<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by the Registrant
[] Filed by a Party other than the Registrant
[] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 140.14a-12
INDUSTRIAL FUNDING CORP.
2121 S.W. BROADWAY
SUITE 100
PORTLAND, OREGON 97201
(Name of Registrant as Specified in its Charter)
________________
Payment of Filing Fee:
[] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
[] Check box if any part of fee is offset as provided by Exchange Act Rule
0-1(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
Date Filed: July 25, 1994
<PAGE>
IFC [Logo]
DEAR SHAREHOLDERS:
You are cordially invited to attend the Special Meeting of Shareholders of
Industrial Funding Corp. Our meeting will be held at the Marriott Hotel, located
at 1401 S.W. Front Avenue, Portland, Oregon, on September , 1994 commencing at
10:00 a.m.
The Company's Notice of Special Meeting and Proxy Statement is attached,
and describes in detail the formal business that we will discuss. All holders of
the Company's outstanding shares of Common Stock as of the close of business on
July 1, 1994 (the "Record Date") will be entitled to notice of and to vote at
the Special Meeting.
At the meeting, you will be asked to consider and vote upon a proposal to
approve the Plan of Dissolution and Complete Liquidation of Industrial Funding
Corp. (the "Plan"). Details of the Plan and other important information are set
forth in the accompanying Proxy Statement which you are urged to read carefully.
Your Board of Directors has carefully reviewed and considered the Plan, and
has unanimously approved the Plan. The Board recommends that you vote FOR the
approval of the Plan.
Upon adoption of the Plan, the Company's activities will be limited to the
collection and disposition of the Company's remaining assets, the investment of
the Company's financial assets pending distribution, the management of the
outstanding legal proceedings involving the Company, and such other activities
that are permissible for corporations in dissolution under Oregon law. The
Company intends to redeem all or a portion of the outstanding shares of its
Series A Preferred Stock at such time as the Board of Directors determines that
the assets of the Company are sufficient to satisfy all the liabilities of the
Company, whether fixed or contingent, and if such redemption is otherwise not
prohibited by Oregon law or court order. The Company intends thereafter to
distribute to its shareholders the net proceeds resulting from the collection or
disposition of the Company's remaining assets at such time as the Board of
Directors determines that it has paid, discharged or set aside a sufficient
reserve for all the liabilities of the Company, whether fixed or contingent, and
if such distribution is otherwise not prohibited by Oregon law or court order.
As of the Record Date, IFC Holdings Inc. ("IFC Holdings") owned 100 percent
of the Class B Common Stock of the Company which represents 75.0 percent of the
ownership of the Company, and 96.8 percent of the outstanding Common Stock
voting rights of the Company. As a result, IFC Holdings has a sufficient number
of votes to constitute a quorum and to approve the Plan, regardless of the vote
of any other shareholders. IFC Holdings has agreed to vote such shares in favor
of the proposed Plan, and as a result, APPROVAL OF THE PLAN IS ASSURED.
Whether or not you plan to attend the Special Meeting, please complete,
sign and date the accompanying proxy card and return it in the enclosed prepaid
envelope. If you attend the Special Meeting, you may revoke such proxy and vote
in person if you wish, even if you have previously returned your proxy card.
Your prompt cooperation is appreciated.
Very truly yours,
JOHN J. ESTOK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
INDUSTRIAL FUNDING CORP.
2121 S.W. BROADWAY
SUITE 100
PORTLAND, OREGON 97201
(503) 228-2111
- - - --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER , 1994
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Industrial
Funding Corp., an Oregon corporation (the "Company"), will be held at the
Marriott Hotel, located at 1401 S.W. Front Avenue, Portland, Oregon on September
, 1994 at 10:00 a.m., local time, to consider and vote upon the following:
1) the adoption by the Company of the proposed Plan of Dissolution and
Complete Liquidation of Industrial Funding Corp. (the "Plan") and;
2) the transaction of any other business that may properly come before
the Special Meeting or any adjournment thereof.
Accompanying this notice is a Proxy Statement describing the Plan, and a
form of proxy.
Shareholders of record at the close of business on July 1, 1994 (the
"Record Date") are entitled to notice of, and to vote at, the Special Meeting or
any adjournments thereof.
By Order of the Board of Directors
JOHN W. PITT
SECRETARY
Portland, Oregon
July 25, 1994
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
TO AMERICAN STOCK TRANSFER & TRUST COMPANY, 40 WALL STREET, NEW YORK, NEW YORK,
10005. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE SUCH PROXY AND VOTE IN PERSON
IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
2
<PAGE>
INDUSTRIAL FUNDING CORP.
2121 S.W. BROADWAY, SUITE 100
PORTLAND, OREGON, 97201
(503) 228-2111
PROXY STATEMENT
_______________
This Proxy Statement and the accompanying form of proxy are being furnished
to holders of common stock, no par value per share, of Industrial Funding Corp.
("Industrial Funding" or the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company, for use at the Special Meeting
of Shareholders of the Company (the "Special Meeting") to be held on
September , 1994, at the Marriott Hotel, located at 1401 S.W. Front Avenue,
Portland, Oregon, commencing at 10:00 a.m., local time, or any adjournments
thereof. This Proxy Statement and the accompanying form of proxy are first
being mailed to shareholders of the Company on or about September , 1994.
A shareholder giving a proxy has the power to revoke such proxy at any time
before it is exercised by filing with the Secretary of the Company an instrument
of revocation, a duly executed proxy bearing a later date or by personally
attending and voting at the Special Meeting. Subject to such revocation, all
shares represented by each properly executed proxy received by the Company will
be voted in accordance with the instructions indicated thereon. In the absence
of instructions to the contrary, such shares will be voted in favor of the
proposed Plan.
_______________
The date of this Proxy Statement is July 25, 1994.
3
<PAGE>
TABLE OF CONTENTS
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . 5
PROPOSAL I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . 10
Matters to be Considered at the Special Meeting. . . . . . . . . 10
Voting at the Special Meeting; Record Date . . . . . . . . . . . 10
THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Recommendation of the Board of Directors . . . . . . . . . . . . 13
Potential Conflicts of Interest. . . . . . . . . . . . . . . . . 14
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 14
Certain Federal Income Tax Consequences. . . . . . . . . . . . . 15
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 16
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . 18
Interest of Certain Persons in Approval of the Plan. . . . . . . 18
Certain Legal Proceedings. . . . . . . . . . . . . . . . . . . . 18
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . 20
Description of the Company's Capital Stock . . . . . . . . . . . 20
Security Ownership of Certain Beneficial Owners and Management . 22
Market Price Data of the Company . . . . . . . . . . . . . . . . 22
THE PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION . . . . . . . . . . 23
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . 24
PROXY SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . . . 24
Annex 1 - Plan of Dissolution and Complete Liquidation of Industrial Funding
Corp.
Annex 2 - Form 10-Q for the second fiscal quarter ended May 31, 1994.
4
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED IN THIS PROXY STATEMENT AND
THE ANNEXES HERETO. UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS USED IN
THIS SUMMARY HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM ELSEWHERE IN THIS
PROXY STATEMENT. SHAREHOLDERS ARE URGED TO READ THIS PROXY STATEMENT AND THE
ANNEXES HERETO IN ITS ENTIRETY.
THE SPECIAL MEETING
Time, Date and Place The Special Meeting will be held at the the
Marriott Hotel, located at 1401 S.W. Front
Avenue, Portland, Oregon, on September ,
1994, at 10:00 a.m., local time.
Purpose of the Meeting The purpose of the Special Meeting is to
consider and vote upon the following
proposals: (i) the adoption by the Company of
a Plan of Dissolution and Complete
Liquidation; and (ii) the transaction of any
other business that may properly come before
the Special Meeting or any adjournments
thereof.
Record Date; Shares Entitled
to Vote Holders of record of shares of Class A Common
Stock and Class B Common Stock (collectively,
the "Common Stock of the Company") at the
close of business on July 1, 1994, are
entitled to notice of and to vote at the
Special Meeting. At the Record Date there
were 1,875,000 shares outstanding of Class A
Common Stock, each entitled to one vote per
share, and 5,625,000 shares of Class B Common
Stock, each entitled to ten votes per share,
on each matter to be acted upon at the
Special Meeting and any adjournments thereof.
Voting Requirements The approval of the proposed will require the
affirmative vote of the holders of a majority
of the votes entitled to be cast at the
Special Meeting. As of the Record Date, IFC
Holdings Inc. ("IFC Holdings") owned 100
percent of the Class B Common Stock of the
Company which represents 75.0 percent of the
ownership of the Company and represents 96.8
percent of the outstanding common stock
voting rights of the Company. As a result,
IFC Holdings has a sufficient number of votes
to constitute a quorum and to approve the
proposal, regardless of the vote of any other
shareholders.
5
<PAGE>
PROPOSAL I:
GENERAL Proposal I of this Proxy Statement relates to the
proposed adoption by the Company of a Plan of
Dissolution and Complete Liquidation. Under the
Plan, the Company will liquidate all of the
Company's remaining assets. The Company will
discharge or set aside reserves for the
liabilities of the Company. Assuming sufficient
assets are available therefor, the Company will
pay the cumulative preferred stock dividends which
have accrued in respect of the Company's Series A
Cumulative Preferred Stock and redeem or otherwise
repurchase all issued and outstanding shares of
such Series A Cumulative Preferred Stock. As of
May 31, 1994, accumulated and unpaid dividends on
the Preferred Stock were $6.13 million. The
redemption price of the Preferred Stock is $13.4
million. After such payment and redemption, any
remaining assets will be distributed to holders of
the Common Stock of the Company, in such amounts
and at such times and in such manner as the Board
shall deem appropriate. The Company is unable to
predict the amount, if any, that will be
distributed to holders of the Common Stock of the
Company if the Plan is adopted.
BACKGROUND
Background of the Plan See THE PLAN - BACKGROUND.
Recommendation of the Board
of Directors The Board of Directors has unanimously approved
the Plan and recommends that the holders of Class
A and Class B Common Stock vote FOR approval of
the Plan. For a discussion of the factors
considered by the Board of Directors in reaching
its decision and the reasons for the Plan, see THE
PLAN - RECOMMENDATION OF THE BOARD OF DIRECTORS.
Certain Federal Income Tax
Consequences Holders of Class A and Class B Common Stock will
experience federal income tax consequences as a
result of the adoption and implementation of the
Plan by the Company. For a discussion of material
tax consequences to stockholders, see THE PLAN -
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. SHARE-
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO
THE TAX CONSEQUENCES
6
<PAGE>
OF THE PLAN TO THEM UNDER APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN TAX LAWS.
Accounting Treatment As a result of approval of the Plan by the Board
of Directors, the Company's financial statements
as of May 31, 1994, have been prepared on a
liquidation basis of accounting rather than a
going concern (historical cost) basis. The net
adjustment was a decrease in the carrying value of
net assets of $4.2 million. The Company has not
reflected future revenues including interest,
investment income and gains associated with its
nonperforming lease portfolio. Such income will be
recognized when realized. The conversion of the
Company's balance sheet to a liquidation basis of
presentation requires significant judgments and
estimates by management of the Company. For the
assumptions on which such judgments and estimates
have been based, see THE PLAN - ACCOUNTING
TREATMENT. All such assumptions are subject to
change should facts and circumstances change.
Appraisal Rights Holders of Class A and Class B Common Stock will
have no appraisal, dissenters' or similar rights
under Oregon law in connection with the approval
or implementation of the Plan.
The Plan On May 20, 1994, the Company's Board of Directors
unanimously approved for submission to the holders
of Common Stock of Company a Plan of Dissolution
and Complete Liquidation of Industrial Funding
Corp. Under the Plan, the Company, during a period
commencing from the date the Plan is adopted and
ending on the fifth anniversary thereof unless
shortened or extended by the Board of Directors
(the "Liquidation Period"), will liquidate, sell,
collect or otherwise dispose of all of the
Company's remaining assets. Not more than sixty
(60) days after the date the Plan is adopted, the
Company shall file articles of dissolution with
the office of the Secretary of State of the State
of Oregon. During the Liquidation Period, the
Company will pay, discharge or set aside a reserve
fund for, or otherwise provide for, all of its
liabilities and obligations, fixed or contingent,
including, without limitation, any liabilities
arising by reason of the securities class action
lawsuits filed against the Company in the United
States District Court for
7
<PAGE>
Northern District of California and any
liabilities and obligations arising under the
Asset Purchase Agreement between Industrial
Leasing Company and ILC Acquisition Corp. See THE
PLAN - CERTAIN LEGAL PROCEEDINGS and THE PLAN -
BACKGROUND. Assuming sufficient assets are
available therefor, the Company will pay the
cumulative peferred stock dividends which have
accrued in respect of the Company's Series A
Preferred Stock and redeem or otherwise repurchase
all issued and outstanding shares of such Series A
Cumulative Preferred Stock. After such payment and
redemption, any remaining assets will be
distributed to holders of the Common Stock of the
Company, in such amounts and at such times and in
such manner as the Board shall deem appropriate.
Prior to distributions of assets by the Company to
its shareholders, Industrial Funding will invest
its cash or other liquid assets in money market
mutual funds, bank money market funds, bank
repurchase agreements collateralized by direct
obligations of the United States Government, bank
time deposits, certificates of deposit and
bankers' acceptances, investment-grade commercial
paper or corporate bonds, securities issued or
guaranteed by the United States Government or any
agency thereof, or mutual funds investing
exclusively in the same. Commencing on the date
the Plan is adopted, the Company's directors,
officers, employees and agents are prohibited from
purchasing or selling any shares of the stock of
the Company during the Liquidation Period except
for the exercise of stock options previously
granted by the Board of Directors.
Activities after Adoption of
the Plan After adoption of the Plan, the activities of the
Company and Industrial Leasing Corporation, its
wholly-owned subsidiary, will principally include
the collection of the promissory note delivered to
Industrial Leasing in connection with its 1993
asset sale, having a remaining principal balance
of $12.7 million as of May 31, 1994, the
collection or disposition of certain nonperforming
assets retained after the 1993 asset sale with an
aggregate book value of $395,000 as of May 31,
1994, the investment of financial assets in the
approximate amount of $29.4 million at May 31,
1994, and the management of legal proceedings
involving the Company. The liabilities to be
satisfied following the adoption of the Plan
8
<PAGE>
include the liabilities of the Company at May 31,
1994, of approximately $800,000, and the
establishment of a reserve for estimated costs
during the Liquidation Period of $4.2 million. The
contingent liabilities of the Company include the
liabilities, if any, that may arise in connection
with the securities class action lawsuits filed
against the Company in the United States District
Court for the Northern District of California and
a lawsuit filed by the underwriters of the
Company's initial public offering in the United
States District Court for the District of Oregon
seeking reimbursement of attorney's fees and costs
as they were incurred in connection with the
securities class action lawsuits. See THE PLAN -
CERTAIN LEGAL PROCEEDINGS. In the securities class
action lawsuits, plaintiffs have alleged damages
of approximately $20.25 million plus prejudgment
interest. The Company has been advised that, as of
May 31, 1994, the total amount of expenses
incurred by the underwriters was approximately
$566,000. In addition, Continental Insurance has
advanced the Company attorneys fees and costs in
the approximate amount of $1.6 million in
connection with the defense of the securities
class action lawsuits. Continental has asserted a
counterclaim against the Company for reimbursement
of such advances if it is determined that the
coverage is not available to the Company under an
insurance policy with Continental. A jury trial of
the securities class action lawsuits is scheduled
to begin in September, 1994.
9
<PAGE>
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, shareholders of the Company as of the Record Date
will consider and vote upon the following proposals: (i) to approve a Plan of
Dissolution and Complete Liquidation of the Company; and (ii) to transact any
other business that may properly come before the Special Meeting or any
adjournment thereof.
VOTING AT THE SPECIAL MEETING; RECORD DATE
The Board of Directors has fixed July 1, 1994 as the Record Date for the
determination of the shareholders entitled to notice of and to vote at the
Special Meeting. Accordingly, only holders of record of Class A Common Stock and
Class B Common Stock on the Record Date will be entitled to notice of, and to
vote at the Special Meeting. As of the Record Date, there were 1,875,000 shares
of Class A Common Stock outstanding and entitled to vote, which shares are held
by approximately 845 holders of record. In addition, there were 5,625,000 shares
of Class B Common Stock outstanding and entitled to vote, all of which were held
by IFC Holdings. Class A Common Stock and Class B Common Stock are identical in
all respects, except that holders of record of Class A Common Stock are entitled
to one vote per share, and holders of record of Class B Common Stock are
entitled to ten votes per share with respect to all matters on which
shareholders are entitled to vote. The presence, by person or proxy, of the
holders of a majority of the votes entitled to be cast at the Special Meeting is
necessary to constitute a quorum at the Special Meeting. The affirmative vote of
a majority of the votes entitled to be cast at the Special Meeting is required
to approve the Plan of Dissolution and Complete Liquidation of Industrial
Funding Corp.
As of the Record Date, IFC Holdings owned 75.0 percent of the Common Stock
of the Company, and 96.8 percent of the outstanding Common Stock voting rights
and, therefore, has sufficient voting power to constitute a quorum and approve
the Plan regardless of the vote of any other shareholder. IFC Holdings has
agreed to vote the shares of Common Stock owned by IFC Holdings in favor of the
proposed Plan, and as result, approval of the Plan is assured.
THE PLAN
On May 20, 1994, the Industrial Funding Board of Directors unanimously
approved for submission to the holders of Common Stock of the Company a Plan of
Dissolution and Complete Liquidation of Industrial Funding Corp. (the "Plan").
Under the Plan, the Company, during a period commencing from the date the Plan
is adopted and ending on the fifth anniversary thereof, unless shortened or
extended by the Board of Directors (the "Liquidation Period"), will liquidate,
sell, collect or otherwise dispose of all of the Company's remaining assets. Not
more than sixty (60) days after the Plan is adopted, the Company will file
articles of dissolution with the office of the Secretary of State of Oregon.
After adoption of the Plan, the activities of the Company and Industrial
Leasing, its wholly-owned operating subsidiary, will principally include the
collection of the promissory note delivered to Industrial Leasing in connection
with its 1993 asset sale and having a remaining principal balance of $12.7
million as of May 31, 1994, the collection or disposition of certain
nonperforming assets retained after the 1993 asset sale with an aggregate book
value of $395,000
10
<PAGE>
as of May 31, 1994, the investment of financial assets in the approximate amount
of $29.4 million at May 31, 1994, and the management of legal proceedings
involving the Company.
During the Liquidation Period, the Company will pay, discharge or set aside
a reserve fund for, or otherwise provide for, all of its liabilities and
obligations, fixed or contingent, including, without limitation, any liabilities
arising by reason of the securities class action lawsuits filed against the
Company in the United States District Court for the Northern District of
California (the "Securities Litigation") and any liabilities and obligations
arising out of the Asset Purchase Agreement between Industrial Leasing Company
and ILC Acquisition Corp. See THE PLAN - CERTAIN LEGAL PROCEEDINGS and THE PLAN
- - - - BACKGROUND. The liabilities to be satisfied following adoption of the Plan
include the liabilities of the Company at May 31, 1994, of approximately
$800,000, and estimated future liabilities during the implementation of the Plan
of $4.2 million. For a discussion of the assumptions underlying the estimate of
future liabilities, see THE PLAN - ACCOUNTING TREATMENT. The contingent
liabilities of the Company include the liabilities, if any, that may arise in
connection with the Securities Litigation and a lawsuit filed by underwriters of
the Company's initial public offering in the United States District Court for
the District of Oregon seeking reimbursement of attorney's fees and costs as
they are incurred in the Securities Litigation. See THE PLAN - CERTAIN LEGAL
PROCEEDINGS. In the Securities Litigation, plaintiffs have alleged damages of
$20.25 million plus prejudgement interest. The Company has been advised that,
as of May 31, 1994, the total amount of expenses incurred by the underwriters
was approximately $566,000. In addition, Continental Insurance has advanced the
Company attorneys fees and costs in the approximate amount of $1.6 million in
connection with the defense of the Securities Litigation. Continental has
asserted a counterclaim against the Company for reimbursement of such advances
if it is determined that the coverage is not available to the Company under an
insurance policy with Continental. A jury trial of the Securities Litigation is
scheduled to begin in September, 1994.
Dividends accrue annually on the Company's Series A Preferred Stock in the
amount of $1.9 million. As of May 31, 1994, accumulated and unpaid dividends on
the Company's Series A Cumulative Preferred Stock were $6.13 million. See
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK - PREFERRED STOCK. This accrual
reduces assets available for distribution to holders of the Company's Common
Stock, both Class A and Class B, by the approximate amount of $.25 per share
annually. The Company therefore currently intends to pay the accrued Series A
Preferred Stock Dividends and to redeem or otherwise repurchase all or a portion
of the outstanding shares of its Series A Preferred Stock if the Board of
Directors determines that, and if such payment and redemption is otherwise not
prohibited by Oregon law or court order. The redemption price of the Preferred
Stock is $13.4 million.
After such payment and redemption and upon a determination by the Board of
Directors that the assets of the Company are sufficient to satisfy all
liabilities of the Company, whether fixed or contingent, and if such
distribution is otherwise not prohibited by Oregon law or court order, any
remaining assets of the Company will be distributed to holders of the Common
Stock of the Company, both Class A and Class B, in such amounts, and at such
time and in such manner as the Board shall deem appropriate.
The Company is unable to predict the amount, if any, or timing, of
distributions to holders of the Common Stock of the Company. The amounts and
timing of all such distributions will be determined by the Board and will depend
upon the amounts realized by the Company in the liquidation, sale, collection
and other disposition of the Company's assets and upon the amounts
11
<PAGE>
deemed necessary to pay, discharge, or reserve for the Company's liabilities,
whether fixed or contingent, including, without limitation, any liabilities that
may arise in connection with the Securities Litigation.
BACKGROUND
Industrial Funding Corp. was incorporated in October, 1989, to serve as a
holding company formed for the purpose of owning Industrial Leasing Corporation.
Industrial Leasing, until May 1993, provided full-payout, non-cancelable "small
ticket" leases for capital equipment to smaller businesses.
During 1990, 1991 and 1992, the Company incurred substantial operating
losses due principally to the deterioration in the performance of its small-
ticket lease portfolio. As a consequence of its operating results and the
Company's default under certain financial covenants contained in its existing
credit agreements, the Company was constrained to operate under financial
conditions imposed by its lenders. Specifically, under the terms of the
Company's agreements with its lenders, the Company was limited in its ability to
obtain additional secured indebtedness, distribute or pay dividends or use
excess cash from operations. Alternative sources of capital were unavailable to
the Company on terms acceptable to the Company due to its operating results and
the uncertainties created by the Securities Litigation. In addition, sources of
capital previously made available to the Company by its former parent
corporation were no longer available following the divestiture by First City
Realty Investment Corp. of its interest in the Company. The unavailability of
alternative sources of financing on terms acceptable to the Company and the
Company's operating results adversely affected the Company's ability to
effectively compete in markets in which it had previously done business or to
penetrate new markets. As a result of these considerations, during 1991 and
1992 the Company's Board of Directors explored strategic options available to
the Company, including those other than the maintenance of the Company's then
existing business operations and portfolio growth. For a discussion of these
factors and the strategic reviews process, see the Company's Proxy Statement
dated May 6, 1993.
On December 11, 1992, Industrial Leasing entered into an Asset Purchase
Agreement with ILC Acquisition Corp. On May 27, 1993, the Company completed the
sale of substantially all of the assets of Industrial Leasing to ILC Acquisition
Corp. (the "Asset Sale"). The Company sold all of its active lease portfolio
with an aggregate value of $83.8 million, all cash and restricted cash balances
in the amount of $15.6 million, and certain other assets with an aggregate value
of $3.1 million. The consideration received by Industrial Leasing included
$20.2 million in cash, a promissory note in the final adjusted amount of $19.0
million (the "Purchase Note"), the payment of senior and subordinated debt of
$61.5 million, and the assumption of certain other liabilities of $1.2 million.
The Purchase Note has a three-year term with semi-annual principal and
interest payments payable each May 27 and November 27. The interest rate on the
Purchase Note is 6 percent per annum. The Purchase Note also supports
representations and warranties made by Industrial Leasing in connection with the
sale. If an indemnification obligation arises as a result of the asset sale,
ILC Acquisition Corp. has the right to offset such obligation under the Purchase
Note. On November 29, 1993, and May 24, 1994, the Company received scheduled
payments of principal and interest pursuant to the terms of the Purchase Note in
the approximate aggregate amount of $7.4 million.
12
<PAGE>
Since the Asset Sale, the Company has paid indemnification obligations in the
approximate amount of $25,000.
In September, 1993, the Company's Board of Directors initiated a review of
strategic alternatives available to the Company as a result of the asset sale.
At a regularly scheduled meeting the Board on September 24, 1993, the Board
directed John Estok, the Company's President, to report to the Board regarding
strategic alternatives that might be available to the Company. Mr. Estok was
specifically directed to identify strategies that might continue to be available
to the Company in the leasing business and also to explore alternatives to
permit the sale by the Company of its nonperforming lease portfolio.
During February, 1994, the Board was provided an executive summary and
related materials addressing a proposal for the Company to initiate the
marketing of full payout finance leases of health care equipment to the
physician market. This proposal was reviewed by the Board at a special meeting
on March 7, 1994. The Board determined that the continued consolidation of the
leasing industry resulting in well-capitalized and aggressive competitors,
coupled with the Company's lack of infrastructure necessary to support such an
initiative, precluded the Company from further pursuing this strategic
alternative.
During the Board's special meeting on April 8, 1994, and a special meeting
on April 27, 1994, the Board reviewed various strategic alternatives for the
disposition of the Company's remaining nonperforming lease portfolio. The Board
has directed the Company's officers to continue to explore alternatives for the
sale of the Company's nonperforming lease portfolio, including potential
disposition of such assets through auction.
As of May 31, 1994, the total assets of the Company were comprised of the
following: (i) $6.15 million in cash; (ii) $800,000 in restricted cash; (iii)
$23.2 million in short-term investments; (iv) $12.7 million Purchase Note; and
(v) $600,000 in nonperforming and other assets. The Company maintains a staff
of 11 employees, comprised principally of collections personnel, and expects
that staffing levels will continue to decline as the level of nonperforming
assets decreases.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believe that the proposed Plan is in the best
interest of the Company and its shareholders. For the complete proposed Plan see
ANNEX 1 - PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION OF INDUSTRIAL FUNDING.
In arriving at its conclusion, the Board noted that the Industrial Leasing
Asset Sale required the sale of the Company's lease receivables and capital
assets essential to its operating capability. Over the past year, the Company
has operated with a significantly reduced staff, comprised principally of
collection personnel. In order to pursue a going concern strategy, the Company
would be required to make a significant investment in human resources, including
marketing and credit personnel, and capital resources, including a management
information system.
The experience of the Company's officers is primarily in the area of
equipment leasing. In recent years, the equipment leasing industry has
undergone significant restructuring, with the emergence of large national and
well-capitalized participants. The Company's lack of access to
13
<PAGE>
capital on terms acceptable to the Company, exacerbated by the continuing
pendency of the Securities Litigation, precludes the Company from successfully
competing in the market.
POTENTIAL CONFLICTS OF INTEREST
In its deliberations regarding the Plan, the Board was aware that the
interests of the Company's Class B Common and Series A Preferred shareholders
were divergent from those of the Company's Class A Common shareholders. IFC
Holdings owns 5,625,000 shares of the Company's Class B Common Stock,
representing 100 percent of the issued and outstanding shares of that class, and
134,310 shares of the Company's Series A Preferred Stock, representing 100
percent of the issued and outstanding shares of that class. IFC Holdings'
beneficial owners include Harrowston Corporation and Talborne Capital
Corporation, which hold in the aggregate a 17 percent beneficial interest, and
Canadian and Swiss retail investors. IFC Holdings issued a promissory note in
the principal amount of CDN$59,940,000 in consideration for the Class B Common
Stock and Series A Preferred Stock. Under the terms of the promissory note, IFC
Holdings is required to repay the note on the earlier of January 1, 1997, 60
days after the sale by IFC Holdings of its interest in the Company's stock, or
60 days after receipt of any dividend, distribution, redemption or payment in
respect of the Company's stock. In the event that the net proceeds of any such
sale or dividend, distribution, redemption or other payment exceed
US$23,673,523, IFC Holdings will be entitled to retain a success fee equal to 20
percent of the amount by which the value of such net proceeds exceeds
US$23,673,523.
At the election of the Company, the Series A Preferred Stock may be
redeemed at any time at a redemption price of $100.00 per share or $13,431,000
plus accrued and unpaid dividends. After March 14, 1996, any holders of the
Preferred Stock may require the Company to redeem all or part of such holder's
Preferred Stock. Dividends on the Company's Series A Preferred Stock accrue at
the annual rate of $14.22 per share. As of May 31, 1994, accumulated and unpaid
dividends on the Series A Preferred Stock were $6.13 million. See VOTING
SECURITIES AND PRINCIPAL SHAREHOLDERS - DESCRIPTION OF THE COMPANY'S CAPITAL
STOCK. If the Company were to pay accumulated and unpaid dividends on the
Preferred Stock and redeem such Preferred Stock during implementation of the
Plan, such payment and redemption would not make available to IFC Holdings
sufficient proceeds from the implementation of the Plan in respect of the Series
A Preferred Stock to entitle IFC Holdings to retain a success fee.
The Board concluded that, despite the divergent interests of the Company's
Class A Common shareholders and the Class B Common and Series A Preferred
shareholder, the Plan is fair and in the best interest of the Company and all of
its shareholders for the reasons set forth under the THE PLAN - RECOMMENDATION
OF THE BOARD OF DIRECTORS.
REGULATORY APPROVALS
No regulatory approvals are required in connection with the Plan.
14
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of material federal income tax
consequences to stockholders relevant to the Company's adoption and
implementation of the Plan. The discussion does not deal with all of the tax
consequences of the Plan that may be relevant to particular holders of the
Company's Class A and Class B Common Stock, such as foreign persons.
STOCKHOLDERS SHOULD THEREFORE CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF THE PLAN TO THEM UNDER APPLICABLE FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS. The discussion of tax consequences that follows is based upon
the Code, Treasury Regulations, Internal Revenue Service (the "IRS") rulings,
and judicial decisions now in effect, all of which are subject to change at any
time; any such changes may be applied retroactively. The following discussion
and other discussions of federal income tax consequences herein have no binding
effect on the IRS or the courts and assume that the Company will liquidate
substantially in accordance with the Plan. This summary is not intended as a
substitute for careful tax planning, particularly because certain of the tax
consequences of the Plan may not be the same for all stockholders.
CONSEQUENCES TO STOCKHOLDERS
The Company believes that liquidation distributions to stockholders
pursuant to the Plan will be treated as distributions in complete liquidation of
the Company. In such case, a stockholder will recognize gain or loss with
respect to each share of stock held by the stockholder, measured by the
difference between (i) the stockholder's tax basis in that share and (ii) the
total amount of cash and fair market value of other property, if any, received
by the stockholder with respect to such share pursuant to the Plan. If a
stockholder holds more than one block of stock (groups of shares acquired at
different times or at a different costs), each liquidating distribution will be
allocated ratably among the various blocks shares and gain or loss will be
computed separately with respect to each block of shares.
The Plan may result in more than one liquidating distribution to the
holders of the Company's Class A and Class B Common Stock. If so, each
liquidating distribution will be first applied against the adjusted tax basis of
each of the holder's shares of stock, and gain will be recognized with respect
to a share only after an amount equal to the adjusted tax basis of such share
has been fully recovered. Any losses with respect to a share may be recognized
by a shareholder only after the Company has made its final liquidating
distribution or after the last substantial liquidating distribution is
determinable with reasonable certainty. As a consequence of the foregoing,
stockholders incurring losses under the Plan will likely be prevented from
recognizing such losses until the receipt of the final liquidating distribution.
Gain or loss recognized by a stockholder will be capital gain or loss
provided the shares of stock are held by the stockholder as capital assets;
capital gain or loss will be long-term if the shares were held for more than one
year.
TAXATION OF NON-UNITED STATES STOCKHOLDERS
Persons who are not citizens or residents of the United States should
consult their tax advisors with respect to the United States and non-United
States tax consequences of the Plan.
15
<PAGE>
STATE AND LOCAL INCOME TAX
Stockholders may also be subject to state or local taxes with respect to
distributions under the Plan and should consult their tax advisors regarding
such taxes.
BACKUP WITHHOLDING
A stockholder may be subject to backup withholding at the rate of 31
percent in connection with liquidating distributions received with respect to
his or her shares of stock, unless such stockholder (i) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact; or (ii) provides a correct taxpayer identification number, certifies
as to no loss of exemption for backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A stockholder who does
not provide the Company with his or her correct taxpayer identification number
may be subject to penalties imposed by the IRS. Any amount paid as backup
withholding will be creditable against the stockholder's income tax liability.
The Company will report to the stockholders and the IRS the amount of any
"reportable payments" distributed and the amount of tax withheld, if any, with
respect to the shares.
CONCLUSION
Distributions pursuant to the Plan may occur at various times and in more
than one tax year. No assurances can be given that the tax treatment described
herein will remain unchanged at the time of such distributions. The Company
recommends that each stockholder consult his or her own tax advisor regarding
the tax consequences of the Plan.
ACCOUNTING TREATMENT
As a result of the Board's approval of the Plan, the Company's financial
statements as of May 31, 1994, and for the three and six months then ended, have
been prepared on a liquidation basis. Accordingly, assets have been valued at
their estimated net realizable value and liabilities include estimated costs
associated with carrying out the Plan.
The net adjustment at May 31, 1994 required to convert from a going concern
(historical cost) basis to a liquidation basis of accounting was a decrease in
the carrying value of net assets of $4.2 million which is included in the
consolidated statement of income and changes in net assets (liquidation basis).
This decrease in the carrying value of net assets is a result of recording
estimated liabilities associated with carrying out the Plan.
Under the liquidation basis, the Company has estimated future liabilities
associated with carrying out the Plan (see assumptions below). The Company has
not reflected future revenues by way of interest or investment income or gains
associated with the nonperforming portfolio as such income will be recognized
when realized.
The statement of net assets as of May 31, and November 30, 1993, and the
consolidated statement of income and changes in net assets for the three and six
months ended May 31, 1993 have been prepared using the historical cost (going
concern) basis of accounting on which the Company has previously reported its
financial condition and its results of operations.
16
<PAGE>
The conversion of the Company's assets and liabilities to the liquidation
basis of accounting requires significant estimates and judgments by management
of the Company. A summary of the Plan, and the significant judgments and
estimates made, are described below.
The Plan calls for the orderly liquidation of the Company over a five year
period from the effective date of the Plan. The period may be shortened or
lengthened if it is deemed to be in the best interest of the shareholders. The
Company may engage in transactions as may be appropriate to its complete
liquidation, including the sale, exchange, or other disposition of all or any
part of its remaining assets for cash, shares, bonds, or other securities or
property, or any combination of the foregoing. Prior to the final distribution
of the assets of the Company to its shareholders, the Company will invest its
cash or other liquid assets. The Company will also discharge or otherwise
provide for all its liabilities and obligations.
The Company has made the following assumptions in the valuation of the
assets and liabilities of the Company on the liquidation basis of accounting.
See Annex 2, the Company's Form 10-Q for the period ended May 31, 1994, for the
Company's financial statements as modified by the liquidation presentation.
1) Short-term investments are carried at their estimated net realizable
value. No accrual has been made for future income or loss on
investments except for unrealized gains or losses that existed at May
31, 1994, if any.
2) Notes receivable. The Company has the intent and ability to hold this
receivable to maturity, which is May 27, 1996. No valuation allowance
is deemed necessary. Interest income will be recognized when earned
at a rate of 6 percent per annum.
3) Nonperforming assets are carried at their estimated net realizable
value. The Company does not anticipate any additional losses on the
aggregate nonperforming assets as of May 31, 1994, therefore, no
write-down of these assets was taken. Gains, if any, on the
liquidation of the nonperforming assets will be recorded at the time
they are realized. The Company estimates that the collection efforts
on the nonperforming assets will cease at approximately December 31,
1994; however, this date is subject to change should facts and
circumstances change.
4) Preferred stock. Dividends on preferred stock have been accreted
through May 31, 1994. Additional dividends will be accreted as
earned.
5) Reserve for estimated costs during the period of liquidation. This
amount represents costs that management estimates will be incurred to
liquidate the Company. Major assumptions are as follows:
a) Nonperforming assets will be liquidated as of December 31,
1994;
b) The Securities Litigation is scheduled to go to trial in
September of 1994. Legal costs associated with this
litigation have been accrued through October 1994. No
accrual has been made as to the resolution of this
litigation, as the amount, if any, cannot presently be
determined;
17
<PAGE>
c) No accrual has been made with regard to the demand of the
Company's underwriters that the Company pay the
underwriters' attorney fees and costs incurred in connection
with their defense of the Securities Litigation of the
Company. Based in part on discussions with counsel,
management believes that any liability related to the matter
is unlikely to occur; and
d) Administrative costs have been accrued through May 31, 1996,
the anticipated date of the final payment on the note
receivable. No costs have been accrued subsequent to May
1996, as the Company currently anticipates all matters will
be resolved at that time.
All of the above assumptions are subject to change should facts and
circumstances change.
APPRAISAL RIGHTS
Holders of Class A and Class B Common Stock will have no appraisal,
dissenters' or similar rights under Oregon law in connection with the approval
or implementation of the Plan.
INTEREST OF CERTAIN PERSONS IN APPROVAL OF THE PLAN
The directors of the Company and the directors and executive officers of
the Company as a group, owned beneficially the following amounts of the
outstanding equity securities of the Company on July 25, 1994. No outstanding
shares of Class B Common Stock are held by directors or officers of the Company.
SECURITY OWNERSHIP OF DIRECTORS AND NAMED OFFICERS
<TABLE>
<CAPTION>
Amount Beneficially Owned
------------------------------------
Stock Percent
Class of Securities Name Direct Options Total of Class
- - - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Common Stock Brent S. Belzberg 0 0 0 0.0%
Richard L. Doege 0 50,000 50,000 2.7%
John J. Estok 0 150,000 150,000 8.0%
Alan R. Hibben 0 0 0 0.0%
K. Peter Zech 0 50,000 50,000 2.7%
All Board of Directors and
Executive Officers as a
Group (5 persons) 0 250,000 250,000 13.3%
</TABLE>
CERTAIN LEGAL PROCEEDINGS
There is litigation pending against the Company, Industrial Leasing, the
Company's previous majority shareholder, First City, and certain of its former
affiliates and subsidiaries, certain directors, certain former directors and
officers, its independent auditor, and the underwriters of the December 8, 1989,
initial public offering. The class action lawsuits, WADE ET. AL. V. INDUSTRIAL
ET. AL., filed
18
<PAGE>
January 1992, and a related case BOWER ET. AL. V. BELZBERG ET. AL., filed
February 1992, allege violations of federal securities law. The WADE lawsuit
also alleged violations under California state law; however, these claims were
dismissed by the Court in January 1994. These lawsuits were filed in the United
States District Court for the Northern District of California (the "Court") and
allege that plaintiffs were damaged as a result of alleged misstatements and
omissions in documents disseminated in connection with the initial public
offering and in subsequent communications and public filings by the Company,
through February 1991. The Company has retained legal counsel to defend against
these actions. Initial discovery has been completed, however, expert discovery
is ongoing. Disposition motions by plaintiffs and defendants, including the
Company, are pending. The Court has ordered a jury trial of WADE scheduled for
September 1994. Plaintiffs allege damages of approximately $20.25 million plus
prejudgement interest. The lawsuits could have a material effect on results of
operations and financial condition of the Company if adversely determined.
As a result of the sale of substantially all of Industrial Leasing's assets
on May 27, 1993, plaintiffs moved the Court for a preliminary injunction
restraining the Company from withdrawing, transferring, pledging or disposing of
any funds or assets received in connection with the Asset Sale, and further
moved the Court to supervise the transfer of any such assets. The Court denied
plaintiffs' injunction motions. In so doing, the Court stated that plaintiffs
were likely to prevail on their Section 11 claims and that, in the absence of
the requested injunction, there was a possibility plaintiffs would be
irreparably harmed. The preliminary findings of the Court, however, will not
control the ultimate determination of liability in connection with the
plaintiffs' Section 11 claim. On July 18, 1994, the Ninth Circuit Court of
Appeals (the "Court of Appeals") remanded the matter to the Court for
determination of whether the injunction should be granted based on newly
articulated standards adopted by the Court of Appeals. It is believed that to
grant the injunction, the Court must find that the Company has engaged in a
pattern of secreting assets or that its insolvency is impending.
On October 6, 1993, the Court ordered the WADE and BOWER cases to a
settlement magistrate in an attempt to facilitate a settlement of the
Securities Litigation. There can be no assurance, however, that the Securities
Litigation will be resolved by a settlement among the parties.
On June 23, 1994, the Company and the other defendants in WADE moved for
summary judgment of the claims asserted by the plaintiffs. Also, on June 23,
1994, plaintiffs moved for summary judgment against the Company solely on
plaintiffs' Section 11 claim. Oral argument is currently scheduled to be heard
by the Court on these motions on August 10, 1994.
The Company has filed a lawsuit against two insurance carriers, demanding
coverage against American Home under a directors and officers liability policy
in the amount of approximately $5 million (Canadian), and against Continental
Insurance under a general liability policy and umbrella policy of approximately
$4 million (Canadian) and $16 million (Canadian), respectively. American Home
and Continental have each filed answers denying liability. Continental has also
filed a counterclaim against the Company, demanding reimbursement of the
attorney fees and costs it advanced to the Company in connection with the
defense of the Securities Litigation under a reservation of rights. As of May
31, 1994, Continental has advanced the Company attorney fees and costs in the
amount of approximately $1.6 million.
In May 1994, the Company filed a motion for summary adjudication of its
claims against American Home. On June 27, 1994, the Court granted the insured
plaintiffs' motion for summary
19
<PAGE>
judgment against American Home. The Court held the claims asserted in WADE were
covered acts under the American Home policy unless it is ultimately determined
by a finder of fact that the insureds deliberately defrauded investors or were
unjustly enriched from the disclosures identified in WADE. The Court also held
that allocation issues remain concerning the Continental policies and the
American Home policy.
In January 1993, Alex. Brown & Sons and Piper Jaffray, Inc., the
underwriters of the Company's initial public offering, filed an action against
the Company, demanding that the Company pay the underwriters' attorney fees and
costs associated with their defense of the Securities Litigation, in accordance
with the Underwriting Agreement entered into by the Company. The Court granted
the underwriters' motion for summary judgment on July 9, 1993, and ordered the
Company to pay the underwriters' costs and legal fees as they are incurred. An
appeal of this decision is pending before the Court of Appeals. The Company has
been advised that as of May 31, 1994 the total amount of expenses incurred by
the underwriters was approximately $566,000. Such amount has not been accrued
as the Company, based in part on discussions with counsel, believe that any
liability related to the matter is unlikely to occur.
On March 4, 1994, the underwriter defendants filed a third-party claim in
WADE for contribution against one current director, certain former directors,
and one former officer of the Company. In their claim, the underwriter
defendants seek to shift any damages assessed against them to these present and
former directors and officers. On May 18, 1994, the Court dismissed some of
these contribution claims against some of the parties. On June 6, 1994, the
Court stayed and severed the contribution action, to be adjudicated following
the conclusion of WADE. Under Oregon law, the Company may be required to
indemnify the officers and directors if this matter is adversely determined.
The Company is also a defendant in various lawsuits resulting from normal
business activity. In the opinion of management, the disposition of all other
such litigation currently pending will not have a material effect on the
financial position or results of operation of the Company.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
COMMON STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
Class A, without par value, and 10,000,000 shares of Class B Common Stock,
without par value. As of the date of the Proxy Statement, the Company has
1,875,000 shares of Class A Common Stock issued and outstanding and 5,625,000
shares of Class B Common Stock issued and outstanding held by IFC Holdings, Inc.
The Class A Common Stock and the Class B Common Stock are identical in all
respects except that: (i) the holders of the Class A Common Stock are entitled
to one vote per share and holders of Class B Common Stock are entitled to ten
votes per share with respect to all matters on which holders of Common Stock are
entitled to vote; (ii) if stock dividends are declared, holders of Class A
Common Stock will receive Class A Common Stock and holders of Class B Common
Stock
20
<PAGE>
will receive shares of Class B Common Stock; and (iii) each share of Class B
Common Stock is convertible in to one share of Class A Common Stock at the
option of the holder at any time. Holders of Class A and Class B Common Stock
do not have cumulative voting rights in connection with the election of the
Company's Board of Directors.
Dividends may be declared and paid to the holders of Class B Common
Stock only if at such time an equal per share dividend is declared and paid to
the holders of Class A Common Stock, and vice versa. The Company may not
declare or pay any dividends or other distributions on the Class A or Class B
Common Stock until all cumulative dividends on the Preferred Stock have been
paid or declared and set aside for payment. After the satisfaction in full of
the liquidation preferences of holders of the Company's Preferred Stock, holders
of Class A and Class B Common Stock are entitled to ratable distribution of the
remaining assets and funds of the Company available for distribution to
stockholders in the event of any liquidation, dissolution or winding up of the
Company. The shares of Common Stock are not subject to redemption by
operations of a sinking fund or otherwise, and holders of such shares are not
entitled to preemptive rights.
PREFERRED STOCK
The Company has 10,000,000 authorized shares of Preferred Stock without par
value, which may be issued from time to time in one or more classes or series.
The Company's Articles of Incorporation authorize the Board of Directors to
issue from time to time one or more series of Preferred Stock with such
designations and preferences and other annual rights and qualifications,
limitations and restrictions thereon, as permitted by law and as fixed from time
to time by resolution of the Board of Directors. The Company issued 134,310
shares of Series A Cumulative Preferred Stock for $10 million in cash and
forgiveness of $3,431,000 of indebtedness owing by the Company to an affiliated
company, the stock of which has been acquired by IFC Holdings, Inc.
Dividends on the Preferred Stock accrue at the annual rate of $14.22 per
share. Unpaid dividends accumulate but do not bear interest. Until all such
dividends have been paid or declared and set aside for payment, the Company may
not declare or pay dividends or other distributions on the Class A or Class B
Common Stock. As of May 31, 1994, accumulated and unpaid dividends on the
Series A Preferred Stock were $6.13 million. The shares of Preferred Stock are
not convertible to any other securities of the Company, including shares of
Class A or Class B Common Stock.
At the election of the Company, the Preferred Stock may be redeemed at any
time at a redemption price of $100.00 per share plus accrued and unpaid
dividends. After March 14, 1996, any holder of the Preferred Stock may require
the Company to redeem all or part of such holder's Preferred Stock at a
redemption price of $100.00 per share plus accrued and unpaid dividends.
In the event of the liquidation or dissolution of the Company, after
payment or provisions for payment of the debts of the Company, each holder of
shares of Preferred Stock will be entitled to revenues for each share of
Preferred Stock held by such holders in the amount of $100.00, plus all accrued
and unpaid dividends prior to any distribution to holders of shares of Common
Stock.
Holders of Preferred Stock do not have voting rights, except as
specifically required by the laws of the State of Oregon. Holders of Preferred
Stock will not have the right to vote on the Plan.
There are no restrictions or limitations on the authority of the Company's
Board of Directors
21
<PAGE>
to issue additional shares of Preferred Stock. The Company's Board of Directors
does not, however, have any present intention or plan to issue additional shares
of Preferred Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Persons and groups owning in excess of 5 percent of the Company's Common
Stock are required to file certain reports disclosing such ownership pursuant to
the Securities Exchange Act of 1934. Based on such reports, the following
persons or group are believed by the Company to be beneficial owners, as of July
25, 1994, of more than five percent of the Company's securities.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Shares
Owned Percent
Title of Class Name & Address Beneficially of Class
- - - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Common Stock Mr. Jeffrey Tannenbaum 165,000 8.8%
1211 Avenue of the Americas
29th Floor
New York, NY 10031
Class B Common Stock IFC Holdings, Inc.(1) 5,625,000 100.0%
151 Yonge Street
Toronto, Ontario
CANADA M5C 2W7
Series A Cumulative IFC Holdings, Inc.(1) 134,310 100.0%
Preferred Stock 151 Yonge Street
Toronto, Ontario
CANADA M5C 2W7
<FN>
(1) Under the terms of the IFC Sale Agreement, dated as of June 30, 1992, among
IFC Holdings Inc., FCRIC, First City Trust Company and the R-M Trust Company as
Trustee, IFC Holdings Inc. must seek to divest itself of its interest in
Industrial Leasing prior to January 1, 1997.
</TABLE>
For a description of the ownership of the Company's securities by the
Company's directors and officers, see the plan - interest of certain persons in
approval of the plan.
MARKET PRICE DATA OF THE COMPANY
<TABLE>
<CAPTION>
Stock
Closing
Date of Event Price Description of Event
- - - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
May 27, 1993 $0.88 Date of the Asset Sale
September 24, 1993 0.88 Board of Directors meeting: review strategic options
February 10, 1994 1.50 Board of Directors meeting: discuss strategic options
March 7, 1994 1.38 Special Board of Directors meeting: discuss strategic options
April 27, 1994 1.28 Special Board of Directors meeting: potential Plan of Liquidation discussed
May 20, 1994 1.28 Board of Directors adopt the Plan of Liquidation
</TABLE>
22
<PAGE>
THE PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION
On May 20, 1994, the Company's Board of Directors unanimously approved for
submission to the holders of Common Stock of Company a Plan of Dissolution and
Complete Liquidation of Industrial Funding Corp. Under the Plan, the Company,
during a period commencing from the date the Plan is adopted and ending on the
fifth anniversary thereof unless shortened or extended by the Board of Directors
(the "Liquidation Period"), will liquidate, sell, collect or otherwise dispose
of all of the Company's remaining assets.
Not more than sixty (60) days after the date the Plan is adopted, the
Company shall file articles of dissolution with the office of the Secretary of
State of the State of Oregon. During the Liquidation Period, the Company will
pay, discharge or set aside a reserve fund for, or otherwise provide for, all of
its liabilities and obligations, fixed or contingent, including, without
limitation, any liabilities arising by reason of the securities class action
lawsuits filed against the Company in the United States District Court for
Northern District of California and any liabilities and obligations arising
under the Asset Purchase Agreement between Industrial Leasing Company and ILC
Acquisition Corp. See THE PLAN - CERTAIN LEGAL PROCEEDINGS and THE PLAN -
BACKGROUND.
Assuming sufficient assets are available therefore, the Company will pay
the cumulative preferred stock dividends which have accrued in respect of the
Company's Series A Preferred Stock and redeem or otherwise repurchase all issued
and outstanding shares of such Series A Cumulative Preferred Stock. After such
payment and redemption, any remaining assets will be distributed to holders of
the Common Stock of the Company, in which amounts and at such times and in such
manner as the Board shall deem appropriate. Prior to distribution of assets by
the Company to its shareholders, Industrial Funding will invest its cash or
other liquid assets in money market mutual funds, bank money market funds, bank
repurchase agreements collateralized by direct obligations of the United States
Government, bank time deposits, certificates of deposit and bankers'
acceptances, investment-grade commercial paper or corporate bonds, securities
issues or guaranteed by the United States Government or any agency thereof, or
mutual funds investing exclusively in the same.
Commencing on the date the Plan is adopted, the Company's directors,
officers, employees and agents shall be prohibited from purchasing or selling
any shares of the stock of the Company during the Liquidation Period except for
the exercise of stock options previously granted by the Board of Directors.
OTHER MATTERS
The management of the Company is not aware of any business to come before
the Special Meeting, other than the matter described in this Proxy Statement. If
any matters properly come before the Special Meeting, it is intended that
proxies on the accompanying form will be voted in respect thereof in accordance
with the judgment of the person or persons voting the proxies.
23
<PAGE>
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
the Special Meeting, any shareholder proposal to take action at such meeting
must have been received at the Company's main office at 2121 SW Broadway,
Portland, Oregon 97201, no later than July 15, 1994. No such proposals were
received.
PROXY SOLICITATION
The cost of this solicitation will be borne by the Company. Solicitations
will be made by mail, telephone, or facsimile and personally by directors,
officers, and other employees of the Company, but such persons will not receive
compensation for such services over and above their regular salaries. The
Company will reimburse brokers, bank custodians, nominees and fiduciaries
holding stock in their names or in the names of their nominees for their
reasonable charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock.
24
<PAGE>
ANNEX 1
PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION
OF INDUSTRIAL FUNDING CORP.
1. Adoption of Plan. The effective date of this Plan (the "Effective
Date") shall be the date on which it is approved and adopted by the
Shareholders.
2. Liquidation Period. The actions authorized in this Plan shall be
accomplished during the period (the "Liquidation Period") commencing on the
Effective Date and ending on the fifth anniversary of the Effective Date;
provided, however, that the Board may shorten the Liquidation Period if the
Board determines that all material assets of IFC have been sold or collected,
all liabilities of IFC, fixed or contingent, have been paid, discharged, or
adequate provisions have been established therefore, and such a shortening of
the Liquidation Period is in the best interests of IFC and its Shareholders or
the Board may extend the Liquidation Period if the Board determines that such an
extension is in the best interest of IFC and its Shareholders. IFC shall cause
the adoption of a plan of complete liquidation by Industrial Leasing Corporation
which plan shall provide for the complete liquidation of Industrial Leasing
Corporation during the Liquidation Period.
3. Dissolution. Not more than 60 days after the Effective Date,
appropriate officers of IFC shall execute and deliver for filing articles of
dissolution of IFC in accordance with Or. Rev. Stat. Section 60.621, thereby
limiting the purposes and activities of IFC to those described in Or. Rev. Stat.
Section 60.637. Following the filing of such articles and for so long as IFC
shall continue to exist pursuant to Or. Rev. Stat. Section 60.637. IFC shall, to
the maximum extent permitted by law, continue to have the power and authority to
take any of the actions that this Plan would authorize IFC to take during the
Liquidation Period. Upon filing of such articles of dissolution, IFC, its Board,
officers, employees and agents shall hold IFC out as a corporation in
dissolution.
4. Sale or other Disposition of Assets. IFC shall have the authority to
engage in such transactions as may be appropriate to its complete liquidation,
including, without limitation, the sale, exchange or other disposition of all or
part of its remaining assets for cash, shares, bonds, or other securities or
property, or any combination of the foregoing, in one or more transactions, to
such persons or entities and upon such terms and conditions as the Board, or
officers, employees or agents of IFC acting pursuant to authority delegated by
the Board, shall determine, with no further approvals by the Shareholders except
as required by law.
IFC shall have the authority to commence and prosecute any proceeding
against any party for contribution, indemnification, recoupment of defense cost,
or to establish insurance coverage in respect of any cost, expense, loss or
damage suffered by ILC by reason of the WADE litigation or any related
proceeding upon a determination by the Board, or officers, employees or agents
of IFC acting pursuant to authority delegated by the Board, that such proceeding
is in the best interest of IFC or its Shareholders; provided, however, that
nothing herein shall operate to limit IFC from commencing or prosecuting any
other proceeding permitted under Or. Rev. Stat. Section 60.637.
25
<PAGE>
5. Investment Policy Pending Shareholder Distribution. Prior to the final
distribution of the assets of IFC to its Shareholders, IFC shall have the
authority to invest its cash or other liquid assets in: money market mutual
funds; bank money market funds; bank repurchase agreements collateralized by
direct obligations of the United States Government; bank time deposits;
certificates of deposit; bankers' acceptances; investment grade commercial paper
or corporate bonds; securities issued or guaranteed by the United States
Government or any agency thereof and mutual funds investing exclusively in the
same.
6. Provision for Liabilities. Within the Liquidation Period, IFC shall
pay or discharge, or set aside a reserve fund for, or otherwise provide for, all
its liabilities and obligations, fixed or contingent, including, without
limitation, any liabilities arising by reason of the WADE litigation, related
proceedings, and the Parrish Purchase and Sale Agreement.
7. Distribution to Shareholders. Subject to the limitations on the
declaration and payment of dividends and the repurchase of capital stock arising
under law, including such limitations as may arise by reason of the pendency of
the WADE litigation and related proceedings, IFC shall, at such time and in such
manner as the Board shall deem appropriate, but in any event within the
Liquidation Period, distribute its assets to its Shareholders to the end that,
by the end of the Liquidation Period, IFC shall have distributed all its assets,
including proceeds of sales, exchanges or other dispositions, to its
Shareholders. Subject to the limitations on the declaration and payment of
dividends and the repurchase of capital stock arising under law, including such
limitations as may arise by reason of the pendency of the WADE litigation, and
related proceedings, but as soon as reasonably practical, IFC shall, at such
times and in such manner as the Board shall deem appropriate, pay the cumulative
preferred stock dividends which have accrued in respect of IFC's Series A
Cumulative Preferred Stock, and redeem or otherwise repurchase all issued and
outstanding shares of such Series A Cumulative Preferred Stock. If, in the
judgment of the Board, such a course appears advisable, IFC may incur
indebtedness to such persons and entities, in such amounts and on such terms and
conditions as the Board shall determine to permit IFC to make distributions of
cash to Shareholders. The preceding sentence shall not operate to limit the
power of IFC to incur indebtedness under any other circumstance.
8. Transfer of Assets to Transferee Entities. If, in the judgment of the
Board, such a course appears advisable, IFC may distribute assets of IFC to its
Shareholders by transferring such assets to one or more partnerships, trusts,
corporations or other entities, each a "Transferee Entity," and distributing
interests in such Transferee Entity or Entities to the Shareholders. If the
Board deems it to be advisable, the general partner (or its directors or
officers, if any) of any Transferee Entity that is a partnership, the trustee of
any Transferee Entity that is a trust, the directors or officers of any
Transferee Entity that is a corporation or the persons with comparable rules and
any other type of Transferee Entity may be officers, directors or employees of
IFC or any of its subsidiaries or persons or entities (including subsidiaries)
otherwise controlling, controlled by, or under common control with IFC.
9. Methods of Distributions to Shareholders. Any distribution to
Shareholders may be by way of prorated dividends or other distributions of cash,
securities or other property, tender or exchange offers for shares of IFC's
stock or repurchases or redemptions of, or privately negotiated exchanges of
IFC's assets for, such shares.
10. Restrictions on Self-Dealing. Commencing on the Effective Date, IFC
shall not sell,
26
<PAGE>
exchange, or otherwise dispose of any of its remaining assets to any director,
officer, employee, or agent of IFC. Except for the exercise of stock options
previously granted by the Board and for sales of the capital stock of IFC to IFC
as contemplated under Paragraphs 7 and 9 of this Plan, no director, officer,
employee of IFC shall purchase or sell any shares of the capital stock of IFC
during the Liquidation Period.
11. Amendment of Plan. The Board may modify or amend this Plan at any time
without Shareholder approval if it determines that such action would be in the
best interest of IFC or its Shareholders. If any amendment or modification
appears necessary and, in the judgment of the Board, will materially and
adversely affect the interest of its Shareholders, such an amendment or
modification shall be submitted to the Shareholders for approval.
12. Authorization to Board and Officers. The Board and officers of IFC are
authorized to approve such changes to the terms of any of the transactions
referred to herein, to interpret any of the provisions of the Plan, and to make,
execute and deliver such other agreements, conveyances, assignments, transfers,
certificates, and other documents and to take such actions as the Board and such
officers deem necessary or desirable in order to carry out the provisions of
this Plan and effect the complete liquidation and dissolution of IFC in
accordance with Section 60.627 and other applicable sections of the Oregon
Revised Statutes.
27
<PAGE>
SUPPLEMENT TO PROXY STATEMENT
On August 15, 1994, a preliminary settlement agreement was reached in
the securities class action litigation pending against the Company, its
officers, directors, former parent companies, subsidiary Industrial Leasing
Corporation, its accountants, and the underwriters of its initial public
offering. See THE PLAN - CERTAIN LEGAL PROCEEDINGS. The proposed settlement is
subject to further negotiation of release terms by the parties and the final
approval of the United States District Court for the Northern District of
California. When finalized, all claims will be settled in the cases WADE ET AL.
V. INDUSTRIAL ET AL., BOWER ET AL. V. BELZBERG ET AL. and ALEX BROWN V.
INDUSTRIAL FUNDING, originally filed in January 1992.
Under the terms of the proposed settlement, the Company will
contribute $5,000,000 of a total settlement of $10,000,000. The Company
maintains that its litigation positions have merit, but it agreed to the
settlement in order to avoid the risk and expense of further legal proceedings.
All claims for insurance coverage and reimbursement of defense costs
also will be resolved in the settlement, except for the Company's claim against
Continental Insurance for recovery of additional legal expenses incurred as a
result of these actions. Through July 29, 1994, the Company had submitted
claims aggregating $4.6 million for recovery of legal expenses incurred as a
result of the securities class action lawsuits. To date, Continental has
reimbursed the Company attorney fees and costs in the amount of $1.6 million.
Upon final approval of the proposed settlement, the Company intends to
promptly pay all accrued and unpaid Series A Preferred Stock dividends and to
redeem all outstanding shares of its Series A Preferred Stock. See DESCRIPTION
OF THE COMPANY'S CAPITAL STOCK - PREFERRED STOCK. Based upon the terms of the
settlement, the Company believes that assets will be available for distribution
to holders of the Common Stock of the Company after the payment by the Company
of the accrued Series A Preferred Stock dividends and the redemption of the
outstanding shares of the Series A Preferred Stock.
The Company is unable to predict the amount or timing of distributions
to holders of the Common Stock of the Company. The amount and timing of all
such distributions will be determined by the Board and will depend, in part, on
the amounts realized by the Company in the liquidation, sale, collection or
other disposition of the Company's assets and upon the amounts deemed necessary
to pay, discharge or reserve for the Company's remaining liabilities. The
timing of distributions to holders of the Common Stock of the Company will
depend, in part, on the receipt by the Company of payments of principal and
interest under the Purchase Note issued to the Company in connection with the
sale by the Company of substantially all of the assets of Industrial Leasing
Corporation to ILC Acquisition Corp. in May 1993. As of May 31, 1994, the
Purchase Note had a remaining principal balance of $12.7 million. In accordance
with its terms, the remaining principal balance and interest are payable in four
semi-annual installments on November 27, 1994, May 27, 1995, November 27, 1995
and May 27, 1996. See THE PLAN - BACKGROUND.
Date of this Supplement: August 16, 1994
