be adversely affected if we are unable to secure adequate
funding; our reliance on wholesale funding sources exposes us to potential
liquidity risk.
Due to balance sheet growth and increased competition for deposits in Irwin
Union Bank's markets, we have in recent months increased our reliance on
wholesale funding, including short-term credit facilities, Federal Home Loan
Bank borrowings and brokered deposits. Wholesale funding sources have in the
past proven to be somewhat volatile in our industry depending on the varying
levels of confidence these investors have in commercial and consumer finance
businesses. For this reason, the continued availability to us of these funding
sources is uncertain, and we could be adversely impacted if our specialized
financial services niches fall out of favor with wholesale lenders. Our
financial flexibility will be severely constrained if we are unable to renew
our wholesale funding or if adequate financing is not available in the future
at acceptable rates of interest. We may not have sufficient liquidity to
continue to fund new loan or lease originations, and we could need to liquidate
loans or other assets unexpectedly in order to repay obligations as they
mature. We regularly resell the majority of our mortgage loan originations into
the secondary market, and Irwin Home Equity and Irwin Business Finance also
seek to sell loans into the secondary market in the regular course of business
as a source of liquidity. At times, some of our financial assets, such as
nontraditional, nonprime mortgage and high loan-to-value home equity loans, may
not be readily marketable, and we may not be able to sell assets when required
at favorable prices. This could adversely affect our earnings and our ability
to pay interest on the debentures.
We have credit risk inherent in the asset portfolios that we own as well as in
certain assets that we have sold but continue to service.
Some borrowers may not repay loans that we make to them. This risk is
inherent in our finance businesses. Like all financial institutions, we
maintain an allowance for loan and lease losses to absorb the level of losses
that we think is probable in the portfolios that we own, but our allowance for
loan and lease losses may not be sufficient to cover the loan and lease losses
that we may actually incur. While we maintain a reserve at a level management
believes is adequate, our charge-offs could exceed these reserves. In
particular, at September 30, 2000, approximately 49.22% of our total managed
home equity portfolio consisted of high loan-to-value loans that are not fully
collateralized by interests in real estate. If we experience defaults in these
loans to a greater extent than we anticipated, this could adversely affect our
earnings and our ability to pay interest on the debentures.
In our home equity lending line of business, some assets are reflected on
our balance sheet at the net present value of the future revenue stream of the
instruments measured at the time we sell the underlying portfolio of loans.
These assets are interest-only instruments and generally represent residual
interests in loans that we have sold or securitized. From time to time we may
also purchase interest-only instruments that relate to portfolios of loans
securitized by others. Payment defaults by borrowers on the related loans will
cause deterioration in the value of these assets. If we do not collect the
interest we expect, our future earnings will be adversely affected because we
are required to record a trading loss equal to the amount the asset is
impaired.
Our business may be adversely affected by the highly regulated environment in
which we operate.
Irwin and our subsidiaries are subject to extensive federal and state
regulation and supervision. Recently enacted, proposed and future legislation
and regulations have had, will continue to have or may have significant impact
on the financial services industry. Recent and proposed state legislative
action to limit the use of fees, points, and interest rates on consumer loans
may adversely affect the market for some of our residential
17
<PAGE>
mortgage loan products. In addition, the principal banking regulators have
recently issued a proposal to change the capital treatment of residual
interests from loans securitized by the banking institution. The rules being
proposed are intended to limit the use of residual interests including
interest-only strips which are often retained by lenders like us when
securitizing a pool of loans. If these rules are adopted, we are likely to
reduce our use of securitization structures that create interest-only strips,
principally in our home equity line of business, which, in turn, could change
the revenue recognition pattern in that line of our business as well as others.
These and other potential changes in regulation or government policies could
increase our costs of doing business and could adversely affect our operations.
Pending litigation could subject us to material liability.
Numerous class action lawsuits have been filed against mortgage lenders,
including Irwin Mortgage, alleging that certain payments to mortgage brokers by
those lenders violate the federal Real Estate Settlement Procedures Act
(RESPA). These lawsuits have generally been filed on behalf of a purported
nationwide class of borrowers and allege that various forms of direct and
indirect payments to mortgage brokers are referral fees or unearned fees which
are prohibited under RESPA, or that consumers were not informed of the brokers'
compensation, in violation of law.
Our subsidiary, Irwin Mortgage (formerly known as Inland Mortgage
Corporation), is a defendant in litigation alleging that it violated RESPA in
connection with mortgages originated by mortgage brokers. The name of this
litigation is Culpepper v. Inland Mortgage Corporation. The initial action was
filed in April 1996. In January 1997, the federal district court granted
summary judgment in favor of Irwin Mortgage and denied the plaintiff's motion
to certify the case as a class action. The plaintiff appealed, and in January
1998, the court of appeals reversed the district court's grant of summary
judgment. The court of appeals sent the case back to the trial court to decide
the merits of the case and the class certification issue. A second lawsuit was
filed against Irwin Mortgage in August 1998 alleging similar RESPA violations
and was consolidated with the first case. In June 1999, the trial court
certified a limited class of borrowers. Irwin Mortgage appealed and the class
certification issue was submitted to the court of appeals for review in
December 1999.
The court of appeals could issue its order regarding class certification at
any time. A decision regarding class certification, however decided, will not
conclude the lawsuit or otherwise establish liability. A judicial determination
in this case of whether Irwin Mortgage has liability under RESPA would be
reached only by a trial or other adjudication addressing the merits of the
allegations made by the plaintiffs in the lawsuit. However, if class
certification is upheld, negative publicity regarding this litigation, and the
possibility of additional RESPA litigation in the mortgage industry, could
cause the trading price of our common stock, the preferred securities and the
convertible preferred securities, to decline.
We intend to continue to vigorously defend this lawsuit. At this stage of
litigation, we cannot predict the likelihood of an adverse outcome. We are also
unable at this stage of litigation to reasonably predict the extent or amount
of potential liability, if any, that we may incur. An adverse outcome in this
litigation could have a material adverse effect on our financial condition and
results of operations, and the trading price of our common the stock, the
preferred securities and the convertible preferred securities, and could impact
our ability to retire or make distributions on the preferred securities and the
convertible preferred securities.
Ownership of our common stock is concentrated in persons affiliated with us.
Our chairman, William I. Miller, has voting control over more than 50% of
our common stock. Together with Mr. Miller, directors and executive officers of
Irwin beneficially own approximately 58% of our common stock. These persons
have the ability to control the outcome of all shareholder votes and to direct
our affairs and business. This voting power would enable them to cause actions
to be taken that may prove to be inconsistent with the interests of non-
affiliated shareholders.
We rely heavily on our management team, and the unexpected loss of key managers
may adversely affect our operations.
Our success to date has been influenced strongly by our ability to attract
and to retain senior management experienced in banking and financial services.
Our ability to retain executive officers and the current
18
<PAGE>
management teams of each of our lines of business will continue to be important
to successful implementation of our strategies. We do not have employment or
non-compete agreements with any of these key employees. The unexpected loss of
services of any key management personnel, or the inability to recruit and
retain qualified personnel in the future, could have an adverse effect on our
business and financial results.
Our future success is dependent on our ability to compete effectively in
various highly competitive industries.
The financial services business, including commercial banking, mortgage
banking, home equity lending and leasing, is highly competitive, and we and our
operating subsidiaries encounter strong direct competition for deposits, loans
and other financial services in all of our market areas in each of our lines of
business. Our principal competitors include other commercial banks, savings
banks, savings and loan associations, mutual funds, money market funds, finance
companies, trust companies, insurers, leasing companies, credit unions,
mortgage companies, private issuers of debt obligations, venture capital firms,
and suppliers of other investment alternatives, such as securities firms. Many
of our non-bank competitors are not subject to the same degree of regulation as
that imposed on bank holding companies, federally insured Indiana chartered
banks or federal savings banks. As a result, such non-bank competitors have
advantages over us in providing certain services. Many of these financial
institutions, lending and leasing companies and other businesses are
significantly larger than Irwin and have greater access to capital and other
resources. In addition, our ability to compete effectively in our lines of
business is also dependent on our ability to adapt successfully to
technological changes within the banking and financial services industries
generally.
Risks Related to an Investment in the Preferred Securities and
the Convertible Preferred Securities
If we do not make interest payments under the debentures or the convertible
debentures, the related trust will be unable to pay distributions and
liquidation amounts. The guarantee would not apply because the guarantee covers
payments only if the trust has funds available.
Each trust will depend solely on our payments on the debentures or the
convertible debentures to pay amounts due to you on the preferred securities or
the convertible preferred securities, as the case may be. If we default on our
obligation to pay the principal or interest on the debentures or the
convertible debentures, the applicable trust will not have sufficient funds to
pay distributions or the liquidation amount on the related preferred
securities. In that case, you will not be able to rely on the applicable
guarantee for payment of these amounts because the guarantee only applies if
the applicable trust has sufficient funds to make distributions or to pay the
liquidation amount. Instead, you or the applicable property trustee will have
to institute a direct action against us to enforce the property trustee's
rights under the indenture relating to the debentures or the convertible
debentures, as the case may be.
Our ability to make interest payments on the debentures and convertible
debentures to the trusts may be restricted.
We are a holding company and substantially all of our assets are held by our
subsidiaries, principally at Irwin Union Bank. Our ability to make payments on
the debentures and the convertible debentures when due will depend primarily on
available cash resources at the bank holding company and dividends from our
subsidiaries. Dividend payments or extensions of credit from the bank are
subject to regulatory limitations, generally based on capital levels and
current and retained earnings, imposed by the various regulatory agencies with
authority over our banking subsidiary. The ability of our subsidiaries to pay
dividends is also subject to their profitability, financial condition, capital
expenditures and other cash flow requirements. Our subsidiaries may not be able
to pay dividends in the future.
19
<PAGE>
We could also be precluded from making interest payments on the debentures
and the convertible debentures by our regulators if in the future they were to
perceive deficiencies in liquidity or regulatory capital levels at our holding
company. If this were to occur, we may be required to obtain the consent of our
regulators prior to paying dividends on our common stock or interest on the
debentures and the convertible debentures. If consent became required and our
regulators were to withhold their consent, we would likely exercise our right
to defer interest payments on the debentures and the convertible debentures,
and the trusts would not have funds available to make distributions on the
preferred securities and the convertible preferred securities during such
period.
The debentures, the convertible debentures and the guarantees rank lower than
most of our other indebtedness and our holding company structure effectively
subordinates any claims against us to those of our subsidiaries' creditors.
Our obligations under the debentures, the convertible debentures and the
guarantees are unsecured and will rank junior in priority of payment to our
existing and future senior and subordinated indebtedness, which totaled $82.4
million of outstanding principal amount at September 30, 2000. The issuance of
the debentures, the convertible debentures, the preferred securities and the
convertible preferred securities does not limit our ability or the ability of
our subsidiaries to incur additional indebtedness, guarantees or other
liabilities.
Because we are a holding company, the creditors of our subsidiaries,
including depositors, also will have priority over you in any distribution of
our subsidiaries' assets in liquidation, reorganization or otherwise.
Accordingly, the debentures, the convertible debentures and the guarantees will
be effectively subordinated to all existing and future liabilities of our
subsidiaries, and you should look only to our assets for payments on the
preferred securities, the convertible preferred securities, the debentures and
the convertible debentures. Please see the last risk factor on page 23
regarding the further subordination of the convertible debentures.
We have the option to defer interest payments on the debentures and the
convertible debentures for substantial periods.
We may, at one or more times, defer interest payments on the debentures and
the convertible debentures for up to 20 consecutive quarters. If we defer
interest payments on the debentures or the convertible debentures, the
applicable trust will defer distributions on the preferred securities or the
convertible preferred securities, as the case may be, during any deferral
period. During a deferral period, you will be required to recognize as income
for federal income tax purposes the amount approximately equal to the interest
that accrues on your proportionate share of the debentures or the convertible
debentures, held by the applicable trust in the tax year in which that interest
accrues, even though you will not receive these amounts until a later date.
You will also not receive the cash related to any accrued and unpaid
interest from the applicable trust if you sell the preferred securities or the
convertible preferred securities, as the case may be, before the end of any
deferral period. During a deferral period, accrued but unpaid distributions
will increase your tax basis in the preferred securities or the convertible
preferred securities, as the case may be. If you sell the preferred securities
or the convertible preferred securities during a deferral period, your
increased tax basis will decrease the amount of any capital gain or increase
the amount of any capital loss that you may have otherwise realized on the
sale. A capital loss, except in certain limited circumstances, cannot be
applied to offset ordinary income. As a result, deferral of distributions could
result in ordinary income, and a related tax liability for the holder, and a
capital loss that may only be used to offset a capital gain.
We do not currently intend to exercise our rights to defer interest payments
on the debentures or the convertible debentures. However, if we do defer
interest payments, the market price of the preferred securities or the
convertible preferred securities, as the case may be, would likely be adversely
affected. The preferred securities or the convertible preferred securities may
trade at a price that does not fully reflect the value of accrued but unpaid
interest on the debentures or the convertible debentures. If you sell the
preferred securities or the convertible preferred securities during a deferral
period, you may not receive the same return on
20
<PAGE>
investment as someone who continues to hold the preferred securities or the
convertible preferred securities. Because of our right to defer interest
payments, the market price of the preferred securities and the convertible
preferred securities may be more volatile than the market prices of other
securities without the deferral feature.
We have made only limited covenants in the indenture and the trust agreement.
The indentures governing the debentures and the convertible debentures and
the trust agreements governing the trusts do not require us to maintain any
financial ratios or specified levels of net worth, revenues, income, cash flow
or liquidity. The instruments do not protect holders of the debentures, the
convertible debentures, the preferred securities or the convertible preferred
securities in the event we experience significant adverse changes in our
financial condition or results of operations. In addition, neither the
indentures nor the trust agreements limit our ability or the ability of any
subsidiary to incur additional indebtedness. Therefore, you should not consider
the provisions of these governing instruments as a significant factor in
evaluating whether we will be able to comply with our obligations under the
debentures, the convertible debentures, or the guarantees.
We may redeem the debentures and the convertible debentures before September
30, 2030.
Under the following circumstances, we may redeem the debentures or the
convertible debentures or both before their stated maturity without payment of
premium:
. We may redeem the debentures and the convertible debentures, in whole or
in part, at any time on or after September 30, 2005.
. We may redeem the debentures and the convertible debentures in whole, but
not in part, within 180 days after certain occurrences at any time during
the life of the trust. These occurrences may include adverse tax,
investment company or bank regulatory developments.
We have additional rights to redeem the convertible debentures early under
certain conditions. See the discussion under "--Additional Risks Related to the
Convertible Preferred Securities" on page 23.
You should assume that an early redemption may be attractive to us if we are
able to obtain capital at a lower cost than we must pay on the debentures or
the convertible debentures or if it is otherwise in our interest to redeem the
debentures or the convertible debentures. If the debentures or the convertible
debentures are redeemed, the applicable trust must redeem preferred securities
or convertible preferred securities, as the case may be, having an aggregate
liquidation amount equal to the aggregate principal amount of debentures or the
convertible debentures redeemed, and you may be required to reinvest your
principal at a time when you may not be able to earn a return that is as high
as you were earning on the preferred securities or convertible preferred
securities, as the case may be.
We can distribute the debentures and the convertible debentures to you, which
may have adverse tax consequences for you; this right could also adversely
affect the market price of the preferred securities and the convertible
preferred securities.
Each trust may be dissolved at any time before maturity of the debentures or
the convertible debentures, as the case may be. If this happens, the trustees
may distribute the debentures or the convertible debentures, as the case may
be, to you under the terms of the related trust agreement.
We cannot predict the market prices for the debentures or the convertible
debentures that may be distributed in exchange for preferred securities or
convertible preferred securities, as the case may be, upon liquidation of the
applicable trust. The preferred securities and the convertible preferred
securities, or the debentures and the convertible debentures that you may
receive if the applicable trust is liquidated, may trade
21
<PAGE>
at a discount to the price that you paid to purchase the preferred securities
or convertible preferred securities, as the case may be. Because you may
receive debentures or the convertible debentures, your investment decision with
regard to the preferred securities or convertible preferred securities will
also be an investment decision with regard to the debentures and the
convertible debentures, as the case may be. You should carefully review all of
the information contained in this prospectus regarding the debentures and the
convertible debentures.
Under current interpretations of federal income tax laws supporting
classification of each of the trusts as a grantor trust for tax purposes, a
distribution of the debentures or the convertible debentures to you upon the
dissolution of the applicable trust would not be a taxable event to you.
Nevertheless, if the applicable trust is classified for federal income tax
purposes as an association taxable as a corporation at the time it is
dissolved, the distribution of the debentures or the convertible debentures, as
the case may be, would be a taxable event to you. In addition, if there is a
change in law, a distribution of the debentures or the convertible debentures
upon the dissolution of the applicable trust could be a taxable event to you.
There is no current public market for the preferred securities or the
convertible preferred securities and their market prices may be subject to
significant fluctuations.
There is currently no public market for the preferred securities or the
convertible preferred securities. Although we have applied to have the
preferred securities and the convertible preferred securities included on the
Nasdaq National Market, there is no guarantee that an active or liquid trading
market will develop for the preferred securities or the convertible preferred
securities or that the quotation of the preferred securities or the convertible
preferred securities will continue on the Nasdaq National Market. If an active
trading market does not develop, the market price and liquidity of the
preferred securities or the convertible preferred securities, as the case may
be, will be adversely affected. Even if an active public market does develop,
there is no guarantee that the market price for the preferred securities or the
convertible preferred securities will equal or exceed the price you pay for the
preferred securities or the convertible preferred securities.
Future trading prices of the preferred securities and the convertible
preferred securities may be subject to significant fluctuations in response to
prevailing interest rates, our future operating results and financial
condition, the market for similar securities and general economic and market
conditions. The initial public offering price of the preferred securities and
the convertible preferred securities has been set at the applicable liquidation
amount of the preferred securities or the convertible preferred securities, as
the case may be, and may be greater than the market price of the applicable
security following the offering.
The market price for the preferred securities or the convertible preferred
securities and the debentures or the convertible debentures, as the case may
be, that you may receive in a distribution, is also likely to decline during
any period that we are deferring interest payments on the debentures or the
convertible debentures, as the case may be.
You must rely on the applicable property trustee to enforce your rights if
there is an event of default under either indenture.
You may not be able to directly enforce your rights against us if an event
of default under the applicable indenture occurs. If an event of default under
the applicable indenture occurs and is continuing, this event will also be an
event of default under the applicable trust agreement. In that case, you must
rely on the enforcement by the applicable property trustee of its rights as
holder of the debentures or the convertible debentures, as the case may be,
against us. The holders of a majority in liquidation amount of the preferred
securities or convertible preferred securities, as the case may be, will have
the right to direct the applicable property trustee to enforce its rights. If
the property trustee does not enforce its rights following an event of default
and a request by the record holders to do so, any record holder may, to the
extent permitted by applicable law, take action directly against us to enforce
the applicable property trustee's rights. If an event of default occurs under
the applicable trust agreement that is attributable to our failure to pay
interest or principal on the debentures or
22
<PAGE>
the convertible debentures, as the case may be, or if we default under the
applicable guarantee, you may proceed directly against us. You will not be able
to exercise directly any other remedies available to the holders of the
debentures or the convertible debentures, as the case may be, unless the
applicable property trustee fails to do so.
As a holder of preferred securities or convertible preferred securities you
have limited voting rights.
Holders of preferred securities and convertible preferred securities have
limited voting rights. Your voting rights pertain primarily to amendments to
the applicable trust agreement. In general, only we can replace or remove any
of the trustees. However, if an event of default under the applicable trust
agreement occurs and is continuing, the holders of at least a majority in
aggregate liquidation amount of the preferred securities or convertible
preferred securities, as the case may be, may replace the applicable property
trustee and the applicable Delaware trustee.
Additional Risks Related to the Convertible Preferred Securities
We may redeem the convertible debentures earlier than September 30, 2005 in
certain circumstances.
As long as the fair market value of our common stock has been at least 125%
of the conversion price of the convertible preferred securities for a period of
20 consecutive trading days ending within five business days of the date of
notice of redemption, we have the option to redeem any or all of the
outstanding convertible debentures prior to maturity in the following
circumstances:
. on or after September 30, 2003 but before September 30, 2004, upon
payment of a redemption premium equal to % of the principal amount to
be redeemed, plus any accrued and unpaid interest on the convertible
debentures to the date of redemption; and
. on or after September 30, 2004 but before September 30, 2005, upon
payment of a redemption premium equal to % of the principal amount to
be redeemed, plus any accrued and unpaid interest on the convertible
debentures to the date of redemption.
The convertible debentures are more deeply subordinated and will rank lower
than debentures issued in connection with our other trust preferred financings.
The convertible debentures will be unsecured and will rank junior to all of
our senior and subordinated debt, including indebtedness we may incur in the
future, and will be further subordinated to any debt issued in connection with
trust preferred securities intended to qualify for "Tier 1" capital treatment
unless those debt securities are also convertible into our common stock.
Therefore, the $50 million of subordinated debentures we issued to IFC Capital
Trust I and the debentures that we will be issuing to IFC Capital Trust II will
rank senior to the convertible debentures that we will be issuing to IFC
Capital Trust III.
23
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in or incorporated by reference into this
prospectus constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Irwin intends such forward-looking statements to be covered by the
safe harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and is including this statement for
purposes of invoking these safe harbor provisions. You can identify these
statements from our use of the words "estimate," "project," "believe,"
"intend," "anticipate," "expect," "target" and similar expressions. These
forward-looking statements may include, among other things:
. statements relating to projected growth; anticipated improvements in
earnings, earnings per share, and other financial performance measures;
and management's long term performance goals;
. statements relating to the anticipated effects on results of operations
or financial condition from expected developments or events;
. statements relating to our business and growth strategies, including
potential acquisitions; and
. any other statements which are not historical facts.
Forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause our actual results, performance or
achievements, or industry results, to differ materially from our expectations
of future results, performance or achievements expressed or implied by these
forward-looking statements. In addition, our past results of operations do not
necessarily indicate our future results. We discuss these and other
uncertainties in the "Risk Factors" section of this prospectus beginning on
page 16.
RECENT DEVELOPMENTS
On October 19, 2000, we announced our third quarter earnings for the year.
Our net income for the third quarter of 2000 was $9.1 million or $0.43 per
share. This represents a 7.5% increase in earnings per share compared to net
income of $8.7 million, or $0.40 per share, in the third quarter of 1999. For
the nine months ended September 30, 2000, net income was $26.1 million, or
$1.23 per share, which is an increase of 7.0% over the first nine months of
1999. Our total net revenues in the third quarter of 2000 were $79.2 million,
compared to $65.1 million in the third quarter of 1999, an increase of 21.6%.
Return on average equity in the third quarter was 21.0% and our return on
average assets was 1.67%. Our assets totaled $2.2 billion at September 30,
2000, a $0.5 billion increase from a year earlier. The increase in assets is
primarily attributable to a 67.0% increase in the amount of commercial loans
and leases in our portfolio.
Nonperforming assets (including other real estate owned of $3.0 million)
were $7.9 million or 0.37% of total assets at September 30, 2000, down from
$8.9 million or 0.53% of total assets a year earlier. Our allowance for loan
losses totaled $12.6 million at September 30, 2000, compared with $8.8 million
a year earlier. The ratio of allowance for loan losses to total loans at
September 30, 2000, declined to 1.13%, compared to 1.32% at September 30, 1999.
The ratio reflects the growth of our loan and lease portfolios. The ratio of
allowance for loan losses to nonperforming loans was 253% at quarter-end.
We had $181.1 million in shareholders' equity as of September 30, 2000, an
increase of 14.1% compared to September 30, 1999. Shareholders' equity as of
September 30, 2000, was $8.55 per common share, a year-over-year increase of
15.2%. Our Tier 1 leverage ratio and total risk-based capital ratios were 12.0%
and 11.1%, respectively, compared to 12.6% and 14.3% a year earlier.
24
<PAGE>
Our third quarter was marked by continued strong performance in our home
equity line of business. We earned $4.0 million in this line of business ($6.7
million pre-tax) in the third quarter, compared with $2.6 million pre-tax for
the year earlier quarter, a 162.6% pre-tax improvement. Home equity loan and
line of credit originations totaled $193.0 million in the quarter, an increase
of $95.4 million or 97.8% compared to the 1999 quarter. Our owned portfolio of
home equity loans and lines of credit increased 42.7% to $1.1 billion at
quarter-end, from $0.7 billion at September 30, 1999. This improvement in net
income was primarily the result of a $7.6 million or 187.1% increase in gain on
sale revenues. This increase resulted from a 179.1% increase in the principal
balance of loans we delivered to the secondary market during the third quarter
of 2000 compared to the prior year period. Origination fees and points
increased $3.1 million, or 203.1%, to $4.7 million for the 2000 third quarter.
In addition, we announced completion of three separate transactions which we
feel are significant to the continued development of our home equity lending
growth strategy.
. We completed our 11th asset-backed transaction in the home equity line of
business with the sale of approximately $350 million of asset-backed AAA-
rated bonds and a AAA-rated interest-only strip. The bonds are to be
collateralized by a pool of home equity loans and lines of credit that
include loans with 100% and 125% combined loan-to-value ratios. We
delivered a portion of the collateral during the third quarter and expect
to complete the sale of additional loans to the securitization vehicle
over the next six months.
. We sold 38% of the residual interest that we had retained in home equity
loans that we previously securitized in December 1999. The unpaid
principal balance of loans relating to the residual interest sold was
approximately $125 million. As we had achieved with two previous residual
sales, we sold the residual interest for a price equal to the carrying
value of the instrument reflected on our balance sheet. The transaction
established a market value for the residual consistent with our valuation
assumptions.
. Early in the fourth quarter, we acquired the residual interest, servicing
rights and related whole loans of an approximately $400 million pool of
home equity lines of credit previously securitized by another lender. The
collateral supporting the pool is comprised of seasoned lines of credit
that primarily have loan-to-value ratios of not more than 100% and which
are similar in credit quality and yield to the lines of credit we
originate in our home equity line of business. Based on our
interpretation of recently proposed federal banking regulations, we
believe the acquisition of the interest-only strip would qualify as a
purchased residual interest for purposes of regulatory capital treatment.
In our mortgage banking line of business, net income for the third quarter
was $3.7 million, a decrease of $2.8 million or 42.9% compared to third quarter
1999 earnings of $6.5 million. The decline principally reflected decreased loan
origination fees, lower interest income due to reduced volume resulting from
higher interest rates, and lower absorption of fixed costs.
Mortgage loan originations during the quarter totaled $1.0 billion, down
$0.3 billion or 24.5% from the 1999 third quarter. Refinanced loans accounted
for 13.2% of originations in the third quarter, compared to 15.9% a year
earlier. Our owned mortgage servicing portfolio decreased 4.8% year-over-year
to $10.0 billion at September 30, 2000, reflecting our decision to sell
selected portions of the portfolio to take advantage of increasing values as
interest rates have risen. The capitalized value of our servicing portfolio
increased 4.2% to $133.3 million at September 30, 2000, compared to $127.9
million a year earlier, primarily reflecting positive valuation adjustments
resulting from slower prepayment speeds. Based on recent market sales, the
total economic value of our servicing portfolio at quarter end was $203.0
million, which was $69.7 million greater than the capitalized value.
Net income in our commercial banking line of business was $1.8 million in
the third quarter, a decrease of $0.1 million or 4.3% from a year earlier. The
decrease is primarily the result of increased expenses related to our expansion
activities. During the third quarter, the bank successfully opened new markets
in Louisville and
25
<PAGE>
Salt Lake City and hired personnel to start up markets in Las Vegas and
Phoenix, continuing the progress of our strategy to identify metropolitan
markets which have undergone disruptive commercial bank merger and acquisition
activity and to staff the markets with experienced, senior lending officers.
The amount of the increases in compensation, office support, and related
capital expense charges were in line with management's expectations.
The commercial loan portfolio of $974.5 million increased $324.2 million, or
49.8% year-over-year. Our net interest margin in the commercial banking line of
business was 4.40%, compared to 4.89% a year earlier, reflecting higher cost
sources of funds. Net charge-offs were $103,000 during the third quarter,
compared to $121,000 during the third quarter of 1999, and commercial loans
past due 30 days or more comprised 0.29% of total loans at September 30, 2000,
compared to 1.03% of total loans a year earlier.
In our leasing line of business, we incurred a pre-tax loss of $0.6 million
during the third quarter. This loss was in line with management's expectations,
reflecting the start-up phase of our leasing business. The leasing line of
business originated $27.8 million in leases in the quarter and had a portfolio
at September 30, 2000 of $128.2 million, including $60.8 million acquired as
part of the Onset acquisition.
Irwin Ventures lost $0.2 million during the three months ended September 30,
2000, reflecting operating expenses. There were no valuation adjustments in the
venture capital investment portfolio during the quarter. The venture investment
portfolio currently has a $12.9 million carrying value and a $4.1 million cost
basis.
USE OF PROCEEDS
The trusts will invest all of the proceeds from the sale of the preferred
securities and the convertible preferred securities in the corresponding
debentures and convertible debentures. We anticipate that the net proceeds to
Irwin from the sale of the debentures and convertible debentures will be
approximately $ million after deduction of offering expenses, estimated to
be $705,000, and deduction of underwriting commissions.
The purpose of the offering is to provide capital to fund continued growth
at our subsidiaries and for general corporate purposes. We expect to contribute
the majority of the net proceeds to Irwin Union Bank to fund loans, including
commercial loans, home equity loans and leases from our various lines of
business.
26
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is quoted on the Nasdaq National Market under the symbol
"IRWN." The following table sets forth the high and low sales prices and cash
dividends declared per share of common stock for the periods indicated. All
information has been adjusted for stock splits.
<TABLE>
<CAPTION>
Price Range
--------------- Dividends
High Low Declared
------- ------- --------- ---
<S> <C> <C> <C> <C>
Year Ended December 31, 1998
First quarter................................... $28.25 $19.50 $0.04
Second quarter.................................. 30.00 25.125 0.04
Third quarter................................... 37.00 20.50 0.04
Fourth quarter.................................. 31.00 20.125 0.04
Year Ended December 31, 1999
First quarter................................... $28.875 $20.00 $0.05
Second quarter.................................. 25.50 17.50 0.05
Third quarter................................... 25.00 19.33 0.05
Fourth quarter.................................. 22.875 17.00 0.05
Year Ending December 31, 2000
First quarter................................... $18.313 $13.563 $0.06
Second quarter.................................. 18.50 14.375 0.06
Third quarter................................... 17.00 13.438 0.06
Fourth quarter (through October 25)............. 16.50 14.375 --
</TABLE>
As of October 10, 2000, there were approximately 1,677 holders of record of
our common stock. The last reported sales price of the common stock on Nasdaq
on October 25, 2000, was $14.75.
Holders of our common stock will be entitled to receive any cash dividends
as may be declared by our board of directors. The declaration and payment of
future dividends to holders of our common stock will be at the discretion of
our board of directors and will depend upon our earnings and financial
condition, the capital requirements of our subsidiaries, regulatory conditions
and considerations and such other factors as our board of directors may deem
relevant.
As a holding company, Irwin is ultimately dependent upon its subsidiaries to
provide funding for its operating expenses, debt service and dividends. Various
banking laws applicable to our banking subsidiary limit the payment of
dividends, management fees and other distributions by the bank to us and may
therefore limit our ability to make dividend payments.
27
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at September 30, 2000, on
a historical basis and as adjusted for the offering of the preferred securities
and the convertible preferred securities (assuming no exercise of the
underwriters' over-allotment options) and the application of the estimated net
proceeds from the corresponding sale of the debentures and the convertible
debentures to the applicable trust as if such sale had been consummated on
September 30, 2000. This data should be read in conjunction with the
consolidated financial statements and notes thereto incorporated by reference
into this prospectus from our Annual Report on Form 10-K for the fiscal year
ended December 31, 1999. See "Documents Incorporated by Reference" on page 97.
<TABLE>
<CAPTION>
September 30,
2000
------------------
As
Actual Adjusted
-------- --------
(dollars in
thousands)
<S> <C> <C>
Long-term debt(/1/)........................................ $ 30,000 $ 30,000
======== ========
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust(/2/)....................... $ 50,000 $ 95,000
======== ========
Company-obligated mandatorily redeemable convertible
preferred securities of subsidiary trust(/2/)............. $ -- $ 45,000
======== ========
Shareholders' Equity:
Preferred stock, no par value; 4,000,000 shares
authorized; an aggregate of 333,330 shares designated
Convertible Preferred Stock, Series A, B, C or D and
an aggregate of 96,336 shares issued and outstanding of
Series A, B and C....................................... $ 1,386 $ 1,386
Common stock, no par value; 40,000,000 shares authorized;
23,402,080 shares issued, including 2,397,764 shares in
treasury................................................ 29,965 29,965
Additional paid-in capital............................... 4,311 4,311
Accumulated comprehensive income......................... (160) (160)
Retained earnings........................................ 193,440 193,440
Less treasury stock, at cost............................. (47,877) (47,877)
-------- --------
Total shareholders' equity.............................. $181,065 $181,065
======== ========
Capital Ratios(/3/):
Leverage ratio(/4/)(/5/)................................. 12.01% 12.55%
Tier 1 capital ratio(/5/)................................ 9.40% 9.83%
Total risk based capital ratio(/5/)...................... 11.15% 14.66%
Average shareholders' equity to average assets........... 8.71% 8.71%
</TABLE>
--------
(1) Our long-term debt is shown on our balance sheet as of September 30, 2000
net of capitalized issuance costs of $404,000.
(2) Our outstanding preferred securities are shown on our balance sheet as of
September 30, 2000 net of capitalized issuance costs of $1,875,000; as
adjusted, the preferred securities and convertible preferred securities to
be issued in this offering will be shown on our balance sheet net of
issuance costs, estimated to be $4,080,000 in total.
(3) The capital ratios, as adjusted, are computed including the estimated net
proceeds from the sale of the preferred securities, in a manner consistent
with Federal Reserve regulations.
(4) The leverage ratio is core capital divided by average quarterly assets,
after deducting intangible assets and net deferred tax assets in excess of
regulatory maximum limits.
(5) The preferred securities and the convertible preferred securities have been
structured to qualify as Tier 1 capital. However, in calculating the amount
of Tier 1 qualifying capital, the preferred securities and the convertible
preferred securities, together with any other trust preferred securities or
cumulative preferred stock of Irwin that may be outstanding in the future,
can only be included up to the amount constituting 25% of total Tier 1
capital. As adjusted for this offering, Irwin's Tier 1 capital as of
September 30, 2000, would have been approximately $240 million, of which
$10 million would have been attributable to the preferred securities and
the convertible preferred securities offered by this prospectus.
28
<PAGE>
ACCOUNTING AND REGULATORY TREATMENT
The trusts will be treated, for financial reporting purposes, as our
subsidiaries and, accordingly, the accounts of each trust will be included in
our consolidated financial statements. The preferred securities and the
convertible preferred securities will be presented as a separate line item in
our consolidated balance sheet under the caption "Company-obligated mandatorily
redeemable (convertible) preferred securities of subsidiary trust," or other
similar caption. In addition, appropriate disclosures about the preferred
securities the convertible preferred securities, the guarantees, the debentures
and the convertible debentures will be included in the notes to our
consolidated financial statements. For financial reporting purposes, we will
record distributions payable on the preferred securities and the convertible
preferred securities in our consolidated statements of income.
Our future reports filed under the Securities Exchange Act of 1934 will
include a footnote to the audited consolidated financial statements stating
that:
. each trust is wholly-owned;
. the sole assets of each trust are the debentures or the convertible
debentures, as the case may be, specifying the debentures' and the
convertible debentures' outstanding principal amount, interest rate and
maturity date; and
. our obligations described in this prospectus, in the aggregate,
constitute a full, irrevocable and unconditional guarantee on a
subordinated basis by us of the obligations of the trusts under the
preferred securities and the convertible preferred securities.
Under accounting rules of the SEC, we are not required to include separate
financial statements of the trusts in this prospectus because we will own all
of the voting securities of each trust, each trust has no independent
operations and we guarantee the payments on the preferred securities and the
convertible preferred securities to the extent described in this prospectus.
29
<PAGE>
THE PREFERRED SECURITIES OF IFC CAPITAL TRUST II
Description of the Trust
IFC Capital Trust II is a statutory business trust formed pursuant to the
Delaware Business Trust Act under a trust agreement executed by us, as sponsor
for the trust, and the trustees, and a certificate of trust has been filed with
the Delaware Secretary of State. The trust agreement will be amended and
restated in its entirety in the form filed as an exhibit to the registration
statement of which this prospectus is a part, as of the date the preferred
securities are initially issued. The trust agreement will be qualified under
the Trust Indenture Act of 1939.
The holders of the preferred securities issued pursuant to the offering
described in this prospectus will own all of the issued and outstanding
preferred securities of the trust which have certain prior rights over the
other securities of the trust in certain circumstances as specified in this
prospectus. We will not initially own any of the preferred securities. We will
acquire common securities in an amount equal to at least 3% of the total
capital of the trust and will initially own, directly or indirectly, all of the
issued and outstanding common securities. The common securities, together with
the preferred securities, are called the trust securities.
The trust exists exclusively for the purposes of:
. issuing the preferred securities to the public for cash;
. issuing its common securities to us in exchange for our capitalization of
the trust;
. investing the proceeds from the sale of the trust securities in an
equivalent amount of debentures; and
. engaging in other activities that are incidental to those listed above,
such as receiving payments on the debentures and making distributions to
security holders, furnishing notices and other administrative tasks.
The rights of the holders of the trust securities are as set forth in the
trust agreement, the Delaware Business Trust Act and the Trust Indenture Act.
The trust agreement does not permit the trust to borrow money or make any
investment other than in the debentures. Other than with respect to the trust
securities, Irwin has agreed to pay for all debts and obligations and all costs
and expenses of the trust, including the fees and expenses of the trustees and
any income taxes, duties and other governmental charges, and all costs and
expenses related to these charges, to which the trust may become subject,
except for United States withholding taxes that are properly withheld.
The number of trustees of the trust will initially be five. Three of the
trustees will be persons who are employees or officers of or who are affiliated
with Irwin. They are the administrative trustees. The fourth trustee will be an
entity that maintains its principal place of business in the State of Delaware.
It is the Delaware trustee. Initially, Wilmington Trust Company, a Delaware
banking corporation, will act as Delaware trustee. The fifth trustee, called
the property trustee, will also initially be Wilmington Trust Company. The
property trustee is the institutional trustee under the trust agreement and
acts as the indenture trustee called for under the applicable provisions of the
Trust Indenture Act. Also for purposes of compliance with the Trust Indenture
Act, Wilmington Trust Company will act as guarantee trustee and indenture
trustee under the guarantee agreement and the indenture. We, as holder of all
of the common securities, will have the right to appoint or remove any trustee
unless an event of default under the indenture has occurred and is continuing,
in which case only the holders of the preferred securities may remove the
Delaware trustee or the property trustee. The trust has a term of approximately
31 years but may terminate earlier as provided in the trust agreement.
The property trustee will hold the debentures for the benefit of the holders
of the trust securities and will have the power to exercise all rights, powers
and privileges under the indenture as the holder of the debentures. In
addition, the property trustee will maintain exclusive control of a segregated
noninterest-bearing "payment
30
<PAGE>
account" established with Wilmington Trust Company to hold all payments made on
the debentures for the benefit of the holders of the trust securities. The
property trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the trust securities
out of funds from the payment account. The guarantee trustee will hold the
guarantee for the benefit of the holders of the preferred securities. We will
pay all fees and expenses related to the trust and the offering of the
preferred securities, including the fees and expenses of the trustees.
Description of the Preferred Securities
The preferred securities will be issued pursuant to the trust agreement. For
more information about the trust agreement, see "--Description of the Trust"
beginning on page 30. Wilmington Trust Company will act as property trustee for
the preferred securities under the trust agreement for purposes of complying
with the provisions of the Trust Indenture Act. The terms of the preferred
securities will include those stated in the trust agreement and those made part
of the trust agreement by the Trust Indenture Act.
General
The trust agreement authorizes the administrative trustees, on behalf of the
trust, to issue the trust securities, which are comprised of the preferred
securities to be sold to the public and the common securities. We will own all
of the common securities issued by the trust. The trust is not permitted to
issue any securities other than the trust securities or incur any other
indebtedness.
The preferred securities will represent preferred undivided beneficial
interests in the assets of the trust, and the holders of the preferred
securities will be entitled to a preference over the common securities upon an
event of default with respect to distributions and amounts payable on
redemption or liquidation. The preferred securities will rank equally, and
payments on the preferred securities will be made proportionally, with the
common securities, except as described under "--Subordination of Common
Securities" on page 35.
The property trustee will hold legal title to the debentures in trust for
the benefit of the holders of the trust securities. We will guarantee the
payment of distributions out of money held by the trust, and payments upon
redemption of the preferred securities or liquidation of the trust, to the
extent described under "Description of the Guarantees" on page 79. The
guarantee agreement does not cover the payment of any distribution or the
liquidation amount when the trust does not have sufficient funds available to
make these payments.
Distributions
Source of Distributions. The funds of the trust available for distribution
to holders of the preferred securities will be limited to payments made under
the debentures, which the trust will purchase with the proceeds from the sale
of the trust securities. Distributions will be paid through the property
trustee, which will hold the amounts received from our interest payments on the
debentures in the payment account for the benefit of the holders of the trust
securities. If we do not make interest payments on the debentures, the property
trustee will not have funds available to pay distributions on the preferred
securities.
Payment of Distributions. Distributions on the preferred securities will be
payable at the annual rate of % of the $25 stated liquidation amount,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, to the holders of the preferred securities on the relevant record dates.
So long as the preferred securities are represented by a global security, as
described below, the record date will be the business day immediately preceding
the relevant distribution date. The first distribution date for the preferred
securities will be December 31, 2000.
Distributions will accumulate from the date of issuance, will be cumulative
and will be computed on the basis of a 360-day year of twelve 30-day months. If
the distribution date is not a business day, then payment of
31
<PAGE>
the distributions will be made on the next day that is a business day, without
any additional interest or other payment for the delay. However, if the next
business day is in the next calendar year, payment of the distribution will be
made on the business day immediately preceding the scheduled distribution date.
When we use the term "business day" we mean any day other than a Saturday, a
Sunday, a day on which banking institutions in New York, New York are
authorized or required by law, regulation or executive order to remain closed
or a day on which the corporate trust office of the property trustee or the
indenture trustee is closed for business.
Extension Period. As long as no event of default under the indenture has
occurred and is continuing, we have the right to defer the payment of interest
on the debentures at any time for a period not exceeding 20 consecutive
quarters. We refer to this period of deferral as an "extension period." No
extension period may extend beyond September 30, 2030 or end on a date other
than an interest payment date, which dates are the same as the distribution
dates. If we defer the payment of interest, quarterly distributions on the
preferred securities will also be deferred during any such extension period.
Any deferred distributions under the preferred securities will accumulate
additional amounts at the annual rate of %, compounded quarterly from the
relevant distribution date. The term "distributions" as used in this prospectus
includes those accumulated amounts.
During an extension period, we may not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock (other than stock dividends, non-cash dividends in connection with
the implementation of a shareholder rights plan, purchases of common
stock in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock) or allow any of our subsidiaries to do the same with
respect to their capital stock (other than the payment of dividends or
distributions to us);
. make any payment of principal, interest or premium on or repay,
repurchase or redeem any debt securities that rank equally with
(including the debentures issued to our other affiliated Delaware
trusts), or junior in interest to, the debentures or allow any of our
subsidiaries to do the same;
. make any guarantee payments with respect to any other guarantee by us of
any other debt securities of any of our subsidiaries if the guarantee
ranks equally with or junior to the debentures (other than payments under
the guarantee for the preferred securities); or
. redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
After the termination of any extension period and the payment of all amounts
due, we may elect to begin a new extension period, subject to the above
requirements.
We do not currently intend to exercise our right to defer distributions on
the preferred securities by deferring the payment of interest on the
debentures.
Redemption or Exchange
General. Subject to the prior approval of the Federal Reserve, if required,
we will have the right to redeem the debentures:
.in whole at any time, or in part from time to time, on or after
September 30, 2005;
. at any time, in whole, within 180 days following the occurrence of a
Tax Event, an Investment Company Event or a Capital Treatment Event,
which terms we define below; or
32
<PAGE>
. at any time, and from time to time, to the extent of any preferred
securities we purchase, plus a proportionate amount of the common
securities we hold.
Mandatory Redemption. Upon our repayment or redemption, in whole or in part,
of any debentures, whether on September 30, 2030 or earlier, the property
trustee will apply the proceeds to redeem the same amount of the trust
securities, upon not less than 30 days' nor more than 60 days' notice, at the
redemption price. The redemption price will equal 100% of the aggregate
liquidation amount of the trust securities plus accumulated but unpaid
distributions to the date of redemption. If less than all of the debentures are
to be repaid or redeemed on a date of redemption, then the proceeds from such
repayment or redemption will be allocated to redemption of preferred securities
and common securities proportionately.
Distribution of Debentures in Exchange for Preferred Securities. Upon prior
approval of the Federal Reserve, if required, we will have the right at any
time to dissolve, wind-up or terminate the trust and, after satisfaction of the
liabilities of creditors of the trust as provided by applicable law, including,
without limitation, amounts due and owing the trustees of the trust, cause the
debentures to be distributed directly to the holders of trust securities in
liquidation of the trust. See "--Liquidation Distribution Upon Termination" on
page 36.
After the liquidation date fixed for any distribution of debentures in
exchange for preferred securities:
. those trust securities will no longer be deemed to be outstanding;
. certificates representing debentures in a principal amount equal to the
liquidation amount of those preferred securities will be issued in
exchange for the preferred securities;
. we will use our best efforts to list the debentures on the Nasdaq
National Market or a national exchange;
. any certificates representing trust securities that are not surrendered
for exchange will be deemed to represent debentures with a principal
amount equal to the liquidation amount of those preferred securities,
accruing interest at the rate provided for in the debentures from the
last distribution date on the preferred securities;
. all rights of the trust securityholders other than the right to receive
debentures upon surrender of a certificate representing trust securities
will terminate.
We cannot assure you that the market prices for the preferred securities or
the debentures that may be distributed if a dissolution and liquidation of the
trust were to occur would be favorable. The preferred securities that an
investor may purchase, or the debentures that an investor may receive on
dissolution and liquidation of the trust, may trade at a discount to the price
that the investor paid to purchase the preferred securities.
Redemption upon a Tax Event, Investment Company Event or Capital Treatment
Event. If a Tax Event, an Investment Company Event or a Capital Treatment Event
occurs, we will have the right to redeem the debentures in whole, but not in
part, and thereby cause a mandatory redemption of all of the trust securities
at the redemption price described above. If one of these events occurs and we
do not elect to redeem the debentures, or to dissolve the trust and cause the
debentures to be distributed to holders of the trust securities, then the
preferred securities will remain outstanding and additional interest may be
payable on the debentures.
"Tax Event" means the receipt by the trust and us of an opinion of counsel
experienced in such matters stating that, as a result of any change or
prospective change in the laws or regulations of the United States or any
political subdivision or taxing authority of the United States, or as a result
of any official administrative
33
<PAGE>
pronouncement or judicial decision interpreting or applying the tax laws or
regulations, there is more than an insubstantial risk that:
. interest payable by us on the debentures is not, or within 90 days of the
date of the opinion will not be, deductible by us, in whole or in part,
for federal income tax purposes;
. the trust is, or will be within 90 days after the date of the opinion,
subject to federal income tax with respect to income received or accrued
on the debentures; or
. the trust is, or will be within 90 days after the date of opinion,
subject to more than an immaterial amount of other taxes, duties,
assessments or other governmental charges.
"Investment Company Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that the trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act, as a result of a change in law or regulation
or a change in interpretation or application of law or regulation.
"Capital Treatment Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that there is more
than an insubstantial risk of impairment of our ability to treat the preferred
securities as Tier 1 capital for purposes of the current capital adequacy
guidelines of the Federal Reserve, as a result of any amendment to any laws or
any regulations.
For all of the events described above, we or the trust must request and
receive an opinion with regard to the event within a reasonable period of time
after we become aware of the possible occurrence of an event of this kind.
Redemption of Debentures in Exchange for Preferred Securities We Purchase.
Upon prior approval of the Federal Reserve, if required, we will also have the
right at any time, and from time to time, to redeem debentures in exchange for
any preferred securities we may have purchased in the market. If we elect to
surrender any preferred securities beneficially owned by us in exchange for
redemption of a like amount of debentures, we will also surrender a
proportionate amount of common securities in exchange for debentures. Preferred
securities owned by other holders will not be called for redemption at any time
when we elect to exchange trust securities we own to redeem debentures.
The common securities we surrender will be in the same proportion to the
preferred securities we surrender as is the ratio of common securities
purchased by us to the preferred securities issued by the trust. In exchange
for the trust securities surrendered by us, the property trustee will cause to
be released to us for cancellation debentures with a principal amount equal to
the liquidation amount of the trust securities, plus any accumulated but unpaid
distributions, if any, then held by the property trustee allocable to those
trust securities. After the date of redemption involving an exchange by us, the
trust securities we surrender will no longer be deemed outstanding and the
debentures redeemed in exchange will be cancelled.
Redemption Procedures
Preferred securities will be redeemed at the redemption price with the
applicable proceeds from our contemporaneous redemption of the debentures.
Redemptions of the preferred securities will be made, and the redemption price
will be payable, on each redemption date only to the extent that the trust has
funds available for the payment of the redemption price.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the date of redemption to each holder of trust securities to be
redeemed at its registered address. Unless we default in payment of the
redemption price on the debentures, interest will cease to accumulate on the
debentures called for redemption on and after the date of redemption.
34
<PAGE>
If the trust gives notice of redemption of its trust securities, then the
property trustee, to the extent funds are available, will irrevocably deposit
with the depositary for the trust securities funds sufficient to pay the
aggregate redemption price and will give the depositary for the trust
securities irrevocable instructions and authority to pay the redemption price
to the holders of the trust securities. If the preferred securities are no
longer in book-entry only form, the property trustee, to the extent funds are
available, will deposit with the designated paying agent for such preferred
securities funds sufficient to pay the aggregate redemption price and will give
the paying agent irrevocable instructions and authority to pay the redemption
price to the holders upon surrender of their certificates evidencing the
preferred securities. Notwithstanding the foregoing, distributions payable on
or prior to the date of redemption for any trust securities called for
redemption will be payable to the holders of the trust securities on the
relevant record dates for the related distribution dates.
If notice of redemption has been given and we have deposited funds as
required, then on the date of the deposit all rights of the holders of the
trust securities called for redemption will cease, except the right to receive
the redemption price, but without interest on such redemption price after the
date of redemption. The trust securities will also cease to be outstanding on
the date of the deposit. If any date fixed for redemption of trust securities
is not a business day, then payment of the redemption price payable on that
date will be made on the next day that is a business day without any additional
interest or other payment in respect of the delay. However, if the next
business day is in the next succeeding calendar year, payment of the interest
will be made on the immediately preceding business day.
If payment of the redemption price in respect of trust securities called for
redemption is improperly withheld or refused and not paid by the trust, or by
us pursuant to the guarantee, distributions on the trust securities will
continue to accumulate at the applicable rate from the date of redemption
originally established by the trust for the trust securities to the date the
redemption price is actually paid. In this case, the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
redemption price.
Payment of the redemption price on the preferred securities and any
distribution of debentures to holders of preferred securities will be made to
the applicable recordholders as they appear on the register for the preferred
securities on the relevant record date. As long as the preferred securities are
represented by a global security, the record date will be the business day
immediately preceding the date of redemption or liquidation date, as
applicable.
If less than all of the trust securities are to be redeemed, then the
aggregate liquidation amount of the trust securities to be redeemed will be
allocated proportionately to those trust securities based upon the relative
liquidation amounts. The particular preferred securities to be redeemed will be
selected by the property trustee from the outstanding preferred securities not
previously called for redemption by a method the property trustee deems fair
and appropriate. This method may provide for the redemption of portions equal
to $25 or an integral multiple of $25 of the liquidation amount of the
preferred securities. The property trustee will promptly notify the registrar
for the preferred securities in writing of the preferred securities selected
for redemption and, in the case of any preferred securities selected for
partial redemption, the liquidation amount to be redeemed.
Subject to applicable law, and if we are not exercising our right to defer
interest payments on the debentures, we may, at any time, purchase outstanding
preferred securities.
Subordination of Common Securities
Payment of distributions on, and the redemption price of, the preferred
securities and common securities will be made based on the liquidation amount
of these securities. However, if an event of default under the indenture has
occurred and is continuing, no distributions on or redemption of the common
securities may be made unless payment in full in cash of all accumulated and
unpaid distributions on all of the outstanding preferred securities for all
distribution periods terminating on or before that time, or in the case of
payment of the redemption price, payment of the full amount of the redemption
price on all of the outstanding preferred
35
<PAGE>
securities then called for redemption, has been made or provided for. All funds
available to the property trustee will first be applied to the payment in full
in cash of all distributions on, or the redemption price of, the preferred
securities then due and payable.
In the case of the occurrence and continuance of any event of default under
the trust agreement resulting from an event of default under the indenture, we,
as holder of the common securities, will be deemed to have waived any right to
act with respect to that event of default under the trust agreement until the
effect of the event of default has been cured, waived or otherwise eliminated.
Until the event of default under the trust agreement has been so cured, waived
or otherwise eliminated, the property trustee will act solely on behalf of the
holders of the preferred securities and not on our behalf, and only the holders
of the preferred securities will have the right to direct the property trustee
to act on their behalf.
Liquidation Distribution Upon Termination
We will have the right at any time to dissolve, wind-up or terminate the
trust and cause debentures to be distributed to the holders of the preferred
securities. This right is subject, however, to us receiving approval of the
Federal Reserve, if required.
In addition, the trust will automatically terminate upon expiration of its
term and will terminate earlier on the first to occur of:
. our bankruptcy, dissolution or liquidation;
. the distribution of a like amount of the debentures to the holders of
trust securities, if we have given written direction to the property
trustee to terminate the trust;
. redemption of all of the preferred securities as described under "--
Redemption or Exchange--Mandatory Redemption" on page 33; or
. the entry of a court order for the dissolution of the trust.
With the exception of a redemption as described under "--Redemption or
Exchange--Mandatory Redemption" on page 33, if an early termination of the
trust occurs, the trust will be liquidated by the administrative trustees as
expeditiously as they determine to be possible. After satisfaction of
liabilities to creditors of the trust as provided by applicable law, the
trustees will distribute to the holders of trust securities, debentures:
. in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of the trust securities;
. with an interest rate identical to the distribution rate on the trust
securities; and
. with accrued and unpaid interest equal to accumulated and unpaid
distributions on the trust securities.
However, if the property trustee determines that the distribution is not
practical, then the holders of trust securities will be entitled to receive,
instead of debentures, a proportionate amount of the liquidation distribution.
The liquidation distribution will be the amount equal to the aggregate of the
liquidation amount plus accumulated and unpaid distributions to the date of
payment. If the liquidation distribution can be paid only in part because the
trust has insufficient assets available to pay in full the aggregate
liquidation distribution, then the amounts payable directly by the trust on the
trust securities will be paid on a proportional basis, based on liquidation
amounts, to us, as the holder of the common securities, and to the holders of
the preferred securities. However, if an event of default under the indenture
has occurred and is continuing, the
36
<PAGE>
preferred securities will have a priority over the common securities. See "--
Subordination of Common Securities."
Under current United States federal income tax law and interpretations and
assuming that the trust is treated as a grantor trust, as is expected, a
distribution of the debentures should not be a taxable event to holders of the
preferred securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or another circumstance, however, the distribution
could be a taxable event to holders of the preferred securities. If we do not
elect to redeem the debentures prior to maturity or to liquidate the trust and
distribute the debentures to holders of the preferred securities, the preferred
securities will remain outstanding until the repayment of the debentures. See
"Federal Income Tax Consequences--Receipt of Debentures or Cash Upon
Liquidation of the Trust" on page 89 for more information regarding a taxable
distribution.
If we elect to dissolve the trust and thus cause debentures to be
distributed to holders of the trust securities in liquidation of the trust, we
will continue to have the right to shorten the maturity of the debentures.
Liquidation Value
The amount of the liquidation distribution payable on the preferred
securities in the event of any liquidation of the trust is $25 per preferred
security plus accumulated and unpaid distributions to the date of payment,
which may be in the form of a distribution of debentures having a liquidation
value and accrued interest of an equal amount.
Events of Default; Notice
Any one of the following events constitutes an event of default under the
trust agreement with respect to the preferred securities:
. the occurrence of an event of default under the indenture;
. a default by the trust in the payment of any distribution when it becomes
due and payable, and continuation of the default for a period of 30 days;
. a default by the trust in the payment of any redemption price of any of
the trust securities when it becomes due and payable;
. a default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the trust agreement, other than
those defaults covered in the previous two points, and continuation of
the default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the trustee(s) by the holders of at
least 25% in aggregate liquidation amount of the outstanding preferred
securities, a written notice specifying the default or breach and
requiring it to be remedied and stating that the notice is a "Notice of
Default" under the trust agreement; or
. the occurrence of events of bankruptcy or insolvency with respect to the
property trustee and our failure to appoint a successor property trustee
within 60 days.
Within five business days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to the holders of the preferred securities, the
administrative trustees and to us, unless the event of default has been cured
or waived. Irwin and the administrative trustees are required to file annually
with the property trustee a certificate as to whether or not they are in
compliance with all the conditions and covenants applicable to them under the
trust agreement.
37
<PAGE>
If an event of default under the indenture has occurred and is continuing,
the preferred securities will have preference over the common securities upon
termination of the trust. The existence of an event of default under the trust
agreement does not entitle the holders of preferred securities to accelerate
the maturity thereof, unless the event of default is caused by the occurrence
of an event of default under the indenture and both the indenture trustee and
holders of at least 25% in principal amount of the debentures fail to
accelerate the maturity thereof.
Removal of the Trustees
Unless an event of default under the indenture has occurred and is
continuing, we may remove any trustee at any time. If an event of default under
the indenture has occurred and is continuing, only the holders of a majority in
liquidation amount of the outstanding preferred securities may remove the
property trustee or the Delaware trustee. The holders of the preferred
securities have no right to vote to appoint, remove or replace the
administrative trustees. These rights are vested exclusively with us as the
holder of the common securities. No resignation or removal of a trustee and no
appointment of a successor trustee will be effective until the successor
trustee accepts the appointment in accordance with the trust agreement.
Co-Trustees and Separate Property Trustee
Unless an event of default under the indenture has occurred and is
continuing, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the trust property
may at the time be located, we will have the power to appoint at any time or
times, and upon written request of the property trustee will appoint, one or
more persons or entities either (1) to act as a co-trustee, jointly with the
property trustee, of all or any part of the trust property, or (2) to act as
separate trustee of any trust property. In either case these trustees will have
the powers that may be provided in the instrument of appointment, and will have
vested in them any property, title, right or power deemed necessary or
desirable, subject to the provisions of the trust agreement. In case an event
of default under the indenture has occurred and is continuing, the property
trustee alone will have power to make the appointment.
Merger or Consolidation of Trustees
Generally, any person or successor to any of the trustees may be a successor
trustee to any of the trustees, including a successor resulting from a merger
or consolidation. However, any successor trustee must meet all of the
qualifications and eligibility standards to act as a trustee.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. For these purposes, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
in some cases that transaction may be considered to involve a replacement of
the trust, and the conditions set forth below would apply to such transaction.
The trust may, at our request, with the consent of the administrative trustees
and without the consent of the holders of the preferred securities, the
property trustee or the Delaware trustee, undertake a transaction listed above
if the following conditions are met:
. the successor entity either (a) expressly assumes all of the obligations
of the trust with respect to the preferred securities, or (b) substitutes
for the preferred securities other securities having substantially the
same terms as the preferred securities (referred to as "successor
securities") so long as the successor securities rank the same in
priority as the preferred securities with respect to distributions and
payments upon liquidation, redemption and otherwise;
38
<PAGE>
. we appoint a trustee of the successor entity possessing substantially the
same powers and duties as the property trustee in its capacity as the
holder of the debentures;
. the successor securities are listed or traded or will be listed or traded
on any national securities exchange or other organization on which the
preferred securities are then listed, if any;
. the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the preferred securities (including any
successor securities) in any material respect;
. the successor entity has a purpose substantially identical to that of the
trust;
. prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we have received an opinion from
independent counsel that (a) any transaction of this kind does not
adversely affect the rights, preferences and privileges of the holders of
the preferred securities (including any successor securities) in any
material respect, and (b) following the transaction, neither the trust
nor the successor entity will be required to register as an "investment
company" under the Investment Company Act; and
. we own all of the common securities of the successor entity and guarantee
the obligations of the successor entity under the successor securities at
least to the extent provided by the guarantee, the debentures, the trust
agreement and the expense agreement.
Notwithstanding the foregoing, the trust may not, except with the consent of
every holder of the preferred securities, enter into any transaction of this
kind if the transaction would cause the trust or the successor entity not to be
classified as a grantor trust for federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as described below and under "Description of the Guarantees--
Amendments" on page 80 and as otherwise required by the Trust Indenture Act and
the trust agreement, the holders of the preferred securities will have no
voting rights.
The trust agreement may be amended from time to time by us and the trustees,
without the consent of the holders of the preferred securities, in the
following circumstances:
. with respect to acceptance of appointment by a successor trustee;
. to cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under
the trust agreement, as long as the amendment is not inconsistent with
the other provisions of the trust agreement and does not have a material
adverse effect on the interests of any holder of trust securities; or
. to modify, eliminate or add to any provisions of the trust agreement if
necessary to ensure that the trust will be classified for federal income
tax purposes as a grantor trust at all times that any trust securities
are outstanding or to ensure that the trust will not be required to
register as an "investment company" under the Investment Company Act.
With the consent of the holders of a majority of the aggregate liquidation
amount of the outstanding trust securities, we and the trustees may amend the
trust agreement if the trustees receive an opinion of counsel to the effect
that the amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not affect the trust's status as a grantor
trust for federal income tax purposes or the trust's
39
<PAGE>
exemption from status as an "investment company" under the Investment Company
Act. However, without the consent of each holder of trust securities, the trust
agreement may not be amended to (a) change the amount or timing of any
distribution on the trust securities or otherwise adversely affect the amount
of any distribution required to be made in respect of the trust securities as
of a specified date, or (b) restrict the right of a holder of trust securities
to institute suit for the enforcement of the payment on or after that date.
As long as the property trustee holds any debentures, the trustees will not,
without obtaining the prior approval of the holders of a majority in aggregate
liquidation amount of all outstanding preferred securities:
. direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee, or executing any trust or
power conferred on the property trustee with respect to the debentures;
. waive any past default that is waivable under the indenture;
. exercise any right to rescind or annul a declaration that the principal
of all the debentures will be due and payable; or
. consent to any amendment or termination of the indenture or the
debentures, where the property trustee's consent is required. However,
where a consent under the indenture requires the consent of each holder
of the affected debentures, no consent will be given by the property
trustee without the prior consent of each holder of the preferred
securities.
The trustees may not revoke any action previously authorized or approved by a
vote of the holders of the preferred securities except by subsequent vote of
the holders of the preferred securities. The property trustee will notify each
holder of preferred securities of any notice of default with respect to the
debentures. In addition to obtaining the foregoing approvals of the holders of
the preferred securities, prior to taking any of the foregoing actions, the
trustees must obtain an opinion of counsel experienced in these matters to the
effect that the trust will not be classified as an association taxable as a
corporation for federal income tax purposes on account of the action.
Any required approval of holders of trust securities may be given at a
meeting or by written consent. The property trustee will cause a notice of any
meeting at which holders of the trust securities are entitled to vote, or of
any matter upon which action by written consent of the holders is to be taken,
to be given to each holder of record of trust securities.
No vote or consent of the holders of preferred securities will be required
for the trust to redeem and cancel its preferred securities in accordance with
the trust agreement.
Notwithstanding the fact that holders of preferred securities are entitled
to vote or consent under any of the circumstances described above, any of the
preferred securities that are owned by Irwin, the trustees or any affiliate of
Irwin or any trustee, will, for purposes of the vote or consent, be treated as
if they were not outstanding.
Global Preferred Securities
The preferred securities will be represented by one or more global preferred
securities registered in the name of The Depository Trust Company, New York,
New York ("DTC"), or its nominee. A global preferred security is a security
representing interests of more than one beneficial holder. Ownership of
beneficial interests in the global preferred securities will be reflected in
DTC participant account records through DTC's book-entry transfer and
registration system. Participants are brokers, dealers, or others having
accounts with DTC. Indirect beneficial interests of other persons investing in
the preferred securities will be shown on, and transfers
40
<PAGE>
will be effected only through, records maintained by DTC participants. Except
as described below, preferred securities in definitive form will not be issued
in exchange for the global preferred securities.
No global preferred security may be exchanged for preferred securities
registered in the names of persons other than DTC or its nominee unless:
. DTC notifies the indenture trustee that it is unwilling or unable to
continue as a depositary for the global preferred security and we are
unable to locate a qualified successor depositary;
. we execute and deliver to the indenture trustee a written order stating
that we elect to terminate the book-entry system through DTC; or
. there shall have occurred and be continuing an event of default under the
indenture.
Any global preferred security that is exchangeable pursuant to the preceding
sentence will be exchangeable for definitive certificates registered in the
names as DTC directs. It is expected that the instructions will be based upon
directions received by DTC with respect to ownership of beneficial interests in
the global preferred security. If preferred securities are issued in definitive
form, the preferred securities will be in denominations of $25 and integral
multiples of $25 and may be transferred or exchanged at the offices described
below.
Unless and until it is exchanged in whole or in part for the individual
preferred securities represented thereby, a global preferred security may not
be transferred except as a whole by DTC to a nominee of DTC, by a nominee of
DTC to DTC or another nominee of DTC or by DTC or any nominee to a successor
depositary or any nominee of the successor.
Payments on global preferred securities will be made to DTC, as the
depositary for the global preferred securities. If the preferred securities are
issued in definitive form, distributions will be payable by check mailed to the
address of record of the persons entitled to the distribution, and the transfer
of the preferred securities will be registrable, and preferred securities will
be exchangeable for preferred securities of other denominations of a like
aggregate liquidation amount, at the corporate office of the property trustee,
or at the offices of any paying agent or transfer agent appointed by the
administrative trustees. In addition, if the preferred securities are issued in
definitive form, the record dates for payment of distributions will be the 15th
day of the month in which the relevant distribution date occurs. For a
description of the terms of DTC arrangements relating to payments, transfers,
voting rights, redemptions and other notices and other matters, see "Book-Entry
Issuance" on page 83.
Upon the issuance of one or more global preferred securities, and the
deposit of the global preferred security with or on behalf of DTC or its
nominee, DTC or its nominee will credit, on its book-entry registration and
transfer system, the respective aggregate liquidation amounts of the individual
preferred securities represented by the global preferred security to the
designated accounts of persons that participate in the DTC system. These
participant accounts will be designated by the dealers, underwriters or agents
selling the preferred securities. Ownership of beneficial interests in a global
preferred security will be limited to persons or entities having an account
with DTC or who may hold interests through participants. With respect to
interests of any person or entity that is a DTC participant, ownership of
beneficial interests in a global preferred security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee. With respect to persons or entities who hold interests in a
global preferred security through a participant, the interest and any transfer
of the interest will be shown only on the participant's records. The laws of
some states require that certain purchasers of securities take physical
delivery of securities in definitive form. These laws may impair the ability to
transfer beneficial interests in a global preferred security.
So long as DTC or another depositary, or its nominee, is the registered
owner of the global preferred security, the depositary or the nominee, as the
case may be, will be considered the sole owner or holder of the preferred
securities represented by the global preferred security for all purposes under
the trust agreement.
41
<PAGE>
Except as described in this prospectus, owners of beneficial interests in a
global preferred security will not be entitled to have any of the individual
preferred securities represented by the global preferred security registered in
their names, will not receive or be entitled to receive physical delivery of
any the preferred securities in definitive form and will not be considered the
owners or holders of the preferred securities under the trust agreement.
None of us, the property trustee, any paying agent or the securities
registrar for the preferred securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the global preferred security representing
the preferred securities or for maintaining, supervising or reviewing any
records relating to the beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of the
liquidation amount or distributions in respect of a global preferred security,
immediately will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
liquidation amount of the global preferred security as shown on the records of
DTC or its nominee. We also expect that payments by participants to owners of
beneficial interests in the global preferred security held through the
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." The payments will be the responsibility of
the participants.
Payment and Paying Agency
Payments in respect of the preferred securities will be made to DTC, which
will credit the relevant accounts of participants on the applicable
distribution dates, or, if any of the preferred securities are not held by DTC,
the payments will be made by check mailed to the address of the holder as
listed on the register of holders of the preferred securities. The paying agent
for the preferred securities will initially be the property trustee and any co-
paying agent chosen by the property trustee and acceptable to us and the
administrative trustees. The paying agent for the preferred securities may
resign as paying agent upon 30 days' written notice to the administrative
trustees, the property trustee and us. If the property trustee no longer is the
paying agent for the preferred securities, the administrative trustees will
appoint a successor to act as paying agent. The successor must be a bank or
trust company acceptable to us and the property trustee.
Registrar and Transfer Agent
The property trustee will act as the registrar and the transfer agent for
the preferred securities. Registration of transfers of preferred securities
will be effected without charge by or on behalf of the trust, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The trust and its registrar and transfer agent will
not be required to register or cause to be registered the transfer of preferred
securities after they have been called for redemption.
Information Concerning the Property Trustee
The property trustee undertakes to perform only the duties set forth in the
trust agreement. After the occurrence of an event of default that is
continuing, the property trustee must exercise the same degree of care and
skill as a prudent person exercises or uses in the conduct of its own affairs.
The property trustee is under no obligation to exercise any of the powers
vested in it by the trust agreement at the request of any holder of preferred
securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred. If no event of default under
the trust agreement has occurred and is continuing and the property trustee is
required to decide between alternative causes of action, construe ambiguous or
inconsistent provisions in the trust agreement or is unsure of the application
of any provision of the trust agreement, and the matter is not one on which
holders of preferred securities are entitled to vote upon, then the property
trustee
42
<PAGE>
will take the action directed in writing by us. If the property trustee is not
so directed, then it will take the action it deems advisable and in the best
interests of the holders of the trust securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that:
. the trust will not be deemed to be an "investment company" required to be
registered under Investment Company Act;
. the trust will not be classified as an association taxable as a
corporation for federal income tax purposes; and
. the debentures will be treated as indebtedness of Irwin for federal
income tax purposes.
In this regard, we and the administrative trustees are authorized to take any
action not inconsistent with applicable law, the certificate of trust or the
trust agreement, that we and the administrative trustees determine to be
necessary or desirable for these purposes.
The administrative trustees are required to use their best efforts to
maintain the listing of the preferred securities on the Nasdaq National Market
or a national securities exchange, but this requirement will not prevent us
from redeeming all or a portion of the preferred securities in accordance with
the trust agreement.
Holders of the preferred securities have no preemptive or similar rights.
The trust agreement and the trust securities will be governed by Delaware law.
Description of the Debentures
Concurrently with the issuance of the preferred securities, the trust will
invest the proceeds from the sale of the trust securities in the debentures
issued by us. The debentures will be issued as unsecured debt under the
indenture between us and Wilmington Trust Company, as indenture trustee. The
indenture will be qualified under the Trust Indenture Act.
The following discussion is subject to, and is qualified in its entirety by
reference to, the indenture and to the Trust Indenture Act. We urge prospective
investors to read the form of the indenture, which is filed as an exhibit to
the registration statement of which this prospectus forms a part.
General
The debentures will be limited in aggregate principal amount to $46,391,775,
or $53,350,525 if the underwriters' over-allotment option is exercised in full.
This amount represents the sum of the aggregate stated liquidation amounts of
the trust securities. The debentures will bear interest at the annual rate of
% of the principal amount. The interest will be payable quarterly on March
31, June 30, September 30 and December 31 of each year, beginning December 31,
2000, to the person in whose name each debenture is registered at the close of
business on the 15th day of the last month of the calendar quarter. It is
anticipated that, until the liquidation, if any, of the trust, the debentures
will be held in the name of the property trustee in trust for the benefit of
the holders of the trust securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. If any date on which interest is
payable on the debentures is not a business day, then payment
43
<PAGE>
of interest will be made on the next day that is a business day without any
additional interest or other payment in respect of the delay. However, if the
next business day is in the next calendar year, payment of interest will be
made on the immediately preceding business day. Accrued interest that is not
paid on the applicable interest payment date will bear additional interest on
the amount due at the annual rate of %, compounded quarterly.
The debentures will mature on September 30, 2030, the stated maturity date.
We may shorten this date once at any time to any date not earlier than
September 30, 2005, subject to the prior approval of the Federal Reserve, if
required.
We will give notice to the indenture trustee and the holders of the
debentures, no more than 180 days and no less than 30 days prior to the
effectiveness of any change in the stated maturity date. We will not have the
right to redeem the debentures from the trust until after September 30, 2005,
except if (a) a Tax Event, an Investment Company Event or a Capital Treatment
Event, which terms are defined on pages 30 and 31, has occurred, or (b) we
repurchase preferred securities in the market, in which case we can elect to
redeem debentures specifically in exchange for a like amount of preferred
securities owned by us plus a proportionate amount of common securities.
The debentures will be unsecured and will rank junior to all of our senior
and subordinated debt, including indebtedness we may incur in the future.
Because we are a holding company, our right to participate in any distribution
of assets of any of our subsidiaries, upon any subsidiary's liquidation or
reorganization or otherwise, and thus the ability of holders of the debentures
to benefit indirectly from any distribution by a subsidiary, is subject to the
prior claim of creditors of the subsidiary, except to the extent that we may be
recognized as a creditor of the subsidiary. The debentures will, therefore, be
effectively subordinated to all existing and future liabilities of our
subsidiaries, and holders of debentures should look only to our assets for
payment. The indenture does not limit our ability to incur or issue secured or
unsecured senior and junior debt. See "--Subordination."
The indenture does not contain provisions that afford holders of the
debentures protection in the event of a highly leveraged transaction or other
similar transaction involving us, nor does it require us to maintain or achieve
any financial performance levels or to obtain or maintain any credit rating on
the debentures.
Option to Extend Interest Payment Period
As long as no event of default under the indenture has occurred and is
continuing, we have the right under the indenture to defer the payment of
interest on the debentures at any time for a period not exceeding 20
consecutive quarters. However, no extension period may extend beyond the stated
maturity of the debentures or end on a date other than a date interest is
normally due. At the end of an extension period, we must pay all interest then
accrued and unpaid, together with interest thereon at the annual rate of %,
compounded quarterly. During an extension period, interest will continue to
accrue and holders of debentures, or the holders of preferred securities if
they are then outstanding, will be required to accrue and recognize as income
for federal income tax purposes the accrued but unpaid interest amounts in the
year in which such amounts accrued. See "--Interest Payment Period and Original
Issue Discount" on page 88.
During an extension period, we may not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock (other than stock dividends, non-cash dividends in connection with
the implementation of a shareholder rights plan, purchases of common
stock in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock) or allow any of our subsidiaries to do the same with
respect to their capital stock (other than payment of dividends or
distributions to us);
44
<PAGE>
. make or allow any of our subsidiaries to make any payment of principal,
interest or premium on, or repay, repurchase or redeem any debt
securities issued by us that rank equally with or junior to the
debentures;
. make or allow any of our subsidiaries to make any guarantee payments with
respect to any other guarantee by us of any other debt securities of any
of our subsidiaries if the guarantee ranks equally with or junior to the
debentures (other than payments under the guarantee relating to the
preferred securities); or
. redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
Prior to the termination of any extension period, so long as no event of
default under the indenture is continuing, we may further defer the payment of
interest subject to the above stated requirements. Upon the termination of any
extension period and the payment of all amounts then due, we may elect to begin
a new extension period at any time. We do not currently intend to exercise our
right to defer payments of interest on the debentures.
We must give the property trustee, the administrative trustees and the
indenture trustee notice of our election of an extension period at least two
business days prior to the earlier of (a) the next date on which distributions
on the trust securities would have been payable except for the election to
begin an extension period, or (b) the date we are required to give notice of
the record date, or the date the distributions are payable, to the Nasdaq
National Market, or other applicable self-regulatory organization, or to
holders of the preferred securities, but in any event at least one business day
prior to the record date.
Other than as described above, there is no limitation on the number of times
that we may elect to begin an extension period.
Additional Sums to be Paid as a Result of Additional Taxes
If the trust is required to pay any additional taxes, duties, assessments or
other governmental charges as a result of the occurrence of a Tax Event, we
will pay as additional interest on the debentures any amounts which may be
required so that the net amounts received and retained by the trust after
paying any additional taxes, duties, assessments or other governmental charges
will not be less than the amounts the trust would have received had the
additional taxes, duties, assessments or other governmental charges not been
imposed.
Redemption
Subject to prior approval of the Federal Reserve, if required, we may redeem
the debentures prior to maturity:
. on or after September 30, 2005, in whole at any time or in part from time
to time; or
. in whole at any time within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event; or
. at any time, and from time to time, to the extent of any preferred
securities we purchase, plus a proportionate amount of the common
securities we hold.
In each case we will pay a redemption price equal to the accrued and unpaid
interest on the debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount of the redeemed debentures.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of debentures to be redeemed
at its registered address. Redemption of less than all
45
<PAGE>
outstanding debentures must be effected proportionately, by lot or in any other
manner deemed to be fair and appropriate by the indenture trustee. Unless we
default in payment of the redemption price for the debentures, on and after the
redemption date interest will no longer accrue on the debentures or the
portions of the debentures called for redemption.
The debentures will not be subject to any sinking fund.
Distribution Upon Liquidation
As described under "--Liquidation Distribution Upon Termination" on page 36,
under certain circumstances and with the Federal Reserve's approval, debentures
may be distributed to the holders of the trust securities in liquidation of the
trust after satisfaction of liabilities to creditors of the trust. If this
occurs, we will use our best efforts to list the debentures on the Nasdaq
National Market or other stock exchange or national quotation system on which
the preferred securities are then listed, if any. There can be no assurance as
to the market price of any debentures that may be distributed to the holders of
preferred securities.
Restrictions on Payments
We are restricted from making certain payments (as described below) if we
have chosen to defer payment of interest on the debentures, if an event of
default has occurred and is continuing under the indenture, or if we are in
default with respect to our obligations under the guarantee.
If any of these events occur, we will not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock (other than stock dividends, non-cash dividends in
connection with the implementation of a shareholder rights plan,
purchases of common stock in connection with employee benefit plans or in
connection with the reclassification of any class of our capital stock
into another class of capital stock) or allow any of our subsidiaries to
do the same with respect to their capital stock (other than payment of
dividends or distributions to us);
. make or allow any of our subsidiaries to make any payment of principal,
interest or premium on, or repay or repurchase or redeem any of our debt
securities that rank equally with or junior to the debentures;
. make or allow any of our subsidiaries to make any guarantee payments with
respect to any guarantee by us of the debt securities of any of our
subsidiaries if the guarantee ranks equally with or junior to the
debentures (other than payments under the guarantee relating to the
preferred securities); or
. redeem, purchase or acquire less than all of the debentures or any of the
preferred securities.
Subordination
The debentures are subordinated and junior in right of payment to all of our
senior and subordinated debt, as defined below. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up or reorganization of Irwin, whether voluntary or involuntary in bankruptcy,
insolvency, receivership or other proceedings in connection with any insolvency
or bankruptcy proceedings, the holders of our senior and subordinated debt will
first be entitled to receive payment in full of principal and interest before
the holders of debentures will be entitled to receive or retain any payment in
respect of the debentures.
If the maturity of any debentures is accelerated, the holders of all of our
senior and subordinated debt outstanding at the time of the acceleration will
also be entitled to first receive payment in full of all amounts
46
<PAGE>
due to them, including any amounts due upon acceleration, before the holders of
the debentures will be entitled to receive or retain any principal or interest
payments on the debentures.
No payments of principal or interest on the debentures may be made if there
has occurred and is continuing a default in any payment with respect to any of
our senior or subordinated debt or an event of default with respect to any of
our senior or subordinated debt resulting in the acceleration of the maturity
of the senior or subordinated debt, or if any judicial proceeding is pending
with respect to any default.
The term "debt" means, with respect to any person, whether recourse is to
all or a portion of the assets of the person and whether or not contingent:
. every obligation of the person for money borrowed;
. every obligation of the person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
. every reimbursement obligation of the person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account
of the person;
. every obligation of the person issued or assumed as the deferred purchase
price of property or services, excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business;
. every capital lease obligation of the person; and
. every obligation of the type referred to in the first five points of
another person and all dividends of another person the payment of which,
in either case, the first person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
The term "senior debt" means the principal of, and premium and interest,
including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us, on, debt, whether incurred on
or prior to the date of the indenture or incurred after the date. However,
senior debt will not be deemed to include:
. any debt where it is provided in the instrument creating the debt that
the obligations are not superior in right of payment to the debentures or
to other debt which is equal with, or subordinated to, the debentures,
including our 9.25% Subordinated Debentures due 2027, issued to IFC
Capital Trust I and the % Convertible Junior Subordinated Debentures
of IFC Capital Trust III;
. any of our debt that when incurred and without regard to any election
under the federal bankruptcy laws, was without recourse to us;
. any debt of ours to any of our subsidiaries;
. any debt to any of our employees;
. any debt that by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of the debt by the holders of
the debentures as a result of the subordination provisions of the
indenture would be greater than they otherwise would have been as a
result of any obligation of the holders to pay amounts over to the
obligees on the trade accounts payable or accrued liabilities arising in
the ordinary course of business as a result of subordination provisions
to which the debt is subject; and
. debt which constitutes subordinated debt.
47
<PAGE>
The term "subordinated debt" means the principal of, and premium and
interest, including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us, on, debt. Except as described
below, subordinated debt includes debt incurred on or prior to the date of the
indenture or thereafter incurred, which is by its terms expressly provided to
be junior and subordinate to other debt of ours. Subordinated debt will not be
deemed to include:
. any of our debt which when incurred and without regard to any election
under the federal bankruptcy laws was without recourse to us;
. any debt of ours to any of our subsidiaries;
. any debt to any of our employees;
. any debt which by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of the debt by the holders of
the debentures as a result of the subordination provisions of the
indenture would be greater than they otherwise would have been as a
result of any obligation of the holders to pay amounts over to the
obligees on the trade accounts payable or accrued liabilities arising in
the ordinary course of business as a result of subordination provisions
to which the debt is subject;
. debt which constitutes senior debt;
. any debt of ours under debt securities (and guarantees in respect of
these debt securities) initially issued to any trust, or a trustee of a
trust, partnership or other entity affiliated with us that is, directly
or indirectly, our financing subsidiary in connection with the issuance
by that entity of preferred securities or other securities which are
intended to qualify for "Tier 1" capital treatment, such as the
approximately $50 million of 9.25% Subordinated Debentures due March 31,
2027 that we issued to IFC Capital Trust I in 1997 and the %
Convertible Junior Subordinated Debentures that we will be issuing to
Capital Trust III.
We expect from time to time to incur additional indebtedness, and there is
no limitation under the indenture on the amount of indebtedness we may incur.
We had consolidated senior and subordinated debt of $82.4 million outstanding
principal amount at September 30, 2000.
Payment and Paying Agents
Generally, payment of principal of and interest on the debentures will be
made at the office of the indenture trustee in Wilmington, Delaware. However,
we have the option to make payment of any interest by (a) check mailed to the
address of the person entitled to payment at the address listed in the register
of holders of the debentures, or (b) wire transfer to an account maintained by
the person entitled thereto as specified in the register of holders of the
debentures, provided that proper transfer instructions have been received by
the applicable record date. Payment of any interest on debentures will be made
to the person in whose name the debenture is registered at the close of
business on the regular record date for the interest payment, except in the
case of defaulted interest.
Any moneys deposited with the indenture trustee or any paying agent for the
debentures, or then held by us in trust, for the payment of the principal of or
interest on the debentures and remaining unclaimed for two years after the
principal or interest has become due and payable, will be repaid to us on
September 30 of each year. If we hold any of this money in trust, then it will
be discharged from the trust to us and the holder of the debenture will
thereafter look, as a general unsecured creditor, only to us for payment.
48
<PAGE>
Registrar and Transfer Agent
The indenture trustee will act as the registrar and the transfer agent for
the debentures. Debentures may be presented for registration of transfer, with
the form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed, at the office of the registrar. Provided that we
maintain a transfer agent in Wilmington, Delaware, we may rescind the
designation of any transfer agent or approve a change in the location through
which any transfer agent acts. We may at any time designate additional transfer
agents with respect to the debentures.
If we redeem any of the debentures, neither we nor the indenture trustee
will be required to (a) issue, register the transfer of or exchange any
debentures during a period beginning at the opening of business 15 days before
the day of the mailing of and ending at the close of business on the day of the
mailing of the relevant notice of redemption, or (b) transfer or exchange any
debentures so selected for redemption, except, in the case of any debentures
being redeemed in part, any portion not to be redeemed.
Modification of Indenture
We and the indenture trustee may, from time to time without the consent of
the holders of the debentures, amend, waive our rights under or supplement the
indenture for purposes which do not materially adversely affect the rights of
the holders of the debentures. Other changes may be made by us and the
indenture trustee with the consent of the holders of a majority in principal
amount of the outstanding debentures. However, without the consent of the
holder of each outstanding debenture affected by the proposed modification, no
modification may:
. extend the maturity date of the debentures; or
. reduce the principal amount or the rate or extend the time of payment of
interest; or
. reduce the percentage of principal amount of debentures required to amend
the indenture.
As long as any of the preferred securities remain outstanding, no modification
of the indenture may be made that requires the consent of the holders of the
debentures, no termination of the indenture may occur, and no waiver of any
event of default under the indenture may be effective, without the prior
consent of the holders of a majority of the aggregate liquidation amount of the
preferred securities.
Debenture Events of Default
The indenture provides that any one or more of the following events with
respect to the debentures that has occurred and is continuing constitutes an
event of default under the indenture:
. our failure to pay any interest on the debentures for 30 days after the
due date, except where we have properly deferred the interest payment;
. our failure to pay any principal on the debentures when due whether at
maturity, upon redemption or otherwise;
. our failure to observe or perform in any material respect any other
covenants or agreements contained in the indenture for 90 days after
written notice to us from the indenture trustee or the holders of at
least 25% in aggregate outstanding principal amount of the debentures; or
. our bankruptcy, insolvency or reorganization or dissolution of the trust.
49
<PAGE>
The holders of a majority of the aggregate outstanding principal amount of
the debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the indenture trustee.
The indenture trustee, or the holders of at least 25% in aggregate outstanding
principal amount of the debentures, may declare the principal due and payable
immediately upon an event of default under the indenture. The holders of a
majority of the outstanding principal amount of the debentures may rescind and
annul the declaration and waive the default if the default has been cured and a
sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the indenture trustee.
The holders may not annul the declaration and waive a default if the default is
the non-payment of the principal of the debentures which has become due solely
by the acceleration. Should the holders of the debentures fail to annul the
declaration and waive the default, the holders of at least 25% in aggregate
liquidation amount of the preferred securities will have this right.
If an event of default under the indenture has occurred and is continuing,
the property trustee will have the right to declare the principal of and the
interest on the debentures, and any other amounts payable under the indenture,
to be immediately due and payable and to enforce its other rights as a creditor
with respect to the debentures.
We are required to file annually with the indenture trustee a certificate as
to whether or not we are in compliance with all of the conditions and covenants
applicable to us under the indenture.
Enforcement of Certain Rights by Holders of the Preferred Securities
If an event of default under the indenture has occurred and is continuing
and the event is attributable to the failure by us to pay interest on or
principal of the debentures on the date on which the payment is due and
payable, then a holder of preferred securities may institute a direct action
against us to compel us to make the payment. We may not amend the indenture to
remove the foregoing right to bring a direct action without the prior written
consent of all of the holders of the preferred securities. If the right to
bring a direct action is removed, the trust may become subject to the reporting
obligations under the Securities Exchange Act of 1934.
The holders of the preferred securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the debentures unless there has been an event of
default under the trust agreement.
Consolidation, Merger, Sale of Assets and Other Transactions
We may not consolidate with or merge into any other entity or convey or
transfer our properties and assets substantially as an entirety to any entity,
and no entity may be consolidated with or merged into us or sell, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to us, unless:
. if we consolidate with or merge into another person or convey or transfer
our properties and assets substantially as an entirety to any person, the
successor person is organized under the laws of the United States or any
state or the District of Columbia, and the successor person expressly
assumes by supplemental indenture our obligations on the debentures, and
the ultimate parent entity of the successor entity expressly assumes our
obligations under the guarantee, to the extent the preferred securities
are then outstanding;
. immediately after the transaction, no event of default under the
indenture, and no event which, after notice or lapse of time, or both,
would become an event of default under the indenture, has occurred and is
continuing; and
. other conditions as prescribed in the indenture are met.
50
<PAGE>
Under certain circumstances, if we consolidate or merge with another entity,
or transfer or sell substantially all of our assets to another entity, such
transaction may be considered to involve a replacement of the trust, and the
provisions of the trust agreement relating to a replacement of the trust would
apply to such transaction. See "--Mergers, Consolidations, Amalgamations or
Replacements of the Trust" on page 38.
Satisfaction and Discharge
The indenture will cease to be of further effect and we will be deemed to
have satisfied and discharged our obligations under the indenture when all
debentures not previously delivered to the indenture trustee for cancellation:
. have become due and payable;
. will become due and payable at their stated maturity within one year or
are to be called for redemption within one year, and we deposit or cause
to be deposited with the indenture trustee funds, in trust, for the
purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the debentures not previously delivered to the indenture
trustee for cancellation, for the principal and interest due to the date
of the deposit or to the stated maturity or redemption date, as the case
may be.
We may still be required to provide officers' certificates, opinions of
counsel and pay fees and expenses due after these events occur.
Governing Law
The indenture and the debentures will be governed by and construed in
accordance with Indiana law.
Information Concerning the Indenture Trustee
The indenture trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to these provisions, the indenture trustee is under no obligation to
exercise any of the powers vested in it by the indenture at the request of any
holder of debentures, unless offered reasonable security or indemnity by the
holder against the costs, expenses and liabilities which might be incurred. The
indenture trustee is not required to expend or risk its own funds or otherwise
incur personal financial liability in the performance of its duties if the
indenture trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
Miscellaneous
We have agreed, pursuant to the indenture, for so long as preferred
securities remain outstanding:
. to maintain directly or indirectly 100% ownership of the common
securities of the trust, except that certain successors that are
permitted pursuant to the indenture may succeed to our ownership of the
common securities;
. not to voluntarily terminate, wind up or liquidate the trust without
prior approval of the Federal Reserve, if required;
. to use our reasonable efforts to cause the trust (a) to remain a business
trust (and to avoid involuntary termination, winding up or liquidation),
except in connection with a distribution of debentures, the redemption of
all of the trust securities of the trust or mergers, consolidations or
amalgamations, each as permitted by the trust agreement; and (b) to
otherwise continue not to be treated as an association taxable as a
corporation or partnership for federal income tax purposes; and
51
<PAGE>
. to use our reasonable efforts to cause each holder of trust securities to
be treated as owning an individual beneficial interest in the debentures.
THE CONVERTIBLE PREFERRED SECURITIES OF IFC CAPITAL TRUST III
Description of the Trust
IFC Capital Trust III is a statutory business trust formed pursuant to the
Delaware Business Trust Act under a trust agreement executed by us, as sponsor
for the trust, and the trustees, and a certificate of trust has been filed with
the Delaware Secretary of State. The trust agreement will be amended and
restated in its entirety in the form filed as an exhibit to the registration
statement of which this prospectus is a part, as of the date the convertible
preferred securities are initially issued. The trust agreement will be
qualified under the Trust Indenture Act of 1939.
The holders of the convertible preferred securities issued pursuant to the
offering described in this prospectus will own all of the issued and
outstanding convertible preferred securities of the trust which have certain
prior rights over the other securities of the trust in certain circumstances as
specified in this prospectus. We will not initially own any of the convertible
preferred securities. We will acquire common securities in an amount equal to
at least 3% of the total capital of the trust and will initially own, directly
or indirectly, all of the issued and outstanding common securities. The common
securities, together with the convertible preferred securities, are called the
trust securities.
The trust exists exclusively for the purposes of:
. issuing the convertible preferred securities to the public for cash;
. issuing its common securities to us in exchange for our capitalization of
the trust;
. investing the proceeds from the sale of the trust securities in an
equivalent amount of convertible debentures; and
. engaging in other activities that are incidental to those listed above,
such as receiving payments on the debentures and making distributions to
security holders, furnishing notices and other administrative tasks.
The rights of the holders of the trust securities are as set forth in the
trust agreement, the Delaware Business Trust Act and the Trust Indenture Act.
The trust agreement does not permit the trust to borrow money or make any
investment other than in the convertible debentures. Other than with respect to
the trust securities, Irwin has agreed to pay for all debts and obligations and
all costs and expenses of the trust, including the fees and expenses of the
trustees and any income taxes, duties and other governmental charges, and all
costs and expenses related to these charges, to which the trust may become
subject, except for United States withholding taxes that are properly withheld.
The number of trustees of the trust will initially be five. Three of the
trustees will be persons who are employees or officers of or who are affiliated
with Irwin. They are the administrative trustees. The fourth trustee will be an
entity that maintains its principal place of business in the State of Delaware.
It is the Delaware trustee. Initially, Wilmington Trust Company, a Delaware
banking corporation, will act as Delaware trustee. The fifth trustee, called
the property trustee, will also initially be Wilmington Trust Company. The
property trustee is the institutional trustee under the trust agreement and
acts as the indenture trustee called for under the applicable provisions of the
Trust Indenture Act. Also for purposes of compliance with the Trust Indenture
Act, Wilmington Trust Company will act as guarantee trustee and indenture
trustee under the guarantee agreement and the indenture. We, as holder of all
of the common securities, will have the right to
52
<PAGE>
appoint or remove any trustee unless an event of default under the indenture
has occurred and is continuing, in which case only the holders of the
convertible preferred securities may remove the Delaware trustee or the
property trustee. The trust has a term of approximately 31 years but may
terminate earlier as provided in the trust agreement.
The property trustee will hold the convertible debentures for the benefit of
the holders of the trust securities and will have the power to exercise all
rights, powers and privileges under the indenture as the holder of the
convertible debentures. In addition, the property trustee will maintain
exclusive control of a segregated noninterest-bearing "payment account"
established with Wilmington Trust Company to hold all payments made on the
convertible debentures for the benefit of the holders of the trust securities.
The property trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the trust securities
out of funds from the payment account. The guarantee trustee will hold the
guarantee for the benefit of the holders of the convertible preferred
securities. We will pay all fees and expenses related to the trust and the
offering of the convertible preferred securities, including the fees and
expenses of the trustees.
Description of the Convertible Preferred Securities
The convertible preferred securities will be issued pursuant to the trust
agreement. For more information about the trust agreement, see "--Description
of the Trust" beginning on page 52. Wilmington Trust Company will act as
property trustee for the convertible preferred securities under the trust
agreement for purposes of complying with the provisions of the Trust Indenture
Act. The terms of the convertible preferred securities will include those
stated in the trust agreement and those made part of the trust agreement by the
Trust Indenture Act.
General
The trust agreement authorizes the administrative trustees, on behalf of the
trust, to issue the trust securities, which are comprised of the convertible
preferred securities to be sold to the public and the common securities. We
will own all of the common securities issued by the trust. The trust is not
permitted to issue any securities other than the trust securities or incur any
other indebtedness.
The convertible preferred securities will represent preferred undivided
beneficial interests in the assets of the trust, and the holders of the
convertible preferred securities will be entitled to a preference over the
common securities upon an event of default with respect to distributions and
amounts payable on redemption or liquidation. The convertible preferred
securities will rank equally, and payments on the convertible preferred
securities will be made proportionally, with the common securities, except as
described under "--Subordination of Common Securities" on page 61.
The property trustee will hold legal title to the convertible debentures in
trust for the benefit of the holders of the trust securities. We will guarantee
the payment of distributions out of money held by the trust, and payments upon
redemption of the convertible preferred securities or liquidation of the trust,
to the extent described under "Description of the Guarantees" on page 79. The
guarantee agreement does not cover the payment of any distribution or the
liquidation amount when the trust does not have sufficient funds available to
make these payments.
Distributions
Source of Distributions. The funds of the trust available for distribution
to holders of the convertible preferred securities will be limited to payments
made under the convertible debentures, which the trust will purchase with the
proceeds from the sale of the trust securities. Distributions will be paid
through the property trustee, which will hold the amounts received from our
interest payments on the convertible debentures in the payment account for the
benefit of the holders of the trust securities. If we do not make interest
payments on
53
<PAGE>
the convertible debentures, the property trustee will not have funds available
to pay distributions on the convertible preferred securities.
Payment of Distributions. Distributions on the convertible preferred
securities will be payable at the annual rate of % of the $25 stated
liquidation amount, payable quarterly on March 31, June 30, September 30 and
December 31 of each year, to the holders of the convertible preferred
securities on the relevant record dates. So long as the convertible preferred
securities are represented by a global security, as described below, the record
date will be the business day immediately preceding the relevant distribution
date. The first distribution date for the convertible preferred securities will
be December 31, 2000.
Distributions will accumulate from the date of issuance, will be cumulative
and will be computed on the basis of a 360-day year of twelve 30-day months. If
the distribution date is not a business day, then payment of the distributions
will be made on the next day that is a business day, without any additional
interest or other payment for the delay. However, if the next business day is
in the next calendar year, payment of the distribution will be made on the
business day immediately preceding the scheduled distribution date. When we use
the term "business day" we mean any day other than a Saturday, a Sunday, a day
on which banking institutions in New York, New York are authorized or required
by law, regulation or executive order to remain closed or a day on which the
corporate trust office of the property trustee or the indenture trustee is
closed for business.
Extension Period. As long as no event of default under the indenture has
occurred and is continuing, we have the right to defer the payment of interest
on the convertible debentures at any time for a period not exceeding 20
consecutive quarters. We refer to this period of deferral as an "extension
period." No extension period may extend beyond September 30, 2030 or end on a
date other than an interest payment date, which dates are the same as the
distribution dates. If we defer the payment of interest, quarterly
distributions on the convertible preferred securities will also be deferred
during any such extension period. Any deferred distributions under the
convertible preferred securities will accumulate additional amounts at the
annual rate of %, compounded quarterly from the relevant distribution date.
The term "distributions" as used in this prospectus includes those accumulated
amounts.
During an extension period, we may not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock (other than stock dividends, non-cash dividends in connection with
the implementation of a shareholder rights plan, purchases of common
stock in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock) or allow any of our subsidiaries to do the same with
respect to their capital stock (other than the payment of dividends or
distributions to us);
. make any payment of principal, interest or premium on or repay,
repurchase or redeem any debt securities that rank equally with
(including the debentures issued to our other affiliated Delaware trust),
or junior in interest to, the convertible debentures or allow any of our
subsidiaries to do the same;
. make any guarantee payments with respect to any other guarantee by us of
any other debt securities of any of our subsidiaries if the guarantee
ranks equally with or junior to the convertible debentures (other than
payments under the guarantee); or
. redeem, purchase or acquire less than all of the convertible debentures
or any of the convertible preferred securities.
After the termination of any extension period and the payment of all amounts
due, we may elect to begin a new extension period, subject to the above
requirements.
54
<PAGE>
We do not currently intend to exercise our right to defer distributions on
the convertible preferred securities by deferring the payment of interest on
the convertible debentures.
Conversion Rights
General. Convertible preferred securities will be convertible at any time on
or after November 30, 2000, and prior to the close of business on the business
day immediately preceding the date of repayment of such convertible preferred
securities, whether at stated maturity or upon redemption (either at the option
of Irwin or pursuant to a Tax Event, an Investment Company Event or a Capital
Treatment Event), at the option of the holder thereof and in the manner
described below, into shares of common stock at an initial conversion ratio of
shares of common stock for each convertible preferred security
(equivalent to an initial conversion price of $ per share of common stock),
subject to adjustment as described below. The trust will covenant in the trust
agreement not to convert convertible debentures held by it except pursuant to a
notice of conversion delivered to the property trustee, as conversion agent, by
a holder of convertible preferred securities. A holder of a convertible
preferred security wishing to exercise its conversion right must deliver an
irrevocable notice of conversion, together, if the convertible preferred
security is in certificated form, with the certificate representing such
convertible preferred security, to the conversion agent, which will, on behalf
of such holder, exchange such convertible preferred security for a portion of
the convertible debentures and immediately convert such convertible debentures
into common stock. Holders may obtain copies of the required form of the
conversion notice from the conversion agent. In the event Cede & Co. receives a
conversion request from the conversion agent, DTC will redeem the amount of
interest credited to the applicable direct participant(s) in the convertible
preferred securities in accordance with its procedures.
Holders of convertible preferred securities at the close of business on a
distribution record date will be entitled to receive the distribution payable
on such convertible preferred securities on the corresponding distribution date
notwithstanding the conversion of such convertible preferred securities
following the distribution record date but prior to the distribution date;
provided, however, that if any convertible preferred securities are surrendered
for conversion during the period from the close of business on any record date
through and including the next succeeding distribution date (except any such
convertible preferred securities surrendered for conversion after such
convertible preferred securities have been called for redemption by Irwin
during an extension period), the convertible preferred securities when
surrendered for conversion must be accompanied by payment in next day funds of
an amount equal to the distribution which the registered holder on such record
date is to receive. Except as described above, no distribution will be payable
by Irwin on converted convertible preferred securities with respect to any
distribution date subsequent to the date of conversion and neither the trust
nor Irwin will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid distributions, whether or not in arrears,
on convertible preferred securities surrendered for conversion. Each conversion
will be deemed to have been effected immediately prior to the close of business
on the day on which the related conversion notice was received by the
conversion agent.
Shares of common stock issued upon conversion of convertible preferred
securities will be validly issued, fully paid and nonassessable. No fractional
shares of common stock will be issued as a result of conversion, but in lieu
thereof such fractional interest will be paid by us in cash based on the last
reported sale price of common stock on the date such convertible preferred
securities are surrendered for conversion.
Conversion Ratio Adjustments--General. The conversion ratio is subject to
adjustment if we take certain actions after the date of issuance of the
convertible preferred securities offered in this prospectus, including:
. issue shares of common stock as a dividend or a distribution with respect
to common stock,
. effect subdivisions, combinations and reclassification of common stock,
55
<PAGE>
. issue rights or warrants to all holders of common stock entitling them
(for a period not exceeding 45 days) to subscribe for or purchase shares
of common stock at less than the then current market price (as defined
below) of the common stock,
. distribute evidences of indebtedness, capital stock, cash or assets
(including securities, but excluding those rights, warrants, dividends
and distributions referred to above, and dividends and distributions paid
exclusively in cash) to all holders of common stock,
. pay any dividends (and other distributions) on common stock exclusively
in cash, but not including cash dividends we pay out of our retained
earnings, and
. make a tender or exchange offer (other than an odd-lot offer) for our
common stock and pay a price in excess of 110% of the then current market
price of our common stock based on the closing price on the trading day
next succeeding the last date tenders or exchanges may be made pursuant
to such tender or exchange offer.
"Current Market Price" means, in general, the average of the daily Closing
Prices (as defined below) for the five consecutive trading days selected by
Irwin commencing not more than 20 trading days before, and ending not later
than, the earlier of the day in question or, if applicable, the day before the
"ex" date with respect to the issuance or distribution in question.
"Closing Price" of any security on any day means the last reported sale
price, regular way, on such day or, if no sale takes place on such day, the
average of the reported closing bid and asked price on such day, regular way,
in either case as reported on the Nasdaq National Market, or, if such security
is not quoted or admitted to trading on Nasdaq, on the principal national
securities exchange on which such security is listed or admitted to trading, or
if such security is not listed or admitted to trading on a national securities
exchange, on the principal quotation system on which such security is listed or
admitted to trading or quoted, or, if not listed or admitted to trading or
quoted on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security in the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated, or if not so available in such manner, as otherwise determined in
good faith by our board of directors.
From time to time, we may increase the conversion ratio of the convertible
debentures (and thus increase the conversion ratio of the convertible preferred
securities) by any amount selected by us for any period of at least 20 days, in
which case we will give at least fifteen days' notice of such increase. We may,
at our option, make such increases in the conversion ratio, in addition to
those set forth above, as we deem advisable to avoid or diminish any income tax
to holders of common stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income tax
purposes. See "--Adjustment of Conversion Ratio" on page 90.
No adjustment of the conversion ratio will be made upon the issuance of any
shares of common stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of Irwin and the
investment of additional optional amounts in shares of common stock under any
such plan, or upon the issuance of any shares of common stock or options or
rights pursuant to any employee benefit plan or program, or pursuant to any
option, warrant, right or any exercisable, exchangeable or convertible security
outstanding as of the date on which the convertible debentures are first
issued. No adjustment of the conversion ratio will be made upon the issuance of
rights under any shareholder rights plan. The conversion ratio will be rounded
to four decimal places. No adjustment in the conversion ratio will be required
unless adjustment would require a change of at least one percent (1%) in the
conversion ratio then in effect; provided, however, that any adjustment that
would not be required to be made will be carried forward and taken into account
in any subsequent adjustment. If any action would require adjustment of the
conversion ratio pursuant to more than one of the provisions described above,
only one adjustment will be made with
56
<PAGE>
respect to that action and such adjustment will be the amount of adjustment
that has the highest absolute value to the holder of the convertible preferred
securities.
Conversion Ratio Adjustments--Merger, Consolidation or Sale of Assets of
Company. In the event that Irwin becomes a party to any transaction, including,
without limitation, and with certain exceptions:
. a recapitalization or reclassification of the common stock;
. consolidation of Irwin with, or merger of Irwin into, any other person,
or any merger of another person into Irwin;
. any sale, transfer or lease of all or substantially all of the assets of
Irwin; or
. any compulsory share exchange pursuant to which the common stock is
converted into the right to receive other securities, cash or other
property (each of the foregoing being referred to as a "business
consolidation transaction"), then the holders of convertible preferred
securities then outstanding will have the right to convert the
convertible preferred securities into the kind and amount of securities,
cash or other property receivable upon the consummation of such business
consolidation transaction by a holder of the number of shares of common
stock issuable upon conversion of such convertible preferred securities
immediately prior to such business consolidation transaction.
In the case of a business consolidation transaction, each convertible
preferred security would become convertible into the securities, cash or
property receivable by a holder of the number of shares of the common stock
into which such convertible preferred security was convertible immediately
prior to such business consolidation transaction. This change could
substantially lessen or eliminate the value of the conversion privilege
associated with the convertible preferred securities in the future. For
example, if Irwin were acquired in a cash merger, each convertible preferred
security would become convertible solely into cash and would no longer be
convertible into securities which value would vary depending on the future
prospects of Irwin and other factors.
Conversion ratio adjustments or omissions in making such adjustments may,
under certain circumstances, be deemed to be distributions that could be
taxable as dividends to holders of convertible preferred securities or to the
holders of common stock. See "--Adjustment of Conversion Ratio" on page 90.
Whenever the conversion ratio is adjusted as described above, we will place
on file with the property trustee and with the conversion agent a statement
signed by the appropriate officer of Irwin showing in detail the facts
requiring such adjustment and the conversion ratio after such adjustment and
the property trustee or the conversion agent will exhibit the same from time to
time to any holder desiring to inspect the statement.
Redemption or Exchange
General. Subject to the prior approval of the Federal Reserve, if required,
we will have the right to redeem the convertible debentures:
. in whole at any time, or in part from time to time, on or after September
30, 2005;
. at any time, in whole, within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event, which
terms we define below; or
. at any time, and from time to time, to the extent of any convertible
preferred securities we purchase, plus a proportionate amount of the
common securities we hold.
57
<PAGE>
In addition, as long as the price of our common stock has been at least 125%
of the conversion price of the convertible preferred securities for a period of
20 consecutive trading days ending within five days of the date of notice of
redemption, we also have the option to redeem any or all of the outstanding
convertible debentures prior to maturity in the following circumstances:
. on or after September 30, 2003 but before September 30, 2004 upon payment
of a redemption premium equal to % of the principal amount to be
redeemed, plus any accrued and unpaid interest on the convertible
debentures to the date of such redemption; and
. on or after September 30, 2004 but before September 30, 2005, upon
payment of a redemption premium equal to % of the principal amount to
be redeemed, plus any accrued and unpaid interest on the convertible
debentures to the date of such redemption.
Mandatory Redemption. Upon our repayment or redemption, in whole or in part,
of any convertible debentures, whether on September 30, 2030 or earlier, the
property trustee will apply the proceeds to redeem the same amount of the trust
securities, upon not less than 30 days' nor more than 60 days' notice, at the
redemption price. The redemption price will equal 100% of the aggregate
liquidation amount of the trust securities, plus premium, if any, plus
accumulated but unpaid distributions to the date of redemption. If less than
all of the convertible debentures are to be repaid or redeemed on a date of
redemption, then the proceeds from such repayment or redemption will be
allocated to redemption of convertible preferred securities and common
securities proportionately.
Distribution of Convertible Debentures in Exchange for Convertible Preferred
Securities. Upon prior approval of the Federal Reserve, if required, we will
have the right at any time to dissolve, wind-up or terminate the trust and,
after satisfaction of the liabilities of creditors of the trust as provided by
applicable law, including, without limitation, amounts due and owing the
trustees of the trust, cause the convertible debentures to be distributed
directly to the holders of trust securities in liquidation of the trust.
After the liquidation date fixed for any distribution of convertible
debentures in exchange for convertible preferred securities:
. those trust securities will no longer be deemed to be outstanding;
. certificates representing convertible debentures in a principal amount
equal to the liquidation amount of those convertible preferred securities
will be issued in exchange for the convertible preferred securities;
. we will use our best efforts to list the convertible debentures on the
Nasdaq National Market or a national exchange;
. any certificates representing trust securities that are not surrendered
for exchange will be deemed to represent convertible debentures with a
principal amount equal to the liquidation amount of those convertible
preferred securities, accruing interest at the rate provided for in the
convertible debentures from the last distribution date on the convertible
preferred securities;
. all rights of the trust securityholders other than the right to receive
convertible debentures upon surrender of a certificate representing trust
securities will terminate.
We cannot assure you that the market prices for the convertible preferred
securities or the convertible debentures that may be distributed if a
dissolution and liquidation of the trust were to occur would be favorable. The
convertible preferred securities that an investor may purchase, or the
convertible debentures that an investor may receive on dissolution and
liquidation of the trust, may trade at a discount to the price that the
investor paid to purchase the convertible preferred securities.
58
<PAGE>
Redemption upon a Tax Event, Investment Company Event or Capital Treatment
Event. If a Tax Event, an Investment Company Event or a Capital Treatment Event
occurs, we will have the right to redeem the convertible debentures in whole,
but not in part, and thereby cause a mandatory redemption of all of the trust
securities at the redemption price described above. If one of these events
occurs and we do not elect to redeem the convertible debentures, or to dissolve
the trust and cause the convertible debentures to be distributed to holders of
the trust securities, then the convertible preferred securities will remain
outstanding and additional interest may be payable on the convertible
debentures.
"Tax Event" means the receipt by the trust and us of an opinion of counsel
experienced in such matters stating that, as a result of any change or
prospective change in the laws or regulations of the United States or any
political subdivision or taxing authority of the United States, or as a result
of any official administrative pronouncement or judicial decision interpreting
or applying the tax laws or regulations, there is more than an insubstantial
risk that:
. interest payable by us on the convertible debentures is not, or within 90
days of the date of the opinion will not be, deductible by us, in whole
or in part, for federal income tax purposes;
. the trust is, or will be within 90 days after the date of the opinion,
subject to federal income tax with respect to income received or accrued
on the convertible debentures; or
. the trust is, or will be within 90 days after the date of opinion,
subject to more than an immaterial amount of other taxes, duties,
assessments or other governmental charges.
"Investment Company Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that the trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act, as a result of a change in law or regulation
or a change in interpretation or application of law or regulation.
"Capital Treatment Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that there is more
than an insubstantial risk of impairment of our ability to treat the
convertible preferred securities as Tier 1 capital for purposes of the current
capital adequacy guidelines of the Federal Reserve, as a result of any
amendment to any laws or any regulations.
For all of the events described above, we or the trust must request and
receive an opinion with regard to the event within a reasonable period of time
after we become aware of the possible occurrence of an event of this kind.
Redemption of Convertible Debentures in Exchange for Convertible Preferred
Securities We Purchase. Upon prior approval of the Federal Reserve, if
required, we will also have the right at any time, and from time to time, to
redeem convertible debentures in exchange for any convertible preferred
securities we may have purchased in the market. If we elect to surrender any
convertible preferred securities beneficially owned by us in exchange for
redemption of a like amount of convertible debentures, we will also surrender a
proportionate amount of common securities in exchange for convertible
debentures. Convertible preferred securities owned by other holders will not be
called for redemption at any time when we elect to exchange trust securities we
own to redeem convertible debentures.
The common securities we surrender will be in the same proportion to the
convertible preferred securities we surrender as is the ratio of common
securities purchased by us to the convertible preferred securities issued by
the trust. In exchange for the trust securities surrendered by us, the property
trustee will cause to be released to us for cancellation convertible debentures
with a principal amount equal to the liquidation amount of the trust
securities, plus any accumulated but unpaid distributions, if any, then held by
the property trustee allocable to those trust securities. After the date of
redemption involving an exchange by us, the trust securities we
59
<PAGE>
surrender will no longer be deemed outstanding and the convertible debentures
redeemed in exchange will be cancelled.
Redemption Procedures
Convertible preferred securities will be redeemed at the redemption price
with the applicable proceeds from our contemporaneous redemption of the
convertible debentures. Redemptions of the convertible preferred securities
will be made, and the redemption price will be payable, on each redemption date
only to the extent that the trust has funds available for the payment of the
redemption price.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the date of redemption to each holder of trust securities to be
redeemed at its registered address. Unless we default in payment of the
redemption price on the convertible debentures, interest will cease to
accumulate on the convertible debentures called for redemption on and after the
date of redemption.
If the trust gives notice of redemption of its trust securities, then the
property trustee, to the extent funds are available, will irrevocably deposit
with the depositary for the trust securities funds sufficient to pay the
aggregate redemption price and will give the depositary for the trust
securities irrevocable instructions and authority to pay the redemption price
to the holders of the trust securities. If the convertible preferred securities
are no longer in book-entry only form, the property trustee, to the extent
funds are available, will deposit with the designated paying agent for such
convertible preferred securities funds sufficient to pay the aggregate
redemption price and will give the paying agent irrevocable instructions and
authority to pay the redemption price to the holders upon surrender of their
certificates evidencing the convertible preferred securities. Notwithstanding
the foregoing, distributions payable on or prior to the date of redemption for
any trust securities called for redemption will be payable to the holders of
the trust securities on the relevant record dates for the related distribution
dates.
If notice of redemption has been given and we have deposited funds as
required, then on the date of the deposit all rights of the holders of the
trust securities called for redemption will cease, except the right to receive
the redemption price, but without interest on such redemption price after the
date of redemption. The trust securities will also cease to be outstanding on
the date of the deposit. If any date fixed for redemption of trust securities
is not a business day, then payment of the redemption price payable on that
date will be made on the next day that is a business day without any additional
interest or other payment in respect of the delay. However, if the next
business day is in the next succeeding calendar year, payment of the interest
will be made on the immediately preceding business day.
If payment of the redemption price in respect of trust securities called for
redemption is improperly withheld or refused and not paid by the trust, or by
us pursuant to the guarantee, distributions on the trust securities will
continue to accumulate at the applicable rate from the date of redemption
originally established by the trust for the trust securities to the date the
redemption price is actually paid. In this case, the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
redemption price.
Payment of the redemption price on the convertible preferred securities and
any distribution of convertible debentures to holders of convertible preferred
securities will be made to the applicable recordholders as they appear on the
register for the convertible preferred securities on the relevant record date.
As long as the convertible preferred securities are represented by a global
security, the record date will be the business day immediately preceding the
date of redemption or liquidation date, as applicable.
If less than all of the trust securities are to be redeemed, then the
aggregate liquidation amount of the trust securities to be redeemed will be
allocated proportionately to those trust securities based upon the relative
liquidation amounts. The particular convertible preferred securities to be
redeemed will be selected by the
60
<PAGE>
property trustee from the outstanding convertible preferred securities not
previously called for redemption by a method the property trustee deems fair
and appropriate. This method may provide for the redemption of portions equal
to $25 or an integral multiple of $25 of the liquidation amount of the
convertible preferred securities. The property trustee will promptly notify the
registrar for the convertible preferred securities in writing of the
convertible preferred securities selected for redemption and, in the case of
any convertible preferred securities selected for partial redemption, the
liquidation amount to be redeemed.
Subject to applicable law, and if we are not exercising our right to defer
interest payments on the convertible debentures, we may, at any time, purchase
outstanding convertible preferred securities.
Subordination of Common Securities
Payment of distributions on, and the redemption price of, the convertible
preferred securities and common securities will be made based on the
liquidation amount of these securities except to the extent of any redemption
premium on the convertible preferred securities as described on page 60.
However, if an event of default under the indenture has occurred and is
continuing, no distributions on or redemption of the common securities may be
made unless payment in full in cash of all accumulated and unpaid distributions
on all of the outstanding convertible preferred securities for all distribution
periods terminating on or before that time, or in the case of payment of the
redemption price, payment of the full amount of the redemption price on all of
the outstanding convertible preferred securities then called for redemption,
has been made or provided for. All funds available to the property trustee will
first be applied to the payment in full in cash of all distributions on, or the
redemption price of, the convertible preferred securities then due and payable.
In the case of the occurrence and continuance of any event of default under
the trust agreement resulting from an event of default under the indenture, we,
as holder of the common securities, will be deemed to have waived any right to
act with respect to that event of default under the trust agreement until the
effect of the event of default has been cured, waived or otherwise eliminated.
Until the event of default under the trust agreement has been so cured, waived
or otherwise eliminated, the property trustee will act solely on behalf of the
holders of the convertible preferred securities and not on our behalf, and only
the holders of the convertible preferred securities will have the right to
direct the property trustee to act on their behalf.
Liquidation Distribution Upon Termination
We will have the right at any time to dissolve, wind-up or terminate the
trust and cause convertible debentures to be distributed to the holders of the
trust securities. This right is subject, however, to us receiving approval of
the Federal Reserve, if required.
In addition, the trust will automatically terminate upon expiration of its
term and will terminate earlier on the first to occur of:
. our bankruptcy, dissolution or liquidation;
. the distribution of a like amount of the convertible debentures to the
holders of trust securities, if we have given written direction to the
property trustee to terminate the trust;
. redemption of all of the convertible preferred securities as described
under "--Redemption or Exchange--Mandatory Redemption" on page 58;
. the entry of a court order for the dissolution of the trust; or
. the distribution of common stock upon conversion of all outstanding
convertible preferred securities.
With the exception of a redemption as described under "--Redemption or
Exchange--Mandatory Redemption" on page 58 , if an early termination of the
trust occurs, the trust will be liquidated by the
61
<PAGE>
administrative trustees as expeditiously as they determine to be possible.
After satisfaction of liabilities to creditors of the trust as provided by
applicable law, the trustees will distribute to the holders of trust
securities, convertible debentures:
. in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of the trust securities;
. with an interest rate identical to the distribution rate on the trust
securities; and
. with accrued and unpaid interest equal to accumulated and unpaid
distributions on the trust securities.
However, if the property trustee determines that the distribution is not
practical, then the holders of trust securities will be entitled to receive,
instead of convertible debentures, a proportionate amount of the liquidation
distribution. The liquidation distribution will be the amount equal to the
aggregate of the liquidation amount plus accumulated and unpaid distributions
to the date of payment. If the liquidation distribution can be paid only in
part because the trust has insufficient assets available to pay in full the
aggregate liquidation distribution, then the amounts payable directly by the
trust on the trust securities will be paid on a proportional basis, based on
liquidation amounts, to us, as the holder of the common securities, and to the
holders of the convertible preferred securities. However, if an event of
default under the indenture has occurred and is continuing, the convertible
preferred securities will have a priority over the common securities. See "--
Subordination of Common Securities" on page 61.
Under current federal income tax law and interpretations and assuming that
the trust is treated as a grantor trust, as is expected, a distribution of the
convertible debentures should not be a taxable event to holders of the
convertible preferred securities. Should there be a change in law, a change in
legal interpretation, a Tax Event or another circumstance, however, the
distribution could be a taxable event to holders of the convertible preferred
securities. If we do not elect to redeem the convertible debentures prior to
maturity or to liquidate the trust and distribute the convertible debentures to
holders of the convertible preferred securities, the convertible preferred
securities will remain outstanding until the repayment of the convertible
debentures. See "Federal Income Tax Consequences--Receipt of Debentures or Cash
Upon Liquidation of the Trust" on page 89 for more information regarding a
taxable distribution.
If we elect to dissolve the trust and thus cause convertible debentures to
be distributed to holders of the trust securities in liquidation of the trust,
we will continue to have the right to shorten the maturity of the convertible
debentures.
Liquidation Value
The amount of the liquidation distribution payable on the convertible
preferred securities in the event of any liquidation of the trust is $25 per
convertible preferred security plus accumulated and unpaid distributions to the
date of payment, which may be in the form of a distribution of convertible
debentures having a liquidation value and accrued interest of an equal amount.
Events of Default; Notice
Any one of the following events constitutes an event of default under the
trust agreement with respect to the convertible preferred securities:
. the occurrence of an event of default under the indenture;
. a default by the trust in the payment of any distribution when it becomes
due and payable, and continuation of the default for a period of 30 days;
62
<PAGE>
. a default by the trust in the payment of any redemption price of any of
the trust securities when it becomes due and payable;
. a default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the trust agreement, other than
those defaults covered in the previous two points, and continuation of
the default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the trustee(s) by the holders of at
least 25% in aggregate liquidation amount of the outstanding convertible
preferred securities, a written notice specifying the default or breach
and requiring it to be remedied and stating that the notice is a "Notice
of Default" under the trust agreement; or
. the occurrence of events of bankruptcy or insolvency with respect to the
property trustee and our failure to appoint a successor property trustee
within 60 days.
Within five business days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to the holders of the convertible preferred
securities, the administrative trustees and to us, unless the event of default
has been cured or waived. Irwin and the administrative trustees are required to
file annually with the property trustee a certificate as to whether or not they
are in compliance with all the conditions and covenants applicable to them
under the trust agreement.
If an event of default under the indenture has occurred and is continuing,
the convertible preferred securities will have preference over the common
securities upon termination of the trust. The existence of an event of default
under the trust agreement does not entitle the holders of convertible preferred
securities to accelerate the maturity thereof, unless the event of default is
caused by the occurrence of an event of default under the indenture and both
the indenture trustee and holders of at least 25% in principal amount of the
convertible debentures fail to accelerate the maturity thereof.
Removal of the Trustees
Unless an event of default under the indenture has occurred and is
continuing, we may remove any trustee at any time. If an event of default under
the indenture has occurred and is continuing, only the holders of a majority in
liquidation amount of the outstanding convertible preferred securities may
remove the property trustee or the Delaware trustee. The holders of the
convertible preferred securities have no right to vote to appoint, remove or
replace the administrative trustees. These rights are vested exclusively with
us as the holder of the common securities. No resignation or removal of a
trustee and no appointment of a successor trustee will be effective until the
successor trustee accepts the appointment in accordance with the trust
agreement.
Co-Trustees and Separate Property Trustee
Unless an event of default under the indenture has occurred and is
continuing, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the trust property
may at the time be located, we will have the power to appoint at any time or
times, and upon written request of the property trustee will appoint, one or
more persons or entities either (1) to act as a co-trustee, jointly with the
property trustee, of all or any part of the trust property, or (2) to act as
separate trustee of any trust property. In either case these trustees will have
the powers that may be provided in the instrument of appointment, and will have
vested in them any property, title, right or power deemed necessary or
desirable, subject to the provisions of the trust agreement. In case an event
of default under the indenture has occurred and is continuing, the property
trustee alone will have power to make the appointment.
63
<PAGE>
Merger or Consolidation of Trustees
Generally, any person or successor to any of the trustees may be a successor
trustee to any of the trustees, including a successor resulting from a merger
or consolidation. However, any successor trustee must meet all of the
qualifications and eligibility standards to act as a trustee.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. For these purposes, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
in some cases that transaction may be considered to involve a replacement of
the trust, and the conditions set forth below would apply to such transaction.
The trust may, at our request, with the consent of the administrative trustees
and without the consent of the holders of the convertible preferred securities,
the property trustee or the Delaware trustee, undertake a transaction listed
above if the following conditions are met:
. the successor entity either (a) expressly assumes all of the obligations
of the trust with respect to the convertible preferred securities, or (b)
substitutes for the convertible preferred securities other securities
having substantially the same terms as the convertible preferred
securities (referred to as "successor securities") so long as the
successor securities rank the same in priority as the convertible
preferred securities with respect to distributions and payments upon
liquidation, redemption and otherwise;
. we appoint a trustee of the successor entity possessing substantially the
same powers and duties as the property trustee in its capacity as the
holder of the convertible debentures;
. the successor securities are listed or traded or will be listed or traded
on any national securities exchange or other organization on which the
convertible preferred securities are then listed, if any;
. the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the convertible preferred securities
(including any successor securities) in any material respect;
. the successor entity has a purpose substantially identical to that of the
trust;
. prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we have received an opinion from
independent counsel that (a) any transaction of this kind does not
adversely affect the rights, preferences and privileges of the holders of
the convertible preferred securities (including any successor securities)
in any material respect, and (b) following the transaction, neither the
trust nor the successor entity will be required to register as an
"investment company" under the Investment Company Act; and
. we own all of the common securities of the successor entity and guarantee
the obligations of the successor entity under the successor securities at
least to the extent provided by the guarantee, the convertible
debentures, the trust agreement and the expense agreement.
Notwithstanding the foregoing, the trust may not, except with the consent of
every holder of the convertible preferred securities, enter into any
transaction of this kind if the transaction would cause the trust or the
successor entity not to be classified as a grantor trust for federal income tax
purposes.
64
<PAGE>
Voting Rights; Amendment of Trust Agreement
Except as described below and under "Description of the Guarantees--
Amendments" on page 80 and as otherwise required by the Trust Indenture Act and
the trust agreement, the holders of the convertible preferred securities will
have no voting rights.
The trust agreement may be amended from time to time by us and the trustees,
without the consent of the holders of the convertible preferred securities, in
the following circumstances:
. with respect to acceptance of appointment by a successor trustee;
. to cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under
the trust agreement, as long as the amendment is not inconsistent with
the other provisions of the trust agreement and does not have a material
adverse effect on the interests of any holder of trust securities; or
. to modify, eliminate or add to any provisions of the trust agreement if
necessary to ensure that the trust will be classified for federal income
tax purposes as a grantor trust at all times that any trust securities
are outstanding or to ensure that the trust will not be required to
register as an "investment company" under the Investment Company Act.
With the consent of the holders of a majority of the aggregate liquidation
amount of the outstanding trust securities, we and the trustees may amend the
trust agreement if the trustees receive an opinion of counsel to the effect
that the amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not affect the trust's status as a grantor
trust for federal income tax purposes or the trust's exemption from status as
an "investment company" under the Investment Company Act. However, without the
consent of each holder of trust securities, the trust agreement may not be
amended to (a) change the amount or timing of any distribution on the trust
securities or otherwise adversely affect the amount of any distribution
required to be made in respect of the trust securities as of a specified date,
or (b) restrict the right of a holder of trust securities to institute suit for
the enforcement of the payment on or after that date.
As long as the property trustee holds any convertible debentures, the
trustees will not, without obtaining the prior approval of the holders of a
majority in aggregate liquidation amount of all outstanding convertible
preferred securities:
. direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee, or executing any trust or
power conferred on the property trustee with respect to the convertible
debentures;
. waive any past default that is waivable under the indenture;
. exercise any right to rescind or annul a declaration that the principal
of all the convertible debentures will be due and payable; or
. consent to any amendment or termination of the indenture or the
convertible debentures, where the property trustee's consent is required.
However, where a consent under the indenture requires the consent of each
holder of the affected convertible debentures, no consent will be given
by the property trustee without the prior consent of each holder of the
convertible preferred securities.
The trustees may not revoke any action previously authorized or approved by a
vote of the holders of the convertible preferred securities except by
subsequent vote of the holders of the convertible preferred securities. The
property trustee will notify each holder of convertible preferred securities of
any notice of default with respect to the convertible debentures. In addition
to obtaining the foregoing approvals of the holders of the
65
<PAGE>
convertible preferred securities, prior to taking any of the foregoing actions,
the trustees must obtain an opinion of counsel experienced in these matters to
the effect that the trust will not be classified as an association taxable as a
corporation for federal income tax purposes on account of the action.
Any required approval of holders of trust securities may be given at a
meeting or by written consent. The property trustee will cause a notice of any
meeting at which holders of the trust securities are entitled to vote, or of
any matter upon which action by written consent of the holders is to be taken,
to be given to each holder of record of trust securities.
No vote or consent of the holders of convertible preferred securities will
be required for the trust to redeem and cancel its convertible preferred
securities in accordance with the trust agreement.
Notwithstanding the fact that holders of convertible preferred securities
are entitled to vote or consent under any of the circumstances described above,
any of the convertible preferred securities that are owned by Irwin, the
trustees or any affiliate of Irwin or any trustee, will, for purposes of the
vote or consent, be treated as if they were not outstanding.
Global Convertible Preferred Securities
The convertible preferred securities will be represented by one or more
global convertible preferred securities registered in the name of The
Depository Trust Company, New York, New York ("DTC"), or its nominee. A global
convertible preferred security is a security representing interests of more
than one beneficial holder. Ownership of beneficial interests in the global
convertible preferred securities will be reflected in DTC participant account
records through DTC's book-entry transfer and registration system. Participants
are brokers, dealers, or others having accounts with DTC. Indirect beneficial
interests of other persons investing in the convertible preferred securities
will be shown on, and transfers will be effected only through, records
maintained by DTC participants. Except as described below, convertible
preferred securities in definitive form will not be issued in exchange for the
global convertible preferred securities.
No global convertible preferred security may be exchanged for convertible
preferred securities registered in the names of persons other than DTC or its
nominee unless:
. DTC notifies the indenture trustee that it is unwilling or unable to
continue as a depositary for the global convertible preferred security
and we are unable to locate a qualified successor depositary;
. we execute and deliver to the indenture trustee a written order stating
that we elect to terminate the book-entry system through DTC; or
. there shall have occurred and be continuing an event of default under the
indenture.
Any global convertible preferred security that is exchangeable pursuant to the
preceding sentence will be exchangeable for definitive certificates registered
in the names as DTC directs. It is expected that the instructions will be based
upon directions received by DTC with respect to ownership of beneficial
interests in the global convertible preferred security. If convertible
preferred securities are issued in definitive form, the convertible preferred
securities will be in denominations of $25 and integral multiples of $25 and
may be transferred or exchanged at the offices described below.
Unless and until it is exchanged in whole or in part for the individual
convertible preferred securities represented thereby, a global convertible
preferred security may not be transferred except as a whole by DTC to a nominee
of DTC, by a nominee of DTC to DTC or another nominee of DTC or by DTC or any
nominee to a successor depositary or any nominee of the successor.
66
<PAGE>
Payments on global convertible preferred securities will be made to DTC, as
the depositary for the global convertible preferred securities. If the
convertible preferred securities are issued in definitive form, distributions
will be payable by check mailed to the address of record of the persons
entitled to the distribution, and the transfer of the convertible preferred
securities will be registrable, and convertible preferred securities will be
exchangeable for convertible preferred securities of other denominations of a
like aggregate liquidation amount, at the corporate office of the property
trustee, or at the offices of any paying agent or transfer agent appointed by
the administrative trustees. In addition, if the convertible preferred
securities are issued in definitive form, the record dates for payment of
distributions will be the 15th day of the month in which the relevant
distribution date occurs. For a description of the terms of DTC arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Book-Entry Issuance" on page 83.
Upon the issuance of one or more global convertible preferred securities,
and the deposit of the global convertible preferred security with or on behalf
of DTC or its nominee, DTC or its nominee will credit, on its book-entry
registration and transfer system, the respective aggregate liquidation amounts
of the individual convertible preferred securities represented by the global
convertible preferred security to the designated accounts of persons that
participate in the DTC system. These participant accounts will be designated by
the dealers, underwriters or agents selling the convertible preferred
securities. Ownership of beneficial interests in a global convertible preferred
security will be limited to persons or entities having an account with DTC or
who may hold interests through participants. With respect to interests of any
person or entity that is a DTC participant, ownership of beneficial interests
in a global convertible preferred security will be shown on, and the transfer
of that ownership will be effected only through, records maintained by DTC or
its nominee. With respect to persons or entities who hold interests in a global
convertible preferred security through a participant, the interest and any
transfer of the interest will be shown only on the participant's records. The
laws of some states require that certain purchasers of securities take physical
delivery of securities in definitive form. These laws may impair the ability to
transfer beneficial interests in a global convertible preferred security.
So long as DTC or another depositary, or its nominee, is the registered
owner of the global convertible preferred security, the depositary or the
nominee, as the case may be, will be considered the sole owner or holder of the
convertible preferred securities represented by the global convertible
preferred security for all purposes under the trust agreement. Except as
described in this prospectus, owners of beneficial interests in a global
convertible preferred security will not be entitled to have any of the
individual convertible preferred securities represented by the global
convertible preferred security registered in their names, will not receive or
be entitled to receive physical delivery of any of the convertible preferred
securities in definitive form and will not be considered the owners or holders
of the convertible preferred securities under the trust agreement.
None of us, the property trustee, any paying agent or the securities
registrar for the convertible preferred securities will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the global convertible preferred
security representing the convertible preferred securities or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests.
We expect that DTC or its nominee, upon receipt of any payment of the
liquidation amount or distributions in respect of a global convertible
preferred security, immediately will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interest in
the aggregate liquidation amount of the global convertible preferred security
as shown on the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global convertible
preferred security held through the participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
The payments will be the responsibility of the participants.
67
<PAGE>
Payment and Paying Agency
Payments in respect of the convertible preferred securities will be made to
DTC, which will credit the relevant accounts of participants on the applicable
distribution dates, or, if any of the convertible preferred securities are not
held by DTC, the payments will be made by check mailed to the address of the
holder as listed on the register of holders of the convertible preferred
securities. The paying agent for the convertible preferred securities will
initially be the property trustee and any co-paying agent chosen by the
property trustee and acceptable to us and the administrative trustees. The
paying agent for the convertible preferred securities may resign as paying
agent upon 30 days' written notice to the administrative trustees, the property
trustee and us. If the property trustee no longer is the paying agent for the
convertible preferred securities, the administrative trustees will appoint a
successor to act as paying agent. The successor must be a bank or trust company
acceptable to us and the property trustee.
Registrar, Transfer Agent and Conversion Agent
The property trustee will act as the registrar, the transfer agent and the
conversion agent for the convertible preferred securities. Registration of
transfers of convertible preferred securities will be effected without charge
by or on behalf of the trust, but upon payment of any tax or other governmental
charges that may be imposed in connection with any transfer or exchange. The
trust and its registrar and transfer agent will not be required to register or
cause to be registered the transfer of convertible preferred securities after
they have been called for redemption.
Information Concerning the Property Trustee
The property trustee undertakes to perform only the duties set forth in the
trust agreement. After the occurrence of an event of default that is
continuing, the property trustee must exercise the same degree of care and
skill as a prudent person exercises or uses in the conduct of its own affairs.
The property trustee is under no obligation to exercise any of the powers
vested in it by the trust agreement at the request of any holder of convertible
preferred securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred. If no event of default
under the trust agreement has occurred and is continuing and the property
trustee is required to decide between alternative causes of action, construe
ambiguous or inconsistent provisions in the trust agreement or is unsure of the
application of any provision of the trust agreement, and the matter is not one
on which holders of convertible preferred securities are entitled to vote upon,
then the property trustee will take the action directed in writing by us. If
the property trustee is not so directed, then it will take the action it deems
advisable and in the best interests of the holders of the trust securities and
will have no liability except for its own bad faith, negligence or willful
misconduct.
Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that:
. the trust will not be deemed to be an "investment company" required to be
registered under Investment Company Act;
. the trust will not be classified as an association taxable as a
corporation for federal income tax purposes; and
. the convertible debentures will be treated as indebtedness of Irwin for
federal income tax purposes.
68
<PAGE>
In this regard, we and the administrative trustees are authorized to take any
action not inconsistent with applicable law, the certificate of trust or the
trust agreement, that we and the administrative trustees determine to be
necessary or desirable for these purposes.
The administrative trustees are required to use their best efforts to
maintain the listing of the convertible preferred securities on the Nasdaq
National Market or a national securities exchange, but this requirement will
not prevent us from redeeming all or a portion of the convertible preferred
securities in accordance with the trust agreement.
Holders of the convertible preferred securities have no preemptive or
similar rights. The trust agreement and the trust securities will be governed
by Delaware law.
Description of the Convertible Debentures
Concurrently with the issuance of the convertible preferred securities, the
trust will invest the proceeds from the sale of the trust securities in the
convertible debentures issued by us. The convertible debentures will be issued
as unsecured debt under the indenture between us and Wilmington Trust Company,
as indenture trustee. The indenture will be qualified under the Trust Indenture
Act.
The following discussion is subject to, and is qualified in its entirety by
reference to, the indenture and to the Trust Indenture Act. We urge prospective
investors to read the form of the indenture, which is filed as an exhibit to
the registration statement of which this prospectus forms a part.
General
The convertible debentures will be limited in aggregate principal amount to
$46,391,775, or $53,350,525 if the underwriters' over-allotment option is
exercised in full. This amount represents the sum of the aggregate stated
liquidation amounts of the trust securities. The convertible debentures will
bear interest at the annual rate of % of the principal amount. The interest
will be payable quarterly on March 31, June 30, September 30 and December 31 of
each year, beginning December 31, 2000, to the person in whose name each
convertible debenture is registered at the close of business on the 15th day of
the last month of the calendar quarter. It is anticipated that, until the
liquidation, if any, of the trust, the convertible debentures will be held in
the name of the property trustee in trust for the benefit of the holders of the
trust securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. If any date on which interest is
payable on the convertible debentures is not a business day, then payment of
interest will be made on the next day that is a business day without any
additional interest or other payment in respect of the delay. However, if the
next business day is in the next calendar year, payment of interest will be
made on the immediately preceding business day. Accrued interest that is not
paid on the applicable interest payment date will bear additional interest on
the amount due at the annual rate of %, compounded quarterly.
The convertible debentures will mature on September 30, 2030, the stated
maturity date. We may shorten this date once at any time to any date not
earlier than September 30, 2005, subject to the prior approval of the Federal
Reserve, if required.
We will give notice to the indenture trustee and the holders of the
convertible debentures, no more than 180 days and no less than 30 days prior to
the effectiveness of any change in the stated maturity date. We will not have
the right to redeem the convertible debentures from the trust until after
September 30, 2005, except if (a) a Tax Event, an Investment Company Event or a
Capital Treatment Event, which terms are defined on page 59, has occurred, or
(b) we pay a specific redemption premium, provided that our common stock price
exceeds the conversion price of the convertible preferred securities by at
least 125% for a certain period of time, or (c)
69
<PAGE>
we repurchase convertible preferred securities in the market, in which case we
can elect to redeem convertible debentures specifically in exchange for a like
amount of convertible preferred securities owned by us plus a proportionate
amount of common securities.
The convertible debentures will be unsecured and will rank junior to all of
our senior and subordinated debt, including indebtedness we may incur in the
future, and will be further subordinated to any debt of ours issued in
connection with trust preferred securities intended to qualify for "Tier 1"
capital treatment unless those debt securities are also convertible into our
common stock. Because we are a holding company, our right to participate in any
distribution of assets of any of our subsidiaries, upon any subsidiary's
liquidation or reorganization or otherwise, and thus the ability of holders of
the convertible debentures to benefit indirectly from any distribution by a
subsidiary, is subject to the prior claim of creditors of the subsidiary,
except to the extent that we may be recognized as a creditor of the subsidiary.
The convertible debentures will, therefore, be effectively subordinated to all
existing and future liabilities of our subsidiaries, and holders of convertible
debentures should look only to our assets for payment. The indenture does not
limit our ability to incur or issue secured or unsecured senior and junior
debt. See "--Subordination" on page 73.
The indenture does not contain provisions that afford holders of the
convertible debentures protection in the event of a highly leveraged
transaction or other similar transaction involving us, nor does it require us
to maintain or achieve any financial performance levels or to obtain or
maintain any credit rating on the convertible debentures.
Option to Extend Interest Payment Period
As long as no event of default under the indenture has occurred and is
continuing, we have the right under the indenture to defer the payment of
interest on the convertible debentures at any time for a period not exceeding
20 consecutive quarters. However, no extension period may extend beyond the
stated maturity of the convertible debentures or end on a date other than a
date interest is normally due. At the end of an extension period, we must pay
all interest then accrued and unpaid, together with interest thereon at the
annual rate of %, compounded quarterly. During an extension period, interest
will continue to accrue and holders of convertible debentures, or the holders
of convertible preferred securities if they are then outstanding, will be
required to accrue and recognize as income for federal income tax purposes the
accrued but unpaid interest amounts in the year in which such amounts accrued.
See "--Interest Payment Period and Original Issue Discount" on page 88.
During an extension period, we may not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock (other than stock dividends, non-cash dividends in connection with
the implementation of a shareholder rights plan, purchases of common
stock in connection with employee benefit plans or in connection with the
reclassification of any class of capital stock into another class of
capital stock) or allow any of our subsidiaries to do the same with
respect to their capital stock (other than payment of dividends or
distributions to us);
. make or allow any of our subsidiaries to make any payment of principal,
interest or premium on, or repay, repurchase or redeem any debt
securities issued by us that rank equally with or junior to the
convertible debentures;
. make or allow any of our subsidiaries to make any guarantee payments with
respect to any other guarantee by us of any other debt securities of any
of our subsidiaries if the guarantee ranks equally with or junior to the
convertible debentures (other than payments under the guarantee); or
. redeem, purchase or acquire less than all of the convertible debentures
or any of the convertible preferred securities.
70
<PAGE>
Prior to the termination of any extension period, so long as no event of
default under the indenture is continuing, we may further defer the payment of
interest subject to the above stated requirements. Upon the termination of any
extension period and the payment of all amounts then due, we may elect to begin
a new extension period at any time. We do not currently intend to exercise our
right to defer payments of interest on the convertible debentures.
We must give the property trustee, the administrative trustees and the
indenture trustee notice of our election of an extension period at least two
business days prior to the earlier of (a) the next date on which distributions
on the trust securities would have been payable except for the election to
begin an extension period, or (b) the date we are required to give notice of
the record date, or the date the distributions are payable, to the Nasdaq
National Market, or other applicable self-regulatory organization, or to
holders of the convertible preferred securities, but in any event at least one
business day prior to the record date.
Other than as described above, there is no limitation on the number of times
that we may elect to begin an extension period.
Additional Sums to be Paid as a Result of Additional Taxes
If the trust is required to pay any additional taxes, duties, assessments or
other governmental charges as a result of the occurrence of a Tax Event, we
will pay as additional interest on the convertible debentures any amounts which
may be required so that the net amounts received and retained by the trust
after paying any additional taxes, duties, assessments or other governmental
charges will not be less than the amounts the trust would have received had the
additional taxes, duties, assessments or other governmental charges not been
imposed.
Redemption
Subject to prior approval of the Federal Reserve, if required, we may redeem
the convertible debentures prior to maturity without payment of premium:
. on or after September 30, 2005, in whole at any time or in part from time
to time; or
. in whole at any time within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event; or
. at any time, and from time to time, to the extent of any convertible
preferred securities we purchase, plus a proportionate amount of the
common securities we hold.
In each case, we will pay a redemption price equal to the accrued and unpaid
interest on the convertible debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount of the redeemed convertible
debentures.
In certain circumstances, we may also redeem the convertible debentures
prior to September 30, 2005 if we pay a redemption premium, as follows:
. on or after September 30, 2003 but before September 30, 2004, for an
amount equal to % of the principal amount to be redeemed, plus any
accrued and unpaid interest on the convertible debentures to the date of
such redemption; and
. on or after September 30, 2004 but before September 30, 2005, for an
amount equal to % of the principal amount to be redeemed, plus any
accrued and unpaid interest on the convertible debentures to the date of
such redemption.
71
<PAGE>
Except in the special events described above, we will only have the right to
redeem prior to September 30, 2005, if the price of our common stock has been
at least 125% of the conversion price of the convertible preferred securities
for a period of 20 consecutive trading days ending within five business days of
the date of notice of redemption.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of convertible debentures to
be redeemed at its registered address. Redemption of less than all outstanding
convertible debentures must be effected proportionately, by lot or in any other
manner deemed to be fair and appropriate by the indenture trustee. Unless we
default in payment of the redemption price for the convertible debentures, on
and after the redemption date interest will no longer accrue on the convertible
debentures or the portions of the convertible debentures called for redemption.
The convertible debentures will not be subject to any sinking fund.
Distribution Upon Liquidation
As described above in "--Liquidation Distribution Upon Termination" on page
61, under certain circumstances and with the Federal Reserve's approval,
convertible debentures may be distributed to the holders of the trust
securities in liquidation of the trust after satisfaction of liabilities to
creditors of the trust. If this occurs, we will use our best efforts to list
the convertible debentures on the Nasdaq National Market or other stock
exchange or national quotation system on which the convertible preferred
securities are then listed, if any. There can be no assurance as to the market
price of any convertible debentures that may be distributed to the holders of
convertible preferred securities.
Restrictions on Payments
We are restricted from making certain payments (as described below) if we
have chosen to defer payment of interest on the convertible debentures, if an
event of default has occurred and is continuing under the indenture, or if we
are in default with respect to our obligations under the guarantee.
If any of these events occur, we will not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock (other than stock dividends, non-cash dividends in
connection with the implementation of a shareholder rights plan,
purchases of common stock in connection with employee benefit plans or in
connection with the reclassification of any class of our capital stock
into another class of capital stock) or allow any of our subsidiaries to
do the same with respect to their capital stock (other than payment of
dividends or distributions to us);
. make or allow any of our subsidiaries to make any payment of principal,
interest or premium on, or repay or repurchase or redeem any of our debt
securities that rank equally with or junior to the convertible
debentures;
. make or allow any of our subsidiaries to make any guarantee payments with
respect to any guarantee by us of the debt securities of any of our
subsidiaries if the guarantee ranks equally with or junior to the
convertible debentures (other than payments under the guarantee with
respect to the convertible preferred securities); or
. redeem, purchase or acquire less than all of the convertible debentures
or any of the convertible preferred securities.
72
<PAGE>
Subordination
The convertible debentures are subordinated and junior in right of payment
to all of our senior and subordinated debt, as defined below. Upon any payment
or distribution of assets to creditors upon any liquidation, dissolution,
winding up or reorganization of Irwin, whether voluntary or involuntary in
bankruptcy, insolvency, receivership or other proceedings in connection with
any insolvency or bankruptcy proceedings, the holders of our senior and
subordinated debt will first be entitled to receive payment in full of
principal and interest before the holders of convertible debentures will be
entitled to receive or retain any payment in respect of the convertible
debentures.
If the maturity of any convertible debentures is accelerated, the holders of
all of our senior and subordinated debt outstanding at the time of the
acceleration will also be entitled to first receive payment in full of all
amounts due to them, including any amounts due upon acceleration, before the
holders of the convertible debentures will be entitled to receive or retain any
principal or interest payments on the convertible debentures.
No payments of principal or interest on the convertible debentures may be
made if there has occurred and is continuing a default in any payment with
respect to any of our senior or subordinated debt or an event of default with
respect to any of our senior or subordinated debt resulting in the acceleration
of the maturity of the senior or subordinated debt, or if any judicial
proceeding is pending with respect to any default.
The term "debt" means, with respect to any person, whether recourse is to
all or a portion of the assets of the person and whether or not contingent:
. every obligation of the person for money borrowed;
. every obligation of the person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
. every reimbursement obligation of the person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account
of the person;
. every obligation of the person issued or assumed as the deferred purchase
price of property or services, excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business;
. every capital lease obligation of the person; and
. every obligation of the type referred to in the first five points of
another person and all dividends of another person the payment of which,
in either case, the first person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
The term "senior debt" means the principal of, and premium and interest,
including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us, on, debt, whether incurred on
or prior to the date of the indenture or incurred after the date. However,
senior debt will not be deemed to include:
. any debt where it is provided in the instrument creating the debt that
the obligations are not superior in right of payment to the convertible
debentures or to other debt which is equal with, or subordinated to, the
convertible debentures;
. any of our debt that when incurred and without regard to any election
under the federal bankruptcy laws, was without recourse to us;
. any debt of ours to any of our subsidiaries;
73
<PAGE>
. any debt to any of our employees;
. any debt that by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of the debt by the holders of
the convertible debentures as a result of the subordination provisions of
the indenture would be greater than they otherwise would have been as a
result of any obligation of the holders to pay amounts over to the
obligees on the trade accounts payable or accrued liabilities arising in
the ordinary course of business as a result of subordination provisions
to which the debt is subject; and
. debt which constitutes subordinated debt, including our 9.25%
Subordinated Debentures due 2027, issued to IFC Capital Trust I and the
% Junior Subordinated Debentures to be held by IFC Capital Trust II.
The term "subordinated debt" means the principal of, and premium and
interest, including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us, on, debt. Except as described
below, subordinated debt includes debt incurred on or prior to the date of the
indenture or thereafter incurred, which is by its terms expressly provided to
be junior and subordinate to other debt of ours. For purposes of the
convertible debentures, subordinated debt also includes any debt of ours under
debt securities (and guarantees in respect of these debt securities) initially
issued to any trust, or a trustee of a trust, partnership or other entity
affiliated with us that is, directly or indirectly, our financing subsidiary in
connection with the issuance by that entity of preferred securities or other
securities which are intended to qualify for "Tier 1" capital treatment, such
as the approximately $50 million of 9.25% Subordinated Debentures due 2027 that
we issued to IFC Capital Trust I in 1997 and the % Junior Subordinated
Debentures that we will be issuing to IFC Capital Trust II, unless those debt
securities are also convertible into our common stock. Subordinated debt will
not be deemed to include:
. any of our debt which when incurred and without regard to any election
under the federal bankruptcy laws was without recourse to us;
. any debt of ours to any of our subsidiaries;
. any debt to any of our employees;
. any debt which by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of the debt by the holders of
the convertible debentures as a result of the subordination provisions of
the indenture would be greater than they otherwise would have been as a
result of any obligation of the holders to pay amounts over to the
obligees on the trade accounts payable or accrued liabilities arising in
the ordinary course of business as a result of subordination provisions
to which the debt is subject;
. debt which constitutes senior debt.
We expect from time to time to incur additional indebtedness, and there is
no limitation under the indenture on the amount of indebtedness we may incur.
We had consolidated senior and subordinated debt of $82.4 million outstanding
principal amount at September 30, 2000, plus, for purposes of the convertible
preferred securities, the $50 million of outstanding indebtedness related to
the trust preferred securities issued to IFC Capital Trust I.
Conversion of Convertible Debentures
The convertible debentures will be convertible into common stock at the
option of the holders thereof at any time on or after January 31, 2001, and
prior to p.m. (Eastern time) on the business day immediately preceding
the date of repayment of such convertible debentures, whether at stated
maturity or upon redemption
74
<PAGE>
(either at the option of Irwin or pursuant to a Tax Event, an Investment
Company Event or a Capital Treatment Event), at the conversion ratio as
adjusted, as applicable, as described under "Description of Convertible
Preferred Securities--Conversion Rights" on page 55. The trust will covenant
not to convert convertible debentures held by it except pursuant to a notice of
conversion delivered to the conversion agent by a holder of convertible
preferred securities. Upon surrender of a convertible preferred security to the
conversion agent for conversion, the trust will distribute $25 principal amount
of the convertible debentures per convertible preferred security to the
conversion agent on behalf of the holder of the convertible preferred
securities so converted whereupon the conversion agent will convert such
convertible debentures to common stock on behalf of such holder. Irwin's
delivery to the holders of the convertible debentures (through the conversion
agent) of the fixed number of shares of common stock into which the debentures
are convertible (together with the cash payment, if any, in lieu of fractional
shares) will be deemed to satisfy our obligation to pay the principal amount of
the convertible debentures so converted, and the accrued and unpaid interest
thereupon attributable to the period from the last date to which interest has
been paid or duly provided for; provided, however, that if any debentures are
converted after a record date for payment of interest and on or before the
related interest payment date, the interest payable on the related interest
payment date with respect to such convertible debentures will be paid to the
trust (which will distribute an equivalent amount to the holder of such
convertible preferred security on the related record date) or other holder of
convertible debentures, as the case may be, despite such conversion, and the
holder of the convertible debentures must deliver an amount equal to the
interest payable on the related interest payment date prior to receiving the
shares of common stock; provided, further that if any convertible debentures
are delivered for conversion during an extension period by a holder after
receiving a notice of redemption from the property trustee, we will be required
to pay to the trust or other holder of the converted debentures all accrued and
unpaid interest, if any, on such convertible debentures through the date of
conversion which amount will be simultaneously distributed to the holders of
the convertible preferred securities, if any, in respect of which such
convertible debentures were delivered. Except as provided above, neither the
trust nor Irwin will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid interest, whether or not in arrears, on
the convertible debentures surrendered for conversion.
Payment and Paying Agents
Generally, payment of principal of and interest on the convertible
debentures will be made at the office of the indenture trustee in Wilmington,
Delaware. However, we have the option to make payment of any interest by (a)
check mailed to the address of the person entitled to payment at the address
listed in the register of holders of the convertible debentures, or (b) wire
transfer to an account maintained by the person entitled thereto as specified
in the register of holders of the convertible debentures, provided that proper
transfer instructions have been received by the applicable record date. Payment
of any interest on convertible debentures will be made to the person in whose
name the convertible debenture is registered at the close of business on the
regular record date for the interest payment, except in the case of defaulted
interest.
Any moneys deposited with the indenture trustee or any paying agent for the
convertible debentures, or then held by us in trust, for the payment of the
principal of or interest on the convertible debentures and remaining unclaimed
for two years after the principal or interest has become due and payable, will
be repaid to us on September 30 of each year. If we hold any of this money in
trust, then it will be discharged from the trust to us and the holder of the
convertible debenture will thereafter look, as a general unsecured creditor,
only to us for payment.
Registrar and Transfer Agent
The indenture trustee will act as the registrar and the transfer agent for
the convertible debentures. Convertible debentures may be presented for
registration of transfer, with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed, at the office of
the registrar. Provided that we maintain a transfer agent in Wilmington,
Delaware, we may rescind the designation of any transfer agent or
75
<PAGE>
approve a change in the location through which any transfer agent acts. We may
at any time designate additional transfer agents with respect to the
convertible debentures.
If we redeem any of the convertible debentures, neither we nor the indenture
trustee will be required to (a) issue, register the transfer of or exchange any
convertible debentures during a period beginning at the opening of business 15
days before the day of the mailing of and ending at the close of business on
the day of the mailing of the relevant notice of redemption, or (b) transfer or
exchange any convertible debentures so selected for redemption, except, in the
case of any convertible debentures being redeemed in part, any portion not to
be redeemed.
Modification of Indenture
We and the indenture trustee may, from time to time without the consent of
the holders of the convertible debentures, amend, waive our rights under or
supplement the indenture for purposes which do not materially adversely affect
the rights of the holders of the convertible debentures. Other changes may be
made by us and the indenture trustee with the consent of the holders of a
majority in principal amount of the outstanding convertible debentures.
However, without the consent of the holder of each outstanding convertible
debenture affected by the proposed modification, no modification may:
. extend the maturity date of the convertible debentures; or
. reduce the principal amount or the rate or extend the time of payment of
interest; or
. reduce the percentage of principal amount of convertible debentures
required to amend the indenture.
As long as any of the convertible preferred securities remain outstanding, no
modification of the indenture may be made that requires the consent of the
holders of the convertible debentures, no termination of the indenture may
occur, and no waiver of any event of default under the indenture may be
effective, without the prior consent of the holders of a majority of the
aggregate liquidation amount of the convertible preferred securities.
Debenture Events of Default
The indenture provides that any one or more of the following events with
respect to the convertible debentures that has occurred and is continuing
constitutes an event of default under the indenture:
. our failure to pay any interest on the convertible debentures for 30 days
after the due date, except where we have properly deferred the interest
payment;
. our failure to pay any principal on the convertible debentures when due
whether at maturity, upon redemption or otherwise;
. our failure to observe or perform in any material respect any other
covenants or agreements contained in the indenture for 90 days after
written notice to us from the indenture trustee or the holders of at
least 25% in aggregate outstanding principal amount of the convertible
debentures; or
. our bankruptcy, insolvency or reorganization or dissolution of the trust.
The holders of a majority of the aggregate outstanding principal amount of
the convertible debentures have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the indenture trustee.
The indenture trustee, or the holders of at least 25% in aggregate outstanding
principal amount of the convertible debentures, may declare the principal due
and payable immediately upon an event of default under the indenture. The
holders of a majority of the outstanding principal amount of the convertible
debentures may rescind and annul the declaration and waive the default if the
default has been cured and a sum
76
<PAGE>
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the indenture trustee.
The holders may not annul the declaration and waive a default if the default is
the non-payment of the principal of the convertible debentures which has become
due solely by the acceleration. Should the holders of the convertible
debentures fail to annul the declaration and waive the default, the holders of
at least 25% in aggregate liquidation amount of the convertible preferred
securities will have this right.
If an event of default under the indenture has occurred and is continuing,
the property trustee will have the right to declare the principal of and the
interest on the convertible debentures, and any other amounts payable under the
indenture, to be immediately due and payable and to enforce its other rights as
a creditor with respect to the convertible debentures.
We are required to file annually with the indenture trustee a certificate as
to whether or not we are in compliance with all of the conditions and covenants
applicable to us under the indenture.
Enforcement of Certain Rights by Holders of the Convertible Preferred
Securities
If an event of default under the indenture has occurred and is continuing
and the event is attributable to the failure by us to pay interest on or
principal of the convertible debentures on the date on which the payment is due
and payable, then a holder of convertible preferred securities may institute a
direct action against us to compel us to make the payment. We may not amend the
indenture to remove the foregoing right to bring a direct action without the
prior written consent of all of the holders of the convertible preferred
securities. If the right to bring a direct action is removed, the trust may
become subject to the reporting obligations under the Securities Exchange Act
of 1934.
The holders of the convertible preferred securities will not be able to
exercise directly any remedies, other than those set forth in the preceding
paragraph, available to the holders of the convertible debentures unless there
has been an event of default under the trust agreement.
Consolidation, Merger, Sale of Assets and Other Transactions
We may not consolidate with or merge into any other entity or convey or
transfer our properties and assets substantially as an entirety to any entity,
and no entity may be consolidated with or merged into us or sell, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to us, unless:
. if we consolidate with or merge into another person or convey or transfer
our properties and assets substantially as an entirety to any person, the
successor person is organized under the laws of the United States or any
state or the District of Columbia, and the successor person expressly
assumes by supplemental indenture our obligations on the convertible
debentures, and the ultimate parent entity of the successor entity
expressly assumes our obligations under the guarantee, to the extent the
convertible preferred securities are then outstanding;
. immediately after the transaction, no event of default under the
indenture, and no event which, after notice or lapse of time, or both,
would become an event of default under the indenture, has occurred and is
continuing; and
. other conditions as prescribed in the indenture are met.
Under certain circumstances, if we consolidate or merge with another entity,
or transfer or sell substantially all of our assets to another entity, such
transaction may be considered to involve a replacement of the trust, and the
provisions of the trust agreement relating to a replacement of the trust would
apply to such transaction. See "--Mergers, Consolidations, Amalgamations or
Replacements of the Trust" on page 64.
77
<PAGE>
Satisfaction and Discharge
The indenture will cease to be of further effect and we will be deemed to
have satisfied and discharged our obligations under the indenture when all
convertible debentures not previously delivered to the indenture trustee for
cancellation:
. have become due and payable;
. will become due and payable at their stated maturity within one year or
are to be called for redemption within one year, and we deposit or cause
to be deposited with the indenture trustee funds, in trust, for the
purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the convertible debentures not previously delivered to
the indenture trustee for cancellation, for the principal and interest
due to the date of the deposit or to the stated maturity or redemption
date, as the case may be.
We may still be required to provide officers' certificates, opinions of
counsel and pay fees and expenses due after these events occur.
Governing Law
The indenture and the convertible debentures will be governed by and
construed in accordance with Indiana law.
Information Concerning the Indenture Trustee
The indenture trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to these provisions, the indenture trustee is under no obligation to
exercise any of the powers vested in it by the indenture at the request of any
holder of convertible debentures, unless offered reasonable security or
indemnity by the holder against the costs, expenses and liabilities which might
be incurred. The indenture trustee is not required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of its
duties if the indenture trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
Miscellaneous
We have agreed, pursuant to the indenture, for so long as convertible
preferred securities remain outstanding:
. to maintain directly or indirectly 100% ownership of the common
securities of the trust, except that certain successors that are
permitted pursuant to the indenture may succeed to our ownership of the
common securities;
. not to voluntarily terminate, wind up or liquidate the trust without
prior approval of the Federal Reserve, if required;
. to use our reasonable efforts to cause the trust (a) to remain a business
trust (and to avoid involuntary termination, winding up or liquidation),
except in connection with a distribution of convertible debentures, the
redemption of all of the trust securities of the trust or mergers,
consolidations or amalgamations, each as permitted by the trust
agreement; and (b) to otherwise continue not to be treated as an
association taxable as a corporation or partnership for federal income
tax purposes; and
. to use our reasonable efforts to cause each holder of trust securities to
be treated as owning an individual beneficial interest in the convertible
debentures.
78
<PAGE>
DESCRIPTION OF THE GUARANTEES
The preferred securities guarantee agreement will be executed and delivered
by us concurrently with the issuance of the preferred securities for the
benefit of the holders of the preferred securities. The convertible preferred
securities guarantee agreement will be executed and delivered by us
concurrently with the issuance of the convertible preferred securities for the
benefit of the holders of the convertible preferred securities. Each guarantee
agreement will be qualified as an indenture under the Trust Indenture Act.
Wilmington Trust Company, the guarantee trustee, will act as trustee for
purposes of complying with the provisions of the Trust Indenture Act, and will
also hold each guarantee for the benefit of the holders of the preferred
securities and the convertible preferred securities, as the case may be.
Prospective investors are urged to read the form of the guarantee agreements,
which have been filed as an exhibit to the registration statement of which this
prospectus forms a part.
General
We agree to pay in full on a subordinated basis, to the extent described in
the guarantee agreements, the guarantee payments (as defined below) to the
holders of the preferred securities and the convertible preferred securities,
as the case may be, as and when due, regardless of any defense, right of set-
off or counterclaim that the trust may have or assert other than the defense of
payment.
The following payments with respect to the preferred securities and the
convertible preferred securities are called the "guarantee payments" and, to
the extent not paid or made by the applicable trust and to the extent that the
applicable trust has funds available for those distributions, will be subject
to the applicable guarantee:
. any accumulated and unpaid distributions required to be paid on the
preferred securities or the convertible preferred securities, as the case
may be;
. with respect to any preferred securities or convertible preferred
securities called for redemption, as the case may be, the redemption
price; and
. upon a voluntary or involuntary dissolution, winding up or termination of
the applicable trust (other than in connection with the distribution of
debentures to the holders of preferred securities in exchange for
preferred securities or the distribution of convertible debentures to the
holders of convertible preferred securities, as the case may be), the
lesser of:
(a) the amount of the liquidation distribution; and
(b) the amount of assets of the applicable trust remaining available
for distribution to holders of preferred securities or convertible
securities, as the case may be, in liquidation of the applicable
trust.
We may satisfy our obligations to make a guarantee payment by making a
direct payment of the required amounts to the holders of the preferred
securities or the convertible preferred securities, as the case may be, or by
causing the applicable trust to pay the amounts to the applicable holders.
The guarantee agreements are each a guarantee, on a subordinated basis, of
the guarantee payments, but the guarantees only apply to the extent the
applicable trust has funds available for those distributions. If we do not make
interest payments on the debentures purchased by the applicable trust, the
applicable trust will not have funds available to make the distributions and
will not pay distributions on the preferred securities or the convertible
preferred securities, as the case may be.
79
<PAGE>
Status of the Guarantees
Each guarantee constitutes our unsecured obligation that ranks subordinate
and junior in right of payment to all of our senior and subordinated debt in
the same manner as the debentures and the convertible debentures. We expect to
incur additional indebtedness in the future, although we have no specific plans
in this regard presently, and neither of the indentures nor the trust
agreements limits the amounts of the obligations that we may incur.
Each guarantee constitutes a guarantee of payment and not of collection. If
we fail to make guarantee payments when required, holders of preferred
securities or convertible preferred securities, as the case may be, may
institute a legal proceeding directly against us to enforce their rights under
the applicable guarantee without first instituting a legal proceeding against
any other person or entity.
Neither guarantee will be discharged except by payment of the applicable
guarantee payments in full to the extent not paid by the applicable trust or
upon distribution of the debentures to the holders of the preferred securities
or convertible preferred securities, as the case may be. Because we are a bank
holding company, our right to participate in any distribution of assets of any
subsidiary upon the subsidiary's liquidation or reorganization or otherwise is
subject to the prior claims of creditors of that subsidiary, except to the
extent we may be recognized as a creditor of that subsidiary. Our obligations
under each guarantee, therefore, will be effectively subordinated to all
existing and future liabilities of our subsidiaries, and claimants should look
only to our assets for payments under the guarantees.
Amendments
Except with respect to any changes that do not materially adversely affect
the rights of holders of the preferred securities or the convertible preferred
securities, as the case may be, in which case no vote will be required, neither
guarantee may be amended without the prior approval of the holders of a
majority of the aggregate liquidation amount of the outstanding preferred
securities or the convertible preferred securities, as the case may be.
Events of Default; Remedies
An event of default under the respective guarantee agreement will occur upon
our failure to make any required guarantee payments or to perform any other
obligations under the respective guarantee. The holders of a majority in
aggregate liquidation amount of the preferred securities or the convertible
preferred securities, as the case may be, will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the applicable guarantee trustee in respect of the applicable guarantee and may
direct the exercise of any power conferred upon the applicable guarantee
trustee under the applicable guarantee agreement.
Any holder of preferred securities or convertible preferred securities, as
the case may be, may institute and prosecute a legal proceeding directly
against us to enforce its rights under the applicable guarantee without first
instituting a legal proceeding against the applicable trust, the applicable
guarantee trustee or any other person or entity.
We are required to provide to the guarantee trustee annually a certificate
as to whether or not we are in compliance with all of the conditions and
covenants applicable to us under the guarantee agreement.
80
<PAGE>
Termination of the Guarantees
Each guarantee will terminate and be of no further force and effect upon:
. full payment of the redemption price of the preferred securities or
convertible preferred securities, as the case may be;
. full payment of the amounts payable upon liquidation of the applicable
trust; or
. distribution of the debentures to the holders of the preferred securities
or the convertible preferred securities, as the case may be.
If at any time any holder of the preferred securities or the convertible
preferred securities, as the case may be, must restore payment of any sums paid
under the preferred securities or the convertible preferred securities, as the
case may be, or the applicable guarantee, the applicable guarantee will
continue to be effective or will be reinstated with respect to such amounts.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance of
our default in performance of the guarantee, undertakes to perform only those
duties as are specifically set forth in the guarantee. When an event of default
has occurred and is continuing, the guarantee trustee must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to those provisions, the guarantee
trustee is under no obligation to exercise any of the powers vested in it by
the applicable guarantee at the request of any holder of any preferred
securities or any convertible preferred securities, as the case may be, unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
Expense Agreements
We will, pursuant to the separate Agreement as to Expenses and Liabilities
entered into by us and the trusts under the respective trust agreements,
irrevocably and unconditionally guarantee to each person or entity to whom the
applicable trust becomes indebted or liable, the full payment of any costs,
expenses or liabilities of the applicable trust, other than obligations of the
trust to pay to the holders of the preferred securities or other similar
interests in the trust of the amounts due to the holders pursuant to the terms
of the preferred securities or other similar interests, as the case may be.
Third party creditors of the trust may proceed directly against us under the
expense agreement, regardless of whether they had notice of the expense
agreement.
Governing Law
Each guarantee will be governed by Indiana law.
RELATIONSHIP AMONG THE PREFERRED SECURITIES AND THE
DEBENTURES, THE CONVERTIBLE PREFERRED SECURITIES
AND THE CONVERTIBLE DEBENTURES AND THE GUARANTEES
Full and Unconditional Guarantee
We irrevocably guarantee, as and to the extent described in this prospectus,
payments of distributions and other amounts due on the preferred securities and
the convertible preferred securities, as the case may be, to the extent the
respective trust has funds available for the payment of these amounts. We and
the applicable trust
81
<PAGE>
believe that, taken together, our obligations under the debentures, the
convertible debentures, the indentures, the trust agreements, the expense
agreements and the guarantee agreements provide, in the aggregate, a full,
irrevocable and unconditional guarantee, on a subordinated basis, of payment of
distributions and other amounts due on the preferred securities and the
convertible preferred securities, as the case may be. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes a guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the obligations of each trust under the preferred
securities or the convertible preferred securities, as the case may be.
If and to the extent that we do not make payments on the debentures or the
convertible debentures, the applicable trust will not pay distributions or
other amounts due on the preferred securities or the convertible preferred
securities, as the case may be. The guarantees do not cover payment of
distributions when the applicable trust does not have sufficient funds to pay
the distributions. In this event, the remedy of a holder of preferred
securities or convertible preferred securities, as the case may be, is to
institute a legal proceeding directly against us for enforcement of payment of
the distributions to the holder. Our obligations under the guarantees are
subordinated and junior in right of payment to all of our other indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
debentures and the convertible debentures, as the case may be, these payments
will be sufficient to cover distributions and other payments due on the
preferred securities or convertible preferred securities, as the case may be,
primarily because:
. the aggregate principal amount of the debentures and the convertible
debentures, as the case may be, will be equal to the sum of the aggregate
stated liquidation amount of the respective trust securities;
. the interest rate and interest and other payment dates on the debentures
and the convertible debentures as the case may be, will match the
distribution rate and distribution and other payment dates for the
preferred securities or convertible preferred securities, as the case may
be;
. we will pay for any and all costs, expenses and liabilities of each
trust, except the obligations of the applicable trust to pay to holders
of the preferred securities or convertible preferred securities, as the
case may be, the amounts due to the holders pursuant to the terms of the
preferred securities or convertible preferred securities, as the case may
be; and
. neither trust will engage in any activity that is not consistent with the
limited purposes of such trust.
Enforcement Rights of Holders of Preferred Securities and Convertible Preferred
Securities
A holder of any preferred security or convertible preferred security may
institute a legal proceeding directly against us to enforce its rights under
the applicable guarantee without first instituting a legal proceeding against
the respective guarantee trustee, the applicable trust or any other person. A
default or event of default under any of our senior or subordinated debt would
not constitute a default or event of default under either trust agreement. In
the event, however, of payment defaults under, or acceleration of, our senior
or subordinated debt, the subordination provisions of the indentures provide
that no payments may be made in respect of the debentures or the convertible
debentures, as the case may be, until the obligations have been paid in full or
any payment default has been cured or waived. Failure to make required payments
on the debentures or the convertible debentures, as the case may be, would
constitute an event of default under the applicable trust agreement.
82
<PAGE>
Limited Purpose of the Trusts
The preferred securities and the convertible preferred securities, as the
case may be, evidence preferred undivided beneficial interests in the assets of
the applicable trust. Each trust exists for the exclusive purposes of issuing
the trust securities, investing the proceeds thereof in debentures or
convertible debentures, as the case may be, and engaging in only those other
activities necessary, advisable or incidental thereto. A principal difference
between the rights of a holder of a preferred security or convertible preferred
security and the rights of a holder of a debenture or a convertible debenture
is that a holder of a debenture or a convertible debenture is entitled to
receive from us the principal amount of and interest accrued on debentures or
convertible debentures, as the case may be, held, while a holder of preferred
securities or convertible preferred securities, as the case may be, is entitled
to receive distributions from the applicable trust (or from us under the
applicable guarantee) if and to the extent the applicable trust has funds
available for the payment of the distributions.
Rights Upon Termination
Upon any voluntary or involuntary termination, winding-up or liquidation of
the applicable trust involving the liquidation of the debentures or convertible
debentures, as the case may be, the holders of the preferred securities or
convertible preferred securities, as the case may be, will be entitled to
receive, out of assets held by the applicable trust, the liquidation
distribution in cash.
Upon our voluntary or involuntary liquidation or bankruptcy, the property
trustee, as holder of the debentures or the convertible debentures, as the case
may be, would be a subordinated creditor of ours. Therefore, the property
trustee would be subordinated in right of payment to all of our senior and
subordinated debt, but is entitled to receive payment in full of principal and
interest before any of our shareholders receive payments or distributions.
Since we are the guarantor under the guarantees and have agreed to pay for all
costs, expenses and liabilities of each trust other than the obligations of the
applicable trust to pay to holders of the preferred securities or the
convertible preferred securities, as the case may be, the amounts due to the
holders pursuant to the terms of the preferred securities or the convertible
preferred securities, as the case may be, the positions of a holder of the
preferred securities or the convertible preferred securities, as the case may
be, and a holder of the debentures or the convertible debentures, as the case
may be, relative to our other creditors and to our shareholders in the event of
liquidation or bankruptcy are expected to be substantially the same.
BOOK-ENTRY ISSUANCE
General
DTC will act as securities depositary for each of the preferred securities
and the convertible preferred securities and may act as securities depositary
for all of the debentures and all of the convertible debentures in the event of
the distribution of the debentures to the holders of preferred securities or
the convertible debentures to the holders of the convertible preferred
securities, as the case may be. Except as described below, the preferred
securities and the convertible preferred securities will be issued only as
registered securities in the name of Cede & Co. (DTC's nominee). One or more
global preferred securities will be issued for the preferred securities and the
convertible preferred securities and will be deposited with DTC.
DTC is a limited purpose trust company organized under New York banking law,
a "banking organization" within the meaning of the New York banking law, 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 Section 17A of the Securities Exchange Act of 1934. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates.
83
<PAGE>
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its direct participants and by the New York Stock Exchange, the
American Stock Exchange and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to indirect participants, such
as securities brokers and dealers, banks and trust companies that clear through
or maintain custodial relationships with direct participants, either directly
or indirectly. The rules applicable to DTC and its participants are on file
with the SEC.
Purchases of preferred securities and convertible preferred securities
within the DTC system must be made by or through direct participants, which
will receive a credit for the preferred securities and convertible preferred
securities on DTC's records. The ownership interest of each actual purchaser of
each preferred security and convertible preferred security ("beneficial owner")
is in turn to be recorded on the direct and indirect participants' records.
Beneficial owners will not receive written confirmation from DTC of their
purchases, but beneficial owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the direct or indirect participants through which the beneficial
owners purchased preferred securities or convertible preferred security, as the
case may be. Transfers of ownership interests in the preferred securities or
convertible preferred securities, as the case may be, are to be accomplished by
entries made on the books of participants acting on behalf of beneficial
owners. Beneficial owners will not receive certificates representing their
ownership interest in preferred securities or convertible preferred securities,
as the case may be, except if use of the book-entry-only system for the
preferred securities or the convertible preferred securities is discontinued.
DTC will have no knowledge of the actual beneficial owners of the preferred
securities or the convertible preferred securities; DTC's records reflect only
the identity of the direct participants to whose accounts the preferred
securities or convertible preferred securities are credited, which may or may
not be the beneficial owners. The participants will remain responsible for
keeping account of their holdings on behalf of their customers.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be accurate, but we and the
trusts assume no responsibility for the accuracy thereof. Neither we nor the
trusts have any responsibility for the performance by DTC or its participants
of their respective obligations as described in this prospectus or under the
rules and procedures governing their respective operations.
Notices and Voting
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
and indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the preferred securities and the convertible preferred securities. If less than
all of the preferred securities or the convertible preferred securities, as the
case may be, are being redeemed, the amount to be redeemed will be determined
in accordance with the applicable trust agreement.
Although voting with respect to the preferred securities and the convertible
preferred securities is limited to the holders of record of the preferred
securities or the convertible preferred securities, as the case may be, in
those instances in which a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to preferred securities or convertible
preferred securities, as the case may be. Under its usual procedures, DTC would
mail an omnibus proxy to the property trustee as soon as possible after the
record date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights
to those direct participants to whose accounts
84
<PAGE>
the preferred securities or the convertible preferred securities, as the case
may be, are credited on the record date.
Distribution of Funds
The applicable property trustee will make distribution payments on the
preferred securities or the convertible preferred securities, as the case may
be, to DTC. DTC's practice is to credit direct participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on the payment date. Payments by participants to beneficial owners
will be governed by standing instructions and customary practices and will be
the responsibility of the participant and not of DTC, the property trustees,
the trusts or us, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of distributions to DTC is the
responsibility of the applicable property trustee, disbursement of the payments
to direct participants is the responsibility of DTC, and disbursements of the
payments to the beneficial owners is the responsibility of direct and indirect
participants.
Successor Depositaries and Termination of Book-Entry System
DTC may discontinue providing its services with respect to any of the
preferred securities or the convertible preferred securities at any time by
giving reasonable notice to the applicable property trustee or us. If no
successor securities depositary is obtained, definitive certificates
representing the preferred securities or the convertible preferred securities,
as the case may be, are required to be printed and delivered. We also have the
option to discontinue use of the system of book-entry transfers through DTC (or
a successor depositary). After an event of default under the applicable
indenture, the holders of a majority in liquidation amount of preferred
securities or convertible preferred securities, as the case may be, may
determine to discontinue the system of book-entry transfers through DTC. In
these events, definitive certificates for the preferred securities or the
convertible preferred securities, as the case may be, will be printed and
delivered.
DESCRIPTION OF CAPITAL STOCK
The following descriptions do not purport to be complete and are subject to,
and qualified in their entirety by reference to our Restated Articles of
Incorporation and our Code of By-laws, as amended to date.
Common Stock
We are authorized to issue 40,000,000 shares of common stock, no par value,
of which 21,004,316 shares were outstanding as of September 30, 2000. As of
September 30, 2000, 1,612,329 shares of common stock were reserved for issuance
upon the exercise of employee stock options (of which options to purchase an
aggregate of 1,209,871 shares of common stock were currently exercisable). The
outstanding shares of common stock currently are, and the shares of common
stock to be issued upon conversion of the convertible trust preferred
securities to be issued in the offering will be (when issued and delivered in
accordance with the terms and conditions of the conversion), fully paid and
non-assessable. Each share of common stock has the same relative rights as, and
is identical in all respects with, each other share of common stock. Each
holder of record of common stock is entitled to one vote per share on all
matters voted upon by our shareholders. Holders of shares of common stock have
no preemptive, redemption or cumulative voting rights. In the event of
liquidation, the holders of shares of common stock are entitled to share
ratably in any of our assets retained after payment in full of creditors and,
if any preferred stock is then authorized, issued and outstanding, after
payment to holders of such preferred stock but only to the extent of any
liquidation preference.
85
<PAGE>
Dividend Rights
Holders of the common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor, and
to receive pro rata any assets distributable to holders of the common stock
upon liquidation of Irwin.
Voting Rights
Holders of the common stock are entitled to vote for the election of
directors and upon all other matters, which may be submitted to a vote of
shareholders generally, with each share being entitled to one vote. The common
shareholders do not possess cumulative voting rights, which means that our
chairman, William Miller, who votes more than 50% of our common stock, can
elect all of our directors.
Common shareholders have no conversion rights or preemptive rights to
purchase additional securities that may be issued by us. There are no
redemption provisions applicable to our common stock and common shareholders
are not liable for any further capital call or assessment.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the company,
the holders of our common stock would be entitled to receive, after payment or
provision for payment of all our debts and liabilities, all of our assets
available for distribution. Holders of preferred stock may have a priority over
the holders of common stock in the event of any liquidation or dissolution.
Preferred Stock
Our Board of Directors is authorized, pursuant to our Restated Articles of
Incorporation, to issue 4,000,000 shares of preferred stock, no par value, in
one or more series with respect to which the Board of Directors, without
shareholder approval, may determine voting, conversion and other rights which
could adversely affect the rights of the holders of our common stock.
Currently, an aggregate of 333,330 shares of preferred stock have been
designated Convertible Preferred Stock, Series A, B, C or D, each of which
shares is convertible into, at a minimum, one share of common stock. Each
series relates to a particular geographic market of Irwin Union Bank and the
preferred shares will be convertible into a greater number of shares of common
stock if that banking office achieves specified deposit growth goals. In the
aggregate, the shares designated Series A, Series B, Series C and Series D
Convertible Preferred Stock would be convertible into a maximum of 120,420
shares of common stock, subject to adjustment in the event of certain capital
changes, such as stock splits, if all of the shares designated were to be
issued. Prior to conversion, we have the right to redeem the preferred shares
of each series for cash in an amount equal to the price at which we sold them.
The Board of Directors has authorized the designation of other similar series
of Convertible Preferred Stock as part of the Irwin Union Bank deposit
development program, up to a maximum number of shares of preferred stock
issuable under the program of 400,000 shares.
As of September 30, 2000, there were outstanding: 14,208 shares of Series A
Convertible Preferred Stock, 26,317 shares of Series B Convertible Preferred
Stock, 55,811 shares of Series C Convertible Preferred Stock, and no shares of
Series D Convertible Preferred Stock.
The following are the dividend rights, voting rights and liquidation rights
with respect to our Series A, B, C and D Convertible Preferred Stock.
86
<PAGE>
Dividend Rights
Holders of the Series A, B, C and D Convertible Preferred Stock are not
entitled to receive any dividends.
Voting Rights
Holders of the Series A, B, C and D Convertible Preferred Stock have no
voting rights except as may be required by the Indiana Business Corporation
Law.
Liquidation Rights
Prior to conversion into our common stock, each share of Series A, B, C and
D Convertible Preferred Stock will have a liquidation preference out of assets
available for distribution to equity holders equal to the per share purchase
price ($14.78125 for the shares currently outstanding of each of Series A,
Series B and Series C), prior to any distribution to holders of our common
stock, subject to certain adjustments to reflect changes in the capital
structure of Irwin. No shares of Series D have been sold yet.
FEDERAL INCOME TAX CONSEQUENCES
General
The following summary of the material federal income tax considerations
that may be relevant to the purchasers of preferred securities, insofar as the
discussion relates to matters of law and legal conclusions, represents the
opinion of Vedder, Price, Kaufman & Kammholz, counsel to Irwin and the trusts.
The conclusions expressed herein are based upon current provisions of the
Internal Revenue Code of 1986, as amended, regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change
at any time, with possible retroactive effect. Subsequent changes may cause
tax consequences to vary substantially from the consequences described below.
Furthermore, the authorities on which the following summary is based are
subject to various interpretations, and it is therefore possible that the
federal income tax treatment of the purchase, ownership and disposition of
preferred securities may differ from the treatment described below.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting purchasers of preferred securities.
Moreover, the discussion generally focuses on holders of preferred securities
who are individual citizens or residents of the United States and trust and
estates whose federal taxable income is taxed in the same manner as individual
citizens or residents of the United States, and who acquire preferred
securities on their original issue at their initial offering price and hold
preferred securities as capital assets. The discussion has only limited
application to dealers in securities, corporations, partnerships, or
nonresident aliens and does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as, for
example, banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-
exempt investors or persons that will hold the preferred securities as a
position in a "straddle," as part of a "synthetic security" or "hedge," as
part of a "conversion transaction" or other integrated investment, or as other
than a capital asset. The following discussion also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or beneficiaries of a
holder of preferred securities. Further, it does not include any description
of any alternative minimum tax consequences or the tax laws of any state or
local government or of any foreign government that may be applicable to the
preferred securities. Accordingly, each prospective investor should consult,
and should rely exclusively on, the investor's own tax advisors in analyzing
the federal, state, local and foreign tax consequences of the purchase,
ownership or disposition of preferred securities.
87
<PAGE>
Except as specifically stated below, the federal income tax consequences
described below with respect to the debentures, the preferred securities and
holders of the preferred securities shall apply in the same manner with respect
to the convertible debentures, the convertible preferred securities and holders
of the convertible preferred securities.
Classification of the Debentures
Based on advice of counsel, we intend to take the position that the
debentures will be classified for federal income tax purposes as indebtedness
of Irwin under current law, and, by acceptance of a preferred security, you, as
a holder, covenant to treat the debentures as indebtedness and the preferred
securities as evidence of an indirect beneficial ownership interest in the
debentures. No assurance can be given, however, that this position will not be
challenged by the Internal Revenue Service ("IRS") or, if challenged, that it
will not be successful. The remainder of this discussion assumes that the
debentures will be classified for federal income tax purposes as indebtedness
of Irwin.
Classification of IFC Capital Trust II and IFC Capital Trust III
Vedder, Price, Kaufman & Kammholz, counsel for Irwin and the trusts, has
rendered its opinion that, under current law and assuming full compliance with
the terms of their respective trust agreement and indenture, each of IFC
Capital Trust II and IFC Capital Trust III will be classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for federal income tax purposes, you, as a holder of
preferred securities and convertible preferred securities, as the case may be,
will be treated as owning an undivided beneficial interest in the debentures
and convertible debentures, as the case may be, and you will be required to
include in its gross income any interest with respect to such debentures at the
time such interest is accrued or is received, in accordance with the holder's
method of accounting. If such debentures were determined to be subject to the
original issue discount ("OID") rules, you as a holder would instead be
required to include in its gross income any OID accrued with respect to your
allocable share of such debentures whether or not cash was actually distributed
to you.
Interest Payment Period and Original Issue Discount
Under the applicable Treasury regulations, debt instruments such as the
debentures, which are issued at face value will not be considered issued with
OID, even if their issuer can defer payments of interest, if the likelihood of
any deferral is remote. Assuming the accuracy of our conclusion as set forth
below that the likelihood of exercising its option to defer payments is remote,
the debentures will not be treated as issued with OID. Accordingly, except as
set forth below, stated interest on the debentures generally will be included
in income by a holder as ordinary income at the time it is paid or accrued in
accordance with such holder's regular method of accounting.
A debt instrument will generally be treated as issued with OID if the stated
interest on the instrument does not constitute "qualified stated interest."
Qualified stated interest is generally any one of a series of stated interest
payments on an instrument that are unconditionally payable at least annually at
a single fixed rate. In determining whether stated interest on an instrument is
unconditionally payable and thus constitutes qualified stated interest, remote
contingencies as to the timely payment of stated interest are ignored. In the
case of the debentures, we have concluded that the likelihood of exercising our
option to defer payments of interest is remote. This is in part because we have
a history of paying dividends on our common stock and intend to continue to do
so, and we would be unable to continue paying these dividends, which could
adversely affect the market for our common stock, if we deferred our payments
under the debentures.
If the likelihood that we would exercise the option to defer any payment of
interest was determined not to be "remote" or if Irwin actually exercises its
option to defer the payment of interest, the debentures would be treated as
issued with OID at the time of issuance or at the time of such exercise, as the
case may be, and all
88
<PAGE>
stated interest would thereafter be treated as OID as long as the debentures
remained outstanding. In such event, all of a holder's taxable interest income
in respect of the debentures would constitute OID that would have to be
included in income on a constant yield method before the receipt of the cash
attributable to such income, regardless of such holder's method of tax
accounting, and actual distributions of stated interest would not be reported
as taxable income. Consequently, a holder of preferred securities would be
required to include such OID in gross income even though Irwin would not make
any actual cash payments during an extension period.
The Treasury regulations referred to above have not been interpreted by any
court decisions or addressed in any ruling or other pronouncements of the IRS,
and it is possible that the IRS could take a position contrary to the
conclusions herein.
Because income on the preferred securities will constitute interest,
corporate holders of preferred securities will not be entitled to a dividends-
received deduction with respect to any income recognized with respect to the
preferred securities.
Market Discount and Acquisition Premium
Holders of preferred securities other than a holder who purchased the
preferred securities upon original issuance or who purchased for a price other
than the first price at which a substantial amount of the preferred securities
were sold for money other than to a bond house, broker, or other person acting
as an underwriter, placement agent or wholesaler may be considered to have
acquired their undivided interests in the debentures with "market discount" or
"acquisition premium" as these phrases are defined for federal income tax
purposes. Such holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of the
preferred securities.
Receipt of Debentures or Cash Upon Liquidation of the Trust
Under the circumstances described under "Description of the Preferred
Securities -- Redemption or Exchange" and "-- Liquidation Distribution Upon
Termination," the debentures may be distributed to holders of preferred
securities upon a liquidation of the trust. Under current federal income tax
law, such a distribution would be treated as a nontaxable event to the holder
and would result in the holder having an aggregate tax basis in the debentures
received in the liquidation equal to the holder's aggregate tax basis in the
preferred securities immediately before the distribution. A holder's holding
period in debentures received in liquidation of the trust would include the
period for which the holder held the preferred securities.
If, however, a Tax Event occurs which results in the trust being treated as
an association taxable as a corporation, the distribution would likely
constitute a taxable event to holders of the preferred securities. Under
certain circumstances described herein, the debentures may be redeemed for cash
and the proceeds of the redemption distributed to holders in redemption of
their preferred securities. Under current law, such a redemption should, to the
extent that it constitutes a complete redemption, constitute a taxable
disposition of the redeemed preferred securities, and, for federal income tax
purposes, a holder should therefore recognize gain or loss as if the holder
sold the preferred securities for cash.
Disposition of Preferred Securities
A holder that sells preferred securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the preferred
securities and the holder's adjusted tax basis in the preferred securities. A
holder's adjusted tax basis in the preferred securities generally will be its
initial purchase price increased by OID, if any, previously includible in the
holder's gross income to the date of disposition and decreased by payments, if
any, received on the preferred securities in respect of OID to the date of
disposition.
89
<PAGE>
A gain or loss of this kind will generally be a capital gain or loss and will
be a long-term capital gain or loss if the preferred securities have been held
for more than one year at the time of sale.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
debentures. A holder that disposes of its preferred securities between record
dates for payments of distributions thereon will be required to include accrued
but unpaid interest on the debentures through the date of disposition in income
as ordinary income, and to add the amount to its adjusted tax basis in its
proportionate share of the underlying debentures deemed disposed of. Any OID
included in income will increase a holder's adjusted tax basis as discussed
above. To the extent the selling price is less than the holder's adjusted tax
basis a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
federal income tax purposes.
Conversion of Convertible Preferred Securities
A holder of convertible preferred securities generally will not recognize
income, gain or loss upon the conversion of its convertible preferred
securities into our common stock. A holder will, however, recognize gain upon
the receipt of cash in lieu of a fractional share of common stock equal to the
amount of cash received less the holder's tax basis in such fractional share. A
holder's tax basis in the common stock received upon exchange and conversion
should generally be equal to the holder's tax basis in the convertible
preferred securities delivered to the conversion agent for exchange less the
basis allocated to any fractional share for which cash is received, and a
holder's holding period in the common stock received upon exchange and
conversion will generally begin on the date that the holder acquired the
convertible preferred securities delivered to the conversion agent for
exchange.
Adjustment of Conversion Ratio
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of convertible preferred securities as having received a constructive
distribution from us in the event that the conversion ratio of the convertible
debentures were adjusted if (1) as a result of such adjustment, the
proportionate interest (measured by the quantum of common stock into or for
which the convertible debentures are convertible or exchangeable) of the
holders of the convertible preferred securities in the assets or earnings and
profits of Irwin were increased, and (2) the adjustment was not made pursuant
to a bona fide, reasonable anti-dilution formula. An adjustment of the
conversion ratio would not be considered made pursuant to such a formula if the
adjustment was made to compensate for certain taxable distributions with
respect to the common stock. Thus, under certain circumstances, an increase in
the conversion ratio for the holders may result in deemed dividend income to
holders to the extent of the current or accumulated earnings and profits of
Irwin. Holders of the convertible preferred securities would be required to
include their allocable share of such deemed dividend income in gross income
but would not receive any cash related thereto.
Ownership of Common Stock
Distributions received by holders of common stock in respect of such common
stock (other than certain distributions of additional shares of common stock or
rights to acquire additional shares of common stock) will be treated as
ordinary dividend income to such holders to the extent such distributions are
considered to be paid by us out of our current or accumulated earnings and
profits, as determined under federal income tax principles. Corporate holders
of common stock may be entitled to a "dividends-received deduction" with
respect to such dividends.
To the extent that any such distribution exceeds our current or accumulated
earnings and profit, such distribution will be treated, first, as a tax-free
return of capital to a holder of common stock to the extent of such holder's
adjusted tax basis in the common stock and, thereafter, as capital gain.
90
<PAGE>
Distributions of additional shares of common stock, or rights to acquire
additional shares of common stock, that are received as part of a pro rata
distribution of such shares, or rights to acquire such shares, to all our
shareholders generally should not be subject to federal income tax. The tax
basis of such new shares or rights generally will be determined by allocating
the shareholder's adjusted tax basis in the "old" shares of common stock
between such "old" shares and the new shares or rights received by such
shareholder, based upon their relative fair market values on the date of the
distribution.
A holder of common stock generally will recognize gain or loss on a sale or
other taxable disposition of common stock equal to the difference between the
amount realized by the shareholder on such sale or disposition and the
shareholder's adjusted tax basis in such common stock. Such gain or loss
generally will be capital gain or loss and generally will be considered long-
term capital gain or loss if the holder had held such common stock for more
than one year immediately prior to such sale or disposition.
Effect of Possible Changes in Tax Laws
Congress and the Clinton Administration have considered certain proposed tax
law changes in the past that would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations if the debt obligations have a maximum term in excess of 15 years
and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. Other proposed tax law changes would have denied interest
deductions if the term was in excess of 20 years. Although these proposed tax
law changes have not been enacted into law, there can be no assurance that tax
law changes will not be reintroduced into future legislation which, if enacted
after the date hereof, may adversely affect the federal income tax
deductibility of interest payable on the debentures.
In addition, in a case filed in the U.S. Tax Court, Enron Corp. v.
Commissioner, Tax Court Docket No. 6149-98, the IRS challenged the
deductibility for federal income tax purposes of interest paid on securities
which are similar, but not identical to, the preferred securities. The parties
filed a stipulation of settled issues, a portion of which stipulated there
shall be no adjustment for the interest deducted by the taxpayer with respect
to the securities. The IRS may also challenge the deductibility of interest
paid on the debentures, which, if such challenge were litigated resulting in
the IRS's position being sustained, would trigger a Tax Event and possibly a
redemption of the preferred securities.
Accordingly, there can be no assurance that a Tax Event will not occur. A
Tax Event would permit us, upon approval of the Federal Reserve, if then
required, to cause a redemption of the preferred securities before, as well as
after, September 30, 2005.
Backup Withholding and Information Reporting
Interest paid, or, if applicable, OID accrued, on the preferred securities
held of record by individual citizens or residents of the United States, or
certain trusts, estates and partnerships, will be reported to the Internal
Revenue Service on Forms 1099-INT, or, where applicable, Forms 1099-OID, which
forms should be mailed to the holders by January 31 following each calendar
year. Payments made on, and proceeds from the sale of, the preferred securities
may be subject to a "backup" withholding tax (currently at 31%) unless the
holder complies with certain identification and other requirements. Any amounts
withheld under the backup withholding rules will be allowed as a credit against
the holder's federal income tax liability, provided the required information is
provided to the Internal Revenue Service.
The federal income tax discussion set forth above is included for general
information only and may not be applicable depending upon the particular
situation of a holder of preferred securities. Holders of preferred securities
should consult their tax advisors with respect to the tax consequences to them
of the purchase, ownership and disposition of the preferred securities,
including the tax consequences under state, local, foreign and other tax laws
and the possible effects of changes in federal or other tax laws.
91
<PAGE>
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, or Section 4975 of the Internal Revenue Code, generally
may purchase preferred securities and convertible preferred securities, subject
to the investing fiduciary's determination that the investment in preferred
securities and convertible preferred securities satisfies ERISA's fiduciary
standards and other requirements applicable to investments by the plan.
In any case, we and/or any of our affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Internal Revenue Code) with respect to certain
plans. These plans generally include plans maintained or sponsored by, or
contributed to by, any such persons with respect to which we or any of our
affiliates are a fiduciary or plans for which we or any of our affiliates
provide services. The acquisition and ownership of preferred securities and
convertible preferred securities by a plan (or by an individual retirement
arrangement or other plans described in Section 4975(e)(1) of the Internal
Revenue Code) with respect to which we or any of our affiliates are considered
a party in interest or a disqualified person may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Internal Revenue
Code, unless the preferred securities or convertible preferred securities are
acquired pursuant to and in accordance with an applicable exemption.
As a result, plans with respect to which we or any of our affiliates or any
of its affiliates is a party in interest or a disqualified person should not
acquire preferred securities or convertible preferred securities unless the
preferred securities or convertible preferred securities are acquired pursuant
to and in accordance with an applicable exemption. Any other plans or other
entities whose assets include plan assets subject to ERISA or Section 4975 of
the Internal Revenue Code proposing to acquire preferred securities or
convertible preferred securities should consult with their own counsel.
92
<PAGE>
UNDERWRITING
Subject to the terms and conditions of separate underwriting agreements for
the preferred securities and the convertible preferred securities among Irwin,
the applicable trust and the underwriters named below, for whom Stifel,
Nicolaus & Company, Incorporated is acting as representative, the underwriters
have severally agreed to purchase from IFC Capital Trust II, and IFC Capital
Trust II has agreed to sell to them, an aggregate of 1,800,000 preferred
securities, and the underwriters have severally agreed to purchase from IFC
Capital Trust III, and IFC Capital Trust III has agreed to sell to them, an
aggregate of 1,800,000 convertible preferred securities in the amounts set
forth below opposite their respective names.
<TABLE>
<CAPTION>
Number of
Number of Convertible
Underwriters Preferred Securities Preferred Securities
------------ -------------------- --------------------
<S> <C> <C>
Stifel, Nicolaus & Company,
Incorporated.................
McDonald Investments Inc......
J.J.B. Hilliard, W.L. Lyons,
Inc..........................
Howe Barnes Investments, Inc..
--------- ---------
Total..................... 1,800,000 1,800,000
========= =========
</TABLE>
In the underwriting agreements, the obligations of the underwriters are
subject to approval of certain legal matters by their counsel and to various
other conditions. Under the terms and conditions of the underwriting
agreements, the underwriters are committed to accept and pay for all of the
preferred securities and the convertible preferred securities, as the case may
be, if any are taken.
The underwriters propose to offer the preferred securities directly to the
public at the public offering price set forth on the cover page of this
prospectus, and to certain securities dealers (who may include the
underwriters) at this price, less a concession not in excess of $ per
preferred security. The underwriters may allow, and the selected dealers may
reallow, a concession not in excess of $ per preferred security to certain
brokers and dealers. After the preferred securities are released for sale to
the public, the offering price and other selling terms may from time to time be
changed by the underwriters.
The underwriters propose to offer the convertible preferred securities
directly to the public at the public offering price set forth on the cover page
of this prospectus, and to certain securities dealers (who may include the
underwriters) at this price, less a concession not in excess of $ per
convertible preferred security. The underwriters may allow, and the selected
dealers may reallow, a concession not in excess of $ per convertible
preferred security to certain brokers and dealers. After the convertible
preferred securities are released for sale to the public, the offering price
and other selling terms may from time to time be changed by the underwriters.
Each trust has granted to the underwriters an option, exercisable within 30
days after the date of this prospectus, to purchase up to 270,000 additional
preferred securities and up to 270,000 additional convertible preferred
securities, as the case may be, at the same price per security to be paid by
the underwriters for the other securities being offered. If the underwriters
purchase any of the additional securities under the applicable option, each
underwriter will be committed to purchase the additional securities in
approximately the same proportion allocated to them in the table above. The
underwriters may exercise the applicable option only for the purpose of
covering over-allotments, if any, made in connection with the distribution of
the applicable securities being offered.
93
<PAGE>
If the underwriters exercise their option to purchase additional securities,
the applicable trust will issue and sell to us additional common securities and
we will issue and sell to the applicable trust, as the case may be, additional
debentures in an aggregate principal amount equal to the total aggregate
liquidation amount of the additional securities being purchased under the
applicable option and the additional common securities sold to us.
The table below shows the price and proceeds on a per security and aggregate
basis. The proceeds to be received by the trust as shown in the table below do
not reflect estimated expenses of $ payable by Irwin.
<TABLE>
<CAPTION>
Per
Per Convertible
Preferred Preferred
Security Total Security Total
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Public Offering Price...... $25.00 $45,000,000 $25.00 $45,000,000
Proceeds to IFC Capital
Trust II.................. $25.00 $45,000,000 -- --
Proceeds to IFC Capital
Trust III................. -- -- $25.00 $45,000,000
</TABLE>
In view of the fact that the proceeds of the sale of the preferred
securities will be used by IFC Capital Trust II to purchase the debentures from
us, we have agreed to pay the underwriters $ per preferred security, or a
total of $ , as compensation for arranging the investment in the debentures.
Should the underwriters exercise the over-allotment option, an aggregate of
$ will be paid to the underwriters for arranging the investment in the
debentures.
In view of the fact that the proceeds of the sale of the convertible
preferred securities will be used by IFC Capital Trust III to purchase the
convertible debentures from us, we have agreed to pay the underwriters $
per convertible preferred security, or a total of $ , as compensation for
arranging the investment in the convertible debentures. Should the underwriters
exercise the over-allotment option, an aggregate of $ will be paid to the
underwriters for arranging the investment in the convertible debentures.
The offering of the preferred securities and the convertible preferred
securities are made for delivery when, as and if accepted by the underwriters
and subject to prior sale and to withdrawal, cancellation or modification of
the offerings without notice. The underwriters reserve the right to reject any
order for the purchase of the preferred securities or the convertible preferred
securities.
Irwin and the trusts have agreed to indemnify the several underwriters
against several liabilities, including liabilities under the Securities Act of
1933.
The preferred securities and the convertible preferred securities are
expected to be approved for inclusion on the Nasdaq National Market, and
trading is expected to commence on or prior to delivery of the securities. The
representative has advised the trusts that it presently intends to make a
market in the securities after the commencement of trading on Nasdaq, but no
assurances can be made as to the liquidity of the securities or that an active
and liquid market will develop or, if developed, that the market will continue.
The applicable offering prices and distribution rates have been determined by
negotiations among representatives of Irwin and the underwriters, and the
offering prices of the securities may not be indicative of the market prices
following the offering. The representative will have no obligation to make a
market in the securities, however, and may cease market-making activities, if
commenced, at any time.
In connection with the offering, the underwriters may engage in transactions
that are intended to stabilize, maintain or otherwise affect the price of the
securities during and after the offering, such as the following:
. the underwriters may over-allot or otherwise create a short position in
the securities for their own account by selling more securities than have
been sold to them;
94
<PAGE>
. the underwriters may elect to cover any short position by purchasing
securities in the open market or by exercising the over-allotment option;
. the underwriters may stabilize or maintain the price of the securities by
bidding;
. the underwriters may engage in passive market making transactions; and
. the underwriters may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in the
offering are reclaimed if securities previously distributed in the
offering are repurchased in connection with stabilization transactions or
otherwise.
The effect of these transactions may be to stabilize or maintain the market
price at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the securities to
the extent that it discourages resales. No representation is made as to the
magnitude or effect of any such stabilization or other transactions. Such
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
In connection with this offering, some underwriters who are qualified market
makers on the Nasdaq National Market may engage in passive market making
transactions in our common stock on the Nasdaq National Market in accordance
with Rule 103 of Regulation M. Rule 103 permits passive market making during
the period when Regulation M would otherwise prohibit market making activity by
the participants in this offering. Passive market making may occur during the
business day before the pricing of this offering, before the commencement of
offers or sales of the preferred securities and the convertible preferred
securities. Passive market makers must comply with applicable volume and price
limitations and must be identified as a passive market maker. In general, a
passive market maker must display its bid at a price not in excess of the
highest independent bid for the security. If all independent bids are lowered
below the passive market maker's bid, however, the bid must then be lowered
when purchase limits are exceeded. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume in our common stock during a specified period and
must be discontinued when such limit is reached. Underwriters and dealers are
not required to engage in passive market making and may end passive market
making activities at any time.
Because the National Association of Securities Dealers, Inc. may view the
preferred securities and the convertible securities as interests in a direct
participation program, the offer and sale of the securities is being made in
compliance with the provisions of Rule 2810 under the NASD Conduct Rules. The
underwriters have advised us that they will not make any sales to any accounts
over which they exercise discretionary authority without the prior specific
written approval of the customer.
Certain of the underwriters and their affiliates have, from time to time,
performed investment banking and other services for us and our affiliates in
the ordinary course of business and have received fees from us for their
services.
Subject to certain exceptions, we and certain of our executive officers and
directors have agreed not to sell or otherwise dispose of any securities
similar to those offered by this prospectus, or any of our shares of common
stock or our other securities convertible into common stock, or permit the
registration of any shares of our common stock, for a period of 90 days after
the date of this prospectus (other than securities sold pursuant to this
prospectus) without the prior written consent of Stifel, Nicolaus & Company,
Incorporated.
95
<PAGE>
LEGAL MATTERS
Certain legal matters, including matters relating to federal income tax
considerations, for Irwin and the trusts will be passed upon by Vedder, Price,
Kaufman & Kammholz, Chicago, Illinois, special counsel to Irwin and the trusts.
Certain legal matters for Irwin will be passed upon by Ellen Z. Mufson, Vice
President--Legal. Certain legal matters will be passed upon for the
underwriters by Lewis, Rice & Fingersh, L.C., St. Louis, Missouri. Vedder,
Price, Kaufman & Kammholz and Lewis, Rice & Fingersh, L.C. will rely on the
opinion of Richards, Layton & Finger, P.A. as to matters of Delaware law.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of Irwin Financial Corporation for the years ended
December 31, 1999, 1998 and 1997 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND INFORMATION
This prospectus is a part of a Registration Statement on Form S-3 filed by
Irwin and the trusts with the SEC under the Securities Act, with respect to the
preferred securities, the convertible preferred securities, the debentures, the
convertible debentures and the guarantees. This prospectus does not contain all
the information set forth in the registration statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC. For
further information with respect to Irwin and the securities offered by this
prospectus, reference is made to the registration statement, including the
exhibits to the registration statement and documents incorporated by reference.
Statements contained in this prospectus concerning the provisions of such
documents are necessarily summaries of such documents and each such statement
is qualified in its entirety by reference to the copy of the applicable
document filed with the SEC.
We file periodic reports, proxy statements and other information with the
SEC. Our filings are available to the public over the Internet at the SEC's web
site at http://www.sec.gov. You may also inspect and copy these materials at
the public reference facilities of the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, as well as at 75 Park Place, Room 1400, New York,
New York 10007. Copies of such material can be obtained at prescribed rates
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information.
Each holder of the securities offered by this prospectus will receive a copy
of our annual report at the same time as we furnish the annual report to the
holders of our common stock.
96
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
We "incorporate by reference" into this prospectus the information in
documents we file with the SEC, which means that we can disclose important
information to you through those documents. The information incorporated by
reference is an important part of this prospectus. Some information contained
in this prospectus updates the information incorporated by reference and some
information that we file subsequently with the SEC will automatically update
this prospectus. We incorporate by reference the documents listed below:
(a) our Annual Report on Form 10-K for the year ended December 31, 1999,
filed with the SEC on March 30, 2000;
(b) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000,
filed with the SEC on May 12, 2000, as amended by Form 10-Q/A filed
with the Commission on May 16, 2000;
(c) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000,
filed with the SEC on August 10, 2000;
(d) our Current Report on Form 8-K dated February 8, 2000, filed with the
SEC on February 9, 2000;
(e) our Current Report on Form 8-K dated October 19, 2000, filed with the
SEC on October 19, 2000; and
(f) the information set forth under the caption "Description of Common
Shares" in our Registration Statement on Form 10 filed with the SEC on
or about March 31, 1973 pursuant to Section 12(g) of the Securities
Exchange Act of 1934, Registration No. 0-6835.
We also incorporate by reference any filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the initial filing of the registration statement that contains this prospectus
and before the time that all of the securities offered in this prospectus are
sold.
You may request, and we will provide, a copy of these filings at no cost by
contacting Ellen Z. Mufson, our Vice President, Legal, at the following address
and phone number:
Irwin Financial Corporation
500 Washington Street
Columbus, Indiana 47201
(812) 376-1020
97
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary................................................................... 1
Selected Consolidated Financial Data...................................... 14
Risk Factors.............................................................. 16
Special Note Regarding Forward-Looking Statements......................... 24
Recent Developments....................................................... 24
Use of Proceeds........................................................... 26
Price Range of Common Stock and Dividends................................. 27
Capitalization............................................................ 28
Accounting and Regulatory Treatment....................................... 29
The Preferred Securities of IFC Capital Trust II.......................... 30
Description of the Trust................................................ 30
Description of Preferred Securities..................................... 31
Description of the Debentures........................................... 43
The Convertible Preferred Securities of IFC Capital Trust III............. 52
Description of the Trust................................................ 52
Description of the Convertible Preferred Securities..................... 53
Description of the Convertible Debentures............................... 69
Description of the Guarantees............................................. 79
Relationship among the Preferred Securities and the Debentures, the
Convertible Preferred Securities and the Convertible Debentures and the
Guarantees............................................................... 81
Book-Entry Issuance....................................................... 83
Description of Capital Stock.............................................. 85
Federal Income Tax Consequences........................................... 87
ERISA Considerations...................................................... 92
Underwriting.............................................................. 93
Legal Matters............................................................. 96
Experts................................................................... 96
Where You Can Find Information............................................ 96
Documents Incorporated by Reference....................................... 97
</TABLE>
. You should only rely on the information contained or incorporated by
reference in this prospectus. We have not, and our underwriters have not,
authorized any person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely
on it.
. We are not, and our underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
. You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only.
. This prospectus does not constitute an offer to sell, or the solicitation
of an offer to buy, any securities other than the securities to which it
relates.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1,800,000 Preferred Securities
IFC CAPITAL TRUST II
% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per
Preferred Security)
Fully, irrevocably and unconditionally
guaranteed on a subordinated basis, as
described in this prospectus, by
IRWIN FINANCIAL CORPORATION
and
$45,000,000
% Junior Subordinated Debentures
of
IRWIN FINANCIAL CORPORATION
----------------
1,800,000 Convertible Preferred Securities
IFC CAPITAL TRUST III
% Cumulative Convertible Trust Preferred Securities
(Liquidation Amount $25 per
Convertible Preferred Security)
Fully, irrevocably and unconditionally guaranteed on a subordinated basis, as
described in this prospectus, by
IRWIN FINANCIAL CORPORATION
and
$45,000,000
% Convertible Junior Subordinated Debentures of
IRWIN FINANCIAL CORPORATION
----------------
Prospectus
, 2000
----------------
Stifel, Nicolaus & Company
Incorporated
McDonald Investments Inc.
J.J.B. Hilliard, W.L. Lyons, Inc.
Howe Barnes Investments, Inc.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of such expenses will be paid by
Irwin. All amounts shown are estimates, except the SEC registration fee and the
NASD and the Nasdaq National Market filing fees:
<TABLE>
<S> <C>
SEC registration fee............................................ $ 27,324
NASD filing fee................................................. 10,850
Nasdaq National Market filing fee............................... 77,500
Trustees' fees.................................................. 25,000
Printing and mailing expenses................................... 55,000
Fees and expenses of counsel.................................... 245,000
Accounting and related expenses................................. 250,000
Blue Sky fees and expenses...................................... 2,500
Miscellaneous................................................... 11,826
--------
Total....................................................... $705,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of Irwin
pursuant to the following provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
The Indiana Business Corporation Law ("IBCL"), the provisions of which
govern Irwin, empowers an Indiana corporation to indemnify present and former
directors, officers, employees, or agents or any person who may have served at
the request of the corporation as a director, officer, employee, or agent of
another corporation ("Eligible Persons") against liability incurred in any
proceeding, civil or criminal, in which the Eligible Person is made a party by
reason of being or having been in any such capacity, or arising out of his
status as such, if the individual acted in good faith and reasonably believed
that (a) the individual was acting in the best interests of the corporation, or
(b) if the challenged action was taken other than in the individual's official
capacity as an officer, director, employee or agent, the individual's conduct
was at least not opposed to the corporation's best interests, or (c) if in a
criminal proceeding, either the individual had reasonable cause to believe his
conduct was lawful or no reasonable cause to believe his conduct was unlawful.
The IBCL further empowers a corporation to pay or reimburse the reasonable
expenses incurred by an Eligible Person in connection with the defense of any
such claim, including counsel fees; and, unless limited by its Articles of
Incorporation, the corporation is required to indemnify an Eligible Person
against reasonable expenses if he is wholly successful in any such proceeding,
on the merits or otherwise. Under certain circumstances, a corporation may pay
or reimburse an Eligible Person for reasonable expenses prior to final
disposition of the matter. Unless a corporation's articles of incorporation
otherwise provide, an Eligible Person may apply for indemnification to a court
which may order indemnification upon a determination that the Eligible Person
is entitled to mandatory indemnification for reasonable expenses or that the
Eligible Person is fairly and reasonably entitled to indemnification in view of
all the relevant circumstances without regard to whether his actions satisfied
the appropriate standard of conduct.
Before a corporation may indemnify any Eligible Person against liability or
reasonable expenses under the IBCL, a quorum consisting of directors who are
not parties to the proceeding must (1) determine that indemnification is
permissible in the specific circumstances because the Eligible Person met the
requisite
II-1
<PAGE>
standard of conduct, (2) authorize the corporation to indemnify the Eligible
Person and (3) if appropriate, evaluate the reasonableness of expenses for
which indemnification is sought. If it is not possible to obtain a quorum of
uninvolved directors, the foregoing action may be taken by a committee of two
or more directors who are not parties to the proceeding, special legal counsel
selected by the Board or such a committee, or by the shareholders of the
corporation.
In addition to the foregoing, the IBCL states that the indemnification it
provides shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any provision of the articles of
incorporation or bylaws, resolution of the board of directors or shareholders,
or any other authorization adopted after notice by a majority vote of all the
voting shares then issued and outstanding. The IBCL also empowers an Indiana
corporation to purchase and maintain insurance on behalf of any Eligible Person
against any liability asserted against or incurred by him in any capacity as
such, or arising out of his status as such, whether or not the corporation
would have had the power to indemnify him against such liability.
Irwin's Amended and Restated Articles of Incorporation provide for
indemnification as a matter of right to any director, officer or employee of
Irwin who has been successful on the merits of a claim against him, and for
indemnification under certain other circumstances where allowed, by the action
of disinterested members of the Board of Directors.
Irwin has purchased $5 million in directors' and officers' liability
insurance, the effect of which is to indemnify the directors and officers of
Irwin and its subsidiaries against certain losses caused by errors,
misstatement or misleading statements, wrongful acts, omissions, neglect or
breach of duty by them or similar matters claimed against them in their
capacities as directors or officers.
Each Amended and Restated Trust Agreement will provide for indemnification
of the Delaware Trustee and each of the administrative trustees by Irwin
against any loss, damage, claims, liability, penalty or expense of any kind
incurred by the trustees in connection with the performance of their duties or
powers under the agreement in a manner reasonably believed by the trustee to be
within the scope of its authority under the agreement, except that none of
these trustees will be so indemnified for any loss, damage or claim incurred by
reason of such trustee's gross negligence, bad faith or willful misconduct.
Similarly, the agreements provide for indemnification of the Property Trustee
except that the Property Trustee is not indemnified from liability for its own
negligent action, negligent failure to act or willful misconduct. Under each
agreement, Irwin agrees to advance those expenses incurred by any trustee in
defending any such claim, demand, action, suit or proceeding.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement for Preferred Securities.*
1.2 Form of Underwriting Agreement for Convertible Preferred
Securities.*
4.1 Restated Articles of Incorporation of Irwin Financial
Corporation.
4.2 Code of By-Laws, as amended to date. (Incorporated by
reference to Exhibit 3(ii)3(a) to Form 10-K for the year
ended December 31, 1997, File No. 0-6835.)
4.3 Form of Indenture for Junior Subordinated Debentures.
4.4 Form of Junior Subordinated Debenture (included as Exhibit
A to Exhibit 4.3).
4.5 Certificate of Trust of IFC Capital Trust II.
4.6 Trust Agreement of IFC Capital Trust II.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
4.7 Form of Amended and Restated Trust Agreement of IFC
Capital Trust II.
4.8 Form of Preferred Securities Certificate of IFC Capital
Trust II (included as Exhibit D to Exhibit 4.7).
4.9 Form of Preferred Securities Guarantee Agreement of IFC
Capital Trust II.
4.10 Form of Agreement as to Expenses and Liabilities of IFC
Capital Trust II (included as Exhibit C to Exhibit 4.7).
4.11 Form of Indenture for Convertible Junior Subordinated
Debentures.
4.12 Form of Convertible Junior Subordinated Debenture.
(included as Exhibit A to Exhibit 4.11)
4.13 Certificate of Trust of IFC Capital Trust III.
4.14 Trust Agreement of IFC Capital Trust III.
4.15 Form of Amended and Restated Trust Agreement of IFC
Capital Trust III.
4.16 Form of Convertible Preferred Securities Certificate of
IFC Capital Trust III (included as Exhibit D to Exhibit
4.15).
4.17 Form of Convertible Preferred Securities Guarantee
Agreement of IFC Capital Trust III.
4.18 Form of Agreement as to Expenses and Liabilities of IFC
Capital Trust III (included as Exhibit C to Exhibit 4.15).
5.1 Opinion of Vedder, Price, Kaufman & Kammholz.
5.2 Opinion of Richards, Layton & Finger, P.A.*
8.1 Opinion of Vedder, Price, Kaufman & Kammholz as to certain
tax matters.*
12.1 Calculation of ratios of earnings to fixed charges.
23.1 Consent of PricewaterhouseCoopers LLP.*
23.2 Consent of Vedder, Price, Kaufman & Kammholz (included in
opinions filed as Exhibits 5.1 and 8.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in
opinion filed as Exhibit 5.2).
24.1 Powers of Attorney (included as part of signature pages).
25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as trustee under the Indenture for Junior
Subordinated Debentures.
25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as property trustee under the Amended and
Restated Trust Agreement for IFC Capital Trust II.
25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as trustee under the Guarantee Agreement relating
to IFC Capital Trust II.
25.4 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as trustee under the Indenture for Convertible
Junior Subordinated Debentures.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
25.5 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as trustee under the Amended and Restated Trust
Agreement for IFC Capital Trust III.
25.6 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Wilmington Trust
Company, as trustee under the Guarantee Agreement relating
to IFC Capital Trust III.
</TABLE>
--------
* Filed herewith.
Item 17. Undertakings.
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in that Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer, or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, each Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(i) The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, IFC Capital
Trust II certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus, State of Indiana, on October 26, 2000.
IFC Capital Trust II
By: Irwin Financial Corporation
as Depositor
/s/ William I. Miller
By: _________________________________
William I. Miller
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, IFC Capital
Trust III certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus, State of Indiana, on October 26, 2000.
IFC Capital Trust III
By: Irwin Financial Corporation
as Depositor
/s/ William I. Miller
By: _________________________________
William I. Miller
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, Irwin Financial
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, State of Indiana, on October 26,
2000.
Irwin Financial Corporation
/s/ William I. Miller
By: _________________________________
William I. Miller
Chairman of the Board
S-1
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Sally A. Dean* Director October 26, 2000
____________________________________
Sally A. Dean
/s/ David W. Goodrich* Director October 26, 2000
____________________________________
David W. Goodrich
Director
____________________________________
John T. Hackett
/s/ William H. Kling* Director October 26, 2000
____________________________________
William H. Kling
/s/ Brenda J. Lauderback* Director October 26, 2000
____________________________________
Brenda J. Lauderback
/s/ John C. McGinty, Jr.* Director October 26, 2000
____________________________________
John C. McGinty, Jr.
/s/ William I. Miller Director, Chairman of the October 26, 2000
____________________________________ Board (Principal Executive
William I. Miller Officer)
/s/ John A. Nash Director, President and October 26, 2000
____________________________________ Chairman of the Executive
John A. Nash Committee
/s/ Lance R. Odden* Director October 26, 2000
____________________________________
Lance R. Odden
Director
____________________________________
Theodore M. Solso
/s/ Gregory F. Ehlinger Senior Vice President October 26, 2000
____________________________________ (Principal Financial
Gregory F. Ehlinger Officer)
/s/ Jody A. Littrell Vice President and October 26, 2000
____________________________________ Controller (Principal
Jody A. Littrell Accounting Officer)
</TABLE>
--------
*Signed pursuant to power of attorney.
/s/ William I. Miller
By: ___________________________
William I. Miller
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement for Preferred Securities.*
1.2 Form of Underwriting Agreement for Convertible Preferred
Securities.*
4.1 Restated Articles of Incorporation of Irwin Financial
Corporation.
4.2 Code of By-Laws, as amended to date. (Incorporated by
reference to Exhibit 3(ii)3(a) to Form 10-K for the year ended
December 31, 1997, File No. 0-6835.)
4.3 Form of Indenture for Junior Subordinated Debentures.
4.4 Form of Junior Subordinated Debenture (included as Exhibit A
to Exhibit 4.3).
4.5 Certificate of Trust of IFC Capital Trust II.
4.6 Trust Agreement of IFC Capital Trust II.
4.7 Form of Amended and Restated Trust Agreement of IFC Capital
Trust II.
4.8 Form of Preferred Securities Certificate of IFC Capital Trust
II (included as Exhibit D to Exhibit 4.7).
4.9 Form of Preferred Securities Guarantee Agreement of IFC
Capital Trust II.
4.10 Form of Agreement as to Expenses and Liabilities of IFC
Capital Trust II (included as Exhibit C to Exhibit 4.7).
4.11 Form of Indenture for Convertible Junior Subordinated
Debentures.
4.12 Form of Convertible Junior Subordinated Debenture (included as
Exhibit A to Exhibit 4.11).
4.13 Certificate of Trust of IFC Capital Trust III.
4.14 Trust Agreement of IFC Capital Trust III.
4.15 Form of Amended and Restated Trust Agreement of IFC Capital
Trust III.
4.16 Form of Convertible Preferred Securities Certificate of IFC
Capital Trust III (included as Exhibit D to Exhibit 4.15).
4.17 Form of Convertible Preferred Securities Guarantee Agreement
of IFC Capital Trust III.
4.18 Form of Agreement as to Expenses and Liabilities of IFC
Capital Trust III (included as Exhibit C to Exhibit 4.15).
5.1 Opinion of Vedder, Price, Kaufman & Kammholz.
5.2 Opinion of Richards, Layton & Finger, P.A.*
8.1 Opinion of Vedder, Price, Kaufman & Kammholz as to certain tax
matters.*
12.1 Calculation of ratios of earnings to fixed charges.
23.1 Consent of PricewaterhouseCoopers LLP.*
23.2 Consent of Vedder, Price, Kaufman & Kammholz (included in
opinions filed as Exhibits 5.1 and 8.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in
opinion filed as Exhibit 5.2).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
24.1 Powers of Attorney (included as part of signature pages).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
trustee under the Indenture for Junior Subordinated
Debentures.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
property trustee under the Amended and Restated Trust
Agreement for IFC Capital Trust II.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
trustee under the Guarantee Agreement relating to IFC Capital
Trust II.
25.4 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
trustee under the Indenture for Convertible Junior
Subordinated Debentures.
25.5 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
trustee under the Amended and Restated Trust Agreement for IFC
Capital Trust III.
25.6 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
trustee under the Guarantee Agreement relating to IFC Capital
Trust III.
</TABLE>
--------
*Filed herewith.
