Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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Insignia Financial Group, Inc.
Insignia Financing I
(Exact name of registrant as specified in its charter)
Delaware 13-35911193
Delaware Pending
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
(864) 239-1000
(Address, including zip code, and telephone number,
including area code, of registrants' principal
executive offices)
John K. Lines, Esq.
General Counsel
Insignia Financial Group, Inc.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
(864) 239-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of all correspondence to:
Allan R. Williams, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036-8299
Tel: (212) 969-3220
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement has been declared 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. |_|
<PAGE>
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 plan, check the following box. |X|
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. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed
Proposed Maximum Maximum
Title of Each Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of
To Be Registered Registered(1) Unit(2) Price(2) Registration Fee(1)
- ----------------------------- ------------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Trust Convertible Preferred
Securities of Insignia
Financing I 2,990,000 $54.00(1) $161,460,000 $48,927
Convertible Subordinated
Debentures of Insignia
Financial Group, Inc. (3) -- -- --
Class A Common Stock of
Insignia Financial Group, Inc. (4) -- -- --
Guarantee of Insignia Financial
Group, Inc. and Certain Back-
Up Undertakings(5)
Class A Common Stock of
Insignia Financial Group, Inc. 6,668,588 $23.00(1) $153,377,524 $46,478
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Total $95,405
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</TABLE>
(1) The price stated is estimated solely for the purpose of calculating
the registration fee in accordance with Rule 457 under the Securities
Act of 1933.
(2) Exclusive of accrued interest and distributions, if any.
(3) $149,500,000 in aggregate principal amount of 6 1/2% Convertible
Subordinated Debentures (the "Convertible Subordinated Debt
Securities") of Insignia Financial Group, Inc. (the "Company") were
issued and sold to Insignia Financing I (the "Trust") in connection
with the issuance by the Trust of 2,990,000 of its 6 1/2% Trust
Convertible Preferred Securities (the "Convertible Preferred
Securities"). The Convertible Subordinated Debt Securities may be
distributed, under certain circumstances, to the holders of
Convertible Preferred Securities for no additional consideration.
(4) Such indeterminate number of shares of Insignia Financial Group, Inc.
Class A common stock as may be issuable upon conversion of the
Convertible Preferred Securities registered hereunder, including such
shares as may be issuable pursuant to anti-dilution adjustments.
(5) No separate consideration will be received for the Guarantee. The
Guarantee includes the rights of holders of the Convertible Preferred
Securities under the Guarantee, the Convertible Subordinated Debt
Securities and certain back-up undertakings, comprised of obligations
of Insignia Financial Group, Inc. under the Indenture and pursuant to
the Declaration to provide certain indemnities in respect of, and be
responsible for certain costs, expenses, debts and liabilities of,
Insignia Financing I, as described in the Registration Statement. All
obligations under the Declaration, including the indemnity obligation,
are included in the back-up undertakings.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
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.
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Explanatory Note: This Registration Statement contains two prospectuses: (1)
one relating to the resale of 6 1/2% Trust Convertible Preferred Securities of
Insignia Financing I and the shares of Class A Common Stock of Insignia
Financial Group, Inc. which may be issued upon the conversion of the Trust
Convertible Preferred Securities and (2) the other relating to the resale of
certain outstanding shares of Class A Common Stock of Insignia Financial
Group, Inc. and shares of Class A Common Stock which may be issued upon the
exercise of certain outstanding warrants.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
Subject to Completion, Dated December 10, 1996
PROSPECTUS
2,990,000 6 1/2% Trust Convertible Preferred Securities
Insignia Financing I
(Liquidation Amount $50 per Convertible Preferred Security)
Guaranteed to the extent set forth herein by, and
convertible into the Common Stock of,
Insignia Financial Group, Inc.
This Prospectus relates to the resale of the 6 1/2% Trust Convertible
Preferred Securities (the "Convertible Preferred Securities"), liquidation
amount $50 per Convertible Preferred Security, which represent preferred
undivided beneficial interests in the assets of Insignia Financing I, a
statutory business trust created under the laws of the State of Delaware (the
"Trust") and the shares of Class A common stock, par value $0.01 per share
("Common Stock"), of Insignia Financial Group, Inc., a Delaware corporation
("IFG," and together with its subsidiaries, "Insignia" or the "Company"),
issuable upon conversion of the Convertible Preferred Securities. The
Convertible Preferred Securities were issued and sold (the "Original
Offering") on November 1, 1996 (the "Original Closing Date") and November 6,
1996 (together with the Original Closing Date, the "Original Offering Date")
to the Initial Purchasers (as defined herein, see "Selling Holders") and were
simultaneously sold by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), in the United States to persons reasonably believed by the
Initial Purchasers to be qualified institutional buyers as defined in Rule
144A under the Securities Act, in the United States to a limited number of
other institutional "accredited investors" (as defined in Rule 501(A)(1), (2),
(3) or (7) under the Securities Act and outside the United States to non-U.S.
persons in offshore transactions in reliance on Regulation S under the
Securities Act. Insignia directly or indirectly owns all the common securities
representing common undivided beneficial interests in the assets of the Trust
(the "Common Securities" and, together with the Convertible Preferred
Securities, the "Trust Securities"). The Trust exists for the exclusive
purposes of issuing the Trust Securities and investing the proceeds of the
sale thereof in 6 1/2% Convertible Subordinated Debentures due September 30,
2016 of IFG (the "Convertible Subordinated Debt Securities") in an aggregate
principal amount equal to the aggregate liquidation amount of the Trust
Securities. The Convertible Subordinated Debt Securities are unsecured
obligations of IFG and are subordinate and junior in right of payment to
certain other indebtedness of IFG as described herein. Upon an event of
default under the Declaration (as defined herein), the holders of the
Convertible Preferred Securities will have a preference over the holder of the
Common Securities with respect to payments in respect of distributions and
payments upon liquidation, redemption and otherwise.
Each Convertible Preferred Security is convertible in the manner
described herein at the option of the holder, at any time beginning January 1,
1997 and prior to the Conversion Expiration Date (as defined herein), into
shares of Common Stock, at the rate of 1.8868 shares of Common Stock for each
Convertible Preferred Security (equivalent to a conversion price of $26.50 per
share of Common Stock), subject to adjustment in certain circumstances. See
"Description of the Convertible Preferred Securities --Conversion Rights." The
last reported sale price of Common Stock, which is reported under the symbol
"IFS" on the New York Stock Exchange Composite Tape, on December 5, 1996, was
$23.00 per share.
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The Convertible Preferred Securities and the Common Stock issuable
upon conversion of the Convertible Preferred Securities (the "Offered
Securities") may be offered and sold from time to time by the holders named
herein or by their transferees, pledgees, donees or their successors
(collectively, the "Selling Holders") pursuant to this Prospectus. The Offered
Securities may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution" and "Selling Holders." If required, the names of any such agents
or underwriters involved in the sale of the Offered Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (each, a "Prospectus Supplement"). The Selling Holders will receive
all of the net proceeds from the sale of the Offered Securities and will pay
all underwriting discounts and selling commissions, if any, applicable to any
such sale. No portion of the net proceeds of this offering will be received by
the Company or the Trust. The Company is responsible for payment of all other
expenses incident to the offer and sale of the Offered Securities, estimated
to be $930,000. The Selling Holders and any broker-dealers, agents or
underwriters which participate in the distribution of the Offered Securities
may be deemed to be "underwriters" within the meaning of the Securities Act,
and any commission received by them and any profit on the resale of the
Offered Securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
Holders of the Convertible Preferred Securities are entitled to
receive cumulative cash distributions at an annual rate of 6 1/2% of the
liquidation amount of $50 per Convertible Preferred Security, accruing from
November 1, 1996 and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing December 31, 1996
("distributions"). The distribution payable on December 31, 1996, which will
be calculated at the above rate and based on a period that is shorter than a
full quarter, will be in the amount of $0.5417 per Convertible Preferred
Security. The distribution rate and the distribution and other payment dates
for the Convertible Preferred Securities correspond to the interest rate and
interest and other payment dates on the Convertible Subordinated Debt
Securities, which is and will be the sole asset of the Trust. As a result, if
principal or interest is not paid on the Convertible Subordinated Debt
Securities, no amounts will be paid on the Convertible Preferred Securities.
The payment of distributions out of moneys held by the Trust, and payments on
liquidation of the Trust or the redemption of Convertible Preferred
Securities, as set forth below, are guaranteed by IFG (the "Guarantee") to the
extent described herein and under "Description of the Guarantee." The
Guarantee covers payments of distributions and other payments on the
Convertible Preferred Securities only if and to the extent the Trust has funds
available therefor, which will not be the case unless IFG has made a
(CONTINUED ON NEXT PAGE)
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See "Risk Factors" commencing on page P-6 of this Prospectus for
certain information relevant to an investment in the Convertible Preferred
Securities, including the period and circumstances during and under which
payments of distributions on the Convertible Preferred Securities may be
deferred and the related United States federal income tax consequences of such
deferral.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the
offering made by this Prospectus, and any information or representations not
contained herein must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy the securities to which this Prospectus
relates in any jurisdiction to any person to whom it is unlawful to make such
an offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December , 1996.
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(CONTINUED FROM PREVIOUS PAGE)
payment of interest or principal or other payments on the Convertible
Subordinated Debt Securities held by the Trust as its sole asset. IFG's
obligations under the Guarantee, taken together with its obligations under the
Convertible Subordinated Debt Securities and the Indenture (as defined herein)
and its obligations under the Declaration, including its liabilities to pay
costs, expenses, debts and obligations of the Trust (other than with respect
to the Trust Securities), constitute a full and unconditional guarantee by IFG
of amounts due on the Convertible Preferred Securities. See "Effect of
Obligations Under the Convertible Subordinated Debt Securities and the
Guarantee" and "Description of the Guarantee."
The obligations of IFG under the Guarantee are subordinate and junior
in right of payment to all other liabilities of IFG and will rank pari passu
with the most senior preferred stock issued by IFG from time to time, if any,
and with any guarantee that may be entered into by IFG in respect of any
preferred stock of any subsidiary or affiliate of IFG. If IFG does not make
principal or interest payments on the Convertible Subordinated Debt
Securities, the Trust will not have sufficient funds to redeem or make
distributions on the Convertible Preferred Securities, in which event holders
of the Convertible Preferred Securities would not be able to rely on the
Guarantee for payment of such redemptions or distributions until the Trust has
sufficient funds available therefor. The obligations of IFG under the
Convertible Subordinated Debt Securities are subordinate and junior in right
of payment to all present and future Senior Indebtedness (as defined herein)
of IFG. Among other forms of indebtedness, borrowings pursuant to the
Revolving Credit Facility (as defined herein), which provides for borrowings
up to $200 million, would constitute Senior Indebtedness, as would renewals
and replacements thereof and additional loans. At September 30, 1996, IFG had
Senior Indebtedness of approximately $187.7 million (excluding accrued
interest), and IFG's consolidated subsidiaries had indebtedness and other
liabilities of approximately $47.6 million, to which the Convertible
Subordinated Debt Securities would effectively be subordinate. As of September
30, 1996, on a pro forma basis giving effect to the completion of the Original
Offering and the use of the net proceeds therefrom, IFG would have had $43.2
million in Senior Indebtedness, (excluding accrued interest) and IFG's
consolidated subsidiaries would have had indebtedness and other liabilities of
approximately $47.6 million.
So long as IFG shall not be in default under the Convertible
Subordinated Debt Securities, IFG has the right to defer payments of interest
on the Convertible Subordinated Debt Securities by extending the interest
payment period on the Convertible Subordinated Debt Securities, at any time,
for up to 20 consecutive quarters (each, an "Extension Period"). If interest
payments are so deferred, distributions on the Convertible Preferred
Securities also will be deferred. Despite such deferral, during an Extension
Period distributions will continue to accumulate with interest thereon (to the
extent permitted by applicable law) at an annual rate of 6 1/2% per annum,
compounded quarterly, and during any Extension Period, holders of Convertible
Preferred Securities will be required to include deferred interest income in
their gross income for United States federal income tax purposes in advance of
receipt of the cash distributions attributable to such deferred income. There
could be multiple Extension Periods of varying lengths throughout the term of
the Convertible Subordinated Debt Securities. Accrued interest will not be
paid on the Convertible Subordinated Debt Securities that are converted;
provided, however, that if a Convertible Subordinated Debt Security is
converted on or after a record date for payment of interest thereon, the
interest payable on the related payment date with respect to such Convertible
Subordinated Debt Securities shall be paid to the Trust (which will distribute
such interest to the holder of the converted Convertible Preferred Securities
as of the record date) or other holder of Convertible Subordinated Debt
Securities as of the record date, as the case may be, despite such conversion.
See "Description of the Convertible Subordinated Debt Securities--Option to
Extend Interest Payment Period," "Risk Factors--Option to Extend Interest
Payment Period" and "Certain United States Federal Income Tax
Consequences--Original Issue Discount, Premium and Market Discount." In the
event of any such deferral of interest payments, the holders of the
Convertible Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
The Convertible Subordinated Debt Securities are redeemable at the
option of IFG (in whole or in part) from time to time, on or after November 1,
1999 or at any time in certain circumstances upon the occurrence of
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a Tax Event (as defined herein). If IFG redeems Convertible Subordinated Debt
Securities, the Trust must redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Convertible
Subordinated Debt Securities so redeemed at the prices set forth herein (the
"Redemption Price") plus accrued and unpaid distributions thereon to the date
fixed for redemption. See "Description of the Convertible Preferred
Securities--Redemption." In addition, upon the occurrence of a Special Event
(as defined herein) arising from a change in law or a change in legal
interpretation, unless the Convertible Subordinated Debt Securities are
redeemed in the limited circumstances described below and subject to certain
conditions, the Trust may be dissolved (with the consent of IFG) with the
result that the Convertible Subordinated Debt Securities would be distributed
(with the consent of IFG) to the holders of the Convertible Preferred
Securities, on a pro rata basis, in lieu of any cash distribution. If IFG
declines to consent to such dissolution and distribution, IFG may incur an
obligation to pay Additional Interest (as defined herein). See "Description of
the Convertible Subordinated Debt Securities--Additional Interest." In the
case of the occurrence of a Special Event that is a Tax Event, IFG will have
the right in certain circumstances to redeem the Convertible Subordinated Debt
Securities at 100% of the principal amount thereof plus accrued and unpaid
interest thereon, which would result in the redemption by the Trust of Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Convertible Subordinated Debt Securities so redeemed,
on a pro rata basis. The outstanding Convertible Preferred Securities will be
redeemed upon maturity of the Convertible Subordinated Debt Securities. The
Convertible Subordinated Debt Securities mature on September 30, 2016. See
"Description of the Convertible Preferred Securities--Special Event Redemption
or Distribution" and "Description of the Convertible Subordinated Debt
Securities." The Convertible Subordinated Debt Securities purchased by the
Trust may be subsequently distributed pro rata to holders of the Convertible
Preferred Securities and Common Securities in connection with the dissolution
of the Trust, upon the occurrence of certain events.
In the event of the voluntary or involuntary liquidation,
dissolution, winding-up or termination of the Trust, after satisfaction of
creditors of the Trust, if any, the holders of the Convertible Preferred
Securities will be entitled to receive, for each Convertible Preferred
Security, a liquidation amount of $50 plus accrued and unpaid distributions
thereon (including interest, if any, thereon) to the date of payment, unless
in connection with such liquidation, dissolution, winding-up or termination
the Convertible Subordinated Debt Securities are distributed to the holders of
the Convertible Preferred Securities. See "Description of the Convertible
Preferred Securities--Liquidation Distribution Upon Termination."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Risk Factors,"
"The Company," and elsewhere in this Prospectus may constitute forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995
(the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements speak only as of
the date of this Prospectus. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the United
States Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at 500 West Madison, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. They are also available through the
Commission's World Wide Web site (http://www.sec.gov). The Common Stock is
traded on the New York Stock Exchange. Reports and other information
concerning the Company also may be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
No separate financial statements of the Trust have been included
herein. Insignia does not consider that such financial statements would be
material to holders of Convertible Preferred Securities because (i) all of the
voting securities of the Trust are owned by Insignia, a reporting company
under the Exchange Act, (ii) the Trust has no independent operations and
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in the Convertible Subordinated Debt Securities issued by Insignia and
(iii) the Guarantee, when taken together with the Company's obligations under
the Convertible Subordinated Debt Securities and the Indenture and its
obligations under the Declaration, including its obligation to pay costs,
expenses, debts and obligations of the Trust (other than with respect to the
Trust Securities), provides a full and unconditional guarantee of amounts due
on the Convertible Preferred Securities. See "The Trust," "Description of the
Convertible Subordinated Debt Securities" and Description of the Guarantee."
This Prospectus constitutes a part of a registration statement on
Form S-3 (together with all amendments and exhibits, the "Registration
Statement") filed by Insignia with the Commission under the Securities Act
with respect to the securities offered hereby. This Prospectus omits certain
of the information contained in the Registration Statement, and reference is
hereby made to the Registration Statement for further information with respect
to Insignia, the Trust and the securities offered hereby. Although summaries
of and certain statements concerning documents are included herein, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. These documents may be
inspected without charge at the office of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be obtained at
fees and charges prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1995; (ii) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, June 30 and September 30, 1996;
(iii) the proxy statement for the Company's Annual Meeting of Stockholders
held on May 23, 1996; (iv) the Company's Current Reports on Form 8-K dated
January 19, 1996, January 29, 1996, July 1, 1996, July 1, 1996, December 9,
1996, December 10, 1996 and December 10, 1996 and Form 8-K/A dated September
13, 1996; (v) the financial statements of certain partnerships formerly
affiliated with National Property Investors, Inc. contained in Exhibits
99.1(a) through 99.14(a) to the Company's Current Report on Form 8-K it filed
with the Securities and Exchange Commission on September 1, 1995; (vi) the
financial statements of certain partnerships formerly affiliated with National
Property Investors, Inc. contained in the Company's Registration Statement on
Form S-3 filed with the Securities and Exchange Commission on September 1,
1995, as amended by Amendment No. 1 to Form S-3 filed on September 19, 1995,
and the final prospectus filed pursuant to Rule 424(b) on October 13, 1995;
and (vii) the description of the Common Stock contained in Insignia's
Registration Statement on Form 8-A, dated September 19, 1995, on Form
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8-A/A(1) dated October 3, 1995 and on Form 8-A/A(2) dated June 21, 1996. All
documents subsequently filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the
securities offered hereby shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge
to each person to whom this Prospectus is delivered, upon written request of
such person, a copy of any or all documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such copies
should be delivered to John K. Lines, General Counsel and Secretary, Insignia
Financial Group, Inc., One Insignia Financial Plaza, P.O. Box 1089,
Greenville, South Carolina 29602 or by telephone at (864) 239-1000.
RISK FACTORS
PROSPECTIVE PURCHASERS OF CONVERTIBLE PREFERRED SECURITIES SHOULD
CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, THE FOLLOWING FACTORS.
RANKING OF OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE SUBORDINATED
DEBT SECURITIES
IFG's obligations under the Guarantee are subordinate and junior in
right of payment to all other liabilities of IFG and pari passu with the most
senior preferred stock issued by IFG from time to time, if any, and with any
guarantee that may be entered into by IFG in respect of any preferred stock of
any subsidiary or affiliate of IFG. The obligations of IFG under the
Convertible Subordinated Debt Securities are subordinate and junior in right
of payment to all present and future Senior Indebtedness of IFG. No payment of
principal of (including redemption payments), premium, if any, or interest on
the Convertible Subordinated Debt Securities may be made if (a) any Senior
Indebtedness of IFG is not paid when due and any applicable grace period with
respect to such default has ended with such default not being cured or waived
or ceasing to exist or (b) the maturity of any Senior Indebtedness has been
accelerated because of a default. At September 30, 1996, IFG had Senior
Indebtedness of approximately $187.7 million (excluding accrued interest), and
IFG's consolidated subsidiaries had indebtedness and other liabilities of
approximately $47.6 million. Because IFG's subsidiaries have not guaranteed
payment of the Convertible Subordinated Debt Securities, claims of holders of
Convertible Preferred Securities are effectively subordinate to the claims of
creditors of such subsidiaries, including trade creditors. As of September 30,
1996, on a pro forma basis giving effect to the completion of the Original
Offering and the use of the net proceeds therefrom, IFG would have had $43.2
million in Senior Indebtedness (excluding accrued interest), and IFG's
consolidated subsidiaries would have had indebtedness and other liabilities of
approximately $47.6 million. There are no terms in the Convertible Preferred
Securities, the Convertible Subordinated Debt Securities or the Guarantee that
prohibit or limit the ability of IFG or its subsidiaries to incur additional
indebtedness, including indebtedness that ranks senior to the Convertible
Subordinated Debt Securities or the Guarantee. See "Description of the
Guarantee" and "Description of the Convertible Subordinated Debt
Securities--Subordination."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Convertible Preferred
Securities the payment of (i) any accrued and unpaid distributions which are
required to be paid on the Convertible Preferred Securities, to the extent the
Trust shall have funds available therefor, (ii) the Redemption Price, which
includes all accrued and unpaid distributions to the date of the redemption,
to the extent the Trust has funds available therefor, with respect to any
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Convertible Preferred Securities called for redemption by the Trust and (iii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Trust (other than in connection with the distribution of Convertible
Subordinated Debt Securities to the holders of Convertible Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Convertible Preferred Securities to
the date of payment thereof, to the extent the Trust has funds available
therefor, and (b) the amount of assets of the Trust remaining available for
distribution to holders of Convertible Preferred Securities in liquidation of
the Trust. Holders of the Convertible Preferred Securities have the right to
proceed directly against IFG to enforce IFG's obligations to make payments
under the Guarantee, without first instituting a legal proceeding against the
Trust, the Guarantee Trustee (as defined herein) or any other person or
entity. If IFG were to default in its obligation to pay amounts payable on the
Convertible Subordinated Debt Securities, the Trust would lack available funds
for the payment of distributions or amounts payable on redemption of the
Convertible Preferred Securities or otherwise, and in such event holders of
the Convertible Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, holders of the Convertible
Preferred Securities would rely on the enforcement by the Property Trustee (as
defined herein) of its rights as registered holder of the Convertible
Subordinated Debt Securities against IFG, pursuant to the terms of the
Convertible Subordinated Debt Securities. See "Description of the
Guarantee--Status of the Guarantee" and "Description of the Convertible
Subordinated Debt Securities--Subordination." The Declaration provides that
each holder of Convertible Preferred Securities by acceptance thereof agrees
to the provisions of the Guarantee and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CONVERTIBLE PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Convertible Preferred Securities would rely on
the enforcement by the Property Trustee of its rights as the holder of the
Convertible Subordinated Debt Securities against IFG. In addition, the holders
of a majority in aggregate liquidation amount of the Convertible Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee or to direct
the exercise of any trust or power conferred upon the Property Trustee under
the Declaration, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Convertible
Subordinated Debt Securities. If a Declaration Event of Default occurs that
results from the failure of IFG to pay principal of or interest on the
Convertible Subordinated Debt Securities when due, during the continuance of
such an event of default a holder of Convertible Preferred Securities may
institute a legal proceeding directly against IFG to obtain payment to such
holder of such principal or interest on Convertible Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Convertible Preferred Securities owned of record by such holder. In
addition, if the Property Trustee fails to enforce its rights as holder of the
Convertible Subordinated Debt Securities for 30 days after a request therefor
by a holder of Convertible Preferred Securities to the fullest extent
permitted by law, such holder may proceed to enforce such rights directly
against IFG. The holders of Convertible Preferred Securities will not be able
to exercise directly against IFG any other remedy available to the Property
Trustee unless the Property Trustee first fails to do so. See "Description of
the Convertible Preferred Securities--Declaration Events of Default;" and
"--Voting Rights."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Should IFG exercise its right under the Indenture to defer payments
of interest by extending the interest payment period, each holder of
Convertible Preferred Securities will continue to accrue income (as original
issue discount) for United States federal income tax purposes in respect of
the deferred interest allocable to its Convertible Preferred Securities, which
will be allocated, but not distributed, to holders of record of Convertible
Preferred Securities. As a result, holders of Convertible Preferred Securities
will recognize income for United States federal income tax purposes in advance
of the receipt of cash and will not receive cash from the Trust related to
such income if such holder disposes of its Convertible Preferred Securities
prior to the record date for the date on which distributions of such amounts
are made. IFG has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Convertible Subordinated Debt Securities. However, should IFG determine to
exercise such right in the future, the market price of the Convertible
Preferred Securities is likely to be affected. A holder that disposes of its
Convertible Preferred Securities during an Extension Period, therefore,
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might not receive the same return on its investment as a holder that continues
to hold its Convertible Preferred Securities. In addition, as a result of the
existence of IFG's right to defer interest payments, the market price of the
Convertible Preferred Securities (which represent a preferred undivided
beneficial interest in the Convertible Subordinated Debt Securities) may be
more volatile than other securities on which original issue discount accrues
that are not subject to such right. See "Certain United States Federal Income
Tax Consequences--Original Issue Discount, Premium and Market Discount."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, the Trust may be terminated
(with the consent of IFG), except in the limited circumstances described
below, with the result that the Convertible Subordinated Debt Securities would
be distributed to the holders of the Trust Securities in connection with the
liquidation of the Trust. If IFG declines to consent to such termination and
distribution, IFG may incur an obligation to pay Additional Interest. In the
case of a Special Event that is a Tax Event, in certain circumstances IFG
shall have the right to redeem the Convertible Subordinated Debt Securities,
in whole or in part, in which event the Trust will redeem the Trust Securities
on a pro rata basis to the same extent as the Convertible Subordinated Debt
Securities are redeemed. If (i) the Trust is terminated and the Convertible
Subordinated Debt Securities are distributed to the holders of the Trust
Securities or (ii) IFG exercises its right to redeem the Convertible
Subordinated Debt Securities, either such occurrence would constitute an event
of default under the Revolving Credit Facility. See "Description of the
Convertible Preferred Securities--Special Event Redemption or Distribution"
and "Certain United States Federal Income Tax Consequences."
Under current United States federal income tax law, a distribution of
the Convertible Subordinated Debt Securities upon the termination of the Trust
would not be a taxable event to holders of the Convertible Preferred
Securities. Interest payments on Convertible Subordinated Debt Securities held
by a United States Alien Holder (as defined herein) would be subject to
withholding for U.S. income taxes at a rate of 30%. Upon occurrence of a Tax
Event, however, a termination of the Trust in which holders of the Convertible
Preferred Securities receive cash would be a taxable event to such holders.
Liquidation of the Trust and redemption of the Convertible Preferred
Securities would constitute a default under the Revolving Credit Facility. See
"Certain United States Federal Income Tax Consequences--Receipt of Convertible
Subordinated Debt Securities or Cash upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Convertible
Preferred Securities, or the Convertible Subordinated Debt Securities that may
be distributed in exchange for Convertible Preferred Securities if a
termination of the Trust were to occur. Accordingly, the Convertible Preferred
Securities that an investor may purchase, or the Convertible Subordinated Debt
Securities that the 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 offered hereby. Because holders of
Convertible Preferred Securities may receive Convertible Subordinated Debt
Securities upon the occurrence of a Special Event, prospective purchasers of
Convertible Preferred Securities also are making an investment decision with
regard to the Convertible Subordinated Debt Securities and should carefully
review all the information regarding the Convertible Subordinated Debt
Securities and the Company contained herein. See "Description of the
Convertible Preferred Securities--Special Event Redemption or Distribution"
and "Description of the Convertible Subordinated Debt Securities."
PROPOSED TAX LEGISLATION
On March 19, 1996, as a part of President Clinton's Fiscal 1997
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would (i) treat as equity for United
States federal income tax purposes certain debt instruments with a maximum
term of more than 20 years and (ii) disallow interest deductions on certain
convertible debt instruments or defer interest deductions on certain debt
instruments issued with original issue discount. The Proposed Legislation is
proposed to be effective for debt instruments issued on or after December 7,
1995; however, if enacted in its current proposed form, it would not cause the
Convertible Subordinated Debt Securities to be treated as equity for United
States federal income tax purposes since the
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maximum term of the Convertible Subordinated Debt Securities will not exceed
20 years and should not affect IFG's ability to deduct interest payments on
the Convertible Subordinated Debt Securities.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth,
Jr. and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint Statement") indicating their intent that the Proposed
Legislation, if adopted by either of the tax-writing committees of Congress,
would have an effective date that is no earlier than the date of "appropriate
Congressional action." Based upon the Joint Statement, it is expected that if
the Proposed Legislation were enacted, such legislation would not apply to the
Convertible Subordinated Debt Securities since they would be issued prior to
the date of any "appropriate Congressional action" or otherwise qualify for
transitional relief. However, there can be no assurances that the effective
date guidance contained in the Joint Statement will be incorporated in the
Proposed Legislation, if enacted, or that other legislation enacted after the
date hereof will not otherwise adversely affect the tax treatment of the
Convertible Subordinated Debt Securities. If legislation were enacted that
adversely affects the tax treatment of the Convertible Subordinated Debt
Securities, there could be a distribution of the Convertible Subordinated Debt
Securities to holders of the Convertible Preferred Securities or, in certain
circumstances, the redemption of the Convertible Subordinated Debt Securities
by IFG and the distribution by the Trust of the resulting cash in redemption
of the Convertible Preferred Securities. See "Description of the Convertible
Preferred Securities Special Event Redemption or Distribution."
LIMITED VOTING RIGHTS
Holders of Convertible Preferred Securities have limited voting
rights, primarily in connection with directing the activities of the Property
Trustee as the holder of the Convertible Subordinated Debt Securities. Such
holders are not entitled to vote to appoint, remove or replace, or to increase
or decrease the number of, Company Trustees, which voting rights are vested
exclusively in IFG as the holder of the Common Securities. See "Description of
the Convertible Preferred Securities--Voting Rights."
ABSENCE OF TRADING MARKET FOR THE CONVERTIBLE PREFERRED SECURITIES
There is no existing trading market for the Convertible Preferred
Securities and there can be no assurance as to the liquidity of any such
market that may develop, the ability of the holders of Convertible Preferred
Securities to sell such securities, the price at which the holders of
Convertible Preferred Securities would be able to sell such securities or
whether a trading market, if it develops, will continue. If such a market were
to exist, the Convertible Preferred Securities could trade at prices higher or
lower then their liquidation amount, depending on many factors, including
prevailing interest rates, the market for similar securities and the operating
results of the Company. In the event that the Convertible Subordinated Debt
Securities are distributed by the Trust to the holders of the Convertible
Preferred Securities, the preceding considerations would be equally applicable
to the Convertible Subordinated Debt Securities.
TRADING PRICE OF CONVERTIBLE PREFERRED SECURITIES
The Convertible Preferred Securities may trade at a price that does
not fully reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Subordinated Debt Securities. A holder disposing of
Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
on the Convertible Subordinated Debt Securities through the date of
disposition in income as ordinary income (i.e., OID (as defined herein)), and
to add such amount to the adjusted tax basis in the holder's Convertible
Preferred Securities. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all
accrued but unpaid interest), a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes. See "Certain
United States Federal Income Tax Consequences--Original Issue Discount,
Premium and Market Discount" and "--Sale of Convertible Preferred Securities."
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DEPENDENCE ON MANAGEMENT AGREEMENTS
Insignia is substantially dependent on revenues received for services
under property and asset management agreements. On a pro forma basis giving
effect to the consummation of the ESG and Paragon (as such terms are defined
herein) acquisitions, for the nine months ended September 30, 1996, revenues
from property and asset management agreements constituted approximately 95% of
total revenues, and, as of such date, property and asset management agreements
constituted approximately 28% of Insignia's total assets. There can be no
assurance that Insignia will be able to maintain all such agreements. In
particular, a majority of agreements with non-affiliated parties have terms of
one year, and many are cancelable by the property owner on as little as 30 to
60 days' notice. Approximately 78% of Insignia's pro forma revenues for the
nine months ended September 30, 1996, giving effect to such acquisitions as if
effected at the beginning of such period, were derived from fees for services
provided to entities not controlled by Insignia or Metropolitan Asset
Enhancement, L.P. (together with its subsidiaries, "MAE"). MAE is an entity in
which Insignia holds a 19.1% limited partner interest and the general partner
of which is owned by Andrew L. Farkas, the Chairman of the Board, Chief
Executive Officer and President of Insignia. The loss of a substantial number
of management agreements could have a material adverse effect on Insignia.
After giving pro forma effect to the ESG and Paragon acquisitions,
approximately 6% of Insignia's pro forma revenues during the nine months ended
September 30, 1996 were derived from services performed for properties
controlled by a single client, The Balcor Company ("Balcor"). Insignia
purchased the right to manage such properties in 1994 and has contractual
arrangements with Balcor that are intended to reduce the likelihood that such
management agreements will be terminated. As of September 30, 1996, the
Company managed approximately 178 properties, comprising approximately 30,200
units of multifamily residential housing and 11.0 million square feet of
commercial space, associated with that acquisition (44 of the properties,
comprising approximately 1,600 units of multifamily residential housing and
4.9 million square feet of commercial space, are not controlled by Balcor).
Insignia also manages 6.1 million square feet of commercial space in
properties controlled by Balcor which produced $3.2 million in revenues for
the nine months ended September 30, 1996. The Company believes such properties
will be sold in the near future.
During the first quarter of 1996, Balcor announced its intention to
sell a significant number of its properties. In connection with the potential
sales of such properties, Balcor has entered into agreements with the Company
to provide additional services (the "Advisory Agreements"), including
collection of data, the preparation of materials for potential purchasers, and
assistance with regard to transition plans. The Advisory Agreements have an
initial term of one year and provide for fees to be paid to the Company if and
when a property is sold (the "Advisory Fees"), regardless of whether or not
the purchaser retains the Company to continue to manage the property. If all
sales were consummated for the properties that Balcor is marketing,
approximately $14.4 million in annual revenues would be lost while
approximately $14.7 million in Advisory Fees would be collected. Through
September 30, 1996, 48 properties comprising 14,800 units producing $4.9
million in annual management fees have been sold, with Advisory Fees received
or due aggregating $4.6 million. There are proposed sales of an additional 113
properties comprising 25,800 units and 3.3 million square feet of commercial
space which generate approximately $9.5 million in annual management revenues
and which would produce Advisory Fees of $10.1 million. The completed and
proposed sales are included in the totals mentioned above. Management believes
that the unamortized purchase price relating to properties managed for Balcor
properly reflects the asset value and that no impairment exists.
The number and timing of property sales by Balcor during the term of
the Advisory Agreements cannot be predicted. Therefore, the Company cannot
estimate with any reasonable accuracy the amount of any Advisory Fees it may
receive, the reduction of its management fees or the amount of unamortized
purchase price to be written off. The Company expects that any potential
impact to its EBITDA in 1996 from potential property sales and resulting
terminations of the Company's management agreements would not be material.
However, revenues lost and not replaced through acquisitions of incremental
third party servicing would fully impact 1997 EBITDA.
On a pro forma basis giving effect to the consummation of the ESG and
Paragon acquisitions, approximately 16% of Insignia's revenues for the nine
months ended September 30, 1996 were derived from fees
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for services provided to entities controlled by MAE. MAE and Insignia are
parties to an agreement governing the structuring of acquisitions and other
aspects of their relationship. MAE has agreed to (i) retain Insignia for a
substantial term as property manager for all properties currently controlled
by MAE or of which MAE acquires control, subject to its fiduciary duties and
certain other exceptions, and (ii) make certain payments to Insignia on any
disposition by MAE of its assets. However, there can be no assurance that such
payments will adequately compensate Insignia for the loss of management
agreements that may result from any properties being sold by MAE.
RISKS ASSOCIATED WITH ACQUISITIONS
Insignia's growth since its inception in 1990 has been based
principally upon the acquisition of portfolios of general partner interests in
real estate limited partnerships and the provision by Insignia of management
and related services to such partnerships. Since its inception, Insignia and
its affiliates have acquired control of, or management rights to, 32
portfolios of properties. The Company's ability to expand successfully through
acquisitions depends on many factors, including the successful identification
and acquisition of businesses and management's ability effectively to
integrate the acquired businesses. The future growth of Insignia will be
dependent in part upon the ability of Insignia or MAE to acquire control of
real estate entities at favorable prices and upon favorable terms and
conditions, and to continue to manage such entities and the properties they
own on a profitable basis. In addition, with respect to a limited portion of
the managed portfolio, lenders may foreclose upon properties which are unable
to service their mortgage indebtedness. In such event, there can be no
assurance that Insignia will retain the contracts to manage such properties.
Acquisitions entail risks that investments will fail to perform in
accordance with expectations, and that business judgments with respect to a
property's revenues, operating expenses, and costs of improvements and the
Company's ability to restructure and benefit from restructurings, will prove
inaccurate. Acquisitions also involve the risks of the diversion of
management's attention, the assimilation of the operations and personnel of
the acquired companies, the amortization of acquired intangible assets and the
potential loss of key employees, each of which could adversely affect the
Company's operating results. In addition, the success of any completed
acquisition will depend in part on the Company's ability effectively to
integrate any acquired businesses into the Company.
There can be no assurance that future acquisition opportunities, if
any, can be consummated on favorable terms, that Insignia will be successful
in acquiring or integrating any businesses or in restructuring the liabilities
of any such entities, or that any such acquisition will enhance the Company's
business.
On a pro forma basis giving effect to the completion of the Original
Offering and the use of the net proceeds therefrom, at September 30, 1996 the
Company had $161.4 million in funds available under its agreement with First
Union National Bank of South Carolina and an affiliate of Lehman Brothers Inc.
with respect to a revolving credit facility (the "Revolving Credit Facility")
for acquisitions and its working capital needs, but there can be no assurance
that Insignia's financing resources will be sufficient to finance future
acquisitions, if any. First Union National Bank of South Carolina serves as
the Debt Trustee, the Property Trustee, and the Guarantee Trustee and is an
affiliate of First Union Bank of Delaware, the Delaware Trustee. Lehman
Brothers Inc. is one of the Initial Purchasers. To the extent the Company
issues shares of its Common Stock or rights to acquire shares of its Common
Stock in connection with any such acquisitions, the ownership of existing
stockholders will be diluted.
POTENTIAL CONFLICTS OF INTEREST; DEPENDENCE UPON AND CONTROL BY ANDREW L. FARKAS
Andrew L. Farkas, the Chairman, President and Chief Executive Officer
of Insignia, may be deemed to be in control of each of Insignia, MAE, and
certain significant stockholders of the Company. Insignia has in the past
engaged, and expects in the future to engage, in certain transactions with
each of such affiliated entities. Such transactions could result in actual or
potential conflicts of interest between Insignia, on the one hand, and Mr.
Farkas, MAE, or such stockholders, as the case may be, on the other hand. In
addition, conflicts may arise between Insignia and the partnerships in which
MAE is a general partner, particularly with respect to determinations of
whether to dispose of properties. Insignia has entered into agreements with
MAE and Mr. Farkas to address
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certain of such potential conflicts. Insignia also has a policy that all
transactions with affiliates shall be on terms no less favorable to Insignia
than could be obtained from an unaffiliated party and must be approved by
either a majority of independent directors or the Audit Committee of the Board
of Directors. There are no other formal procedures for resolving such
conflicts.
As of December 1, 1996, Mr. Farkas beneficially owned approximately
28.4% of the outstanding Common Stock. Accordingly, Mr. Farkas will continue
to be able to exercise a controlling influence over the business and affairs
of Insignia, including, but not limited to, having sufficient voting power to
substantially control the election of the entire Board of Directors of
Insignia and, in general, substantially to determine the outcome of any
corporate transaction or other matter submitted to the stockholders for
approval, including mergers, consolidations, or the sale of substantially all
of Insignia's assets or preventing or causing a change in the control of
Insignia.
Insignia is dependent upon the continued services of Mr. Farkas. Mr.
Farkas expects to continue to devote substantially all of his time to Insignia
and MAE. The loss of Mr. Farkas's services could have a material adverse effect
upon the business and financial condition of Insignia. Mr. Farkas has entered
into an employment agreement with Insignia, expiring September 1, 1998,
providing for, among other things, an agreement not to compete with Insignia
during his employment and for a period of one year thereafter. Insignia
maintains a $10 million key man life insurance policy on Mr. Farkas.
Insignia is required to make certain payments to Mr. Farkas in the
event of certain changes in control which may constitute excess parachute
payments and would not be deductible by Insignia for income tax purposes. In
addition, Insignia may not be permitted to deduct for income tax purposes that
portion of an executive's compensation which exceeds $1 million in any year,
excluding certain performance based compensation. There can be no assurance
that Insignia will be able to deduct the entire amount earned by Mr. Farkas in
any year.
DEPENDENCE ON PROPERTY PERFORMANCE
Insignia's revenues from property management services are generally
percentages of aggregate rent collections from the properties. Accordingly,
the continued success of Insignia will be dependent in large part upon the
performance of the properties it manages. Such performance in turn will depend
in part upon the ability of Insignia to attract and retain creditworthy
tenants, the magnitude of defaults by tenants under their respective leases,
Insignia's ability to control operating expenses (many of which are subject to
various contingencies), governmental regulations, local rent control or
stabilization ordinances which are or may be put into effect, various
uninsurable risks, financial conditions prevailing generally and in the areas
in which such properties are located, the nature and extent of competitive
properties in the areas where such properties are located, and the real estate
market generally.
RISKS RELATED TO INVESTMENT IN LIMITED PARTNER INTERESTS
The Company owns significant limited partner interests in 28
different real estate limited partnerships (the "Partnerships") directly or
indirectly through wholly owned subsidiaries and joint ventures. The Company's
limited partner interests, including the Company's interests in two limited
partnerships which are consolidated in Insignia's financial statements,
represent approximately 29% of the book value of the Company's assets at
September 30, 1996. All of such limited partnerships own residential, and in
some cases commercial, properties.
Limited partner interests are subject to varying degrees of risk
incident to the ownership and operation of commercial and residential real
estate, including possible environmental liabilities. See "--Possible
Environmental Liabilities." The success of an investment in a real estate
limited partnership will depend on factors such as general economic
conditions, both on a national basis and in those areas where a limited
partnership's properties are located, the availability and costs of borrowed
funds, real estate tax rates, construction and property management costs,
federal and state income tax laws, operating expenses, energy costs, and
government regulations. Typically, properties held by the limited partnerships
are subject to mortgages and the loss of a property through foreclosure could
adversely affect the value of a limited partnership interest. In addition,
numerous properties compete for tenants with the properties owned by the
limited partnerships in which the Company has limited partner interests.
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No active market for limited partner interests in the Partnerships
exists, none is expected to develop, and such interests are typically only
transferable at significant discounts to underlying value. The Company may be
limited in its ability to vary its portfolio promptly in response to changes
in economic or other conditions. The price to be paid for additional limited
partner interests may need to be increased, and the percentage of such
interests to be acquired decreased, in response to competing offers for such
interests that may be made.
The Company participates with other entities in ownership of limited
partner interests through partnerships and joint ventures. Partnership and
joint venture investments may, under certain circumstances, involve risks not
otherwise present, including the possibility that such partners or
co-venturers might at any time have business interests or goals inconsistent
with the business interests or goals of the Company and that such partners or
co-venturers may be in a position to take action contrary to the Company's
instructions, requests, policies, or objectives. The Company will, however,
seek to maintain sufficient influence over such partnerships or joint ventures
to permit the Company's business objectives to be achieved. The Company
currently owns limited partner interests in six real estate limited
partnerships in which MAE is the general partner. There can be no assurance
that MAE will not transfer to a third party its general partner interests in
those partnerships or that MAE will not take actions contrary to the Company's
interests with respect to those partnerships. See "--Potential Conflicts of
Interests."
POTENTIAL ALTERNATIVE STRUCTURING OF REAL ESTATE INVESTMENTS
The Company actively is exploring a structure whereby its multifamily
real estate investment and ownership activities would (a) qualify for United
States federal income tax purposes as a Real Estate Investment Trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"), and (b)
obtain equity and debt capital from parties other than Insignia to expand
these activities.
In this regard, Insignia formed Insignia Properties Corporation, a
Delaware corporation and wholly-owned subsidiary, in January 1996 and Insignia
Properties Trust, a Maryland real estate investment trust ("IPT"), in April
1996, with the intention of implementing a series of transactions that would
result in substantially all of the Company's real estate limited partner
interests in real estate limited partnerships being conveyed to an entity that
would intend to qualify as a REIT. As of the date of this Prospectus, the
Company is actively preparing to raise capital through the private placement
of securities in IPT. Such transaction would be structured such that the
Company would continue to own and control a majority interest in IPT. In
addition, the Company has had discussions with the management of Angeles
Mortgage Investment Trust, a publicly-traded California business trust and
REIT ("AMIT"), regarding a potential business combination transaction with IPT
and has acquired the beneficial ownership of approximately 6.0% of the Class A
shares of AMIT. These discussions principally have involved whether general
and limited partner interests owned by Insignia in certain partnerships which
own real property could be transferred, through a merger or otherwise, to AMIT
in exchange for securities in AMIT. The Company, however, has no plans
otherwise to dispose of its interests in such partnerships.
There can be no assurance that the transactions that are currently
contemplated and that are discussed herein in connection with the proposed
REIT transaction will be consummated or, if consummated, that they will be
consummated on the terms described herein.
TENDER OFFER LITIGATION
Since the latter part of 1994, Insignia, through various
subsidiaries, has acquired limited partner interests in real estate limited
partnerships through public tender offers. Insignia believes that there
continue to be opportunities to acquire limited partner interests and it may
acquire such interests through future public tender offers. Tender offers
often result in competing tender offers, as well as litigation initiated by
limited partners in the subject partnerships or by competing bidders. In some
of its tender offers, Insignia has faced competing offers and litigation which
alleged breaches of the federal securities laws and breaches of fiduciary
duties by Insignia.
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Due to the inherent uncertainty of litigation, the Company could be subject to
adverse judgments in substantial amounts. Litigation costs and competing
offers are factors considered by the Company prior to initiating tender
offers. Insignia has settled all litigation brought against it in connection
with tender offers made by it with the exception of certain litigation in
connection with tender offers for limited partner interests in limited
partnerships controlled by Balcor.
COMPETITION FOR PERSONNEL
The continued success of Insignia's residential and commercial
property management business will depend, in part, on Insignia's ability to
maintain its experienced management team and to attract additional managers as
Insignia's property management business expands. Insignia believes that there
is currently a shortage of qualified property management personnel. To
maintain and attract qualified individuals, Insignia may be required to
increase substantially the compensation to property managers.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal and state environmental laws and regulations, a
current or previous owner or operator of a real estate property may be
required to investigate and clean up certain hazardous or toxic substances or
petroleum product releases at the property, and may be held liable to a
governmental entity or to third parties for property damage and for
investigation and cleanup costs incurred by such parties in connection with
contamination. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs
in connection with the contamination. The presence of contamination or the
failure to remediate contamination may adversely affect the owner's ability to
sell or lease real estate or to borrow using the real estate as collateral.
The owner or operator of a site may be liable under common law to third
parties for damages and injuries resulting from environmental contamination
emanating from the site. There can be no assurance that Insignia, or any
assets owned or controlled by Insignia, currently are in compliance with all
of such laws and regulations, or that Insignia will not become subject to
liabilities that arise in whole or in part out of any such laws, rules, or
regulations. Moreover, there can be no assurance that any of such liabilities
to which Insignia may become subject will not have a material adverse effect
upon the business or financial condition of Insignia.
Except for (i) environmental audits of approximately 240 properties
conducted in connection with various refinancings and reviews of sellers'
files with respect to environmental matters in connection with certain
acquisitions and (ii) Phase I audits of properties owned by National Property
Investors, Inc. and certain affiliates and related partners in which Insignia
acquired limited partner interests (and certain other investigations in the
case of certain such properties), Insignia has not undertaken any review, on a
property-by-property basis, of the extent of the presence of asbestos or other
environmental risks at any of its owned or controlled properties, the remedial
or other requirements of state and local environmental laws, rules, and
regulations in each of the jurisdictions in which such properties are located,
or the costs of any required remedial work. Although the results of all but a
few of the Company's audits did not require any material remedial work, there
can be no assurance that remedial work may not be required at these or other
properties. Most of the structures situated upon such properties were
constructed prior to 1978, in a period when the use of asbestos in the
construction of structures similar to those situated upon such properties was
common. The presence of asbestos or other environmental risks at any of such
properties could result in the incurrence of significant cleanup costs
therefor by Insignia or partnerships in which it owns interests or the
incurrence of toxic tort claims against Insignia or partnerships in which it
owns interests.
There can be no assurance that Insignia will not experience
difficulty in reselling real estate assets owned by partnerships or
refinancing any indebtedness secured by their respective assets as a result of
the presence of asbestos or other environmental risks on the properties, lose
its management contracts with respect to such properties, or become subject to
costs and litigation relating to the presence of asbestos or other
environmental risks on such properties that will have a material adverse
effect upon the business or financial condition of Insignia or any of its
affiliates.
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POSSIBLE LOSS OF HUD APPROVAL; RESTRUCTURING OF HUD
Approximately 17% of the residential units which Insignia managed at
September 30, 1996 were housing projects financed under various government
programs administered by the United States Department of Housing and Urban
Development ("HUD"). As a result, certain aspects of Insignia's operations are
subject to regulation by HUD. For the nine months ended September 30, 1996,
revenues from the management of HUD regulated or subsidized units constituted
approximately 7% of Insignia's total pro forma revenues giving effect to the
Paragon and ESG acquisitions. If Insignia were to lose its qualification to
manage HUD properties, Insignia could be precluded from obtaining HUD
contracts, could lose the contracts to manage some or all of the HUD
properties then managed, or could be subject to fines or other penalties,
depending on the reason for such loss of qualification. Such results could
have a material adverse effect on Insignia's business or financial condition.
As of the date of this Prospectus, Congress is considering various
proposals to reorganize and restructure certain of HUD's housing assistance
programs. One proposal calls for the elimination of HUD by terminating,
privatizing, and transferring its functions. Another proposal contemplates
that, rather than providing specific project-based subsidies, HUD would give
qualified participants vouchers to use at the property of their choice. Since
the value of such a voucher would be fixed, participants electing to move from
their present apartment complex would have to pay the difference between such
voucher value and the rent at an alternative property. Due to a relative lack
of amenities in most HUD projects, residents (if they could afford the price
differential) might be inclined to move from such projects into complexes with
more amenities. If such residents could not be replaced, the occupancy level
or rental rates of such project could be affected and, accordingly, the
management fee paid to the property manager could be reduced. The current
proposals with regards to the reorganization are not sufficiently specific to
determine their actual impact, if any, on management fee revenue paid to
Insignia by HUD properties. There can be no assurance that the proposed
changes would not have a material adverse impact on Insignia's business or
financial condition.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS AND PREEMPTIVE RIGHTS
Sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock. In addition to
the outstanding Common Stock as of September 30, 1996, up to 13,796,232
additional shares of Common Stock may be issued upon exercise of options and
warrants granted or to be granted and conversion of outstanding convertible
securities, including (i) up to 3,919,994 shares of Common Stock issuable upon
exercise of options granted or to be granted pursuant to the Company's 1992
Stock Incentive Plan, as amended, of which 3,422,826 have been granted, (ii)
up to 2,921,966 shares of Common Stock issuable on exercise of certain
outstanding warrants, (iii) up to 200,000 shares of Common Stock issuable upon
conversion of $2 million of convertible notes, (iv) up to 400,000 shares of
Common Stock issuable upon exercise of options granted or to be granted
pursuant to the Company's Non-Employee Director Stock Option Plan, of which
150,000 have been granted, (v) up to 50,000 shares of Common Stock issuable
upon exercise of warrants issued in connection with the Paragon acquisition,
(vi) up to 1,398,612 shares of Common Stock issuable upon exercise of options
assumed by IFG in connection with the ESG acquisition and (vii) up to
4,905,660 shares of Common Stock issuable upon conversion of the Convertible
Preferred Securities.
Certain stockholders have certain registration rights with respect to
the securities held or which may be acquired by them. Some of such shares are
subject to the agreements referred to above. In addition, one stockholder has
certain contractual rights to purchase additional shares of Common Stock in
connection with certain issuances of voting stock by IFG.
THE TRUST
The Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary
of State on October 9, 1996 and the entering into of a Declaration of Trust on
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October 4, 1996. The Trust's purpose is defined in an Amended and Restated
Declaration of Trust, dated as of November 1, 1996 (the "Declaration"),
executed by IFG, as sponsor, and the Company Trustees (as defined herein) as
of that date. IFG directly has acquired all of the Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of the Trust.
The Trust exists for the exclusive purposes of (i) issuing the Trust
Securities, representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the
Convertible Subordinated Debt Securities and (iii) engaging in only those
other activities necessary or incidental thereto. The Trust has a term of
approximately 55 years, but may terminate earlier as provided in the
Declaration.
The Trust's affairs are conducted by the trustees (the "Company
Trustees") appointed by IFG, as holder of the Common Securities. The duties
and obligations of the Company Trustees are governed by the Declaration.
Pursuant to the Declaration, the number of Company Trustees is initially five.
Three of the Company Trustees (the "Regular Trustees") are persons who are
employees or officers of, or affiliated with, Insignia. A fourth trustee is a
financial institution unaffiliated with the Company that serves as property
trustee (the "Property Trustee") under the Declaration. First Union National
Bank of South Carolina will act as the Property Trustee until removed or
replaced by the holder of the Common Securities. First Union National Bank of
South Carolina also will act as indenture trustee under the Guarantee (the
"Guarantee Trustee"). See "Description of the Guarantee." The fifth trustee
will be a financial institution or an affiliate thereof which maintains a
principal place of business or residence in the State of Delaware (the
"Delaware Trustee"). First Union Bank of Delaware, an affiliate of First Union
National of South Carolina, will act as the Delaware Trustee until removed or
replaced by the holder of the Common Securities.
The Property Trustee holds the title to the Convertible Subordinated
Debt Securities for the benefit of the Trust and holders of the Trust
Securities and has the power to exercise all rights, powers and privileges
under the Indenture as the holder of the Convertible Subordinated Debt
Securities. In addition, the Property Trustee maintains exclusive control of a
segregated non-interest bearing bank account (the "Property Account") to hold
all payments made in respect of the Convertible Subordinated Debt Securities
for the benefit of the Trust and 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 Property Account. The Guarantee Trustee holds the Guarantee for the
benefit of the holders of the Convertible Preferred Securities. IFG, as the
holder of all the Common Securities, has the right to appoint, remove or
replace any Company Trustee and to increase or decrease the number of Company
Trustees, provided that the number of Company Trustees shall be at least
three, a majority of which shall be Regular Trustees. IFG will pay all fees,
expenses, debts and obligations (other than the Trust Securities) related to
the Trust and the offering of the Trust Securities. IFG has agreed that the
Property Trustee and any person to whom such fees, expenses, debts and
obligations are owed will have the right to enforce IFG's obligations in
respect of such fees, expenses, debts and obligations directly against IFG
without first proceeding against the Trust. See "Description of the
Convertible Preferred Securities--Expenses and Taxes."
The financial statements of the Trust will be consolidated with
Insignia's financial statements, and in the event that the Trust obtains an
exemption from the periodic reporting requirements of the Exchange Act
pursuant to the Commission's Staff Accounting Bulletin 53, the Trust will not
file separate financial statements under the Exchange Act and the Company's
future filings under the Exchange Act will (i) present the Trust's securities
as a separate line item on the balance sheet entitled "Company-Obligated
Mandatorily Redeemable Convertible Preferred Securities of a Subsidiary
Trust;" (ii) state in a footnote to the financial statements that the sole
assets of the Trust are the Convertible Subordinated Debt Securities with an
aggregate principal amount of approximately $154.1 million, which bear
interest at the rate of 6 1/2% per annum and mature on September 30, 2016; and
(iii) include in an audited footnote to the financial statements disclosure
that (a) the Trust is wholly-owned; (b) the sole assets of the Trust are the
Convertible Subordinated Debt Securities with an aggregate principal amount of
approximately $154.1 million, which bear interest at the rate of 6 1/2% per
annum and mature on September 30, 2016; and (c) the Guarantee, when taken
together with the Company's obligations under the Convertible Subordinated
Debt Securities and the Indenture and its obligations under the Declaration,
including its obligation to pay costs, expenses, debts and obligations of the
Trust, constitutes a full and unconditional guarantee by the Company of the
Trust's obligations under the Convertible Preferred Securities.
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The rights of the holders of the Convertible Preferred Securities,
including economic rights, rights to information and voting rights, are as set
forth in the Declaration and the Delaware Business Trust Act, as amended (the
"Trust Act"). See "Description of the Convertible Preferred Securities."
The principal place of business of the Trust is c/o Insignia Financial
Group, Inc., One Insignia Financial Plaza, P.O. Box 1089, Greenville, South
Carolina 29602; Telephone: (864) 239-1000.
THE COMPANY
GENERAL
Insignia Financial Group, Inc. is a fully integrated real estate
services organization specializing in the operation and ownership of
securitized real estate assets. According to Commercial Property News and the
National Multi-Housing Council, Insignia is the largest property manager in
the United States, has been the largest manager of multi-family residential
properties since 1992, and is among the largest managers of commercial
properties. Insignia's real estate services include property management,
providing all of the day-to-day services necessary to operate a property,
whether residential or commercial; asset management, including long-term
financial planning, monitoring and implementing capital improvement plans, and
development and execution of refinancings and dispositions; real estate
leasing and brokerage; maintenance and construction services; marketing and
advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations. The Company through its subsidiary,
Compleat Resource Group, Inc. ("CRG"), markets consumer goods and services to
the residents and owners of multi-family properties, including properties
which Insignia manages. CRG has formed a strategic alliance with GE Capital -
ResCom, L.P. for the purpose of providing long-distance telephone and cable
television services.
Insignia commenced operations in December 1990 and since then has
grown to provide property and/or asset management services for over 2,500
properties, which include approximately 283,000 residential units, and
approximately 107 million square feet of commercial space, located in over 500
cities in 48 states. Insignia currently provides partnership administration
services to approximately 900 limited partnerships having approximately
400,000 limited partners. Insignia also owns limited partner interests
(ranging from 4% to 54% of the outstanding interests) in 28 real estate
limited partnerships which in the aggregate own 143 properties with
approximately 38,100 residential apartment units and approximately 865,000
square feet of commercial space located in 83 cities in 28 states.
Insignia's principal business strategy is to expand its real estate
services business in three primary ways. First, Insignia seeks to acquire, or
to have an affiliate acquire, controlling positions in entities that own or
control real estate properties, and then, subject to their fiduciary duties,
to have such entities engage Insignia to provide services. Second, Insignia
seeks to enter into special contractual relationships with non-affiliated
third parties that own or control portfolios of real estate properties
pursuant to which Insignia will provide management services. Third, Insignia
seeks to expand its management of properties that are owned by non-affiliated
third parties, such as large insurance companies, banks, government or
quasi-government agencies, and other institutional investors and lenders.
As used in this Prospectus, "IFG" means Insignia Financial Group,
Inc. without its subsidiaries, "Insignia" and the "Company" mean IFG together
with its subsidiaries and "MAE" means Metropolitan Asset Enhancement, L.P.
together with its subsidiaries.
The Company is a Delaware corporation incorporated in July 1990 and
its principal executive offices are located at One Insignia Financial Plaza,
P.O. Box 1089, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000.
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RECENT DEVELOPMENTS
ESG ACQUISITION
On June 30, 1996, the Company acquired the business and substantially
all of the assets of Edward S. Gordon Company, Incorporated and its affiliates
("ESG"), the fourth largest commercial real estate property services firm in
the United States. ESG's services include commercial real estate leasing,
including tenant and landlord representation, real estate consulting services
and commercial real estate brokerage, as well as commercial property
management in the New York City metropolitan area. The purchase price was
approximately $73.8 million. At closing, ESG managed approximately 25.5
million square feet of commercial space comprised of 57 properties in New
York, New Jersey and Connecticut. The ESG acquisition provided Insignia with a
substantial presence in the commercial segment of the metropolitan New York
City market, which complements its leading presence in the residential
segment.
PARAGON ACQUISITION
On June 30, 1996, the Company acquired the commercial real estate
services business of Paragon Group, Inc. ("Paragon"). The services of the
acquired business include commercial property management, leasing and tenant
improvement services performed with respect to Paragon properties, as well as
brokerage, fee development and real estate consulting services performed for
various institutional clients. The purchase price paid was $18.5 million. At
closing, the acquired business managed and leased approximately 22 million
square feet of commercial space comprised of 166 properties located in 17
states: 12.5 million square feet of office properties, 4.9 million square feet
of industrial properties, and 4.5 million square feet of retail properties.
This acquisition added substantially to the Company's presence in the Southern
California and Dallas markets and provided a substantial presence in the
Central Florida market.
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
For the years ended December 31, 1995, 1994, 1993 and 1992, the ratio
of earnings to combined fixed charges and preferred stock dividends was 2.59,
8.29, 6.22 and 3.14, respectively. For the year ended December 31, 1991,
earnings were not sufficient to cover combined fixed charges and preferred
stock dividends by approximately $353,000. For the nine-month periods ended
September 30, 1996 and 1995, the ratio of earnings to combined fixed charges
and preferred stock dividends was 1.97 and 2.23, respectively. For the
calculation of the ratio of earnings to combined fixed charges and preferred
stock dividends, "earnings" is defined as pre-tax income from continuing
operations with the following adjustments: Add to pretax income (i) the amount
of combined fixed charges and preferred stock dividends (less any capitalized
interest and/or preferred stock dividends), (ii) the minority interest in the
income of consolidated majority-owned affiliates, and (iii) distributed income
of less-than-fifty percent-owned affiliates, net of any undistributed earnings
of affiliates accounted for under the equity method. Combined fixed charges
and preferred stock dividends consist of interest (whether expensed or
capitalized); amortization of debt discount and issuance expense related to
any indebtedness; the portion of rental expense that is considered to be
representative of interest expense; and any preferred stock dividend
requirements of the Company or any majority-owned subsidiaries.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of
the Offered Securities. Neither Insignia nor the Trust will receive any
proceeds from the sale of the Offered Securities.
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DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
The Convertible Preferred Securities have been issued pursuant to the
terms of the Declaration. The terms of the Convertible Preferred Securities
include those stated in the Declaration. The following summary of the
principal terms and provisions of the Convertible Preferred Securities does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Declaration (a copy of which is available for inspection at
the corporate trust office of the Property Trustee in Columbia, South Carolina
and is attached as an exhibit to the Registration Statement of which this
Prospectus forms a part) and the Trust Act.
GENERAL
The Declaration authorizes the Regular Trustees, on behalf of the
Trust, to issue the Convertible Preferred Securities, which represent
preferred undivided beneficial interests in the assets of the Trust, and the
Common Securities, which represent common undivided beneficial interests in
the assets of the Trust. All of the Common Securities are owned directly or
indirectly by IFG. The Common Securities rank pari passu with the Convertible
Preferred Securities, and payments will be made on the Common Securities on a
pro rata basis with the Convertible Preferred Securities, except that upon the
occurrence and during the continuation of a Declaration Event of Default, the
rights of the holders of the Common Securities to receive payment of periodic
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights to payment of the holders of the Convertible
Preferred Securities. The Declaration does not permit the issuance by the
Trust of any securities other than the Trust Securities or the incurrence of
any indebtedness by the Trust. Pursuant to the Declaration, the Property
Trustee owns and holds the Convertible Subordinated Debt Securities for the
benefit of the Trust and the holders of the Trust Securities. 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, are
guaranteed by IFG to the extent described under "Description of the
Guarantee."
The Guarantee Trustee holds the Guarantee for the benefit of the
holders of the Convertible Preferred Securities. The Guarantee does not cover
payment of distributions on the Convertible Preferred Securities when the
Trust does not have sufficient available funds in the Property Account to make
such distributions.
FORM, DENOMINATION AND REGISTRATION
The Convertible Preferred Securities are issued in fully registered
form, without coupons.
Global Certificate; Book-Entry Form. Except as provided below,
Convertible Preferred Securities sold in the Original Offering to "qualified
institutional buyers," as defined in Rule 144A under the Securities Act
("QIBs"), otherwise than in reliance on Regulation S, were evidenced by one or
more global certificates representing Convertible Preferred Securities
(collectively, the "Restricted Global Certificate"), which were deposited with
the Property Trustee as custodian for DTC and registered in the name of Cede &
Co. ("Cede") as DTC's nominee. Convertible Preferred Securities sold to
persons who acquired such Convertible Preferred Securities in compliance with
Regulation S under the Securities Act ("Non-U.S. Persons") were evidenced by
one or more global certificates (collectively, the "Regulation S Global
Certificate" and together with the Restricted Global Certificate, the "Global
Certificates" or each individually, a "Global Certificate"), which were
registered in the name of a nominee of DTC and deposited with the Property
Trustee, for the accounts of the Euroclear System ("Euroclear") or Cedel Bank,
societe anonyme ("Cedel"). The Global Certificates (and any Convertible
Preferred Securities issued in exchange therefor) are subject to certain
restrictions on transfer set forth therein and in the Declaration and bear the
legend regarding such restrictions set forth under "Transfer Restrictions."
Except as forth below, record
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ownership of a Global Certificate may be transferred, in whole or in part,
only to another nominee of DTC or to a successor of DTC or its nominee.
A QIB may hold its interests in the Restricted Global Certificate
directly through DTC if such QIB is a participant in DTC, or indirectly
through organizations which are participants in DTC (the "Participants").
Transfers between Participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in same-day funds. The laws of
some states require that certain persons take physical delivery of securities
in definitive form. Consequently, the ability to transfer beneficial interest
in the Restricted Global Certificate to such persons may be limited.
Beneficial interests in the Restricted Global Certificate may be
transferred to a person who takes delivery in the form of an interest in the
Regulation S Global Certificate only upon receipt by the Property Trustee of a
written certification from the transferor to the effect that such transfer is
being made in accordance with Regulation S or Rule 144A under the Securities
Act. Any beneficial interest in one of the Global Certificates that is
transferred to a person who takes delivery in the form of an interest in
another Global Certificate will, upon transfer, cease to be an interest in
such Global Certificate and become an interest in such other Global
Certificate and, accordingly, thereafter will be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Certificate for as long as it remains such an interest.
Investors may hold their interests in the Regulation S Global
Certificate through Euroclear or Cedel, if they are participants in such
systems, or indirectly through organizations that are participants in such
systems. Investors also may hold such interests through organizations other
than Euroclear or Cedel that are Participants in DTC. Euroclear and Cedel will
hold interests in the Regulation S Global Certificate on behalf of their
participants through customers' securities accounts in their respective names
on the books of their respective depositaries, which in turn, will hold such
interests in the Regulation S Global Certificate in customers' securities
accounts in the depositaries' names on the books of DTC. All interests in a
Global Certificate, including those held through Euroclear or Cedel, may be
subject to the procedures and requirements of DTC. Those interests held
through Euroclear and Cedel also may be subject to the procedures and
requirements of such systems.
QIBs and Non-U.S. Persons who are not Participants may beneficially
own interests in a Global Certificate held by DTC only through Participants,
including Euroclear and Cedel, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). So long as Cede, as the nominee of DTC, is the registered
owner of a Global Certificate, Cede for all purposes will be considered the
sole holder of such Global Certificate. Except as provided below, owners of
beneficial interests in a Global Certificate will not be entitled to have
certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form, and will not be
considered holders thereof.
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Subject to compliance with the transfer restrictions applicable to
the Global Certificates described herein and in the Declaration, cross-market
transfers between holders of interests in the Restricted Global Certificate,
on the one hand, and direct or indirect account holders at a Euroclear or
Cedel participant (each, a "Member Organization") holding interests in the
Regulation S Global Certificate, on the other hand, will be effected through
DTC in accordance with DTC's rules and the rules of Euroclear or Cedel, as
applicable. Such cross-market transactions will require, among other things,
delivery of instructions by such Member Organization to Euroclear or Cedel, as
the case may be, in accordance with the rules and procedures and within
deadlines (Brussels time) established by Euroclear or Cedel, as the case may
be. If the transaction complies with all relevant requirements, Euroclear or
Cedel, as the case may be, will then deliver instructions to its depositary to
take action to effect final settlement on its behalf.
Conveyance of notices and other communications by DTC to
Participants, by Participants to Indirect Participants and by Participants and
Indirect Participants to owners of beneficial interests in the Global
Certificate held by DTC will be governed by arrangements among them, subject
to any statutory or regulatory requirements that may be in effect from time to
time. Redemption notices shall be sent to Cede. If less than all of the
Convertible Preferred Securities are being redeemed, DTC will reduce the
amount of the interest of each Participant in such Convertible Preferred
Securities in accordance with its procedures.
Although voting with respect to the Convertible Preferred Securities
is limited, in those cases where a vote is required, neither DTC nor Cede will
itself consent or vote with respect to Convertible Preferred Securities. Under
its usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as
possible after the record date. The Omnibus Proxy assigns Cede's consenting or
voting rights to those Participants to whose accounts the Convertible
Preferred Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy). IFG and the Trust believe that the
arrangements among DTC, Participants and Indirect Participants, and owners of
beneficial interests in the Global Certificate held by DTC will enable such
beneficial owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in the
Trust.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company and the Trust believe
to be reliable, but neither the Company nor the Trust takes responsibility for
the accuracy thereof.
Distribution payments on the Global Certificates will be made to
Cede, the nominee for DTC, as the registered owner of the Global Certificates
by wire transfer of immediately available funds. Neither IFG, the Property
Trustee nor any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Certificates or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
IFG has been informed by DTC that, with respect to any distribution
payments on the Global Certificates, DTC's practice is to credit Participants'
accounts on the payment date therefor with payments in amounts proportionate
to their respective beneficial interests in the Convertible Preferred
Securities represented by a Global Certificate, as shown on the records of
DTC, unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by Participants to owners of beneficial interests in
Convertible Preferred Securities represented by a Global Certificate held
through such Participants will be the responsibility of such Participants, as
is now the case with securities held for the accounts of customers registered
in "street name."
Holders who desire to convert their Convertible Preferred Securities
into Common Stock pursuant to the terms of the Convertible Preferred
Securities should contact their brokers or other Participants or Indirect
Participants to obtain information on procedures, including proper forms and
cut-off times, for submitting such requests.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Convertible Preferred Securities represented
by
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a Global Certificate to pledge such interest to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of
such interest, may be affected by the lack of a physical certificate
evidencing such interest.
Neither IFG nor the Property Trustee (or any registrar, paying agent
or conversion agent under the Declaration) will have any responsibility for
the performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised IFG that it will take any action permitted to be
taken by a holder of Convertible Preferred Securities (including, without
limitation, the presentation of Convertible Preferred Securities for exchange
as described below) only at the direction of one or more Participants to whose
account with DTC interests in the Global Certificate are credited and only in
respect of the number of Convertible Preferred Securities represented by the
Global Certificate as to which such Participant or Participants has or have
given such direction.
DTC has advised IFG as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
United States Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes to accounts of its Participants, thereby eliminating the
need for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations such as the Initial Purchasers. Certain of
such Participants (or their representatives), together with other entities,
own DTC. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Participant, either directly or indirectly.
Although DTC, Euroclear and Cedel have agreed to the foregoing
procedures in order to facilitate transfers of interests in the Global
Certificates among Participants of DTC, Euroclear and Cedel, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed
by IFG within 90 days, IFG will cause the Convertible Preferred Securities to
be issued in definitive form in exchange for the Global Certificates. None of
IFG, the Property Trustee nor any of their respective agents will have any
responsibility for the performance by DTC, Euroclear and Cedel, their
Participants or Indirect Participants of their respective obligations under
the rules and procedures governing their operations, including maintaining,
supervising or reviewing the records relating to, or payments made on account
of, beneficial ownership interests in the Global Certificate.
Certificated Convertible Preferred Securities. Convertible Preferred
Securities sold to investors that are neither QIBs nor Non-U.S. Persons were
issued in definitive registered form in minimum denominations of 5,000
Convertible Preferred Securities and integral amounts in excess thereof, and
were not and may not be represented by the Global Certificate. In addition,
QIBs and Non-U.S. Persons may request that their Convertible Preferred
Securities be issued in certificated form, and may request at any time that
their interest in a Global Certificate be exchanged for Convertible Preferred
Securities in certificated form, upon compliance with certain procedures set
forth in the Declaration. Finally, certificated Convertible Preferred
Securities may be issued in exchange for Convertible Preferred Securities
represented by the Global Certificate if no successor depositary is appointed
by IFG as set forth above under "--Global Certificate; Book-Entry Form" or in
certain other circumstances set forth in the Declaration, including the
occurrence of a Declaration Event of Default.
DISTRIBUTIONS
Distributions on the Convertible Preferred Securities are fixed at a
rate per annum of 6 1/2% of the stated liquidation amount of $50 per
Convertible Preferred Security (equivalent to $3.25 per Convertible Preferred
Security). Distributions in arrears for more than one quarter will bear
interest at the rate of 6 1/2% per annum
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compounded quarterly (to the extent permitted by applicable law). The term
"distributions" as used herein includes any such interest payable unless
otherwise stated.
Distributions on the Convertible Preferred Securities will be
cumulative, will accrue from November 1, 1996, and will be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year to
the holders of record on the applicable record date, commencing December 31,
1996, when, as and if available for payment by the Property Trustee, except as
otherwise described below. The amount of distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months. The
initial distribution, payable on December 31, 1996, will be based on a period
less than a full quarter (November 1 to December 31, 1996) and will be in the
amount of $0.5417 per Convertible Preferred Security.
So long as no Indenture Event of Default (as defined herein) shall
have occurred and be continuing, IFG has the right under the Indenture to
defer payments of interest (including any Additional Interest and Liquidated
Damages (as defined herein)) on the Convertible Subordinated Debt Securities
by extending the interest payment period from time to time on the Convertible
Subordinated Debt Securities which, if exercised, would defer quarterly
distributions on the Convertible Preferred Securities (though such
distributions would continue to accrue interest at the distribution rate,
compounded quarterly, since interest would continue to accrue on the
Convertible Subordinated Debt Securities) during any such extended interest
payment period. In the event that IFG exercises this right, then (a) IFG shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by IFG of its obligations under any
employee benefit plans, (ii) as a result of a reclassification of IFG's
capital stock or the exchange or conversion of one class or series of IFG's
capital stock for another class or series of IFG's capital stock or (iii) the
purchase of fractional interests in shares of IFG's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged), (b) IFG shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by IFG which rank pari passu with or junior to the
Convertible Subordinated Debt Securities, and (c) IFG shall not make any
guarantee payments (other than pursuant to the Guarantee) with respect to the
foregoing; provided, however, that the foregoing restrictions do not apply to
any dividend, redemption, liquidation, interest, principal or guarantee
payments by IFG where the payment is made by way of securities (including
capital stock) that rank junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made. Prior to
the termination of any such Extension Period, IFG may further extend the
interest payment period, provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity of the Convertible
Subordinated Debt Securities or any earlier redemption date. Upon the
termination of any Extension Period and the payment of all amounts then due
(including any Additional Interest and Liquidated Damages), IFG may commence a
new Extension Period as if no Extension Period had previously been declared,
subject to the above requirements. See "--Voting Rights" below and
"Description of the Convertible Subordinated Debt Securities--Interest" and
"--Option to Extend Interest Payment Period." If distributions are deferred,
the deferred distributions and accrued interest thereon shall be paid to
holders of record of the Convertible Preferred Securities, if funds are
available therefor, as they appear on the books and records of the Trust on
the record date next following the termination of such Extension Period.
Distributions on the Convertible Preferred Securities must be paid on
the dates payable to the extent that the Trust has funds available for the
payment of such distributions in the Property Account. The Trust's funds
available for distribution to the holders of the Convertible Preferred
Securities will be limited to payments received under the Convertible
Subordinated Debt Securities. See "Description of the Convertible Subordinated
Debt Securities." The payment of distributions out of moneys held by the Trust
is guaranteed by the Company to the extent set forth under "Description of the
Guarantee."
Distributions on the Convertible Preferred Securities will be payable
to the holders thereof as they appear on the books and records of the Trust on
the relevant record dates, which will be 15 days prior to the relevant payment
dates, which payment dates correspond to the interest payment dates on the
Convertible Subordinated Debt
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Securities. In the event that any Convertible Preferred Security is redeemed
after a record date and prior to (but not on) the corresponding payment date,
the accrued and unpaid distributions on such Convertible Preferred Security as
of the redemption date will be paid to the holder thereof on the redemption
date, not to the holder thereof on the record date. In the event that a
redemption date is also a payment date, then the accrued and unpaid
distributions will be paid to the holder of such Convertible Preferred
Security as of the record date. Such distributions will be paid through the
Property Trustee, who will hold amounts received in respect of the Convertible
Subordinated Debt Securities in the Property Account for the benefit of the
Trust and the holders of the Trust Securities. Subject to any applicable laws
and regulations and the provisions of the Declaration, each such payment will
be made as described under "--Form, Denomination and Registration" above. In
the event that any date on which distributions are to be made on the
Convertible Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay) except that if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date. A "Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in New York, New York or Columbia,
South Carolina are authorized or required by law to close.
CONVERSION RIGHTS
General. The Convertible Preferred Securities will be convertible at
any time following January 1, 1997 through the close of business on September
30, 2016 (or, in the case of Convertible Preferred Securities called for
redemption, prior to the close of business on the Business Day prior to the
redemption date) (the "Conversion Expiration Date"), at the option of the
holders thereof and in the manner described below, into shares of Common Stock
at an initial conversion rate of 1.8868 shares of Common Stock for each
Convertible Preferred Security (equivalent to a conversion price of $26.50 per
share of Common Stock), subject to adjustment as described under "--Conversion
Price Adjustments--General" and "--Conversion Price Adjustments--Merger,
Consolidation or Sale of Assets of IFG" below.
The terms of the Convertible Preferred Securities provide that a
holder of a Convertible Preferred Security wishing to exercise its conversion
right shall surrender such Convertible Preferred Security, if it is in
certificated form, together with an irrevocable conversion notice, to the
Property Trustee, as conversion agent (the "Conversion Agent"), which shall,
on behalf of such holder, exchange such Convertible Preferred Security for a
portion of the Convertible Subordinated Debt Securities and immediately
convert an equivalent amount of Convertible Subordinated Debt Securities into
Common Stock. Holders may obtain copies of the required form of the conversion
notice from the Conversion Agent. So long as a book-entry system for the
Convertible Preferred Securities is in effect, however, the procedures for
converting the Convertible Preferred Securities that are in the form of Global
Certificates into shares of Common Stock will be as described under "--Form,
Denomination and Registration."
Accrued distributions will not be paid on the Convertible Preferred
Securities that are converted, provided, however, that if any Convertible
Preferred Security is converted on or after a record date for payment of
distributions thereon, the distributions payable on the related payment date
with respect to such Convertible Preferred Security shall be distributed to
the holder, despite such conversion. Except as provided in the immediately
preceding sentence, neither the Trust nor IFG shall make any payment,
allowance or adjustment for accumulated and unpaid distributions, whether or
not in arrears, on converted Convertible Preferred Securities. IFG will make
no payment or allowance for distributions on the shares of Common Stock issued
upon such conversion, except to the extent that such shares of Common Stock
are held of record on the record date for any such distributions. Each
conversion will be deemed to have been made immediately prior to the close of
business on the day on which the related conversion notice is received by the
Conversion Agent.
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 IFG
in cash based on the current market price of Common Stock on the date such
Convertible Preferred Securities are surrendered for conversion.
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<PAGE>
Conversion Price Adjustments--General. The conversion price of the
Convertible Subordinated Debt Securities, and, accordingly, the conversion
rate on the Convertible Preferred Securities, are subject to adjustment in
certain events, including (a) the issuance of shares of Common Stock as a
dividend or a distribution with respect to Common Stock, (b) subdivisions,
combinations and reclassification of Common Stock, (c) the issuance to all
holders of Common Stock of rights or warrants entitling them to subscribe for
shares of Common Stock at less than the current market price, (d) the
distribution to all holders of Common Stock of capital stock (other than
Common Stock) or evidences of indebtedness of IFG or of assets (other than
cash distributions covered by clause (e) below), or rights or warrants to
subscribe for or purchase any of its securities (excluding rights or warrants
to purchase Common Stock referred to in clause (c) above), (e) distributions
consisting of cash, excluding any quarterly cash dividend on Common Stock to
the extent that the aggregate cash dividend per share of Common Stock in any
quarter does not exceed the greater of (i) the amount per share of Common
Stock of the immediately preceding quarterly dividend on Common Stock to the
extent that such preceding quarterly dividend did not require an adjustment of
the conversion rate pursuant to this clause (e) (as adjusted to reflect
subdivisions or combinations of Common Stock), and (ii) 3.125% of the average
of the last reported sales price of Common Stock during the ten trading days
immediately prior to the date of declaration of such dividend, and excluding
any dividend or distribution in connection with the liquidation, dissolution
or winding-up of IFG, (f) payment to holders of Common Stock in respect of a
tender or exchange offer by IFG or any subsidiary for Common Stock (other than
an odd lot tender offer) at a price in excess of the current market price of
Common Stock as of the trading day next succeeding the last date tenders or
exchanges may be made pursuant to such tender or exchange offer, and (g)
payment to holders of Common Stock in respect of a tender or exchange offer by
a person other than IFG or a subsidiary thereof for Common Stock at a price in
excess of the current market price of Common Stock as of the trading day next
succeeding the last date tenders or exchanges may be made pursuant to such
tender or exchange offer in which, as of the closing date of the offer, IFG's
Board of Directors is not recommending rejection of the offer. If an
adjustment is required to be made as set forth in clause (e) above as a result
of a distribution that is a quarterly dividend, such adjustment would be based
upon the amount by which such distribution exceeds the amount of the quarterly
cash dividend permitted to be excluded pursuant to clause (e). If an
adjustment is required to be made as set forth in clause (e) above as a result
of a distribution that is not a quarterly dividend, such adjustment would be
based upon the full amount of the distribution. The adjustment referred to in
clause (g) above will only be made if the tender offer or exchange offer is
made for an amount which increases that person's ownership of Common Stock to
more than 25% of the total shares of Common Stock outstanding. The adjustment
referred to in clause (g) above will not be made, however, if as of the close
of the offer, the offering documents with respect to such offer disclose a
plan or an intention to cause IFG to engage in a consolidation or merger of
IFG or a sale of all of IFG's assets.
IFG from time to time may elect to reduce the conversion price of the
Convertible Subordinated Debt Securities (and thus the conversion rate of the
Convertible Preferred Securities) by any amount selected by IFG for any period
of at least 20 days, in which case IFG shall give at least 15 days' notice of
such reduction. IFG may exercise the option to make such reductions in the
conversion price if IFG's Board of Directors deems such reductions 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 "Certain United States
Federal Income Tax Consequences--Adjustment of Conversion Price."
No adjustment of the conversion price 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 IFG and
the investment of additional optional amounts in shares of Common Stock under
any such plan. No adjustment in the conversion price will be required unless
such adjustment would require a change of at least one percent (1%) in the
price then in effect; provided, however, that any adjustment that would not be
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any action would require adjustment of the
conversion price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the holders of the
Convertible Subordinated Debt Securities and, accordingly, to the holders of
the Convertible Preferred Securities.
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<PAGE>
Conversion Price Adjustments--Merger, Consolidation or Sale of Assets
of IFG. If any transaction shall occur (including without limitation (i) any
recapitalization or reclassification of shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination of Common Stock),
(ii) any consolidation or merger of IFG with or into another person or any
merger of another person into IFG (other than a merger that does not result in
a reclassification, conversion, exchange or cancellation of Common Stock),
(iii) any sale or transfer of all or substantially all of the assets of IFG,
or (iv) any compulsory share exchange) pursuant to which either shares of
Common Stock shall be converted into the right to receive other securities,
cash or other property, or, in the case of a sale or transfer of all or
substantially all of the assets of IFG, the holders of Common Stock shall be
entitled to receive other securities, cash or other property, then appropriate
provision shall be made so that the holder of each Convertible Preferred
Security then outstanding shall have the right thereafter to convert such
Convertible Preferred Security only into the kind and amount of the
securities, cash or other property that would have been receivable upon such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock issuable
upon conversion of such Convertible Preferred Security immediately prior to
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange, subject to funds being legally available for such purpose
under applicable law at the time of such conversion.
The company formed by such consolidation or resulting from such
merger or that acquires such assets or that acquires IFG's shares, as the case
may be, shall make provisions in its certificate or articles of incorporation
or other constituent document to establish such right. Such certificate or
articles of incorporation or other constituent document shall provide for
adjustments that, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent documents, shall
be as nearly equivalent as may be practicable to the relevant adjustments
provided for in the preceding paragraphs and in this paragraph.
REDEMPTION
The Convertible Preferred Securities will have no stated maturity but
are subject to mandatory redemption upon the repayment of the Convertible
Subordinated Debt Securities, whether at their stated maturity or upon
acceleration or redemption. The Convertible Subordinated Debt Securities will
mature on September 30, 2016 and may be redeemed at the option of IFG, in
whole or in part, at any time on or after November 1, 1999, or at any time in
certain circumstances upon the occurrence of a Tax Event. See "--Special Event
Redemption or Distribution." Upon the repayment of the Convertible
Subordinated Debt Securities, whether at maturity or upon acceleration,
redemption or otherwise, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Convertible
Subordinated Debt Securities so repaid or redeemed at a redemption price equal
to the liquidation amount of the Trust Securities or, in the case of a
redemption of the Convertible Subordinated Debt Securities, at the redemption
price paid with respect to the Convertible Subordinated Debt Securities, as
described below, together with accrued and unpaid distributions on the Trust
Securities to the date of redemption; provided, however, that holders of
Convertible Preferred Securities shall be given not less than 20 nor more than
60 days notice of such redemption.
In the event IPG elects to redeem the Convertible Subordinated Debt
Securities (other than in certain circumstances upon the occurrence of a
Special Event) the appropriate amount of the Convertible Preferred Securities
shall be redeemed at the following prices (expressed as percentages of the
liquidation amount of the Convertible Preferred Securities) together with
accrued and unpaid distributions, to, but excluding, the redemption date, if
redeemed during the 12-month period beginning September 30 (or, in the case of
1999, the period beginning November 1):
YEAR REDEMPTION PRICE
- ---- ----------------
1999 102%
2000 101
and 100% if redeemed on or after September 30, 2001.
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In the event IFG redeems the Convertible Subordinated Debt Securities
in certain circumstances upon the occurrence of a Tax Event as described under
"--Special Event Redemption or Distribution," the appropriate amount of the
Convertible Preferred Securities will be redeemed at 100% of the liquidation
amount thereof together with accrued and unpaid distributions to the
redemption date.
Notwithstanding the foregoing, if Convertible Preferred Securities
are redeemed on any March 31, June 30, September 30, or December 31, accrued
and unpaid distributions with respect to the redeemed Convertible Preferred
Securities shall be payable to holders of record on the relevant record date,
instead of the holders on the redemption date.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
A "Tax Event" means that the Regular Trustees shall have received an
opinion from nationally recognized independent tax counsel experienced in such
matters (a "Dissolution Tax Opinion") to the effect that, on or after the date
of this Prospectus, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof
or therein, (b) any judicial decision, official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action"), or (c) any amendment to, clarification of, or change
in the official position or the interpretation of such Administrative Action
or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental authority
or regulatory body, irrespective of the manner in which such amendment,
clarification or change is made known, which amendment, clarification, or
change is effective or such pronouncement or decision is announced, in each
case on or after the date of this Prospectus (collectively, a "Change in Tax
Law"), there is the creation by such Change in Tax Law of more than an
insubstantial risk that (i) the Trust is or will be subject to United States
federal income tax with respect to income accrued or received on the
Convertible Subordinated Debt Securities, (ii) the Trust is or will be subject
to more than a de minimis amount of taxes, duties or other governmental
charges, or (iii) interest paid in cash by IFG to the Trust on the Convertible
Subordinated Debt Securities is not, or will not be, deductible, in whole or
in part, by IFG for United States federal income tax purposes. Notwithstanding
the foregoing, a Tax Event shall not include any Change in Tax Law that
requires IFG for United States federal income tax purposes to defer taking a
deduction for any original issue discount ("OID") that accrues with respect to
the Convertible Subordinated Debt Securities until the interest payment
related to such OID is paid by IFG in cash; provided, that such Change in Tax
Law does not create more than an insubstantial risk that IFG will be prevented
from taking a deduction for OID accruing with respect to the Convertible
Subordinated Debt Securities at a date that is no later than the date the
interest payment related to such OID is actually paid by IFG in cash.
An "Investment Company Event" means that the Regular Trustees shall
have received an opinion from nationally recognized independent counsel
experienced in practice under the 1940 Act (as hereinafter defined) to the
effect that, as a result of the occurrence of a change in law or regulation or
a written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an insubstantial risk that the
Trust is or will be considered an "investment company" which is required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which Change in 1940 Act Law becomes effective on or after the date of
this Prospectus.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Trust
may, with the consent of IFG, except in the circumstances described below, be
terminated and dissolved with the result that Convertible Subordinated Debt
Securities, with an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the distribution
rate of, and accrued and unpaid interest equal to accrued and unpaid
distributions on, the Trust Securities, would be distributed to the holders of
the Trust Securities, in liquidation of such holders' interests in the Trust
on a pro rata basis, within 90 days following the occurrence of such Special
Event; provided, however, that, as a condition of such termination,
dissolution and distribution, (i) in the case of the occurrence of a Tax
Event, the Regular Trustees shall have received an opinion from nationally
recognized independent tax counsel experienced in such
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<PAGE>
matters (a "No Recognition Opinion"), which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that neither
the Trust nor the holders of the Trust Securities will recognize any gain or
loss for United States federal income tax purposes as a result of such
termination and dissolution of the Trust and the distribution of the
Convertible Subordinated Debt Securities and (ii) IFG shall have given its
prior written consent to the dissolution and distribution; and, provided,
further, that, if there is available to the Trust the opportunity to
eliminate, within such 90-day period, the Special Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure, which has no adverse effect on the
Trust, IFG or the holders of the Trust Securities, the Trust will pursue such
measure in lieu of termination and dissolution.
If in the case of the occurrence of a Tax Event (i) IFG has received
an opinion (a "Redemption Tax Opinion") from nationally recognized independent
tax counsel experienced in such matters that, as a result of a Tax Event,
there is more than an insubstantial risk that IFG would be precluded from
deducting the interest on the Convertible Subordinated Debt Securities for
United States federal income tax purposes even if the Convertible Subordinated
Debt Securities were distributed to the holders of Trust Securities in
liquidation of such holders' interests in the Trust as described above or (ii)
the Regular Trustees shall have been informed by nationally recognized
independent tax counsel experienced in such matters that a No Recognition
Opinion cannot be delivered, IFG shall have the right, upon not less than 20
nor more than 60 days' notice, to redeem the Convertible Subordinated Debt
Securities in whole or in part at 100% of the principal amount thereof plus
accrued and unpaid interest thereon for cash within 90 days following the
occurrence of such Tax Event, and, following such redemption, Trust Securities
with an aggregate liquidation amount equal to the aggregate principal amount
of the Convertible Subordinated Debt Securities so redeemed shall be redeemed
by the Trust at the liquidation amount thereof plus accrued and unpaid
distributions thereon to the redemption date on a pro rata basis; provided,
however, that, if there is available to IFG or the Trust the opportunity to
eliminate, within such 90-day period, the Tax Event by taking some ministerial
action, such as filing a form or making an election, or pursuing some other
similar reasonable measure which has no adverse effect on the Trust, IFG or
the holders of the Trust Securities, IFG or the Trust will pursue such measure
in lieu of redemption. If IFG declines to consent to the dissolution and
distribution, IFG may incur an obligation to pay Additional Interest. See
"Description of the Convertible Subordinated Debt Securities--Additional
Interest."
After the date for any distribution of Convertible Subordinated Debt
Securities upon termination of the Trust, (i) the Convertible Preferred
Securities and the Guarantee will no longer be deemed to be outstanding, (ii)
the depositary or its nominee, as a record holder of the Convertible Preferred
Securities, will receive one or more registered global certificates
representing the Convertible Subordinated Debt Securities to be delivered to
the depositary or its nominee in connection with and upon such distribution
and (iii) any certificates representing Convertible Preferred Securities and
the Guarantee not held by the depositary or its nominee will be deemed to
represent Convertible Subordinated Debt Securities having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, such Convertible
Preferred Securities, until such certificates are presented to IFG or its
agent for transfer or reissuance.
There can be no assurance as to the market prices for the Convertible
Preferred Securities or the Convertible Subordinated Debt Securities that may
be distributed in exchange for the Convertible Preferred Securities if a
termination and liquidation of the Trust were to occur. Accordingly, the
Convertible Preferred Securities that an investor may purchase, whether
pursuant to this Offering or in the secondary market, or the Convertible
Subordinated Debt Securities that the investor may receive on termination and
liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Convertible Preferred Securities offered hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding
Convertible Preferred Securities unless all accrued and unpaid distributions
have been paid on all Trust Securities for all quarterly distribution periods
terminating on or prior to the date of redemption.
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<PAGE>
If the Trust gives a notice of redemption in respect of Convertible
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York City time, on the redemption date, provided that IFG has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption or other repayment of the Convertible Subordinated Debt Securities,
the Trust will irrevocably deposit with the depositary funds sufficient to pay
the applicable Redemption Price and will give the depositary irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Convertible Preferred Securities. See "--Form, Denomination and Registration."
If notice of redemption shall have been given and funds deposited as required,
then immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such
Convertible Preferred Securities so called for redemption will cease, except
the right of the holders of such Convertible Preferred Securities to receive
the Redemption Price, but without interest on such Redemption Price. In the
event that any date fixed for redemption of Convertible Preferred Securities
is not a Business Day, then payment of the Redemption Price payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will
be made on the immediately preceding Business Day. In the event that payment
of the Redemption Price in respect of Convertible Preferred Securities is
improperly withheld or refused and not paid either by the Trust or by IFG
pursuant to the Guarantee, distributions on such Convertible Preferred
Securities will continue to accrue, from the original redemption date to the
actual date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Convertible
Preferred Securities are to be redeemed, the Convertible Preferred Securities
will be redeemed pro rata, provided that the distribution of redemption
proceeds payable to DTC, any other depositary, or their respective nominees
shall be made in accordance with the procedures of DTC or such other
depositary. See "--Form, Denomination and Registration."
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding
Convertible Preferred Securities by tender, in the open market or by private
agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation,
termination, dissolution or winding-up of the Trust (each, a "Liquidation"),
the holders of the Convertible Preferred Securities at that time will be
entitled to receive out of the assets of the Trust, after satisfaction of
liabilities to creditors, distributions in an amount equal to the aggregate of
the stated liquidation amount of $50 per Convertible Preferred Security plus
accrued and unpaid distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such Liquidation,
Convertible Subordinated Debt Securities in an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal
to accrued and unpaid distributions on, the Convertible Preferred Securities,
have been distributed on a pro rata basis to the holders of Convertible
Preferred Securities in exchange for such Convertible Preferred Securities.
If, upon any such Liquidation, 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 Convertible Preferred Securities shall be paid on
a pro rata basis. The holders of the Common Securities will be entitled to
receive distributions upon any such dissolution pro rata with the holders of
the Convertible Preferred Securities, except that if a Declaration Event of
Default has occurred and is continuing, the Convertible Preferred Securities
shall have a preference over the Common Securities with regard to such
distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on
September 30, 2051, the expiration of the term of the Trust, (ii) upon the
bankruptcy of IFG or the holder of the Common Securities, (iii) upon the
filing of a certificate of dissolution or its equivalent with respect to IFG
or the holder of the Common Securities, the filing of a certificate of
cancellation with respect to the Trust, or the revocation of the charter of
IFG or the holder of the
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Common Securities and the expiration of 90 days after the date of revocation
without a reinstatement thereof, (iv) upon the distribution of the Convertible
Subordinated Debt Securities following the occurrence of a Special Event, (v)
upon the entry of a decree of a judicial dissolution of IFG or the holder of
the Common Securities or the Trust, (vi) upon the redemption of all of the
Trust Securities or (vii) upon the distribution of Common Stock to all holders
of Convertible Preferred Securities upon conversion of all outstanding
Convertible Preferred Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of
Default") (see "Description of the Convertible Subordinated Debt
Securities-Indenture Events of Default") constitutes an event of default under
the Declaration with respect to the Trust Securities (a "Declaration Event of
Default"); provided, that pursuant to the Declaration, the holder of the
Common Securities will be deemed to have waived any Declaration Event of
Default with respect to the Common Securities or its consequences until all
Declaration Events of Default with respect to the Convertible Preferred
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Convertible Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee will be deemed to be acting solely on behalf of the holders of the
Convertible Preferred Securities and only the holders of the Convertible
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Property
Trustee, as the sole holder of the Convertible Subordinated Debt Securities,
will have the right under the Indenture to declare the principal of, and
interest on, the Convertible Subordinated Debt Securities to be immediately
due and payable. The Property Trustee shall notify all holders of the
Convertible Preferred Securities of any notice of default received from the
Debt Trustee with respect to the Convertible Subordinated Debt Securities.
Such notice shall state that such Indenture Event of Default also constitutes
a Declaration Event of Default. If a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of IFG to pay
interest or principal on the Convertible Subordinated Debt Securities on the
date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a holder of Convertible Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Subordinated
Debt Securities having a principal amount equal to the aggregate liquidation
amount of the Convertible Preferred Securities of such Holder (a "Direct
Action") on or after the respective due date specified in the Convertible
Subordinated Preferred Securities. In connection with such Direct Action, the
rights of the holders of the Common Securities will be subrogated to the
rights of such holder of Convertible Preferred Securities to the extent of any
payment made by IFG to such holder of Convertible Preferred Securities in such
Direct Action. In addition, if the Property Trustee fails to enforce its
rights under the Convertible Subordinated Debt Securities (other than rights
arising from an Indenture Event of Default described in the immediately
preceding sentence) for a period of 30 days after any holder of Convertible
Preferred Securities shall have made a written request to the Property Trustee
to enforce such rights to the fullest extent permitted by law, such holder of
Convertible Preferred Securities may, to the extent permitted by law,
institute a Direct Action to enforce the Property Trustee's rights as holder
of the Convertible Subordinated Debt Securities, without first instituting any
legal proceeding against the Property Trustee or any other Person. Except as
provided in the preceding sentences, the holders of Convertible Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Convertible Subordinated Debt Securities. See "--Voting
Rights."
VOTING RIGHTS
Except as provided below and except as provided under the Trust Act
and under "Description of the Guarantee--Amendments and Assignment" below, and
except as otherwise required by law and the Declaration, the holders of the
Convertible Preferred Securities will have no voting rights. In the event that
IFG elects to defer payments of interest on the Convertible Subordinated Debt
Securities as described above under "--Distributions," the holders of the
Convertible Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
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Subject to the requirement of the Property Trustee obtaining a tax
opinion as set forth in the last sentence of this paragraph, the holders of a
majority in aggregate liquidation amount of the Convertible Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or to direct
the exercise of any trust or power conferred upon the Property Trustee under
the Declaration, including the right to direct the Property Trustee, as the
holder of the Convertible Subordinated Debt Securities, to (i) exercise the
remedies available under the Indenture with respect to the Convertible
Subordinated Debt Securities, (ii) waive any past Indenture Event of Default
which is waivable under the Indenture, (iii) exercise any right to rescind or
annul a declaration that the principal of all the Convertible Subordinated
Debt Securities shall be due and payable, or (iv) consent to any amendment,
modification or termination of the Indenture or the Convertible Subordinated
Debt Securities, where such consent shall be required, provided that where a
consent or action under the Indenture would require the consent or act of the
holders of greater than a majority in principal amount of Convertible
Subordinated Debt Securities affected thereby (a "Super-Majority"), only the
holders of at least the proportion in liquidation amount of the Convertible
Preferred Securities which the relevant Super-Majority represents of the
aggregate principal amount of the Convertible Subordinated Debt Securities may
direct the Property Trustee to give such consent or take such action. The
Property Trustee shall not take any action described in clauses (i), (ii),
(iii) or (iv) above unless the Property Trustee has obtained an opinion of
nationally recognized independent tax counsel to the effect that, as a result
of such action, the Trust will not be classified as other than a grantor trust
for United States federal income tax purposes and each holder of Trust
Securities will be treated as owning an undivided beneficial interest in the
Convertible Subordinated Debt Securities.
In the event the consent of the Property Trustee, as the holder of
the Convertible Subordinated Debt Securities, is required under the Indenture
with respect to any amendment, modification or termination of the Indenture,
the Property Trustee shall request the direction of the holders of the Trust
Securities with respect to such amendment, modification or termination. The
Property Trustee shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Convertible
Preferred Securities and, if no Declaration Event of Default has occurred and
is continuing, a majority in liquidation amount of the Common Securities,
voting together as a single class, provided that where a consent under the
Indenture would require the consent of a Super-Majority, the Property Trustee
may only give such consent at the direction of the holders of at least the
proportion in liquidation amount of the Convertible Preferred Securities and
Common Securities, respectively, which the relevant Super-Majority represents
of the aggregate principal amount of the Convertible Subordinated Debt
Securities outstanding. The Property Trustee shall not take any such action in
accordance with the directions of the holders of the Trust Securities unless
the Property Trustee has obtained an opinion of nationally recognized
independent tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Declaration Event of Default.
Any required approval or direction of holders of Convertible
Preferred Securities may be given at a separate meeting of holders of
Convertible Preferred Securities convened for such purpose, at a meeting of
all of the holders of Trust Securities or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which holders of
Convertible Preferred Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be mailed
to each holder of record of Convertible Preferred Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the
date by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such holders are entitled to
vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents. No vote or consent of
the holders of Convertible Preferred Securities will be required for the Trust
to redeem and cancel Convertible Preferred Securities or distribute
Convertible Subordinated Debt Securities in accordance with the Declaration.
Notwithstanding 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 at such time by IFG
or any entity directly or indirectly controlling or controlled by, or under
direct or indirect common control
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with, IFG, shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if such Convertible Preferred Securities
were not outstanding.
The procedures by which holders of Convertible Preferred Securities
may exercise their voting rights are described above. See "--Form, Denomination
and Registration."
Holders of the Convertible Preferred Securities will have no rights
to appoint or remove the Company Trustees, who may be appointed, removed or
replaced solely by IFG, as the direct or indirect holder of all the Common
Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved and executed
by a majority of the Regular Trustees, provided that if any proposed amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights
of the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust
other than pursuant to the terms of the Declaration, then the holders of the
Trust Securities as a single class will be entitled to vote on such amendment
or proposal and such amendment or proposal shall not be effective except with
the approval of at least a majority in liquidation amount of the Trust
Securities affected thereby, provided that a reduction of the principal amount
or the distribution rate, or a change in the payment dates or maturity of the
Convertible Preferred Securities, shall not be permitted without the consent
of each holder of Convertible Preferred Securities. In the event any amendment
or proposal referred to in clause (i) above would adversely affect only the
Convertible Preferred Securities or the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be
made to the Declaration if such amendment or modification would (i) cause the
Trust to be classified for purposes of United States federal income taxation
as other than a grantor trust, (ii) reduce or otherwise adversely affect the
powers of the Property Trustee or (iii) cause the Trust to be deemed to be an
"investment company" which is required to be registered under the 1940 Act.
EXPENSES AND TAXES
In the Declaration, IFG has agreed to pay for all obligations (other
than with respect to the Trust Securities) and all costs and expenses of the
Trust (including costs and expenses relating to the organization of the Trust,
the fees and expenses of the Company Trustees and the costs and expenses
relating to the operation of the Trust) and to pay any and all taxes and all
costs and expenses with respect thereto (other than United States withholding
taxes) to which the Trust might become subject. The foregoing obligations of
the Trust under the Declaration are for the benefit of, and shall be
enforceable by, the Property Trustee and any person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice thereof. The Property Trustee and any such
Creditor may enforce such obligations of the Trust directly against IFG, and
IFG has irrevocably waived any right or remedy to require that the Property
Trustee or any such Creditor take any action against the Trust or any other
person before proceeding against IFG. IFG also has agreed in the Declaration
to execute such additional agreements as may be necessary or desirable to give
full effect to the foregoing agreement of IFG.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President's Clinton's Fiscal 1997
Budget Proposal, the Treasury Department proposed the Proposed Legislation
which, among other things, would (i) treat as equity for United States federal
income tax purposes certain debt instruments with a maximum term of more than
20 years and (ii) disallow interest deductions on certain convertible debt
instruments or defer interest deductions on certain debt instruments issued
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with OID. The Proposed Legislation is proposed to be effective for debt
instruments issued on or after December 7, 1995; however, if enacted in its
current proposed form, it would not cause the Convertible Subordinated Debt
Securities to be treated as equity for United States federal income tax
purposes since the maximum term of the Convertible Subordinated Debt
Securities will not exceed 20 years and should not affect IFG's ability to
deduct interest payments on Convertible Subordinated Debt Securities.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth,
Jr. and House Ways and Means Committee Chairman Bill Archer issued Joint
Statement indicating their intent that the Proposed Legislation, if adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of "appropriate Congressional action." Based
upon the Joint Statement, it is expected that if the Proposed Legislation were
enacted, such legislation would not apply to the Convertible Subordinated Debt
Securities since they would be issued prior to the date of any "appropriate
Congressional action" or otherwise qualify for transitional relief. However,
there can be no assurances that the effective date guidance contained in the
Joint Statement will be incorporated in the Proposed Legislation, if enacted,
or that other legislation enacted after the date hereof will not otherwise
adversely affect the tax treatment of the Convertible Subordinated Debt
Securities.
If the Proposed Legislation or any similar legislation changed the
tax treatment of the Convertible Subordinated Debt Securities and the
Convertible Preferred Securities, the United States federal income tax
consequences of the purchase, ownership and disposition of the Convertible
Preferred Securities would differ from those described herein. If legislation
were enacted that would constitute a Tax Event, there could be a distribution
of Convertible Subordinated Debt Securities to holders of the Convertible
Preferred Securities or, in certain circumstances, at IFG's option, redemption
of the Convertible Subordinated Debt Securities by IFG. There can be no
assurances as to whether or in what form the Proposed Legislation may be
enacted into law or whether other legislation will be enacted that otherwise
adversely affects the tax treatment of the Convertible Subordinated Debt
Securities and the Convertible Preferred Securities. The discussion herein
assumes that the Proposed Legislation, if enacted, will not apply to the
Convertible Subordinated Debt Securities and the Convertible Preferred
Securities.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, except as described below and as
described in "Description of the Convertible Preferred Securities--Special
Event Redemption or Distribution." The Trust may, with the consent of a
majority of the Regular Trustees and without the consent of the holders of the
Trust Securities or the other Company Trustees, consolidate, amalgamate, merge
with or into, or be replaced by a trust organized as such under the laws of
any State; provided, that (i) such successor entity either (x) expressly
assumes all of the obligations of the Trust with respect to the Trust
Securities or (y) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Securities rank in priority with respect to distributions and payments upon
termination, liquidation, redemption, maturity and otherwise, (ii) IFG
expressly acknowledges a trustee of such successor entity which possesses the
same powers and duties as the Property Trustee as the holder of the
Convertible Subordinated Debt Securities, (iii) the Convertible Preferred
Securities or any Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or other organization on which the Convertible Preferred Securities
are then listed, (iv) such merger, consolidation, amalgamation or replacement
does not cause the Convertible Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in
the new entity), (vi) such successor entity has a purpose substantially
identical to that of the Trust, (vii) prior to such merger, consolidation,
amalgamation or replacement, IFG has received an opinion from nationally
recognized independent counsel to the Trust experienced in such matters to the
effect that (A) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in
the new entity), (B) following
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such merger, consolidation, amalgamation or replacement, neither the Trust nor
such successor entity will be required to register as an investment company
under the 1940 Act and (C) following such merger, consolidation, amalgamation
or replacement, the Trust (or such successor entity) will be treated as a
grantor trust for United States federal income tax purposes, and (viii) IFG
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, the Trust shall not, except with the consent of holders of 100%
in liquidation amount of the Trust Securities, consolidate, amalgamate, merge
with or into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the Trust or
the successor entity to be classified for United States federal income tax
purposes as other than a grantor trust and any holder of Trust Securities not
to be treated as owning an undivided beneficial interest in the Convertible
Subordinated Debt Securities.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company and the Trust
entered into a registration rights agreement with the Initial Purchasers dated
November 1, 1996 (the "Registration Rights Agreement"), pursuant to which the
Company and the Trust agreed, at the Company's expense, for the benefit of the
holders of the Convertible Preferred Securities, the Guarantee, the
Convertible Subordinated Debt Securities and the shares of Common Stock
issuable upon conversion of the Convertible Preferred Securities and the
Convertible Subordinated Debt Securities (together, the "Registrable
Securities"), to (i) file with the Commission within 90 days after the
Original Closing Date, a registration statement (the "Shelf Registration
Statement") covering resales of the Registrable Securities, (ii) use all
reasonable efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act as promptly as practicable and in no event
later than 180 days after the Original Closing Date and (iii) use all
reasonable efforts to keep effective the Shelf Registration Statement until
three years after the Original Closing Date (or such earlier date as the
holders of Registrable Securities are able to sell all Registrable Securities
immediately without restriction pursuant to Rule 144(k) under the Securities
Act or any successor rule thereto or otherwise) (such period, the
"Effectiveness Period"). The Trust and IFG are permitted under the
Registration Rights Agreement to suspend the use of this Prospectus (which is
a part of the Shelf Registration Statement) in connection with sales of
Registrable Securities by holders during certain periods of time under certain
circumstances relating to pending corporate developments relating to the
Company and public filings with the Commission and similar events. The Trust
and IFG agreed to provide to each registered holder of Registrable Securities
copies of such prospectus, notify each registered holder when the Shelf
Registration Statement has become effective, and take certain other actions as
are required to permit unrestricted sales of the Registrable Securities. A
holder of Registrable Securities that sells such Registrable Securities
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling security holder in the related prospectus, to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales, and will be
bound by the provisions of the Registration Rights Agreement referred to below
that are applicable to such holder (including certain indemnification
provisions).
If (i) on or prior to January 30, 1997, a Shelf Registration
Statement has not been filed with the Commission or (ii) on or prior to the
date 180 days after the Original Closing Date such Shelf Registration
Statement has not been declared effective (each such event, a "Registration
Default"), additional interest ("Liquidated Damages") will accrue on the
Convertible Subordinated Debt Securities and, accordingly, additional
distributions will accrued on the Convertible Preferred Securities, in each
case from and including the date following the Registration Default until such
date as the Shelf Registration Statement is declared effective. Liquidated
Damages will be paid quarterly in arrears, with the first quarterly payment
due on the first interest or distribution date, as applicable, following the
date on which such Liquidated Damages begin to accrue, and will accrue at a
rate per annum equal to an additional one-quarter of one percent (0.25%) of
the principal amount or liquidation amount, as applicable, to and including
the 90th day following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default.
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This summary of the material provisions of the Registration Rights
Agreement does not purport to be complete, and reference is made to the
Registration Rights Agreement filed as an exhibit to the Registration
Statement.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with
respect to the Trust Securities and after the curing of all such defaults that
may have occurred, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after default, shall exercise the same
degree of care as a prudent individual would exercise in the conduct of his or
her own affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Convertible Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby; but the foregoing shall not
relieve the Property Trustee, upon the occurrence of a Declaration Event of
Default, from its obligation to exercise the rights and powers vested in it by
the Declaration. The Property Trustee also serves as the Debt Trustee under
the Indenture and as the Guarantee Trustee under the Guarantee.
CONVERSION AGENT; REGISTRAR AND TRANSFER AGENT
First Union National Bank of South Carolina shall act as Conversion
Agent for the Convertible Preferred Securities. In the event that the
Convertible Preferred Securities do not remain in book-entry only form, the
Property Trustee will act as paying agent and may designate an additional or
substitute paying agent at any time. Registration of transfers of Convertible
Preferred Securities will be effected without charge by or on behalf of the
Trust, but upon payment (with the giving of such indemnity as the Regular
Trustees may require) in respect of any tax or other government charges which
may be imposed in relation to it. The Trust will not be required to register
or cause to be registered the transfer of Convertible Preferred Securities
after such Convertible Preferred Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Convertible Preferred Securities will be
governed by, and construed in accordance with, the internal law of the State
of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust
in such a way so that the Trust will not be deemed to be an "investment
company" required to be registered under the 1940 Act or characterized for
United States federal income tax purposes as other than a grantor trust. IFG
is authorized and directed to conduct its affairs so that the Convertible
Subordinated Debt Securities will be treated as indebtedness of IFG for United
States federal income tax purposes. In this connection, the Regular Trustees
and IFG are authorized to take any action, not inconsistent with applicable
law, the Declaration or the Certificate of Incorporation of IFG, that each of
the Regular Trustees and IFG determines in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially and
adversely affect the interests of the holders of the Convertible Preferred
Securities.
Holders of the Convertible Preferred Securities will have no
preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee
by IFG for the benefit of the holders from time to time of the Convertible
Preferred Securities. First Union National Bank of South Carolina is acting
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as the Guarantee Trustee. The terms of the Guarantee are those set forth
therein. The following summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the Guarantee (a copy of which is available at the corporate
trust office of the Guarantee Trustee in Columbia, South Carolina and is
attached as an exhibit to the Registration Statement of which this Prospectus
forms a part). The Guarantee will be held by the Guarantee Trustee for the
benefit of the holders of the Convertible Preferred Securities.
GENERAL
Pursuant to the Guarantee, IFG irrevocably and unconditionally
agrees, to the extent set forth therein, to pay in full to the holders of the
Convertible Preferred Securities the Guarantee Payments (as defined herein)
(without duplication of amounts theretofore paid by the Trust), to the extent
not paid by the Trust, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The following payments or
distributions with respect to the Convertible Preferred Securities to the
extent not paid or made by the Trust (the "Guarantee Payments") will be
subject to the Guarantee (without duplication): (i) any accrued and unpaid
distributions that are required to be paid on the Convertible Preferred
Securities, to the extent the Trust has funds available therefor, (ii) the
Redemption Price, which includes all accrued and unpaid distributions to the
date of the redemption, to the extent the Trust has funds available therefor,
with respect to any Convertible Preferred Securities called for redemption by
the Trust and (iii) upon a voluntary or involuntary termination, dissolution
or winding-up of the Trust (other than in connection with the distribution of
Convertible Subordinated Debt Securities to the holders of Convertible
Preferred Securities in exchange for Convertible Preferred Securities), the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on the Convertible Preferred Securities to the date of
payment, to the extent the Trust has funds available therefor and (b) the
amount of assets of the Trust remaining available for distribution to holders
of Convertible Preferred Securities in liquidation of the Trust. IFG's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by IFG to the holders of Convertible Preferred Securities
or by causing the Trust to pay such amounts to such holders.
The Guarantee is a full and unconditional guarantee of the Guarantee
Payments with respect to the Convertible Preferred Securities from the time of
issuance of the Convertible Preferred Securities, but will not apply to the
payment of distributions and other payments on the Convertible Preferred
Securities when the Property Trustee does not have sufficient funds in the
Property Account to make such distributions or other payments. If IFG does not
make interest payments on the Convertible Subordinated Debt Securities held by
the Property Trustee, the Trust will not make distributions on the Convertible
Preferred Securities issued by the Trust and will not have funds available
therefor. See "Risk Factors--Rights under the Guarantee" and "Description of
the Convertible Subordinated Debt Securities --Certain Covenants."
IFG also has agreed separately to guarantee the obligations of the
Trust with respect to the Common Securities (the "Common Securities
Guarantee") to the same extent as the Guarantee, except that upon the
occurrence and during the continuation of an Indenture Event of Default,
holders of Convertible Preferred Securities shall have priority over holders
of Common Securities with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, IFG has covenanted that, so long as the Convertible
Preferred Securities remain outstanding, if there shall have occurred and is
continuing any event that would constitute an event of default under the
Guarantee or the Declaration, then (a) IFG shall not declare or pay any
dividend on, or make any distribution with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock, (b) IFG shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by IFG
which rank pari passu with or junior to the Convertible Subordinated Debt
Securities and (c) IFG shall not make any guarantee payments (other than
pursuant to the Guarantee) with respect to the foregoing. However, the
foregoing restriction will not apply to any dividend, redemption, liquidation,
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interest, principal or guarantee payments by IFG where the payment is made by
way of securities (including capital stock) that rank junior to the securities
on which such dividend, redemption, interest, principal or guarantee payment
is being made.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of Convertible Preferred Securities (in which
case no vote will be required), the Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount
of the outstanding Convertible Preferred Securities. The manner of obtaining
any such approval of holders of the Convertible Preferred Securities is set
forth under "Description of the Convertible Preferred Securities--Voting
Rights." All guarantees and agreements contained in the Guarantee shall bind
the successors, assigns, receivers, trustees and representatives of IFG and
shall inure to the benefit of the holders of the Convertible Preferred
Securities then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect as
to the Convertible Preferred Securities upon full payment of the Redemption
Price of all Convertible Preferred Securities, or upon distribution of the
Convertible Subordinated Debt Securities to the holders of the Convertible
Preferred Securities, and will terminate completely upon full payment of the
amounts payable upon liquidation of the Trust. The Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of Convertible Preferred Securities must repay to the Trust or IFG, or
their successors, any sums paid to them under such Convertible Preferred
Securities or the Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure
of IFG to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee
Trustee fails to enforce the Guarantee, any holder of Convertible Preferred
Securities may institute a legal proceeding directly against IFG to enforce
the Guarantee Trustee's rights under the Guarantee, without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other
person or entity. In addition, any record holder of Convertible Preferred
Securities shall have the right, which is absolute and unconditional, to
proceed directly against IFG to obtain Guarantee Payments, without first
waiting to determine if the Guarantee Trustee has enforced the Guarantee or
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. IFG has waived any right or remedy to require that any
action be brought first against the Trust, or any other person or entity
before proceeding directly against IFG.
STATUS OF THE GUARANTEE; SUBORDINATION
The Company's obligations under the Guarantee to make the Guarantee
Payments will constitute an unsecured obligation of IFG and will rank (i)
subordinate and junior in right of payment to all other liabilities of IFG,
including the Convertible Subordinated Debt Securities, except those
liabilities of IFG made pari passu or subordinate by their terms, (ii) pari
passu with the most senior preferred stock issued from time to time by IFG, if
any, and with any guarantee now or hereafter entered into by IFG in respect of
any preferred stock of any subsidiary or affiliate of IFG and (iii) senior to
the Common Stock. The terms of the Convertible Preferred Securities provide
that each holder of Convertible Preferred Securities by acceptance thereof
agrees to the subordination provisions and other terms of the Guarantee.
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The Guarantee constitutes a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the guarantee
without instituting a legal proceeding against any other person or entity).
The Guarantee has been deposited with the Guarantee Trustee to be held for the
benefit of the holders of the Convertible Preferred Securities. Subject to the
rights of holders of Convertible Preferred Securities to institute proceedings
directly against IFG to enforce their rights under the Guarantee, the
Guarantee Trustee has the right to enforce the Guarantee on behalf of the
holders of the Convertible Preferred Securities.
IFG's obligations under the Guarantee, taken together with its
obligations under the Declaration, the Convertible Subordinated Debt
Securities and the Indenture, in the aggregate provide a full and
unconditional guarantee by IFG of payments due on the Convertible Preferred
Securities.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with
respect to the Guarantee and after the curing of all such defaults that may
have occurred, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Convertible Preferred Securities, unless offered
reasonable indemnity against the costs, expenses and liabilities which might
be incurred thereby; but the foregoing shall not relieve the Guarantee
Trustee, upon the occurrence of an event of default under the Guarantee, from
its obligation to exercise the rights and powers vested in it by the
Guarantee.
GOVERNING LAW
The Guarantee is governed by, and construed in accordance with, the
internal law of the State of New York.
DESCRIPTION OF THE CONVERTIBLE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the terms of the Convertible
Subordinated Debt Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture, dated as of November 1, 1996 (the "Indenture"), between IFG and
First Union National Bank of South Carolina, as Trustee (the "Debt Trustee"),
copies of which will be available for inspection at the corporate trust office
of the Debt Trustee in Columbia, South Carolina and a copy of which is
attached as an exhibit to the Registration Statement of which this Prospectus
forms a part. The terms of the Convertible Subordinated Debt Securities
include those stated in the Indenture. Certain capitalized terms used herein
are defined in the Indenture.
Under certain circumstances involving the termination of the Trust
following the occurrence of a Special Event, Convertible Subordinated Debt
Securities may be distributed to the holders of Trust Securities in liquidation
of the Trust. See "Description of the Convertible Preferred Securities--Special
Event Redemption or Distribution."
GENERAL
The Convertible Subordinated Debt Securities have been issued as
unsecured subordinated debt securities under the Indenture. The Convertible
Subordinated Debt Securities were limited in aggregate principal amount to
approximately $154.1 million, such amount being the sum of the aggregate
stated liquidation amount of the Convertible Preferred Securities and the
capital contributed by IFG in exchange for the Common Securities.
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The Convertible Subordinated Debt Securities are not subject to any
sinking fund provision. The entire principal amount of the Convertible
Subordinated Debt Securities will mature and become due and payable, together
with any accrued and unpaid interest thereon, including Additional Interest,
if any, on September 30, 2016.
If Convertible Subordinated Debt Securities are distributed to
holders of the Convertible Preferred Securities in liquidation of such
holders' interests in the Trust, such Convertible Subordinated Debt Securities
will initially be issued in the same form as the Convertible Preferred
Securities that such Convertible Subordinated Debt Securities replace. Any
Global Certificate will be replaced by one or more Global Securities (as
defined under "--Book Entry and Settlement"). As described herein, under
certain circumstances, Convertible Subordinated Debt Securities may be issued
in certificated form in exchange for a Global Security. See "--Book-Entry and
Settlement" below. In the event Convertible Subordinated Debt Securities are
issued in certificated form, such Convertible Subordinated Debt Securities
will be in denominations of $50 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments on
Convertible Subordinated Debt Securities issued as a Global Security will be
made to the depositary for the Convertible Subordinated Debt Securities. In
the event Convertible Subordinated Debt Securities are issued in certificated
form, principal and interest will be payable, the transfer of the Convertible
Subordinated Debt Securities will be registrable and Convertible Subordinated
Debt Securities will be exchangeable for Convertible Subordinated Debt
Securities of other denominations of a like aggregate principal amount at the
corporate trust office of the Debt Trustee in Columbia, South Carolina;
provided that payment of interest may be made at the option of IFG by check
mailed to the address of the persons entitled thereto.
The Indenture does not contain provisions that afford holders of the
Convertible Subordinated Debt Securities protection in the event of a highly
leveraged transaction involving the Company or a decline in the credit quality
of the Company resulting from a change of control transaction.
SUBORDINATION
The Indenture provides that the Convertible Subordinated Debt
Securities are subordinated and junior in right of payment to all Senior
Indebtedness of IFG, whether now existing or hereafter incurred. No payment of
principal of (including redemption payments, if any), premium, if any, or
interest on, the Convertible Subordinated Debt Securities may be made if (a)
any Senior Indebtedness of IFG is not paid when due and any applicable grace
period with respect to such default has ended with such default not being
cured or waived or ceasing to exist or (b) the maturity of any Senior
Indebtedness or the Convertible Subordinated Debt Securities has been
accelerated because of a default. Upon any distribution of assets of IFG to
creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership
or other proceedings, all principal of, premium, if any, and interest due or
to become due on, all Senior Indebtedness must be paid in full before the
holders of the Convertible Subordinated Debt Securities are entitled to
receive or retain any payment. Upon satisfaction of all claims of all Senior
Indebtedness then outstanding, the rights of the holders of the Convertible
Subordinated Debt Securities will be subrogated to the rights of the holders
of Senior Indebtedness to receive payments or distributions applicable to such
Senior Indebtedness until all amounts owing on the Convertible Subordinated
Debt Securities are paid in full.
The term "Senior Indebtedness" means the principal of, premium, if
any, interest on, and any other payment due pursuant to, any of the following,
whether outstanding on the Original Offering Date or thereafter incurred or
created: (a) all indebtedness of IFG for money borrowed or evidenced by notes,
debentures, bonds or other securities (including, but not limited to, those
which are convertible or exchangeable for securities of IFG and indebtedness
owed to subsidiaries and affiliates of IFG); (b) all indebtedness of IFG due
and owing with respect to letters of credit (including, but not limited to,
reimbursement obligations with respect thereto); (c) all obligations of IFG
due and owing with respect to reimbursement agreements under any surety bond,
insurance policy, bankers' acceptance, security purchase facility, or similar
agreement or arrangement; (d) all indebtedness or other obligations of IFG due
and owing with respect to interest rate and currency swap agreements, cap,
floor and collar agreements, currency spot and forward contracts and other
similar agreements and arrangements; (e) all indebtedness consisting of
commitment or standby fees due and payable to lending institutions with
respect to credit facilities or letters of credit available to IFG; (f) all
obligations of IFG under leases required or permitted to be capitalized under
generally
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accepted accounting principles; (g) all obligations of IFG issued or assumed
as the deferred purchase price of property or services, all conditional sale
obligations of IFG, and all obligations of IFG under any title retention
agreement; (h) all obligations of IFG under agreements or arrangements with
respect to deferred compensation due its employees or employees of its
subsidiaries and its obligations under employee benefit plans; (i) all
indebtedness or obligations of others of the kinds described in any of the
preceding clauses (a)-(h) that are (x) assumed by or guaranteed in any manner
by IFG or in effect guaranteed (directly or indirectly) by IFG through an
agreement to purchase, contingent or otherwise, or in its capacity as a
general partner of any entity, and all obligations of IFG under any such
guarantee or other arrangements or (y) secured by a lien on any property or
asset of IFG (whether or not such obligation is assumed by IFG); and (j) all
renewals, extensions, refundings, deferrals, amendments or modifications of
indebtedness or obligations of the kinds described in any of the preceding
clauses (a)-(i); unless in the case of any particular indebtedness,
obligation, renewal, extension, refunding, amendment, modification or
supplement, the instrument or other document creating or evidencing the same
or the assumption or guarantee of the same expressly provides that such
indebtedness, renewal, extension, refunding, amendment, modification or
supplement is subordinate to, or is not superior to, or is pari passu with,
the Convertible Subordinated Debt Securities; provided that Senior
Indebtedness shall not include indebtedness for trade payables or constituting
the deferred purchase price of assets or services incurred in the ordinary
course of business.
The Indenture does not limit the aggregate amount of Senior
Indebtedness which may be issued by IFG. As of September 30, 1996, on a pro
forma basis giving effect to the completion of the Original Offering and the
application of the proceeds therefrom, Senior Indebtedness of IFG aggregated
approximately $43.2 million (excluding accrued interest), and IFG's
consolidated subsidiaries had indebtedness and other liabilities of
approximately $47.6 million to which the Convertible Subordinated Debt
Securities are effectively subordinated.
CERTAIN COVENANTS
If (i) there shall have occurred and be continuing any event that
would constitute an Indenture Event of Default, (ii) IFG shall be in default
with respect to its payment of any obligations under the Guarantee or the
Common Securities Guarantee, and such default shall be continuing or (iii) IFG
shall have given notice of its election to defer payments of interest on the
Convertible Subordinated Debt Securities as provided in the Indenture and any
Extension Period shall be continuing, then, in each case, (a) IFG shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock (other than (A) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by IFG of its obligations under any
employee benefit plans, (B) as a result of a reclassification of capital stock
of IFG or the exchange or conversion of one class or series of IFG's capital
stock for another class or series of capital stock of IFG or (C) the purchase
of fractional interests in shares of IFG's capital stock pursuant to the
conversion or exchange provisions of such capital stock of IFG or the security
being converted or exchanged), (b) IFG shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by IFG which rank pari passu with or
junior to the Convertible Subordinated Debt Securities and (c) IFG shall not
make any guarantee payments (other than pursuant to the Guarantee) with
respect to the foregoing.
Notwithstanding the foregoing restrictions, IFG will be permitted, in
any event, to make dividend, redemption, liquidation and guarantee payments on
capital stock of IFG, and interest, principal, redemption and guarantee
payments on debt securities issued by IFG ranking pari passu with or junior to
Convertible Subordinated Debt Securities, where the payment is made by way of
securities (including capital stock) that rank junior to the securities on
which such payment is being made.
For so long as the Trust Securities remain outstanding, IFG has
covenanted (i) to maintain 100% direct or indirect ownership of the Common
Securities of the Trust; provided, however, that any permitted successor of
IFG under the Indenture may succeed to IFG's ownership of such Common
Securities, (ii) not to cause, as sponsor of the Trust, or to permit, as
holder of the Common Securities, the termination, dissolution or winding-up of
the Trust, except in connection with a distribution of the Convertible
Subordinated Debt Securities as provided in the
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Declaration and in connection with certain mergers, consolidations or
amalgamations, (iii) to use its reasonable efforts, consistent with the terms
of the Declaration, to cause the Trust (a) to remain a statutory business
trust, except in connection with the distribution of Convertible Subordinated
Debt Securities to the holders of Trust Securities in liquidation of the
Trust, the redemption of all of the Trust Securities of the Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the
Declaration, and (b) to otherwise continue to be classified as a grantor trust
for United States federal income tax purposes and (iv) to use reasonable
efforts to cause each holder of Trust Securities to be treated as owning an
undivided beneficial interest in the Convertible Subordinated Debt Securities.
OPTIONAL REDEMPTION
IFG shall have the right to redeem the Convertible Subordinated Debt
Securities, in whole or in part, from time to time, on or after November 1,
1999, upon not less than 20 nor more than 60 days notice to the holders
thereof, at the following prices (expressed as percentages of the principal
amount of the Convertible Subordinated Debt Securities) together with accrued
and unpaid interest, including Additional Interest (as defined herein) to, but
excluding, the redemption date, if redeemed during the 12-month period
beginning September 30 (or, in the case of 1999, the period beginning November
1):
YEAR REDEMPTION PRICE
- ---- ----------------
1999 102%
2000 101
and 100% if redeemed on or after September 30, 2001.
IFG also shall have the right to redeem the Convertible Subordinated
Debt Securities at any time in certain circumstances upon the occurrence of a
Tax Event as described under "Description of the Convertible Preferred
Securities--Special Event Redemption or Distribution" at 100% of the principal
amount thereof together with accrued and unpaid interest (including Additional
Interest) to the redemption date.
Notwithstanding the foregoing, if Convertible Subordinated Debt
Securities are redeemed on any March 31, June 30, September 30, or December
31, accrued and unpaid interest with respect to the redeemed Convertible
Subordinated Debt Securities shall be payable to holders of record on the
relevant record date, instead of the holders on the redemption date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of any of the Convertible
Subordinated Debt Securities will be used to redeem Convertible Preferred
Securities.
INTEREST
Each Convertible Subordinated Debt Security shall bear interest at
the rate of 6 1/2% per annum from November 1, 1996, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year (each,
an "Interest Payment Date"), commencing December 31, 1996, to the person in
whose name such Convertible Subordinated Debt Security is registered, subject
to certain exceptions, at the close of business on the Business Day next
preceding such Interest Payment Date. In the event the Convertible
Subordinated Debt Securities are distributed to holders of the Convertible
Preferred Securities in liquidation of such holders' interests in the Trust
and such Convertible Subordinated Debt Securities shall not thereafter
continue to remain in book-entry only form, IFG shall have the right to select
record dates which shall be not less than fifteen days prior to each Interest
Payment Date.
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The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on the Convertible Subordinated Debt Securities is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Indenture Event of Default shall have occurred and be
continuing, IFG shall have the right at any time, and from time to time,
during the term of the Convertible Subordinated Debt Securities to defer
payments of interest by extending the interest payment period for a period not
exceeding 20 consecutive quarters, at the end of which Extension Period IFG
shall pay all interest then accrued and unpaid (including any Additional
Interest and Liquidated Damages), together with interest thereon at the rate
specified for the Convertible Subordinated Debt Securities to the extent
permitted by applicable law; provided, that, during any such Extension Period,
(a) IFG shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock (other than (A) purchases or acquisitions of shares
of Common Stock in connection with the satisfaction by IFG of its obligations
under any employee benefit plans, (B) as a result of a reclassification of
capital stock of IFG or the exchange or conversion of one class or series of
IFG's capital stock for another class or series of capital stock of IFG or (C)
the purchase of fractional interests in shares of IFG's capital stock pursuant
to the conversion or exchange provisions of such capital stock of IFG or the
security being converted or exchanged), (b) IFG shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by IFG which rank pari passu with or junior to the
Convertible Subordinated Debt Securities and (c) IFG shall not make any
guarantee payments (other than pursuant to the Guarantee) with respect to the
foregoing; provided, however, the foregoing restriction will not apply to any
dividend, redemption, liquidation, interest, principal or guarantee payments
by IFG where the payment is made by way of securities (including capital
stock) that rank junior to the securities on which such dividend, redemption,
interest, principal or guarantee payment is being made. Prior to the
termination of any such Extension Period, IFG may further defer payments of
interest by extending the interest payment period, provided that such
Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters or extend beyond the maturity
of the Convertible Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, IFG may select a new
Extension Period, as if no Extension Period had previously been declared,
subject to the above requirements. No interest during an Extension Period,
except at the end thereof, shall be due and payable. IFG has no present
intention of exercising its right to defer payments of interest by extending
the interest payment period on the Convertible Subordinated Debt Securities.
If the Property Trustee shall be the sole holder of the Convertible
Subordinated Debt Securities, IFG shall give the Regular Trustees and the
Property Trustee notice of its selection of an Extension Period one Business
Day prior to the earlier of (i) the next succeeding date on which
distributions on the Convertible Preferred Securities are payable or (ii) the
date the Trust is required to give notice to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the Convertible
Preferred Securities of the record date or the date such distribution is
payable, but in any event not less than ten Business Days prior to such record
date. The Regular Trustees shall give notice of IFG's selection of such
Extension Period to the holders of the Convertible Preferred Securities. If
the Property Trustee shall not be the sole holder of the Convertible
Subordinated Debt Securities, IFG shall give the holders of the Convertible
Subordinated Debt Securities notice of its selection of such Extension Period
ten Business Days prior to the earlier of (i) the relevant Interest Payment
Date or (ii) the date IFG is required to give notice to the New York Stock
Exchange or other applicable self-regulatory organization or to holders of the
Convertible Subordinated Debt Securities of the record or payment date of such
related interest payment, but in any event at least two Business Days before
such record date.
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CONVERSION OF THE SUBORDINATED DEBT SECURITIES
The Convertible Subordinated Debt Securities are convertible into
Common Stock at the option of the holders of the Convertible Subordinated Debt
Securities at any time beginning January 1, 1997 and prior to the close of
business on September 30, 2016 (or, in the case of Convertible Subordinated
Debt Securities called for redemption, the close of business on the Business
Day prior to the redemption date) at the initial conversion rate of 1.8868
shares of Common Stock for each Convertible Preferred Security (equivalent to
a conversion price of $26.50 for each share of Common Stock) subject to the
conversion price adjustments described under "Description of the Convertible
Preferred Securities--Conversion Rights." The Trust has agreed not to convert
Convertible Subordinated Debt Securities 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
Convertible Subordinated Debt Securities to the Conversion Agent on behalf of
the holder of the Convertible Preferred Securities so converted, whereupon the
Conversion Agent will convert such Convertible Subordinated Debt Securities to
Common Stock on behalf of such holder. The Company's delivery to the holders
of the Convertible Subordinated Debt Securities (through the Conversion Agent)
of the fixed number of shares of Common Stock into which the Convertible
Subordinated Debt Securities are convertible (together with the cash payment,
if any, in lieu of fractional shares) will be deemed to satisfy IFG's
obligation to pay the principal amount of the Convertible Subordinated Debt
Securities so converted, and the accrued and unpaid interest thereon
attributable to the period from the last date to which interest has been paid
or duly provided for; provided, however, that if any Convertible Subordinated
Debt Securities are converted after a record date for payment of interest, the
interest payable on the related interest payment date with respect to such
Convertible Subordinated Debt Securities shall be paid to the Trust (which
will distribute such interest to the converting holder) or other holder of
Convertible Subordinated Debt Securities), as the case may be, despite such
conversion.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, IFG will pay as additional interest ("Additional Interest")
such additional amounts as shall be required so that the net amounts received
and retained by the Trust after paying any such taxes, duties, assessments or
other governmental charges will be equal to the amounts the Trust would have
received had no such taxes, duties, assessments or other governmental charges
been imposed.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following
described events, which has occurred and is continuing, constitutes an "Event
of Default" with respect to the Convertible Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Convertible
Subordinated Debt Securities, including any Additional Interest and Liquidated
Damages in respect thereof, when due; provided, however, that a valid
extension of the interest payment period by IFG shall not constitute a default
in the
payment of interest for this purpose; or
(b) failure to pay principal or premium, if any, on the Convertible
Subordinated Debt Securities when due whether at maturity, upon earlier
redemption or otherwise; or
(c) failure to issue and deliver shares of Common Stock upon an
election by a holder of Convertible Subordinated Debt Securities to convert
such Convertible Subordinated Debt Securities; or
(d) failure to observe or perform any other covenant contained in the
Indenture for 90 days after written notice to IFG from the Debt Trustee or the
holders of at least 25% in principal amount of the outstanding Convertible
Subordinated Debt Securities; or
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(e) certain events of bankruptcy, insolvency or reorganization of IFG;
or
(f) the voluntary or involuntary termination, dissolution or
winding-up of the Trust, except in connection with the distribution of
Convertible Subordinated Debt Securities to the holders of Convertible
Preferred Securities in liquidation of the Trust, the redemption of all
outstanding Trust Securities of the Trust and certain mergers, consolidations
or amalgamations permitted by the Declaration.
The holders of a majority in aggregate outstanding principal amount
of the Convertible Subordinated Debt Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Debt Trustee. The Debt Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Convertible Subordinated Debt
Securities may declare the principal due and payable immediately on default,
but the holders of a majority in aggregate outstanding principal amount may
rescind and annul such declaration and its consequences if the default has
been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration and any applicable premium
has been deposited with the Debt Trustee. So long as the Property Trustee is
the holder of the Convertible Subordinated Debt Securities, it will have the
right to accelerate the maturity of the indebtedness thereunder and to
exercise the other rights of the holder of the Convertible Subordinated Debt
Securities described above.
The holders of a majority in aggregate outstanding principal amount
of the Convertible Subordinated Debt Securities affected thereby may, on
behalf of the holders of all the Convertible Subordinated Debt Securities,
waive any past default, except (i) a default in the payment of principal,
premium, if any, or interest, including Additional Interest and Liquidated
Damages (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration and any applicable premium has been deposited with the Debt
Trustee), or (ii) a default in the covenant of IFG described under "--Certain
Covenants" above, or (iii) in respect of a covenant or provision of the
Indenture that cannot be modified or amended without the consent of the holder
of each outstanding Convertible Subordinated Debt Security affected thereby
(see "--Modification of the Indenture").
An Indenture Event of Default also constitutes a Declaration Event of
Default. The holders of Convertible Preferred Securities in certain
circumstances have the right to direct the Property Trustee to exercise its
rights as the holder of the Convertible Subordinated Debt Securities. See
"Description of the Convertible Preferred Securities--Declaration Events of
Default" and "--Voting Rights."
In addition, if an Indenture Event of Default results from the
failure of IFG to pay principal of or interest on the Convertible Subordinated
Debt Securities when due, during the continuance of such an event of default a
holder of Convertible Preferred Securities may immediately institute a legal
proceeding directly against IFG to obtain payment of such principal or
interest on Convertible Subordinated Debt Securities having a principal amount
equal to the aggregate liquidation amount of the Convertible Preferred
Securities owned of record by such holder. Also, if the Property Trustee fails
to enforce its rights as holder of the Convertible Subordinated Debt
Securities for 30 days after a request therefor by a holder of Convertible
Preferred Securities, such holder may proceed to enforce such rights directly
against IFG to the fullest extent permitted by law.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Convertible Preferred Securities in
connection with the voluntary or involuntary termination, dissolution or
winding-up of the Trust as a result of the occurrence of a Special Event, the
Convertible Subordinated Debt Securities will be issued in the same form as
the Convertible Preferred Securities that such Convertible Subordinated Debt
Securities replace. Any Convertible Preferred Securities evidenced by a Global
Certificate will be replaced by Convertible Subordinated Debt Securities in
the form of one or more global certificates (each, a "Global Security")
registered in the name of the depositary or its nominee. Convertible
Subordinated Debt Securities represented by the Global Security will be
exchangeable for Convertible Subordinated Debt Securities in certificated
form, and beneficial interests in Global Securities and Convertible
Subordinated Debt Securities in certificated form will be transferable, on
terms and conditions generally the same as those applicable
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to the Convertible Preferred Securities prior to such distribution. See
"Description of the Convertible Preferred Securities--Form, Denomination and
Registration." The Global Securities described above may not be transferred
except by the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or to a
successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
THE DEPOSITARY
If Convertible Subordinated Debt Securities are distributed to
holders of Convertible Preferred Securities in liquidation of such holders'
interests in the Trust, DTC will act as securities depositary for the
Convertible Subordinated Debt Securities. For a description of DTC and the
specific terms of the depository arrangements in effect as of the date of this
Prospectus, see "Description of the Convertible Preferred Securities--Form,
Denomination and Registration." The description therein of DTC's book-entry
system and DTC's practices as they relate to purchases, transfers, notices and
payments with respect to the Convertible Preferred Securities apply in all
material respects to any debt obligations represented by one or more Global
Securities held by DTC. IFG may appoint a successor to DTC or any successor
depositary in the event DTC or such successor depositary is unable or
unwilling to continue as depositary.
None of IFG, the Trust, the Debt Trustee, any paying agent and any
other agent of IFG or the Debt Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such
Convertible Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICE
A Global Security shall be exchangeable for Convertible Subordinated
Debt Securities registered in the names of persons other than the depositary
or its nominee if (i) the depositary notifies IFG that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, or if at any time the depositary ceases
to be a clearing agency registered or in good standing under the Exchange Act
(or other applicable statute or regulation) at a time when the depositary is
required to be so registered to act as such depositary and no successor
depositary shall have been appointed by IFG within 90 days after IFG receives
such notice or becomes aware of such condition, (ii) IFG in its sole
discretion determines that such Global Security shall be so exchangeable or
(iii) there shall have occurred an Indenture Event of Default with respect to
such Convertible Subordinated Debt Securities. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Convertible Subordinated Debt Securities registered in such names as the
depositary shall direct. It is expected that such instructions will be based
upon directions received by the depositary from its Participants with respect
to ownership of beneficial interests in such Global Security.
In the event the Convertible Subordinated Debt Securities are not
represented by one or more Global Securities, certificates evidencing
Convertible Subordinated Debt Securities may be presented for registration of
transfer (with the form of transfer endorsed thereon duly executed) or
exchange, at the office of the Debt Registrar (as defined in the Indenture) or
at the office of any transfer agent designated by IFG for such purpose with
respect to the Convertible Subordinated Debt Securities, without service
charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon
the Debt Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request. IFG
has appointed the Debt Trustee as Debt Registrar with respect to the
Convertible Subordinated Debt Securities. IFG may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that IFG will be required
to maintain a transfer agent at the place of payment. IFG may at any time
designate additional transfer agents with respect to the Convertible
Subordinated Debt Securities.
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In the event of any redemption in part, IFG shall not be required to
(i) issue, exchange or register the transfer of Convertible Subordinated Debt
Securities during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption of less than all of the
Convertible Subordinated Debt Securities and ending at the close of business
on the date of such mailing or (ii) register the transfer of or exchange any
Convertible Subordinated Debt Securities so selected for redemption, in whole
or in part, except the unredeemed portion of any Convertible Subordinated Debt
Securities being redeemed in part.
CONVERSION AGENT; PAYMENT AND PAYING AGENTS
First Union National Bank of South Carolina shall act as Conversion
Agent for the Convertible Subordinated Debt Securities. Payment of principal
of and premium, if any, on the Convertible Subordinated Debt Securities will
be made only against surrender to the Paying Agent (as defined in the
Indenture) of the Convertible Subordinated Debt Securities. Principal of and
premium, if any, and interest on Convertible Subordinated Debt Securities will
be payable, subject to any applicable laws and regulations, at the office of
such Paying Agent or Paying Agents as IFG may designate from time to time,
except that at the option of IFG payment of any interest may be made by check
mailed to the address of the person entitled thereto as such address shall
appear in the Debt Register with respect to the Convertible Subordinated Debt
Securities. Payment of interest on the Convertible Subordinated Debt
Securities on any Interest Payment Date will be made to the person in whose
name the Convertible Subordinated Debt Security (or predecessor security) is
registered at the close of business on the Regular Record Date (as defined in
the Indenture) for such interest payment.
IFG initially will act as Paying Agent with respect to the
Convertible Subordinated Debt Securities except that, if the Convertible
Subordinated Debt Securities are distributed to the holders of the Convertible
Preferred Securities in liquidation of such holders' interests in the Trust,
the Debt Trustee will act as the Paying Agent. IFG at any time may designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except
that IFG will be required to maintain a Paying Agent at the place of payment.
All moneys paid by IFG to a Paying Agent for the payment of the
principal of, premium, if any, or interest, if any, on the Convertible
Subordinated Debt Securities which remain unclaimed at the end of two years
after such principal, premium or interest shall have become due and payable
will be repaid to IFG, and the holder of such Convertible Subordinated Debt
Securities will thereafter look only to IFG for payment thereof.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting IFG and the Debt
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Convertible Subordinated Debt Securities, to modify
the Indenture or any supplemental indenture affecting that series or the
rights of the holders of the Convertible Subordinated Debt Securities;
provided that no such modification may, without the consent of the holder of
each outstanding Convertible Subordinated Debt Security affected thereby, (i)
change the stated maturity of the Convertible Subordinated Debt Securities,
reduce the principal amount thereof, reduce the rate or extend the time of
payment of interest (including any Additional Interest or Liquidated Damages)
thereon, or reduce any premium payable upon the redemption thereof, adversely
affect the right to convert any Convertible Subordinated Debt Security,
decrease the conversion rate or increase the conversion price of any
Convertible Subordinated Debt Security, or change the subordination provisions
of the Indenture in a manner that adversely affects the rights of any holders
of Convertible Subordinated Debt Securities or (ii) reduce the percentage of
Convertible Subordinated Debt Securities the holders of which are required to
consent to any such supplemental indenture or to waive defaults, without the
consent of the holders of each Convertible Subordinated Debt Security then
outstanding and affected thereby.
In addition, IFG and the Debt Trustee may execute, without the
consent of holders of the Convertible Subordinated Debt Securities, any
supplemental indenture for certain other usual purposes.
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SUCCESSOR CORPORATION
IFG may not consolidate with or merge into, or transfer its
properties and assets substantially as an entirety to, another corporation
unless (i) the successor corporation, which shall be a corporation organized
under the laws of the United States or a State thereof, assumes by
supplemental indenture all the obligations of IFG under the Convertible
Subordinated Debt Securities and the Indenture, and (ii) immediately after
giving effect to such transaction, no Indenture Event of Default shall have
occurred and be continuing. The Indenture does not otherwise contain any
covenant which restricts the ability of IFG to merge or consolidate with or
into any other corporation, sell or convey all or substantially all of its
assets to any person, firm or corporation or otherwise engage in restructuring
transactions.
GOVERNING LAW
The Indenture and the Convertible Subordinated Debt Securities are
governed by, and construed in accordance with, the internal law of the State
of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default,
shall exercise the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such provision, the Debt
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 Subordinated Debt
Securities, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby; but the
foregoing shall not relieve the Debt Trustee, upon the occurrence of an
Indenture Event of Default, from its obligation to exercise the rights and
powers vested in it by the Indenture. The Debt 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 Debt Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it. The Debt
Trustee also serves as Property Trustee under the Declaration and as the
Guarantee Trustee under the Guarantee.
MISCELLANEOUS
IFG will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly owned
subsidiary of IFG; provided, that in the event of any such assignment, IFG
will remain liable for all of the obligations of such subsidiary. Subject to
the foregoing, the Indenture will be binding upon and inure to the benefit of
the parties thereto and their respective successors and assigns. The Indenture
provides that it may not otherwise be assigned by the parties thereto.
The Indenture will provide that IFG will pay all costs, expenses,
debts and obligations of the Trust other than with respect to the Trust
Securities.
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE SUBORDINATED
DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the exclusive purposes of the Trust
are to (i) issue the Trust Securities, (ii) invest the proceeds thereof in the
Convertible Subordinated Debt Securities and (iii) engage in only those other
activities necessary or incidental thereto.
As long as payments of interest and other payments are made when due
on the Convertible Subordinated Debt Securities, such payments will be
sufficient to cover distributions and payments due on the Trust Securities
primarily because (i) the aggregate principal amount of the Convertible
Subordinated Debt Securities will be equal
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to the sum of the aggregate stated liquidation amount of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Convertible
Subordinated Debt Securities will match the distribution rate and distribution
and other payment dates for the Convertible Preferred Securities; (iii) IFG
shall pay for all costs, expenses, debts and obligations of the Trust (other
than with respect to the Trust Securities); and (iv) the Declaration provides
that Regular Trustees shall not cause or permit the Trust to, among other
things, engage in any activity that is not consistent with the purposes of the
Trust.
Payments of distributions (to the extent funds therefor are
available) and other payments due on the Convertible Preferred Securities (to
the extent funds therefor are available) are guaranteed by IFG as and to the
extent set forth under "Description of the Guarantee." If IFG does not make
interest payments on the Convertible Subordinated Debt Securities purchased by
the Trust, it is expected that the Trust will not have sufficient funds to pay
distributions on the Convertible Preferred Securities. The Guarantee does not
apply to any payment of distributions unless and until the Trust has
sufficient funds for the payment of such distributions. The Guarantee covers
the payment of distributions and other payments on the Convertible Preferred
Securities only if and to the extent that IFG has made a payment of interest
or principal on the Convertible Subordinated Debt Securities held by the Trust
as its sole asset. The Guarantee, when taken together with IFG's obligations
under the Convertible Subordinated Debt Securities, the Indenture and the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee of amounts on the Convertible
Preferred Securities.
If IFG fails to make interest or other payments on the Convertible
Subordinated Debt Securities when due (taking into account any Extension
Period), the Declaration provides a mechanism whereby the holders of the
Convertible Preferred Securities, using the procedures described in
"Description of the Convertible Preferred Securities--Voting Rights," may
direct the Property Trustee to enforce its rights under the Convertible
Subordinated Debt Securities, including proceeding directly against IFG to
enforce the Convertible Subordinated Debt Securities. If the Property Trustee
fails to enforce its rights under the Indenture or the Convertible
Subordinated Debt Securities, a holder of Convertible Preferred Securities
may, to the extent permitted by law, institute a legal proceeding directly
against IFG to enforce the Property Trustee's rights under the Indenture and
the Convertible Subordinated Debt Securities without first instituting any
legal proceeding against the Property Trustee or any other person or entity,
including the Trust. In addition, during the continuance of a Declaration
Event of Default that results from the failure of IFG to pay principal of or
interest on the Convertible Subordinated Debt Securities when due, a holder
may proceed directly against IFG, without first waiting to determine if the
Property Trustee has enforced its rights under the Declaration, to obtain
payment of such principal or interest on Convertible Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Convertible Preferred Securities owned of record by such holder.
If IFG fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Convertible Preferred
Securities may direct the Guarantee Trustee to enforce its rights thereunder.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of
Convertible Preferred Securities may institute a legal proceeding directly
against IFG to enforce the Guarantee Trustee's rights under the Guarantee,
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. In addition, any record holder of
Convertible Preferred Securities shall have the right, which is absolute and
unconditional, to proceed directly against IFG to obtain Guarantee Payments,
without first waiting to determine if the Guarantee Trustee has enforced the
Guarantee or instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
DESCRIPTION OF CAPITAL STOCK
As of the date of this Prospectus, the authorized capital stock of
Insignia consists of 53,000,000 shares of capital stock, of which (i)
50,000,000 are Class A Common Stock, par value $0.01 per share, (ii) 2,000,000
are Class B Common Stock, par value $0.01 per
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share, and (iii) 1,000,000 are Preferred Stock, par value $0.01 per share, of
which 15,000 have been designated as 7.5% Step-Up Rate Convertible Preferred
Stock (the "7.5% Preferred Stock").
As of September 30, 1996, there were outstanding 28,796,039 shares of
Class A Common Stock, no shares of Class B Common Stock and no shares of
Preferred Stock.
The following description of the capital stock of Insignia is a
summary and is qualified in its entirety by the provisions of Insignia's
Certificate of Incorporation, as amended (the "Certificate"), and Insignia's
By-Laws.
COMMON STOCK
All shares of Class A Common Stock and Class B Common Stock are
identical in all respects, except that (i) holders of the Class B Common Stock
have no voting rights except as may be required pursuant to the General
Corporation Law of the State of Delaware (the "Delaware Corporation Law") and
(ii) on December 31, 1995, each share of Class B Common Stock was converted
automatically into one share of Class A Common Stock.
The holders of shares of Class A Common Stock elect all directors and
are entitled to one vote per share. There are no cumulative voting rights.
Subject to the prior rights of holders of Preferred Stock, holders of Class A
and Class B Common Stock are entitled to receive dividends when, as, and if
declared by the Board of Directors out of funds legally available therefor,
and to share ratably in the assets of Insignia legally available for
distribution to the stockholders in the event of liquidation or dissolution.
Holders of Class A and Class B Common Stock have no preemptive, subscription,
or redemption rights except that one stockholder has certain preemptive rights
if the Company proposes to sell voting stock (other than in an underwritten
public offering or certain other circumstances).
PREFERRED STOCK
Pursuant to the Certificate, the Board of Directors is authorized,
subject to any limitations prescribed by law, from time to time to issue up to
an aggregate of 1,000,000 shares of Preferred Stock, in one or more series,
and to determine the designation, number of shares, and rights and
preferences, including voting rights, dividend rights, conversion rights,
redemption privileges, and liquidation preferences, of each such series.
The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have an adverse effect on holders of Class A and Class B
Common Stock, depending upon the rights of such Preferred Stock, by delaying
or preventing a change in control of Insignia, making removal of the present
management of Insignia more difficult, or resulting in restrictions upon the
payment of dividends or other distributions to holders of Class A or Class B
Common Stock.
As of September 30, 1996, there were outstanding no shares of the
Preferred Stock, all shares of 7.5% Preferred Stock having been converted on
April 29, 1996 for an aggregate of 1,509,062 shares of Common Stock at the
option of the holder.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the principal United States
federal income tax consequences to a holder of Convertible Preferred
Securities (a "Holder") of the purchase, ownership and disposition of the
Convertible Preferred Securities. This summary deals only with the tax
considerations applicable to the purchasers of the Convertible Preferred
Securities that hold the Convertible Preferred Securities as capital assets.
This summary is based on the United States federal income tax laws,
regulations and rulings and decisions now in effect (or, in the case of
certain United States Treasury Regulations ("Treasury Regulations"), now in
proposed form), all of which are subject to change, possibly on a retroactive
basis. This summary does not address the tax consequences applicable to
investors that may be subject to special tax rules such as banks, thrifts,
real estate
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investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors or persons that will
hold the Convertible 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.
This summary 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. 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 a Holder.
CLASSIFICATION OF THE CONVERTIBLE SUBORDINATED DEBT SECURITIES
The Company intends to take the position that the Convertible
Subordinated Debt Securities will be classified for United States federal
income tax purposes as indebtedness of the Company under current law, and, by
acceptance of a Convertible Preferred Security, each Holder covenants to treat
the Convertible Subordinated Debt Securities as indebtedness and the
Convertible Preferred Securities as evidence of an indirect beneficial
ownership interest in the Convertible Subordinated Debt Securities. No
assurance can be given, however, that such position of the Company will not be
challenged by the Internal Revenue Service. The remainder of this discussion
assumes that the Convertible Subordinated Debt Securities will be classified
for United States income tax purposes as indebtedness of the Company.
CLASSIFICATION OF INSIGNIA FINANCING I
In connection with the issuance of the Convertible Preferred
Securities, Proskauer Rose Goetz & Mendelsohn LLP, special counsel to the
Company and to the Trust, has rendered its opinion that, under current law and
assuming full compliance with the terms of the Indenture and the Declaration
(and certain other documents), the Trust will be classified as a "grantor
trust" for United States federal income tax purposes and not as a partnership
or an association taxable as a corporation. Each Holder will be treated for
United States federal income tax purposes as owning an undivided beneficial
interest in the Convertible Subordinated Debt Securities. Accordingly, each
Holder will be required to include in its gross income the OID accrued with
respect to its allocable share of Convertible Subordinated Debt Securities.
Investors should be aware that the opinion of Proskauer Rose Goetz &
Mendelsohn LLP does not address any other tax issue and is not binding on the
Internal Revenue Service or the courts.
ORIGINAL ISSUE DISCOUNT, PREMIUM AND MARKET DISCOUNT
Because IFG has the option, under the terms of the Convertible
Subordinated Debt Securities, to defer payments of interest by extending
interest payment periods for up to 20 consecutive quarters, the Convertible
Subordinated Debt Securities will be treated as issued with OID equal to the
total amount of the stated interest payments on the Convertible Subordinated
Debt Securities. Holders must include the OID attributable to the Convertible
Subordinated Debt Securities in income on an economic accrual basis before the
receipt of cash attributable to the interest, regardless of their method of
tax accounting. The amount of OID that accrues in any month will approximately
equal the amount of the interest that accrues in that month at the stated
interest rate. In the event that the interest payment period is extended,
Holders will continue to accrue OID approximately equal to the amount of the
interest payment due at the end of the extended interest payment period on an
economic accrual basis over the length of the extended interest period.
Corporate Holders will not be entitled to a dividends-received deduction with
respect to any income earned with respect to the Convertible Preferred
Securities.
To the extent a Holder acquires its Convertible Preferred Securities
at a price that is greater or less than the adjusted issue price of such
Holder's share of the Convertible Subordinated Debt Securities (which
generally should approximate par plus accrued but unpaid interest), such
Holder will be deemed to have acquired its interest in the Convertible
Preferred Securities with acquisition premium or with market discount, as the
case may be. Such Holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of the
Convertible Preferred Securities. A Holder acquiring Convertible Preferred
Securities with acquisition premium will be permitted to reduce the amount of
OID required to be included in income to reflect such
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premium. A Holder acquiring Convertible Preferred Securities at a market
discount will include the amount of such discount in income in accordance with
the market discount rules described below.
A Holder acquiring Convertible Preferred Securities at a market
discount generally will be required to recognize ordinary income to the extent
of accrued market discount upon the retirement of the underlying Convertible
Subordinated Debt Securities or, to the extent of any gain, upon the
disposition of the Convertible Preferred Securities. Such market discount
would accrue ratably, or, at the election of the Holder, under a constant
yield method, over the remaining term of the Convertible Subordinated Debt
Securities. A Holder also will be required, in the absence of the election
described in the next sentence, to defer the deduction of a portion of the
interest paid or accrued on indebtedness incurred to purchase or carry
Convertible Preferred Securities acquired with market discount. In lieu of the
foregoing, a Holder may elect to include market discount in income currently
as it accrues on all market discount instruments acquired by such Holder in
the taxable year of the election or thereafter, in which case the interest
deduction deferral rule will not apply.
A Holder may elect, in lieu of applying the market discount or
premium rules described above, to account for all income under the Convertible
Preferred Securities as if it were OID.
RECEIPT OF CONVERTIBLE SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION
OF THE TRUST
Under certain circumstances, as described under the caption
"Description of the Convertible Preferred Securities--Special Event Redemption
or Distribution," Convertible Subordinated Debt Securities may be distributed
to Holders in exchange for the Convertible Preferred Securities and in
liquidation of the Trust. Such a distribution would be treated as a
non-taxable event to each Holder, and each Holder would receive an aggregate
tax basis in the Convertible Subordinated Debt Securities equal to such
Holder's aggregate tax basis in the Convertible Preferred Securities. A
Holder's holding period in the Convertible Subordinated Debt Securities so
received in liquidation of the Trust would include the period during which the
Convertible Preferred Securities were held by such Holder. If, however, the
related Special Event is a Tax Event which results in the Trust being treated
as an association taxable as a corporation, the distribution would likely be a
taxable event to Holders.
Under certain circumstances, as described under the caption
"Description of the Convertible Preferred Securities--Special Event Redemption
or Distribution," upon the occurrence of a Tax Event, Holders may receive cash
in redemption of their Convertible Preferred Securities. Such a redemption
would be a taxable disposition of the redeemed Convertible Preferred
Securities, and a Holder would recognize gain or loss as if it sold such
redeemed Convertible Preferred Securities for cash.
SALE OF CONVERTIBLE PREFERRED SECURITIES
A Holder that sells Convertible Preferred Securities will recognize
gain or loss equal to the difference between its adjusted tax basis in the
Convertible Preferred Securities and the amount realized on the sale. A
Holder's adjusted tax basis in the Convertible Preferred Securities generally
will be its initial purchase price increased by OID (and accrued market
discount, if any) previously includible in such Holder's gross income to the
date of disposition and decreased by payments received on the Convertible
Preferred Securities. Subject to the market discount rules described above,
any such gain or loss generally will be capital gain or loss and generally
will be long-term capital gain or loss if the Convertible Preferred Securities
have been held for more than one year.
The Convertible Preferred Securities may trade at a price that does
not accurately reflect the value of accrued but unpaid interest with respect
to the underlying Convertible Subordinated Debt Securities. A Holder disposing
of its Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
through the date of disposition in income as ordinary income (i.e., OID), and
to add such amount to its adjusted tax basis in its Convertible Preferred
Securities. To the extent the selling price is less than the Holder's adjusted
tax basis (which will include, in the form of OID, all accrued but unpaid
interest), a Holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
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CONVERSION OF CONVERTIBLE PREFERRED SECURITIES TO COMMON STOCK
A Holder will not recognize income, gain or loss upon the conversion,
through the Conversion Agent, of Convertible Subordinated Debt Securities into
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 such Holder's tax basis in such fractional share. Such a
Holder's tax basis in the Common Stock received upon conversion generally
should be equal to such Holders'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 such
Holder's holding period in the Common Stock received upon conversion generally
should begin on the date such Holder acquired the Convertible Preferred
Securities delivered to the Conversion Agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would
treat Holders as having received a constructive distribution from IFG in the
event the conversion ratio of the Convertible Subordinated Debt Securities
were adjusted if (i) as a result of such adjustment, the proportionate
interest (measured by the quantum of Common Stock into or for which the
Convertible Subordinated Debt Securities are convertible or exchangeable) of
the Holders in the assets or earnings and profits of the Company were
increased and (ii) the adjustment was not made pursuant to a bona fide,
reasonable anti-dilution formula. An adjustment in 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, a reduction in the conversion price
for the Holders may result in deemed dividend income to Holders to the extent
of the current or accumulated earnings and profits of the Company. Holders
would be required to include their allocable share of such deemed dividend in
gross income but will not receive any cash related thereto. Corporate Holders
may, however, be eligible for a dividend-received deduction with respect to
such amounts.
PROPOSED TAX LEGISLATION
Please refer to discussion above under the heading "Description of
the Convertible Preferred Securities--Proposed Tax Legislation."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is
any Holder that is not a "U.S. person." A U.S. person means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States, an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source, and any other person included within the definition
of United States person under the Code and the regulations thereunder.
As discussed above, IFG intends to take the position that the
Convertible Preferred Securities will be classified for United States federal
income tax purposes as indebtedness of IFG under current law; no assurance can
be given, however, that such position of IFG will not be challenged by the
Internal Revenue Service. See "--Classification of the Convertible
Subordinated Debt Securities."
As discussed above, the Convertible Preferred Securities will be
treated as evidence of an indirect beneficial ownership interest in the
Convertible Subordinated Debt Securities. See "--Classification of the
Convertible Subordinated Debt Securities." Thus, assuming the Convertible
Subordinated Debt Securities are classified for United States federal income
tax purposes as indebtedness of the Company, distributions of interest on the
Convertible Subordinated Debt Securities by the Trust or any of its paying
agents to the Holders will be treated as payments of interest, and such
payments to a United States Alien Holder will not be subject to United States
withholding tax, provided that (1) the beneficial owner of the Convertible
Preferred Securities ("Beneficial Owner") does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote, (2) the Beneficial Owner is not a controlled
foreign corporation for United States tax
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purposes that is related to the Company through stock ownership, and (3)
either (i) the Beneficial Owner certifies, under penalties of perjury, to the
Trust or its agent that it is not a U.S. person and provides its name and
address or (ii) any securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution"), holding the Convertible
Preferred Securities in such capacity on behalf of the Beneficial Owner,
certifies, under penalties of perjury, to the Trust or its agent that such
statement has been received from the Beneficial Owner by it (or another
financial institution), and furnishes the Trust or its agent with a copy
thereof. The certification may be made on IRS Form W-8, and a United States
Alien Holder must inform the Trust or its agent of any change in the
information on the form within 30 days of the change. The United States
Internal Revenue Service ("IRS") has issued proposed Treasury Regulations
that, if finalized in their current form, would modify the foregoing
discussion.
A United States Alien Holder generally will not be subject to United
States withholding tax or United States federal income tax on any gain
recognized upon the sale or other disposition of Convertible Preferred
Securities or upon receipt of cash in lieu of a fractional share of Common
Stock upon the conversion of Convertible Subordinated Debt Securities into
Common Stock, unless: (i) the gain is effectively connected with a United
States trade or business and, if certain tax treaties apply, is attributable
to a permanent establishment maintained by the United States Alien Holder
within the Unites States; (ii) the United States Alien Holder is an individual
who is present in the United States for 183 days or more in the taxable year
of sale or other disposition and either (a) has a "tax home" (as defined for
United States federal income tax purposes) in the United States or (b) the
gain is attributable to an office or other fixed place of business maintained
by such individual in the United States; (iii) the United States Alien Holder
is subject to tax pursuant to the provisions of the United States federal tax
law applicable to certain United States expatriates; or (iv) the Company is or
becomes a United States real property holding corporation ("USRPHC") within
the meaning of Section 897(c) of the Code and certain other requirements are
met, as described below.
United States federal withholding tax at a rate of 30% (or such lower
rate as may be provided by an applicable tax treaty, if any) may apply to the
following payments received by a United States Alien Holder: (i) a deemed
dividend as a result of an adjustment of the conversion ratio of the
Convertible Subordinated Debt Securities, as described under "--Adjustment of
Conversion Price;" and (ii) certain payments made by the Trust or any of its
paying agents, if the Convertible Subordinated Debt Securities were not
classified for United States federal income tax purposes as indebtedness of
the Company. Under recently proposed Treasury Regulations (generally
effective, if adopted, for payments made after December 31, 1997), a claim for
a reduced rate of withholding based upon an income tax treaty would require
certification on IRS Form W-8 (or an acceptable substitute) of certain
information regarding the beneficial owner of the dividends, including its
non-U.S. status and residence in the relevant treaty country.
The Company believes that it is not a USRPHC and does not expect to
become such a corporation. Under present law, the Company would not be a
USRPHC so long as (a) the fair market value of its United States real property
interests is less than (b) 50% of the sum of the fair market value of its
United States real property interests, its interests in real property located
outside the United States, and its other assets which are used or held for use
in a trade or business. If the Company were treated as or were to become a
USRPHC, a United States Alien Holder that disposes of its Convertible
Preferred Securities, or of its Common Stock (after a conversion of the
Convertible Preferred Securities), generally would not be subject to United
States federal income tax, so long as (i) the Convertible Preferred
Securities, or the Common Stock (after a conversion of the Convertible
Preferred Securities), were, on the date of disposition, "regularly traded on
an established securities market" and (ii) the United States Alien Holder
held, directly or indirectly (including ownership through attribution), 5% or
less of the Convertible Preferred Securities, or the Common Stock (after a
conversion of the Convertible Preferred Securities), at all times during the
five-year period ending on the date of disposition.
P-53
<PAGE>
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the
Convertible Preferred Securities will be reported to Holders on Form 1099,
which forms should be mailed to Holders by January 31 following each calendar
year.
The Trust will be obligated to report annually to Cede, as Holder of
record of the Convertible Preferred Securities, the OID with respect to the
Convertible Preferred Securities that accrued during that year. The Trust
currently intends to report such information on Form 1099 prior to January 31
following each calendar year even though the Trust is not legally required to
report to record Holders until April 15 following each calendar year. The
Initial Purchasers have indicated to the Trust that, to the extent that they
hold Convertible Preferred Securities as nominees for Beneficial Owners, they
currently expect to report to such Beneficial Owners on Forms 1099 by January
31 following each calendar year. Under current law, Holders who hold
Convertible Preferred Securities as nominees for Beneficial Owners will not
have any obligation to report information regarding the Beneficial Owners to
the Trust. The Trust, moreover, will not have any obligation to report to
Beneficial Owners who are not also record Holders. Thus, Beneficial Owners of
Convertible Preferred Securities who hold their Convertible Preferred
Securities through the Initial Purchasers or otherwise in "street name" will
receive Forms 1099 reflecting the income on their Convertible Preferred
Securities from such nominee Holders rather than from the Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Convertible
Preferred Securities may be subject to a "backup" withholding tax of 31% if
the Holder fails to comply with certain identification requirements. Any
withheld amounts will be allowed as a credit against the Holder's United
States federal income tax, provided that required information is furnished to
the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON
A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CONVERTIBLE 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.
P-54
<PAGE>
SELLING HOLDERS
This combined consolidated balance sheets of NPI Property Management
Corporation, Inc. and Subsidiaries, Nation property Investors, Inc. and
Subsidiaries and NPI-CL Management L.P. as of June 30, 1995 and 1994, and the
related combined consolidated statements of operations and cash flows of
National Property Investors, Inc. for the years then ended and the consolidated
statements of operations and cash flows for the year ended June 30, 1993,
incorporated herein by reference have been audited by
Coopers & Lybrand L.L.P., independent auditors, as set forth in their reports
thereon and are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
The financial statements of the NPI Partnerships appearing in Insignia's
Current Report on Form 8-K dated September 1, 1995 and appearing in Insignia's
Current Report on Form 8-K dated December 10, 1996 have been audited by Imowitz
Koenig & Co., LLP as set forth in their reports included therein and
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The Convertible Preferred Securities were originally issued and sold
by the Trust to Lehman Brothers Inc., Dillon, Read & Co. Inc., Goldman, Sachs
& Co. and A. G. Edwards & Sons, Inc. (the "Initial Purchasers"), and
simultaneously sold by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act, to persons reasonably
believed by such Initial Purchasers to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act), in the United States to a
limited number of other institutional "accredited investors" (as defined in
Rule 501(A)(1), (2), (3) or (7) under the Securities Act and outside the
United States to non-U.S. persons in offshore transactions in reliance on
Regulation S under the Securities Act. The Selling Holders may from time to
time offer and sell pursuant to this Prospectus any or all of the Convertible
Preferred Securities and the shares of Common Stock issued upon conversion
thereof. The term Selling Holder includes the holders listed below and the
beneficial owners of the Convertible Preferred Securities and their
transferees, pledgees, donees or other successors.
Lehman Brothers Holding, Inc., an affiliate of Lehman Brothers Inc.,
one of the Initial Purchasers, is a lender and agent under the Revolving
Credit Facility. From time to time, Lehman Brothers Inc. or its affiliates
have provided, and may continue to provide, financial advisory services to the
Company. In addition, Lehman Brothers Inc. has been retained to finance
properties owned by partnerships controlled by Insignia or its affiliates.
First Union National Bank of South Carolina is a lender and agent under the
Revolving Credit Facility. In addition, First Union Capital Markets Corp., a
registered broker dealer and affiliate of First Union National Bank of South
Carolina, was paid a fee of $195,000 for services rendered in connection with
the Original Offering which amount was paid from commissions paid to the
Initial Purchasers by IFG.
The following table sets forth information with respect to the
Selling Holders and the respective number of Convertible Preferred Securities
beneficially owned by each Selling Holder that may be offered pursuant to this
Prospectus. Such information has been obtained from the Selling Holders and
the Property Trustee.
Number of Convertible
Selling Holder Preferred Securities
- -------------- -----------------------
[Information to be provided by Amendment]
Any other holder of Convertible Preferred Securities or
future transferee, pledgee, donee or other successor
of such holder.............................................. ---
---------
Total.................................................. 2,990,000
=========
P-55
<PAGE>
Except as set forth above, none of the Selling Holders has, or within the past
three years has had, any position, office or other material relationship with
the Trust or the Company or any of their predecessors or affiliates. Because
the Selling Holders may, pursuant to this Prospectus, offer all or some
portion of the Convertible Preferred Securities, the Convertible Subordinated
Debt Securities or the Common Stock issuable upon conversion thereof, no
estimate can be given as to the amount of the Convertible Preferred
Securities, the Convertible Subordinated Debt Securities or the Common Stock
issuable upon conversion thereof that will be held by the Selling Holders upon
termination of any such sales. In addition, the Selling Holders identified
above may have sold, transferred or otherwise disposed of all or a portion of
their Convertible Preferred Securities since the date on which they provided
the information regarding their Convertible Preferred Securities, in
transactions exempt from the registration requirements of the Securities Act.
See "Plan of Distribution."
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers
directly by the Selling Holders. Alternatively, the Selling Holders may from
time to time offer the Offered Securities to or through underwriters,
broker/dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Holders or
the purchasers of such securities for whom they may act as agents. The Selling
Holders and any underwriters, broker/dealers or agents that participate in the
distribution of Offered Securities may be deemed to be "underwriters" within
the meaning of the Securities Act and any profit on the sale of such
securities and any discounts, commissions, concessions or other compensation
received by any such underwriter, broker/dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions)
on any national securities exchange or quotation service on which the Offered
Securities may be listed or quoted at the time of sale, in the
over-the-counter market, in transactions otherwise than on such exchanges or
in the over-the-counter market or through the writing of options. At the time
a particular offering of the Offered Securities is made, a Prospectus
Supplement, if required, will be distributed which will set forth the
aggregate amount and type of Offered Securities being offered and the terms of
the offering, including the name or names of any underwriters, broker/dealers
or agents, any discounts, commissions and other terms constituting
compensation from the Selling Holders and any discounts, commissions or
concessions allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the Offered Securities will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Offered Securities may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Securities by
the Selling Holders. The foregoing may affect the marketability of such
securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that the Selling
Holders will pay all underwriting discounts and selling commissions, if any.
The Selling Holders will be indemnified by the Company and the Trust, jointly
P-56
<PAGE>
and severally against certain civil liabilities, including certain liabilities
under the Securities Act, or will be entitled to contribution in connection
therewith. The Company and the Trust will be indemnified by the Selling
Holders severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith.
LEGAL MATTERS
The validity of the Convertible Subordinated Debt Securities, the
Guarantee, the Common Stock issuable upon conversion of the Convertible
Preferred Securities and certain United States Federal income taxation matters
with respect to the Convertible Subordinated Debt Securities and the
Convertible Preferred Securities will be passed upon for the Trust and the
Company by Proskauer Rose Goetz & Mendelsohn LLP, New York, New York, and the
validity of the Convertible Preferred Securities will be passed upon for the
Trust by Richards, Layton & Finger, Wilmington, Delaware. The wife of a
partner of Proskauer Rose Goetz & Mendelsohn LLP is a limited partner in each
of two of Insignia's principal stockholders.
EXPERTS
The consolidated financial statements of Insignia Financial Group,
Inc. appearing in Insignia's Annual Report (Form 10-K) for the year ended
December 31, 1995 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The combined balance sheets of Edward S. Gordon Company, Incorporated
and Edward S. Gordon Company of New Jersey, Inc. as of December 31, 1995 and
1994, and the related combined statements of operations, shareholders' equity
and cash flows for each of the years ended December 31, 1995, 1994 and 1993
incorporated by reference in this Registration Statement have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
given upon the authority of that firm as experts in accounting and auditing.
P-57
<PAGE>
===============================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by Insignia Financial Group, Inc. or Insignia
Financing I or any of their agents. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein is correct as of
any time subsequent to the date hereof or that there has been no change in the
affairs Insignia Financial Group, Inc. or Insignia Financing I since such
date.
TABLE OF CONTENTS
Page
----
Special Note Regarding
Forward-Looking Statements............................................. 4
Available Information.................................................... 5
Incorporation Of Certain Documents
By Reference........................................................... 5
Risk Factors............................................................. 6
The Trust................................................................ 15
The Company.............................................................. 17
Ratio of Earnings To Combined Fixed
Charges And Preferred Stock Dividends.................................. 18
Use of Proceeds.......................................................... 18
Description Of The Convertible
Preferred Securities................................................... 19
Description Of The Guarantee............................................. 35
Description Of The Convertible
Subordinated Debt Securities........................................... 38
Effect Of Obligations Under The
Convertible Subordinated Debt
Securities And The Guarantee........................................... 47
Description Of Capital Stock............................................. 48
Certain United States Federal Income
Tax Consequences....................................................... 49
Selling Holders.......................................................... 55
Plan Of Distribution..................................................... 56
Legal Matters............................................................ 57
Experts.................................................................. 57
===============================================================================
===============================================================================
INSIGNIA FINANCING I
2,990,000
6 1/2% TRUST CONVERTIBLE PREFERRED
SECURITIES
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY,
AND
CONVERTIBLE INTO THE COMMON STOCK OF,
INSIGNIA FINANCIAL GROUP,
INC.
PROSPECTUS
DATED DECEMBER , 1996
===============================================================================
P-58
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
Subject to Completion, dated December 10, 1996
PROSPECTUS
6,668,588 Shares
INSIGNIA FINANCIAL GROUP, INC.
Class A Common Stock
--------------------
All of the 6,668,588 shares of Class A Common Stock, par value $0.01
per share (the "Common Stock"), of Insignia Financial Group, Inc. ("Insignia"
or the "Company") are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The shares offered hereby comprise shares of Common
Stock held by the Selling Stockholders or which may hold acquired by the
Selling Stockholders upon exercise of certain warrants held by them. The
Company will receive the exercise price on any exercise of such warrants, but
otherwise will not receive any proceeds from the sale of shares by the Selling
Stockholders. See "Selling Stockholders."
--------------------
SEE "RISK FACTORS" BEGINNING ON PAGE P-5 FOR A DISCUSSION OF CERTAIN
FACTORS TO BE CONSIDERED BY PROSPECTIVE INVESTORS.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
DECEMBER , 1996
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Risk Factors,"
"The Company," and elsewhere in this Prospectus may constitute forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995
(the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements speak only as of
the date of this Prospectus. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the United
States Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at 500 West Madison, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. They are also available through the
Commission's World Wide Web site (http://www.sec.gov). The Common Stock is
traded on the New York Stock Exchange. Reports and other information
concerning the Company also may be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on
Form S-3 (together with all amendments and exhibits, the "Registration
Statement") filed by Insignia with the Commission under the Securities Act
with respect to the securities offered hereby. This Prospectus omits certain
of the information contained in the Registration Statement, and reference is
hereby made to the Registration Statement for further information with respect
to Insignia and the securities offered hereby. Although summaries of and
certain statements concerning documents are included herein, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. These documents may be inspected
without charge at the office of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies may be obtained at fees and
charges prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1995; (ii) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, June 30 and September 30, 1996;
(iii) the proxy statement for the Company's Annual Meeting of Stockholders
held on May 23, 1996; (iv) the Company's Current Reports on Form 8-K dated,
January 19, 1996, January 29, 1996, July 1, 1996, July 1, 1996, December 9,
1996, December 10, 1996 and December 10, 1996 and Form 8-K/A dated September
13, 1996; (v) September 1, 1995, NPI Property Management Corporation, Inc., the
financial statements of NPI Property Management Corporation, Inc., National
Property Investors, Inc. and NPI CL Management L.P. contained in the Company's
Registration Statement on Form S-3 filed with the Securities and Exchange
Commission on September 1, 1995, as amended by Amendment No. 1 to Form S-3 filed
on September 19, 1995, and the final prospectus filed pursuant to Rule 424(b) on
October 13, 1995; and (vi) the description of the Common Stock contained in
Insignia's Registration Statement on Form 8-A, dated September 19, 1995, on Form
P-2
<PAGE>
8-A/A(1) dated October 3, 1995 and on Form 8-A/A(2) dated June 21, 1996. All
documents subsequently filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the
securities offered hereby shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge
to each person to whom this Prospectus is delivered, upon written request of
such person, a copy of any or all documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such copies
should be delivered to John K. Lines, General Counsel and Secretary, Insignia
Financial Group, Inc., One Insignia Financial Plaza, P.O. Box 1089,
Greenville, South Carolina 29602 or by telephone at (864) 239-1000.
THE COMPANY
GENERAL
Insignia is a fully integrated real estate services organization
specializing in the operation and ownership of securitized real estate assets.
According to Commercial Property News and the National Multi- Housing Council,
Insignia is the largest property manager in the United States, has been the
largest manager of multi-family residential properties since 1992, and is
among the largest managers of commercial properties. Insignia's real estate
services include property management, providing all of the day-to-day services
necessary to operate a property, whether residential or commercial; asset
management, including long-term financial planning, monitoring and
implementing capital improvement plans, and development and execution of
refinancings and dispositions; real estate leasing and brokerage; maintenance
and construction services; marketing and advertising; investor reporting and
accounting; and investment banking, including assistance in workouts and
restructurings, mergers and acquisitions, and
P-3
<PAGE>
debt and equity securitizations. The Company through its subsidiary, Compleat
Resource Group, Inc. ("CRG"), markets consumer goods and services to the
residents and owners of multi-family properties, including properties which
Insignia manages. CRG has formed a strategic alliance with GE Capital - ResCom,
L.P. for the purpose of providing long-distance telephone and cable television
services.
Insignia commenced operations in December 1990 and since then has
grown to provide property and/or asset management services for over 2,500
properties, which include approximately 283,000 residential units, and
approximately 107 million square feet of commercial space, located in over 500
cities in 48 states. Insignia currently provides partnership administration
services to approximately 900 limited partnerships having approximately
400,000 limited partners. Insignia also owns limited partner interests
(ranging from 4% to 54% of the outstanding interests) in 28 real estate
limited partnerships which in the aggregate own 143 properties with
approximately 38,100 residential apartment units and approximately 865,000
square feet of commercial space located in 83 cities in 28 states.
Insignia's principal business strategy is to expand its real estate
services business in three primary ways. First, Insignia seeks to acquire, or
to have an affiliate acquire, controlling positions in entities that own or
control real estate properties, and then, subject to their fiduciary duties,
to have such entities engage Insignia to provide services. Second, Insignia
seeks to enter into special contractual relationships with non-affiliated
third parties that own or control portfolios of real estate properties
pursuant to which Insignia will provide management services. Third, Insignia
seeks to expand its management of properties that are owned by non-affiliated
third parties, such as large insurance companies, banks, government or
quasi-government agencies, and other institutional investors and lenders.
The Company is a Delaware corporation incorporated in July 1990 and
its principal executive offices are located at One Insignia Financial Plaza,
P.O. Box 1089, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000.
RECENT DEVELOPMENTS
ESG ACQUISITION
On June 30, 1996, the Company acquired the business and substantially
all of the assets of Edward S. Gordon Company, Incorporated and its affiliates
("ESG"), the fourth largest commercial real estate property services firm in
the United States. ESG's services include commercial real estate leasing,
including tenant and landlord representation, real estate consulting services
and commercial real estate brokerage, as well as commercial property
management in the New York City metropolitan area. The purchase price was
approximately $73.8 million. At closing, ESG managed approximately 25.5
million square feet of commercial space comprised of 57 properties in New
York, New Jersey and Connecticut. The ESG acquisition provided Insignia with a
substantial presence in the commercial segment of the metropolitan New York
City market, which complements its leading presence in the residential
segment.
PARAGON ACQUISITION
On June 30, 1996, the Company acquired the commercial real estate
services business of Paragon Group, Inc. ("Paragon"). The services of the
acquired business include commercial property management, leasing and tenant
improvement services performed with respect to Paragon properties, as well as
brokerage, fee development and real estate consulting services performed for
various institutional
P-4
<PAGE>
clients. The purchase price paid was $18.5 million. At closing, the acquired
business managed and leased approximately 22 million square feet of commercial
space comprised of 166 properties located in 17 states: 12.5 million square
feet of office properties, 4.9 million square feet of industrial properties,
and 4.5 million square feet of retail properties. This acquisition added
substantially to the Company's presence in the Southern California and Dallas
markets and provided a substantial presence in the Central Florida market.
CONVERTIBLE PREFERRED SECURITIES OFFERING
On November 1 and 6, 1996, Insignia Financing I, a Delaware business
trust (the "Trust"), issued and sold (the "Convertible Preferred Securities
Offering") 2,990,000 of its 6 1/2% Trust Convertible Preferred Securities with
an aggregate liquidation amount of $149.5 million (the "Convertible Preferred
Securities"). All of the outstanding common securities of the Trust, with an
aggregate liquidation value of approximately $4.6 million (the "Common
Securities"), are owned by the Company, which entitles it to designate the
trustees of the Trust. The Convertible Preferred Securities were sold to
Lehman Brothers, Dillon, Read & Co. Inc., Goldman, Sachs & Co. and A.G.
Edwards & Sons, Inc. (the "Initial Purchasers") for an aggregate purchase
price of $149.5 million. The Company paid the Initial Purchasers a commission
of 3% of the aggregate purchase price. The Initial Purchasers resold the
Convertible Preferred Securities (i) to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) in compliance with Rule 144A,
(ii) to other institutional "accredited investors" (as defined in Rule 501(A)
(1), (2), (3) or (7) under the Securities Act) in compliance with Regulation D
under the Securities Act and (iii) outside the United States to persons other
than U.S. persons in reliance on Regulation S under the Securities Act. The
Preferred Securities may be converted at the option of the holder after
December 30, 1996 into shares of Common Stock at the rate of 1.8868 shares of
Common Stock for each Convertible Preferred Security (equivalent to a
conversion price of $26.50 per share of Common Stock), subject to adjustment
in certain circumstances. The Convertible Preferred Securities and the Common
Securities represent undivided beneficial interests in the assets of the
Trust, which consist of approximately $154.1 million aggregate principal
amount of the Company's 6 1/2% Convertible Subordinated Debentures due
September 30, 2016.
RISK FACTORS
Prospective investors should consider carefully, in addition to the
other information contained in, and incorporated by reference into, this
Prospectus, the following factors.
DEPENDENCE ON MANAGEMENT AGREEMENTS
Insignia is substantially dependent on revenues received for services
under property and asset management agreements. On a pro forma basis giving
effect to the consummation of the ESG and Paragon acquisitions, for the nine
months ended September 30, 1996, revenues from property and asset management
agreements constituted approximately 95% of total revenues, and, as of such
date, property and asset management agreements constituted approximately 28%
of Insignia's total assets. There can be no assurance that Insignia will be
able to maintain all such agreements. In particular, a majority of agreements
with non-affiliated parties have terms of one year, and many are cancelable by
the property owner on as little as 30 to 60 days' notice. Approximately 78% of
Insignia's pro forma revenues for the
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nine months ended September 30, 1996, giving effect to such acquisitions as if
effected at the beginning of such period, were derived from fees for services
provided to entities not controlled by Metropolitan Asset Enhancement, L.P.
("MAE") or Insignia. MAE is an entity in which Insignia holds a 19.1% limited
partner interest and the general partner of which is owned by Andrew L.
Farkas. The loss of a substantial number of management agreements could have a
material adverse effect on Insignia.
After giving pro forma effect to the ESG and Paragon acquisitions,
approximately 6% of Insignia's pro forma revenues during the nine months ended
September 30, 1996 were derived from services performed for properties
controlled by a single client, The Balcor Company ("Balcor"). Insignia
purchased the right to manage such properties in 1994 and has contractual
arrangements with Balcor that are intended to reduce the likelihood that such
management agreements will be terminated. As of September 30, 1996, the
Company managed approximately 178 properties, comprising approximately 30,200
units of multifamily residential housing and 11 million square feet of
commercial space, associated with that acquisition (44 of the properties,
comprising approximately 1,600 units of multifamily residential housing and
4.9 million square feet of commercial space, are not controlled by Balcor).
Insignia also manages 6.1 million square feet of commercial space in
properties controlled by Balcor which produced $3.2 million in revenues for
the nine months ended September 30, 1996. The Company believes such properties
will be sold in the near future.
During the first quarter of 1996, Balcor announced its intention to
sell a significant number of its properties. In connection with the potential
sales of such properties, Balcor has entered into agreements with the Company
to provide additional services (the "Advisory Agreements"), including
collection of data, the preparation of materials for potential purchasers, and
assistance with regard to transition plans. The Advisory Agreements have an
initial term of one year and provide for fees to be paid to the Company if and
when a property is sold (the "Advisory Fees"), regardless of whether or not
the purchaser retains the Company to continue to manage the property. If all
sales were consummated for the properties that Balcor is marketing,
approximately $14.4 million in annual revenues would be lost while
approximately $14.7 million in Advisory Fees would be collected. Through
September 30, 1996, 48 properties comprising 14,800 units producing $4.9
million in annual management fees have been sold, with Advisory Fees received
or due aggregating $4.6 million. There are proposed sales of an additional 113
properties comprising 25,800 units and 3.3 million square feet of commercial
space which generate approximately $9.5 million in management revenues which
would produce Advisory Fees of $10.1 million. The completed and proposed sales
are included in the totals mentioned above. Management believes that the
unamortized purchase price relating to properties managed for Balcor properly
reflects the asset value and that no impairment exists.
The number and timing of property sales by Balcor during the term of
the Advisory Agreements cannot be predicted. Therefore, the Company cannot
estimate with any reasonable accuracy the amount of any Advisory Fees it may
receive, the reduction of its management fees or the amount of unamortized
purchase price to be written off. The Company expects that any potential
impact to its EBITDA in 1996 from potential property sales and resulting
terminations of the Company's management agreements would not be material.
However, revenues lost and not replaced through acquisitions of incremental
third party servicing would fully impact 1997 EBITDA.
On a pro forma basis giving effect to the consummation of the ESG and
Paragon acquisitions, approximately 16% of Insignia's revenues for the nine
months ended September 30, 1996 were derived from fees for services provided
to entities controlled by MAE. MAE has agreed to (i) retain Insignia for
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a substantial term as property manager for all properties currently controlled
by MAE or of which MAE acquires control, subject to its fiduciary duties and
certain other exceptions, and (ii) make certain payments to Insignia on any
disposition by MAE of its assets. However, there can be no assurance that such
payments will adequately compensate Insignia for the loss of management
agreements that may result from any properties being sold by MAE.
RISKS ASSOCIATED WITH ACQUISITIONS
Insignia's growth since its inception in 1990 has been based
principally upon the acquisition of portfolios of general partner interests in
real estate limited partnerships and the provision by Insignia of management
and related services to such partnerships. Since its inception, Insignia and
its affiliates have acquired control of, or management rights to, 32
portfolios of properties. The Company's ability to expand successfully through
acquisitions depends on many factors, including the successful identification
and acquisition of businesses and management's ability effectively to
integrate the acquired businesses. The future growth of Insignia will be
dependent in part upon the ability of Insignia or MAE to acquire control of
real estate entities at favorable prices and upon favorable terms and
conditions, and to continue to manage such entities and the properties they
own on a profitable basis. In addition, with respect to a limited portion of
the managed portfolio, lenders may foreclose upon properties which are unable
to service their mortgage indebtedness. In such event, there can be no
assurance that Insignia will retain the contracts to manage such properties.
Acquisitions entail risks that investments will fail to perform in
accordance with expectations, and that business judgments with respect to a
property's revenues, operating expenses, and costs of improvements and the
Company's ability to restructure and benefit from restructurings, will prove
inaccurate. Acquisitions also involve the risks of the diversion of
management's attention, the assimilation of the operations and personnel of
the acquired companies, the amortization of acquired intangible assets and the
potential loss of key employees, each of which could adversely affect the
Company's operating results. In addition, the success of any completed
acquisition will depend in part on the Company's ability effectively to
integrate any acquired businesses into the Company.
There can be no assurance that future acquisition opportunities, if
any, can be consummated on favorable terms, that Insignia will be successful
in acquiring or integrating any businesses or in restructuring the liabilities
of any such entities, or that any such acquisition will enhance the Company's
business.
On a pro forma basis giving effect to the Convertible Preferred
Securities Offering and the use of the net proceeds therefrom, at September
30, 1996 the Company had $161.4 million in funds available under its agreement
with First Union National Bank of South Carolina and an affiliate of Lehman
Brothers Inc. with respect to a revolving credit facility for acquisitions and
its working capital needs, but there can be no assurance that Insignia's
financing resources will be sufficient to finance future acquisitions, if any.
To the extent the Company issues shares of its Common Stock or rights to
acquire shares of its Common Stock in connection with any such acquisitions,
the ownership of existing stockholders will be diluted.
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POTENTIAL CONFLICTS OF INTEREST; DEPENDENCE UPON AND CONTROL BY ANDREW L. FARKAS
Andrew L. Farkas, the Chairman, President and Chief Executive Officer
of Insignia, may be deemed to be in control of each of Insignia, MAE, and
certain significant stockholders of the Company. Insignia has in the past
engaged, and expects in the future to engage, in certain transactions with
each of such affiliated entities. Such transactions could result in actual or
potential conflicts of interest between Insignia, on the one hand, and Mr.
Farkas, MAE, or such stockholders, as the case may be, on the other hand. In
addition, conflicts may arise between Insignia and the partnerships in which
MAE is a general partner, particularly with respect to determinations of
whether to dispose of properties. Insignia has entered into agreements with
MAE and Mr. Farkas to address certain of such potential conflicts. Insignia
also has a policy that all transactions with affiliates shall be on terms no
less favorable to Insignia than could be obtained from an unaffiliated party
and must be approved by either a majority of independent directors or the
Audit Committee of the Board of Directors. There are no other formal
procedures for resolving such conflicts.
As of December 1, 1996, Mr. Farkas beneficially owned approximately
28.4% of the outstanding Common Stock. Mr. Farkas continues to exercise a
controlling influence over the business and affairs of Insignia, including,
but not limited to, having sufficient voting power to substantially control
the election of the entire Board of Directors of Insignia and, in general,
substantially to determine the outcome of any corporate transaction or other
matter submitted to the stockholders for approval, including mergers,
consolidations, or the sale of substantially all of Insignia's assets or
preventing or causing a change in the control of Insignia.
Insignia is dependent upon the continued services of Mr. Farkas. Mr.
Farkas expects to continue to devote substantially all of his time to Insignia
and MAE. The loss of Mr. Farkas's services could have a material adverse effect
upon the business and financial condition of Insignia. Mr. Farkas has entered
into an employment agreement with Insignia, expiring September 1, 1998,
providing for, among other things, an agreement not to compete with Insignia
during his employment and for a period of one year thereafter. Insignia
maintains a $10 million key man life insurance policy on Mr. Farkas.
Insignia is required to make certain payments to Mr. Farkas in the
event of certain changes in control which may constitute excess parachute
payments and would not be deductible by Insignia for income tax purposes. In
addition, Insignia may not be permitted to deduct for income tax purposes that
portion of an executive's compensation which exceeds $1 million in any year,
excluding certain performance based compensation. There can be no assurance
that Insignia will be able to deduct the entire amount earned by Mr.
Farkas in any year.
DEPENDENCE ON PROPERTY PERFORMANCE
Insignia's revenues from property management services are generally
percentages of aggregate rent collections from the properties. Accordingly,
the continued success of Insignia will be dependent in large part upon the
performance of the properties it manages. Such performance in turn will depend
in part upon the ability of Insignia to attract and retain creditworthy
tenants, the magnitude of defaults by tenants under their respective leases,
Insignia's ability to control operating expenses (many of which are subject to
various contingencies), governmental regulations, local rent control or
stabilization ordinances which are or may be put into effect, various
uninsurable risks, financial conditions prevailing
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generally and in the areas in which such properties are located, the nature
and extent of competitive properties in the areas where such properties are
located, and the real estate market generally.
RISKS RELATED TO INVESTMENT IN LIMITED PARTNER INTERESTS
The Company owns significant limited partner interests in 28
different real estate limited partnerships (the "Partnerships") directly or
indirectly through wholly owned subsidiaries and joint ventures. The Company's
limited partner interests, including the Company's interests in two limited
partnerships which are consolidated in Insignia's financial statements,
represent approximately 29% of the book value of the Company's assets at
September 30, 1996. All of such limited partnerships own residential, and in
some cases commercial, properties.
Limited partner interests are subject to varying degrees of risk
incident to the ownership and operation of commercial and residential real
estate, including possible environmental liabilities. See "--Possible
Environmental Liabilities." The success of an investment in a real estate
limited partnership will depend on factors such as general economic
conditions, both on a national basis and in those areas where a limited
partnership's properties are located, the availability and costs of borrowed
funds, real estate tax rates, construction and property management costs,
federal and state income tax laws, operating expenses, energy costs, and
government regulations. Typically, properties held by the limited partnerships
are subject to mortgages and the loss of a property through foreclosure could
adversely affect the value of a limited partnership interest. In addition,
numerous properties compete for tenants with the properties owned by the
limited partnerships in which the Company has limited partner interests.
No active market for limited partner interests in the Partnerships
exists, none is expected to develop and such interests are typically only
transferable at significant discounts to underlying value. The Company may be
limited in its ability to vary its portfolio promptly in response to changes
in economic or other conditions. The price to be paid for additional limited
partner interests may need to be increased, and the percentage of such
interests to be acquired decreased, in response to competing offers for such
interests that may be made.
The Company participates with other entities in ownership of limited
partner interests through partnerships and joint ventures. Partnership and
joint venture investments may, under certain circumstances, involve risks not
otherwise present, including the possibility that such partners or
co-venturers might at any time have business interests or goals inconsistent
with the business interests or goals of the Company and that such partners or
co-venturers may be in a position to take action contrary to the Company's
instructions, requests, policies, or objectives. The Company will, however,
seek to maintain sufficient influence over such partnerships or joint ventures
to permit the Company's business objectives to be achieved. The Company
currently owns limited partner interests in six real estate limited
partnerships in which MAE is the general partner. There can be no assurance
that MAE will not transfer to a third party its general partner interests in
those partnerships or that MAE will not take actions contrary to the Company's
interests with respect to those partnerships. See "--Potential Conflicts of
Interests."
POTENTIAL ALTERNATIVE STRUCTURING OF REAL ESTATE INVESTMENTS
The Company actively is exploring a structure whereby its multifamily
real estate investment and ownership activities would (a) qualify for United
States federal income tax purposes as a Real Estate
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Investment Trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), and (b) obtain equity and debt capital from parties other than
Insignia to expand these activities.
In this regard, Insignia formed Insignia Properties Corporation, a
Delaware corporation and wholly-owned subsidiary, in January 1996 and Insignia
Properties Trust, a Maryland real estate investment trust ("IPT"), in April
1996, with the intention of implementing a series of transactions that would
result in substantially all of the Company's real estate limited partner
interests in real estate limited partnerships being conveyed to an entity that
would intend to qualify as a REIT. As of the date of this Prospectus, the
Company is actively preparing to raise capital through the private placement
of securities in IPT. Such transaction would be structured such that the
Company would continue to own and control a majority interest in IPT. In
addition, the Company has had discussions with the management of Angeles
Mortgage Investment Trust, a publicly-traded California business trust and
REIT ("AMIT"), regarding a potential business combination transaction with IPT
and has acquired the beneficial ownership of approximately 6.0% of the Class A
shares of AMIT. These discussions principally have involved whether general
and limited partner interests owned by Insignia in certain partnerships which
own real property could be transferred, through a merger or otherwise, to AMIT
in exchange for securities in AMIT. The Company, however, has no plans
otherwise to dispose of its interests in such partnerships.
There can be no assurance that the transactions that are currently
contemplated and that are discussed herein in connection with the proposed
REIT transaction will be consummated or, if consummated, that they will be
consummated on the terms described herein.
TENDER OFFER LITIGATION
Since the latter part of 1994, Insignia, through various
subsidiaries, has acquired limited partner interests in real estate limited
partnerships through public tender offers. Insignia believes that there
continue to be opportunities to acquire limited partner interests and it may
acquire such interests through future public tender offers. Tender offers
often result in competing tender offers, as well as litigation initiated by
limited partners in the subject partnerships or by competing bidders. In some
of its tender offers, Insignia has faced competing offers and litigation which
alleged breaches of the federal securities laws and breaches of fiduciary
duties by Insignia. Due to the inherent uncertainty of litigation, the Company
could be subject to adverse judgments in substantial amounts. Litigation costs
and competing offers are factors considered by the Company prior to initiating
tender offers. Insignia has settled all litigation brought against it in
connection with tender offers made by it with the exception of certain
litigation in connection with tender offers for limited partner interests in
limited partnerships controlled by Balcor.
COMPETITION FOR PERSONNEL
The continued success of Insignia's residential and commercial
property management business will depend, in part, on Insignia's ability to
maintain its experienced management team and to attract additional managers as
Insignia's property management business expands. Insignia believes that there
is currently a shortage of qualified property management personnel. To
maintain and attract qualified individuals, Insignia may be required to
increase substantially the compensation to property managers.
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<PAGE>
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal and state environmental laws and regulations, a
current or previous owner or operator of real estate property may be required
to investigate and clean up certain hazardous or toxic substances or petroleum
product releases at the property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
cleanup costs incurred by such parties in connection with contamination. In
addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the
contamination. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral. The owner or operator
of a site may be liable under common law to third parties for damages and
injuries resulting from environmental contamination emanating from the site.
There can be no assurance that Insignia, or any assets owned or controlled by
Insignia, currently are in compliance with all of such laws and regulations,
or that Insignia will not become subject to liabilities that arise in whole or
in part out of any such laws, rules, or regulations. Moreover, there can be no
assurance that any of such liabilities to which Insignia may become subject
will not have a material adverse effect upon the business or financial
condition of Insignia.
Except for (i) environmental audits of approximately 240 properties
conducted in connection with various refinancings and reviews of sellers'
files with respect to environmental matters in connection with certain
acquisitions and (ii) Phase I audits of properties owned by National Property
Investors, Inc. and certain affiliates and related partners in which Insignia
acquired limited partner interests (and certain other investigations in the
case of certain such properties), Insignia has not undertaken any review, on a
property-by-property basis, of the extent of the presence of asbestos or other
environmental risks at any of its owned or controlled properties, the remedial
or other requirements of state and local environmental laws, rules, and
regulations in each of the jurisdictions in which such properties are located,
or the costs of any required remedial work. Although the results of all but a
few of the Company's audits did not require any material remedial work, there
can be no assurance that remedial work may not be required at these or other
properties. Most of the structures situated upon such properties were
constructed prior to 1978, in a period when the use of asbestos in the
construction of structures similar to those situated upon such properties was
common. The presence of asbestos or other environmental risks at any of such
properties could result in the incurrence of significant cleanup costs
therefor by Insignia or partnerships in which it owns interests or the
incurrence of toxic tort claims against Insignia or partnerships in which it
owns interests.
There can be no assurance that Insignia will not experience
difficulty in reselling real estate assets owned by partnerships or
refinancing any indebtedness secured by their respective assets as a result of
the presence of asbestos or other environmental risks on the properties, lose
its management contracts with respect to such properties, or become subject to
costs and litigation relating to the presence of asbestos or other
environmental risks on such properties that will have a material adverse
effect upon the business or financial condition of Insignia or any of its
affiliates.
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POSSIBLE LOSS OF HUD APPROVAL; RESTRUCTURING OF HUD
Approximately 17% of the residential units which Insignia managed at
September 30, 1996 were housing projects financed under various government
programs administered by the United States Department of Housing and Urban
Development ("HUD"). As a result, certain aspects of Insignia's operations are
subject to regulation by HUD. For the nine months ended September 30, 1996,
revenues from the management of HUD regulated or subsidized units constituted
approximately 7% of Insignia's total pro forma revenues giving effect to the
Paragon and ESG acquisitions. If Insignia were to lose its qualification to
manage HUD properties, Insignia could be precluded from obtaining HUD
contracts, could lose the contracts to manage some or all of the HUD
properties then managed, or could be subject to fines or other penalties,
depending on the reason for such loss of qualification. Such results could
have a material adverse effect on Insignia's business or financial condition.
As of the date of this Prospectus, Congress is considering various
proposals to reorganize and restructure certain of HUD's housing assistance
programs. One proposal calls for the elimination of HUD by terminating,
privatizing, and transferring its functions. Another proposal contemplates
that, rather than providing specific project-based subsidies, HUD would give
qualified participants vouchers to use at the property of their choice. Since
the value of such a voucher would be fixed, participants electing to move from
their present apartment complex would have to pay the difference between such
voucher value and the rent at an alternative property. Due to a relative lack
of amenities in most HUD projects, residents (if they could afford the price
differential) might be inclined to move from such projects into complexes with
more amenities. If such residents could not be replaced, the occupancy level
or rental rates of such project could be affected and, accordingly, the
management fee paid to the property manager could be reduced. The current
proposals with regards to the reorganization are not sufficiently specific to
determine their actual impact, if any, on management fee revenue paid to
Insignia by HUD properties. There can be no assurance that the proposed
changes would not have a material adverse impact on Insignia's business or
financial condition.
SELLING STOCKHOLDERS
The following table sets forth certain information as of the date of
this Prospectus with respect to the Selling Stockholders. All of the shares to
be sold by the Selling Stockholders represent shares of Common Stock held by
the Selling Stockholders or which may be acquired by them on exercise of
certain warrants issued to them in accordance with agreements between such
Selling Stockholder and the Company. The Company will receive the exercise
price on any exercise of such warrants, but otherwise will not receive any of
the proceeds from the sale of shares by the Selling Stockholders.
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<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL NUMBER
OWNERSHIP OF SHARES
SELLING STOCKHOLDER PRIOR TO OFFERING OFFERED
------------------- ----------------- -----------
<S> <C> <C>
APTS Partners, L.P. 1,315,000 1,315,000
APTS Partners IV-AB, L.P. 200,000 200,000
APTS Partners II, L.P. 1,509,062 1,509,062
APTS Partners III, L.P. 1,117,732 1,117,732
APTS V, L.L.C. 151,248 151,248
Ultra Cerberus Ltd. 11,200 11,200
Pequod Investments, L.P. 5,600 5,600
Cerberus International Ltd. 57,200 57,200
Cerberus Partners, L.P. 426,000 426,000
Marvin H. Chudnoff 100,000 100,000
John G. Combs/ICG 13,000 13,000
D&S Grant Revocable Trust 23,400 23,400
Douglas Elliman-Gibbon & Ives 68,708 68,708
Farallon Capital Institutional Partners, L.P. 227,150 227,150
Farallon Capital Institutional Partners II, L.P. 168,740 168,740
Tinicum Partners, L.P 25,960 25,960
Farallon Capital Partners, L.P. 227,150 227,150
HFS Incorporated 1,000,000 1,000,000
J&C Westling Revocable Trust 23,400 23,400
J&P O'Donnell Revocable Trust 46,800 46,800
Neil J. Kreisel 200,000 200,000
Joel B. Leff 50,000 50,000
Douglas C. Neff 23,400 23,400
Walter C. Klein 26,300 26,300
Hillside Capital Incorporated 5,700 5,700
James O. Welch, Sr. Trust F/B/O James O. Welch, 66,800 66,800
Jr. U/A Dated 6/29/39
</TABLE>
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<TABLE>
<CAPTION>
BENEFICIAL NUMBER
OWNERSHIP OF SHARES
SELLING STOCKHOLDER PRIOR TO OFFERING OFFERED
------------------- ----------------- -----------
<S> <C> <C>
Vedna Welch Grandchildren Trust U/A Dated 6/27/85 52,200 52,200
Charterhouse Equity Partners, L.P. 674,020 674,020
Northern & Midland Nominees Limited 1,818 1,818
</TABLE>
The sale of the shares by the Selling Stockholders may be effected
from time to time in transactions (which may include block transactions by or
for the account of the Selling Stockholders) on the NYSE or in negotiated
transactions, through the writing of options on such shares, a combination of
such methods of sale, or otherwise. Sales may be made at fixed prices which
may be changed, at market prices prevailing at the time of sale, or at
negotiated prices.
Selling Stockholders may effect such transactions by selling their
shares directly to purchasers, through broker-dealers acting as agents for the
Selling Stockholders, or to broker-dealers who may purchase shares as
principals and thereafter sell the shares from time to time on the NYSE in
negotiated transactions, or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions, or commissions
from the Selling Stockholders and/or the purchasers for whom such
broker-dealers may act as agents or to whom they may sell as principals or
both (which compensation as to a particular broker-dealer may be in excess of
customary commissions).
The Selling Stockholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of such shares might be deemed to be
underwriting discounts and commissions under the Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for Insignia and the Selling Stockholders by Proskauer Rose Goetz
& Mendelsohn LLP, New York, New York. The wife of a partner of Proskauer Rose
Goetz & Mendelsohn LLP is a limited partner in each of two of Insignia's
principal stockholders.
EXPERTS
The consolidated financial statements of Insignia Financial Group,
Inc. appearing in Insignia's Annual Report (Form 10-K) for the year ended
December 31, 1995 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The combined balance sheets of Edward S. Gordon Company, Incorporated
and Edward S. Gordon Company of New Jersey, Inc. as of December 31, 1995 and
1994, and the related combined statements of operations, shareholders' equity
and cash flows for each of the years ended December 31, 1995, 1994 and 1993
incorporated by reference in this Registration Statement have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
given upon the authority of that firm as experts in accounting and auditing.
This combined consolidated balance sheets of NPI Property Management
Corporation, Inc. and Subsidiaries, Nation property Investors, Inc. and
Subsidiaries and NPI-CL Management L.P. as of June 30, 1995 and 1994, and the
related combined consolidated statements of operations and cash flows of
National Property Investors, Inc. for the years then ended and the consolidated
statements of operations and cash flows for the year ended June 30, 1993,
incorporated herein by reference have been audited by
Coopers & Lybrand L.L.P., independent auditors, as set forth in their reports
thereon and are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
The financial statements of the NPI Partnerships appearing in Insignia's
Current Report on Form 8-K dated September 1, 1995 and appearing in Insignia's
Current Report on Form 8-K dated December 10, 1996 have been audited by Imowitz
Koenig & Co., LLP as set forth in their reports included therein and
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
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===============================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by Insignia Financial Group, Inc., any of its
agents or any Selling Stockholder. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein is correct as of
any time subsequent to the date hereof or that there has been no change in the
affairs of Insignia Financial Group, Inc. since such date.
TABLE OF CONTENTS
Page
----
Special Note Regarding
Forward-Looking Statements............................................. 2
Available Information.................................................... 2
Incorporation Of Certain Documents
By Reference........................................................... 2
The Company.............................................................. 3
Risk Factors............................................................. 5
Selling Stockholders..................................................... 12
Legal Matters............................................................ 14
Experts.................................................................. 14
===============================================================================
===============================================================================
INSIGNIA FINANCIAL GROUP,
INC.
6,668,588 SHARES
CLASS A COMMON STOCK
PROSPECTUS
DATED DECEMBER , 1996
===============================================================================
<PAGE>
Part II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of expenses (all but the
registration fee are estimates) of the Company in connection with the issuance
and sale of the Securities being registered hereunder.
Securities and Exchange Commission
registration filing fee................................. $95,405
Blue Sky qualification fees and expenses,
including legal fees..................................... 8,000
Printing expenses ......................................... 300,000
Transfer Agent and Trustee fees and expenses............... 22,000
Legal fees and expenses ................................... 300,000
Accounting fees and expenses............................... 200,000
Miscellaneous ............................................. 4,595
--------
Total......................................................$930,000
========
Item 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
The Company is incorporated in Delaware. Under Section 145 of the
General Corporation Law of the State of Delaware, a Delaware corporation has
the power, under specified circumstances, to indemnify its directors,
officers, employees and agents in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any action, suit
or proceeding. Article Seventh of the Certificate of Incorporation of the
Company provides for indemnification of directors and officers to the fullest
extent permitted by the General Company Law of the State of Delaware, and the
Company has entered into agreements with 20 of its officers and directors with
respect to such indemnification. Reference is made to the Certificate of
Incorporation of the Company and such agreements, incorporated by reference as
Exhibits to the Company's Registration Statement on Form S-1, File No.
33-67486.
Section 102(b)(7) of the General Company Law of the State of Delaware
provides that a certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director provided that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock) of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit. Article Eighth of the
Company's Certificate of Incorporation contains such a provision.
II-1
<PAGE>
The Company currently has a Directors and Officers Liability
Insurance Policy (the "Policy") in place with Federal Insurance Company. The
Policy is a "claims made" policy with a $5,000,000 policy aggregate. However,
the Board of Directors believes that it serves the Company's best interest to
supplement this coverage or any coverage which the Company may maintain in the
future by agreeing by contract to indemnify directors and executive officers
to the fullest extent permitted under applicable law.
The form of Indemnification Agreement to be entered into by the
Company with directors and executive officers of the Company is based on the
provisions of the General Corporation Law of the State of Delaware, which are
contained primarily in Section 145 of the General Corporate Law of the State
of Delaware, but is intended to provide broader indemnification than that
which is specifically provided by Section 145. The form of Indemnification
Agreement provides generally that the Company will to the fullest extent
permitted by applicable law indemnify the director or executive officer
against expenses arising from any event or occurrence, either prior to or
after the time the Indemnification Agreement is executed, related to the fact
that such person is or was serving as a director or executive officer of the
Company (or of another entity at the Company's request). To be indemnified, a
party must meet the relevant standards of conduct, but the form of
Indemnification Agreement provides that such standard is presumed to have been
met unless the Company demonstrates otherwise.
INDEMNIFICATION OF TRUSTEES AND OFFICERS OF THE TRUST
The Declaration of the Trust provides that no Regular Trustee,
affiliate of any Regular Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular
Trustee, or any officer, employee or agent of the Trust or its affiliates
(each an "Indemnified Person") shall be liable, responsible or accountable in
damages or otherwise to the Trust or any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or its
affiliates or any holder of Convertible Preferred Securities for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by the Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions. The
Declaration of the Trust also provides that, to the fullest extent permitted
by law, Insignia shall indemnify and hold harmless the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee from and against any loss, liability
or expense (including reasonable legal fees and expenses) incurred without
gross negligence (in the case of the Property Trustee, negligence) or bad
faith on its part, arising out of or in connection with the acceptance or
administration or the Trust under the Declaration.
The Declaration of the Trust further provides that, to the full
extent permitted by applicable law, Insignia shall indemnify any Indemnified
Person against expenses (including attorneys' fees, judgments, fines and
amounts paid in settlement) reasonably incurred by him in connection with any
action, suit or proceeding to which he was, is or is threatened to be made a
party if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
The Declaration of the Trust further provides that Insignia shall
indemnify, to the full extent permitted by law, any Indemnified Person who was
or is or is threatened to be made a party to any action or suit by or in the
right of the Trust to procure a judgment in its favor by reason of the fact
that he is or was a Indemnified Person against expenses (including attorneys'
fees) reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust and except
that no such indemnification shall be made in respect of any matter as to
which such Indemnified Person shall have been adjudged to be liable to the
Trust (with certain exceptions).
II-2
<PAGE>
The Declaration of the Trust further provides that expenses
(including attorneys' fees) incurred by an Indemnified Person in defending a
civil, criminal, administrative or investigative action, suit or proceeding
shall be advanced by Insignia in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such Indemnified Person to repay such amount if it shall ultimately be
determined that the Indemnified Person is not entitled to be indemnified by
Insignia for the underlying cause of action as authorized by the Declaration.
The directors and officers of Insignia and the Regular Trustees are
covered by insurance policies indemnifying them against certain liabilities,
including certain liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), which might be incurred by them in such
capacities and against which they may not be indemnified by Insignia or the
Trust.
The Selling Holders have been indemnified by Insignia and the Trust,
jointly and severally, against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith. Insignia and the Trust have been indemnified by the
Selling Holders severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith.
Item 16: EXHIBITS
Exhibit No. Description
----------- -----------
4.1 Declaration of Trust of Insignia Financing I, dated as
of October 4, 1996, among Insignia Financial Group,
Inc., as Sponsor, First Union Bank of Delaware, as
Delaware Trustee, and John K. Lines and Ronald Uretta,
as Trustees.
4.2 Amended and Restated Declaration of Trust of Insignia
Financing I, dated as of November 1, 1996, among
Insignia Financial Group, Inc., as Sponsor, First Union
National Bank of South Carolina, as Property Trustee,
First Union Bank of Delaware, as Delaware Trustee and
Andrew L. Farkas, John K. Lines and Ronald Uretta as
Regular Trustees
4.3 Indenture for the 6 1/2% Convertible Subordinated
Debentures, dated as of November 1, 1996, between
Insignia Financial Group, Inc., as Issuer, and First
Union National Bank of South Carolina, as Trustee
4.4 Form of 6 1/2% Convertible Preferred Securities
(included in Exhibit 4.2 above)
4.5 Form of 6 1/2% Convertible Subordinated Debentures
(included in Exhibit 4.3 above)
4.6 Preferred Securities Guarantee Agreement, dated as of
November 1, 1996, between Insignia Financial Group,
Inc., as Guarantor, and First Union National Bank of
South Carolina, as Preferred Guarantee Trustee
4.7 Certificate of Incorporation of Insignia Financial
Group, Inc., as amended (incorporated herein by
reference to Exhibit 3.1 to the Registration Statement
filed on Form S-4 of Insignia Financial Group, Inc.
(then MetSouth Financial Corporation), Registration No.
33-38094, on December 7, 1990 (the "Form S-4"))
II-3
<PAGE>
4.8 By-Laws of Insignia Financial Group, Inc. (incorporated
herein by reference to Exhibit 3.2 to the Form S-4
4.9 Warrant No. 8 issued to Joel Leff as of July 15, 1994.
(Filed as an exhibit to the Annual Report on Form 10-K
of Insignia Financial Group, Inc. for the year ended
December 31, 1994, and incorporated herein by
reference.)
4.10 Warrant No. 32 to purchase 50,000 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
Marvin Chudnoff. (Filed as an exhibit to the Annual
Report on Form 10-K of Insignia Financial Group, Inc.
for the year ended December 31, 1995 (the "1995 10-K"),
and incorporated herein by reference.)
4.11 Warrant issued to APTS Partners, L.P. to purchase
300,000 shares of Insignia Financial Group, Inc. Class A
Common Stock. (Filed as an exhibit to the 1995 10- K and
incorporated herein by reference.)
4.12 Warrant issued to APTS Partners, L.P. to purchase
137,500 shares of Insignia Financial Group, Inc. Class A
Common Stock. (Filed as an exhibit to the 1995 10- K and
incorporated herein by reference.)
4.13 Warrant No. 12 to purchase 46,800 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to the
J & P O'Donnell Revocable Trust. (Filed as an exhibit to
the 1995 10-K and incorporated herein by reference.)
4.14 Warrant No. 13 to purchase 23,400 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to The
D & S Grant Revocable Trust. (Filed as an exhibit to the
1995 10-K and incorporated herein by reference.)
4.15 Warrant No. 14 to purchase 23,400 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to The
J & C Westling Revocable Trust. (Filed as an exhibit to
the 1995 10-K and incorporated herein by reference.)
II-4
<PAGE>
4.16 Warrant No. 15 to purchase 23,400 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
Douglas C. Neff. (Filed as an exhibit to the 1995 10-K
and incorporated herein by reference.)
4.17 Warrant No. 16 to purchase 13,000 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
John G. Combs. (Filed as an exhibit to the 1995 10-K and
incorporated herein by reference.)
4.18 Warrant No. 34 to purchase 38,958 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
APTS V, L.L.C. (Filed as an exhibit to the 1995 10-K and
incorporated herein by reference.)
4.19 Warrant to Neil J. Kreisel to purchase shares of
Insignia Financial Group, Inc. Class A Common Stock
(included as an exhibit to the Employment Agreement,
dated as of September 5, 1995, by and between Insignia
Financial Group, Inc., Kreisel Company, Inc. and Neil J.
Kreisel (incorporated herein by reference to Exhibit No.
2.3 to the Current Report on Form 8-K of Insignia
Financial Group, Inc. dated September 5, 1995.))
5.1 Opinion of Richards, Layton & Finger as to the validity
of the Convertible Preferred Securities being registered
hereby
5.2 Opinion of Proskauer Rose Goetz & Mendelsohn LLP as to
the validity of the Convertible Subordinated Debt
Securities, Preferred Securities Guarantee and Common
Stock being registered hereby
8.1 Opinion of Proskauer Rose Goetz & Mendelsohn LLP
relating to certain tax matters (included in Exhibit 5.2
above)
10.1 Registration Rights Agreement, dated November 1, 1996,
among Insignia Financing I, and Insignia Financial
Group, Inc. and Lehman Brothers Inc., Dillon, Read & Co.
Inc., Goldman, Sachs & Co., and A.G. Edwards & Sons,
Inc., as Initial Purchasers
12 Statement re: Computation of Ratios
23.1(a) Consent of Ernst & Young LLP
23.1(b) Consent of Coopers & Lybrand L.L.P.
23.1(c) Consent of Coopers & Lybrand L.L.P.
23.1(d) Consent of Imowitz Koenig & Co., LLP
23.2 Consent of Richards, Layton & Finger (included in its
opinion filed as Exhibit 5.1)
23.3 Consent of Proskauer Rose Goetz & Mendelsohn LLP
(included in its opinion filed as Exhibit 5.2)
24.1 Powers of Attorney (Insignia Financial Group, Inc.)
24.2 Powers of Attorney (Insignia Financing I)
II-5
<PAGE>
25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank of South Carolina, as Trustee under the
6 1/2% Convertible Subordinated Debentures Indenture
25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank of South Carolina, as Property Trustee
under the Amended and Restated Declaration of Trust
25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank of South Carolina, as Preferred Guarantee
Trustee under the Preferred Securities Guarantee
Item 17: UNDERTAKINGS
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) Each of the undersigned registrants hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant'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 therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
(c) Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant 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, the
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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(d) To the extent either registrant intends to rely on section 305(b)(2) of
the Trust Indenture Act of 1939 for determining the eligibility of the trustee
under indentures for securities to be used, offered or sold on a delayed basis
by or on behalf of such registrant, each of the undersigned registrants hereby
undertakes to file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of section 310 of such
Act in accordance with the rules and regulations prescribed by the Commission
under section 305(b)(2) of such Act.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for 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 Greenville, State of South Carolina,
on December 10, 1996.
INSIGNIA FINANCING I
By: /s/ Andrew L. Farkas*
--------------------------
Andrew L. Farkas
Regular Trustee
By: /s/ John K. Lines
--------------------------
John K. Lines
Regular Trustee
By: /s/ Ronald Uretta*
--------------------------
Ronald Uretta
Regular Trustee
*By: /s/ John K. Lines
------------------------
Attorney-in-Fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for 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 Greenville, State of South Carolina,
on December 10, 1996.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Andrew L. Farkas*
-------------------------
Name: Andrew L. Farkas
Title: Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated, on December 10, 1996.
Signature Title
--------- -----
/s/ Andrew L. Farkas* Chairman of the Board of Directors, President and
- ----------------------- Chief Executive Officer (Principal Executive Officer)
Andrew L. Farkas
/s/ James A. Aston* Office of the Chairman and Chief Financial Officer
- ----------------------- (Principal Financial Officer)
James A. Aston
/s/ Ronald Uretta* Chief Operating Officer and Treasurer (Principal
- ----------------------- Accounting Officer)
Ronald Uretta
/s/ Robert J. Denison*
- ----------------------- Director
Robert J. Denison
/s/ Robin L. Farkas*
- ----------------------- Director
Robin L. Farkas
/s/ Merril M. Halpern*
- ----------------------- Director
Merril M. Halpern
/s/ John F. Jacques*
- ----------------------- Director
John F. Jacques
/s/ Robert G. Koen*
- ----------------------- Director
Robert G. Koen
/s/ Michael I. Lipstein*
- ----------------------- Director
Michael I. Lipstein
/s/ Buck Mickel*
- ----------------------- Director
Buck Mickel
*By /s/ John K. Lines
-------------------
Attorney-in-Fact
II-9
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
4.1 Declaration of Trust of Insignia Financing I, dated as
of October 4, 1996, among Insignia Financial Group,
Inc., as Sponsor, First Union Bank of Delaware, as
Delaware Trustee, and John K. Lines and Ronald Uretta,
as Trustees.
4.2 Amended and Restated Declaration of Trust of Insignia
Financing I, dated as of November 1, 1996, among
Insignia Financial Group, Inc., as Sponsor, First Union
National Bank of South Carolina, as Property Trustee,
First Union Bank of Delaware, as Delaware Trustee and
Andrew L. Farkas, John K. Lines and Ronald Uretta as
Regular Trustees
4.3 Indenture for the 6 1/2% Convertible Subordinated
Debentures, dated as of November 1, 1996, between
Insignia Financial Group, Inc., as Issuer, and First
Union National Bank of South Carolina, as Trustee
4.4 Form of 6 1/2% Convertible Preferred Securities
(included in Exhibit 4.2 above)
4.5 Form of 6 1/2% Convertible Subordinated Debentures
(included in Exhibit 4.3 above)
4.6 Preferred Securities Guarantee Agreement, dated as of
November 1, 1996, between Insignia Financial Group,
Inc., as Guarantor, and First Union National Bank of
South Carolina, as Preferred Guarantee Trustee
4.7 Certificate of Incorporation of Insignia Financial
Group, Inc., as amended (incorporated herein by
reference to Exhibit 3.1 to the Registration Statement
filed on Form S-4 of Insignia Financial Group, Inc.
(then MetSouth Financial Corporation), Registration No.
33-38094, on December 7, 1990 (the "Form S-4"))
4.8 By-Laws of Insignia Financial Group, Inc. (incorporated
herein by reference to Exhibit 3.2 to the Form S-4
4.9 Warrant No. 8 issued to Joel Leff as of July 15, 1994.
(Filed as an exhibit to the Annual Report on Form 10-K
of Insignia Financial Group, Inc. for the year ended
December 31, 1994, and incorporated herein by
reference.)
4.10 Warrant No. 32 to purchase 50,000 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
Marvin Chudnoff. (Filed as an exhibit to the Annual
Report on Form 10-K of Insignia Financial Group, Inc.
for the year ended December 31, 1995 (the "1995 10-K"),
and incorporated herein by reference.)
4.11 Warrant issued to APTS Partners, L.P. to purchase
300,000 shares of Insignia Financial Group, Inc. Class A
Common Stock. (Filed as an exhibit to the 1995 10- K and
incorporated herein by reference.)
4.12 Warrant issued to APTS Partners, L.P. to purchase
137,500 shares of Insignia Financial Group, Inc. Class A
Common Stock. (Filed as an exhibit to the 1995 10- K and
incorporated herein by reference.)
4.13 Warrant No. 12 to purchase 46,800 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to the
J & P O'Donnell Revocable Trust. (Filed as an exhibit to
the 1995 10-K and incorporated herein by reference.)
4.14 Warrant No. 13 to purchase 23,400 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to The
D & S Grant Revocable Trust. (Filed as an exhibit to the
1995 10-K and incorporated herein by reference.)
4.15 Warrant No. 14 to purchase 23,400 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to The
J & C Westling Revocable Trust. (Filed as an exhibit to
the 1995 10-K and incorporated herein by reference.)
<PAGE>
4.16 Warrant No. 15 to purchase 23,400 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
Douglas C. Neff. (Filed as an exhibit to the 1995 10-K
and incorporated herein by reference.)
4.17 Warrant No. 16 to purchase 13,000 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
John G. Combs. (Filed as an exhibit to the 1995 10-K and
incorporated herein by reference.)
4.18 Warrant No. 34 to purchase 38,958 shares of Insignia
Financial Group, Inc. Class A Common Stock issued to
APTS V, L.L.C. (Filed as an exhibit to the 1995 10-K and
incorporated herein by reference.)
4.19 Warrant to Neil J. Kreisel to purchase shares of
Insignia Financial Group, Inc. Class A Common Stock
(included as an exhibit to the Employment Agreement,
dated as of September 5, 1995, by and between Insignia
Financial Group, Inc., Kreisel Company, Inc. and Neil J.
Kreisel (incorporated herein by reference to Exhibit No.
2.3 to the Current Report on Form 8-K of Insignia
Financial Group, Inc. dated September 5, 1995.))
5.1 Opinion of Richards, Layton & Finger as to the validity
of the Convertible Preferred Securities being registered
hereby
5.2 Opinion of Proskauer Rose Goetz & Mendelsohn LLP as to
the validity of the Convertible Subordinated Debt
Securities, Preferred Securities Guarantee and Common
Stock being registered hereby
8.1 Opinion of Proskauer Rose Goetz & Mendelsohn LLP
relating to certain tax matters (included in Exhibit 5.2
above)
10.1 Registration Rights Agreement, dated November 1, 1996,
among Insignia Financing I, and Insignia Financial
Group, Inc. and Lehman Brothers Inc., Dillon, Read & Co.
Inc., Goldman, Sachs & Co., and A.G. Edwards & Sons,
Inc., as Initial Purchasers
12 Statement re: Computation of Ratios
23.1(a) Consent of Ernst & Young LLP
23.1(b) Consent of Coopers & Lybrand L.L.P.
23.1(c) Consent of Coopers & Lybrand L.L.P.
23.1(d) Consent of Imowitz Koenig & Co., LLP
23.2 Consent of Richards, Layton & Finger (included in its
opinion filed as Exhibit 5.1)
23.3 Consent of Proskauer Rose Goetz & Mendelsohn LLP
(included in its opinion filed as Exhibit 5.2)
24.1 Powers of Attorney (Insignia Financial Group, Inc.)
24.2 Powers of Attorney (Insignia Financing I)
<PAGE>
25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank of South Carolina, as Trustee under the
6 1/2% Convertible Subordinated Debentures Indenture
25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank of South Carolina, as Property Trustee
under the Amended and Restated Declaration of Trust
25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank of South Carolina, as Preferred Guarantee
Trustee under the Preferred Securities Guarantee
<PAGE>
DECLARATION OF TRUST
OF
INSIGNIA FINANCING I
OCTOBER 4,1996
DECLARATION OF TRUST ("Declaration") dated and effective as of
October 4, 1996, by the undersigned trustees (together with all other Persons
from time to time duly appointed and serving as trustees in accordance with
the provisions of this Declaration, the "Trustees"), the Parent as trust
sponsor (the "Sponsor"), and by the holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor desire to establish a trust
(the "Trust") pursuant to the Delaware Business Trust Act for the sole purpose
of issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Convertible Subordinated Debt Securities issued by the Sponsor; and
NOW, THEREFORE, it being the intention of the parties hereto that the
Trust constitute a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
DEFINITIONS
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Article
I.
(b) A term defined anywhere in this Declaration has the same meaning
throughout.
(c) All references to "the Declaration" or "this Declaration" are to
this Declaration of Trust as modified, supplemented or amended from time to
time.
(d) All references in this Declaration to Articles and Sections and
Exhibits are to Articles and Sections of and Exhibits to this Declaration
unless otherwise specified.
(e) A reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
<PAGE>
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss.3801 et seq., as it may be amended from time to time.
"Certificate" means a Common Security Certificate or a Preferred
Security Certificate.
"Commission" means the Securities and Exchange Commission.
"Common Security" means a security denominated as a common security
and representing an undivided beneficial interest in the assets of the Trust
with such terms as may be set out in any amendment to this Declaration.
"Convertible Subordinated Debt Securities" means the series of
convertible subordinated debt securities to be issued by the Sponsor.
"Covered Person" means any employee or agent of the Trust or its
Affiliates.
"Delaware Trustee" has the meaning set forth in Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"Holder" means the Person in whose name a Certificate representing a
Security is registered.
"Indemnified Person" means any Trustee, including in his, her or its
individual capacity, any Affiliate of any Trustee or any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Trustee or any employee or agent of the Trust or its Affiliates.
"Parent" means Insignia Financial Group, Inc., a Delaware
corporation, or any successor entity in a merger.
"Person" means a legal person, including any individual corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Preferred Security" means a security denominated as a preferred
security and representing an undivided beneficial interest in the assets of
the Trust with such terms as may be set out in any amendment to this
Declaration.
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<PAGE>
"Regular Trustee" means any Trustee other than the Delaware Trustee.
"Securities" means the Common Securities and the Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Sponsor" means the Parent in its capacity as sponsor of the Trust.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees
shall refer to such Person or Persons solely in their capacity as trustees
hereunder.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name.
The Trust created by this Declaration is named Insignia Financing I.
The Trust's activities may be conducted under the name of the Trust or any
other name deemed advisable by the Regular Trustees.
SECTION 2.2 Office.
The address of the principal office of the Trust is c/o One Insignia
Financial Plaza, P.O. Box 1089, Greenville, South Carolina 29602. At any time,
the Regular Trustees may designate another principal office.
SECTION 2.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to issue
and sell Securities and use the proceeds from such sale to acquire the
Convertible Subordinated Debt Securities, and (b) except as otherwise limited
herein, to engage in only those other activities necessary or incidental
thereto. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments or, other than as permitted herein, pledge any of its
assets.
3
<PAGE>
SECTION 2.4 Authority.
Subject to the limitations provided in this Declaration, the Regular
Trustees shall have exclusive and complete authority to carry out the purposes
of the Trust. An action taken by the Regular Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust. In dealing
with the Regular Trustees acting on behalf of the Trust, no person shall be
required to inquire into the authority of the Regular Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively on the
power and authority of the Regular Trustees as set forth in this Declaration
SECTION 2.5 Title to Property of the Trust.
Legal title to all assets of the Trust shall be vested in the Trust.
SECTION 2.6 Powers of the Trustees.
The Regular Trustees shall have the exclusive power and authority to
cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided,
however, that the Trust may issue no more than one series
of Preferred Securities and no more than one series of
Common Securities, and, provided further, there shall be no
interests in the Trust other than the Securities;
(b) to employ or otherwise engage employees and agents (who may
be designated as officers with titles) and managers,
contractors, advisors, and consultants and provide for
reasonable compensation for such services;
(c) to incur expenses which are necessary or incidental to carry
out any of the purposes of this Declaration; and
(d) to execute all documents or instruments, perform all duties
and powers, and do all things for and on behalf of the
Trust in all matters necessary or incidental to the
foregoing.
SECTION 2.7 Filing of Certificate of Trust.
On or after the date of execution of this Declaration, the Trustees
shall cause the filing of the Certificate of Trust for the Trust in the form
attached hereto as Exhibit A with the Secretary of State of the State of
Delaware.
4
<PAGE>
SECTION 2.8 Duration of Trust.
The Trust, absent termination pursuant to the provisions of Section
5.2, shall have existence until September 30, 2051.
ARTICLE III
TRUSTEES
SECTION 3.1 Trustees.
The number of Trustees shall initially be three (3), and thereafter
the number of Trustees shall be such number as shall be fixed from time to
time by a written instrument signed by the Sponsor. The Sponsor is entitled to
appoint or remove without cause any Trustee at any time; provided, however,
that the number of Trustees shall in no event be less than three (3); and
provided further that one Trustee, in the case of a natural person, shall be a
person who is a resident of the State of Delaware or which, if not a natural
person, has its principal place of business in the State of Delaware (the
"Delaware Trustee"). The Delaware Trustee may, at any time resign as Trustee
hereunder upon 30 days' prior written notice of such resignation to the
Sponsor. Upon its receipt of such notice of resignation, the Sponsor promptly
shall appoint a successor Delaware Trustee (each, a "Successor Trustee") and
such resignation shall take effect when the Successor Trustee accepts in
writing the Successor Trustee's appointment as successor Delaware Trustee. If
within such 30-day period, the Sponsor has failed to take appropriate steps to
appoint a Successor Trustee, the Delaware Trustee may, but shall not be
required to, petition any court of competent jurisdiction for the appointment
of a Successor Trustee. Such court may thereupon appoint a Successor Trustee
after such notice to the Sponsor as such court may deem proper and prescribe.
The resignation of the Delaware Trustee shall not be deemed to constitute bad
faith for the purposes of Section 4.2(b) hereof. Except as expressly set forth
in this Declaration, any power of the Regular Trustees may be exercised by, or
with the consent of, a majority of the Regular Trustees.
The initial Regular Trustees shall be Ronald Uretta and John K. Lines,
both individuals.
The initial Delaware Trustee shall be First Union Bank of Delaware, a
Delaware banking corporation.
SECTION 3.2 Delaware Trustee.
Notwithstanding any other provision of this Declaration, the Delaware
Trustee shall not be entitled to exercise any of the powers, nor shall the
Delaware Trustee have any of the duties and responsibilities of the Regular
Trustees described in this Declaration. The Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of
ss.3807 of the Business Trust Act.
5
<PAGE>
SECTION 3.3 Execution of Documents.
(a) The Regular Trustees are authorized to execute on behalf of the
Trust any documents which the Regular Trustees have the power and authority to
cause the Trust to execute pursuant to Section 2.6; and
(b) A Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purposes of signing any documents which the Regular Trustees
have power and authority to cause the Trust to execute pursuant to Section
2.6.
ARTICLE IV
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 4.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions; and
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets
from which distributions to Holders of Securities might properly be paid.
SECTION 4.2 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating to the Trust
or to any other Covered Person, such Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties
and liabilities of an Indemnified Person otherwise existing at law or in
equity, are agreed by the parties hereto to replace such other duties and
liabilities of such Indemnified Person.
6
<PAGE>
(b) Unless otherwise expressly provided herein, whenever a conflict
of interest exists or arises between Covered Persons, or this Declaration or
any other agreement contemplated herein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and reasonable
to the Trust or any Holder of Securities, then the Indemnified Person shall
resolve such conflict of interest, take such action or provide such terms,
considering in each case: (i) the relative interest of each party (including
its own interest) in such conflict, agreement, transaction or situation; (ii)
the benefits and burdens relating to such interests; (iii) any customary or
accepted industry practices; and (iv) any applicable generally accepted
accounting practices or principles. In the absence of bad faith by the
Indemnified Person, the resolution, action or term so made, taken or provided
by the Indemnified Person shall not constitute a breach of this Declaration or
any other agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise; and
(c) Whenever in this Declaration an Indemnified Person is permitted
or required to make a decision in its "discretion" or under a grant or similar
authority, the Indemnified Person shall be entitled to consider such interests
and factors as it desires, including its own interests, and shall have no duty
or obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person. However, if the Indemnified Person is
permitted or required to make a decision in its "good faith" or under another
express standard, the Indemnified Person shall act under such express standard
and shall not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 4.3 Indemnification.
(a) To the fullest extent permitted by applicable law, the Sponsor
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Declaration or by law, except that no Indemnified Person shall
be entitled to be indemnified in respect of any loss, damage or claim incurred
by such Indemnified Person by reason of his, her or its gross negligence or
willful misconduct with respect to such acts or omissions; and
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Sponsor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Sponsor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 4.3(a).
SECTION 4.4 Outsider Businesses.
Any Covered Person and the Delaware Trustee may engage in or possess
an interest in other business ventures of any nature or description,
independently or with others,
7
<PAGE>
similar or dissimilar to the affairs of the Trust, and the Trust and the
Holders of Securities shall have no rights by virtue of this Declaration in
and to such independent ventures or the income or profits derived therefrom
and the pursuit of any such venture, even if competitive with the affairs of
the Trust, shall not be deemed wrongful or improper. No Covered Person or the
Delaware Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character
that, if presented to the Trust, could be taken by the Trust, and any Covered
Person and the Delaware Trustee shall have the right to take for its own
account (individually or as a partner or fiduciary) or to recommend to others
any such particular investment or other opportunity. Any Covered Person may
engage or be interested in any financial or other transaction with the Sponsor
or any Affiliate of the Sponsor, or may act on any committee or body of
holders of, securities or other obligations of the Sponsor or its Affiliates.
ARTICLE V
AMENDMENTS, TERMINATION, MISCELLANEOUS
SECTION 5.1 Amendments.
At any time before the issuance of any Securities, this Declaration
may be amended by, and only by, a written instrument executed by all of the
Regular Trustees and the Sponsor.
SECTION 5.2 Termination of Trust.
(a) The Trust shall terminate and be of no further force or effect:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor or the revocation
of the Sponsor's charter or of the Trust's certificate of
trust;
(iii) upon the entry of a decree of judicial dissolution of the
Sponsor or the Trust; and
(iv) before the issuance of any Securities, with the consent of
all of the Regular Trustees and the Sponsor; and
(v) upon the expiration of its term set forth in Section 2.8
hereof; and
(b) As soon as is practicable after the completion of the winding up
of the Trust following the occurrence of an event referred to in Section
5.2(a), the Trustees shall file a certificate of cancellation with the
Secretary of State of the State of Delaware.
8
<PAGE>
SECTION 5.3 Governing Law.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 5.4 Headings.
Headings contained in this Declaration are inserted for convenience
of reference only and do not affect the interpretation of this Declaration or
any provision hereof.
SECTION 5.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.
SECTION 5.6 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder
of this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 5.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
John K. Lines, as Trustee
/s/ John K. Lines
- ---------------------------------------
Ronald Uretta, as Trustee
/s/ Ronald Uretta
- ---------------------------------------
First Union Bank of Delaware,
a Delaware banking corporation,
as Trustee
By: /s/ Melissa Matthews
------------------------------------
Name: Melissa Matthews
----------------------------------
Title: Vice President
---------------------------------
Insignia Financial Group, Inc., as Sponsor
By: /s/ Ronald Uretta
------------------------------------
Ronald Uretta
Chief Operating Officer
10
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST
The undersigned, the trustees of Insignia Financing I, desiring to
form a business trust pursuant to the Delaware Business Trust Act, 12 Del. C.
ss.3810, hereby certify as follows:
(a) The name of the business trust being formed hereby (the "Trust")
is Insignia Financing I.
(b) The name and business address of the trustee of the Trust which
has its principal place of business in the State of Delaware is
as follows:
First Union Bank of Delaware
Corporate Trust Administration
One Rodney Square
920 King Street, 1st Floor
Wilmington, DE 19801
Dated: October 4, 1996
John K. Lines, as Trustee
- ----------------------------------
Ronald Uretta, as Trustee
- ----------------------------------
First Union Bank of Delaware,
a Delaware banking corporation,
as Trustee
By:
-------------------------------
Name: Melissa Matthews
Title: Vice President
A-1
<PAGE>
---------------------------------
AMENDED AND RESTATED DECLARATION
OF TRUST
INSIGNIA FINANCING I
DATED AS OF NOVEMBER 1, 1996
---------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I INTERPRETATION AND DEFINITIONS.............................................................2
SECTION 1.1 Definitions........................................................................2
ARTICLE II TRUST INDENTURE ACT.......................................................................8
SECTION 2.1 Trust Indenture Act; Application...................................................8
SECTION 2.2 Lists of Holders of Securities.....................................................8
SECTION 2.3 Reports by the Property Trustee....................................................9
SECTION 2.4 Periodic Reports to Property Trustee...............................................9
SECTION 2.5 Evidence of Compliance with Conditions Precedent...................................9
SECTION 2.6 Events of Default; Waiver..........................................................9
SECTION 2.7 Event of Default; Notice...........................................................11
ARTICLE III ORGANIZATION.............................................................................11
SECTION 3.1 Name...............................................................................11
SECTION 3.2 Office.............................................................................11
SECTION 3.3 Purpose............................................................................12
SECTION 3.4 Authority..........................................................................12
SECTION 3.5 Title to Property of the Trust.....................................................12
SECTION 3.6 Powers and Duties of the Regular Trustees..........................................12
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees...............................15
SECTION 3.8 Powers and Duties of the Property Trustee..........................................16
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee........................18
SECTION 3.10 Certain Rights of Property Trustee................................................19
SECTION 3.11 Delaware Trustee..................................................................21
SECTION 3.12 Execution of Documents............................................................21
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities............................21
SECTION 3.14 Duration of Trust.................................................................21
SECTION 3.15 Mergers...........................................................................21
ARTICLE IV SPONSOR...................................................................................23
SECTION 4.1 Sponsor's Purchase of Common Securities............................................23
SECTION 4.2 Responsibilities of the Sponsor....................................................23
SECTION 4.3 Expenses...........................................................................24
ARTICLE V TRUSTEES...................................................................................25
SECTION 5.1 Number of Trustees.................................................................25
SECTION 5.2 Delaware Trustee...................................................................25
SECTION 5.3 Property Trustee; Eligibility......................................................26
SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware
Trustee Generally..................................................................26
SECTION 5.5 Regular Trustees...................................................................26
i
<PAGE>
SECTION 5.6 Appointment, Removal and Resignation of Trustees...................................27
SECTION 5.7 Vacancies among Trustees...........................................................28
SECTION 5.8 Effect of Vacancies................................................................28
SECTION 5.9 Meetings...........................................................................28
SECTION 5.10 Delegation of Power...............................................................29
SECTION 5.11 Merger, Conversion, Consolidation or Succession to
Business..........................................................................29
ARTICLE VI DISTRIBUTIONS.............................................................................29
SECTION 6.1 Distributions......................................................................29
ARTICLE VII ISSUANCE OF SECURITIES...................................................................30
SECTION 7.1 General Provisions Regarding Securities............................................30
SECTION 7.2 Execution and Authentication.......................................................30
SECTION 7.3 Form and Dating....................................................................31
SECTION 7.4 Registrar; Paying Agent; Conversion Agent..........................................33
SECTION 7.5 Paying Agent to Hold Money in Trust...............................................33
SECTION 7.6 Replacement Securities............................................................33
SECTION 7.7 Outstanding Convertible Preferred Securities......................................34
SECTION 7.8 Convertible Preferred Securities in Treasury......................................34
SECTION 7.9 Temporary Securities..............................................................34
SECTION 7.10 Cancellation......................................................................34
ARTICLE VIII TERMINATION OF TRUST....................................................................35
SECTION 8.1 Termination of Trust...............................................................35
ARTICLE IX TRANSFER OF INTERESTS.....................................................................36
SECTION 9.1 General............................................................................36
SECTION 9.2 Transfer Procedures and Restrictions...............................................36
SECTION 9.3 Deemed Security Holders............................................................44
SECTION 9.4 Appointment of Successor Depositary................................................44
SECTION 9.5 Registration Rights................................................................44
ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
TRUSTEES OR OTHERS.............................................................................45
SECTION 10.1 Liability.........................................................................45
SECTION 10.2 Exculpation.......................................................................46
SECTION 10.3 Fiduciary Duty....................................................................46
SECTION 10.4 Indemnification...................................................................47
SECTION 10.5 Outside Businesses................................................................49
ARTICLE XI ACCOUNTING................................................................................49
SECTION 11.1 Fiscal Year.......................................................................49
SECTION 11.2 Certain Accounting Matters........................................................50
SECTION 11.3 Banking...........................................................................50
SECTION 11.4 Withholding.......................................................................50
ARTICLE XII AMENDMENTS AND MEETINGS..................................................................51
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<PAGE>
SECTION 12.1 Amendments........................................................................51
SECTION 12.2 Meetings of the Holders of Securities; Action by Written
Consent...........................................................................52
ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND
DELAWARE TRUSTEE...............................................................................53
SECTION 13.1 Representations and Warranties of Property Trustee................................53
SECTION 13.2 Representations and Warranties of Delaware Trustee................................54
ARTICLE XIV MISCELLANEOUS............................................................................55
SECTION 14.1 Notices...........................................................................55
SECTION 14.2 Governing Law.....................................................................56
SECTION 14.3 Intention of the Parties..........................................................56
SECTION 14.4 Headings..........................................................................56
SECTION 14.5 Successors and Assigns............................................................56
SECTION 14.6 Partial Enforceability............................................................56
SECTION 14.7 Counterparts......................................................................56
ANNEX I TERMS OF SECURITIES............................................................ I-1
EXHIBIT A-1 FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE.............................A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE............................................A2-1
EXHIBIT B SPECIMEN OF DEBENTURE.......................................................... B-1
EXHIBIT C PURCHASE AGREEMENT............................................................. C-1
EXHIBIT D FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION
OF TRANSFER FROM RESTRICTED GLOBAL PREFERRED
SECURITY TO REGULATION S GLOBAL PREFERRED SECURITY ............................ D-1
EXHIBIT E FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION
OF TRANSFER FROM REGULATION S GLOBAL PREFERRED
SECURITY TO RESTRICTED GLOBAL PREFERRED SECURITY .............................. E-1
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
INSIGNIA FINANCING I
November 1, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of November 1, 1996, by the Trustees (as defined herein), the
Sponsor (as defined herein), and the holders, from time to time, of undivided
beneficial interests in the assets of the Trust to be issued pursuant to this
Declaration;
WHEREAS, the Trustees and the Sponsor established Insignia Financing I
(the "Trust"), a trust under the Delaware Business Trust Act pursuant to a
Declaration of Trust dated as of October 4, 1996 (the "Original Declaration")
and a Certificate of Trust filed with the Secretary of State of the State of
Delaware on October 9, 1996, for the sole purpose of issuing and selling
certain securities representing undivided beneficial interests in the assets
of the Trust and investing the proceeds thereof in certain Debentures of the
Debenture Issuer;
WHEREAS, as of the date hereof, no interests in the Trust have been issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend
and restate each and every term and provision of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 DEFINITIONS.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective meanings assigned
to them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this
Declaration" are to this Declaration as modified, supplemented or
amended from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections of and
Annexes and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in
this Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Actual Knowledge" means, with respect to the Property Trustee's
knowledge of an occurrence, receipt by a Responsible Officer of the Property
Trustee of written notice of such occurrence from the Sponsor or Holders of at
least ten percent (10%) of the outstanding liquidation amount of the
Securities.
"Additional Preferred Securities" has the meaning set forth in paragraph
1(a) of Annex I.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent or Conversion Agent.
"Applicable Procedures" means the rules and procedures of the Depositary,
Euroclear, and CEDEL applicable to transfer or exchange of beneficial
interests in book-entry securities.
"Authorized Officer" of a Person means any Person that is authorized to
bind such Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in New York, New York or Columbia, South
Carolina are permitted or required by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Section 3801 et seq., as it may be amended from time to time, or
any successor legislation.
2
<PAGE>
"Certificate" means a Common Security Certificate or a Preferred
Certificate.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for
the Convertible Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and
which shall undertake to effect book entry transfers and pledges of the
Convertible Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means November 1, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Security" has the meaning set forth in Section 7.1.
"Common Securities Guarantee" means the guarantee agreement to be dated
as of November 1, 1996 of the Sponsor in respect of the Common Securities.
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officer, director, shareholder,
member, partner, employee, representative or agent of any Regular Trustee; or
(d) any officer, employee or agent of the Trust or its Affiliates.
"Conversion Agent" has the meaning set forth in Section 7.4.
"Convertible Preferred Securities Guarantee" means the guarantee
agreement to be dated as of November 1, 1996, of the Sponsor in respect of the
Convertible Preferred Securities.
"Convertible Preferred Security" has the meaning set forth in Section 7.1.
"Convertible Preferred Security Beneficial Owner" means, with respect to
a Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Corporate Trust Office" means the office of the Property Trustee at
which the corporate trust business of the the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at 1441 Main Street, Fourth Floor,
Columbia, South Carolina 29201.
"Covered Person" means: (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) the Trust's
Affiliates; and (b) any Holder of Securities.
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"Debenture Issuer" means Insignia Financial Group, Inc. in its capacity
as issuer of the Debentures under the Indenture.
"Debenture Trustee" means First Union National Bank of South Carolina, as
trustee under the Indenture until a successor is appointed thereunder, and
thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by the Debenture
Issuer under the Indenture to be held by the Property Trustee, a specimen
certificate for such series of Debentures being attached hereto as Exhibit B.
"Definitive Preferred Certificates" has the meaning set forth in Section
7.3(d).
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Depositary" means DTC or any Clearing Agency appointed as a successor to
DTC pursuant to Section 9.4.
"Direct Action" has the meaning set forth in Section 3.8(e).
"Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Effectiveness Period" has the meaning set forth in Section 9.5.
"Event of Default" in respect of the Securities means an Event of Default
(as defined in the Indenture) has occurred and is continuing in respect of the
Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Exchanged Global Preferred Security" has the meaning set forth in
Section 9.2(b).
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Global Certificate" has the meaning set forth in Section 7.3(c).
"Global Preferred Security" means a Restricted Global Preferred Security
or a Regulation S Global Preferred Security.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"Indenture" means the Indenture dated as of November 1, 1996, between the
Debenture Issuer and the Debenture Trustee, pursuant to which the Debentures
are to be issued.
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"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Liquidated Damages" has the meaning set forth in Section 9.5.
"List of Holders" has the meaning set forth in Section 2.2(a).
"Majority in liquidation amount of the Securities" means, except as
provided in the terms of the Convertible Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Common Securities voting
separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid
on redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of all
outstanding Securities of the relevant class.
"Ministerial Action" has the meaning set forth in the terms of the
Securities as set forth in Annex I.
"Offering Memorandum" has the meaning set forth in Section 3.6(b)(i).
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Declaration shall include:
(a) a statement that each officer signing the Certificate
has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Original Declaration" has the meaning set forth in the Recitals hereto.
"Participant" has the meaning set forth in Section 7.3(c).
"Paying Agent" has the meaning set forth in Section 7.4.
"Payment Amount" has the meaning set forth in Section 6.1.
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"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government, or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"PORTAL" has the meaning specified in Section 3.6(b)(iii).
"Preferred Certificate" means a certificate representing a Convertible
Preferred Security substantially in the form of Exhibit A-1.
"Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in Section 3.8(c).
"Purchase Agreement" means the Purchase Agreement for the offering and
sale of Convertible Preferred Securities in the form of Exhibit C.
"QIB" means a "qualified institutional buyer," as defined in Rule 144A.
"Quorum" means a majority of the Regular Trustees or, if there are only
two Regular Trustees, both of them.
"Registrable Securities" has the meaning set forth in Section 9.5.
"Registrar" has the meaning set forth in Section 7.4.
"Registration Default" has the meaning set forth in Section 9.5.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of November 1, 1996.
"Regular Trustee" has the meaning set forth in Section 5.1.
"Regulation S" has the meaning set forth in Section 7.3(b).
"Regulation S Global Preferred Securities" has the meaning set forth in
Section 7.3(b).
"Related Party" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property Trustee, any
officer within the Corporate Trust Office of the Property Trustee, including
any vice president, any assistant vice president, any assistant secretary, the
treasurer, any assistant treasurer or other officer of the Corporate Trust
Office of the Property Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Restricted Definitive Preferred Security" has the meaning set forth in
Section 7.3(d).
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"Restricted Global Preferred Security" has the meaning set forth in
Section 7.3(a).
"Restricted Period" has the meaning set forth in Section 7.3(b).
"Restricted Preferred Security" means a Restricted Definitive Preferred
Security or a Restricted Global Preferred Security.
"Restricted Securities Legend" has the meaning set forth in Section 9.2(j).
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Convertible Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended from time
to time or any successor legislation.
"Special Event" has the meaning set forth in Annex I hereto.
"Securities Guarantees" means the Common Securities Guarantee and the
Convertible Preferred Securities Guarantee.
"Shelf Registration Statement" has the meaning set forth in Section 9.5.
"Sponsor" means Insignia Financial Group, Inc., a Delaware corporation,
or any successor entity in a merger, consolidation or amalgamation, in its
capacity as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning set forth in Section
5.6(b)(ii).
"Successor Entity" has the meaning set forth in Section 3.15(b)(i).
"Successor Property Trustee" has the meaning set forth in Section 5.6.
"Successor Securities" has the meaning set forth in Section 3.15(b)(i)(B).
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I hereto.
"10% in liquidation amount of the Securities" means, except as provided
in the terms of the Convertible Preferred Securities or by the Trust Indenture
Act, Holder(s) of outstanding Securities voting together as a single class or,
as the context may require, Holders of outstanding Convertible Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of 10% or more of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
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"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust" means Insignia Financing I, a trust created under the Delaware
Business Trust Act.
"Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance
with the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"Unrestricted Definitive Preferred Security" means a Convertible
Preferred Security in definitive, fully registered form without distribution
coupons, that does not bear the Restricted Securities Legend and is free from
any restriction on transfer (other than any such restriction attributable
solely to any Holder's status).
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the extent
applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a Trustee for
the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide the Property Trustee (i) semiannually, not later than March 31
and September 30 of each year, a list, in such form as the Property Trustee
may reasonably require, of the names and addresses of the Holders of the
Securities ("List of Holders") as of a date not more than 15 days prior to the
delivery thereof, and (ii) at any other time within 30 days of receipt by the
Trust of a written request for a List of Holders as of a date no more than 15
days before such List of Holders is given to the Preferred Guarantee Trustee;
provided, however, that neither the Sponsor nor the Regular Trustees on behalf
of the Trust shall be obligated to provide such List of Holders at any time
the List of Holders does not differ from the most recent List of
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Holders given to the Property Trustee by or on behalf of the Sponsor and the
Regular Trustees on behalf of the Trust, and in the absence of the provision
of any such List of Holders to the Property Trustee, then notice shall be
deemed to have been given to the Property Trustee that the List of Holders has
not changed since the most recent List of Holders. The Property Trustee shall
preserve, in as current a form as is reasonably practicable, all information
contained in Lists of Holders given to it or which it receives in the capacity
as Registrar or Paying Agent (if acting in such capacity), provided, however,
that the Property Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under Sections
311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE PROPERTY TRUSTEE.
Within 60 days after May 15 of each year, the Property Trustee shall
provide to the Holders of the Convertible Preferred Securities such reports as
are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Property Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PROPERTY TRUSTEE.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any), for transmission
to Holders of the Convertible Preferred Securities as may be required by such
Section 314, and the compliance certificate required by Section 314 in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
Delivery of such reports, information and documents to the Property
Trustee is for informational purposes only and the Property Trustee's receipt
of such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Sponsor's compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in liquidation amount of Convertible
Preferred Securities may, by vote, on behalf of the Holders of all of the
Convertible Preferred Securities, waive any past Event of Default in respect
of the Convertible Preferred Securities and its consequences,
provided,however, that, if the underlying Event of Default under the
Indenture:
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(i) is not waivable under the Indenture, the Event of
Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority
in principal amount of the holders of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default
under the Declaration may only be waived by the vote of the Holders
of at least the proportion in liquidation amount of the Convertible
Preferred Securities that the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) is
hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act. Upon such waiver, any such default shall
cease to exist, and any Event of Default with respect to the Convertible
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the
Convertible Preferred Securities or impair any right consequent thereon. Any
waiver by the Holders of the Convertible Preferred Securities of an Event of
Default with respect to the Convertible Preferred Securities shall also be
deemed to constitute a waiver by the Holders of the Common Securities of any
such Event of Default with respect to the Common Securities for all purposes
of this Declaration without any further act, vote, or consent of the Holders
of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this Section
2.6(b), the Event of Default under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed
to have waived such Event of Default under the Declaration as
provided below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Common Securities that
the relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding;
provided, however, further, each Holder of Common Securities will be deemed to
have waived any such Event of Default and all Events of Default with respect
to the Common Securities and its consequences until all Events of Default with
respect to the Convertible Preferred Securities have been cured, waived or
otherwise eliminated, and until such Events of Default have been so cured,
waived or otherwise eliminated, the Property Trustee will be deemed to be
acting solely on behalf of the Holders of the Convertible Preferred Securities
and only the Holders of the Convertible Preferred Securities will have the
right to direct the Property Trustee in accordance with the terms of the
Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu
of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such
Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby
expressly excluded from this Declaration and the Securities, as permitted by
the Trust Indenture Act. Subject to the foregoing provisions of this Section
2.6(b), upon such waiver, any such default shall cease to exist and any Event
of
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Default with respect to the Common Securities arising therefrom shall be
deemed to have been cured for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default
with respect to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the Property
Trustee at the direction of the Holders of the Convertible Preferred
Securities constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c)shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Property Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all defaults with respect to the
Securities actually known to a Responsible Officer of the Property Trustee,
unless such defaults have been cured before the giving of such notice (the
term "defaults" for the purposes of this Section 2.7(a) being hereby defined
to be an Event of Default as defined in the Indenture, not including any
periods of grace provided for therein and irrespective of the giving of any
notice provided therein); provided that, except for a default in the payment
of principal of (or premium, if any) or interest on any of the Debentures or
in the payment of any sinking fund installment established for the Debentures,
the Property Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Property Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders of the
Securities.
(b) The Property Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Sections 7.1(a) and (b) of the Indenture; or
(ii) any default as to which the Property Trustee shall have Actual
Knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 NAME.
The Trust is named "Insignia Financing I" as such name may be modified
from time to time by the Regular Trustees following written notice to the
Holders of Securities. The Trust's activities may be conducted under the name
of the Trust or any other name deemed advisable by the Regular Trustees.
SECTION 3.2 OFFICE.
The address of the principal office of the Trust is c/o Insignia
Financial Group, Inc., One Insignia Financial Plaza, P.O. Box 1089,
Greenville, South Carolina 29602. On ten Business Days' written notice to the
Holders of Securities, the Regular Trustees may designate another principal
office.
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SECTION 3.3 PURPOSE.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Securities and use the proceeds from such sale to acquire the Debentures,
and (b) except as otherwise limited herein, to engage in only those other
activities necessary, or incidental thereto. The Trust shall not borrow money,
issue debt or reinvest proceeds derived from investments, pledge any of its
assets, or otherwise undertake (or permit to be undertaken) any activity that
would cause the Trust not to be classified for United States federal income
tax purposes as a grantor trust.
SECTION 3.4 AUTHORITY.
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no Person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
SECTION 3.5 TITLE TO PROPERTY OF THE TRUST.
Except as provided in Sections 3.6 and 3.8 with respect to the Debentures
and the Property Trustee Account or as otherwise provided in this Declaration,
legal title to all assets of the Trust shall be vested in the Trust. The
Holders shall not have legal title to any part of the assets of the Trust, but
shall have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES.
The Regular Trustees shall have the exclusive power, duty and authority
to cause the Trust to engage in the following activities (except to the extent
that the Sponsor has also been granted authority with respect to certain of
such activities pursuant to Section 4.2):
(a) to issue and sell the Convertible Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Convertible Preferred Securities
and no more than one series of Common Securities, and, provided, further, that
there shall be no interests in the Trust other than the Securities, and the
issuance of Securities shall be limited to a simultaneous issuance of both
Convertible Preferred Securities and Common Securities on the Closing Date and
one more simultaneous issuance of both Convertible Preferred Securities and
Common Securities solely to cover overallotments in connection with the sale
of the Convertible Preferred Securities;
(b) in connection with the issue and sale of the Convertible Preferred
Securities, at the direction of the Sponsor, to:
(i) execute, if necessary, an offering memorandum (the
"Offering Memorandum") in preliminary and final form prepared by the
Sponsor, relating to the offering and sale of Convertible Preferred
Securities to qualified institutional buyers in reliance on Rule 144A
under the Securities
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Act, to institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act), and outside
the United States to non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act and to execute and
file with the Commission, at such time as determined by the Sponsor,
a registration statement filed on Form S-3 prepared by the Sponsor,
including any amendments thereto, relating to the resale of
Convertible Preferred Securities;
(ii) execute and file any documents prepared by the Sponsor,
or take any acts as determined by the Sponsor to be necessary, in
order to qualify or register all or part of the Convertible Preferred
Securities in any State or foreign jurisdiction in which the Sponsor
has determined to qualify or register such Convertible Preferred
Securities for sale;
(iii) execute and file an application, prepared by the
Sponsor, to the Private Offerings, Resale and Trading through
Automated Linkages ("PORTAL") Market and, at such time as the Sponsor
may determine, to the New York Stock Exchange or any other national
stock exchange or the Nasdaq Stock Market's National Market for
listing or quotation of the Convertible Preferred Securities;
(iv) execute and deliver letters, documents, or instruments
with DTC relating to the Convertible Preferred Securities;
(v) execute and file with the Commission, at such time as
may be determined by the Sponsor, a registration statement on Form
8-A, including any amendments thereto, prepared by the Sponsor
relating to the registration of the Convertible Preferred Securities
under Section 12(b) of the Exchange Act;
(vi) execute and enter into the Purchase Agreement,
Registration Rights Agreement and other related agreements providing
for the sale and resale of the Convertible Preferred Securities; and
(vii) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be
necessary in order to qualify or register all or part of the
Convertible Preferred Securities in any State in which the Sponsor
has determined to qualify or register such Convertible Preferred
Securities for resale;
(c) to acquire the Debentures with the proceeds of the sale of the
Convertible Preferred Securities and the Common Securities; provided, however,
that the Regular Trustees shall cause legal title to the Debentures to be held
of record in the name of the Property Trustee for the benefit of the Holders
of the Convertible Preferred Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Property Trustee prompt written notice of
the occurrence of a Special Event; provided, however, that the Regular
Trustees shall consult with the Sponsor and provide notice to the Property
Trustee before taking or refraining from taking any Ministerial Action in
relation to a Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the
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Holders of Convertible Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of the
Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by
any Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out any
of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of any
notice received from the Debenture Issuer of its election to defer payments of
interest on the Debentures by extending the interest payment period under the
Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Convertible
Preferred Securities or to enable the Trust to effect the purposes for which
the Trust was created;
(p) to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the activities of the Trust as set out
in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
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(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer
for United States federal income tax purposes, provided that such
action does not adversely affect the interests of Holders; and
(q) to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust.
The Regular Trustees must exercise the powers set forth in this Section
3.6 in a manner that is consistent with the purposes and functions of the
Trust set out in Section 3.3, and the Regular Trustees shall not take any
action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Property Trustee set forth in Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this Section
3.6 shall be reimbursed by the Sponsor.
SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.
(a) The Trust shall not, and the Trustees (including the Property
Trustee) shall not, engage in any activity other than as required or
authorized by this Declaration. In particular, the Trust shall not and the
Regular Trustees and the Property Trustee shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding
the Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than
loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities; or
(vii) other than as provided in this Declaration or Annex I,
(A) direct the time, method and place of exercising any trust power
conferred upon the Debenture Trustee with respect to the Debentures,
(B) waive any past default that is waivable under the Indenture, (C)
exercise any right to rescind or annul any declaration that the
principal of all the Debentures shall be due and payable, or (D)
consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required,
unless, in the case of each action described in Clause (A), (B), (C),
or (D), the Trust shall have received an opinion of counsel to the
effect that,
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as a result of such action, the Trust will not be classified other
than as a grantor trust for United States federal income tax purposes
and each holder of Securities will be treated as owning an individual
beneficial interest in the Debentures.
SECTION 3.8 POWERS AND DUTIES OF THE PROPERTY TRUSTEE.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the
Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.6.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Property Trustee shall not transfer its right, title and interest
in the Debentures to the Regular Trustees or to the Delaware Trustee (if the
Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and
under the exclusive control of the Property Trustee on behalf of the
Holders of the Securities and, upon the receipt of payments of funds
made in respect of the Debentures held by the Property Trustee,
deposit such funds into the Property Trustee Account and make
payments to the Holders of the Convertible Preferred Securities and
Holders of the Common Securities from the Property Trustee Account in
accordance with Section 6.1. Funds in the Property Trustee Account
shall be held uninvested until disbursed in accordance with this
Declaration. The Property Trustee Account shall be an account that is
maintained with a banking institution the rating on whose long-term
unsecured indebtedness is at least equal to the rating assigned to
the Convertible Preferred Securities by a "nationally recognized
statistical rating organization", as that term is defined for
purposes of Rule 436(g)(2) under the Securities Act;
(ii) deposit the proceeds received by the Trust from the
original issuance, from time to time, of Convertible Preferred
Securities (including Additional Preferred Securities) and Common
Securities into the Property Trustee Account and, upon and in
accordance with the order of a Regular Trustee, use such funds to
purchase Debentures;
(iii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Convertible
Preferred Securities and the Common Securities to the extent the
Debentures are redeemed or mature; and
(iv) upon written notice of distribution issued by the
Regular Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as shall be necessary or
appropriate to effect the distribution of the Debentures to Holders
of Securities upon the occurrence of certain Special Events arising
from a change in law or a change in legal interpretation or other
specified circumstances pursuant to the terms of the Securities.
(d) The Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the terms
of the Securities.
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(e) The Property Trustee shall take any Legal Action which arises out of
or in connection with an Event of Default of which the Property Trustee has
Actual Knowledge or the Property Trustee's duties and obligations under this
Declaration or the Trust Indenture Act; provided, however, that if an Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Debenture Issuer to pay interest or principal on the Debentures
on the date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a Holder of Convertible Preferred
Securities may directly institute a proceeding for enforcement of payment to
such Holder of the principal of or interest on the Debentures having a
principal amount equal to the aggregate liquidation amount of the Convertible
Preferred Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such
Direct Action, the rights of the Holders of the Common Securities will be
subrogated to the rights of such Holder of Convertible Preferred Securities to
the extent of any payment made by the Debenture Issuer to such Holder of
Convertible Preferred Securities in such Direct Action. In addition, if the
Property Trustee fails to enforce its rights under the Debentures (other than
rights arising from an Event of Default described in the immediately preceding
sentence) for a period of 30 days after any Holder of Convertible Preferred
Securities shall have made a written request to the Property Trustee to
enforce such rights, such Holder of Convertible Preferred Securities may, to
the fullest extent permitted by law, institute a Direct Action to enforce the
Property Trustee's rights as holder of the Debentures, without first
instituting any legal proceeding against the Property Trustee or any other
Person. Except as provided in the preceding sentences, the Holders of
Convertible Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Debentures.
(f) The Property Trustee shall not resign as a Trustee unless either:
(i) the Trust has been completely liquidated and the proceeds of the
liquidation distributed to the Holders of Securities pursuant to the
terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6.
(g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the
Indenture and, if the Property Trustee has Actual Knowledge that an Event of
Default has occurred and is continuing, the Property Trustee shall, for the
benefit of Holders of the Securities, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms of such
Securities. In no event, however, shall the Property Trustee, in its capacity
as holder of the Debentures, have the power to convert the Debentures.
(h) The Property Trustee may authorize one or more Paying Agents to pay
Distributions, redemption payments or liquidation payments on behalf of the
Trust with respect to all Securities and any such Paying Agent shall comply
with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be
removed by the Property Trustee at any time and a successor Paying Agent or
additional Paying Agents may be appointed at any time by the Property Trustee.
(i) Subject to this Section 3.8, the Property Trustee shall have none of
the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.6 and shall not be responsible for any actions taken by the
Regular Trustees or for monitoring compliance by the Regular Trustees of their
duties hereunder.
The Property Trustee must exercise the powers set forth in this Section
3.8 in a manner that is consistent with the purposes and functions of the
Trust set out in Section 3.3, and the Property Trustee
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shall not take any action that is inconsistent with the purposes and functions
of the Trust set out in Section 3.3.
SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY
TRUSTEE.
(a) The Property Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.6) of which a Responsible
Officer of the Property Trustee has Actual Knowledge, the Property Trustee
shall exercise such of the rights and powers vested in it by this Declaration,
and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of this
Declaration and the Property Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Declaration, and no
implied covenants or obligations shall be read into this
Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively
rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon any certificates or
opinions furnished to the Property Trustee and conforming to
the requirements of this Declaration; but in the case of any
such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Property
Trustee, the Property Trustee shall be under a duty to
examine the same to determine whether or not, on their face,
they conform to the requirements of this Declaration, but
shall otherwise have no duty to determine the accuracy or
completeness thereof or whether the same comply with
applicable laws;
(ii) the Property Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Property Trustee, unless it shall be proved that the Property Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its
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duties or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that the repayment of such
funds or liability is not reasonably assured to it under the terms of
this Declaration or indemnity reasonably satisfactory to the Property
Trustee against such risk or liability is not reasonably assured to
it;
(v) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Property Trustee Account shall be to deal with such property in a
similar manner as the Property Trustee deals with similar property
for its own account, subject to the protections and limitations on
liability afforded to the Property Trustee under this Declaration and
the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability
for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Sponsor. Money held by the Property Trustee need
not be segregated from other funds held by it except in relation to
the Property Trustee Account maintained by the Property Trustee
pursuant to Section 3.8(c)(i) and except to the extent otherwise
required by law; and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the
Property Trustee be liable for any default or misconduct of the
Regular Trustees or the Sponsor.
SECTION 3.10 CERTAIN RIGHTS OF PROPERTY TRUSTEE.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration shall be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration,
the Property Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered by
the Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration
thereof;
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(v) the Property Trustee may consult with counsel of its
selection or other experts and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the scope
of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any
of its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
at the request or direction of any Holder, unless such Holder shall
have provided to the Property Trustee security and indemnity,
reasonably satisfactory to the Property Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of
the Property Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Property Trustee, provided that nothing contained in
this Section 3.10(a)(vi) shall be taken to relieve the Property
Trustee, upon the occurrence of an Event of Default, from its
obligations expressly created hereunder to exercise the rights and
powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or
by or through agents, custodians, nominees or attorneys and the
Property Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and
the signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third
party shall be required to inquire as to the authority of the
Property Trustee to so act or as to its compliance with any of the
terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's
taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive written
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Property Trustee (i) may request
written instructions from the Holders of the Securities which
instructions may only be given by the Holders of the same proportion
in liquidation amount of the Securities as would be entitled to
direct the Property Trustee under the terms of the Securities in
respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in or accordance with such
instructions;
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(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation
to take any action that is discretionary under the provisions of this
Declaration; and
(xii) the Property Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in which the Property
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 DELAWARE TRUSTEE.
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Property Trustee described in
this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
SECTION 3.12 EXECUTION OF DOCUMENTS.
Except as otherwise required by the Business Trust Act, any Regular
Trustee is authorized to execute on behalf of the Trust any documents that the
Regular Trustees have the power and authority to execute pursuant to Section
3.6; provided that the registration statement referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Regular Trustees.
SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained in this Declaration and the Securities shall
be taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 DURATION OF TRUST.
The Trust, unless terminated pursuant to the provisions of Article
VIII hereof, shall terminate on September 30, 2051.
SECTION 3.15 MERGERS.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except in compliance with the
provisions of Sections 3.15(b) and (c).
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(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees and without the
consent of the Holders of the Securities, the Delaware Trustee or the Property
Trustee, consolidate, amalgamate, merge with or into, or be replaced by a
trust organized as such under the laws of any State; provided, however, that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Securities other securities
having substantially the same terms as the Convertible
Preferred Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the Convertible
Preferred Securities rank with respect to Distributions and
payments upon liquidation, redemption and otherwise;
(ii) the Debenture Issuer expressly acknowledges a trustee
of the Successor Entity that possesses the same powers and duties as
the Property Trustee as the Holder of the Debentures;
(iii) the Convertible Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or
with another organization on which the Convertible Preferred
Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation or replacement
does not cause the Convertible Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of
the Holders of the Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of such
Holders' interests in the Convertible Preferred Securities as a
result of such merger, consolidation, amalgamation or replacement);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such
matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights,
preferences and privileges of the Holders of the Securities
(including any Successor Securities) in any material respect
(other than with respect to any dilution of the Holders'
interest in the successor Entity); and
(B) following such merger, consolidation, amalgamation
or replacement, neither the Trust nor the Successor Entity
will be required to register as an Investment Company; and
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(C) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will
continue to be classified as a grantor trust for United
States federal income tax purposes;
(viii) the Sponsor guarantees the obligations of such
Successor Entity under the Successor Securities at least to the
extent provided by the Convertible Preferred Securities Guarantee;
and
(ix) the Regular Trustees shall have furnished the Delaware
Trustee at least 5 Business Days prior written notice of the
consummation of such merger, consolidation, amalgamation or
replacement; provided that failure to provide such notice shall not
affect the validity of any such transaction.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other
Person or permit any other Person to consolidate, amalgamate, merge with or
into, or replace it if such consolidation, amalgamation, merger or replacement
would cause the Trust or Successor Entity to be classified as other than a
grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES.
On the Closing Date, the Sponsor will purchase 80,413 Common
Securities, being all of the Common Securities issued by the Trust on the
Closing Date and representing approximately 3% of the total capital of the
Trust after issuance of the Convertible Preferred Securities on the Closing
Date. In the event that any Additional Preferred Securities are issued by the
Trust after the Closing Date, the Sponsor will, concurrently with such
issuance, purchase additional Common Securities, at a purchase price for each
Common Security equal to the purchase price payable for each Additional
Preferred Security as set forth in the Purchase Agreement, in a number (not to
exceed 12,062) equal to (x) the number of Additional Preferred Securities
issued, divided by (y) 0.97, and multiplied by (z) 0.03, rounded up to the
nearest whole number.
SECTION 4.2 RESPONSIBILITIES OF THE SPONSOR.
In connection with the issue and sale of the Convertible Preferred
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities (except to the extent that the Regular
Trustees have also been granted authority with respect to certain of such
activities pursuant to Section 3.6):
(i) to prepare the Offering Memorandum in preliminary and
final form, and to prepare for filing with the Commission and execute
on behalf of the Trust a shelf registration statement on Form S-3,
including any amendments thereto, relating to the resale of
Convertible Preferred Securities;
(ii) to determine the States and foreign jurisdictions in
which to take appropriate action to qualify or register all or part
of the Convertible Preferred Securities in any jurisdiction in
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which the Sponsor has determined to qualify or register for sale such
Convertible Preferred Securities and to do any and all such acts,
other than actions that must be taken by the Trust, and to advise the
Trust of actions it must take, and to prepare for execution and
filing and execute on behalf of the Trust any documents to be
executed and filed by the Trust, as the Sponsor deems necessary or
advisable in order to comply with the applicable laws of any such
States and foreign jurisdictions;
(iii) to prepare or cause to be prepared for filing and to
execute on behalf of the Trust, an application to PORTAL or any other
national stock exchange or the Nasdaq Stock Market's National Market
for listing or quotation of the Convertible Preferred Securities;
(iv) to prepare and execute on behalf of the Trust letters,
documents, or instruments for filing with DTC relating to the
Convertible Preferred Securities;
(v) to prepare for filing with the Commission, and to
execute on behalf of the Trust, at such time as may be determined by
the Sponsor, a registration statement on Form 8-A, including any
amendments thereto relating to the registration of the Convertible
Preferred Securities under Section 12(b) of the Exchange Act; and
(vi) to negotiate the terms of the Purchase Agreement,
Registration Rights Agreement and other related agreements providing
for the sale and resale of the Convertible Preferred Securities and
to execute such documents on behalf of the Trust.
SECTION 4.3 EXPENSES.
(a) The Sponsor shall be responsible for and shall pay for all debts
and obligations (other than with respect to the Securities) and all costs and
expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization of the Trust, the issuance and sale of the
Convertible Preferred Securities, the fees and expenses (including reasonable
counsel fees and expenses) of the Trustees, the costs and expenses for
printing and engraving and computing or accounting equipment, Paying Agent(s),
registrar(s), transfer agent(s), duplication, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the disposition of Trust assets).
(b) The Sponsor shall pay any and all taxes (other than withholding
taxes attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.3 shall be for the
benefit of, and shall be enforceable by, the Property Trustee and any Person
to whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor"), whether or not such Creditor has received notice hereof. The
Property Trustee and any such Creditor may enforce the Sponsor's obligations
under this Section 4.3 directly against the Sponsor and the Sponsor
irrevocably waives any right or remedy to require that the Property Trustee or
any such Creditor take any action against the Sponsor. The Sponsor agrees to
execute such additional agreements as may be necessary or desirable in order
to give full effect to the provisions of this Section 4.3.
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ARTICLE V
TRUSTEES
SECTION 5.1 NUMBER OF TRUSTEES.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders
of the Common Securities; provided, however, that the number of Trustees shall
in no event be less than two (2); provided, further that (1) one Trustee shall
satisfy the requirements for being a Delaware Trustee as provided in Section
5.2 (the "Delaware Trustee"); (2) there shall be at least one Trustee who is
an employee or officer of, or is affiliated with the Sponsor (each, a "Regular
Trustee"); and (3) one Trustee shall be the Property Trustee for so long as
this Declaration is required to qualify as an indenture under the Trust
Indenture Act, and such Trustee may also serve as Delaware Trustee if it meets
the applicable requirements.
SECTION 5.2 DELAWARE TRUSTEE.
If required by the Business Trust Act, one Trustee, which shall be the
Delaware Trustee, shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law, provided that, if the Property Trustee has its principal place
of business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee shall also be the Delaware Trustee
and Section 3.11 shall have no application.
The initial Delaware Trustee shall be:
First Union Bank of Delaware.
In the event that a national banking association, with the name "First
Union Trust Company, National Association" or any other name, succeeds, as
contemplated, to all or substantially all the corporate trust business of
First Union Bank of Delaware, such successor entity shall automatically be
deemed to be the Delaware Trustee, effective as of the consummation of such
succession, with the same effect as if it had executed this Declaration on the
Closing Date, upon delivery to the Sponsor and the Regular Trustees of an
instrument, in form and substance reasonably satisfactory to the Sponsor and
the Regular Trustees, accepting the responsibilities hereunder as Delaware
Trustee and agreeing to be bound by all of the provisions hereof applicable to
the Delaware Trustee, and thereupon First Union Bank of Delaware will
automatically be deemed to have resigned as the Delaware Trustee, effective as
of the consummation of such succession.
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SECTION 5.3 PROPERTY TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee which shall act as Property
Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a Person permitted by the
Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination
by federal, state, territorial or District of Columbia authority. If
such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or
examining authority referred to above, then for the purposes of this
Section 5.3(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to so
act under Section 5.3(a), the Property Trustee shall immediately resign in the
manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of such Section 310(b).
(d) The Convertible Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be: First Union National Bank of
South Carolina.
SECTION 5.4 CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE
TRUSTEE GENERALLY.
Each Regular Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 5.5 REGULAR TRUSTEES.
The initial Regular Trustees shall be:
Andrew L. Farkas
John K. Lines
Ronald Uretta
(a) Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over
which the Regular Trustees have power to act, any power of the Regular
Trustees may be exercised by, or with the consent of, any one such Regular
Trustee.
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(b) Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act or applicable law, any Regular
Trustee is authorized to execute on behalf of the Trust any documents which
the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6, provided that the registration statement
referred to in Section 3.6, including any amendments thereto, shall be signed
by all of the Regular Trustees; and
(c) A Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purposes of signing any documents which the Regular Trustees
have power and authority to cause the Trust to execute pursuant to Section
3.6.
SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote of the
Holders of a Majority in liquidation amount of the Common Securities
voting as a class at a meeting of the Holders of the Common
Securities.
(b)(i) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 5.6(a) until a successor Property Trustee (the
"Successor Property Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Property Trustee
and delivered to the Regular Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under
Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument
executed by such Successor Delaware Trustee and delivered to the
Regular Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Property Trustee and delivered to
the Trust, the Sponsor and the resigning Property Trustee;
or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed
to the holders of the Securities; and
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(ii) subject to the provisions of the last paragraph of
Section 5.2, no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and delivered
to the Trust, the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use their best efforts to
promptly appoint a Successor Delaware Trustee or Successor Property Trustee as
the case may be if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section 5.6
within 60 days after delivery of an instrument of resignation or removal, the
Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment
of a Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the acts
or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
SECTION 5.7 VACANCIES AMONG TRUSTEES.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees
is increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees, shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.6.
SECTION 5.8 EFFECT OF VACANCIES.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee
shall not operate to annul the Trust. Whenever a vacancy in the number of
Regular Trustees shall occur, until such vacancy is filled by the appointment
of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in
office, regardless of their number, shall have all the powers granted to the
Regular Trustees and shall discharge all the duties imposed upon the Regular
Trustees by this Declaration.
SECTION 5.9 MEETINGS.
If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a time and place fixed
by resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than
48 hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting. Notices shall contain a
brief statement of the time, place and anticipated purposes of the meeting.
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The presence (whether in person or by telephone) of a Regular Trustee at a
meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration,
any action of the Regular Trustees may be taken at a meeting by vote of a
majority of the Regular Trustees present (whether in person or by telephone)
and eligible to vote with respect to such matter, provided, however, that a
Quorum is present, or without a meeting by the unanimous written consent of
the Regular Trustees. In the event there is only one Regular Trustee, any and
all action of such Regular Trustee shall be evidenced by a written consent of
such Regular Trustee.
SECTION 5.10 DELEGATION OF POWER.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from time to time
to such of their number or to officers of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law
or contrary to the provisions of the Trust, as set forth herein.
SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee or the Delaware Trustee, as
the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or
substantially all the corporate trust business of the Property Trustee or the
Delaware Trustee, as the case may be, shall be the successor of the Property
Trustee or the Delaware Trustee, as the case may be, hereunder, provided,
however, such Person shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 DISTRIBUTIONS.
Holders shall receive Distributions (as defined herein) in accordance
with the applicable terms of the relevant Holder's Securities. Distributions
shall be made on the Convertible Preferred Securities and the Common
Securities in accordance with the preferences set forth in their respective
terms. If and to the extent that the Debenture Issuer makes a payment of
interest (including Compounded Interest, Additional Interest, and Liquidated
Damages (as each such term is defined in the Indenture)), premium and/or
principal on the Debentures held by the Property Trustee (the amount of any
such payment being a "Payment Amount"), the Property Trustee shall be, and
hereby is directed, to the extent funds are available for that purpose, to
make a distribution (a "Distribution") of the Payment Amount to Holders.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 GENERAL PROVISIONS REGARDING SECURITIES.
(a) The Regular Trustees shall on behalf of the Trust issue one class of
convertible preferred securities representing undivided beneficial interests
in the assets of the Trust having such terms as are set forth in Annex I (the
"Convertible Preferred Securities") and one class of convertible common
securities, representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Annex I (the "Common Securities.")
The Trust shall issue no securities or other interests in the assets of the
Trust other than the Convertible Preferred Securities and the Common
Securities. The Trust shall issue no Securities in bearer form.
(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(c) Upon issuance of the Convertible Preferred Securities as provided in
this Declaration, the Convertible Preferred Securities so issued shall be
deemed to be validly issued, fully paid and non-assessable.
(d) Every Person, by virtue of having become a Holder or a Convertible
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the
terms of, and shall be bound by, this Declaration and to have expressly
assented and agreed to the terms of the Indenture and the Convertible
Preferred Securities Guarantee.
(e) Convertible Preferred Securities sold other than in reliance on
Regulation S or to QIBs will be issued initially in minimum denominations of
5,000 Convertible Preferred Securities.
SECTION 7.2 EXECUTION AND AUTHENTICATION.
(a) The Certificates shall be signed on behalf of the Trust by a Regular
Trustee. In case any Regular Trustee of the Trust who shall have signed any of
the Securities shall cease to be such Regular Trustee before the Certificates
so signed shall be delivered by the Trust, such Certificates nevertheless may
be delivered as though the person who signed such Certificates had not ceased
to be such Regular Trustee; and any Certificate may be signed on behalf of the
Trust by such persons who, at the actual date of execution of such Security,
shall be the Regular Trustees of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such a
Regular Trustee.
(b) One Regular Trustee shall sign the Convertible Preferred Securities
for the Trust by manual or facsimile signature. Unless otherwise determined by
the Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Convertible Preferred Security Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the
Property Trustee. The signature shall be conclusive evidence that the
Convertible Preferred Security Certificate has been authenticated under this
Declaration.
Upon a written order of the Trust signed by one Regular Trustee, the
Property Trustee shall authenticate the Convertible Preferred Securities
Certificates for original issue.
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The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Convertible Preferred Securities Certificates. An
authenticating agent may authenticate Convertible Preferred Securities
Certificates whenever the Property Trustee may do so. Each reference in this
Declaration to authentication by the Property Trustee includes authentication
by such agent. An authenticating agent has the same rights as the Property
Trustee to deal with the Company or an Affiliate of the Company.
SECTION 7.3 FORM AND DATING.
The Convertible Preferred Securities Certificates and the Property
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1 and the Common Securities Certificates shall be substantially in
the form of Exhibit A-2, each of which is hereby incorporated in and expressly
made a part of this Declaration. Certificates may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Regular Trustees, as evidenced by their execution thereof. The Securities
may have letters, numbers, notations or other marks of identification or
designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject, if any, or usage (provided,
however, that any such notation, legend or endorsement is in a form acceptable
to the Trust). The Trust at the direction of the Sponsor shall furnish any
such legend not contained in Exhibit A-1 to the Property Trustee in writing.
Each Preferred Certificate shall be dated the date of its authentication. The
terms and provisions of the Securities set forth in Annex I and the forms of
Securities set forth in Exhibits A-1 and A-2 are part of the terms of this
Declaration and to the extent applicable, the Property Trustee and the
Sponsor, by their execution and delivery of this Declaration, expressly agree
to such terms and provisions and to be bound thereby.
(a) RESTRICTED GLOBAL PREFERRED SECURITIES. The Convertible Preferred
Securities are being offered and sold by the Trust pursuant to the Purchase
Agreement. Convertible Preferred Securities offered and sold in their initial
distribution to QIBs in reliance on Rule 144A, as provided in the Purchase
Agreement, shall be issued in the form of one or more permanent global
Securities in definitive, fully registered form without distribution coupons
and with the appropriate global legend and Restricted Securities Legend set
forth in Exhibit A-1 hereto (collectively, the "Restricted Global Preferred
Security"), which shall be deposited on behalf of the purchasers of the
Convertible Preferred Securities represented thereby with the Property
Trustee, at its Columbia, South Carolina office, as custodian for the
Depositary, and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Trust and authenticated by the Property
Trustee as hereinafter provided. The number of Convertible Preferred
Securities represented by the Restricted Global Preferred Security may from
time to time be increased or decreased by adjustments made on the records of
the Property Trustee and the Depositary or its nominee as hereinafter
provided.
(b) REGULATION S GLOBAL PREFERRED SECURITIES. Convertible Preferred
Securities offered and sold in their initial distribution in reliance on
Regulation S under the Securities Act ("Regulation S"), as provided in the
Purchase Agreement, shall be issued in the form of one or more permanent
global Securities in definitive, fully registered form without distribution
coupons and with the appropriate global legend and Restricted Securities
Legend set forth in Exhibit A-1 hereto (collectively, the "Regulation S Global
Preferred Security"), which shall be deposited on behalf of the purchasers of
the Convertible Preferred Securities represented thereby with the Property
Trustee, at its Columbia, South Carolina office, as custodian for the
Depositary, and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Trust and authenticated by the Property
Trustee as hereinafter provided, for credit to the respective accounts at the
Depositary of the depositories for Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear, or CEDEL. Until such time as the
Restricted Period shall
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have terminated, investors may hold beneficial interests in such Regulation S
Global Preferred Security only through Euroclear and CEDEL, unless delivery of
such beneficial interest shall be made through the Restricted Global Preferred
Security in accordance with the certification requirements set forth below in
Section 9.2(d). After the Restricted Period shall have terminated, such
certification requirements shall no longer be required for such transfers. As
used herein, the term "Restricted Period" means the period up to (but not
including) the 40th day following the later of (i) the date of the
commencement of the offering of the Convertible Preferred Securities and (ii)
the last original issuance date of the Convertible Preferred Securities. The
number of Convertible Preferred Securities represented by the Regulation S
Global Preferred Security may from time to time be increased or decreased by
adjustments made on the records of the Property Trustee and the Depositary or
its nominee as hereinafter provided.
(c) BOOK-ENTRY PROVISIONS. This Section 7.3(c) shall apply only to the
Restricted Global Preferred Security, the Regulation S Global Preferred
Security and such other Convertible Preferred Securities in global form as may
be authorized by the Trust to be deposited with or on behalf of the
Depositary.
(i) The Trust shall execute and the Property Trustee shall,
in accordance with this Section 7.3, authenticate and make available for
delivery initially one or more certificates representing Restricted Global
Preferred Securities and one or more certificates representing Regulation S
Global Preferred Securities, each of which certificates (collectively, "Global
Certificates") (a) shall be registered in the name of Cede & Co. or other
nominee of the Depositary and (b) shall be delivered by the Property Trustee
to the Depositary or pursuant to the Depositary's written instructions or held
by the Property Trustee as custodian for the Depositary. Any other Global
Preferred Security authenticated under this Declaration shall be registered in
the name of the Depositary or a nominee thereof and delivered to such
Depositary or a nominee thereof or the Property Trustee or other custodian for
the Depositary or such nominee.
(ii) Neither any members of, or participants in, the
Depositary ("Participants") nor any other Persons on whose behalf Participants
may act (including Euroclear and CEDEL and account holders and participants
therein) shall have any rights under this Declaration with respect to any
Global Preferred Security held on their behalf by the Depositary or by the
Property Trustee as the custodian of the Depositary or under such Global
Preferred Security, and the Depositary may be treated by the Trust, the
Property Trustee and any agent of the Trust or the Property Trustee as the
absolute owner of such Global Preferred Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust, the
Property Trustee or any agent of the Trust or the Property Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Participants, the
operation of customary practices of such Depositary governing the exercise of
the rights of a holder of a beneficial interest in any Global Preferred
Security.
(d) CERTIFICATED SECURITIES. Convertible Preferred Securities sold other
than in reliance on Regulation S or to QIBs will be issued only in definitive
certificated form ("Definitive Preferred Certificates") and will be issued
initially in minimum denominations of 5,000 Convertible Preferred Securities.
Purchasers of Convertible Preferred Securities who are QIBs acting on behalf
of institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) and did not purchase Convertible
Preferred Securities in reliance on Regulation S under the Securities Act will
receive Convertible Preferred Securities in the form of individual
certificates in definitive, fully registered form without distribution coupons
and with the Restricted Securities Legend set forth in Exhibit A-1 hereto
("Restricted Definitive Preferred Securities"). Restricted Definitive
Preferred Securities will bear the Restricted Securities Legend set forth on
Exhibit A-1 unless removed in accordance with Section 9.2.
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SECTION 7.4 REGISTRAR; PAYING AGENT; CONVERSION AGENT.
The Trust shall establish or maintain in Charlotte, North Carolina an
office or agency where Securities may be presented for registration of
transfer or exchange (the "Registrar"). In the event that the Convertible
Preferred Securities are not in book-entry only form, the Trust shall maintain
in Charlotte, North Carolina an office or agency where the Convertible
Preferred Securities may be presented for payment ("Paying Agent). The Trust
shall maintain an office or agency where Securities may be presented for
conversion ("Conversion Agent"). The Trust may appoint the Paying Agent and
the Conversion Agent and may appoint one or more additional paying agents and
one or more additional conversion agents in such other locations as it shall
determine. The term "Paying Agent" includes any additional paying agent and
the term "Conversion Agent" includes any additional conversion agent. The
Trust may change any Paying Agent or Conversion Agent without prior notice to
any Holder. The Trust shall notify the Property Trustee in writing of the name
and address of any Agent not a party to this Declaration. If the Trust fails
to appoint or maintain another entity as Paying Agent or Conversion Agent, the
Property Trustee shall act as such. The Trust or any of its Affiliates may act
as Paying Agent or Conversion Agent. The Trust shall act as Paying Agent and
Conversion Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Conversion Agent for
the Convertible Preferred Securities.
SECTION 7.5 PAYING AGENT TO HOLD MONEY IN TRUST.
The Trust shall require each Paying Agent other than the Property Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit
of Holders or the Property Trustee all money held by the Paying Agent for the
payment of principal or distribution on the Securities, and will notify the
Property Trustee if there are insufficient funds. While any such insufficiency
continues, the Property Trustee may require a Paying Agent to pay all money
held by it to the Property Trustee. The Trust at any time may require a Paying
Agent to pay all money held by it to the Property Trustee and to account for
any money disbursed by it. Upon payment over to the Property Trustee, the
Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have
no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money
held by it as Paying Agent.
SECTION 7.6 REPLACEMENT SECURITIES.
If the holder of a Security claims that the Certificate representing such
Security has been lost, destroyed or wrongfully taken or if such Certificate
is mutilated and is surrendered to the Trust or in the case of the Convertible
Preferred Securities to the Property Trustee, the Trust shall issue and the
Property Trustee shall authenticate a replacement Certificate if the Property
Trustee's and the Trust's requirements, as the case may be, are met. If
required by the Property Trustee or the Trust, an indemnity bond must be
sufficient in the judgment of both to protect the Trustees, the Property
Trustee, the Sponsor or any authenticating agent from any loss which any of
them may suffer if a Certificate is replaced. The Company may charge for its
expenses in replacing a Certificate.
Every replacement Security is an additional obligation of the Trust.
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SECTION 7.7 OUTSTANDING CONVERTIBLE PREFERRED SECURITIES.
The Convertible Preferred Securities outstanding at any time are all the
Convertible Preferred Securities represented by Preferred Certificates
authenticated by the Property Trustee except for those canceled by it, those
delivered to it for cancellation, and those described in this Section as not
outstanding.
If a Preferred Certificate is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased
Preferred Certificate is held by a bona fide purchaser.
If Convertible Preferred Securities are considered paid in accordance
with the terms of this Declaration, they cease to be outstanding and interest
on them ceases to accrue.
A Convertible Preferred Security does not cease to be outstanding because
one of the Trust, the Sponsor or an Affiliate of the Sponsor holds such
Security.
SECTION 7.8 CONVERTIBLE PREFERRED SECURITIES IN TREASURY.
In determining whether the Holders of the required amount of Securities
have concurred in any direction, waiver or consent, Convertible Preferred
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be
fully protected in relying on any such direction, waiver or consent, only
Securities which the Property Trustee has Actual Knowledge of being so owned
shall be so disregarded.
SECTION 7.9 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Trust may prepare
and, in the case of the Convertible Preferred Securities, the Property Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations
that the Trust considers appropriate for temporary Securities. Without
unreasonable delay, the Trust shall prepare and deliver to the Property
Trustee Convertible Preferred Securities in certificated form (other than in
the case of Convertible Preferred Securities in global form) and thereupon any
or all temporary Convertible Preferred Securities (other than any such
Convertible Preferred Securities in global form) may be surrendered in
exchange therefor, at the office of the Registrar, and the Property Trustee
shall authenticate and deliver an equal aggregate liquidation amount of
definitive Convertible Preferred Securities in certificated form in exchange
for temporary Convertible Preferred Securities (other than any such
Convertible Preferred Securities in global form). Such exchange shall be made
by the Trust at its own expense and without any charge therefor. Until so
exchanged, temporary Securities shall in all respects be entitled to the same
benefits and subject to the same limitations under this Declaration as
Securities in definitive certificated form authenticated (in the case of
Convertible Preferred Securities) and delivered hereunder.
SECTION 7.10 CANCELLATION.
The Trust at any time may deliver a Convertible Preferred Security to the
Property Trustee for cancellation. The Registrar, Paying Agent and Conversion
Agent shall forward to the Property Trustee any Convertible Preferred Security
surrendered to them for registration of transfer, redemption, conversion,
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exchange or payment. The Property Trustee shall promptly cancel all Preferred
Certificates surrendered for registration of transfer, redemption, conversion,
exchange, payment, replacement or cancellation and shall dispose of canceled
Preferred Certificates as the Trust directs. The Trust may not issue new
Preferred Certificates to replace certificates representing Convertible
Preferred Securities that it has paid or that have been delivered to the
Property Trustee for cancellation or that any Holder has converted.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 TERMINATION OF TRUST.
(a) The Trust shall dissolve:
(i) upon the bankruptcy of the Holder of the Common
Securities or the Sponsor;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Holder of the Common Securities or the
Sponsor; the consent of a majority in liquidation amount of the
Securities voting together as a single class to file a certificate of
cancellation with respect to the Trust; or the revocation of the
charter of the Holder of the Common Securities or the Sponsor and the
expiration of 90 days after the date of revocation without a
reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution of
the Holder of the Common Securities, the Sponsor or the Trust;
(iv) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall
have been paid to the Holders in accordance with the terms of the
Securities;
(v) upon the occurrence and continuation of a Special Event
pursuant to which the Trust shall have been dissolved in accordance
with the terms of the Securities and after satisfaction of all
liabilities to creditors (whether by payment or by making reasonable
provision for payment) all of the Debentures held by the Property
Trustee shall have been distributed to the Holders of Securities in
exchange for all of the Securities;
(vi) upon the distribution of the Common Stock (as defined
in Annex I) to Holders of all outstanding Securities upon conversion
of all such Securities;
(vii) the expiration of the term of the Trust on September
30, 2051; or
(viii) before the issuance of any Securities, with the
consent of all of the Regular Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event referred
to in Section 8.1(a), after satisfaction of all liabilities to creditors
(whether by payment or by making reasonable provision for payment) the
Trustees shall file a certificate of cancellation with the Secretary of State
of the State of Delaware and thereupon the Trust shall terminate.
(c) The provisions of Article X shall survive the termination of the
Trust.
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ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 GENERAL.
(a) When Convertible Preferred Securities are presented to the Registrar
or a co-registrar with a request to register a transfer or to exchange them
for an equal number of Convertible Preferred Securities represented by
different certificates, the Registrar shall register the transfer or make the
exchange if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Trust shall issue and the
Property Trustee shall authenticate Preferred Certificates at the Registrar's
request.
(b) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(c) Subject to this Article IX, the Sponsor and any Related Party may
only transfer Common Securities to the Sponsor or a Related Party of the
Sponsor; provided that, any such transfer is subject to the condition
precedent that the transferor obtain the written opinion of nationally
recognized independent counsel experienced in such matters that such transfer
would not cause more than an insubstantial risk that:
(i) the Trust would not be classified for United States
federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
(d) The Regular Trustees shall provide for the registration of
Certificates and of transfers of Certificates, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other governmental charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Certificates, the Regular Trustees shall cause one or more new Certificates to
be issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Regular Trustees
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled as provided in Section 7.10. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by
this Declaration.
(e) The Trust shall not be required (i) to issue, register the transfer
of, or exchange, Convertible Preferred Securities during a period beginning at
the opening of business 15 days before the day of any selection of Convertible
Preferred Securities for redemption set forth in the terms and ending at the
close of business on the day of selection, or (ii) to register the transfer or
exchange of any Convertible Preferred Security so selected for redemption in
whole or in part, except the unredeemed portion of any Preferred Security
being redeemed in part.
SECTION 9.2 TRANSFER PROCEDURES AND RESTRICTIONS.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE PREFERRED CERTIFICATES. When
Definitive Preferred Certificates are presented to the Registrar or
co-registrar (x) to register the transfer of the Convertible
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Preferred Securities represented thereby; or (y) to exchange such Convertible
Preferred Securities for an equal number of Convertible Preferred Securities
of other authorized denominations, the Registrar or co-registrar shall
register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however, that the
Definitive Preferred Certificates surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Trust
and the Registrar or co-registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing; and
(ii) in the case of Restricted Definitive Preferred
Securities, shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Restricted Preferred Securities are being
delivered to the Registrar by a Holder for registration
in the name of such Holder, without transfer, a
certification from such Holder to that effect
(substantially in the form set forth on the reverse of
the Definitive Preferred Certificate); or
(B) if such Restricted Preferred Securities are being
transferred to a QIB in accordance with Rule 144A, a
certification from such Holder to that effect
(substantially in the form set forth on the reverse of
the Definitive Preferred Certificate); or
(C) if such Restricted Preferred Securities are being
transferred (i) pursuant to an exemption from
registration in accordance with Rule 144 or Regulation
S, or (ii) pursuant to an effective registration
statement under the Securities Act, or (iii) to an
institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3), or (7) under the
Securities Act that is acquiring the Restricted
Preferred Securities for its own account, or for the
account of such an institutional accredited investor,
not with a view to or for offer or sale in connection
with any distribution in violation of the Securities
Act, or (iv) in reliance on another exemption from the
registration requirements of the Securities Act, (X) a
certification from such Holder to that effect
(substantially in the form set forth on the reverse of
the Definitive Preferred Certificate), (Y) in the case
of clauses (i), (iii), and (iv) above, if the Trust or
the Registrar so requests, an opinion of counsel
reasonably acceptable to the Trust or the Registrar, as
the case may be, to the effect that such transfer is in
compliance with the Securities Act, and (Z) in the case
of clause (ii) above, a certificate signed by a Regular
Trustee to the effect that a registration statement
covering the sale of such Restricted Preferred
Securities is effective.
(b) TRANSFERS AFTER EFFECTIVENESS OF SHELF REGISTRATION STATEMENT. After
the effectiveness of a Shelf Registration Statement covering the resale of
Convertible Preferred Securities, Preferred Certificates representing
Convertible Preferred Securities transferred pursuant to such Shelf
Registration Statement in compliance with Section 9.2(a)(ii)(C)(ii) will no
longer be required to bear the Restricted Securities Legend, and beneficial
interests in a Convertible Preferred Security in global form without legends
will be available to transferees of Convertible Preferred Securities
transferred pursuant to such Shelf Registration Statement, upon exchange of
the transferring Holder's Restricted Definitive Preferred Certificate or
directions to transfer such Holder's beneficial interest in the Restricted
Global Preferred
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Security, as the case may be. No such transfer or exchange of a Restricted
Definitive Preferred Certificate or of an interest in the Restricted Global
Preferred Security shall be effective unless the transferor delivers to the
Trust a certification (in the applicable form set forth on the reverse of the
Definitive Preferred Certificate) as to compliance by such Person with the
provisions of this Declaration applicable to such transfer or exchange. After
the effectiveness of the Shelf Registration Statement, the Trust shall issue
and the Property Trustee, upon instruction from the Trust, shall authenticate
a Preferred Certificate in global form without the Restricted Securities
Legend (the "Exchanged Global Preferred Security") to deposit with the
Depositary to evidence (i) transfers of beneficial interests in the Restricted
Global Preferred Security that are thereafter exchanged for interests in such
Exchanged Global Preferred Security, and (ii) transfers of Restricted
Definitive Preferred Securities and Unrestricted Definitive Preferred
Securities with repect to which the transferee elects to take delivery in the
form of beneficial interests in such Exchanged Global Preferred Security, in
each case subject to compliance with the applicable provisions of this
Declaration.
(c) RESTRICTED GLOBAL PREFERRED SECURITY TO REGULATION S GLOBAL PREFERRED
SECURITY. If the holder of a beneficial interest in the Restricted Global
Preferred Security wishes at any time to transfer such interest to a Person
who wishes to take delivery thereof in the form of a beneficial interest in
the Regulation S Global Preferred Security, such transfer may be effected,
subject to the Applicable Procedures, only in accordance with this Section
9.2(c). Upon receipt by the Registrar of (i) written instructions given in
accordance with the Applicable Procedures from a Participant directing the
Registrar to credit or cause to be credited to a specified Participant's
account a beneficial interest in the Regulation S Global Preferred Security in
a number of Convertible Preferred Securities equal to that as to which a
beneficial interest in the Restricted Global Preferred Security is to be so
transferred, (ii) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Participant
(and, if applicable, the Euroclear or CEDEL account, as the case may be) to be
credited with, and the account of the Participant to be debited for, such
beneficial interest, and (iii) a certificate in substantially the form set
forth in Exhibit D given by the holder of such beneficial interest, the
Registrar shall instruct the Depositary to reduce the number of Convertible
Preferred Securities represented by the Restricted Global Preferred Security,
and to increase the number of Convertible Preferred Securities represented by
the Regulation S Global Preferred Security, by the number of Convertible
Preferred Securities as to which a beneficial interest in the Restricted
Global Preferred Security is to be so transferred, and to credit or cause to
be credited to the account of the Person specified in such instructions (which
during the Restricted Period shall be the Participant for Euroclear or CEDEL
or both, as the case may be) a beneficial interest in the Regulation S Global
Preferred Security in a number of Convertible Preferred Securities equal to
that by which the Restricted Global Preferred Security was reduced upon such
transfer.
(d) REGULATION S GLOBAL PREFERRED SECURITY TO RESTRICTED GLOBAL PREFERRED
SECURITY. If, during the Restricted Period, the holder of a beneficial
interest in the Regulation S Global Preferred Security wishes to transfer such
interest to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the Restricted Global Preferred Security, such transfer
may be effected, subject to the Applicable Procedures, only in accordance with
this Section 9.2(d). Upon receipt by the Registrar of (i) written instructions
given in accordance with the Applicable Procedures from a Participant
directing the Registrar to credit or cause to be credited to a specified
Participant's account a beneficial interest in the Restricted Global Preferred
Security in a number of Convertible Preferred Securities equal to that as to
which a beneficial interest in the Regulation S Global Preferred Security is
to be so transferred, (ii) a written order given in accordance with the
Applicable Procedures containing information regarding the account of the
Participant (and, if applicable, the Euroclear or CEDEL account, as the case
may be) to be credited with, and the account of the Participant to be debited
for, such beneficial interest, and (iii) a certificate in substantially the
form set forth in Exhibit E given by the holder of such beneficial interest,
the
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Registrar shall instruct the Depositary to reduce the number of Convertible
Preferred Securities represented by the Regulation S Global Preferred
Security, and to increase the number of Convertible Preferred Securities
represented by the Restricted Global Preferred Security, by the number of
Convertible Preferred Securities as to which a beneficial interest in the
Regulation S Global Preferred Security is to be so transferred, and to credit
or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Restricted Global Preferred Security
in a number of Convertible Preferred Securities equal to that by which the
Regulation S Global Preferred Security was reduced upon such transfer.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF A DEFINITIVE PREFERRED
CERTIFICATE FOR A BENEFICIAL INTEREST IN A GLOBAL PREFERRED SECURITY. A
Definitive Preferred Certificate may not be exchanged for a beneficial
interest in a Global Preferred Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Property Trustee of a
Definitive Preferred Certificate, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Property Trustee,
together with:
(i) if such Definitive Preferred Security is a Restricted
Preferred Security, certification, in the form set forth on the
reverse of the Preferred Certificate, that such Definitive Preferred
Security is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Definitive Preferred Certificate is
a Restricted Preferred Security, written instructions directing the
Property Trustee to make, or to direct the Depositary to make, an
adjustment on its books and records with respect to such Global
Preferred Security to reflect an increase in the number of the
Preferred Securities represented by the Global Preferred Security,
then the Property Trustee shall cancel such Definitive Preferred Certificate
and cause, or direct the Depositary to cause, the aggregate number of
Convertible Preferred Securities represented by the Global Preferred Security
to be increased accordingly. If no Global Preferred Securities are then
outstanding, the Trust shall issue and the Property Trustee shall
authenticate, upon written order of any Regular Trustee, an appropriate number
of Convertible Preferred Securities in global form.
(f) TRANSFER AND EXCHANGE OF GLOBAL PREFERRED SECURITIES. The transfer
and exchange of Global Preferred Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this Declaration
(including applicable restrictions on transfer set forth herein, if any) and
the procedures of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
(g) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL PREFERRED SECURITY FOR
A DEFINITIVE PREFERRED CERTIFICATE.
(i) Any Person having a beneficial interest in a Global
Preferred Security may upon request, and if accompanied by the
information specified below, exchange such beneficial interest for a
Definitive Preferred Certificate representing the same number of
Convertible Preferred Securities. Upon receipt by the Property
Trustee from the Depositary or its nominee on behalf of any Person
having a beneficial interest in a Global Preferred Security of
written instructions or such other form of instructions as is
customary for the Depositary or the Person designated by the
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Depositary as having such a beneficial interest in a Restricted
Preferred Security and the following additional information and
documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the owner
of a beneficial interest in a Global Preferred
Security, a certification from such Person to that
effect (substantially in the form set forth on the
reverse of the Definitive Preferred Certificate); or
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A, a certification from
the transferor to that effect (substantially in the
form set forth on the reverse of the Definitive
Preferred Certificate); or
(C) if such beneficial interest is being transferred (i)
pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S, or (ii)
pursuant to an effective registration statement under
the Securities Act, or (iii) to an institutional
"accredited investor" within the meaning of Rule
501(a)(1), (2), (3), or (7) under the Securities Act
that is acquiring the Restricted Preferred Securities
for its own account, or for the account of such an
institutional accredited investor, not with a view to
or for offer or sale in connection with any
distribution in violation of the Securities Act, or
(iv) in reliance on another exemption from the
registration requirements of the Securities Act, (X) a
certification from the transferee or transferor to that
effect (substantially in the form set forth on the
reverse of the Definitive Preferred Certificate), (Y)
in the case of clauses (i), (iii), and (iv) above, if
the Trust or the Registrar so requests, an opinion of
counsel reasonably acceptable to the Trust or the
Registrar, as the case may be, to the effect that such
transfer is in compliance with the Securities Act, and
(Z) in the case of clause (ii) above, a certificate
signed by a Regular Trustee to the effect that a
registration statement covering the sale of such
Restricted Preferred Securities is effective.
then the Property Trustee will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Property Trustee, the aggregate principal amount of the Global
Preferred Security to be reduced on its books and records and,
following such reduction, the Trust will execute and the Property
Trustee will authenticate and deliver to the transferee a Definitive
Preferred Certificate.
(ii) Definitive Preferred Certificates issued in exchange
for a beneficial interest in a Global Preferred Security pursuant to
this Section 9.2(g) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions
from its Participants or indirect participants or otherwise, shall
instruct the Property Trustee. The Property Trustee shall deliver
such Definitive Preferred Certificates to the Persons in whose names
such Convertible Preferred Securities are so registered in accordance
with the instructions of the Depositary.
(h) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL PREFERRED SECURITIES.
Notwithstanding any other provisions of this Declaration (other than the
provisions set forth in subsection (i) of this Section 9.2), a Global
Preferred Security may not be transferred as a whole except by the Depositary
to a nominee of the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(i) AUTHENTICATION OF DEFINITIVE PREFERRED CERTIFICATES IN ABSENCE OF
DEPOSITARY.
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(i) If at any time:
(A) the Depositary notifies the Trust that the
Depositary is unwilling or unable to continue as Depositary
for the Global Preferred Securities or has ceased to be a
Clearing Agency registered under the Exchange Act, and a
successor Depositary for the Global Preferred Securities is
not appointed by the Trust at the direction of the Sponsor
within 90 days after delivery of such notice; or
(B) in the case of a Global Preferred Security held
for an account of Euroclear or CEDEL, Euroclear or CEDEL, as
the case may be, (A) is closed for business for a continuous
period of 14 days (other than by reason of statutory or
other holidays) or (B) announces an intention permanently to
cease business or does in fact do so; or
(C) the Trust (with the consent of the Sponsor)
notifies the Property Trustee in writing that it elects to
cause the issuance of Definitive Preferred Certificates
under this Declaration; or
(D) an Event of Default has occurred and is
continuing,
then the Trust will execute, and the Property Trustee, upon receipt
of a written order of the Trust signed by one Regular Trustee
requesting the authentication and delivery of Definitive Preferred
Certificates to the Persons designated by the Trust, will
authenticate and deliver Definitive Preferred Certificates,
representing an aggregate number of Convertible Preferred Securities
equal to the aggregate number of Convertible Preferred Securities
represented by such Global Preferred Securities, in exchange for such
Global Certificates. Any Global Preferred Security exchanged pursuant
to clause (A), (B), or (C) above shall be so exchanged in whole and
not in part and any Global Security exchanged pursuant to clause (D)
above may be exchanged in whole or from time to time in part as
directed by the Depositary.
(ii) Definitive Preferred Certificates issued in exchange
for a Global Preferred Security or any portion thereof pursuant to
paragraph (i) above shall be registered in such names and be in such
authorized denominations as the Depositary shall designate and shall
bear any legends required hereunder. Any Global Preferred Security to
be exchanged in whole shall be surrendered by the Depositary to the
Registrar. With regard to any Global Preferred Security to be
exchanged in part, either such Global Preferred Security shall be so
surrendered for exchange or, if the Property Trustee is acting as
custodian for the Depositary or its nominee with respect to such
Global Preferred Security, the number of Convertible Preferred
Securities represented thereby shall be reduced, by an amount equal
to the portion thereof to be so exchanged, by means of an appropriate
adjustment made on the records of the Property Trustee. Upon any such
surrender or adjustment, the Property Trustee shall authenticate and
make available for delivery the Definitive Preferred Certificates
issuable on such exchange to or upon the written order of the
Depositary or an authorized representative thereof.
(j) LEGENDS.
(i) Until three (3) years after the later of the original
issuance date of any Restricted Preferred Security or the last date
that any Affiliate of the Trust was the owner of such Restricted
Preferred Security, any Certificate evidencing such Restricted
Preferred Security (and all securities issued in exchange therefor or
substitution thereof, other than Common Stock, if any, issued upon
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conversion thereof which shall bear the legend set forth in the
Indenture) shall bear a legend (the "Restricted Securities Legend")
in substantially the following form (unless such Restricted Preferred
Security has been transferred pursuant to a registration statement
that has been declared effective under the Securities Act (and which
continues to be effective at the time of such transfer) or unless
otherwise agreed by the Trust in writing, with notice thereof to the
Registrar):
THIS SECURITY (OR ITS PREDECESSOR), ANY CONVERTIBLE SUBORDINATED DEBT
SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY, AND ANY COMMON STOCK ISSUED ON
CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO OR FOR THE
ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES, AND AGREES FOR THE BENEFIT
OF THE ISSUER HEREOF THAT: (I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
INSIGNIA FINANCIAL GROUP, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE") EXCEPT (A) TO THE COMPANY, (B) PURSUANT
TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER,
SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS
SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES FOR SUCH
ISSUER (i) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR
OTHER
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INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE, AND (ii) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
(ii) Any Certificate (or Security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms or as to which the conditions for removal of the
foregoing legend as set forth therein have been satisfied may, upon surrender
of such Certificate for exchange to the Registrar in accordance with the
provisions of this Section 9.2, be exchanged for a new Certificate or
Certificates, of like tenor and aggregate number of Convertible Preferred
Securities, which shall not bear the Restricted Securities Legend.
(k) CANCELLATION OR ADJUSTMENT OF GLOBAL PREFERRED SECURITY. At such time
as all beneficial interests in a Global Preferred Security have either been
exchanged for Definitive Preferred Certificates to the extent permitted by
this Declaration or redeemed, repurchased or canceled in accordance with the
terms of this Declaration, such Global Preferred Security shall be returned to
the Depositary for cancellation or retained and canceled by the Property
Trustee. At any time prior to such cancellation, if any beneficial interest in
a Global Preferred Security is exchanged for Definitive Preferred
Certificates, Convertible Preferred Securities represented by such Global
Preferred Security shall be reduced and an adjustment shall be made on the
books and records of the Property Trustee (if it is then the Securities
Custodian for such Global Preferred Security) with respect to such Global
Preferred Security, by the Property Trustee or the Securities Custodian, to
reflect such reduction.
(l) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF CONVERTIBLE
PREFERRED SECURITIES.
(i) To permit registrations of transfers and exchanges, the
Trust shall execute and the Property Trustee shall authenticate
Definitive Preferred Certificates and Global Preferred Certificates
at the Registrar's or co-registrar's request.
(ii) Registrations of transfers or exchanges will be
effected without charge, but only upon payment (with such indemnity
as the Trust or the Sponsor may require) in respect of any tax or
other governmental charge that may be imposed in relation to it.
(iii) Prior to the due presentation for registrations of
transfer of any Convertible Preferred Security, the Trust, the
Property Trustee, the Paying Agent, the Registrar or any co-registrar
may deem and treat the Person in whose name a Convertible Preferred
Security is registered as the absolute owner of such Convertible
Preferred Security for the purpose of receiving Distributions on such
Convertible Preferred Security and for all other purposes whatsoever,
and none of the Trust, the Property Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the
contrary.
(iv) All Convertible Preferred Securities issued upon any
transfer or exchange pursuant to the terms of this Declaration shall
evidence the same security and shall be entitled to the same benefits
under this Declaration as the Convertible Preferred Securities
surrendered upon such transfer or exchange.
(m) NO OBLIGATION OF THE PROPERTY TRUSTEE.
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(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Preferred Security,
any Participant in the Depositary or other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any
Participant thereof, with respect to any ownership interest in the
Convertible Preferred Securities or with respect to the delivery to
any Participant, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Convertible
Preferred Securities. All notices and communications to be given to
the Holders and all payments to be made to Holders under the
Convertible Preferred Securities shall be given or made only to or
upon the order of the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Preferred
Security). The rights of beneficial owners in any Global Preferred
Security shall be exercised only through the Depositary subject to
the applicable rules and procedures of the Depositary. The Property
Trustee may conclusively rely and shall be fully protected in relying
upon information furnished by the Depositary or any agent thereof
with respect to its Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Declaration or
under applicable law with respect to any transfer of any interest in
any Convertible Preferred Security (including any transfers between
or among Depositary Participants or beneficial owners in any Global
Preferred Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the
terms of this Declaration, and to examine the same to determine
substantial compliance as to form with the express requirements
hereof.
SECTION 9.3 DEEMED SECURITY HOLDERS.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to
or interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Property Trustee,
Registrar, or a co-registrar shall have Actual Knowledge thereof.
SECTION 9.4 APPOINTMENT OF SUCCESSOR DEPOSITARY.
If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Convertible Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency to
act as Depositary with respect to such Convertible Preferred Securities.
SECTION 9.5 REGISTRATION RIGHTS.
The holders of the Convertible Preferred Securities, the Debentures, the
Convertible Preferred Securities Guarantee, and the shares of Common Stock of
the Company issuable upon conversion of the Debentures (collectively, the
"Registrable Securities") are entitled to the benefits of the Registration
Rights Agreement. Pursuant to the Registration Rights Agreement, the Company
has agreed for the benefit of the holders of Registrable Securities that (i)
it will, at its cost, within 90 days after the date of original issuance of
the Debentures, file a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to the resales of the Registrable
Securities, (ii) it will use all reasonable efforts to
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cause such Shelf Registration Statement to be declared effective by the
Commission as promptly as practicable and in no event later than 180 days
after the date of original issuance of the Debentures, and (iii) the Company
will use all reasonable efforts to maintain such Shelf Registration Statement
continuously effective under the Securities Act until the third anniversary of
the effectiveness of the Shelf Registration Statement or such earlier date as
is provided in the Registration Rights Agreement (the "Effectiveness Period").
If (i) on or prior to 90 days following the date of original issuance of
the Registrable Debentures, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180th day following the date
of original issuance of the Debentures, such Shelf Registration Statement is
not declared effective (each, a "Registration Default"), additional interest
("Liquidated Damages") will accrue on the Debentures from and including the
day following such Registration Default. Liquidated Damages will be paid
quarterly in arrears, with the first quarterly payment due on the first
interest or distribution payment date, as applicable, following the date on
which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount or liquidation amount, as applicable, to and including the
90th day following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default. Upon (x) the filing of the Shelf Registration Statement after the
90-day period described in clause (i) above or (y) the effectiveness of the
Shelf Registration Statement after the 180-day period described in clause (ii)
above, the interest rate borne by the Debentures from the date of such filing
or effectiveness, as the case may be, will be reduced to the interest rate
then in effect on the Debentures.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 LIABILITY.
(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; or
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of
the Convertible Preferred Securities shall be entitled to the same limitation
of personal liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of Delaware.
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SECTION 10.2 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by
such Indemnified Person in good faith on behalf of the Trust and in a manner
such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross negligence or
willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets
from which Distributions to Holders of Securities might properly be paid.
SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties
and liabilities of an Indemnified Person otherwise existing at law or in
equity (other than the duties imposed on the Property Trustee under the Trust
Indenture Act), are agreed by the parties hereto to replace such other duties
and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
any Covered Persons; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities, the Indemnified
Person shall resolve such conflict of interest, take such action or
provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to
such interests, any customary or accepted industry practices, and any
applicable generally accepted accounting practices or principles. In
the absence of bad faith by the Indemnified Person, the resolution,
action or term so made, taken or provided by the Indemnified Person
shall not constitute a breach of this Declaration or any other
agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
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shall have no duty or obligation to give any consideration
to any interest of or factors affecting the Trust or any other
Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and
shall not be subject to any other or different standard imposed by
this Declaration or by applicable law.
SECTION 10.4 INDEMNIFICATION.
(a)(i) The Sponsor shall indemnify, to the full extent permitted by law,
any Company Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Trust) by reason of the fact that he
is or was a Company Indemnified Person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Company Indemnified Person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Sponsor shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Trust to
procure a judgment in its favor by reason of the fact that he is or
was a Company Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Trust and except that
no such indemnification shall be made in respect of any claim, issue
or matter as to which such Company Indemnified Person shall have been
adjudged to be liable to the Trust unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity
for such expenses which such Court of Chancery or such other court
shall deem proper.
(iii) To the extent that a Company Indemnified Person shall
be successful on the merits or otherwise (including dismissal of an
action without prejudice or the settlement of an action without
admission of liability) in defense of any action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in
defense of any claim, issue or matter therein, he shall be
indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of
this Section 10.4(a) (unless ordered by a court) shall be made by the
Sponsor only as authorized in the specific case upon a determination
that indemnification of the Company Indemnified Person is proper in
the circumstances because he has met the applicable standard of
conduct set forth in paragraphs (i) and (ii). Such determination
shall be made (1) by the Regular Trustees by a majority vote of a
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quorum consisting of such Regular Trustees who were not parties to
such action, suit or proceeding, (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a
written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees) incurred by a
Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred
to in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid
by the Sponsor in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of
such Company Indemnified Person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by
the Sponsor as authorized in this Section 10.4(a). Notwithstanding
the foregoing, no advance shall be made by the Debenture Issuer if a
determination is reasonably and promptly made (i) by the Regular
Trustees by a majority vote of a quorum of disinterested Regular
Trustees, (ii) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so directs,
by independent legal counsel in a written opinion or (iii) the Common
Security Holder of the Trust, that, based upon the facts known to the
Regular Trustees, counsel or the Common Security Holder at the time
such determination is made, such Company Indemnified Person acted in
bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the Trust, or, with respect to
any criminal proceeding, that such Company Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful.
In no event shall any advance be made in instances where the Regular
Trustees, independent legal counsel or Common Security Holder
reasonably determine that such person deliberately breached his duty
to the Trust or its Common or Convertible Preferred Security Holders.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this
Section 10.4(a) shall not be deemed exclusive of any other rights to
which those seeking indemnification and advancement of expenses may
be entitled under any agreement, vote of stockholders or
disinterested directors of the Sponsor or Convertible Preferred
Security Holders of the Trust or otherwise, both as to action in his
official capacity and as to action in another capacity while holding
such office. All rights to indemnification under this Section 10.4(a)
shall be deemed to be provided by a contract between the Debenture
Issuer and each Company Indemnified Person who serves in such
capacity at any time while this Section 10.4(a) is in effect. Any
repeal or modification of this Section 10.4(a) shall not affect any
rights or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any Person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether
or not the Sponsor would have the power to indemnify him against such
liability under the provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any
person who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to the resulting or
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surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall,
unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a Company Indemnified Person and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
(b) The Sponsor agrees to indemnify, to the fullest extent permitted by
law, the (i) Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate
of the Property Trustee and the Delaware Trustee, and (iv) any officers,
directors, shareholders, members, partners, employees, representatives,
custodians, nominees or agents of the Property Trustee and the Delaware
Trustee (each of the Persons in (i) through (iv) being referred to as a
"Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified
Person harmless against, any loss, liability or expense incurred without gross
negligence (in the case of the Property Trustee, negligence) or bad faith on
its part, arising out of or in connection with the acceptance or
administration or the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 10.4(b) shall survive the
satisfaction and discharge of this Declaration.
SECTION 10.5 OUTSIDE BUSINESSES.
Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent
ventures or the income or profits derived therefrom, and the pursuit of any
such venture, even if competitive with the business of the Trust, shall not be
deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware
Trustee, or the Property Trustee shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and
any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee
shall have the right to take for its own account (individually or as a partner
or fiduciary) or to recommend to others any such particular investment or
other opportunity. Any Covered Person, the Delaware Trustee and the Property
Trustee may engage or be interested in any financial or other transaction with
the Sponsor or any Affiliate of the Sponsor, or may act as depositary for,
trustee or agent for, or act on any committee or body of holders of,
securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 FISCAL YEAR.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year,
or such other year as is required by the Code.
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SECTION 11.2 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and supporting
documents, which shall reflect in reasonable detail, each transaction of the
Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the
records of the Trust shall be examined by and reported upon as of the end of
each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and delivered to each
of the Holders of Securities, within 90 days after the end of each Fiscal Year
of the Trust, annual financial statements of the Trust, including a balance
sheet of the Trust as of the end of such Fiscal Year, and the related
statements of income or loss.
(c) The Regular Trustees shall cause to be duly prepared and delivered to
each of the Holders of Securities, any annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and
the Treasury Regulations. Notwithstanding any right under the Code to deliver
any such statement at a later date, the Regular Trustees shall endeavor to
deliver all such statements within 30 days after the end of each Fiscal Year
of the Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed with
the appropriate taxing authority, an annual United States federal income tax
return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed
by the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 11.3 BANKING.
The Trust shall maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds
in respect of the Debentures held by the Property Trustee shall be made
directly to the Property Trustee Account and no other funds of the Trust shall
be deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Regular Trustees; provided, however, that
the Property Trustee shall designate the signatories for the Property Trustee
Account.
SECTION 11.4 WITHHOLDING.
The Trust and the Regular Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed over withholding, Holders shall be
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limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld from actual Distributions made, the
Trust may reduce subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may only be amended by a written
instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than two
Regular Trustees a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property
Trustee;
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee; and
(iv) if the amendment affects the rights, powers, duties,
obligations or immunities of the Sponsor, the Sponsor.
(b) No amendment shall be made, and any such purported amendment shall be
void and ineffective:
(i) unless, in the case of any proposed amendment,
the Property Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such
amendment is permitted by, and conforms to, the terms of
this Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties, obligations or
immunities of the Property Trustee, the Property Trustee
shall have first received:
(A) an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(B) an opinion of counsel (who may be counsel to
the Sponsor or the Trust) that such amendment is permitted
by, and conforms to, the terms of this Declaration
(including the terms of the Securities); and
(iii) to the extent the result of such amendment would be
to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor trust;
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(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act.
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges
or preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities.
(d) Section 9.1(c) and this Section 12.1 shall not be amended without the
consent of all of the Holders of the Securities.
(e) Article IV shall not be amended without the consent of the Holders of
a Majority in liquidation amount of the Common Securities.
(f) The rights of the Holders of the Common Securities under Article V to
increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of the Holders of a Majority in liquidation
amount of the Common Securities.
(g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of
this Declaration;
(iii) add to the covenants, restrictions or obligations of
the Sponsor; and
(iv) to conform to any change in Rule 3a-5 or written change
in interpretation or application of Rule 3a-5 by any legislative
body, court, government agency or regulatory authority which
amendment does not have a material adverse effect on the right,
preferences or privileges of the Holders.
SECTION 12.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN
CONSENT.
(a) Meetings of the Holders of any class of Securities may be called at
any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class
of Securities are entitled to act under the terms of this Declaration, the
terms of the Securities or the rules of any stock exchange on which the
Convertible Preferred Securities are listed or admitted for trading. The
Regular Trustees shall call a meeting of the Holders of such class if directed
to do so by the Holders of at least 10% in liquidation amount of such class of
Securities. Such direction shall be given by delivering to the Regular
Trustees a writing stating that the signing Holders of Securities wish to call
a meeting and indicating the general or specific purpose for which the meeting
is to be called. Any Holders of Securities calling a meeting shall specify in
writing the Security Certificates held by the Holders of Securities exercising
the right to call a meeting and only those Securities specified shall be
counted for purposes of determining whether the required percentage set forth
in the second sentence of this paragraph has been met.
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(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least 7 days
and not more than 60 days before the date of such meeting. Whenever a
vote, consent or approval of the Holders of Securities is permitted
or required under this Declaration or the rules of any stock exchange
on which the Convertible Preferred Securities are listed or admitted
for trading, such vote, consent or approval may be given at a meeting
of the Holders of Securities. Any action that may be taken at a
meeting of the Holders of Securities may be taken without a meeting
if a consent in writing setting forth the action so taken is signed
by the Holders of Securities owning not less than the minimum amount
of Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders of
Securities having a right to vote thereon were present and voting.
Prompt notice of the taking of action without a meeting shall be
given to the Holders of Securities entitled to vote who have not
consented in writing. The Regular Trustees may specify that any
written ballot submitted to the Security Holder for the purpose of
taking any action without a meeting shall be returned to the Trust
within the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to
act for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after
the expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Holder of Securities executing it. Except as otherwise
provided herein, all matters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation Law
of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders of the Securities were stockholders of a
Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the
Regular Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the t Indenture Act or the listing rules
of any stock exchange on which the Convertible Preferred Securities
are then listed or trading otherwise provides, the Regular Trustees,
in their sole discretion, shall establish all other provisions
relating to meetings of Holders of Securities, including notice of
the time, place or purpose of any meeting at which any matter is to
be voted on by any Holders of Securities, waiver of any such notice,
action by consent without a meeting, the establishment of a record
date, quorum requirements, voting in person or by proxy or any other
matter with respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE.
The Trustee that acts as initial Property Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Property Trustee represents and warrants, as
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applicable, to the Trust and the Sponsor at the time of the Successor Property
Trustee's acceptance of its appointment as Property Trustee that:
(a) the Property Trustee is a national banking association with trust
powers, duly organized, validly existing and in good standing, with trust
power and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, the Declaration;
(b) the execution, delivery and performance by the Property Trustee of
the Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee, and it constitutes a legal, valid and
binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) the execution, delivery and performance of the Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter
or by-laws of the Property Trustee; and
(d) no consent, approval or authorization of, or registration with or
notice to, any South Carolina or federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of the
Declaration.
SECTION 13.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.
The Trustee that acts as initial Delaware Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is a national banking association or a Delaware
banking corporation with trust powers, duly organized, validly existing and in
good standing, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, the Declaration.
(b) The Delaware Trustee has been authorized to perform its obligations
under the Certificate of Trust and the Declaration. The Declaration under
Delaware law constitutes a legal, valid and binding obligation of the Delaware
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles
of equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at
law).
(c) No consent, approval or authorization of, or registration with or
notice to, any Delaware or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of the
Declaration.
(d) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 NOTICES.
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):
Insignia Financing I
c/o Insignia Financial Group, Inc.
One Insignia Financial Plaza
Post Office Box 1089
Greenville, South Carolina 29602
Attention: General Counsel
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
First Union Bank of Delaware
One Rodney Square
920 King Street
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
(c) if given to the Property Trustee, at its Corporate Trust Office to
the attention of Corporate Trust Trustee Administration (or such other address
as the Property Trustee may give notice of to the Holders of the Securities).
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Post Office Box 1089
Greenville, South Carolina 29602
Attention: General Counsel
(e) if given to any other Holder, at the address set forth on the books
and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
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SECTION 14.2 GOVERNING LAW.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 14.3 INTENTION OF THE PARTIES.
It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention
of the parties.
SECTION 14.4 HEADINGS.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 14.5 SUCCESSORS AND ASSIGNS
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 14.6 PARTIAL ENFORCEABILITY.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder
of this Declaration, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 COUNTERPARTS.
This Declaration may contain more than one counterpart of the signature
page and this Declaration may be executed by the affixing of the signature of
each of the Trustees to one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have
the same force and effect as though all of the signers had signed a single
signature page.
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IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ Andrew L. Farkas
-----------------------------------------------
Andrew L. Farkas, as Regular Trustee
/s/ John K. Lines
-----------------------------------------------
John K. Lines, as Regular Trustee
/s/ Ronald Uretta
-----------------------------------------------
Ronald Uretta, as Regular Trustee
First Union Bank of Delaware, as Delaware Trustee
/s/ Melissa Matthews
By:____________________________________________
Name: Melissa Matthews
Title: Vice President
First Union National Bank of South Carolina,
as Property Trustee
/s/ Rosemary M. Greco
By:____________________________________________
Name: Rosemary M. Greco
Title: Vice President
Insignia Financial Group, Inc., as Sponsor
/s/ Ronald Uretta
By:____________________________________________
Name: Ronald Uretta
Title: Chief Operating Officer and Treasurer
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ANNEX I
TERMS OF SECURITIES
6 1/2% TRUST CONVERTIBLE PREFERRED SECURITIES
6 1/2% TRUST CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust,
dated as of November 1, 1996 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Convertible Preferred Securities and the
Common Securities are set out below (each capitalized term used but not
defined herein has the meaning set forth in the Declaration or, if not defined
in such Declaration, as defined in the Offering Memorandum referred to below):
1. DESIGNATION AND NUMBER.
(a) Convertible Preferred Securities. 2,600,000 Convertible Preferred
Securities of the Trust with an aggregate liquidation amount with respect to
the assets of the Trust of $130,000,000, plus up to an additional 390,000
Convertible Preferred Securities of the Trust with an aggregate liquidation
amount with respect to the assets of the Trust of $19,500,000 (the "Additional
Preferred Securities") solely to cover over-allotments (as provided for in the
Purchase Agreement), and a liquidation amount with respect to the assets of
the Trust of $50 per Convertible Preferred Security, are hereby designated for
the purposes of identification only as "6 1/2% Trust Convertible Preferred
Securities" (the "Convertible Preferred Securities"). The Convertible
Preferred Security Certificates evidencing the Convertible Preferred
Securities shall be substantially in the form of Exhibit A-1 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice or to conform to the
rules of any stock exchange on which the Convertible Preferred Securities are
listed.
(b) Common Securities. 80,413 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of
$4,020,650, plus up to an additional 12,062 Common Securities of the Trust
with an aggregate liquidation amount with respect to the assets of the Trust
of $603,100 to meet the capital requirements of the Trust in the event of an
issuance of Additional Preferred Securities, and a liquidation amount with
respect to the assets of the Trust of $50 per common security, are hereby
designated for the purposes of identification only as "6 1/2% Trust
Convertible Common Securities" (the "Common Securities"). The Common Security
Certificates evidencing the Common Securities shall be substantially in the
form of Exhibit A-2 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.
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2. DISTRIBUTIONS.
(a) Distributions payable on each Security will be fixed at a rate per
annum of 6 1/2% (the "Coupon Rate") of the stated liquidation amount of $50
per Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the Coupon Rate (to
the extent permitted by applicable law). The term "Distributions" as used
herein includes such cash distributions and any such interest payable unless
otherwise stated. A Distribution is payable only to the extent that payments
are made in respect of the Debentures held by the Property Trustee and to the
extent the Property Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed on the basis of a
360-day year of twelve 30-day months.
(b) Distributions on the Securities will be cumulative, will accrue from
the date of original issuance of the Securities, and will be payable quarterly
in arrears, on March 31, June 30, September 30 and December 31 of each year,
commencing on December 31, 1996, except as otherwise described below. So long
as no event of default under the Indenture shall have occurred and be
continuing, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period from time to
time on the Debentures for a period not exceeding 20 consecutive quarters
(each an "Extension Period"), during which Extension Period no interest shall
be due and payable on the Debentures, provided that no Extension Period shall
last beyond the date of maturity of the Debentures. As a consequence of such
deferral, Distributions will also be deferred. Despite such deferral,
quarterly Distributions will continue to accrue with interest thereon (to the
extent permitted by applicable law) at the Coupon Rate compounded quarterly
during any such Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further extend such Extension
Period; provided that such Extension Period together with all such previous
and further extensions thereof may not exceed 20 consecutive quarters or
extend beyond the maturity of the Debentures. Payments of accrued
Distributions will be payable to Holders as they appear on the books and
records of the Trust on the first record date after the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which will be 15 days prior to the relevant payment dates, which
payment dates correspond to the interest payment dates on the Debentures;
provided that if the payment date is a Redemption Date, then the record date
for the Distribution shall be as of the opening of business on such record
date for the purpose of permitting a Holder of a Convertible Preferred
Security to convert on such record date while continuing to be the record
holder for the Distribution and therefore entitled to receive the Distribution
on the payment date notwithstanding conversion on the record date. In the
event that any Convertible Preferred Security is redeemed after a record date
and prior to (but not on) the corresponding payment date, the accrued and
unpaid distributions on such Convertible Preferred Security as of the
redemption date will be paid to the holder thereof on the redemption date, not
to the holder thereof on the record date. In the event that a redemption date
is also a payment date,
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then the accrued and unpaid distributions will be paid to the holder of such
Convertible Preferred Security as of the record date. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
such payment in respect of the Convertible Preferred Securities will be made
as described under the heading "Description of the Convertible Preferred
Securities--Form, Denomination and Registration" in the Offering Memorandum,
dated October 29, 1996, of the Trust. The relevant record dates for the Common
Securities shall be the same record date as for the Convertible Preferred
Securities. Distributions payable on any Securities that are not punctually
paid on any Distribution payment date, as a result of the Debenture Issuer
having failed to make a payment under the Debentures, will cease to be payable
to the Person in whose name such Securities are registered on the relevant
record date, and such defaulted Distribution will instead be payable to the
Person in whose name such Securities are registered on the special record date
or other specified date determined in accordance with the Indenture. If any
date on which Distributions are payable on the Securities is not a Business
Day, then payment of the Distribution payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
(d) In the event of an election by the Holder to convert its Securities
through the Conversion Agent into Common Stock (as hereinafter defined)
pursuant to the terms of the Securities as set forth in this Annex I to the
Declaration, no payment, allowance or adjustment shall be made with respect to
accumulated and unpaid Distributions on such Securities, or be required to be
made; provided that Holders of Securities at the close of business on any
record date for the payment of Distributions will be entitled to receive the
Distributions payable on such Securities on the corresponding payment date
notwithstanding the conversion of such Securities into Common Stock following
such record date.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION.
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the Holders of the Securities on the date of the
dissolution, winding-up or termination, as the case may be, will be entitled
to receive out of the assets of the Trust available for distribution to
Holders of Securities after satisfaction of liabilities to creditors an amount
equal to the aggregate of the stated liquidation amount of $50 per Security
plus accrued and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"), unless such dissolution,
winding-up or termination occurs in connection with a Special Event in which
case, in accordance with Section 4(c), Debentures in an aggregate stated
principal amount equal to the aggregate stated liquidation amount of such
Securities, with an interest rate equal to the Coupon Rate of, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on, such Securities, shall be distributed on a Pro Rata basis to
the Holders of the Securities in exchange for such Securities.
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If, upon any such dissolution, 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 Securities shall be paid on a Pro Rata basis.
4. REDEMPTION AND DISTRIBUTION.
(a) Upon the repayment of the Debentures in whole or in part, whether at
maturity or upon redemption (either at the option of the Debenture Issuer or
pursuant to a Special Event as described below), the proceeds from such
repayment or payment shall be simultaneously applied to redeem Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Debentures so repaid or redeemed at a redemption price per Security
equal to the redemption price of the Debentures, together with accrued and
unpaid Distributions thereon through the date of the redemption, payable in
cash (the "Redemption Price"). Holders will be given not less than 20 nor more
than 60 days notice of such redemption.
(b) If fewer than all the outstanding Securities are to be so redeemed,
the Securities will be redeemed Pro Rata from each Holder of Securities, it
being understood that, in respect of Convertible Preferred Securities
registered in the name of and held of record by DTC (or a successor
depositary) or any nominee, the distribution of the proceeds of such
redemption will be made in accordance with the procedures of such agency or
nominee.
(c) If, at any time, a Tax Event or an Investment Company Event (each, as
defined below, a "Special Event") shall occur and be continuing, the Regular
Trustees may with the consent of the Sponsor, except in certain limited
circumstances in relation to a Tax Event described in this Section 4(c),
dissolve the Trust and, after satisfaction of creditors, cause Debentures held
by the Property Trustee, having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid
Distributions on, and having the same record date for payment as the
Securities, to be distributed to the Holders of the Securities in liquidation
of such Holders' interests in the Trust on a Pro Rata basis, within 90 days
following the occurrence of such Special Event (the "90 Day Period");
provided, however, that such dissolution and distribution shall be conditioned
on (i) in the case of the occurrence of a Tax Event, the Regular Trustees'
receipt of an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "No Recognition Opinion"), which opinion may
rely on published revenue rulings of the Internal Revenue Service, to the
effect that neither the Trust nor the Holders of the Securities will recognize
any gain or loss for United States federal income tax purposes as a result of
the dissolution of the Trust and the distribution of Debentures, (ii) in the
case of a Tax Event, the Debenture Issuer or the Trust being unable to
eliminate, within the 90 Day Period, the Tax Event by taking some ministerial
action, such as filing a form or making an election, or pursuing some other
similar reasonable measure that has no adverse effect on the Trust, the
Debenture Issuer, the Sponsor or the Holders of the Securities ("Ministerial
Action"), and (iii) the Sponsor's prior written consent to such dissolution
and distribution.
If in the event of a Tax Event (i) after receipt of a Dissolution Tax
Opinion (as defined hereinafter) by the Regular Trustees, the Sponsor has
received an opinion (a
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"Redemption Tax Opinion") of a nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more
than an insubstantial risk that the Debenture Issuer would be precluded from
deducting the interest on the Debentures for United States federal income tax
purposes even if the Debentures were distributed to the Holders of Securities
in liquidation of such Holders' interests in the Trust as described in this
Section 4(c), or (ii) the Regular Trustees shall have been informed by
nationally recognized independent tax counsel experienced in such matters that
a No Recognition Opinion cannot be delivered to the Trust, the Debenture
Issuer shall have the right at any time, upon not less than 20 nor more than
60 days notice, to redeem the Debentures in whole or in part, at a redemption
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon, for cash within 90 days following the occurrence of such Tax
Event. Following such redemption, Securities with an aggregate liquidation
amount equal to the aggregate principal amount of the Debentures so redeemed
shall be redeemed by the Trust at the Redemption Price on a Pro Rata basis;
provided, however, that, if at the time there is available to the Debenture
Issuer or the Trust the opportunity to eliminate, within such 90-day period,
the Tax Event by taking some Ministerial Action, the Trust or the Debenture
Issuer will pursue such Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an
opinion of a nationally recognized independent tax counsel experienced in such
matters (a "Dissolution Tax Opinion") to the effect that on or after October
29, 1996, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, (b) any judicial decision,
official administrative pronouncement, ruling, regulatory procedure, notice or
announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (c) any amendment
to, clarification of, or change in the official position or the interpretation
of such Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case, by any legislative
body, court, governmental authority or regulatory body, irrespective of the
manner in which such amendment, clarification or change is made known, which
amendment, clarification, or change is effective or such pronouncement or
decision is announced, in each case, on or after, October 29, 1996
(collectively, a "Change in Tax Law"), there is more than an insubstantial
risk that (i) the Trust is or will be subject to United States federal income
tax with respect to interest accrued or received on the Debentures, (ii) the
Trust is, or will be subject to more than a de minimis amount of taxes, duties
or other governmental charges, or (iii) interest payable in cash by the
Debenture Issuer to the Trust on the Debentures is not, or will not be,
deductible, in whole or in part, by the Debenture Issuer for United States
federal income tax purposes. Notwithstanding the foregoing, a Tax Event shall
not include any Change in Tax Law that requires the Debenture Issuer for
United States federal income tax purposes to defer taking a deduction for any
original issue discount ("OID") that accrues with respect to the Debentures
until the interest payment related to such OID is paid by the Debenture Issuer
in cash; provided, that such Change in Tax Law does not create more than an
insubstantial risk that the Debenture Issuer will be prevented from taking a
deduction for OID accruing with respect to the Debentures at a date that is no
later than the date the interest payment related to such OID is actually paid
by the Debenture Issuer in cash.
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"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel experienced
in such matters to the effect that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application of
law or regulations by any legislative body, court, governmental agency or
regulatory authority on or after October 29, 1996 (a "Change in 1940 Act
Law"), there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act").
On and from the date fixed by the Regular Trustees for any distribution
of Debentures upon dissolution of the Trust: (i) the Securities will no longer
be deemed to be outstanding, (ii) The Depository Trust Company (the
"Depositary") or its nominee (or any successor Clearing Agency or its
nominee), as the record Holder of the Convertible Preferred Securities held in
the form of Global Certificates, will receive a registered certificate or
certificates in global form representing the Debentures to be delivered upon
such distribution, and (iii) any certificates representing Securities, except
for Global Certificates representing Convertible Preferred Securities held by
the Depositary or its nominee (or any successor Clearing Agency or its
nominee), will be deemed to represent Debentures having an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the Coupon Rate of, and accrued and unpaid interest equal to
accrued and unpaid Distributions on, such Convertible Preferred Securities
until such certificates are presented to the Debenture Issuer or its agent for
transfer or reissue.
(d) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all Securities
for all quarterly Distribution periods terminating on or before the date of
redemption.
(e) Notice of any redemption of, or notice of distribution of Debentures
in exchange for the Securities (a "Redemption/Distribution Notice"), will be
given by the Trust by mail to each Holder of Securities to be redeemed or
exchanged not fewer than 20 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of a redemption, will be the
date fixed for redemption of the Debentures. For purposes of the calculation
of the date of redemption or exchange and the dates on which notices are given
pursuant to this Section 4(e), a Redemption/Distribution Notice shall be
deemed to be given on the day such notice is first mailed by first-class mail,
postage prepaid, or by such other means suitable to assure delivery of such
written notice, to Holders of Securities. Each Redemption/ Distribution Notice
shall be addressed to the Holders of Securities at the address of each such
Holder appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(f) In the event that fewer than all the outstanding Securities are to be
redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each
Holder of Securities, it being understood that, in respect of Convertible
Preferred Securities registered in the name of and held of record by the
Depositary or its nominee (or any successor Clearing Agency or its nominee) or
any nominee, the distribution of the proceeds of such redemption will be made
to each Clearing Agency Participant (or Person on whose
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behalf such nominee holds such securities) in accordance with the procedures
applied by such agency or nominee.
(g) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 4 (which notice will be
irrevocable), then (A) with respect to the Convertible Preferred Securities
held in Global Certificates, by 12:00 noon, New York City time, on the
redemption date, provided that the Debenture Issuer has paid the Property
Trustee a sufficient amount of cash in connection with the related redemption
or other repayment of the Debentures, the Property Trustee will deposit
irrevocably with the Depositary or its nominee (or successor Clearing Agency
or its nominee) funds sufficient to pay the applicable Redemption Price with
respect to the Convertible Preferred Securities and will give the Depositary
(or its nominee) (or successor Clearing Agency or its nominee) irrevocable
instructions and authority to pay the Redemption Price to the Holders of the
Convertible Preferred Securities, and (B) with respect to Convertible
Preferred Securities issued in definitive form and Common Securities, provided
that the Debenture Issuer has paid the Property Trustee a sufficient amount of
cash in connection with the related redemption or maturity of the Debentures,
the Property Trustee will pay the relevant Redemption Price to the Holders of
such Securities by check mailed to the address of the relevant Holder
appearing on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on
the required date of such deposit, Distributions will cease to accrue on the
Securities so called for redemption and all rights of Holders of such
Securities so called for redemption will cease, except the right of the
Holders of such Securities to receive the Redemption Price, but without
interest on such Redemption Price. Neither the Regular Trustees nor the Trust
shall be required to register or cause to be registered the transfer of any
Securities that have been so called for redemption. If any date fixed for
redemption of Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption.
If payment of the Redemption Price in respect of any Securities is improperly
withheld or refused and not paid either by the Property Trustee or by the
Sponsor as guarantor pursuant to the relevant Securities Guarantee,
Distributions on such Securities will continue to accrue from the original
redemption date to the actual date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(h) Redemption/Distribution Notices shall be sent by the Regular Trustees
on behalf of the Trust to (A) in respect of the Convertible Preferred
Securities held in the form of Global Certificates, to the Depositary or its
nominee (or any successor Clearing Agency or its nominee) and, in respect of
Definitive Convertible Preferred Security Certificates, to the Holder thereof,
and (B) in respect of the Common Securities, to the Holder thereof.
(i) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Sponsor or any of its
subsidiaries may at any
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time and from time to time purchase outstanding Convertible Preferred
Securities by tender, in the open market or otherwise.
5. CONVERSION RIGHTS.
The Holders of Securities shall have the right at any time, beginning
December 31, 1996 through the close of business on September 30, 2016 (or, in
the case of Securities called for redemption, prior to the close of business
on the Business Day prior to the redemption date), at their option, to cause
the Conversion Agent to convert Securities, on behalf of the converting
Holders, into shares of Class A Common Stock of Insignia Financial Group, Inc.
("Common Stock") in the manner described herein on and subject to the
following terms and conditions:
(a) The Securities will be convertible at the office of the Conversion
Agent into fully paid and nonassessable shares of Common Stock pursuant to the
Holder's direction to the Conversion Agent to exchange such Securities for a
portion of the Debentures theretofore held by the Trust on the basis of one
Security per $50 principal amount of Debentures, and immediately convert such
amount of Debentures into fully paid and nonassessable shares of Common Stock
at an initial rate of 1.8868 shares of Common Stock per $50 principal amount
of Debentures (which is equivalent to a conversion price of $26.50 per share
of Common Stock, subject to certain adjustments set forth in Sections 15.3 and
15.4 of the Indenture (as so adjusted, "Conversion Price")).
(b) In order to convert Securities into Insignia's Common Stock the
Holder shall submit to the Conversion Agent at the office referred to above an
irrevocable request to convert Securities on behalf of such Holder (the
"Conversion Request"), together, if the Securities are in certificated form,
with such certificates. The Conversion Request shall (i) set forth the number
of Securities to be converted and the name or names, if other than the Holder,
in which the shares of Common Stock should be issued and (ii) direct the
Conversion Agent (a) to exchange such Securities for a portion of the
Debentures held by the Trust (at the rate of exchange specified in the
preceding paragraph) and (b) to immediately convert such Debentures on behalf
of such Holder, into Common Stock (at the conversion rate specified in the
preceding paragraph). The Conversion Agent shall notify the Trust of the
Holder's election to exchange Securities for a portion of the Debentures held
by the Trust and the Trust shall, upon receipt of such notice, deliver to the
Conversion Agent the appropriate principal amount of Debentures for exchange
in accordance with this Section. The Conversion Agent shall thereupon notify
Insignia of the Holder's election to convert such Debentures into shares of
Common Stock. Holders of Securities at the close of business on a Distribution
record date will be entitled to receive the Distribution payable on such
securities on the corresponding Distribution payment date notwithstanding the
conversion of such Securities following such record date but prior to such
distribution payment date. Except as provided above, neither the Trust nor the
Sponsor will make, or be required to make, any payment, allowance or
adjustment upon any conversion on account of any accumulated and unpaid
Distributions accrued on the Securities (including any Additional Amounts
accrued thereon) surrendered for conversion, or on account of any accumulated
and unpaid dividends on the shares of Common Stock issued upon such
conversion. Securities shall be deemed to have been converted immediately
prior to the close of business on the day on which a Notice of Conversion
relating to such Securities is received by the Trust in accordance with the
foregoing provision (the "Conversion Date").
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The Person or Persons entitled to receive Common Stock issuable upon
conversion of the Debentures shall be treated for all purposes as the record
holder or holders of such Common Stock at such time. As promptly as
practicable on or after the Conversion Date, Insignia shall issue and deliver
at the office of the Conversion Agent a certificate or certificates for the
number of full shares of Common Stock issuable upon such conversion, together
with the cash payment, if any, in lieu of any fraction of any share to the
Person or Persons entitled to receive the same, unless otherwise directed by
the Holder in the notice of conversion and the Conversion Agent shall
distribute such certificate or certificates to such Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints First
Union National Bank of South Carolina "Conversion Agent" for the purpose of
effecting the conversion of Securities in accordance with this Section. In
effecting the conversion and transactions described in this Section, the
Conversion Agent shall be acting as agent of the Holders of Securities
directing it to effect such conversion transactions. The Conversion Agent is
hereby authorized (i) to exchange Securities from time to time for Debentures
held by the Trust in connection with the conversion of such Securities in
accordance with this Section and (ii) to convert all or a portion of the
Debentures into Common Stock and thereupon to deliver such shares of Common
Stock in accordance with the provisions of this Section and to deliver to the
Trust a new Debenture or Debentures for any resulting unconverted principal
amount, provided that the Conversion Agent shall not give effect to any
conversion of Securities if, after giving effect to such conversion, the
aggregate amount of Common Securities outstanding would be less than 3% of the
aggregate liquidation amount of the Securities.
(d) No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof, such fractional interest will be paid in cash
by Insignia to the Conversion Agent, which in turn will make such payment to
the Holder or Holders of Securities so converted. The cash payable shall be
based on the current market price of Common Stock on the date such Securities
are surrendered for conversion.
(e) Insignia shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance upon the conversion
of the Debentures, free from any preemptive or other similar rights, such
number of shares of Common Stock as shall from time to time be issuable upon
the conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, Insignia shall be entitled to deliver upon
conversion of Debentures, shares of Common Stock reacquired and held in the
treasury of Insignia (in lieu of the issuance of authorized and unissued
shares of Common Stock), so long as any such treasury shares are free and
clear of all liens, charges, security interests or encumbrances. Any shares of
Common Stock issued upon conversion of the Debentures shall be duly
authorized, validly issued and fully paid and nonassessable. The Trust shall
deliver the shares of Common Stock received upon conversion of the Debentures
to the converting Holder free and clear of all liens, charges, security
interests and encumbrances, except for United States withholding taxes. Each
of Insignia and the Trust shall prepare and shall use its best efforts to
obtain and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all applicable
requirements as to registration or qualification of Common Stock (and all
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<PAGE>
requirements to list Common Stock issuable upon conversion of Debentures that
are at the time applicable), in order to enable Insignia to lawfully issue
Common Stock to the Trust upon conversion of the Debentures and the Trust to
lawfully deliver Common Stock to each Holder upon conversion of the
Securities.
(f) Insignia will pay any and all taxes that may be payable in respect of
the issue or delivery of shares of Common Stock on conversion of Debentures
and the delivery of the shares of Common Stock by the Trust upon conversion of
the Securities. The Sponsor shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the
Securities so converted were registered, and no such issue or delivery shall
be made unless and until the person requesting such issue has paid to the
Trust the amount of any such tax, or has established to the satisfaction of
the Trust that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the requirement of
the Trust to withhold taxes pursuant to the terms of the Securities or set
forth in this Annex I to the Declaration or in the Declaration itself or
otherwise require the Property Trustee or the Trust to pay any amounts on
account of such withholdings.
6. VOTING RIGHTS - CONVERTIBLE PREFERRED SECURITIES.
(a) Except as provided under Sections 6(b) and 8 and as otherwise
required by law and the Declaration, the Holders of the Convertible Preferred
Securities will have no voting rights.
(b) Subject to the requirements set forth in this paragraph, the Holders
of a Majority in liquidation amount of the Convertible Preferred Securities,
voting separately as a class, may direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as holder of
the Debentures, to (i) exercise the remedies available under the Indenture
with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under Section 7.13 of the Indenture, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable, or (iv) consent to any amendment,
modification, or termination of the Indenture or the Debentures, where such
consent shall be required, provided, however, that, where a consent under the
Indenture would require the consent or act of the Holders of greater than a
majority of the Holders in principal amount of Debentures affected thereby (a
"Super Majority"), the Property Trustee may only give such consent or take
such action at the written direction of the Holders of at least the proportion
in liquidation amount of the Convertible Preferred Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. The Property Trustee shall not revoke any action
previously authorized or approved by a vote of the Holders of the Convertible
Preferred Securities. Other than with respect to directing the time, method
and place of conducting any remedy available to the Property Trustee or the
Debenture Trustee as set forth above, the Property Trustee shall not take any
action in accordance with the directions of the Holders of the Convertible
Preferred Securities under this paragraph unless the Property Trustee has
obtained an opinion of tax counsel to the effect
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that for the purposes of United States federal income tax the Trust will not
be classified as other than a grantor trust on account of such action and each
holder of Securities will be treated as owning an undivided beneficial
interest in the Debentures.
If a Declaration Event of Default has occurred and is continuing and such
event is attributable to the failure of the Debenture Issuer to pay interest
or principal on the Debentures on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), then
a Holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such
Direct Action, the rights of the Holders of the Common Securities will be
subrogated to the rights of such Holder of Convertible Preferred Securities to
the extent of any payment made by the Issuer to such Holder of Convertible
Preferred Securities in such Direct Action. In addition, if the Property
Trustee fails to enforce its rights under the Debentures (other than rights
arising from an Event of Default described in the immediately preceding
sentence) for a period of 30 days after any Holder of Convertible Preferred
Securities shall have made a written request to the Property Trustee to
enforce such rights, such Holder of Convertible Preferred Securities may, to
the fullest extent permitted by law, thereafter institute a Direct Action to
enforce the Property Trustee's rights as holder of the Debentures, without
first instituting any legal proceeding against the Property Trustee or any
other Person. Except as provided in the preceding sentences, the Holders of
Convertible Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Convertible Preferred Securities
may be given at a separate meeting of Holders of Convertible Preferred
Securities convened for such purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent. The Regular Trustees
will cause a notice of any meeting at which Holders of Convertible Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of such Holders is to be taken, to be mailed to each Holder of record
of Convertible Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at
such meeting on which such Holders are entitled to vote or of such matter upon
which written consent is sought and (iii) instructions for the delivery of
proxies or consents.
No vote or consent of the Holders of the Convertible Preferred Securities
will be required for the Trust to redeem and cancel Convertible Preferred
Securities or to distribute the Debentures in accordance with the Declaration
and the terms of the Securities.
Notwithstanding 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 the Sponsor or
any Affiliate of the Sponsor shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
I-11
<PAGE>
7. VOTING RIGHTS - COMMON SECURITIES.
(a) Except as provided under Sections 7(b), (c) and 8 and as otherwise
required by law and the Declaration, the Holders of the Common Securities will
have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with
Article V of the Declaration, to vote to appoint, remove or replace any
Trustee or to increase or decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after any Event of
Default with respect to the Convertible Preferred Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second
to last sentence of this paragraph, the Holders of a Majority in liquidation
amount of the Common Securities, voting separately as a class, may direct the
time, method, and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under Section 5.13 of the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable, provided that, where a consent or
action under the Indenture would require the consent or act of a Super
Majority of the Holders, the Property Trustee may only give such consent or
take such action at the written direction of the Holders of at least the
proportion in liquidation amount of the Common Securities which the relevant
Super Majority represents of the aggregate principal amount of the Debentures
outstanding. Pursuant to this Section 7(c), the Property Trustee shall not
revoke any action previously authorized or approved by a vote of the Holders
of the Convertible Preferred Securities. Other than with respect to directing
the time, method and place of conducting any remedy available to the Property
Trustee or the Debenture Trustee as set forth above, the Property Trustee
shall not take any action in accordance with the directions of the Holders of
the Common Securities under this paragraph unless the Property Trustee has
obtained an opinion of tax counsel to the effect that for the purposes of
United States federal income tax the Trust will not be classified as other
than a grantor trust on account of such action and each holder of Trust
Securities will be treated as owning an undivided beneficial interest in the
Debentures.
If a Declaration Event of Default has occurred and is continuing and such
event is attributable to the failure of the Debenture Issuer to pay interest
or principal on the Debentures on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), then
a Holder of Convertible Preferred Securities may directly institute a Direct
Action on or after the respective due date specified in the Debentures. In
connection with such Direct Action, the rights of the Holders of the Common
Securities will be subrogated to the rights of such Holder of Convertible
Preferred Securities to the extent of any payment made by the Issuer to such
Holder of Convertible Preferred Securities in such Direct Action. In addition,
if the Property Trustee fails to enforce its rights under the Debentures
(other than rights arising from an Event of Default described in the
immediately preceding sentence) for a period of 30 days after any Holder of
Convertible Preferred Securities shall have made a written request to the
Property Trustee
I-12
<PAGE>
to enforce such rights, such Holder of Convertible Preferred Securities
may, to the fullest extent permitted by law, thereafter institute a
Direct Action to enforce the Property Trustee's rights as holder of the
Debentures, without first instituting any legal proceeding against the
Property Trustee or any other Person. Except as provided in the preceding
sentences, the Holders of Convertible Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to
vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
8. AMENDMENTS TO DECLARATION AND INDENTURE.
(a) In addition to any requirements under Section 12.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust, other than as described
in Section 8.1 of the Declaration, then the Holders of outstanding Securities
voting together as a single class, will be entitled to vote on such amendment
or proposal (but not on any other amendment or proposal) and such amendment or
proposal shall not be effective except with the approval of the Holders of at
least a Majority in liquidation amount of the Securities affected thereby;
provided, however, that a reduction of the principal amount or Coupon Rate ,
or a change in the payment dates or maturity of the Convertible Preferred
Securities shall not be permitted without the consent of each Holder of
Convertible Preferred Securities affected thereby; and provided further that,
if any amendment or proposal referred to in clause (i) above would adversely
affect only the Convertible Preferred Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.
(b) In the event the consent of the Property Trustee as the holder of the
Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the written direction of the Holders of the Securities
with respect to such amendment, modification or termination and shall vote
with respect to such amendment, modification or termination as directed by a
Majority in liquidation amount of the Securities voting
I-13
<PAGE>
together as a single class; provided, however, that where a consent under the
Indenture would require the consent of the holders of a Super Majority, the
Property Trustee may only give such consent at the direction of the Holders of
at least the proportion in liquidation amount of the Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding; provided, further, that the Property Trustee shall not
take any action in accordance with the directions of the Holders of the
Securities under this Section 8(b) unless the Property Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for the purposes of
United States federal income tax and that each holder of Securities will be
treated as owning an undivided beneficial interest in the Debentures.
9. PRO RATA.
A reference in these terms of the Securities to any payment, distribution
or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities
held by the relevant Holder in relation to the aggregate liquidation amount of
all Securities outstanding unless, in relation to a payment, an Event of
Default under the Declaration has occurred and is continuing, in which case
any funds available to make such payment shall be paid first to each Holder of
the Convertible Preferred Securities pro rata according to the aggregate
liquidation amount of Convertible Preferred Securities held by the relevant
Holder relative to the aggregate liquidation amount of all Convertible
Preferred Securities outstanding, and only after satisfaction of all amounts
owed to the Holders of the Convertible Preferred Securities, to each Holder of
Common Securities pro rata according to the aggregate liquidation amount of
Common Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Common Securities outstanding.
10. RANKING.
The Convertible Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with, the Common Securities except that, where an Event
of Default occurs and is continuing, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to
payment of the Holders of the Convertible Preferred Securities.
11. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE.
Each Holder of Convertible Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Convertible Preferred
Securities Guarantee and the Common Securities Guarantee, respectively,
including the subordination provisions therein and to the provisions of the
Indenture.
12. NO PREEMPTIVE RIGHTS.
The Holders of the Securities shall have no preemptive or similar rights
to subscribe for any additional securities.
13. MISCELLANEOUS.
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<PAGE>
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Convertible
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request
to the Sponsor at its principal place of business.
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<PAGE>
EXHIBIT A-1
FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE
{IF THE CONVERTIBLE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE,
INSERT - This Convertible Preferred Security is a Global Certificate within
the meaning of the Declaration hereinafter referred to and is registered in
the name of The Depository Trust Company (the "Depositary") or a nominee of
the Depositary. This Convertible Preferred Security is exchangeable for
Convertible Preferred Securities registered in the name of a person other than
the Depositary or its nominee only in the limited circumstances described in
the Declaration and no transfer of this Convertible Preferred Security (other
than a transfer of this Convertible Preferred Security as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary) may be registered except
in limited circumstances.
Unless this Convertible Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the Trust or its agent for registration of transfer, exchange or
payment, and any Convertible Preferred Security issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment hereon is made
to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.}
THIS SECURITY (OR ITS PREDECESSOR), ANY CONVERTIBLE SUBORDINATED DEBT
SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY, AND ANY COMMON STOCK ISSUED ON
CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO OR FOR THE
ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES, AND AGREES FOR THE BENEFIT
OF THE ISSUER HEREOF THAT: (I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
INSIGNIA FINANCIAL GROUP, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTION TERMINATION
A1-1
<PAGE>
DATE") EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE
RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER
DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS SUBJECT TO THE
RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES FOR SUCH ISSUER (i) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE, AND (ii) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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<PAGE>
Certificate Number: Number of Convertible Preferred Securities:
- ------------------- -----------------
{ADD FOR GLOBAL CERTIFICATES: (as
increased or decreased as set forth on
Schedule A attached hereto}
CUSIP NO.
--------
Certificate Evidencing Convertible Preferred Securities
of
INSIGNIA FINANCING I
6 1/2% Trust Convertible Preferred Securities
(liquidation amount $50 per Trust Convertible Preferred Security)
Insignia Financing I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that ______________
(the "Holder") is the registered owner of convertible preferred securities of
the Trust representing undivided beneficial interests in the assets of the
Trust designated the 6 1/2% Trust Convertible Preferred Securities
(liquidation amount $50 per Trust Convertible Preferred Security) (the
"Convertible Preferred Securities"). The Convertible Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Convertible Preferred
Securities represented hereby are issued and shall in all respects be subject
to the provisions of the Amended and Restated Declaration of Trust of the
Trust dated as of November 1, 1996, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the
Convertible Preferred Securities as set forth in Annex I to the Declaration.
Capitalized terms used herein but not defined shall have the meaning given
them in the Declaration. The Holder is entitled to the benefits of the
Convertible Preferred Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Convertible Preferred
Securities Guarantee and the Indenture to a Holder without charge upon written
request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Convertible
Preferred Securities as evidence of indirect beneficial ownership in the
Debentures.
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<PAGE>
Unless the Property Trustee's Certificate of Authentication hereon has
been properly executed, these Convertible Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for
any purpose.
IN WITNESS WHEREOF, the Trust has caused this certificate to be executed.
Insignia Financing I
By:
----------------------------
Name:
Title: Regular Trustee
{FORM OF CERTIFICATE OF AUTHENTICATION}
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Securities referred to in the
within-mentioned Declaration.
Dated:
First Union National Bank of South Carolina,
as Property Trustee
By:
-------------------------
Authorized Signatory
A1-4
<PAGE>
{FORM OF REVERSE OF SECURITY}
Distributions payable on each Convertible Preferred Security will be
fixed at a rate per annum of 6 1/2% (the "Coupon Rate") of the stated
liquidation amount of $50 per Preferred Security, such rate being the rate of
interest payable on the Debentures to be held by the Property Trustee.
Distributions in arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Except as otherwise described below, distributions on the Preferred
Securities will be cumulative, will accrue from November 1, 1996 and will be
payable quarterly in arrears, on March 31, June 30, September 30 and December
31 of each year, commencing on December 31, 1996, which payment dates shall
correspond to the interest payment dates on the Debentures, to Holders of
record at the close of business on the regular record date for such
distribution which shall be the close of business 15 days prior to the
relevant payment date. The Debenture Issuer has the right under the Indenture,
subject to certain conditions, to defer payments of interest by extending the
interest payment period from time to time on the Debentures for a period not
exceeding 20 consecutive quarters (each an "Extension Period") provided that
no Extension Period shall last beyond the date of the maturity of the
Debentures and, as a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at
the Coupon Rate compounded quarterly during any such Extension Period. Prior
to the termination of any such Extension Period, the Debenture Issuer may
further extend such Extension Period; provided that such Extension Period
together with all such previous and further extensions thereof may not exceed
20 consecutive quarters or extend beyond the maturity of the Debentures.
Payments of accrued Distributions will be payable to Holders as they appear on
the books and records of the Trust on the first record date after the end of
the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
The Convertible Preferred Securities shall be redeemable as provided in
the Declaration.
The Convertible Preferred Securities shall be convertible into shares of
Class A Common Stock of Insignia Financial Group, Inc. ("Insignia Common
Stock"), through (i) the exchange of Preferred Securities for a portion of the
Debentures and (ii) the immediate conversion of such Debentures into Insignia
Common Stock, in the manner and according to the terms set forth in the
Declaration.
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<PAGE>
CONVERSION REQUEST
To: First Union National Bank of South Carolina
as Property Trustee of
Insignia Financing I
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Convertible Preferred Securities, or the
portion below designated, into Class A Common Stock of Insignia Financial
Group, Inc. (the "Insignia Common Stock") in accordance with the terms of the
Amended and Restated Declaration of Trust, dated as of November 1, 1996 (as
amended from time to time, the "Declaration"), by the Regular Trustees named
therein, First Union Bank of Delaware, as Delaware Trustee, First Union
National Bank of South Carolina, as Property Trustee, Insignia Financial
Group, Inc., as Sponsor, and by the Holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to the Declaration.
Pursuant to the aforementioned exercise of the option to convert these
Convertible Preferred Securities, the undersigned hereby directs the
Conversion Agent (as that term is defined in the Declaration) to (i) exchange
such Convertible Preferred Securities for a portion of the Debentures (as that
term is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Convertible Preferred Securities set forth as
Annex I to the Declaration) and (ii) immediately convert such Debentures on
behalf of the undersigned, into Insignia Common Stock (at the conversion rate
specified in the terms of the Convertible Preferred Securities set forth as
Annex I to the Declaration).
A1-6
<PAGE>
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Date:
------------, ----
in whole __ in part __
Number of Preferred Securities to be
converted:
------------------
If a name or names other than the
undersigned, please indicate in the
spaces below the name or names in
which the shares of Insignia Common
Stock are to be issued, along with
the address or addresses of such
person or persons
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other
Identifying Number
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Signature Guarantee:*
------------------------
- -------------
* (Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Conversion Agent, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Conversion Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
A1-7
<PAGE>
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible
Preferred Security Certificate to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- -------------------------------------------------------------agent to transfer
this Convertible Preferred Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date:
---------------------------
Signature:
----------------------
(Sign exactly as your name appears on the other side of this Convertible
Preferred Security Certificate)
Signature Guarantee**
----------------------------------
----------------------------------
** Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
A1-8
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF SECURITIES
RE: 6 1/2% Trust Convertible Preferred Securities of Insignia Financing I
This Certificate relates to the exchange or registration for transfer of
_______ (number) of Convertible Preferred Securities held in (check applicable
box) _____ book-entry or ______ definitive form by ___________________ (the
"Transferor"), prior to the Resale Restriction Termination Date (as defined in
the legend on the face of this Certificate).
The Transferor (check applicable box):
o has requested the Registrar by written order to deliver, in
exchange for its beneficial interest in a Global Preferred Security held by
the Depositary, Convertible Preferred Securities in definitive registered form
of authorized denominations and an aggregate number of Convertible Preferred
Securities equal to its beneficial interest in such Global Preferred Security
(or portion thereof as indicated above); or
o has requested the Registrar by written order to exchange or
register the transfer of such Convertible Preferred Securities.
In connection with such request and in respect of all such Convertible
Preferred Securities, the Transferor does hereby certify that Transferor is
familiar with the Declaration relating to the above-captioned Convertible
Preferred Securities and, as provided in Section 9.2 of such Declaration, the
transfer of these Convertible Preferred Securities does not require
registration under the Securities Act because (check applicable box):
o Such Convertible Preferred Securities are being acquired for the
Transferor's own account (in satisfaction of Section 9.2(a)(ii)(A) or Section
9.2(g)(i)(A) of the Declaration).
o Such Convertible Preferred Securities are being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) in reliance on Rule 144A (in satisfaction of Section 9.2(a)(ii)(B) or
Section 9.2(g)(i)(B) of the Declaration).
o Such Convertible Preferred Securities are being transferred
pursuant to an effective registration statement under the Securities Act (in
satisfaction of Section 9.2(a)(ii)(C) or Section 9.2(g)(i)(C) of the
Declaration).
o Such Convertible Preferred Securities are being transferred in
compliance with and in reliance on Rule 144 or Regulation S under the
Securities Act, or to an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3), or (7) under the Securities Act that is
acquiring such Convertible Preferred Securities for its own account, or for
the account of such an institutional accredited investor, not with a view to
or for offer or sale in connection with any distribution in violation of the
Securities Act, or in reliance on another exemption from the registration
requirements of the Securities Act
A1-9
<PAGE>
(other than Rule 144A) and (check if applicable) _____ an opinion of counsel
to the effect that such transfer is in compliance with the Securities Act
accompanies this Certificate (in satisfaction of Section 9.2(a)(ii)(C) or
Section 9.2(g)(i)(C) of the Declaration).
---------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------
Date:
--------------------
A1-10
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The original number of Convertible Preferred Securities represented by
this Global Certificate shall be __________. The following increases or
decreases in the number of Convertible Preferred Securities represented by
this Global Certificate have been made:
Amount of Amount of Signature of
Date of increase in decrease in Number of Securities authorized
increase/ number of number of following such officer of
decrease Securities Securities increase/decrease Trustee
- --------- ----------- ----------- -------------------- -----------
A1-11
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE
REGISTRATION STATEMENT.
OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRRED EXCEPT TO
A RELATED PARTY (AS DEFINED IN THE INDENTURE) OF INSIGNIA FINANCIAL GROUP,
INC.
Certificate Number: Number of Common Securities:
- ------------- ------------------
Certificate Evidencing Common Securities
of
INSIGNIA FINANCING I
6 1/2% Trust Convertible Common Securities
(liquidation amount $50 per Common Security)
Insignia Financing I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that
_________________ (the "Holder") is the registered owner of common securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the 6 1/2% Trust Convertible Common Securities (liquidation
amount $50 per Common Security) (the "Common Securities"). The Common
Securities are transferable on the books and records of the Trust, in person
or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject
to the provisions of the Amended and Restated Declaration of Trust of the
Trust dated as of November 1, 1996, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the Common
Securities as set forth in Annex I to the Declaration. Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration.
The Holder is entitled to the benefits of the Common Securities Guarantee to
the extent provided therein. The Sponsor will provide a copy of the
Declaration, the Common Securities Guarantee and the Indenture to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
A2-1
<PAGE>
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities
as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day
of ____________, 199__.
Insignia Financing I
By:
----------------------------
Name:
Title: Regular Trustee
A2-2
<PAGE>
{FORM OF REVERSE OF SECURITY}
Distributions payable on each Common Security will be fixed at a rate per
annum of 6 1/2% (the "Coupon Rate") of the stated liquidation amount of $50
per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months.
Except as otherwise described below, distributions on the Common
Securities will be cumulative, will accrue from November 1, 1996 and will be
payable quarterly in arrears, on March 31, June 30, September 30 and December
31 of each year, commencing on December 31, 1996, which payment dates shall
correspond to the interest payment dates on the Debentures, to Holders of
record at the close of business on the regular record date for such
distribution which shall be the close of business on the Business Day next
preceding such distribution payment date unless otherwise provided in the
Declaration. The Debenture Issuer has the right under the Indenture, subject
to certain conditions, to defer payments of interest by extending the interest
payment period from time to time on the Debentures for a period not exceeding
20 consecutive quarters (each an "Extension Period") provided that no
Extension Period shall last beyond the date of maturity of the Debentures and,
as a consequence of such deferral, Distributions will also be deferred.
Despite such deferral, quarterly Distributions will continue to accrue with
interest thereon (to the extent permitted by applicable law) at the Coupon
Rate compounded quarterly during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further
extend such Extension Period; provided that such Extension Period together
with all such previous and further extensions thereof may not exceed 20
consecutive quarters or extend beyond the date of maturity of the Debentures.
Payments of accrued Distributions will be payable to Holders as they appear on
the books and records of the Trust on the first record date after the end of
the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
The Common Securities shall be redeemable as provided in the Declaration.
The Common Securities shall be convertible into shares of Class A Common
Stock of Insignia Financial Group, Inc. ("Insignia Common Stock"), through (i)
the exchange of Common Securities for a portion of the Debentures and (ii) the
immediate conversion of such Debentures into Insignia Common Stock, in the
manner and according to the terms set forth in the Declaration.
A2-3
<PAGE>
CONVERSION REQUEST
To: First Union National Bank of South Carolina
as Property Trustee of
Insignia Financing I
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Class A Common Stock of Insignia Financial Group, Inc. (the
"Insignia Common Stock") in accordance with the terms of the Amended and
Restated Declaration of Trust, dated as of November 1, 1996 (as amended from
time to time , the "Declaration"), by the Regular Trustees named therein,
First Union Bank of Delaware, as Delaware Trustee, First Union National Bank
of South Carolina, as Property Trustee, Insignia Financial Group, Inc., as
Sponsor, and by the Holders, from time to time, of undivided beneficial
interests in the Trust to be issued pursuant to the Declaration. Pursuant to
the aforementioned exercise of the option to convert these Common Securities,
the undersigned hereby directs the Conversion Agent (as that term is defined
in the Declaration) to (i) exchange such Common Securities for a portion of
the Debentures (as that term is defined in the Declaration) held by the Trust
(at the rate of exchange specified in the terms of the Common Securities set
forth as Annex I to the Declaration) and (ii) immediately convert such
Debentures on behalf of the undersigned, into Insignia Common Stock (at the
conversion rate specified in the terms of the Common Securities set forth as
Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Date: ,
------------ -----
in whole __ in part __
Number of Common Securities to be
converted:
----------------------
A2-4
<PAGE>
If a name or names other than the undersigned,
please indicate in the spaces belowthe name or
names in which the shares of Insignia Common
Stock are to be issued, along with the address
or addresses of such person or persons
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social or Other
Identifying Number
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Signature Guarantee:*
-------------------------
- ------------------
* (Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Conversion Agent, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Conversion Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
A2-5
<PAGE>
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
-----------------------------------------------------
- ------------------------------------------------------------------------------
- ----------------------------------------agent to transfer this Common Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date:
------------------
Signature:
-------------
(Sign exactly as your name appears on the other side of this Common Security
Certificate) Signature Guarantee**:
-------------------------------------------
- -----------------
** (Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.)
<PAGE>
EXHIBIT B
SPECIMEN OF DEBENTURE
<PAGE>
[(FORM OF FACE OF CONVERTIBLE DEBENTURE)]
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT THE FOLLOWING --
This Debenture is a Book Entry Debenture within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This Debenture is exchangeable for Convertible
Debentures registered in the name of a Person other than the Depositary or its
nominee only in the limited circumstances described in the Indenture, and no
transfer of this Debenture (other than a transfer of this Debenture as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in such limited circumstances.
Unless this Debenture is presented by an authorized representative of The
Depositary Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depositary Trust Company and
any payment hereon is made to Cede & Co. or such other person or entity so
named by The Depositary Trust Company, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER
OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES, AND
AGREES FOR THE BENEFIT OF INSIGNIA FINANCIAL GROUP, INC. (THE "COMPANY") THAT:
(I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF
B-1
<PAGE>
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE
OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS
SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES FOR SUCH
ISSUER (i) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE, AND (ii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
CUSIP No._____________________
Certificate No._______________ $_____________
INSIGNIA FINANCIAL GROUP, INC.
6 1/2% CONVERTIBLE SUBORDINATED DEBENTURE
Insignia Financial Group, Inc., a Delaware corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ______________ or
registered assigns, the principal sum of _____________ Dollars ($___________)
{ADD FOR GLOBAL DEBENTURE OR DEBENTURE ORIGINALLY ISSUED TO PROPERTY TRUSTEE:
(as increased or decreased as indicated on Schedule A attached hereto)} on
September 30, 2016, and to pay interest on said principal sum from November 1,
1996, or from the most recent interest payment date (each such date, an
"Interest Payment Date") to which interest has been paid or duly provided for,
quarterly (subject to deferral as set forth herein) in arrears on March 31,
June 30, September 30, and December 31 of each year commencing December 31,
1996, at the rate of 6 1/2% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and premium, if any, and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at
the same rate per annum compounded quarterly. The amount of interest payable
on any Interest Payment Date shall be computed on the basis of
B-2
<PAGE>
a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on this Convertible Debenture is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture
(referred to on the reverse hereof), be paid to the person in whose name this
Convertible Debenture (or one or more Predecessor Debentures, as defined in
said Indenture) is registered on the Regular Record Date for such interest
installment which shall be the close of business on the date 15 days prior to
such Interest Payment Date unless otherwise provided in the Indenture. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered Holders on such Regular Record
Date and may be paid to the Person in whose name this Convertible Debenture
(or one or more Predecessor Debentures) is registered at the close of business
on a special record date to be fixed by the Trustee (referred to on the
reverse hereof) for the payment of such defaulted interest, notice whereof
shall be given to the registered Holders of the Convertible Debentures not
less than 10 days prior to such special record date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Convertible Debentures may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. The principal of (and premium, if any) and the
interest on this Convertible Debenture shall be payable at the office or
agency of the Trustee maintained for that purpose in any coin or currency of
the United States of America that at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the
registered Holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long as the Holder of this Convertible
Debenture is the Property Trustee, the payment of the principal of (and
premium, if any) and interest on this Convertible Debenture will be made at
such place and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Convertible Debenture is, to the
extent provided in the Indenture, subordinate and junior in right of payment
to the prior payment in full of all Senior Indebtedness, and this Convertible
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Convertible Debenture, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives
all notice of the acceptance of the subordination provisions contained herein
and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder
upon said provisions.
This Convertible Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
B-3
<PAGE>
The provisions of this Convertible Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
INSIGNIA FINANCIAL GROUP, INC.
By:__________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
B-4
<PAGE>
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned
Indenture.
Dated:
--------------------------------
First Union National Bank of South Carolina, as Trustee
By:
----------------------------------
Authorized Signatory
[FORM OF REVERSE OF DEBENTURE]
This Convertible Debenture is one of a duly authorized series of
Debentures of the Company (herein sometimes referred to as the "Debentures"),
specified in the Indenture, all issued or to be issued in one series under and
pursuant to an Indenture (the "Indenture") dated as of November 1, 1996, duly
executed and delivered between the Company and First Union National Bank of
South Carolina, as Trustee (the "Trustee"), to which Indenture (which term
shall include, collectively, any and all indentures supplemental thereto)
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of Convertible Debentures. This series of Debentures
is limited in aggregate principal amount as specified in the Indenture and is
herein sometimes referred to as the "Convertible Debentures."
Upon the occurrence and during the continuation of a Tax Event, in
certain circumstances, this Convertible Debenture may become due and payable,
in whole or in part, at the principal amount together with any interest
accrued thereon, including Additional Payments (the "Special Redemption
Price"). The Special Redemption Price shall be paid prior to 12:00 noon, New
York time, on the date of such redemption or at such earlier time as the
Company determines.
In addition, the Company shall have the right to redeem this Convertible
Debenture at the option of the Company, upon not less than 20 nor more than 60
days' notice, in whole or in part at any time on or after November 1, 1999 (an
"Optional Redemption") at the following prices (expressed as percentages of
the principal amount of the Convertible Debentures) (the "Optional Redemption
Price") together with accrued and unpaid interest, including Additional
Payments, if any, to, but excluding, the redemption date, if redeemed during
the 12-month period beginning September 30 (or, in the case of 1999, the
period beginning November 1):
B-5
<PAGE>
Year Redemption Price
---- ----------------
1999 102.0%
2000 101.0%
2001 and thereafter 100.0%
If Convertible Debentures are redeemed on any March 31, June 30,
September 30, or December 31, accrued and unpaid interest shall be payable to
Holders of record on the relevant record date, instead of the Holders on the
Redemption Date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of any of the Convertible
Debentures will be used to redeem Convertible Preferred Securities.
If the Convertible Debentures are only partially redeemed by the Company
pursuant to an Optional Redemption, the Convertible Debentures will be
redeemed on a pro rata basis, in portions equal to $50 (or any integral
multiple thereof) of the principal amount of Convertible Debentures.
In the event of redemption of this Convertible Debenture in part only, a
new Convertible Debenture or Convertible Debentures for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Convertible Debentures
and all interest accrued thereon (including any Additional Payments) may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Debentures affected at the time outstanding, as
defined in the Indenture, to execute supplemental indentures for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures; provided,
however, that no such supplemental indenture shall (a) change the fixed
maturity of any Debenture, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, or make any change that adversely
affects the right to convert any Debenture or make any change in the
subordination provisions that adversely affects the rights of any Holders of
any Debenture, without the consent of the Holder of each Debenture so
affected, or (b) reduce the aforesaid percentage of Debentures, the Holders of
which are required to consent to any such supplemental indenture, without the
consent of the Holders of each Debenture then outstanding and affected
thereby. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Debentures at the time
outstanding, on behalf of all of the Holders of the Debentures, to waive any
past default in the performance of any of the covenants contained in the
Indenture, or established pursuant to the Indenture, and its consequences,
except a default in the payment of the principal of or premium, if any, or
interest on any Debentures or a default
B-6
<PAGE>
with respect to certain covenants concerning the Insignia Trust more fully set
forth in the Indenture or a default in respect of any provision in the
Indenture that cannot be modified without the consent of the Holders of all
Debentures affected thereby. Any such consent or waiver by the registered
Holder of this Convertible Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Convertible Debenture and of any Convertible
Debenture issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Convertible Debenture.
No reference herein to the Indenture and no provision of this Convertible
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Convertible Debenture at the time and
place and at the rate and in the money herein prescribed.
As long as an Event of Default shall not have occurred and be continuing
and certain other conditions have been satisfied, the Company shall have the
right at any time during the term of the Convertible Debentures and from time
to time to extend the interest payment period of such Convertible Debentures
for up to 20 consecutive quarters (an "Extended Interest Payment Period"), at
the end of which period the Company shall pay all interest (including
Additional Payments) then accrued and unpaid (together with interest thereon
at the rate specified for the Convertible Debentures to the extent that
payment of such interest is enforceable under applicable law) to the Holders
as they appear on the transfer records of the Company as of the first Regular
Record Date after the Extended Interest Payment Period. Before the termination
of any such Extended Interest Payment Period, the Company may further extend
such Extended Interest Payment Period, provided that such Extended Interest
Payment Period together with all such further extensions thereof shall not
exceed 20 consecutive quarters. At the termination of any such Extended
Interest Payment Period and upon the payment of all accrued and unpaid
interest (including all Additional Payments) then due, the Company may
commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Convertible Debenture is transferable by the registered Holder
hereof on the Debenture Register of the Company, upon surrender of this
Convertible Debenture for registration of transfer at the office or agency of
the Trustee in Columbia, South Carolina accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee
duly executed by the registered Holder hereof or his or her attorney duly
authorized in writing, and thereupon one or more new Convertible Debentures of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Convertible
Debenture, the Company, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered Holder hereof as the absolute
owner hereof (whether or not this Convertible Debenture shall be overdue and
notwithstanding any notice of ownership or
B-7
<PAGE>
writing hereon made by anyone other
than the Debenture Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and interest due hereon
and for all other purposes, and neither the Company nor the Trustee nor any
paying agent nor any Debenture Registrar shall be affected by any notice to
the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Convertible Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture,
against any incorporator, stockholder, officer or director, past, present or
future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issuance hereof, expressly waived and released.
The Holder of any Convertible Debenture has the right, exercisable at any
time beginning December 31, 1996 and prior to the close of business (New York
time) on September 30, 2016 (or, in the case of a Convertible Debenture called
for redemption, prior to the close of business on the Business Day prior to
the corresponding redemption date), to convert the principal amount thereof
(or any portion thereof that is an integral multiple of $50) into shares of
Common Stock at the initial conversion rate of 1.8868 shares of Common Stock
for each $50 in aggregate principal amount of Convertible Debenture
(equivalent to a Conversion Price of $26.50 per share of Common Stock),
subject to adjustment under certain circumstances.
To convert a Convertible Debenture, a Holder must (a) complete and sign a
conversion notice substantially in the form attached hereto, (b) surrender the
Convertible Debenture to the Conversion Agent, (c) furnish appropriate
endorsements or transfer documents if required by the Conversion Agent and (d)
pay any transfer or similar tax, if required. Upon conversion, no adjustment
or payment will be made for interest (including Additional Payments) or
dividends, but if any Holder surrenders a Convertible Debenture for conversion
on or after the Regular Record Date for the payment of an installment of
interest and prior to the opening of business on the next Interest Payment
Date, then, notwithstanding such conversion, the interest payable on such
Interest Payment Date will be paid to the registered Holder of such
Convertible Debenture on such Regular Record Date. The number of shares
issuable upon conversion of a Convertible Debenture is determined by dividing
the principal amount of the Convertible Debentures converted by the Conversion
Price in effect on the Conversion Date. No fractional shares will be issued
upon conversion but a cash adjustment will be made for any fractional
interest. The outstanding principal amount of any Convertible Debenture shall
be reduced by the portion of the principal amount thereof converted into
shares of Common Stock.
The Convertible Debentures are issuable only in registered form without
Coupons in denominations of $50 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth,
Convertible Debentures are exchangeable for a like aggregate principal amount
of Convertible Debentures of a different authorized denomination, as requested
by the Holder surrendering the same.
All terms used in this Convertible Debenture that are not defined herein
but are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
B-8
<PAGE>
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND
THE CONVERTIBLE DEBENTURES WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.
B-9
<PAGE>
[FORM OF ELECTION TO CONVERT]
ELECTION TO CONVERT
To: Insignia Financial Group, Inc.
The undersigned owner of this Convertible Debenture hereby irrevocably
exercises the option to convert this Convertible Debenture, or the portion
below designated, into Class A Common Stock of INSIGNIA FINANCIAL GROUP, INC.
in accordance with the terms of the Indenture referred to in this Convertible
Debenture, and directs that the shares issuable and deliverable upon
conversion, together with any check in payment for fractional shares, be
issued in the name of and delivered to the undersigned, unless a different
name has been indicated in the assignment below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Date: ,
------------ ----
in whole in part
---- ----
Portion of Convertible Debenture to be converted
($50 or integral multiples thereof):
$
------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Signature Guarantee: (1)
-------------------------
(1) Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Conversion Agent, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Conversion Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
B-10
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Convertible Debenture to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and irrevocably appoints
-----------------------------------------------------
agent to transfer this Convertible Debenture on the books of the Company. The
agent may substitute another to act for him or her.
Date:
-------------------------
Signature:
---------------------
(Sign exactly as your name appears on the other side of this Convertible
Debenture)
Signature Guarantee(2):
-----------------------------
(2) Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Debenture Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934,
as amended.
B-11
<PAGE>
[TO BE ATTACHED TO GLOBAL DEBENTURE OR DEBENTURE
ORIGINALLY ISSUED TO PROPERTY TRUSTEE]
SCHEDULE A
The original principal amount of this Debenture shall be $__________. The
following increases or decreases in the principal amount of this Debenture
have been made:
Signature of
authorized
Date of Amount of Amount of Principal amount of officer of
increase/ increase in decrease in Debenture following Trustee or
decrease principal amount principal amount increase/decrease Custodian
- -------- ---------------- ---------------- ----------------- ---------
B-12
<PAGE>
EXHIBIT C
PURCHASE AGREEMENT
<PAGE>
2,600,000 Trust Convertible Preferred Securities
INSIGNIA FINANCING I
6 1/2% Trust Convertible Preferred Securities
(Liquidation Amount $50 per Convertible Preferred Security)
PURCHASE AGREEMENT
October 29, 1996
LEHMAN BROTHERS INC.
DILLON, READ & CO. INC.
GOLDMAN, SACHS & CO.
A.G. EDWARDS & SONS, INC.
As Initial Purchasers,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Insignia Financing I, a special purpose statutory business trust
created under the laws of the State of Delaware (the "Trust"), proposes to
issue and sell to you (the "Initial Purchasers") an aggregate of 2,600,000 of
its 6 1/2% trust convertible preferred securities, liquidation amount $50 per
trust convertible preferred security (the "Firm Securities"). In addition, the
Trust proposes to grant to the Initial Purchasers an option to purchase up to
an additional 390,000 of its 6 1/2% trust convertible preferred securities,
liquidation amount $50 per trust convertible preferred security, on the terms
and for the purposes set forth in Section 3 (the "Option Securities"). The
Firm Securities and the Option Securities, if purchased, are hereinafter
collectively called the "Convertible Preferred Securities."
It is understood that the Initial Purchasers will resell the
Convertible Preferred Securities only inside the United States to qualified
institutional buyers in reliance on Rule 144A under the Securities Act of
1933, as amended (the "Securities Act"), and to institutional "accredited
investors," within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, and outside the United States to certain persons in reliance
on Regulation S under the Securities Act ("Regulation S").
C-1
<PAGE>
The Convertible Preferred Securities will be guaranteed by Insignia
Financial Group, Inc., a Delaware corporation ("Insignia"), to the extent
described in a Convertible Preferred Securities Guarantee Agreement (the
"Guarantee") and will be convertible into shares of Class A common stock, par
value $.01 per share, of Insignia (the "Common Stock"). Insignia will also be
the holder of one hundred percent of the common securities (the "Common
Securities" and, together with the Convertible Preferred Securities, the
"Trust Securities"), representing common undivided beneficial interests in the
assets of the Trust. The Trust has been created under Delaware law pursuant to
a Declaration of Trust dated as of October 4, 1996, executed by the then
trustees of the Trust. The Trust's purpose will be defined in an Amended and
Restated Declaration of Trust (the "Declaration"), to be executed by Insignia,
as sponsor, and the Insignia Trustees (as hereinafter defined). The Trust will
use the proceeds from the sale of the Convertible Preferred Securities to
purchase from Insignia 6 1/2% Convertible Subordinated Debentures due
September 30, 2016 in an aggregate principal amount equal to the aggregate
liquidation amount of the Trust Securities (the "Convertible Subordinated Debt
Securities") to be issued under an Indenture (the "Indenture") between
Insignia and First Union National Bank of South Carolina, as Trustee (the
"Debt Trustee"). Insignia will directly or indirectly acquire all of the
Common Securities in an aggregate liquidation amount equal to approximately 3%
of the total capital of the Trust.
Pursuant to the Declaration, the number of Trustees of the Trust (the
"Insignia Trustees") will initially be five. Three of the Insignia Trustees
(the "Regular Trustees") will be persons who are employees or officers of, or
affiliated with, Insignia. A fourth trustee will be a financial institution
unaffiliated with Insignia (the "Institutional Trustee") that will serve as
the property trustee (the "Property Trustee") under the Declaration and as the
indenture trustee under the Guarantee (the "Guarantee Trustee"). The fifth
trustee will be a financial institution or an affiliate thereof that maintains
a principal place of business or residence in the State of Delaware (the
"Delaware Trustee").
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration
Rights Agreement"), pursuant to which the Company will file a registration
statement (the "Shelf Registration Statement") with the Securities and
Exchange Commission registering (i) the Convertible Preferred Securities, (ii)
the Convertible Subordinated Debt Securities, and (iii) the shares of Common
Stock initially issuable upon the conversion of the Convertible Subordinated
Debt Securities and the Convertible Preferred Securities (the "Conversion
Shares") under the Securities Act.
This is to confirm the agreement concerning the purchase of the
Convertible Preferred Securities from the Trust by the Initial Purchasers.
C-2
<PAGE>
1. Representations, Warranties and Agreements of the Trust and Insignia.
Each of the Trust and Insignia jointly and severally represent and warrant to,
and agree with, the Initial Purchasers that:
(a) Insignia confirms that it has prepared an Offering
Memorandum dated the date hereof (the "Offering Memorandum") and
authorizes the Initial Purchasers to distribute copies thereof in
connection with the offering and resale of the Convertible Preferred
Securities as provided herein. Insignia also confirms that it has
prepared a Preliminary Offering Memorandum dated October 16, 1996
(the "Preliminary Offering Memorandum") and has authorized the
Initial Purchasers to distribute copies thereof in connection with
the offering and resale of the Convertible Preferred Securities as
provided herein. Documents filed by Insignia under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), on or prior to
the date of the Offering Memorandum and any documents filed by
Insignia under the Exchange Act after the date of the Offering
Memorandum and prior to the completion of the offering and the
initial resale of the Convertible Preferred Securities ("Exchange Act
Reports"), in each case that are incorporated or deemed incorporated
by reference in the Offering Memorandum, when they were or are filed
with the Securities and Exchange Commission (the "Commission"),
conformed or will conform, as the case may be, in all material
respects to the applicable requirements of the Exchange Act and the
applicable rules and regulations of the Commission thereunder. The
Preliminary Offering Memorandum, Offering Memorandum and any
amendments or supplements thereto and the Exchange Act Reports did
not and will not, as of their respective dates, contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in the Preliminary
Offering Memorandum or the Offering Memorandum based upon written
information furnished to Insignia by the Initial Purchasers through
Lehman Brothers Inc. specifically for use therein.
For purposes of this Agreement, "Rules and Regulations" means the
rules and regulations of the Commission under the Securities Act and
the Exchange Act, as the context requires. Reference made herein to
any Preliminary Offering Memorandum or the Offering Memorandum shall
be deemed to refer to and include any documents incorporated by
reference therein as of the date of such Preliminary Offering
Memorandum or the Offering Memorandum, as the case may be, and any
reference to any amendment or supplement to any Preliminary Offering
Memorandum or the Offering Memorandum shall be deemed to refer to and
include any documents filed under the Exchange Act after the date of
such Preliminary Offering Memorandum or the Offering Memorandum, as
the case may be,
C-3
<PAGE>
and incorporated by reference in such Preliminary Offering Memorandum
or the Offering Memorandum.
(b) Each of Insignia and each of Insignia Management
Corporation, Insignia Mortgage and Investment Company, Inc., IFGP
Corporation, Insignia Commercial Group, Inc., Insignia Management
Services - New York, Inc., Insignia Management Group, L.P., Compleat
Resource Group, Inc., Insignia Properties Corporation, Insignia NPI,
LLC and Edward S. Gordon Company, Incorporated, subsidiaries of
Insignia (as defined in Section 15) (collectively, the "Principal
Subsidiaries") has been duly incorporated or organized and is validly
existing as a corporation, partnership or limited liability company
("LLC"), as the case may be, in good standing under the laws of its
jurisdiction of incorporation or organization, is duly qualified to
do business and in good standing as a foreign corporation,
partnership or LLC, as the case may be, in each jurisdiction in which
its ownership or lease of property or the conduct of its business
requires such qualification, except to the extent the failure to be
so qualified would not have a material adverse effect on Insignia and
its subsidiaries taken as a whole, and has all power and authority
necessary to own or hold its properties and to conduct the businesses
in which it is engaged; and none of the subsidiaries of Insignia
(other than the Principal Subsidiaries) is a "significant
subsidiary," as such term is defined in Rule 405 of the Rules and
Regulations.
(c) Insignia has an authorized capitalization as set forth
in the Offering Memorandum, and all of the issued shares of capital
stock of Insignia have been duly and validly authorized and issued,
are fully paid and non-assessable, and conform to all descriptions
thereof contained in the Offering Memorandum. There are no
outstanding options, warrants or other rights (preemptive or
otherwise) to acquire capital stock of Insignia and no shares of
capital stock of Insignia reserved for future issuance except as
disclosed in the Offering Memorandum. All of the issued shares of
capital stock of each Principal Subsidiary which is a corporation
have been duly and validly authorized and issued and are fully paid
and non-assessable, all of the partnership or membership interests of
each Principal Subsidiary which is a partnership or LLC have been
duly and validly authorized and issued, and all of the shares of
capital stock or partnership or membership interests in any
subsidiary (except as set forth in the Offering Memorandum) are owned
directly or indirectly by Insignia, free and clear of all liens,
encumbrances, equities or claims (provided, however, that in the
cases where Insignia or a subsidiary is the general partner of a
limited partnership or the managing member of an LLC and holds less
than a majority equity interest in such partnership or LLC, to the
extent that the term "subsidiary" is deemed to include such a
partnership or LLC, the immediately foregoing representation
regarding ownership and liens shall apply only to such partnership or
membership interests owned by Insignia, directly or
C-4
<PAGE>
indirectly, and not the entire partnership or LLC), and no options,
warrants or other rights to acquire such capital stock or partnership
or membership interests are outstanding (other than any restriction
on transfer of any partnership or membership interest contained in
the relevant partnership or organizational agreement).
(d) Each of Insignia and the Trust has full legal right,
power and authority to execute, deliver and perform this Agreement
and to consummate the transactions provided for herein; and this
Agreement has been duly and validly authorized, executed and
delivered by each of the Trust and Insignia. This Agreement, assuming
it is a binding agreement of each other party thereto, constitutes a
legal, valid and binding agreement of the Trust and of Insignia,
enforceable against the Trust and Insignia in accordance with its
terms (except as such enforceability may be limited by the provisions
of Article 9 of the certificate of incorporation of Insignia
regarding arrangements with creditors, applicable bankruptcy,
insolvency, reorganization, or other similar laws relating to
creditors' rights generally, and general equitable principles
relating to the availability of remedies, and as rights to indemnity
or contribution may be limited by state or federal securities laws
and the public policy underlying such laws). The execution, delivery
and performance of this Agreement by the Trust and Insignia and the
consummation by each of them of the transactions contemplated hereby,
and the application of the net proceeds of the offering in the manner
set forth in the Offering Memorandum, do not and will not, and the
conduct of the business of Insignia and the affairs of the Trust as
described in the Offering Memorandum does not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default (or result in acceleration of any obligation,
termination of any right or creation of any lien or encumbrance)
under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Trust, Insignia or any
Principal Subsidiary is bound or to which any of the property or
assets of the Trust, Insignia or any Principal Subsidiary is subject,
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Trust,
Insignia or any Principal Subsidiary or any of their properties or
assets, except any such conflict, violation or default which does not
and would not be reasonably likely to have a material adverse effect
on the Trust, Insignia and its subsidiaries taken as a whole, and
such actions do not and will not result in any violation of the
provisions of the charter, by-laws, certificate of limited
partnership and partnership agreement, operating agreement, articles
of organization or other organizational documents, as applicable
(collectively, "organizational documents"), of the Trust, Insignia or
any Principal Subsidiary; and except for such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Convertible
Preferred Securities by
C-5
<PAGE>
the Initial Purchasers, no consent, approval, authorization or order
of, or filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and
performance of this Agreement by the Trust or Insignia.
(e) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Business
Trust Act, is a "grantor trust" for federal income tax purposes under
existing law, has the business trust power and authority to conduct
its affairs as presently conducted and as described in the Offering
Memorandum, and is not required to be authorized to do business in
any other jurisdiction.
(f) The Indenture has been duly authorized by Insignia and,
upon execution and delivery thereof by Insignia, and assuming due
authorization, execution and delivery thereof by the Indenture
Trustee, will be, as of the Closing Date (as hereinafter defined), a
valid and legally binding obligation of Insignia, enforceable against
Insignia in accordance with its terms (except as such enforceability
may be limited by the provisions of Article 9 of the certificate of
incorporation of Insignia regarding arrangements with creditors,
applicable bankruptcy, insolvency, reorganization, or other similar
laws relating to creditors' rights generally, and general equitable
principles relating to the availability of remedies, and as rights to
indemnity or contribution may be limited by state or federal
securities laws and the public policy underlying such laws).
(g) The Declaration has been duly authorized by Insignia
and, upon execution and delivery thereof by Insignia, and assuming
due authorization, execution and delivery thereof by the Insignia
Trustees, will be, as of the Closing Date (as hereinafter defined), a
valid and legally binding obligation of Insignia and the Regular
Trustees, enforceable against Insignia and the Regular Trustees in
accordance with its terms (except as such enforceability may be
limited by the provisions of Article 9 of the certificate of
incorporation of Insignia regarding arrangements with creditors,
applicable bankruptcy, insolvency, reorganization, or other similar
laws relating to creditors' rights generally, and general equitable
principles relating to the availability of remedies, and as rights to
indemnity or contribution may be limited by state or federal
securities laws and the public policy underlying such laws).
(h) The Guarantee has been duly authorized by Insignia and,
upon execution and delivery thereof by Insignia, and assuming due
authorization, execution and delivery thereof by the Guarantee
Trustee, will be, as of the Closing Date (as hereinafter defined), a
valid and legally binding obligation of Insignia, enforceable against
Insignia in accordance with its terms (except as such enforceability
may be limited by the provisions of Article 9 of the certificate of
incorporation of Insignia regarding arrangements with
C-6
<PAGE>
creditors, applicable bankruptcy, insolvency, reorganization, or
other similar laws relating to creditors' rights generally, and
general equitable principles relating to the availability of
remedies, and as rights to indemnity or contribution may be limited
by state or federal securities laws and the public policy underlying
such laws).
(i) The Registration Rights Agreement has been duly
authorized by Insignia and, upon execution and delivery thereof by
Insignia, and assuming due authorization, execution and delivery
thereof by the Initial Purchasers, will be, as of the Closing Date
(as hereinafter defined), a valid and legally binding obligation of
Insignia, enforceable against Insignia in accordance with its terms
(except as such enforceability may be limited by the provisions of
Article 9 of the certificate of incorporation of Insignia regarding
arrangements with creditors, applicable bankruptcy, insolvency,
reorganization, or other similar laws relating to creditors' rights
generally, and general equitable principles relating to the
availability of remedies, and as rights to indemnity or contribution
may be limited by state or federal securities laws and the public
policy underlying such laws).
(j) The Subordinated Convertible Debt Securities have been
duly authorized and, when executed by Insignia, authenticated by the
Indenture Trustee, issued in accordance with the Indenture and
delivered to the Trust against payment therefor as described in the
Offering Memorandum, will constitute valid and legally binding
obligations of Insignia, enforceable against Insignia in accordance
with their terms (except as such enforceability may be limited by the
provisions of Article 9 of the certificate of incorporation of
Insignia regarding arrangements with creditors, applicable
bankruptcy, insolvency, reorganization, or other similar laws
relating to creditors' rights generally, and general equitable
principles relating to the availability of remedies, and as rights to
indemnity or contribution may be limited by state or federal
securities laws and the public policy underlying such laws).
(k) The Convertible Preferred Securities have been duly
authorized by the Declaration and, when executed by the Trust and
authenticated by the Institutional Trustee in accordance with the
Declaration and delivered to you against payment therefor in
accordance with the terms hereof, will be validly issued and will be
fully paid and non-assessable undivided interests in the assets of
the Trust, and the issuance of such Convertible Preferred Securities
is not subject to any preemptive or similar rights. Holders of the
Convertible Preferred Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit under the General Corporation Law of the
State of Delaware. The Trust Common Securities to be issued to
Insignia will be authorized by the Declaration and, when executed in
accordance with the terms of the Declaration and delivered to
Insignia against payment therefor as described in the Offering
C-7
<PAGE>
Memorandum, will represent validly issued undivided beneficial
interests in the assets of the Trust.
(l) The Convertible Preferred Securities, the Convertible
Subordinated Debt Securities, the Declaration, the Indenture, the
Guarantee and the Registration Rights Agreement conform to the
descriptions thereof contained in the Offering Memorandum.
(m) The execution and delivery by Insignia of, and the
performance by Insignia of its obligations under the Declaration, the
Guarantee, the Indenture and the Registration Rights Agreement, the
issuance and sale of the Convertible Subordinated Debt Securities,
and the conversion of the Convertible Subordinated Debt Securities
into shares of Common Stock, will not contravene any provision of
applicable law, the Declaration, the certificate of incorporation or
bylaws of Insignia or any agreement or other instrument binding upon
Insignia or any of its subsidiaries, or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over
Insignia or any subsidiary, except such contraventions as would not
in the aggregate have a material adverse effect on Insignia and its
subsidiaries, taken as a whole.
(n) The issuance and sale of the Convertible Preferred Stock
by the Trust will not contravene any provision of applicable law, the
Declaration, or any agreement or other instrument binding upon the
Trust, or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Trust, except such
contraventions as would not in the aggregate have a material adverse
effect on the Trust.
(o) The Conversion Shares have been duly authorized and
validly reserved for issuance upon conversion of the Convertible
Subordinated Debt Securities by all necessary corporate action of
Insignia and, when issued upon such conversion, will be validly
issued, fully paid and nonassessable. The issuance of the Conversion
Shares will not be subject to any preemptive or similar rights.
(p) Except as disclosed in the Offering Memorandum, there
are no contracts, agreements or understandings between the Trust or
Insignia and any person granting such person the right (other than
rights which have been waived or satisfied) to require the Trust or
Insignia to file a registration statement under the Securities Act
with respect to any securities of the Trust or Insignia owned or to
be owned by such person or to require the Trust or Insignia to
include such securities in the securities being registered pursuant
to any other registration statement filed by the Trust or Insignia
under the Securities Act.
C-8
<PAGE>
(q) Insignia and its subsidiaries, taken as a whole, have
not sustained, since the date of the latest audited financial
statements included or incorporated by reference in the Offering
Memorandum, any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Offering Memorandum, except for any loss or interference which does
not and would not be reasonably likely to have a material adverse
effect on the Insignia and its subsidiaries taken as a whole; and
since such date, there has not been any material change in the rights
or terms of the capital stock or long-term debt of Insignia, the
Trust or any Principal Subsidiary or any material adverse change, or
any development involving a prospective material adverse change, in
or affecting the general affairs, management, financial condition,
stockholders' equity or results of operations of Insignia and its
subsidiaries taken as a whole, otherwise than as set forth in the
Offering Memorandum.
(r) The financial statements (including the related notes
and supporting schedules) included or incorporated by reference in
the Offering Memorandum present fairly the financial condition and
results of operations of the entities purported to be shown thereby,
at the dates and for the periods indicated, and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved. The financial
information and data included or incorporated by reference in the
Offering Memorandum present fairly the information included therein
and have been prepared on a basis consistent with that of the
financial statements included or incorporated by reference in the
Offering Memorandum and the books and records of the respective
entities presented therein. Pro forma financial information included
or incorporated by reference in the Offering Memorandum has been
prepared in accordance with the applicable requirements of the
Securities Act and the Rules and Regulations with respect to pro
forma financial information and includes all adjustments necessary to
present fairly the pro forma financial position of the respective
entity or entities presented therein at the respective dates
indicated and the results of their operations for the respective
periods specified.
(s) Ernst & Young LLP, Coopers & Lybrand LLP and Imowitz
Koenig & Co., LLP, who have certified certain financial statements of
Insignia or of businesses acquired by Insignia, as applicable, and
whose reports appear in the Offering Memorandum or are incorporated
by reference therein, are independent public accountants as required
by the Securities Act and the Rules and Regulations.
C-9
<PAGE>
(t) Insignia and its subsidiaries, taken as a whole, have
good and marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except
such as are described in or incorporated by reference in the Offering
Memorandum or such as do not and would not be reasonably likely in
the aggregate to have a material adverse effect on Insignia and its
subsidiaries taken as a whole; and all real property and buildings
held under lease by Insignia and its subsidiaries are held by them
under valid, subsisting and enforceable leases, with such exceptions
as do not and would not be reasonably likely in the aggregate to have
a material adverse effect on Insignia and its subsidiaries taken as a
whole. Insignia and its subsidiaries own or lease all such material
properties as are necessary to their operations as now conducted and
as proposed to be conducted; and the properties and businesses of
Insignia and its subsidiaries conform in all material respects to all
descriptions thereof contained in the Offering Memorandum and the
documents incorporated by reference therein.
(u) Insignia and its subsidiaries, taken as a whole, carry,
or are covered by, insurance in such amounts and covering such risks
as is adequate for the conduct of the businesses and the value of the
properties of Insignia and its subsidiaries taken as a whole and as
is customary for companies engaged in similar businesses in similar
industries.
(v) Insignia and its subsidiaries, taken as a whole, own or
possess adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights and licenses
necessary for the conduct of the business of Insignia and its
subsidiaries, taken as a whole, and have no reason to believe that
the conduct of such businesses will conflict with, and have not
received any notice of any claim of conflict with, any such rights of
others.
(w) There are no legal or governmental proceedings pending
to which Insignia or any of its subsidiaries is a party or of which
any property or assets of Insignia or any of its subsidiaries is the
subject which, if determined adversely to Insignia or any of its
subsidiaries, have or would be reasonably likely to have a material
adverse effect on the consolidated financial condition, stockholders'
equity, results of operations, or business of Insignia and its
subsidiaries taken as a whole, except as disclosed in the Offering
Memorandum; and to the best of Insignia's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others, except as disclosed in the
Offering Memorandum. All summaries or descriptions of legal or
governmental proceedings or contingencies in the Offering Memorandum
are accurate in all material respects with respect to such matters.
C-10
<PAGE>
(x) All summaries or descriptions of contracts and other
documents described in or incorporated by reference in the Offering
Memorandum are accurate in all material respects with respect to such
matters.
(y) No labor disturbance by the employees of Insignia or any
of its subsidiaries exists or, to the knowledge of Insignia, is
imminent which might be expected to have a material adverse effect on
the consolidated financial condition, stockholders' equity, results
of operations or business of Insignia and its subsidiaries taken as a
whole.
(z) Insignia is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which Insignia would have any liability;
Insignia has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code");
and each "pension plan" for which Insignia would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(aa) Since its inception, Insignia has incurred no material
liability arising under or as a result of any legal or governmental
proceeding, either actual or threatened, alleging any violation of
the provisions of the Securities Act or the Rules and Regulations.
Insignia has not distributed and, prior to the completion of the
distribution of the Convertible Preferred Securities, will not
distribute any offering material in connection with the offering and
sale of the Convertible Preferred Securities other than the Offering
Memorandum or the Preliminary Offering Memorandum, or other
materials, if any, permitted by the Securities Act. Neither Insignia
nor any of its officers, directors or controlling persons or, to
Insignia's knowledge, affiliates (within the meaning of the Rules and
Regulation) has taken or will take, directly or indirectly, any
action resulting in a violation of Rule 10b-6 under the Exchange Act
or designed to stabilize or manipulate the price of any security of
Insignia or of the Trust, or which might in the future reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of Insignia or of the Trust, to facilitate the
sale or resale of the Convertible Preferred Securities or otherwise.
(bb) Each of Insignia and the Trust has filed all federal,
state and local income and franchise tax returns required to be filed
through the date
C-11
<PAGE>
hereof and has paid all taxes due thereon, and no tax deficiency has
been determined adversely to the Trust or Insignia or any of
Insignia's subsidiaries which has had (nor does Insignia have any
knowledge of any tax deficiency which, if determined adversely to the
Trust, Insignia or any of Insignia's subsidiaries, might have) a
material adverse effect on the consolidated financial condition,
stockholders' equity, results of operations, business or prospects of
Insignia and its subsidiaries taken as a whole.
(cc) Since the date as of which information is given in the
Offering Memorandum through the date hereof, and except as may
otherwise be disclosed in the Offering Memorandum, neither of the
Trust or Insignia has (i) issued or granted any securities or rights
to acquire any securities, (ii) incurred any liability or obligation,
direct or contingent, other than liabilities and obligations which
were incurred in the ordinary course of business, or incurred any
long-term debt or other material indebtedness, (iii) entered into any
transaction or acquisition not in the ordinary course of business or
(iv) declared or paid any dividend on its capital stock.
(dd) Each of Insignia and the Trust (i) makes and keeps
accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
financial statements in accordance with generally accepted accounting
principles, and to maintain accountability for its assets, (C) access
to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to the differences.
(ee) Neither the Trust nor Insignia nor any of Insignia's
subsidiaries (i) is in violation of its organizational documents,
(ii) is in default in any material respect, and no event has occurred
which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant
or condition contained in any material indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is
a party or by which it is bound or to which any of its properties or
assets is subject, (iii) is in violation in any material respect of
any law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject, or (iv) has failed
to obtain any material license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership
of its property or to the conduct of its business, or the business
proposed to be conducted by it, as described in the Offering
Memorandum, in each case other than matters which do not and would
not be reasonably likely to have a material adverse effect on
Insignia and its subsidiaries, taken as a whole.
C-12
<PAGE>
(ff) Except as disclosed in, incorporated by reference in,
or contemplated by the Offering Memorandum, (i) there has been no
storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by Insignia or any
of its subsidiaries (or, to the knowledge of the Insignia, any of
their predecessors in interest) at, upon or from any of the property
now or previously owned or leased by Insignia or its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action
under any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit, except for any violation or remedial
action which does not and would not be reasonably likely to have,
singly or in the aggregate with all such violations and remedial
actions, a material adverse effect on the general affairs,
management, financial condition, stockholders' equity or results of
operations of Insignia and its subsidiaries taken as a whole; and
(ii) there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind (an "environmental
discharge") onto such property or into the environment surrounding
such property of any toxic wastes, medical wastes, solid wastes,
hazardous wastes or hazardous substances due to or caused by Insignia
or any of its subsidiaries or with respect to which Insignia or any
of its subsidiaries have knowledge, except for any such environmental
discharge which does not and would not be reasonably likely to have,
singly or in the aggregate with all such environmental discharges, a
material adverse effect on the general affairs, management, financial
condition, stockholders' equity or results of operations of Insignia
and its subsidiaries taken as a whole; and the terms "hazardous
wastes", "toxic wastes", "hazardous substances" and "medical wastes"
shall have the meanings specified in any applicable local, state,
federal and foreign laws or regulations with respect to environmental
protection.
(gg) Neither of the Trust, Insignia nor any subsidiary of
Insignia is an "investment company" within the meaning of such term
under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(hh) No Principal Subsidiary is currently prohibited,
directly or indirectly, under its organizational documents or any
indenture, loan agreement or other agreement or instrument to which
it is a party or by which it is bound or to which any of its
properties or assets is subject, from paying any dividends to
Insignia, from making any other distribution on such Principal
Subsidiary's capital stock, from repaying to Insignia any loans or
advances to such Principal Subsidiary from Insignia or transferring
any of such Principal Subsidiary's property or assets to Insignia or
any other subsidiary of Insignia, except as described in,
incorporated by reference in, or contemplated by the Offering
Memorandum.
C-13
<PAGE>
(ii) Metropolitan Asset Enhancement, L.P. ("MAE") has been
duly organized and is validly existing as a partnership in good
standing under the laws of its jurisdiction of organization, is duly
qualified to do business and is in good standing as a foreign
partnership in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification,
and has all power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged. The
partnership interest of Insignia in MAE has been duly and validly
authorized and issued, conforms to all descriptions thereof contained
in the Offering Memorandum and (except as set forth in the Offering
Memorandum) is owned by Insignia, free and clear of all liens,
encumbrances, equities or claims (other than any restrictions on
transfer of such interest contained in the partnership agreement of
MAE). All descriptions of MAE, the partnership interest of Insignia
in MAE, and the agreements and understandings involving MAE and
Insignia described in or incorporated by reference in the Offering
Memorandum are accurate in all material respects with respect to such
matters. The contracts and agreements between MAE and Insignia
described in or incorporated by reference in the Offering Memorandum
have been duly and validly authorized, executed and delivered by the
parties thereto, and are valid and binding agreements of such
parties, enforceable in accordance with their terms.
(jj) All descriptions of matters relating to companies or
assets acquired by Insignia or MAE, or any of Insignia's
subsidiaries, including, without limitation, descriptions regarding
Edward S. Gordon Company Incorporated, Paragon Group Property
Services, Inc. and National Properties Investors, Inc. or any of
their respective affiliates described in or incorporated by reference
in the Offering Memorandum are accurate in all material respects with
respect to such matters. To the best knowledge of Insignia, except as
set forth in, incorporated by reference in, or contemplated by the
Offering Memorandum, there is no claim or cause of action, whether
asserted or unasserted, which the sellers of such companies or assets
or their affiliates or creditors, have or may have against Insignia,
MAE, or their respective subsidiaries or other affiliates or any
property held by any of them, which, if determined adversely to
Insignia, MAE, or their respective subsidiaries or other affiliates,
would have a material adverse effect on the consolidated financial
condition, stockholders' equity, results of operations, business or
prospects of Insignia (together with its subsidiaries) or MAE
(together with its subsidiaries).
(kk) Neither Insignia nor any of its affiliates (as defined
in Rule 501(b) under Regulation D under the Securities Act), nor any
person acting on its or their behalf has, directly or through any
agent, sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any security (as defined in Section 2(1)
under the Securities Act) which is or will be subject to
C-14
<PAGE>
integration with the Convertible Preferred Securities in a manner
that would require the registration of the Convertible Preferred
Securities under the Securities Act. It is understood that for
purposes of the representations made in this Section 1(kk), the
Initial Purchasers and any persons acting on their behalf shall not
be deemed to be persons acting on behalf of the Trust or Insignia.
(ll) No securities of the same class, within the meaning of
Rule 144A(d)(3) under the Securities Act, as the Convertible
Preferred Securities are listed on any national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system.
(mm) Neither the Trust, Insignia, nor any of their
affiliates, nor any person acting on their behalf, has offered or
sold any Convertible Preferred Securities or similar securities of
the Trust by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities
Act which would cause the exemptions afforded by Section 4(2), Rule
144A and Regulation S of the Securities Act to cease to be applicable
to the offering and resale of any of the Convertible Preferred
Securities. Neither the Trust nor Insignia, nor any of their
affiliates, nor any person acting on their behalf, has engaged or
will engage in any directed selling efforts within the meaning of
Regulation S with respect to the Convertible Preferred Securities,
and the Trust, Insignia, their affiliates and all persons acting on
their behalf have complied and will comply with the offering
restrictions requirements of Regulation S in connection with the
offering of the Convertible Preferred Securities outside of the
United States. It is understood that for purposes of the
representations made in this Section 1(mm), the Initial Purchasers
and any persons acting on their behalf shall not be deemed to be
persons acting on behalf of the Trust or Insignia.
(nn) Neither the Trust nor Insignia has taken or will take,
directly or indirectly, any action prohibited by Rule 10b-6 or Rule
10b-7 under the Exchange Act in connection with the offering of any
of the Convertible Preferred Securities.
(oo) Assuming (i) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof, (ii) the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 2 hereof, and (iii) the accuracy of
the representations and warranties made in accordance with this
Agreement and the Offering Memorandum by purchasers to whom the
Initial Purchasers initially resell Convertible Preferred Securities,
it is not necessary in connection with the offer, sale and delivery
of the Convertible Preferred Securities to the Initial Purchasers or
in connection with the initial resale of the Convertible Preferred
Securities by
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<PAGE>
the Initial Purchasers in the manner contemplated by this Agreement
and the Offering Memorandum to (A) register the Convertible Preferred
Securities under the Securities Act or (B) qualify the Declaration,
in respect of the Convertible Preferred Securities, or the Indenture,
in respect of the Convertible Subordinated Debt Securities, under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(pp) Insignia is subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act.
2. Representations, Warranties and Agreements of the Several Initial
Purchasers. Each of the several Initial Purchasers represents, warrants and
agrees as follows:
(a) Each Initial Purchaser severally represents and warrants
that it is a "qualified institutional buyer" within the meaning of
Rule 144A and that it will offer the Convertible Preferred Securities
for resale only upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum.
(b) The Initial Purchasers severally acknowledge that they
are purchasing the Convertible Preferred Securities pursuant to a
private sale exemption from registration under the Securities Act,
and that the Convertible Preferred Securities have not been
registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of,
U.S. persons except pursuant to an exemption from the registration
requirements of the Securities Act. Each Initial Purchaser severally
represents, warrants and agrees that it has offered the Convertible
Preferred Securities, and will offer and sell the Convertible
Preferred Securities, only (i) inside the United States to persons
whom the Initial Purchaser reasonably believes to be (A) "qualified
institutional buyers" in accordance with Rule 144A and (B)
Institutional Accredited Investors (as hereinafter defined) in
accordance with Section 2(c) herein; or (ii) outside the United
States in accordance with Regulation S. Each Initial Purchaser
severally represents, warrants and agrees that neither it nor its
affiliates nor any person acting on its or their behalf, has engaged
or will engage in any directed selling efforts in the United States
within the meaning of Regulation S with respect to the Convertible
Preferred Securities, and such Initial Purchaser, its affiliates and
all persons acting on its or their behalf have complied and will
comply with the offering restrictions requirements of Regulation S in
connection with the offering of the Convertible Preferred Securities
outside of the United States. Each Initial Purchaser severally
agrees, with respect to resales made in reliance on Regulation S, to
deliver either with the confirmation of such resale or
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<PAGE>
otherwise prior to settlement of such resale a notice substantially
to the following effect:
"The Convertible Preferred Securities covered
hereby and the Conversion Shares issuable upon
conversion hereof have not been registered under
the U.S. Securities Act of 1933, as amended (the
"Securities Act") and may not be offered and sold
within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of the
distribution thereof at any time or (ii) otherwise
until 40 days after the later of the date of the
commencement of the offering and the latest closing
date, except in either case in accordance with
Regulation S under the Securities Act. Terms used
above have the meaning given them by Regulation S."
(c) It is understood and agreed that in addition to offering
and selling Convertible Preferred Securities to persons referred to
in clauses (i)(A) and (ii) of Section 2(b) the Initial Purchasers
have offered, or may offer and sell, Convertible Preferred Securities
having a minimum purchase price of $250,000 to institutions each of
which is reasonably believed by the applicable Initial Purchaser to
be an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act or an entity in which all of
the equity owners are accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (each an
"Institutional Accredited Investor"); provided, however, that each
such Institutional Accredited Investor executes and delivers to such
Initial Purchaser and the Trust, prior to the consummation of any
sale of Convertible Preferred Securities to such institution, a
letter in substantially the form attached as Appendix A to the
Offering Memorandum.
(d) The Initial Purchasers severally represent, warrant and
agree that (i) they have not offered or sold and prior to the date
six months after the date of issue of the Convertible Preferred
Securities will not offer or sell, in the United Kingdom by means of
any document, any Convertible Preferred Securities offered hereby,
other than to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise
in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995, (ii) they have complied
and will comply with all applicable provisions of the Financial
Services Act 1986 and the Public Offers of Securities Regulations
1995 with respect to anything done by them in
C-17
E>
relation to the Convertible Preferred Securities in, from or
otherwise involving the United Kingdom, and (iii) they have only
issued or passed on and will only issue or pass on to any person in
the United Kingdom any document received by them in connection with
the issue of the Convertible Preferred Securities if that person is
of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom the document may otherwise lawfully be issued or
passed on.
(e) The Initial Purchasers severally represent, warrant and
agree that they have not and will not solicit offers for, or offer or
sell the Convertible Preferred Securities purchased from the Trust
hereunder by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act), including, but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. The Initial Purchasers
severally agree, with respect to resales made in reliance on Rule
144A, other than through the National Association of Securities
Dealers, Inc. PORTAL Market (the "PORTAL Market"), of any of the
Convertible Preferred Securities purchased from the Trust hereunder,
to deliver either with the confirmation of such resale or otherwise
prior to settlement of such resale a notice to the effect that the
resale of such Convertible Preferred Securities has been made in
reliance upon the exemption from the registration requirements of the
Securities Act provided by Rule 144A.
(f) Each Initial Purchaser further agrees that it will not
offer, sell or deliver any of the Convertible Preferred Securities in
any jurisdiction except under circumstances that will result in
compliance with the applicable laws thereof, and that, except as
otherwise provided in this Agreement, it will take at its own expense
whatever action is required to permit its purchase and resale of the
Convertible Preferred Securities. Each Initial Purchaser understands
that no action has been taken to permit a public offering in any
jurisdiction where action would be required for such purpose. Each
Initial Purchaser agrees that it is not authorized (i) to make any
offering, sale, resale or delivery of Convertible Preferred
Securities or to circulate or disseminate any material relating to
the acquisition or disposal of Convertible Preferred Securities
except as contemplated in this Agreement and the Offering Memorandum
or (ii) to make any representation or use any information in
connection with the issuance, subscription and sale of the
Convertible Preferred Securities other than as contained in the
Offering Memorandum, or the Offering Memorandum as amended or
supplemented.
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<PAGE>
(g) Lehman Brothers Inc. shall, on behalf of the Initial
Purchasers, give the Trust prompt written notice of completion of the
offering and initial resale of the Convertible Preferred Securities
by the Initial Purchasers.
3. Purchase of the Convertible Preferred Securities by the Initial
Purchasers. On the basis of the representations and warranties contained in,
and subject to the terms and conditions of, this Agreement, the Trust agrees
to sell 2,600,000 Firm Securities, and each of the Initial Purchasers,
severally and not jointly, agrees to purchase the number of Firm Securities
set opposite that Initial Purchaser's name in Schedule A hereto. Each Initial
Purchaser shall be obligated to purchase from the Trust that number of Firm
Securities which represents the same proportion of the number of Firm
Securities to be sold by the Trust as the number of Firm Securities set forth
opposite the name of such Initial Purchaser in Schedule A represents of the
total number of Firm Securities to be purchased by all of the Initial
Purchasers pursuant to this Agreement. The respective purchase obligations of
the Initial Purchasers with respect to the Firm Securities shall be rounded
among the Initial Purchasers to avoid fractional interests in Firm Securities,
as the Initial Purchasers may determine.
In addition, the Trust grants to the Initial Purchasers an
option to purchase up to 390,000 Option Securities. Such option is granted
solely for the purpose of covering over-allotments in the sale of Firm
Securities and is exercisable as provided in Section 4 hereof. Option
Securities shall be purchased severally for the account of the Initial
Purchasers in proportion to the number of Firm Securities set opposite the
name of such Initial Purchasers in Schedule A hereto. The respective purchase
obligations of each Initial Purchaser with respect to the Option Securities
shall be adjusted so that no Initial Purchaser shall be obligated to purchase
Option Securities other than in lots of 100 Option Securities. At any time on
or before the thirtieth day after the date of this Agreement, the option
granted in this Section 3 may be exercised by written notice given to the
Trust and Insignia by the Initial Purchasers. Such notice shall set forth the
aggregate number of Option Securities as to which the option is being
exercised and the date and time, as determined by the Initial Purchasers, when
the Option Securities are to be delivered; provided, however, that this date
and time shall not be earlier than the Closing Date (as hereinafter defined)
nor earlier than the second business day after the date on which the option
shall have been exercised nor later than the fifth business day after the date
on which the option shall have been exercised. The price of both the Firm
Securities and any Option Securities shall be $50 per Convertible Preferred
Security, and Insignia shall pay to the Initial Purchasers a commission equal
to 3% of the aggregate purchase price of the Firm Securities and the Option
Securities.
The Trust shall not be obligated to deliver any of the
Convertible Preferred Securities to be delivered on the Closing Date or the
Option Closing Date (as hereinafter defined), as the case may be, except upon
payment for all the
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Convertible Preferred Securities to be purchased on such Closing Date as
provided herein.
4. Delivery of and Payment for the Convertible Preferred Securities.
Payment for the Firm Securities shall be made at such place in New York City
as shall be agreed upon between Insignia and Lehman Brothers Inc. against
delivery of such Firm Securities for the respective accounts of the several
Initial Purchasers at 10:00 A.M., New York City time, on the third full
business day following the date of this Agreement or such other date as shall
be determined by agreement between the Initial Purchasers and the Trust. This
date and time are hereinafter referred to as the "Firm Closing Date."
Payment for any Option Securities shall be made at such place in New
York City as shall be agreed upon between Insignia and Lehman Brothers Inc.
against delivery of such Option Securities for the respective accounts of the
several Initial Purchasers, at 10:00 A.M., New York City time, on the date
specified in the notice described in Section 3 above or on such other date as
shall be designated in writing by the Initial Purchasers, on behalf of the
Initial Purchasers. This date and time are sometimes referred to as the
"Option Closing Date." The Firm Closing Date and the Option Closing Date are
herein individually referred to as the "Closing Date" and collectively
referred to as the "Closing Dates."
On each Closing Date, payment for the Firm Securities and Optional
Securities shall be made by certified or official bank check or checks, or by
wire transfer, payable to the order of the Trust, in Federal (same day) funds.
On each Closing Date, payment will be made against (i) to the extent
Convertible Preferred Securities are to be resold outside the United States
pursuant to Regulation S, delivery of a global certificate to a common
depository for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System, or Cedel Bank, societe anonyme, for credit
to the respective accounts of the Initial Purchasers or to such other accounts
as such Initial Purchasers may request in writing not less than two business
days prior to each Closing Date, (ii) to the extent Convertible Preferred
Securities are to be resold in the United States pursuant to Rule 144A under
the Securities Act, delivery of a single global certificate in registered form
to be deposited with, or on behalf of, The Depository Trust Company ("DTC")
and registered in the name of CEDE & Co., as nominee for DTC, in such
denominations and registered in such names as the Initial Purchasers shall
request in writing not less than two business days prior to each Closing Date,
and (iii) to the extent Convertible Preferred Securities are to be resold in
the United States to Institutional Accredited Investors, delivery of
definitive certificates for the Convertible Preferred Securities in registered
form in minimum denominations of U.S. $250,000 liquidation amount and
multiples of $1,000 liquidation amount in excess thereof and in such names as
the Initial Purchasers shall request in writing not less than two business
days prior to each Closing Date. Time shall be of the essence, and delivery at
the time and place specified pursuant to this Agreement is
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a further condition to the obligation of each Initial Purchaser hereunder.
With respect to each Closing Date, the Trust shall make available the
certificates representing the Convertible Preferred Securities to be resold
for inspection by the Initial Purchasers in New York, New York not later than
2:00 p.m., New York City time, on the business day prior to such Closing Date.
5. Further Agreements of the Trust and Insignia. The Trust and
Insignia agree:
(a) If at any time prior to notice of completion of the
resale of the Convertible Preferred Securities having been given by
Lehman Brothers Inc. on behalf of the Initial Purchasers, any event
occurs as a result of which the Offering Memorandum as then amended
or supplemented would include an untrue statement of material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at such time to
amend or supplement the Offering Memorandum to comply with any
applicable law, the Trust or Insignia promptly will prepare an
amendment or supplement which will correct such statement or omission
or effect such compliance, and the Trust or Insignia will advise
Lehman Brothers Inc. promptly of such amendment or supplement and
will provide Lehman Brothers Inc. with copies thereof and a
reasonable opportunity to comment thereon prior to the distribution
of any such amendment or supplement. Neither Lehman Brothers Inc.'s
review of, nor the Initial Purchasers' delivery of, any such
amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 7. If at any time prior to notice of
completion of the offering and initial resale of the Convertible
Preferred Securities having been given by Lehman Brothers Inc., on
behalf of the Initial Purchasers, Insignia intends to file a Current
Report on Form 8-K, or to issue any press release or similar
communication relating to the offering of the Convertible Preferred
Securities (or any other release or communication that would be
deemed to be an offer or solicitation with respect to the Convertible
Preferred Securities), the Trust or Insignia will advise Lehman
Brothers Inc. promptly of such report or communication and will not
file such report or issue such communication without previously
informing Lehman Brothers Inc.;
(b) Insignia will furnish to the Initial Purchasers copies
of the Offering Memorandum and all amendments and supplements
thereto, in each case as soon as available and in such quantities as
they may reasonably request, and Insignia will furnish to the Initial
Purchasers on the date hereof, four copies of the independent
accountants' reports included in the Offering Memorandum signed by
the accountants rendering such report;
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(c) During the period of three years after the Closing Date
(or the Option Closing Date, if any), Insignia will, upon request,
furnish to any Initial Purchaser and any holder of Convertible
Preferred Securities a copy of the restrictions on transfer
applicable to such securities;
(d) Neither Insignia nor the Trust will, nor will Insignia
nor the Trust permit any of the Principal Subsidiaries to, resell any
securities which have been acquired by any of them during the period
of three years after the Closing Date (or the Option Closing Date, if
any) and which constitute "restricted securities" under Rule 144,
otherwise than pursuant to an effective registration statement under
the Securities Act;
(e) During the period of three years after the Closing Date
(or the Option Closing Date, if any), neither the Trust nor Insignia
will be or become an "investment company" within the meaning of, or
be or become subject to regulation under, the Investment Company Act;
(f) During the period beginning on the date hereof and
continuing through the date which is 90 days after the date hereof,
without the prior written consent of Lehman Brothers Inc., Insignia
will not, directly or indirectly, offer for sale, sell or other
dispose of (or enter into any transaction or device which is designed
to, or could be expected to, result in the disposition by any person
at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for shares of Common
Stock or warrants or other rights to purchase Common Stock or permit
the registration under the Securities Act of any shares of Common
Stock (other than pursuant to the Shelf Registration Statement,
including any shares of Common Stock held by persons with incidental
registration rights triggered thereby), except (A) Common Stock
issuable pursuant to, or options to purchase Common Stock granted
under, existing employee benefit plans maintained for the benefit of
the officers, directors and employees of Insignia or pursuant to any
existing dividend reinvestment plan of Insignia or Common Stock
issuable upon exercise of stock options previously granted to
consultants and outstanding on the date hereof, (B) Common Stock
issuable upon the exercise, exchange or conversion of options,
rights, warrants to purchase or acquire shares of Common Stock or
convertible or exchangeable securities issued by Insignia or any of
its subsidiaries outstanding as of the date hereof the existence of
which is disclosed in the Offering Memorandum or in any document
incorporated therein, and (C) Common Stock issuable upon conversion
of the Convertible Preferred Securities. Neither the Trust nor
Insignia will at any time offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, contract or disposition would
cause the exemption afforded by Section 4(2) of the Securities Act to
cease to be applicable to the offer and sale of the Convertible
Preferred Securities;
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(g) In connection with the offering, until Lehman Brothers
Inc., on behalf of the Initial Purchasers, shall have notified
Insignia and the other Initial Purchasers of the completion of the
resale of the Convertible Preferred Securities, neither Insignia, nor
the Trust, nor any of its affiliated purchasers (as defined in Rule
10b-6 under the Exchange Act), either alone or with one or more other
persons, in violation of the Securities Act or the Exchange Act has
bid for or purchased or will bid for or purchase, for any account in
which it or any of its affiliated purchasers has a beneficial
interest, any Convertible Preferred Securities, or any securities of
the same class or series as the Convertible Preferred Securities
(collectively, the "Subject Securities") or attempt to induce any
person to purchase any Subject Securities; and neither will Insignia
nor the Trust nor any of its affiliated purchasers make bids or
purchases for the purpose of creating actual, or apparent, active
trading in or of raising the price of the Convertible Preferred
Securities or other Subject Securities;
(h) Insignia will reserve and keep available at all times,
free of preemptive rights, the full number of shares of Common Stock
issuable upon conversion of the Convertible Preferred Securities;
(i) Insignia will use its best efforts to arrange for
qualification of the Convertible Preferred Securities for sale under
the laws of such jurisdictions as the Initial Purchasers may
reasonably designate and to maintain such qualifications in effect so
long as reasonably required for the distribution of the Convertible
Preferred Securities; provided, however, that neither Insignia nor
the Trust will be obligated to qualify to do business as a foreign
corporation in any state in which they are not so qualified or to
file a general consent to service of process in any jurisdiction;
(j) To apply the net proceeds from the sale of the
Convertible Preferred Securities being sold by the Trust
substantially as set forth in the Offering Memorandum;
(k) So long as any of the Convertible Preferred Securities
are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, Insignia will, during any period in which
it is not subject to and in compliance with Section 13 or 15(d) of
the Exchange Act, provide to each holder of such restricted
securities and to each prospective purchase (as designated by such
holder) of such restricted securities, upon the request of such
holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Securities Act. This covenant
is intended to be for the benefit of the holders, and the prospective
purchasers designated by such holders, from time to time of such
restricted securities;
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(l) In connection with the sale of the Convertible Preferred
Securities to the Initial Purchasers, if any of the Convertible
Preferred Securities are initially resold pursuant to Regulation D
under the Securities Act and upon written notification thereof to the
Trust by Lehman Brothers Inc., the Trust will file the notice on Form
D required by Rule 503 under the Securities Act within the time
required by such Rule and otherwise in compliance with such Rule;
(m) Insignia and the Trust will use all reasonable efforts
to cause the Convertible Preferred Securities to be designated PORTAL
eligible securities in accordance with the rules and regulations of
the PORTAL Market and to cause the Convertible Preferred Securities
to be eligible for clearance and settlement through DTC.
(n) To cause each executive officer and director of Insignia
to furnish to the Initial Purchasers, on or prior to the date of this
Agreement, a letter or letters, in form and substance satisfactory to
counsel for the Initial Purchasers, pursuant to which each such
person shall agree not to, directly or indirectly, offer for sale,
sell or otherwise dispose of (or enter into any transaction or device
which is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of
Common Stock or any securities convertible into or exercisable for
Common Stock (other than to donees who agree to be similarly bound or
transfers by will or the laws of descent and distribution or
charitable gifts) for the period beginning on the date hereof and
ending 90 days thereafter, except with the prior written consent of
Lehman Brothers Inc.
(o) For a period of five years following the Closing Date,
Insignia shall furnish to the Initial Purchasers copies of any annual
reports, quarterly reports and current reports filed with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms
as may be designated by the Commission, and such other documents,
reports and information as shall be furnished by Insignia and the
Trust to the Property Trustee or to the holders of the Convertible
Preferred Securities pursuant to the Declaration; and
(p) To notify the Initial Purchasers in writing immediately
if any event occurs that renders any of the representations and
warranties of the Trust and Insignia contained herein inaccurate or
incomplete in any material respect.
The Trust and Insignia consent to the use, in accordance
with the provisions of the Securities Act and with the securities laws of the
jurisdictions in which the Convertible Preferred Securities are offered, by
the Initial Purchasers and by all dealers to whom Convertible Preferred
Securities may be sold, of each Offering Memorandum furnished by the Trust or
Insignia, and any amendment or
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supplement thereto, in connection with the issuance and sale of the
Convertible Preferred Securities.
6. Expenses. Insignia agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Convertible Preferred
Securities and any taxes payable in that connection; (b) the fees and expenses
of its counsel and accountants and any transfer agents, conversion agents and
paying agents; (c) the costs incident to the preparation and printing of this
Agreement, the Registration Rights Agreement, the Indenture, the Guarantee,
the Preliminary Offering Memorandum, the Offering Memorandum and any
information provided by the Trust or Insignia pursuant to Section 5(b) and (k)
hereof and any amendments and supplements thereto, and any other document
relating to the issuance of the Convertible Preferred Securities; (d) the cost
of obtaining approval for the trading of the Convertible Preferred Securities
through the PORTAL Market; (e) the costs of qualifying the Convertible
Preferred Securities for offering and sale under any state securities or blue
sky laws, including reasonable legal fees and expenses of counsel to the
Initial Purchasers in connection therewith; (f) the cost of having the
Convertible Preferred Securities rated by any rating agency; and (g) all other
costs and expenses incident to the performance of the obligations of the Trust
and Insignia under this Agreement; provided, however, that except as provided
in this Section 6 and in Section 11, the Initial Purchasers shall pay their
own costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Convertible Preferred Securities which they may sell and
the expenses of advertising any offering of the Convertible Preferred
Securities made by the Initial Purchasers. The provisions of this Section 6
shall apply whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated.
7. Conditions of Initial Purchasers' Obligations. The respective
obligations of the Initial Purchasers hereunder are subject to the accuracy,
when made and on each Closing Date, of the representations and warranties of
the Trust and of Insignia contained herein, to the performance by the Trust
and Insignia of their respective covenants, agreements and obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Initial Purchasers shall not have been advised by
the Trust or Insignia, and no Initial Purchaser shall have discovered
and disclosed to the Trust or to Insignia, on or prior to such
Closing Date that the Offering Memorandum or any amendment or
supplement thereto or documents incorporated by reference therein
contains an untrue statement of a fact which, in the reasonable
opinion of the Initial Purchasers or counsel for the Initial
Purchasers, is material or omits to state a fact which, in the
reasonable opinion of the Initial Purchasers or such counsel, is
material and is required to be stated therein or is necessary to make
the statements therein not misleading.
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(b) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement,
the Offering Memorandum, the Registration Rights Agreement, the
Guarantee, the Declaration, and the Indenture, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory to the Initial Purchasers and
counsel for the Initial Purchasers, and the Trust and Insignia shall
have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters.
(c) Richards, Layton & Finger shall have furnished to the
Initial Purchasers, as special Delaware counsel to the Trust, the
letters addressed to the Initial Purchasers and dated the Closing
Date, to the effect that:
(i) The Trust has been duly created and is validly
existing in good standing as a business trust under the
Delaware Business Trust Act, and all filings required under
the laws of the State of Delaware with respect to the
creation and valid existence of the Trust as a business
trust have been made.
(ii) Under the Delaware Business Trust Act and the
Declaration, the Trust has the trust power and authority to
own its property and conduct its business as described in
the Offering Memorandum.
(iii) The Convertible Preferred Securities have
been duly authorized by the Declaration and, when executed
by the Trust and authenticated by the Institutional Trustee
in accordance with the Declaration and delivered to the
Initial Purchasers against payment therefor in accordance
with the terms hereof, will be validly issued and will be
fully paid and non-assessable undivided interests in the
assets of the Trust. Holders of the Convertible Preferred
Securities, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of
Delaware.
(iv) Under the Delaware Business Trust Act and the
Declaration, the issuance of such Convertible Preferred
Securities is not subject to any preemptive or similar
rights.
(v) Under the Delaware Business Trust Act and the
Declaration, the Trust has full legal right, power and
authority to execute, deliver and perform this Agreement and
the Registration Rights Agreement and to consummate the
transactions provided for herein and therein, and to issue
and perform its obligations under the
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Convertible Preferred Securities. Under the Delaware
Business Trust Act and the Declaration, this Agreement and
the Registration Rights Agreement have been duly and validly
authorized by the Trust.
(vi) The Declaration constitutes the legal, valid
and binding agreement of Insignia and the Insignia Trustees,
enforceable against Insignia and the Insignia Trustees in
accordance with its terms (except as such enforceability may
be limited by the provisions of Article 9 of the certificate
of incorporation of the Trust regarding arrangements with
creditors and by applicable bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization,
or other similar laws relating to creditors' rights
generally, and general equitable principles (whether
considered in a proceeding in equity or at law) relating to
the availability of remedies, and as rights to indemnity or
contribution may be limited by state or federal securities
laws and the public policy underlying such laws).
(vii) The issuance and sale by the Trust of the
Convertible Preferred Securities, the execution and delivery
by the Trust of, and the performance by the Trust of its
obligations under, this Agreement and the Registration
Rights Agreement, the consummation by the Trust of the
transactions contemplated hereby and thereby and compliance
by the Trust with its obligations hereunder and thereunder,
(A) do not contravene any provision of applicable Delaware
law or administrative regulation thereunder, the Declaration
or the Trust's Certificate of Trust, and (B) do not require
any consent, approval, order or authorization of any
Delaware court or Delaware governmental authority or agency
under the laws of the State of Delaware.
(d) Proskauer Rose Goetz & Mendelsohn LLP shall have
furnished to the Initial Purchasers, as special counsel to Insignia
and the Trust, the letters addressed to the Initial Purchasers and
dated the Closing Date, to the effect that:
(i) Insignia and each Principal Subsidiary is a
corporation, partnership or LLC, as the case may be, validly
existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all
requisite corporate, partnership or LLC power and authority
to own or hold its properties and to conduct the businesses
in which it is engaged, and is duly qualified to do business
and in good standing as a foreign corporation, partnership
or LLC, as the case may be, in each jurisdiction identified
in a schedule to such opinion provided by an officer,
general partner or member of each such entity, which
officer, general partner or member shall certify that such
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schedule lists the only jurisdictions in which its ownership
or lease of property or the conduct of its business requires
such qualification, except to the extent the failure to be
so qualified would not have a material adverse effect on
Insignia and its subsidiaries taken as a whole.
(ii) Insignia has an authorized capitalization as
set forth in the Offering Memorandum. Each outstanding share
of capital stock of Insignia is validly authorized and
validly issued, fully paid and non-assessable. Each
outstanding share of capital stock of each Principal
Subsidiary which is a corporation is validly authorized and
validly issued, fully paid and non-assessable, each
outstanding partnership or membership interest of each
Principal Subsidiary which is a partnership or LLC has been
validly authorized and validly issued, and, except as set
forth in or contemplated by the Offering Memorandum, such
counsel has no actual knowledge that any of the shares of
capital stock of any corporate Principal Subsidiary which
are held of record directly or indirectly by Insignia, are
owned subject to any liens, encumbrances, claims or security
interests. Such counsel has no actual knowledge of any
outstanding options, warrants or other rights (preemptive or
otherwise) to acquire capital stock of Insignia or capital
stock, partnership interests or LLC interests, as the case
may be, of any Principal Subsidiary and no shares of such
capital stock, partnership interests or LLC interests, as
the case may be, are reserved for future issuance except as
disclosed in the Offering Memorandum.
(iii) Insignia has the corporate power and
authority to execute, deliver and perform this Agreement and
to consummate the transactions provided for herein. This
Agreement has been duly authorized, executed and delivered
by Insignia and duly executed and delivered by the Trust.
This Agreement, assuming it is a binding agreement of each
other party hereto and enforceable against each other party
hereto in accordance with its terms, constitutes the legal,
valid and binding agreement of Insignia and the Trust, and
is enforceable against Insignia and the Trust in accordance
with its terms (except as such enforceability may be limited
by the provisions of Article 9 of the certificate of
incorporation of Insignia regarding arrangements with
creditors and by applicable bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization,
or other similar laws relating to creditors' rights
generally, and general equitable principles (whether
considered in a proceeding in equity or at law) relating to
the availability of remedies, and as rights to indemnity or
contribution may be limited by state or federal securities
laws and the public policy underlying such laws).
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(iv) The execution, delivery and performance of
this Agreement by the Trust and Insignia and the
consummation by each of them of the transactions
contemplated hereby, and the application of the net proceeds
of the offering in the manner set forth in the Offering
Memorandum, will not, (A) violate the organizational
documents of Insignia or any Principal Subsidiary or (B)
conflict with or result in a breach or violation of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to
which the Trust, Insignia or any Principal Subsidiary is
bound or to which any of the property or assets of the
Trust, Insignia or any Principal Subsidiary is subject
identified on a schedule attached to such opinion (the
"Material Agreements"), or any statute or any order, rule or
regulation actually known to such counsel of any court or
governmental agency having jurisdiction over the Trust,
Insignia or any Principal Subsidiary, except for such
conflicts, breaches, violations or defaults as would not be
reasonably likely to have a material adverse effect on the
Trust, Insignia and its subsidiaries taken as a whole.
(v) Except for such consents, approvals,
authorizations, registrations, filings or qualifications as
may be required under the Exchange Act, and applicable state
securities laws in connection with the purchase and
distribution of the Convertible Preferred Securities by the
Initial Purchasers (as to which counsel may express no
opinion), such counsel has no actual knowledge of any
consent, approval, authorization or order of, or filing or
registration with, any court or governmental agency having
jurisdiction over Insignia or any Principal Subsidiary that
is required for the execution, delivery and performance of
this Agreement by the Trust or Insignia or the consummation
by Insignia or the Trust of the transactions contemplated
hereby.
(vi) The Indenture has been duly authorized by
Insignia and, upon execution and delivery thereof by
Insignia, and assuming due authorization, execution and
delivery thereof by the Indenture Trustee, will be, as of
the Closing Date, the legal, valid and binding obligation of
Insignia, enforceable against Insignia in accordance with
its terms (except as such enforceability may be limited by
the provisions of Article 9 of the certificate of
incorporation of Insignia regarding arrangements with
creditors and by applicable bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization,
or other similar laws relating to creditors' rights
generally, and general equitable principles (whether
considered in a proceeding in equity or at law) relating to
the availability of remedies).
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(vii) The Guarantee has been duly authorized by
Insignia and, upon execution and delivery thereof by
Insignia, and assuming due authorization, execution and
delivery thereof by the Guarantee Trustee, will be, as of the
Closing Date, the legal, valid and binding obligation of
Insignia, enforceable against Insignia in accordance with its
terms (except as such enforceability may be limited by the
provisions of Article 9 of the certificate of incorporation
of Insignia regarding arrangements with creditors and by
applicable bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer, reorganization, or other similar laws
relating to creditors' rights generally, and general
equitable principles (whether considered in a proceeding in
equity or at law) relating to the availability of remedies,
and as rights to indemnity or contribution may be limited by
state or federal securities laws and the public policy
underlying such laws).
(viii) The Registration Rights Agreement has been
duly authorized by Insignia and, upon execution and delivery
thereof by Insignia and the Trust, and assuming due
authorization, execution and delivery thereof by the Initial
Purchasers and due authorization thereof by the Trust, will
be, as of the Closing Date, the legal, valid and binding
obligation of Insignia and the Trust, enforceable against
Insignia and the Trust in accordance with its terms (except
as such enforceability may be limited by the provisions of
Article 9 of the certificate of incorporation of Insignia
regarding arrangements with creditors and by applicable
bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer, reorganization, or other similar laws relating to
creditors' rights generally, and general equitable principles
(whether considered in a proceeding in equity or at law)
relating to the availability of remedies, and as rights to
indemnity or contribution may be limited by state or federal
securities laws and the public policy underlying such laws).
(ix) The Subordinated Convertible Debt Securities
have been duly authorized and, when executed by Insignia,
authenticated by the Indenture Trustee, issued in accordance
with the Indenture and delivered to the Trust against payment
therefor as described in the Offering Memorandum, will
constitute the legal, valid and binding obligations of
Insignia, enforceable against Insignia in accordance with
their terms (except as such enforceability may be limited by
the provisions of Article 9 of the certificate of
incorporation of Insignia regarding arrangements with
creditors and by applicable bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization,
or other similar laws relating to creditors' rights
generally, and general equitable principles (whether
considered in a proceeding in equity or at law) relating to
the availability of remedies,
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and as rights to indemnity or contribution may be limited by
state or federal securities laws and the public policy
underlying such laws).
(x) The execution and delivery by Insignia of, and
the performance by Insignia of its obligations under, the
Declaration, the Guarantee, the Indenture and the
Registration Rights Agreement, the issuance and sale of the
Convertible Subordinated Debt Securities, and the conversion
of the Convertible Subordinated Debt Securities and the
Convertible Preferred Securities into shares of Common Stock,
will not contravene any provision of applicable law, the
Declaration, the articles of incorporation or bylaws of
Insignia or any Material Agreement, or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over Insignia or any Principal Subsidiary,
except such contraventions as would not in the aggregate have
a material adverse effect on Insignia and its subsidiaries,
taken as a whole.
(xi) The Conversion Shares have been duly authorized
and validly reserved for issuance upon such conversion by all
necessary corporate action of Insignia and, when issued upon
such conversion, will be validly issued, fully paid and
nonassessable. The issuance of the Conversion Shares will not
be subject to any preemptive or similar rights.
(xii) The Convertible Preferred Securities satisfy
the eligibility requirements of Rule 144A(d)(3) under the
Securities Act.
(xiii) Such counsel has no actual knowledge of any
legal or governmental proceedings, pending or threatened, to
which Insignia or any of its Principal Subsidiaries is a
party which, if determined adversely to Insignia or any of
its Principal Subsidiaries, is reasonably likely to have a
material adverse effect on the consolidated financial
condition, stockholders' equity, results of operations, or
business of Insignia and its subsidiaries taken as a whole
and which is not disclosed in or incorporated by reference in
the Offering Memorandum.
(xiv) Insofar as statements in the Offering
Memorandum under the headings "The Offering," "The Company --
Recent Developments," "The Trust," "Risk Factors," in the
third paragraph under "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity
and Capital Resources," "Business -- Real Estate Services --
Acquisitions -- Edward S. Gordon Company, Incorporated,"
"Business -- Real Estate Services -- Acquisitions -- Paragon
Group Property Services, Inc.," "Business -- MAE --
Relationship Between Insignia and MAE," "Description of the
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Convertible Preferred Securities," "Description of the
Guarantee," "Description of the Convertible Subordinated Debt
Securities," "Effect of Obligations Under the Convertible
Subordinated Debt Securities and the Guarantee," and
"Description of Capital Stock" purport to summarize the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts or agreements, such statements accurately
reflect the provisions purported to be summarized and are
correct in all material respects.
(xv) The Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of
Convertible Preferred Securities will generally be considered
the owner of an undivided interest in the Convertible
Subordinated Debt Securities, and each holder will be
required to include in its gross income any income paid or
accrued with respect to its allocable share of such
Convertible Subordinated Debt Securities.
(xvi) The discussion set forth in the Offering
Memorandum under the heading "United States Federal Income
Taxation" constitutes, in all material respects, a fair and
accurate summary of the United States federal income tax
consequences of the purchase, ownership and disposition of
the Convertible Preferred Securities based upon current law
and the assumptions and limitations stated or referred to
therein.
[(xvii) Such counsel has no actual knowledge that
any of the Trust or Insignia (A) is in violation of its
organizational documents, or (B) is in default in any
material respect in the due performance or observance of any
material term, covenant or condition contained in any
Material Agreement.]
(xviii) Neither of the Trust, Insignia nor any
Principal Subsidiary is an "investment company" within the
meaning of such term under the Investment Company Act of 1940
and the rules and regulations of the Commission thereunder.
(xix) No Principal Subsidiary is currently
prohibited, directly or indirectly, under its organizational
documents or any Material Agreement, from paying any
dividends to Insignia, from making any other distribution on
such Principal Subsidiary's capital stock or other equity
interests, from repaying to Insignia any loans or advances to
such Principal Subsidiary from Insignia or transferring any
of such Principal Subsidiary's property or assets to Insignia
or any other
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subsidiary of Insignia, except as described in, incorporated
by reference in, or contemplated by the Offering Memorandum.
(xx) MAE is a partnership validly existing and in
good standing under the laws of the State of Delaware, has
all requisite partnership power and authority necessary to
own or hold its properties and to conduct the business in
which it is engaged and is in good standing as a foreign
partnership in each jurisdiction identified in a schedule to
such opinion provided by an officer of the general partner of
MAE, which officer shall state that, in his opinion, such
schedule lists the only jurisdictions in which its ownership
or lease of property or the conduct of its business is
material to the operation of MAE and its subsidiaries taken
as a whole. The partnership interest of Insignia in MAE
conforms, in all material respects, to the description
thereof contained in the Offering Memorandum under the
caption "Business -- MAE".
(xxi) No securities of the same class, within the
meaning of Rule 144A(d)(3) under the Securities Act, as the
Convertible Preferred Securities are listed on any national
securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S.
automated inter-dealer quotation system.
(xxii) Assuming (i) the accuracy of the
representations and warranties of the Trust and Insignia in
Section 1 hereof and of the Initial Purchasers in Section 2
hereof, (ii) the due performance by the Trust and Insignia of
the covenants and agreements set forth in Section 1 hereof
and by the Initial Purchasers of the covenants and agreements
set forth in Section 2 hereof, and (iii) the accuracy of the
representations and warranties made in accordance with this
Agreement and the Offering Memorandum by purchasers to whom
the Initial Purchasers initially resell Convertible Preferred
Securities, it is not necessary in connection with the offer,
sale and delivery of the Convertible Preferred Securities in
the manner contemplated by this Agreement and the Offering
Memorandum to (A) register the Convertible Preferred
Securities, the Convertible Subordinated Debt Securities or
the Conversion Shares under the Securities Act or (B) qualify
the Declaration, in respect of the Convertible Preferred
Securities, or the Indenture, in respect of the Convertible
Subordinated Debt Securities, under the Trust Indenture Act.
Such counsel shall also furnish to the Initial Purchasers a
letter to the effect that no facts have come to the attention
of such counsel which causes such counsel to believe that the
statements in the Offering Memorandum (except as to the
financial statements, including notes
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and schedules thereto, and the other financial, accounting
and statistical data contained in or incorporated by reference
therein or omitted from the Offering Memorandum as to which
such counsel need express no opinion or belief) at its issue
date and on the Closing Date contained or contains an untrue
statement of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering such opinion, such counsel may (i) state that
their opinions are limited to matters governed by the General
Corporation Law of the State of Delaware, the Revised Uniform
Limited Partnership Act of the State of Delaware, the federal
laws of the United States of America and the laws of the
State of New York, (ii) as to matters of fact, to the extent
such counsel deems proper, on certificates of responsible
officers of the Trust or of Insignia or its subsidiaries and
public officials, and (iii) with respect to Insignia and its
subsidiaries incorporated, organized or doing business in
jurisdictions other than the States of Delaware and New York,
such counsel may assume that the relevant law of such
jurisdictions is the same as the relevant law of the State of
Delaware.
(e) The Initial Purchasers shall have received from Hogan &
Hartson L.L.P., counsel for the Initial Purchasers, such opinion or
opinions, dated such Closing Date, with respect to the issuance and
sale of the Convertible Preferred Securities, the Offering Memorandum
and other related matters as the Initial Purchasers may reasonably
require, and the Trust or Insignia shall have furnished to such
counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(f) At the time of execution of this Agreement, the Initial
Purchasers shall have received from each of Ernst & Young LLP, Coopers
& Lybrand LLP and Imowitz Koenig & Co. LLP a letter, in form and
substance satisfactory to the Initial Purchasers, addressed to the
Initial Purchasers and dated the date hereof (i) confirming that they
are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date hereof
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Offering Memorandum, as of a date not more than five days
prior to the date hereof), the conclusions and findings of such firm
with respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to purchasers in connection
with the sale of securities pursuant to Rule 144A under the Securities
Act.
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(g) With respect to the letters of Ernst & Young LLP, Coopers
& Lybrand LLP and Imowitz Koenig & Co. LLP referred to in the
preceding paragraph delivered to the Initial Purchasers concurrently
with the execution of this Agreement (the "initial letters"), Insignia
shall have furnished to the Initial Purchasers a letter (the
"bring-down letter") of each of such accountants, addressed to the
Initial Purchasers and dated such Closing Date (i) confirming that
they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified
financial information is given in the Offering Memorandum, as of a
date not more than five days prior to the date of the bring-down
letter), the conclusions and findings of such firm with respect to the
financial information and other matters covered by the initial letter
and (iii) confirming in all material respects the conclusions and
findings set forth in the initial letter.
(h) Insignia shall have furnished to the Initial Purchaser a
certificate, dated such Closing Date, of its Chairman of the Board,
President, and Chief Executive Officer and its Chief Financial Officer
stating on behalf of Insignia that:
(i) The representations, warranties and agreements
of the Trust and Insignia in Section 1 are true and correct
in all material respects as of such Closing Date; the Trust
and Insignia have complied in all material respects with all
its agreements contained herein; and the conditions set forth
in Section 7(i) have been fulfilled; and
(ii) They have carefully examined the Offering
Memorandum and as of the Closing Date, (A) the Offering
Memorandum did not include any untrue statement of a material
fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading, and (B) no event has occurred which should
have been set forth in a supplement or amendment to the
Offering Memorandum which has not been so set forth.
(i) Neither Insignia nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Offering Memorandum any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Memorandum or (ii)
since such date there shall not have been any change in the capital
stock or long-term debt of Insignia or
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any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial condition, stockholders' equity or results of operations of
Insignia and its subsidiaries, otherwise than as set forth or
contemplated in the Offering Memorandum, the effect of which, in any
such case described in clause (i) or (ii), is, in the judgment of the
Initial Purchasers, so material and adverse to Insignia and its
subsidiaries taken as a whole as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the
Convertible Preferred Securities being delivered on such Closing Date
on the terms and in the manner contemplated in the Offering Memorandum.
(j) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i)
trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market shall have been
suspended or minimum prices shall have been established on either of
such exchanges or such market by the Commission, by such exchange or
by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by
Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or
(iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in
interest of the several Initial Purchasers, impractical or inadvisable
to proceed with the offering or delivery of the Convertible Preferred
Securities being delivered on such Closing Date on the terms and in
the manner contemplated in the Offering Memorandum.
(k) Subsequent to the execution and delivery of this
Agreement (i) no downgrading shall have occurred in the rating
accorded the Convertible Preferred Securities or Insignia's senior
subordinated indebtedness by any "nationally recognized statistical
rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no
such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its
rating of the Convertible Preferred Securities or Insignia's senior
subordinated indebtedness.
(l) The Convertible Preferred Securities shall have been
approved by the National Association of Securities Dealers, Inc. as
being eligible for trading in the PORTAL Market.
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(m) The Registration Rights Agreement, Declaration, Indenture
and Guarantee shall have been executed and delivered and be in form,
scope and substance reasonably satisfactory to the Initial Purchasers.
(n) The Trust and Insignia shall have furnished the Initial
Purchasers with such further opinions, letters, certificates and
documents as the Initial Purchasers or counsel to the Initial
Purchasers may reasonably request in order to effectuate the
provisions of this Agreement.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to the Initial Purchasers and counsel for the Initial Purchasers.
Any certificate signed by any officer of Insignia and delivered to the Initial
Purchasers or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by such entity to each Initial Purchaser as to the
matters covered thereby.
8. Indemnification and Contribution.
(a) Insignia shall indemnify and hold harmless each Initial
Purchaser, its officers and employees and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities
Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited
to, any loss, claim, damage, liability or action relating to purchases
and sales of Convertible Preferred Securities), to which that Initial
Purchaser, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Offering Memorandum or the
Offering Memorandum or in any amendment or supplement thereto or the
reports filed pursuant to the Exchange Act incorporated by reference
in the Preliminary Offering Memorandum or the Offering Memorandum or
(B) in any blue sky application or other document prepared or
executed by the Trust or Insignia (or based upon any written
information furnished by the Trust or Insignia) specifically for the
purpose of qualifying any or all of the Convertible Preferred
Securities under the securities laws of any state or other
jurisdiction (any such application, document or information being
hereinafter called a "Blue Sky Application"), or (ii) the omission or
alleged omission to state in any Preliminary Offering Memorandum or
the Offering Memorandum, or in any amendment or supplement thereto,
or the reports filed pursuant to the Exchange Act incorporated by
reference in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any Blue Sky Application any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and shall
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reimburse each Initial Purchaser and each such officer, employee or
controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that Initial Purchaser, officer,
employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided,
however, that Insignia shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and
in conformity with written information concerning such Initial
Purchaser furnished to Insignia through Lehman Brothers Inc. by or on
behalf of any Initial Purchaser specifically for inclusion therein;
and provided further that as to any Preliminary Offering Memorandum
or the Offering Memorandum, this indemnity agreement shall not inure
to the benefit of any Initial Purchaser, its officers, employees or
any person controlling that Initial Purchaser on account of any loss,
claim, damage, liability or action arising from the sale of
Convertible Preferred Securities to any person by that Initial
Purchaser if that Initial Purchaser failed to send or give a copy of
the Offering Memorandum, or an amendment or supplement thereto, to
that person to the extent required by law, and the untrue statement
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Offering
Memorandum or the Offering Memorandum was corrected in the Offering
Memorandum, or the amendment or supplement thereto, unless such
failure resulted from non-compliance by Insignia with Section 5(b).
The foregoing indemnity agreement is in addition to any liability
which Insignia may otherwise have to any Initial Purchaser or to any
officer, employee or controlling person of that Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Trust, the Insignia Trustees,
Insignia, its officers and employees, each of its directors, and each
person, if any, who controls the Trust or Insignia within the meaning
of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to
which the Trust, Insignia or any such director, officer, employee, or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or
supplement thereto, or (B) in any Blue Sky Application or (ii) the
omission or alleged omission to state in any Preliminary Offering
Memorandum or the Offering Memorandum, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact
required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the
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extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Initial Purchaser
furnished to the Trust or Insignia through the Initial Purchasers by
or on behalf of that Initial Purchaser specifically for inclusion
therein, and shall reimburse the Trust or Insignia and any such
director, officer, employee, or controlling person for any legal or
other expenses reasonably incurred by the Trust or Insignia or any
such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any
liability which any Initial Purchaser may otherwise have to the Trust
or Insignia or any such director, officer, employee, or controlling
person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for
any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the Initial Purchasers
shall have the right to employ counsel to represent jointly the
Initial Purchasers and their respective officers, employees and
controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Initial
Purchasers against the Trust or Insignia under this Section 8 if, in
the reasonable judgment of the Initial Purchasers, it is advisable for
the Initial Purchasers and their respective officers, employees and
controlling persons to be jointly represented by separate counsel, and
in that event the fees and expenses of such separate counsel shall be
paid by Insignia. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld),
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settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified
parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld),
but if settled with the consent of the indemnifying party or if there
shall be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party under Section 8(a) or 8(b) in respect of
any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits
received by the Trust and Insignia on the one hand and the Initial
Purchasers on the other from the offering of the Convertible Preferred
Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law or if the indemnified party failed to
give the notice required under Section 8(c), in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Trust and Insignia
on the one hand and the Initial Purchasers on the other with respect
to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits
received by the Trust and Insignia on the one hand and the Initial
Purchasers on the other with respect to such offering shall be deemed
to be in the same proportion as the total net proceeds from the
offering of the Convertible Preferred Securities purchased under this
Agreement (before deducting expenses) received by Insignia (after
deducting the total compensation and commissions paid to the Initial
Purchasers) bear to the total compensation and commissions received by
the Initial Purchasers with respect to the Convertible Preferred
Securities purchased under this Agreement. The relative fault shall be
determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state
a material fact relates to information supplied by the Trust or
Insignia, on the one hand, or the Initial Purchasers, on the other
hand, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such
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statement or omission. The Trust, Insignia and the Initial Purchasers
agree that it would not be just and equitable if contributions
pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity
for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include,
for purposes of this Section 8(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8(d), no Initial Purchaser shall be
required to contribute any amount in excess of the amount by which
the total price at which the Convertible Preferred Securities
purchased and distributed by it exceeds the amount of any damages
which such Initial Purchaser has otherwise paid or become liable to
pay by reason of any untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to
contribute as provided in this Section 8(d) are several in proportion
to their respective purchase obligations and not joint.
(e) The Initial Purchasers severally confirm and each of the
Trust and Insignia acknowledges that the statements with respect to
the offering of the Convertible Preferred Securities by the Initial
Purchasers set forth on the cover page of, the legend concerning
over-allotments on the inside front cover page of and the commission
figures appearing under the caption "Plan of Distribution" in the
Offering Memorandum are correct and constitute the only information
concerning such Initial Purchasers furnished in writing to the Trust
or Insignia by or on behalf of the Initial Purchasers specifically for
inclusion in any Preliminary Offering Memorandum or the Offering
Memorandum.
9. Defaulting Initial Purchasers. If, on either Closing Date,
any Initial Purchaser defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting Initial Purchasers may make
arrangements satisfactory to Insignia and the Trust for the purchase of such
Convertible Preferred Securities by other persons, including the other Initial
Purchasers, but if arrangements satisfactory for the purchase of such
Convertible Preferred Securities by other persons are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser, the Trust or Insignia, except as
provided in Sections 6 and 11 (provided that if such default occurs with
respect to the Option Securities after the Firm Closing Date, this Agreement
will not terminate as to the Firm
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Shares). As used in this Agreement, the term "Initial Purchaser" includes, for
all purposes of this Agreement unless the context requires otherwise, any
person or persons substituted for any of the other Initial Purchasers pursuant
to this Section 9. Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Trust or Insignia for damages
caused by its default.
10. Termination. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers by notice given to and received by
the Trust and Insignia prior to delivery of and payment for the Firm Securities
if, prior to that time, any of the events described in Sections 7(i) or 7(j)
shall have occurred or if the Initial Purchasers shall decline to purchase the
Convertible Preferred Securities for any reason permitted under this Agreement
(including, without limitation, any condition in Section 7 not having been
fulfilled when and as required by this Agreement to be fulfilled).
11. Reimbursement of Initial Purchasers' Expenses. If (a) the Trust or
Insignia shall fail to tender the Convertible Preferred Securities for delivery
to the Initial Purchasers for any reason permitted under this Agreement or (b)
the Initial Purchasers shall decline to purchase the Convertible Preferred
Securities for any reason permitted under this Agreement (including the
termination of this Agreement pursuant to Section 10), Insignia shall reimburse
the Initial Purchasers for the fees and expenses of their counsel and for such
other out-of-pocket expenses as shall have been incurred by them in connection
with this Agreement and the proposed purchase of the Convertible Preferred
Securities, and upon demand Insignia shall pay the full amount thereof to the
Initial Purchasers. If this Agreement is terminated pursuant to Section 9 by
reason of the default of one or more Initial Purchasers, neither the Trust nor
Insignia shall be obligated to reimburse any defaulting Initial Purchaser on
account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent
by mail, telex or facsimile transmission to Lehman Brothers Inc.,
Three World Financial Center, New York, New York 10285, Attention:
Syndicate Department (Fax: 212-526-6588), with a copy, in the case of
any notice pursuant to Section 10(d), to the Director of Litigation,
Office of the General Counsel, Lehman Brothers Inc., Three World
Financial Center, 10th Floor, New York, NY 10285;
(b) if to the Trust or to Insignia, shall be delivered or
sent by mail, telex or facsimile transmission to the address of
Insignia set forth in the Offering Memorandum, Attention: John K.
Lines, General Counsel and Secretary (Fax: 803-239-1096), with a
copy to Proskauer Rose Goetz &
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Mendelsohn LLP, 1585 Broadway, New York, New York 10036, Attention:
Arnold S. Jacobs (Fax: 212-969-2900);
provided, however, that any notice to a Initial Purchaser pursuant to Section
8(c) shall be delivered or sent by mail, telex or facsimile transmission to
such Initial Purchaser at its address set forth in its acceptance telex to the
Initial Purchasers, which address will be supplied to any other party hereto by
the Initial Purchasers upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Trust and
Insignia shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Initial Purchasers by Lehman Brothers
Inc.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Trust,
Insignia and their respective personal representatives and successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and
agreements of the Trust and Insignia contained in this Agreement shall also be
deemed to be for the benefit of the person or persons, if any, who control any
Initial Purchaser within the meaning of Section 15 of the Securities Act and
(B) the indemnity agreement of the Initial Purchasers contained in Section 8(b)
of this Agreement shall be deemed to be for the benefit of the Insignia
Trustees, directors of Insignia, officers and employees of Insignia and any
person controlling the Trust or Insignia within the meaning of Section 15 of
the Securities Act. Nothing in this Agreement is intended or shall be construed
to give any person, other than the persons referred to in this Section 13, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
14. Survival. The respective indemnities, representations, warranties
and agreements of the Trust, Insignia and the Initial Purchasers contained in
this Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Convertible
Preferred Securities and shall remain in full force and effect, regardless of
any investigation made by or on behalf of any of them or any person controlling
any of them.
15. Definition of the Terms "Business Day," "Subsidiary" and
"Significant Subsidiary." For purposes of this Agreement, (a) "business day"
means any day on which the New York Stock Exchange, Inc. is open for trading
and (b) "subsidiary" and "significant subsidiary" have the meanings set forth
in Rule 405 of the Rules and Regulations.
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
C-43
<PAGE>
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
C-44
<PAGE>
If the foregoing correctly sets forth the agreement among the
Trust, Insignia and the Initial Purchasers, please indicate your acceptance in
the space provided for that purpose below.
Very truly yours,
INSIGNIA FINANCING I
By /s/ Andrew L. Farkas
----------------------------------
Title: Regular Trustee
INSIGNIA FINANCIAL GROUP,
INC.
By /s/ Ronald Uretta
---------------------------------
Title: Chief Operating Officer
Accepted:
LEHMAN BROTHERS INC.
DILLON, READ & CO., INC.
GOLDMAN, SACHS & CO.
A.G. EDWARDS & SONS INC.
By LEHMAN BROTHERS INC.
By /s/ Todd B. Kristol
-----------------------------
Authorized Representative
C-45
<PAGE>
SCHEDULE A
Number
Initial Purchasers of Firm Securities
- ------------------ ------------------
Lehman Brothers Inc. 1,690,000
Dillon, Read & Co. Inc. 390,000
Goldman, Sachs & Co. 390,000
A.G. Edwards & Sons, Inc. 130,000
Total................................................ 2,600,000
----------
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION
OF TRANSFER FROM RESTRICTED GLOBAL PREFERRED SECURITY TO
REGULATION S GLOBAL PREFERRED SECURITY
(Pursuant to Section 9.2(c) of the Declaration)
First Union National Bank of South Carolina
1441 Main Street, Fourth Floor
Columbia, South Carolina 29201
Attention: Corporate Trust Department
RE: 6 1/2% Trust Convertible Preferred Securities of InsignIA
Financing I
Dear Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Declaration of
Trust, dated as of November 1, 1996 (the "Declaration"), of Insignia Financing
I, a Delaware business trust (the "Trust") , among Insignia Financial Group,
Inc., as Sponsor, and the several trustees named therein. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Declaration.
This letter relates to _________ (number) Convertible Preferred
Securities which are evidenced by one or more Restricted Global Preferred
Securities and held with the Depositary in the name of _____________________
(the "Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Convertible Preferred Securities to a Person who will take
delivery thereof in the form of an equal number of Convertible Preferred
Securities evidenced by one or more Regulation S Global Preferred Securities,
which amount, immediately after such transfer, is to be held with the
Depositary through Euroclear or CEDEL or both.
In connection with such request and in respect of such Convertible
Preferred Securities, the Transferor hereby certifies that such transfer has
been effected in compliance with the transfer restrictions applicable to the
Convertible Preferred Securities and pursuant to and in accordance with Rule
903 or Rule 904 under the United States Securities Act of 1933, as amended
(the "Securities Act"), and accordingly the Transferor hereby further
certifies that:
(1) The offer of the Convertible Preferred Securities was not made to a
person in the United States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person
acting on its
D-1
<PAGE>
behalf reasonably believed and believes that the transferee was
outside the United States; or
(b) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or CEDEL or both.
(6) With respect to transfers made in reliance on Rule 144, the
Convertible Preferred Securities are being transferred in a
transaction permitted by Rule 144 under the Securities Act; and with
respect to transfer made in reliance on Rule 144A, that such
Convertible Preferred Securities are being transferred in accordance
with Rule 144A under the Securities Act to a transferee that the
Transferor reasonably believes is purchasing the Convertible
Preferred Securities for its own account or an account with respect
to which the transferee exercises sole investment discretion and the
transferee and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable
securities laws of any state of the United States or any other
jurisdiction.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903 (c) (2) or (3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903 (c) (2) or (3) or Rule 904(c)(1), as the
case may be.
Upon giving effect to this request to exchange a beneficial interest in a
Restricted Global Preferred Security for a beneficial interest in a Regulation
S Global Preferred Security, the resulting beneficial interest shall be
subject to the restrictions on transfer applicable to Regulation S Global
Preferred Securities pursuant to the Declaration and the Securities Act.
D-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trust and the Initial Purchasers under the
Purchase Agreement, and you and each of them are entitled to rely on the
contents of this certificate. Terms used in this certificate and not otherwise
defined in the Declaration have the meanings set forth in Regulation S under
the Securities Act.
---------------------------------------
[Insert Name of Transferor]
By:
------------------------------------
Name:
Title:
Dated:
--------
D-3
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL PREFERRED SECURITY
TO RESTRICTED GLOBAL PREFERRED SECURITY
(Pursuant to Section 9.2(d) of the Declaration)
First Union National Bank of South Carolina
1441 Main Street, Fourth Floor
Columbia, South Carolina 29201
Attention: Corporate Trust Department
RE: 6 1/2% Trust Convertible Preferred Securities of Insignia Financing I
Dear Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Declaration of
Trust, dated as of November 1, 1996 (the "Declaration"), of Insignia Financing
I, a Delaware business trust (the "Trust") , among Insignia Financial Group,
Inc., as sponsor, and the several trustees namend therein. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Declaration.
This letter relates to _________ (number) Convertible Preferred
Securities which are evidenced by one or more Regulation S Global Preferred
Securities and held with the Depositary through Euroclear or CEDEL or both in
the name of _____________________ (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Convertible Preferred
Securities to a Person who will take delivery thereof in the form of an equal
number of Convertible Preferred Securities evidenced by one or more Restricted
Global Preferred Securities, which amount, immediately after such transfer, is
to be held with the Depositary.
In connection with such request and in respect of such Convertible
Preferred Securities, the Transferor hereby certifies that:
[CHECK ONE]
[ ] such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Convertible Preferred Securities are
being transferred to a Person that the Transferor reasonably
believes is purchasing the Convertible Preferred Securities for its
own account, or for one or more accounts with respect to which such
Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A;
E-1
<PAGE>
or
[ ] such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
[ ] such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Convertible Preferred Securities are being transferred in compliance
with the transfer restrictions applicable to the Convertible
Preferred Securities and in accordance with the requirements of the
exemption claimed, which certification is supported by such legal
opinions or other information provided by the Transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Trust, to the
effect that such transfer is in compliance with the Securities Act;
and such Convertible Preferred Securities are being transferred in compliance
with any applicable blue sky securities laws of any state of the United
States.
Upon giving effect to this request to exchange a beneficial interest in
Regulation S Global Preferred Securities for a beneficial interest in
Restricted Global Preferred Securities, the resulting beneficial interest
shall be subject to the restrictions on transfer applicable to Restricted
Global Preferred Securities pursuant to the Declaration and the Securities
Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trust and the Initial Purchasers under the
Purchase Agreement, and you and each of them are entitled to rely on the
contents of this certificate. Terms used in this certificate and not otherwise
defined in the Declaration have the meanings set forth in Regulation S under
the Securities Act.
---------------------------
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Date: ,
--------------------- ------
E-2
<PAGE>
----------------------------------------------------------
INSIGNIA FINANCIAL GROUP, INC.
as Issuer
TO
FIRST UNION NATIONAL BANK OF SOUTH CAROLINA
as Trustee
INDENTURE
dated as of November 1, 1996
6 1/2% Convertible Subordinated Debentures
Due 2016
----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS............................................................................................1
SECTION 1.1 Definitions........................................................................................1
ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES.....................................9
SECTION 2.1 Designation and Principal Amount...................................................................9
SECTION 2.2 Form of Debentures; Initial Issuance to Property Trustee...........................................9
SECTION 2.3 Denomination of Debentures; Payment of Interest; Extension of Interest Payment Period.............11
SECTION 2.4 Execution, Authentication, Delivery and Dating....................................................14
SECTION 2.5 Registration, Registration of Transfer and Exchange...............................................15
SECTION 2.6 Mutilated, Destroyed, Lost and Stolen Debentures..................................................16
SECTION 2.7 Temporary Debentures..............................................................................16
SECTION 2.8 Persons Deemed Owners.............................................................................17
SECTION 2.9 Cancellation......................................................................................17
ARTICLE III REDEMPTION OF DEBENTURES............................................................................17
SECTION 3.1 Optional Redemption by Company....................................................................17
SECTION 3.2 Tax Event Redemption..............................................................................18
SECTION 3.3 Applicability of Article..........................................................................19
SECTION 3.4 No Sinking Fund...................................................................................19
SECTION 3.5 Election to Redeem; Notice to Trustee.............................................................19
SECTION 3.6 Selection by Trustee of Debentures to Be Redeemed.................................................19
SECTION 3.7 Notice of Redemption..............................................................................20
SECTION 3.8 Deposit of Redemption Price.......................................................................20
SECTION 3.9 Debentures Payable on Redemption Date.............................................................21
SECTION 3.10 Debentures Redeemed in Part......................................................................21
ARTICLE IV SUBORDINATION OF DEBENTURES..........................................................................21
SECTION 4.1 Debentures Subordinate to Senior Indebtedness.....................................................21
SECTION 4.2 Payment Over of Proceeds Upon Dissolution, Etc....................................................21
SECTION 4.3 Prior Payment to Senior Indebtedness Upon Acceleration of Debentures..............................22
SECTION 4.4 No Payment When Senior Indebtedness in Default....................................................23
SECTION 4.5 Payment Permitted in Certain Situations...........................................................23
SECTION 4.6 Subrogation to Rights of Holders of Senior Indebtedness...........................................23
SECTION 4.7 Provisions Solely to Define Relative Rights.......................................................24
SECTION 4.8 Trustee to Effectuate Subordination...............................................................24
SECTION 4.9 No Waiver of Subordination Provisions.............................................................24
SECTION 4.10 Notice to Trustee................................................................................25
SECTION 4.11 Reliance on Judicial Order or Certificate of Liquidating Agent...................................25
SECTION 4.12 Trustee Not Fiduciary for Holders of Senior Indebtedness.........................................26
SECTION 4.13 Rights of Trustee as Holder of Senior Indebtedness, Preservation of Trustee's Rights.............26
SECTION 4.14 Article Applicable to Paying Agents..............................................................26
SECTION 4.15 Certain Conversions Deemed Payment...............................................................26
ARTICLE V CERTAIN COVENANTS.....................................................................................27
SECTION 5.1 Payment of Principal, Premium and Interest........................................................27
SECTION 5.2 Maintenance of Office or Agency...................................................................27
SECTION 5.3 Money for Debentures Payments to Be Held in Trust.................................................27
i
<PAGE>
SECTION 5.4 Existence.........................................................................................28
SECTION 5.5 Statement by Officers as to Default...............................................................29
SECTION 5.6 Limitation on Dividends and Other Payments........................................................29
SECTION 5.7 Covenants as to the Insignia Trust................................................................29
SECTION 5.8 Payment of Expenses of the Insignia Trust.........................................................30
SECTION 5.9 Registration Rights...............................................................................30
ARTICLE VI HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY....................................................31
SECTION 6.1 Company to Furnish Trustee Names and Addresses of Holders.........................................31
SECTION 6.2 Preservation of Information; Communications to Holders............................................32
SECTION 6.3 Reports by Trustee................................................................................33
SECTION 6.4 Reports by Company................................................................................33
ARTICLE VII DEFAULTS AND REMEDIES...............................................................................34
SECTION 7.1 Events of Default.................................................................................34
SECTION 7.2 Acceleration of Maturity; Rescission and Annulment................................................35
SECTION 7.3 Collection of Indebtedness and Suits for Enforcement by Trustee...................................36
SECTION 7.4 Trustee May File Proofs of Claim..................................................................37
SECTION 7.5 Trustee May Enforce Claims Without Possession of Debentures.......................................37
SECTION 7.6 Application of Money Collected....................................................................37
SECTION 7.7 Limitation on Suits...............................................................................38
SECTION 7.8 Unconditional Right of Holders to Receive Principal and Interest and to Convert...................38
SECTION 7.9 Restoration of Rights and Remedies................................................................39
SECTION 7.10 Rights and Remedies Cumulative...................................................................39
SECTION 7.11 Delay or Omission Not Waiver.....................................................................39
SECTION 7.12 Control by Holders of Debentures.................................................................39
SECTION 7.13 Waiver of Past Defaults..........................................................................39
SECTION 7.14 Undertaking for Costs............................................................................40
SECTION 7.15 Waiver of Stay or Extension Laws.................................................................40
SECTION 7.16 Enforcement by Holders of Convertible Preferred Securities.......................................41
ARTICLE VIII CONCERNING THE TRUSTEE.............................................................................41
SECTION 8.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default......................41
SECTION 8.2 Certain Rights of Trustee.........................................................................42
SECTION 8.3 Not Responsible for Recitals or Issuance of Debentures............................................43
SECTION 8.4 May Hold Debentures...............................................................................43
SECTION 8.5 Money Held in Trust...............................................................................44
SECTION 8.6 Compensation and Reimbursement....................................................................44
SECTION 8.7 Resignation and Removal; Appointment of Successor.................................................44
SECTION 8.8 Acceptance of Appointment by Successor............................................................46
SECTION 8.9 Disqualification; Conflicting Interests...........................................................46
SECTION 8.10 Corporate Trustee Required; Eligibility..........................................................46
SECTION 8.11 Preferential Collection of Claims Against Company................................................46
SECTION 8.12 Merger, Conversion, Consolidation or Succession to Business......................................47
SECTION 8.13 Appointment of Authenticating Agent..............................................................47
SECTION 8.14. Notice of Defaults..............................................................................48
ARTICLE IX ACTS OF HOLDERS......................................................................................48
SECTION 9.1 Acts of Holders...................................................................................48
ARTICLE X MEETINGS OF HOLDERS OF DEBENTURES.....................................................................50
ii
<PAGE>
SECTION 10.1 Purposes for Which Meetings May be Called........................................................50
SECTION 10.2 Call, Notice and Place of Meetings...............................................................50
SECTION 10.3 Persons Entitled to Vote at Meetings.............................................................50
SECTION 10.4 Quorum; Action...................................................................................51
SECTION 10.5 Determination of Voting Rights; Conduct and Adjournment of Meetings..............................51
SECTION 10.6 Counting Votes and Recording Action of Meetings..................................................52
ARTICLE XI SUPPLEMENTAL INDENTURES..............................................................................52
SECTION 11.1 Supplemental Indentures Without Consent of Holders...............................................52
SECTION 11.2 Supplemental Indentures With Consent of Holders..................................................53
SECTION 11.3 Execution of Supplemental Indentures.............................................................54
SECTION 11.4 Effect of Supplemental Indentures................................................................54
SECTION 11.5 Conformity with Trust Indenture Act..............................................................54
SECTION 11.6 Reference in Debentures to Supplemental Indentures...............................................54
ARTICLE XII CONSOLIDATION, MERGER, SALE OR CONVEYANCE...........................................................55
SECTION 12.1 Company May Consolidate, Etc. on Certain Terms...................................................55
SECTION 12.2 Successor Corporation Substituted................................................................55
SECTION 12.3 Opinion of Counsel to Trustee....................................................................56
ARTICLE XIII SATISFACTION AND DISCHARGE.........................................................................56
SECTION 13.1 Satisfaction and Discharge of Indenture..........................................................56
SECTION 13.2 Application of Trust Money.......................................................................57
ARTICLE XIV IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES.........................57
ARTICLE XV CONVERSION OF CONVERTIBLE DEBENTURES.................................................................58
SECTION 15.1 Conversion Rights................................................................................58
SECTION 15.2 Conversion Procedures............................................................................58
SECTION 15.3 Conversion Price Adjustments.....................................................................59
SECTION 15.4 Merger, Consolidation, or Sale of Assets.........................................................64
SECTION 15.5 Notice of Adjustments of Conversion Price........................................................64
SECTION 15.6 Prior Notice of Certain Events...................................................................65
SECTION 15.7 Dividend or Interest Reinvestment Plans..........................................................65
SECTION 15.8 Certain Additional Rights........................................................................66
SECTION 15.9 Reservation of Shares of Common Stock............................................................66
SECTION 15.10 Payment of Certain Taxes upon Conversion........................................................66
SECTION 15.11 Nonassessability................................................................................67
SECTION 15.12 Duties of Trustee Regarding Conversion..........................................................67
SECTION 15.13 Repayment of Certain Funds upon Conversion......................................................67
SECTION 15.14 Restrictions on Common Stock Issuable Upon Conversion...........................................67
ARTICLE XVI MISCELLANEOUS PROVISIONS............................................................................68
SECTION 16.1 Compliance Certificates and Opinions.............................................................68
SECTION 16.2 Form of Documents Delivered to Trustee...........................................................68
SECTION 16.3 Notices, Etc., to Trustee and Company............................................................69
SECTION 16.4 Notice to Holders of Debentures; Waiver..........................................................69
SECTION 16.5 Language of Notices, Etc.........................................................................70
SECTION 16.6 Conflict with Required Provisions of the Trust Indenture Act.....................................70
iii
<PAGE>
SECTION 16.7 Effect of Headings and Table of Contents.........................................................70
SECTION 16.8 Successors and Assigns...........................................................................70
SECTION 16.9 Separability Clause..............................................................................70
SECTION 16.10 Benefits of Indenture...........................................................................70
SECTION 16.11 Governing Law...................................................................................70
SECTION 16.12 Legal Holidays..................................................................................70
SECTION 16.13 Execution in Counterparts.......................................................................71
Exhibit A: Form of Debenture
</TABLE>
iv
<PAGE>
INDENTURE, dated as of November 1, 1996, between Insignia Financial
Group, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company," as more fully defined in
Section 1.1), having its principal office at One Insignia Financial Plaza,
Post Office Box 1089, Greenville, South Carolina 29602, and First Union
National Bank of South Carolina, a national banking association having its
principal corporate trust office at 1441 Main Street, Fourth Floor, Columbia,
South Carolina, as Trustee (herein called the "Trustee," as more fully defined
in Section 1.1).
RECITALS OF THE COMPANY:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 6 1/2% Convertible Subordinated Debentures due
2016 (hereinafter sometimes called the "Debentures"), in an aggregate
principal amount not to exceed $134,020,650 (or up to $154,123,750 if the
overallotment option granted under the Purchase Agreement is exercised in
full) and, to provide the terms and conditions upon which the Debentures are
to be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Debentures, the certificate of authentication to be
borne by the Debentures, and the form of assignment, and the form of
conversion notice to be borne by the Debentures are to be substantially in the
forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee or a
duly authorized authenticating agent, as in this Indenture provided, the
valid, binding and legal obligations of the Company, and to constitute these
presents a valid agreement according to its terms, have been done and
performed, and the execution of this Indenture and the issue hereunder of the
Debentures have in all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Debentures are, and are to be, authenticated, issued and delivered, and in
consideration of the premises and of the purchase and acceptance of the
Debentures by the Holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective Holders from
time to time of the Debentures (except as otherwise provided below), as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
<PAGE>
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States of America, and, except as
otherwise herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are
generally accepted in the United States of America at the date of
such computation;
(d) The words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(e) headings are for convenience of reference only and do not
affect interpretation; and
(f) the following terms have the meanings given to them in the
Declaration: (i) Clearing Agency; (ii) Common Stock; (iii) Conversion
Agent; (iv) Convertible Preferred Security Certificate; (v) Delaware
Trustee; (vi) Dissolution Tax Opinion; (vii) DTC; (viii) Investment
Company Event; (ix) No-Recognition Opinion; (x) Property Trustee;
(xi) Purchase Agreement; (xii) Redemption Tax Opinion; (xiii) Regular
Trustees; (xiv) Special Event; and (xv) Tax Event.
"Act," when used with respect to any Holder of a Debenture, has the
meaning specified in Section 9.1.
"Actual Knowledge" means, with respect to the Trustee's knowledge of
an occurrence, receipt by a Responsible Officer of the Trustee of written
notice of such occurrence from the Company or a Holder or Holders of at least
ten percent (10%) of the Outstanding principal amount of the Debentures.
"Additional Interest" has the meaning specified in Section 2.3(b).
"Additional Payment" means any Additional Interest, Compounded
Interest, or Liquidated Damages.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 8.13 to act on behalf of the Trustee to authenticate
Debentures.
"Authorized Newspaper" means a newspaper, in the English language or
in an official language of the country of publication, customarily published
on each Business Day, whether or not published on Saturdays, Sundays or
holidays, and of general circulation in the place in connection with which the
term is used, or in the financial community of such place. Where successive
publications are required to be made in Authorized Newspapers, the successive
publications may be made in the same or in different newspapers in the same
city meeting the foregoing requirements and in each case on any Business Day.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
2
<PAGE>
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Book-Entry Debenture" means a Debenture evidencing all or part of
the Debentures, issued to the Depositary or its nominee, and registered in the
name of such Depositary or nominee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law or executive order to close or be closed.
"Cedel S.A." means Cedel Bank, Societe Anonyme, or its successor.
"Closing Price" of any common stock on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices
regular way of such common stock, in each case on the NYSE Composite Tape or,
if the common stock is not listed or admitted to trading on such exchange, on
the principal national securities exchange on which such common stock is
listed or admitted to trading, or, if not listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices
as furnished by any New York Stock Exchange member firm selected from time to
time by the Board of Directors of the Company for that purpose or, if not so
available in such manner, as otherwise determined in good faith by the Board
of Directors.
"Commission" means the United States Securities and Exchange
Commission.
"Common Securities" means undivided beneficial interests in the
assets of the Insignia Trust which rank pari passu with the Convertible
Preferred Securities issued by the Insignia Trust; provided, however, that,
upon the occurrence of an event of default under the Declaration, the rights
of holders of Common Securities to payment in respect to distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of the Convertible Preferred Securities.
"Common Securities Guarantee" means any Guarantee that the Company
enters into with the Property Trustee or other Persons that operates directly
or indirectly for the benefit of holders of the Common Securities.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
Company and which is not subject to redemption by the Company. Subject to the
anti-dilution provisions of any Debenture, however, shares of Common Stock
issuable on conversion of a Debenture shall include only shares of the class
designated as Class A Common Stock of the Company at the date hereof or shares
of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of the
payment of dividends or the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which
are not subject to redemption by the Company, provided, however, that, if at
any time there shall be more than one such resulting class, the shares of each
such class then so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such reclassifications
bears to the total number of shares of such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
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"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by the Chairman of the Board of Directors or
the President or any Vice Chairman or any Vice President and by the Treasurer
or the Secretary or any Assistant Treasurer or any Assistant Secretary of the
Company and delivered to the Trustee.
"Compounded Interest" has the meaning specified in Section 2.3(c).
"Conversion Price" has the meaning specified in Section 15.1.
"Convertible Preferred Securities" means undivided beneficial
interests in the assets of the Insignia Trust which rank pari passu with the
Common Securities issued by the Insignia Trust; provided, however, that, upon
the occurrence of an event of default under the Declaration, the rights of
holders of Common Securities to payment in respect to distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Convertible Preferred Securities.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered, which as of the date hereof is located at the address set forth
in the first paragraph of this Indenture.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Debenture Register" and "Debenture Registrar" have the respective
meanings specified in Section 2.5.
"Debenture" has the meaning stated in the first recital of this
Indenture and more particularly means any Debenture authenticated and
delivered under this Indenture.
"Declaration" means the Amended and Restated Declaration of Trust of
the Insignia Trust, as it may be amended from time to time in accordance with
its terms.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Deferred Interest" has the meaning specified in Section 2.3(c).
"Depositary" means The Depositary Trust Company until a successor
Depositary shall have been appointed pursuant to procedures adopted under
Section 2.5, and thereafter the term "Depositary" shall mean or include each
Person who is then a Depositary hereunder.
"Direct Action" means a proceeding instituted by a holder of
Convertible Preferred Securities directly against the Company to enforce
rights under the Debentures in certain circumstances, as specified in Section
7.16.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Insignia Trust is to be dissolved in
accordance with the Declaration, and the Debentures held by the Property
Trustee are to be distributed to the holders of the Trust Securities pro rata
in accordance with the Declaration.
"Dollar" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
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"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 7.1.
"Extended Interest Payment Period" has the meaning specified in
Section 2.3(c).
"Global Debenture" has the meaning specified in Section 2.3(a).
"Guarantor" means the Company, in its capacity as guarantor under any
Trust Securities Guarantee.
"Holder," when used with respect to any Debenture, means the Person
in whose name the Debenture is registered in the Debenture Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of the Debentures.
"Interest Payment Date" has the meaning set forth in the form of
Debenture.
"Insignia Trust" means Insignia Financing I, a Delaware statutory
business trust.
"Liquidated Damages" has the meaning set forth in Section 5.9.
"Maturity," when used with respect to any Debenture, means the date
on which the principal of such Debenture becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Maturity Date" means the date on which the Debentures mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional Interest,
if any.
"Non Book-Entry Convertible Preferred Securities" has the meaning
specified in Section 2.3.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors or the President or any Vice Chairman or any Vice
President and by the Treasurer or the Secretary or any Assistant Treasurer or
any Assistant Secretary of the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
an employee of or counsel for the Company, and who shall be acceptable to the
Trustee.
"Optional Redemption Price" has the meaning specified in Section
3.1(a).
"Outstanding," when used with respect to the Debentures, means, as of
the date of determination, all Debentures theretofore authenticated and
delivered under this Indenture, except:
(i) Debentures theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
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(ii) Debentures for whose payment or redemption of which money
or United States Government Obligations in the necessary amount has
been theretofore deposited in accordance with Article XIII with the
Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders of Debentures; provided,
however, that, if Debentures or portions of Debentures are to be
redeemed prior to the Maturity thereof, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Debentures in lieu of which other Debentures have been
authenticated and delivered pursuant to this Indenture, other than
any Debentures in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Debentures are held by
a bona fide purchaser in whose hands such Debentures are valid
obligations of the Company; and
(iv) Debentures converted into Common Stock pursuant to Article
XV, except as otherwise provided in Section 3.6;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of the Outstanding Debentures have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or whether a quorum is present at a meeting of Holders of Debentures,
Debentures owned by the Company or any other obligor upon such Debentures, or
any Affiliate of the Company or of such other obligor, shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, or upon any such
determination as to the presence of a quorum, only Debentures as to which the
Trustee has Actual Knowledge to be so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Debentures and that the pledgee
is not the Company or any other obligor upon such Debentures or any Affiliate
of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of and any premium and interest on any Debentures on behalf of the
Company.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, trust, association, joint stock company,
limited liability company, unincorporated association or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Place of Payment," when used with respect to the Debentures, means
the place or places where, subject to the provisions of Section 5.2, the
principal of and any premium and interest on the Debentures are payable as
specified in or contemplated by the Debentures.
"Predecessor Debenture" of a Debenture means every previous Debenture
evidencing all or a portion of the same debt as that evidenced by such
Debenture; and, for the purposes of this definition, a Debenture authenticated
and delivered under Section 2.6 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Debenture shall be deemed to evidence the same debt
as the mutilated, destroyed, lost or stolen Debenture.
"Preferred Securities Guarantee" means any Guarantee that the
Guarantor may enter into with the Property Trustee or other Persons that
operates directly or indirectly for the benefit of holders of the Convertible
Preferred Securities.
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"Redemption Date," when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the date 15 days prior to such Interest Payment Date,
whether or not such day is a Business Day.
"Responsible Officer" means, when used with respect to the Trustee,
the chairman of the board of directors, the executive committee of the board
of directors, the chairman of the trust committee, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restricted Securities Legend" means the legend restricting transfer
of the Debentures in the form set forth in Section 2.2.
"Senior Indebtedness" means, with respect to the Company, the
principal of, premium, if any, interest on, and any other payment due pursuant
to, any of the following, whether outstanding on the date of this Indenture or
thereafter incurred or created: (a) all indebtedness of the Company for money
borrowed or evidenced by notes, debentures, bonds or other securities
(including, but not limited to, those which are convertible or exchangeable
for securities of the Company and indebtedness owed to subsidiaries and
affiliates of the Company); (b) all indebtedness of the Company due and owing
with respect to letters of credit (including, but not limited to,
reimbursement obligations with respect thereto); (c) all obligations of the
Company due and owing with respect to reimbursement agreements under any
surety bond, insurance policy, bankers' acceptance, security purchase
facility, or similar agreement or arrangement; (d) all indebtedness or other
obligations of the Company due and owing with respect to interest rate and
currency swap agreements, cap, floor and collar agreements, currency spot and
forward contracts and other similar agreements and arrangements; (e) all
indebtedness consisting of commitment or standby fees due and payable to
lending institutions with respect to credit facilities or letters of credit
available to the Company; (f) all obligations of the Company under leases
required or permitted to be capitalized under generally accepted accounting
principles; (g) all obligations of the Company issued or assumed as the
deferred purchase price of property or services, all conditional sale
obligations of the Company, and all obligations of the Company under any title
retention agreement; (h) all obligations of the Company under agreements or
arrangements with respect to deferred compensation due its employees or
employees of its Subsidiaries and its obligations under employee benefit
plans; (i) all indebtedness or obligations of others of the kinds described in
any of the preceding clauses (a), (b), (c), (d), (e), (f), (g), or (h) that
are (x) assumed by or guaranteed in any manner by the Company or in effect
guaranteed (directly or indirectly) by the Company through an agreement to
purchase, contingent or otherwise, or in its capacity as a general partner of
any entity, and all obligations of the Company under any such guarantee or
other arrangements, or (y) secured by a lien on any property or asset of the
Company (whether or not such obligation is assumed by the Company); and (j)
all renewals, extensions, refundings, deferrals, amendments or modifications
of indebtedness or obligations of the kinds described in any of the preceding
clauses (a), (b), (c), (d), (e), (f), (g), (h), or (i); unless in the case of
any particular indebtedness, obligation, renewal, extension, refunding,
amendment, modification or supplement, the instrument or other document
creating or evidencing the same or the assumption or guarantee of the same
expressly provides that such indebtedness, renewal, extension,
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refunding, amendment, modification or supplement is subordinate to, or is not
superior to, or is pari passu with, the Debentures; provided that Senior
Indebtedness shall not include indebtedness for trade payables or constituting
the deferred purchase price of assets or services incurred in the ordinary
course of business.
"Special Redemption Price" has the meaning set forth in Section 3.2.
"Stated Maturity," when used with respect to any Debenture or any
installment of interest thereon, means the date specified in such Debenture as
the fixed date on which the principal of such Debenture or such installment of
interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) any corporation
at least a majority of whose outstanding Voting Stock shall at the time be
owned, directly or indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries, (ii) any
general partnership, joint venture, business trust or similar entity, at least
a majority of whose outstanding partnership or similar interests shall at the
time be owned by such Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries and (iii) any limited partnership
of which such Person or any of its Subsidiaries is a general partner.
"Trading Day" shall mean a day on which any securities are traded on
the national securities exchange or quotation system used to determine the
Closing Price.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder,
and if at any time there is more than one such Person, "Trustee" shall mean
all such Persons.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent of any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Convertible Preferred
Securities.
"Trust Securities Guarantees" means the Common Securities Guarantee
and the Preferred Securities Guarantee.
"United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.
"U.S. Government Obligations" means direct obligations of the United
States for the payment of which its full faith and credit is pledged, or
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States and the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depositary receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended)
as custodian with respect to any such U.S. Government Obligations or a
specific payment of principal of or interest on any such U.S. Government
Obligations held by such custodian for the account of the holder of such
depositary receipt, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depositary receipt from any amount received by the custodian in
respect of the U.S. Government Obligations or the specific payment of
principal of or interest on the U.S. Government Obligations evidenced by such
depositary receipt.
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"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than
shares, interests, participations or other equivalents having such power only
by reason of the occurrence of a contingency.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT.
The Debentures shall be designated as " 6 1/2% Convertible
Subordinated Debentures due 2016". The aggregate principal amount of
Debentures that may be authenticated and delivered pursuant to this Indenture
is limited to the sum of (i) $134,020,650 plus (ii) up to an additional
$20,103,100 in the event that the over-allotment option granted in the
Purchase Agreement is exercised in full (except for Debentures authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Debentures pursuant to Sections 2.5, 2.6, 2.7, 3.6, and 15.2). Upon
the execution of this Indenture, or from time to time thereafter, such
Debentures may be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver such
Debentures upon the written order of the Company, signed by (a) its President,
any Executive or Senior Vice President or any Vice President and (b) its
Treasurer or any Assistant Treasurer or its Secretary or any Assistant
Secretary, without any further action by the Company hereunder.
SECTION 2.2 FORM OF DEBENTURES; INITIAL ISSUANCE TO PROPERTY
TRUSTEE.
The Debentures and the Trustee's Certificate of Authentication to be
borne by the Debentures shall be in substantially the form set forth in
Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Debentures may have such letters, numbers or other marks
of identification (including different CUSIP numbers) and such notations,
legends and endorsements as the officer of the Company executing the same may
approve (execution thereof by such officer to be conclusive evidence of such
approval) and as are not inconsistent with the provisions of this Indenture,
or as may be required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any securities
exchange or automated quotation system on which the Debentures may be listed
or designated for issuance or with the procedures of the Depositary, or to
conform to usage. The Company shall furnish any such legend not contained in
Exhibit A to the Trustee in writing.
The terms and provisions contained in the form of Debentures attached
as Exhibit A hereto shall constitute, and are hereby expressly made a part of,
this Indenture and to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
The definitive Debentures shall be typewritten or printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Debentures may be listed, all as
determined by the officers executing such Debentures, as evidenced by their
execution of such Debentures.
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The Debentures initially issued to the Property Trustee shall be in
the form of one or more individual certificates in definitive, fully
registered form without coupons and shall bear the following legend (the
"Restricted Securities Legend") unless the Company determines otherwise in
accordance with applicable law:
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS,
ACKNOWLEDGES, AND AGREES FOR THE BENEFIT OF INSIGNIA FINANCIAL GROUP, INC.
(THE "COMPANY") THAT: (I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE
RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER
DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS SUBJECT TO THE
RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES FOR SUCH ISSUER (i) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE, AND (ii) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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SECTION 2.3 DENOMINATION OF DEBENTURES; PAYMENT OF INTEREST;
EXTENSION OF INTEREST PAYMENT PERIOD.
(a) Except as provided below, the Debentures shall be issued in fully
registered certificated form without coupons, in denominations of $50 in
principal amount and integral multiples thereof. Principal and interest on the
Debentures issued in certificated form will be payable, the transfer of such
Debentures will be registrable, and such Debentures will be exchangeable for
Debentures bearing identical terms and provisions at the office or agency of
the Trustee; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the Holder at such address as shall
appear in the Debenture Register. Notwithstanding the foregoing, so long as
the Holder of any Debentures is the Property Trustee, the payment of the
principal of and interest (including Compounded Interest and Additional
Interest, if any) on such Debentures held by the Property Trustee will be made
at such place and to such account as may be designated by the Property
Trustee.
In connection with a Dissolution Event, (i) the Debentures in
certificated form may be presented to the Trustee by the Property Trustee in
exchange for a global Debenture in an aggregate principal amount equal to the
aggregate principal amount of all outstanding Debentures (a "Global
Debenture"), to be registered in the name of the Depositary, or its nominee,
and delivered by the Trustee to the Depositary for crediting to the accounts
of its participants pursuant to the instructions of the Regular Trustees. The
Company upon any such presentation shall execute a Global Debenture in such
aggregate principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with this Indenture. Payments on the
Debentures issued as a Global Debenture will be made to the Depositary; and
(ii) if any Convertible Preferred Securities are held in non
book-entry certificated form, any Convertible Preferred Security Certificate
which represents Convertible Preferred Securities other than Convertible
Preferred Securities held by the Clearing Agency or its nominee ("Non
Book-Entry Convertible Preferred Securities") will be deemed to represent
beneficial interests in Debentures having an aggregate principal amount equal
to the aggregate liquidation amount of the Non Book-Entry Convertible
Preferred Securities until such Convertible Preferred Security Certificates
are presented to the Debenture Registrar for transfer or reissuance at which
time such Convertible Preferred Security Certificates will be canceled and a
Debenture, registered in the name of the holder of the Convertible Preferred
Security Certificate or the transferee of the holder of such Convertible
Preferred Security Certificate, as the case may be, with an aggregate
principal amount equal to the aggregate liquidation amount of the Convertible
Preferred Security Certificate canceled, will be executed by the Company and
delivered to the Trustee for authentication and delivery in accordance with
this Indenture. On issue of such Debentures, Debentures with an equivalent
aggregate principal amount that were presented by the Property Trustee to the
Trustee will be deemed to have been canceled.
A Global Debenture may be transferred, in whole but not in part, only
to another nominee of the Depositary, or to a successor depositary selected or
approved by the Company or to a nominee of such successor Depositary.
(b) Each Debenture will bear interest at the rate specified in
Exhibit A (the "Coupon Rate") from November 1, 1996 until the principal
thereof becomes due and payable, and on any overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of this Section 2.3) quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year (each, an
"Interest Payment Date"), commencing on December 31, 1996, to the Person in
whose name such Debenture or any predecessor Debenture is registered, at the
close of business on the Regular Record Date for such interest installment.
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Any interest on any Debenture which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Debentures are registered at the
close of business on a Special Record Date (as defined herein) for the payment
of such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Debenture and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect
of such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as provided in this clause. Thereupon, the Trustee
shall fix a Special Record Date (the "Special Record Date") for the payment of
such Defaulted Interest which shall be not more than 15 days and not less than
10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Debenture Register, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefore having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Debentures are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and, if so listed,
upon such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.3(b), each
Debenture delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Debenture shall carry the rights to
interest accrued and unpaid, and to accrue (including in each case Compounded
Interest), which were carried by such other Debenture.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on the Debentures is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
If, at any time while the Property Trustee is the Holder of any
Debentures, the Insignia Trust or the Property Trustee is required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as additional interest
("Additional Interest") on the Debentures held by the Property Trustee, such
additional amounts as shall be required so that the net amounts received and
retained by the Insignia Trust and the Property Trustee after paying such
taxes, duties, assessments or
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other governmental charges will be equal to the amounts the Insignia Trust and
the Property Trustee would have received had no such taxes, duties,
assessments or other government charges been imposed.
(c) As long as an Event of Default shall not have occurred and be
continuing, the Company shall have the right, at any time and from time to
time during the term of the Debentures, to defer payments of interest by
extending the interest payment period of such Debentures for a period not
exceeding 20 consecutive quarters (the "Extended Interest Payment Period"),
during which Extended Interest Payment Period no interest (including any
Additional Interest, Compounded Interest, and Liquidated Damages) shall be due
and payable; provided that no Extended Interest Payment Period may extend
beyond the Maturity Date or any earlier Redemption Date. To the extent
permitted by applicable law, interest at the Coupon Rate, the payment of which
has been deferred because of the extension of the interest payment period
pursuant to this Section 2.3, will bear interest thereon at the Coupon Rate
compounded quarterly for each quarter of the Extended Interest Payment Period
("Compounded Interest"). At the end of the Extended Interest Payment Period,
the Company shall pay all interest accrued and unpaid on the Debentures,
including any Additional Interest, Compounded Interest and Liquidated Damages
(together, "Deferred Interest") that shall be payable, to the Holders of
Debentures in whose names the Debentures are registered in the Debenture
Register on the first Regular Record Date after the end of the Extended
Interest Payment Period. Before the termination of any Extended Interest
Payment Period, the Company may further extend such period, provided that such
period together with all such further extensions thereof shall not exceed 20
consecutive quarters, or extend beyond the Stated Maturity of the Debentures.
Upon the termination of any Extended Interest Payment Period and upon the
payment of all Deferred Interest then due, the Company may commence a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Company may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period.
If the Property Trustee is the only registered Holder of the
Debentures at the time the Company selects an Extended Interest Payment
Period, the Company shall give written notice to the Regular Trustees, the
Property Trustee and the Trustee of its election of such Extended Interest
Payment Period one Business Day before the earlier of (i) the next succeeding
date on which Distributions on the Trust Securities issued by the Insignia
Trust are payable, or (ii) the date the Insignia Trust is required to give
notice of the record date, or the date such Distributions are payable, to the
New York Stock Exchange or other applicable self-regulatory organization or to
holders of Convertible Preferred Securities issued by the Insignia Trust, but
in any event at least 10 Business Days before such record date.
If the Property Trustee is not the only Holder of the Debentures at
the time the Company elects an Extended Interest Payment Period, the Company
shall give the Holders of Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period at least 10 Business Days
before the earlier of (i) the next succeeding Interest Payment Date, or (ii)
the date the Company is required to give notice of the record date or payment
date with respect to such interest payment to the New York Stock Exchange or
other applicable self-regulatory organization or to Holders of Debentures, but
in any event at least two Business Days before such record date.
The quarter in which any notice is given pursuant to paragraph (c) of
this Section 2.3 shall be counted as one of the 20 quarters permitted in the
maximum Extended Interest Payment Period permitted under this Section 2.3.
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SECTION 2.4 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Debentures shall be signed on behalf of the Company by both (a) its
Chairman of the Board of Directors or any Vice Chairman of the Board of
Directors or its President or one of its Vice Presidents and (b) its Treasurer
or one of its Assistant Treasurers or its Secretary or one of its Assistant
Secretaries, under its corporate seal which may, but need not, be attested.
The signature of any of these officers on Debentures may be manual or
facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Debentures
or did not hold such offices at the date of such Debentures. At any time and
from time to time after the execution and delivery of this Indenture, the
Company may deliver Debentures executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of Debentures, and the Trustee in accordance with the Company Order
shall authenticate and make Debentures available for delivery.
Each Debenture shall be dated the date of its authentication.
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on the Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and delivered hereunder.
Notwithstanding the foregoing, if any Debenture shall have been
authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Debenture to the Trustee for
cancellation as provided in Section 2.9 together with a written statement
stating that such Debenture has never been issued and sold by the Company, for
all purposes of this Indenture such Debenture shall be deemed never to have
been authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
SECTION 2.5 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at an office or agency to be
maintained by the Company in accordance with Section 5.2 a register (the
"Debenture Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of transfers of
Debentures. The Trustee is hereby appointed "Debenture Registrar" for the
purpose of registering transfers of Debentures as herein provided.
Upon due surrender for registration of transfer of any Debenture at
the office or agency of the Company maintained pursuant to Section 5.2 for
such purpose in a Place of Payment, the Company shall execute, and the Trustee
shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Debentures of any
authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denominations and of a like aggregate principal
amount and tenor, upon surrender of the Debentures to be exchanged at any such
office or agency. Whenever any Debentures are so surrendered for exchange, the
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Company shall execute, and the Trustee shall authenticate and make available
for delivery, the Debentures which the Holder making the exchange is entitled
to receive.
Whenever any Debentures are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Debentures which the Holder making the exchange is entitled to
receive.
All Debentures issued upon any registration of transfer or exchange
of Debentures shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Debentures surrendered upon such registration of transfer or exchange.
Every Debenture presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee or any
transfer agent) be duly endorsed, or be accompanied by a written instrument of
transfer in the form included in Exhibit A or in other form satisfactory to
the Company and the Debenture Registrar or any transfer agent duly executed,
by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Debentures,
other than exchanges pursuant to Section 2.7, 3.7 or 15.2 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Debentures during a period beginning at the opening of business
15 days before any selection of Debentures to be redeemed and ending at the
close of business on the day of the mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any Debenture so
selected for redemption, in whole or in part, except the unredeemed portion of
any Debenture being redeemed in part.
The Debentures shall not be transferred, except in compliance with
the Restricted Securities Legend, unless any such transfer is otherwise
determined by the Company to be in compliance with applicable law. Upon any
distribution of the Debentures to the holders of the Trust Securities in
accordance with the Declaration, the Company and the Trustee shall enter into
a supplemental indenture pursuant to Section 11.1(g) to provide for transfer
restrictions (including legends, if any, to be included on the Debentures) and
procedures with respect to the Debentures substantially similar to those
contained in the Declaration to the extent applicable in the circumstances
existing at the time of such distribution and the appointment of a Depositary.
SECTION 2.6 MUTILATED, DESTROYED, LOST AND STOLEN DEBENTURES.
If any mutilated Debenture is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and make available for
delivery in exchange therefor a new Debenture of like principal amount and
tenor and bearing a number not contemporaneously outstanding, and such
mutilated Debenture shall be canceled by the Trustee in accordance with the
Indenture.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Debenture and (ii) such security or indemnity as may be required by them,
then, in the absence of notice to the Company or the Trustee that such
Debenture has been acquired by a bona fide purchaser, the Company shall,
subject to the following paragraph, execute, and the Trustee shall
authenticate and make available for delivery, in lieu of any such destroyed,
lost or stolen Debenture, a new Debenture of like principal amount and tenor
and bearing a number not contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section, the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and any such new
Debenture shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 2.7 TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Debentures which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Debentures in lieu
of which they are issued, in registered form and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Debentures may determine, as evidenced by their execution of
such Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation of
definitive Debentures, all temporary Debentures may be surrendered in exchange
therefor, at the office of the Debenture Registrar, and the Company shall
execute and the Trustee shall authenticate and deliver an equal aggregate
principal amount of definitive Debentures in certificated form in exchange for
temporary Debentures. Such exchange shall be made by the Company at its own
expense and without any charge therefor. Until so exchanged, temporary
Debentures shall in all respects be entitled to the same benefits and subject
to the same limitations under this Indenture as Debentures in definitive
certificated form authenticated and delivered hereunder.
SECTION 2.8 PERSONS DEEMED OWNERS.
Prior to due presentment of a Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Debenture is registered as the owner of such
Debenture for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 2.3 and 2.5) any interest or Additional
Payments on such Debenture and for all other purposes whatsoever, whether or
not such Debenture shall be overdue, and neither the Company, the Trustee nor
any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 2.9 CANCELLATION.
All Debentures surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and promptly shall be canceled by the Trustee. The Company may at any time
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deliver to the Trustee for cancellation any Debentures previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Debentures previously authenticated
hereunder which the Company has not issued and sold, and all Debentures so
delivered promptly shall be canceled by the Trustee. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Debentures held by the Trustee shall be disposed of as directed by a Company
Order; provided that the Trustee shall not be required to destroy the
certificates representing the canceled Debentures.
ARTICLE III
REDEMPTION OF DEBENTURES
SECTION 3.1 OPTIONAL REDEMPTION BY COMPANY.
(a) Subject to the provisions of Sections 3.1(b), (c), and (d) and to
the other provisions of this Article III, the Company shall have the right to
redeem the Debentures, in whole or in part, from time to time, on or after
November 1, 1999, upon not less than 20 days nor more than 60 days notice to
the Holders of the Debentures, at the following prices (expressed as
percentages of the principal amount of the Debentures) (the "Optional
Redemption Price"), if redeemed during the 12-month period beginning September
30 (or, in the case of 1999, the period beginning November 1):
Year Redemption Price
---- ----------------
1999 ......................102.0%
2000 ......................101.0%
2001 and thereafter...................100.0%
plus, in each case, accrued and unpaid interest (including Additional Payments,
if any) to, but excluding, the Redemption Date.
The Optional Redemption Price shall be paid prior to 12:00 noon, New
York time, on the Redemption Date or at such earlier time as the Company
determines, provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Optional Redemption Price by 10:00 a.m., New York time,
on the date such Optional Redemption Price is to be paid.
(b) If a partial redemption of the Debentures would result in the
delisting of the Convertible Preferred Securities issued by the Insignia Trust
from any national securities exchange or other organization on which the
Convertible Preferred Securities are then listed, the Company shall not be
permitted to effect such partial redemption and may only redeem the Debentures
in whole.
(c) The Company may not redeem fewer than all of the outstanding
Debentures unless all accrued and unpaid interest has been paid on all of the
outstanding Debentures.
(d) Notwithstanding the foregoing, if Debentures are redeemed on any
March 31, June 30, September 30, or December 31, accrued and unpaid interest
(and Additional Payments, if any) shall be payable to Holders of record on the
relevant record date, instead of the Holders on the Redemption Date.
(e) Notwithstanding the foregoing, the Trustee shall not redeem any
Debentures pursuant to this Section 3.1 or mail any notice of optional
redemption during the continuance of a default in payment of interest or
premium on the Debentures or of any Event of Default of which, in the case of
any
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Event of Default other than under Section 7.1(a) or (b), a Responsible
Officer of the Trustee has Actual Knowledge.
SECTION 3.2 TAX EVENT REDEMPTION.
If a Tax Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Regular
Trustees shall have been informed by tax counsel rendering the
Dissolution Tax Opinion that a No-Recognition Opinion cannot be
delivered to the Trust,
then, notwithstanding Section 3.1(a) but subject to Sections 3.1(b), (c), and
(d), the Company shall have the right upon not less than 20 days nor more than
60 days notice to the Holders of the Debentures to redeem the Debentures, in
whole or in part, for cash within 90 days following the occurrence of such Tax
Event (the "90-Day Period") at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest (including
Additional Payments, if any) thereon to the date of such redemption (the
"Special Redemption Price"); provided, however, that, if at the time there is
available to the Company or the Insignia Trust the opportunity to eliminate,
within the 90-Day Period, the Tax Event by taking some ministerial action
("Ministerial Action"), such as filing a form or making an election, or
pursuing some other similar reasonable measure which has no adverse effect on
the Company, the Insignia Trust or the Holders of the Trust Securities issued
by the Insignia Trust, the Company shall pursue such Ministerial Action in lieu
of redemption; and, provided, further, that the Company shall have no right to
redeem the Debentures while the Insignia Trust is pursuing any Ministerial
Action pursuant to its obligations under the Declaration.
The Special Redemption Price shall be paid prior to 12:00 noon, New
York time, on the Redemption Date or at such earlier time as the Company
determines, provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Special Redemption Price by 10:00 a.m., New York time, on
the date such Special Redemption Price is to be paid.
SECTION 3.3 APPLICABILITY OF ARTICLE.
Redemption of Debentures at the election of the Company, as permitted
by Section 3.1 and 3.2, shall be made in accordance with such Sections and this
Article.
SECTION 3.4 NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking fund.
SECTION 3.5 ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem Debentures shall be evidenced by
an Officers' Certificate. In the case of any redemption at the election of the
Company, the Company shall, at least 45 days prior to the Redemption Date fixed
by the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Debentures to be redeemed.
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SECTION 3.6 SELECTION BY TRUSTEE OF DEBENTURES TO BE REDEEMED.
If less than all the Debentures are to be redeemed, the particular
Debentures to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Debentures not previously
called for redemption, on a pro rata basis, in portions equal to $50 (or any
integral multiple thereof) of the principal amount of Debentures.
If Debentures selected for partial redemption are converted into
Common Stock in part before termination of the conversion right with respect to
the portion of the Debentures so selected, the converted portion of the
Debentures shall be deemed (so far as may be) to be the portion selected for
redemption. Debentures (or portions thereof) which have been converted into
Common Stock during a selection of Debentures to be redeemed shall be treated
by the Trustee as Outstanding for the purpose of such selection. In any case
where more than one Debenture is registered in the same name, the Trustee in
its discretion may treat the aggregate principal amount so registered as if it
were represented by one Debenture.
The Trustee shall promptly notify the Company in writing of the
Debentures selected for redemption and, in the case of any Debentures selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debentures redeemed or to be redeemed only in part, to the
portion of the principal amount of the Debentures which has been or is to be
redeemed.
SECTION 3.7 NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided in Section
16.4 to the Holders of Debentures to be redeemed not less than 20 nor more than
60 days prior to the Redemption Date. All notices of redemption shall identify
the Debentures (including the CUSIP number) to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued interest and
Additional Payments, if any, to be paid upon such redemption;
(c) if less than all the Outstanding Debentures are to be
redeemed, the aggregate principal amount of Debentures to be redeemed,
the aggregate principal amount of Debentures to be outstanding after
such partial redemption, the identification (and, in the case of
partial redemption, the principal amounts) of the particular
Debentures to be redeemed, and a statement to the effect that on or
after the Redemption Date upon surrender of such Debenture a new
Debenture in the principal amount equal to the unredeemed portion will
be issued;
(d) that on the Redemption Date the Redemption Price will become
due and payable upon each such Debenture to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date;
(e) the place or places where such Debentures are to be
surrendered for payment of the Redemption Price; and
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(f) the Conversion Price then in effect, the date on which the
right to convert the Debentures to be redeemed will terminate, and the
place or places where such Debentures may be surrendered for
conversion.
A notice of redemption published as contemplated by Section 16.4 need
not identify particular Debentures to be redeemed.
Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 3.8 DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 5.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest (including Additional
Payments, if any) on, all the Debentures which are to be redeemed on that date.
If any Debenture called for redemption is converted into Common Stock,
any money deposited with the Trustee or with any Paying Agent or so segregated
and held in trust for the redemption of such Debenture shall (subject to any
right of the Holder of such Debenture or any Predecessor Debenture to receive
interest as provided in this Indenture) be paid to the Company upon Company
Request or, if then held by the Company, shall be discharged from such trust.
SECTION 3.9 DEBENTURES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Debentures so
to be redeemed shall on the Redemption Date become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Debentures shall cease to bear interest. Upon surrender of any
such Debenture for redemption in accordance with said notice, such Debenture
shall be paid by the Company at the Redemption Price together with accrued
interest (including Additional Payments, if any) to the Redemption Date;
subject to the provisions of Section 3.1(d).
If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest (including Additional Payments, if any) from the Redemption
Date at the rate prescribed therefor in the Debenture.
SECTION 3.10 DEBENTURES REDEEMED IN PART.
Any Debenture which is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available for delivery to
the Holder of such Debenture without service charge, a new Debenture or
Debentures of like tenor of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Debenture so surrendered.
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ARTICLE IV
SUBORDINATION OF DEBENTURES
SECTION 4.1 DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and each Holder of a Debenture, by
the Holder's acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article, the
indebtedness represented by the Debenture and the payment of the principal of
(and premium, if any) and interest (including Additional Payments) on each and
all of the Debentures are hereby expressly made subordinate and junior in right
of payment to the prior payment in full of all Senior Indebtedness of the
Company, whether outstanding at the date of this Indenture or thereafter
incurred. No provision of this Article shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 4.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company
on account of the principal (and premium, if any) or interest (including
Additional Payments) on the Debentures; and upon any such dissolution or
winding-up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, which the Holders of the Debentures or the
Trustee would be entitled to receive from the Company, except for the
provisions of this Article, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders of the Debentures or by the Trustee
under the Indenture if received by them or it, directly to the holders of
Senior Indebtedness of the Company (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders, as
calculated by the Company) or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness
in full, in money or money's worth, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness,
before any payment or distribution is made to the Holders of the Debentures or
to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing shall be received by
the Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, and their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness of
the Company, as the case may be, remaining unpaid to the extent necessary to
pay such Senior Indebtedness in full in money in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
benefit of the holders of such Senior Indebtedness.
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For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, which are
subordinated in right of payment to all Senior Indebtedness which may at the
time be outstanding to substantially the same extent as, or to a greater extent
than, the Debentures are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the
conveyance or transfer of its properties and assets substantially as an
entirety to another Person upon the terms and conditions set forth in Article
XII shall not be deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshaling of assets and liabilities
of the Company for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer such properties and assets substantially as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article XII.
SECTION 4.3 PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION
OF DEBENTURES.
In the event that any Debentures are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior
Indebtedness shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Indebtedness or provision shall be
made for such payment in cash, before the Holders of the Debentures are
entitled to receive any payment (including any payment which may be payable by
reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Debentures) by the Company on account of the
principal of (or premium, if any) or interest (including Additional Payments)
on the Debentures or on account of the purchase or other acquisition of
Debentures.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Debenture prohibited by
the foregoing provisions of this Section, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the
case may be, such Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Company.
SECTION 4.4 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company, as the case may be, beyond any applicable
grace period with respect thereto, or in the event that the maturity of any
Senior Indebtedness of the Company, as the case may be, has been accelerated
because of a default, then no payment shall be made by the Company with respect
to the principal (including redemption payments) of, or premium, if any, or
interest (including Additional Payments) on the Debentures, unless and until
such default is cured or waived or ceases to exist or any such acceleration or
demand for payment has been rescinded.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 4.4, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior
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Indebtedness and only the amounts specified in such notice to the Trustee shall
be paid to the holders of Senior Indebtedness.
SECTION 4.5 PAYMENT PERMITTED IN CERTAIN SITUATIONS.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Debentures shall prevent (a) the Company, at any time except during
the pendency of any dissolution, winding-up, liquidation or reorganization of
the Company, whether voluntary or involuntary, or any bankruptcy, insolvency,
receivership or other proceedings of the Company referred to in Section 4.2 or
under the conditions described in Section 4.3 or 4.4, from making payments at
any time of principal of, or premium, if any, or interest (including Additional
Payments) on the Debentures, or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the principal
of, or premium, if any, or interest (including Additional Payments) on the
Debentures or the retention of such payment by the Holders, if, at the time of
such application by the Trustee, it did not have Actual Knowledge that such
payment would have been prohibited by the provisions of this Article.
SECTION 4.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness or the
provision for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, the rights of the Holders
of Debentures shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article (equally and ratably with the holders of
indebtedness of the Company which by its express terms is subordinated to
indebtedness of the Company to substantially the same extent as the Debentures
are subordinated to the Senior Indebtedness and is entitled to like rights of
subrogation) to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to the Senior Indebtedness until the principal of (and premium, if any) and
interest on the Debentures shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of
Debentures or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to or
for the benefit of the holders of Senior Indebtedness by Holders of Debentures
or the Trustee, shall, as among the Company, its creditors other than holders
of Senior Indebtedness, and the Holders of Debentures, be deemed to be a
payment or distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 4.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of Debentures on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Debentures
is intended to or shall (a) impair, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of Debentures, the
obligation of the Company, which is absolute and unconditional (and which,
subject to the rights under this Article of the holders of Senior Indebtedness,
is intended to rank equally with all other general obligations of the Company),
to pay to the Holders of Debentures the principal of (and premium, if any) and
interest on the Debentures as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of Debentures and creditors of the Company, as the case
may be, other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under
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this Article of the holders of Senior Indebtedness to receive cash, property
and securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 4.8 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Debenture by such Holder's acceptance thereof
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article and appoints the Trustee such Holder's attorney-in-fact for any
and all such purposes.
SECTION 4.9 NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of Debentures,
without incurring responsibility to the Holders of Debentures and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of Debentures to the holders of Senior
Indebtedness do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 4.10 NOTICE TO TRUSTEE.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company which would prohibit the making
of any payment to or by the Trustee in respect of any Debentures pursuant to
the provisions of this Article. Notwithstanding the provisions of this Article
or any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee in respect of any Debentures pursuant to the
provisions of this Article, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
or holders of Senior Indebtedness or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Section 8.2, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall have not received the
notice provided for in this Section at least two Business Days prior to the
date upon which, by the terms hereof, any money may become payable for any
purpose (including, without limitation, the payment of the principal of (or
premium, if any) or interest on any Debentures), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to receive such money and to apply the same to the purposes for
which they were received, and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such
date.
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Subject to the provisions of Section 8.2, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 4.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 8.2, and the
Holders of Debentures shall be entitled conclusively to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Debentures, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, as the case may be, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 4.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into the Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness.
SECTION 4.13 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS,
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.6.
SECTION 4.14 ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its
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meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 4.13 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 4.15 CERTAIN CONVERSIONS DEEMED PAYMENT.
For the purposes of this Article only, (a) the issuance and delivery
of junior securities (or cash paid in lieu of fractional shares) upon
conversion of Debentures in accordance with Article XV, shall not be deemed to
constitute a payment or distribution on account of the principal of or premium
or interest on Debentures or on account of the purchase or other acquisition of
Debentures, and (b) the payment, issuance or delivery of cash, property or
securities (other than junior securities and cash paid in lieu of fractional
shares) upon conversion of a Debenture shall be deemed to constitute payment on
account of the principal of such Debenture. For the purposes of this Section,
the term "junior securities" means (i) shares of any stock of any class of the
Company and (ii) securities of the Company which are subordinated in right of
payment to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Debentures are so subordinated as provided in
this Article. Nothing contained in this Article or elsewhere in this Indenture
or in the Debentures is intended to or shall impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of
Debentures, the right, which is absolute and unconditional, of the Holder of
any Debenture to convert such Debenture in accordance with Article XV.
ARTICLE V
CERTAIN COVENANTS
SECTION 5.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees that it will duly and punctually pay
the principal of and any premium and interest (including any Additional
Payments) on the Debentures in accordance with the terms of the Debentures and
this Indenture.
SECTION 5.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the United States an office or agency
where Debentures may be presented or surrendered for payment, where Debentures
may be surrendered for registration of transfer, exchange, or conversion and
where notices and demands to or upon the Company in respect of Debentures and
this Indenture may be served. The Company will give prompt notice to the
Trustee and to the Holders as provided in Sections 16.3 and 16.4, respectively,
of the location and any change in the location, of any such office or agency.
If at any time the Company shall fail to maintain any such required office or
agency in respect of Debentures or shall fail to furnish the Trustee with the
address thereof, such presentations and surrenders of Debentures may be made
and notices and demands may be made or served at the Corporate Trust Office of
the Trustee, and the Company hereby appoints the same as its agent to receive
such respective presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in
accordance with the requirements set forth above for such purposes. The Company
will give prompt written notice to the Trustee and the
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Holders of Debentures of any such designation or rescission and of any change
in the location of any such other office or agency.
SECTION 5.3 MONEY FOR DEBENTURES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to Debentures, it will, on or before each due date of the principal of
and any premium or interest on any of the Debentures, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any premium or interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for
Debentures it will, prior to each due date of the principal of and any premium
or interest on any Debentures, deposit with a Paying Agent a sum sufficient to
pay the principal and any premium or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its action or failure to act.
The Company will cause each Paying Agent for Debentures other than the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of
and any premium or interest on Debentures in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Debentures) in the making of any payment of
principal of and any premium or interest on the Debentures; and
(c) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and any premium or
interest on any Debenture and remaining unclaimed for two years after such
principal and any premium or interest has become due and payable shall be paid
to the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of the Debenture shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such
trust money and all liability of the Company as trustee thereof shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in an Authorized Newspaper in each Place of Payment, notice
that such money remains unclaimed and that after a date specified therein,
which shall not be
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less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 5.4 EXISTENCE.
Subject to Article XII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 5.5 STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate signed by its principal executive officer, principal financial
officer or principal accounting officer stating whether or not to the best
knowledge of the signer thereof the Company is in default in the performance
and observance of any of the terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder), and if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
The Company shall file with the Trustee, within five Business Days
after becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action the
Company is taking or proposes to take with respect thereto.
SECTION 5.6 LIMITATION ON DIVIDENDS AND OTHER PAYMENTS.
In the event that (i) an Event of Default shall have occurred and be
continuing, (ii) the Guarantor shall be in default with respect to its payment
of any obligations under the Preferred Securities Guarantee, or (iii) the
Company shall have given notice of its election to defer payments of interest
on Debentures pursuant to Section 2.3(c) and any Extended Interest Payment
Period shall be continuing, then, in each case, the Company shall not--
(x) declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with
respect to, any of its capital stock (other than (A) purchases or
acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee
benefit plans, (B) as a result of a reclassification of capital stock
of the Company or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of capital
stock of the Company, or (C) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock of the Company or the
security being converted or exchanged), or
(y) the Company shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company which rank
pari passu with or junior to the Debentures; or
(z) make any guarantee payments with respect to the foregoing
(other than pursuant to the Preferred Securities Guarantee).
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Notwithstanding the foregoing, the Company will be permitted, in any
event, to make dividend, redemption, liquidation and guarantee payments on
capital stock of the Company, and interest, principal, redemption and guarantee
payments on debt securities issued by the Company ranking pari passu with or
junior to the Debentures, where the payment is made by way of securities
(including capital stock) that rank junior to the securities on which such
payment is being made.
SECTION 5.7 COVENANTS AS TO THE INSIGNIA TRUST.
For so long as the Trust Securities remain outstanding, the Company
will (a) maintain 100% direct or indirect ownership of the Common Securities of
the Insignia Trust; provided, however, that any permitted successor of the
Company hereunder may succeed to the Company's ownership of the Common
Securities; (b) not to cause, as sponsor of the Insignia Trust, or to permit,
as holder of the Common Securities, termination, dissolution or winding up of
the Insignia Trust, except in connection with a distribution of the Debentures
as provided in the Declaration and in connection with certain mergers,
consolidations or amalgamations as provided for in the Declaration, (c) use its
reasonable efforts, consistent with the terms of the Declaration, to cause the
Insignia Trust (i) to remain a statutory business trust, except in connection
with a distribution of Debentures to the holders of Trust Securities in
liquidation of the Insignia Trust, the redemption of all of the Trust
Securities of the Insignia Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, and (ii) to continue to be
classified as a grantor trust for United States federal income tax purposes;
and (d) to use its reasonable efforts to cause each holder of Trust Securities
to be treated as owning an undivided beneficial interest in the Debentures.
SECTION 5.8 PAYMENT OF EXPENSES OF THE INSIGNIA TRUST.
In connection with the offering, sale and issuance of the Debentures
to the Property Trustee and the sale of the Trust Securities by the Insignia
Trust, the Company shall:
(a) pay for all costs, fees and expenses relating to the offering,
sale and issuance of the Debentures;
(b) be responsible for and pay for all obligations (other than with
respect to the Trust Securities) of the Insignia Trust, pay for all costs and
expenses of the Insignia Trust (including, but not limited to, costs and
expenses relating to the organization of the Insignia Trust, the offering, sale
and issuance of the Trust Securities (including commissions to the Initial
Purchasers in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating to the
operation of the Insignia Trust, including without limitation, costs and
expenses of accountants, attorneys, statistical or bookkeeping services,
expenses for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses incurred
in connection with the acquisition, financing, and disposition of Insignia
Trust assets); and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Insignia Trust or its assets), and all liabilities, costs
and expenses with respect to such taxes, of the Insignia Trust.
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SECTION 5.9 REGISTRATION RIGHTS.
The holders of the Convertible Preferred Securities, the Debentures,
the Preferred Securities Guarantee, and the shares of Common Stock of the
Company issuable upon conversion of the Debentures into Common Stock
(collectively, the "Registrable Securities") are entitled to the benefits of a
Registration Rights Agreement, dated as of November 1, 1996, among the Company
and the Initial Purchasers (the "Registration Rights Agreement"). Pursuant to
the Registration Rights Agreement, the Company has agreed for the benefit of
the holders of Registrable Securities that (i) it will, at its cost, within 90
days after the date of original issuance of the Debentures, file a shelf
registration statement (the "Shelf Registration Statement") with the Commission
with respect to the resales of the Registrable Securities, (ii) it will use all
reasonable efforts to cause such Shelf Registration Statement to be declared
effective by the Commission as promptly as practicable and in no event later
than 180 days after the date of original issuance of the Debentures, and (iii)
the Company will use all reasonable efforts to maintain such Shelf Registration
Statement continuously effective under the Securities Act until three years
after the latest date of original issuance of the Debentures or such earlier
date as is provided in the Registration Rights Agreement (the "Effectiveness
Period").
If (i) on or prior to 90 days following the date of original issuance
of the Registrable Debentures, a Shelf Registration Statement has not been
filed with the Commission, or (ii) on or prior to the 180th day following the
date of original issuance of the Debentures, such Shelf Registration Statement
is not declared effective (each, a "Registration Default"), additional interest
("Liquidated Damages") will accrue on the Debentures from and including the day
following such Registration Default. Liquidated Damages will be paid quarterly
in arrears, with the first quarterly payment due on the first interest or
distribution payment date, as applicable, following the date on which such
Liquidated Damages begin to accrue, and will accrue at a rate per annum equal
to an additional one-quarter of one percent (0.25%) of the principal amount, to
and including the 90th day following such Registration Default and one-half of
one percent (0.50%) thereof from and after the 91st day following such
Registration Default. Upon (x) the filing of the Shelf Registration Statement
after the 90-day period described in clause (i) above or (y) the effectiveness
of the Shelf Registration Statement after the 180-day period described in
clause (ii) above, the interest rate borne by the Debentures from the date of
such filing or effectiveness, as the case may be, will be reduced to the
interest rate then in effect on the Debentures.
ARTICLE VI
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS.
As required by Section 312(a) of the Trust Indenture Act, the Company
will furnish or cause to be furnished to the Trustee:
(a) semiannually, not later than March 31 and September 30 of
each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders of the Debentures ("List of
Holders") as of a date not more than 15 days prior to the delivery
thereof, provided, however, that the Company shall not be obligated to
provide such List of Holders at any time the List of Holders does not
differ from the most recent List of Holders given to the Trustee by or
on behalf of the Company, and in the absence of the provision of any
such List of Holders to the Trustee, then notice shall be deemed to
have been given to the Trustee that the List of Holders has not
changed since the most recent List of Holders; and
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(b) at any other time, within 30 days of receipt by the Company
of a written request for a List of Holders as of a date no more than
15 days before such List of Holders is given to the Trustee.
The Trustee shall preserve, in as current a form as is reasonably practicable,
all information contained in Lists of Holders given to it or which it receives
in the capacity as Debenture Registrar or Paying Agent (if acting in such
capacity), provided, however, that the Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
SECTION 6.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Debentures (i) contained in
the most recent list furnished to the Trustee pursuant to Section 6.1, (ii)
received by the Trustee in its capacity as Debenture Registrar and (iii) filed
with it within the two preceding years pursuant to Section 313(c)(2) of the
Trust Indenture Act. The Trustee may (A) destroy any list furnished to it as
provided in Section 312(a) of the Trust Indenture Act upon receipt of a new
list so furnished, (B) destroy any information received by it as Paying Agent
(if so acting) hereunder upon delivering to itself as Trustee, not earlier than
March 20 or September 20 of each year, a list containing the names and
addresses of the Holders of Debentures obtained from such information since the
delivery of the next previous list, if any, (C) destroy any list delivered to
itself as Trustee which was compiled from information received by it as Paying
Agent (if so acting) hereunder upon the receipt of a new list so delivered and
(D) destroy not earlier than two years after filing, any information filed with
it pursuant to Section 313(c)(2) of the Trust Indenture Act.
(b) If three or more Holders of Debentures (herein referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Debenture for a period of
at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other Holders
of Debentures with respect to their rights under this Indenture or under the
Debentures and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee
shall, within five Business Days after the receipt of such application, at its
election, either (i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with Section 6.2(a), or (ii) inform
such applicants as to the approximate number of Holders of Debentures whose
names and addresses appear in the information preserved at the time by the
Trustee in accordance with Section 6.2(a), and as to the approximate cost of
mailing to such Holders the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of Debentures whose name and address appears in
the information preserved at the time by the Trustee in accordance with Section
6.2(a) a copy of the form of proxy or other communication which is specified in
such request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment of the
reasonable expenses of mailing, unless within five days after such tender the
Trustee shall mail to such applicants and file with the Commission, together
with a copy of the material to be mailed, a written statement to the effect
that, in the opinion of the Trustee, such mailing would be contrary to the best
interests of the Holders of Debentures or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in
the written statement so filed, shall enter an order refusing to sustain any of
such objections or if after the entry of an order sustaining one or more of
such objections, the Commission shall
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find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee
shall mail copies of such material to all such Holders of Debentures with
reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.
(c) Every Holder of Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of any such information as to the names and addresses of the
Holders of Debentures in accordance with Section 6.2(b), regardless of the
source from which such information was derived and that the Trustee shall not
be held accountable by reason of mailing any material pursuant to a request
made under Section 6.2(b).
SECTION 6.3 REPORTS BY TRUSTEE.
The Trustee shall in each year transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act in the manner provided pursuant thereto.
If required by Section 313(a) of the Trust Indenture Act, the Trustee shall,
within 60 days after each May 15 following the date of this Indenture deliver
to Holders a brief report, dated as of such May 15, which complies with the
provisions of Section 313(a).
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Debentures are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when any Debentures are listed on any stock
exchange.
SECTION 6.4 REPORTS BY COMPANY.
The Company shall:
(a) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) which the
Company may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act; or, if the Company
is not required to file information, documents or reports pursuant to
either of such Sections, then it shall file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from
time to time by the Commission, such of the supplementary and
periodic information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports required to be
filed with respect to compliance by the Company with the conditions
and covenants of this Indenture as may be required from time to time
by such rules and regulations; and
(c) transmit to all Holders, in the manner and to the extent
provided in Section 313(c) of the Trust Indenture Act, within 30 days
after the filing thereof with the Trustee, such summaries of any
information, documents and reports required to be filed by the
Company pursuant to
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paragraphs (a) and (b) of this Section as may be required by rules
and regulations prescribed from time to time by the Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VII
DEFAULTS AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT.
"Event of Default," wherever used herein with respect to the
Debentures, means any one or more of the following events (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest upon any Debenture,
including any Compounded Interest, Additional Interest, or Liquidated
Damages in respect thereof, when it becomes due and payable, and
continuance of such default for a period of 30 days (whether or not
such payment is prohibited by the subordination provisions set forth
in Article IV hereof); provided, however, that a valid extension of
an interest payment period by the Company in accordance with the
terms of this Indenture shall not constitute a default in the payment
of interest (including any Additional Payments) for this purpose; or
(b) default in the payment of the principal of (or premium, if
any, on) any Debenture as and when the same shall become due and
payable whether at maturity, upon redemption, by declaration or
otherwise (whether or not such payment is prohibited by the
subordination provisions set forth in Article IV hereof); or
(c) failure by the Company to issue and deliver Common Stock or
other property issuable upon an election to convert such Debentures
pursuant to Article XV (whether or not such delivery is prohibited by
the subordination provisions set forth in Article IV); or
(d) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with), and continuance of such
default or breach for a period of 90 days after there has been given,
by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Debentures, a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default"), hereunder; or
(e) the entry by a court having jurisdiction in the premises of
a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a custodian, receiver, liquidation, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of their property, or ordering the winding up or
liquidation of its affairs, and
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the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(f) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect
of the Company in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidation, assignee, trustee,
sequestrator or similar official of the Company or of any substantial
part of their property, or the making by it of an assignment for the
benefit of creditors; or
(g) the voluntary or involuntary dissolution, winding-up, or
termination of the Insignia Trust except in connection with (i) the
distribution of Debentures to holders of Trust Securities in
liquidation of their interest in the Insignia Trust, (ii) the
redemption of all of the outstanding Trust Securities of the Insignia
Trust or (iii) certain mergers, consolidations or amalgamations, each
as permitted by the Declaration.
SECTION 7.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default described in clause (a), (b), (c), (d), or (g)
of Section 7.1 above occurs and is continuing, then, and in each and every
such case, unless the principal of all of the Debentures shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Debentures then Outstanding hereunder, by
notice in writing to the Company (and to the Trustee if given by the Holders
of Debentures), may declare the entire principal of all Debentures and all
interest accrued thereon (including any Additional Payments) and any other
amounts payable hereunder to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable.
If an Event of Default described in clause (e) or (f) of Section 7.1
occurs, the entire principal of all Debentures and all interest accrued
thereon (including any Additional Payments) and any other amounts payable
hereunder shall become immediately due and payable, without any declaration or
other act on the part of the Trustee or the Holders.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as provided in this Article hereinafter, the Holders of a majority
in aggregate principal amount of the Outstanding Debentures, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay--
(A) all overdue interest (including any Additional Interest,
Compounded Interest and Liquidated Damages) on all Debentures,
(B) the principal of any Debentures which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Debentures, and
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(C) all sums paid or advanced by the Trustee and each
predecessor Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee and each
predecessor Trustee and their respective agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Debentures that have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 7.13.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
In case the Trustee shall have proceeded to enforce any right with
respect to Debentures under this Indenture and such proceedings shall have
been discontinued or abandoned because of such rescission or annulment or for
any other reason or shall have been determined adversely to the Trustee, then
and in every such case the Company and the Trustee shall be restored
respectively to their former positions and rights hereunder, and all rights,
remedies and powers of the Company and the Trustee shall continue as though no
such proceedings had been taken.
SECTION 7.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.
The Company covenants that if,
(a) default is made in the payment of any interest (including
Additional Payments) on any Debenture when such interest becomes due
and payable and such default continues for a period of 30 days
(provided that a valid extension of the interest payment period by
the Company pursuant to this Indenture shall not constitute a default
in the payment of any interest (including Additional Payments) for
this purpose), or
(b) default is made in the payment of the principal of any
Debenture at Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of Debentures, the whole amount then due and payable on Debentures
for principal and interest (including any Additional Payments) and, to the
extent that payment of such interest shall be legally enforceable under
applicable law, interest on any overdue principal and on any overdue interest,
at the rate per annum stated in the Debentures; and in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel under Section 8.6.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid, may
(in addition to exercising any other rights pursuant to Section 7.2) prosecute
such proceeding to judgment or final decree and may enforce the same against
the Company or any other obligor upon the Debentures and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon the Debentures, wherever
situated.
If an Event of Default with respect to Debentures occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Debentures by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, either at law or in equity or in bankruptcy or
otherwise whether for the specific enforcement of any
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covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 7.4 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Debentures or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of Debentures
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of overdue principal or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal
and any premium and interest owing and unpaid in respect of the
Debentures and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel)
and of the Holders of Debentures allowed in such judicial proceeding,
and
(b) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby
authorized by each Holder of Debentures to make such payments to the
Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders of Debentures, to pay
to the Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 8.6.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Debenture any plan of reorganization, arrangement, adjustment or composition
affecting the Debentures or the rights of any Holder thereof or to authorize
the Trustee to vote in respect of the claim of any Holder of Debentures in any
such proceeding.
SECTION 7.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
DEBENTURES.
All rights of action and claims under this Indenture or under any of
the terms established with respect to the Debentures may be prosecuted and
enforced by the Trustee without the possession of any of the Debentures or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel due under Section 8.6, be for the
ratable benefit of the Holders of the Debentures in respect of which such
judgment has been recovered.
SECTION 7.6 APPLICATION OF MONEY COLLECTED.
Subject to the provisions of Article IV, any money collected by the
Trustee pursuant to this Article with respect to Debentures shall be applied
in the following order, at the date or dates fixed by the Trustee and, in case
of the distribution of such money on account of principal or any premium or
interest, upon presentation of the Debentures, and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
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FIRST: To the payment of all amounts due the Trustee under Section
8.6;
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest (including any Additional Payments) on the
Debentures in respect of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable
on Debentures for principal and any premium and interest, respectively.
SECTION 7.7 LIMITATION ON SUITS.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless;
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(c) such Holder or Holders shall have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Debentures;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other of such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all of such Holders.
SECTION 7.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL AND INTEREST AND TO CONVERT.
Notwithstanding any other provision in this Indenture, but subject to
Article IV of this Indenture, the Holder of any Debenture shall have the
right, which is absolute and unconditional, to receive payment of the
principal of and (subject to Section 2.3) interest (including any Additional
Payments) on the Debentures on the Stated Maturity or Maturities expressed in
the Debentures (or, in the case of redemption, on the Redemption Date) and to
convert such Debenture into Common Stock in accordance with Article XV and to
institute suit for the enforcement of any such payment and right to convert,
and such rights shall not be impaired without the consent of such Holder.
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SECTION 7.9 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder of Debentures has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the
Trustee and the Holders of Debentures shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 7.10 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures in the last
paragraph of Section 2.6, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders of Debentures is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 7.11 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Debenture
to exercise any right or remedy accruing upon any Event of Default occurring
and continuing as aforesaid shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Subject to the provisions of Section 7.7, every right and remedy
given by this Article or by law to the Trustee or to the Holders of Debentures
may be exercised from time to time, and as often as may be deemed expedient,
by the Trustee or by the Holders of Debentures, as the case may be.
SECTION 7.12 CONTROL BY HOLDERS OF DEBENTURES.
The Holders of a majority in aggregate principal amount of the
Outstanding Debentures shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Debentures, provided that,
(a) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(b) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction.
SECTION 7.13 WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Debentures may on behalf of the Holders of all the Debentures
waive any past default hereunder with respect to the Debentures and its
consequences, except a default
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(a) in the payment of the principal of (or premium, if any) or
any interest (including Additional Interest, Compounded Interest and
Liquidated Damages) on any Debenture as and when the same shall
become due by the terms of Debentures otherwise than by acceleration
(unless such default has been cured and sums sufficient to pay all
matured installments of interest and principal and any premium has
been deposited with the Trustee (in accordance with Section 7.2)), or
(b) in the covenants contained in Sections 5.6 and 5.7, or
(c) in respect of a covenant or provision hereof which under
Article XI cannot be modified or amended without the consent of the
Holder of each Outstanding Debenture affected; provided, however,
that if the Debentures are held by the Insignia Trust or a trustee of
such trust, such waiver or modification to such waiver shall not be
effective until the holders of a majority in liquidation preference
of Trust Securities of the Insignia Trust shall have consented to
such waiver or modification to such waiver; provided further, that if
the consent of the Holder of each Outstanding Debenture is required,
such waiver shall not be effective until each holder of the Trust
Securities of the Insignia Trust shall have consented to such waiver.
Upon any such waiver, the default covered thereby shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture and the Company, the Trustee and
the holders of the Debentures shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 7.14 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Debenture
by such Holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for
any action taken, suffered or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section shall not
apply to any suit instituted by the Company, to any suit instituted by the
Trustee, to any suit instituted by any Holder or group of Holders holding in
the aggregate more than 10% in principal amount of the Outstanding Debentures,
or to any suit instituted by any Holder of any Debenture for the enforcement
of the payment of the principal of or any premium or interest (including
Additional Payments) on such Debenture on or after the Stated Maturity or
Maturities expressed in such Debenture (or, in the case of redemption, on or
after the Redemption Date) or the right to convert such Debenture in
accordance with the provisions of this Indenture.
SECTION 7.15 WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
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SECTION 7.16 ENFORCEMENT BY HOLDERS OF CONVERTIBLE PREFERRED
SECURITIES.
(a) Notwithstanding anything to the contrary contained herein, if the
Property Trustee as Holder of the Debentures fails to enforce its rights under
the Debentures (other than rights arising from an Event of Default described
in Section 7.16(b)) for a period of 30 days after any holder of Convertible
Preferred Securities shall have made a written request to the Property Trustee
to enforce such rights, such holder of Convertible Preferred Securities may,
to the fullest extent permitted by law, institute a Direct Action to enforce
the Property Trustee's rights as Holder of the Debentures, without first
instituting any legal proceeding against the Property Trustee or any other
Person.
(b) Notwithstanding anything to the contrary contained herein, if an
Event of Default has occurred and is continuing and such Event of Default is
attributable to the failure of the Company to pay interest (including any
Additional Payments) or principal on the Debentures on the date such interest
or principal is otherwise payable, the Company acknowledges that, in such
event, a holder of Convertible Preferred Securities may institute a Direct
Action for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such Holder, on or after the
respective due date specified in the Debentures, without first instituting any
legal proceeding against the Property Trustee or any other Person.
(c) Notwithstanding any payment made to such holder of Convertible
Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of or interest on the
Debentures held by the Insignia Trust or the Property Trustee and the Company
shall be subrogated to the rights of the holder of such Convertible Preferred
Securities with respect to payments on the Convertible Preferred Securities to
the extent of any payments made by the Company to such holder in any Direct
Action.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING
DEFAULT; PRIOR TO DEFAULT.
With respect to the Holders of Debentures issued hereunder, the
Trustee, prior to the occurrence of an Event of Default with respect to the
Debentures and after the curing or waiving of all Events of Default which may
have occurred with respect to Debentures, undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture. In case
an Event of Default with respect to the Debentures has occurred (which has not
been cured or waived), the Trustee shall exercise with respect to the
Debentures such of the rights and powers vested in it by this Indenture, and
shall use the same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs. No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default with respect
to the Debentures and after the curing or waiving of all such Events
of Default with respect to the Debentures which may have occurred:
(i) the duties and obligations of the Trustee with respect
to the Debentures shall be determined solely by the express
provisions of this Indenture, and the Trustee shall
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not be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any statements, certificates or opinions furnished
to the Trustee and conforming to the requirements of this
Indenture; but in the case of any such statements, certificates
or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not, on
their face, they conform to the requirements of this Indenture,
but shall otherwise have no duty to determine the accuracy or
completeness thereof or whether the same comply with applicable
laws;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers
of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders pursuant to Section 7.12 relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the
provisions of this Section 8.1
No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
SECTION 8.2 CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
or as otherwise expressly provided herein and any resolution of the
Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
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(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Debentures pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction; provided, however, that nothing contained in
this Section 8.2(e) shall be taken to relieve the Trustee, upon the
occurrence of an Event of Default, from its obligations expressly
created hereunder to exercise the rights and powers vested in it by
this Indenture;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
SECTION 8.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF DEBENTURES.
The recitals contained herein and in the Debentures (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of any Debentures. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Debentures or the proceeds thereof.
SECTION 8.4 MAY HOLD DEBENTURES.
The Trustee, any Authenticating Agent, any Paying Agent, any
Debenture Registrar or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Debentures and, subject
to Sections 8.9 and 8.11, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Debenture Registrar or such other agent.
SECTION 8.5 MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed in writing with the Company.
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SECTION 8.6 COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(a) to pay to the Trustee or any predecessor Trustee from time
to time such compensation as shall be agreed in writing between the
Company and the Trustee for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustee or any predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Indenture
(including the compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim,
liability or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 7.1(e) or Section 7.1(f), the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar laws.
The provisions of this Section 8.6 shall survive the termination of
this Indenture.
SECTION 8.7 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 8.8.
(b) The Trustee may resign at any time with respect to the Debentures
by giving written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 8.8 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Debentures.
(c) The Trustee may be removed at any time with respect to the
Debentures by Act of the Holders of a majority in principal amount of the
Outstanding Debentures delivered to the Trustee and to the Company. If the
instrument of acceptance by a successor Trustee required by Section 8.8 shall
not have been delivered to the Trustee within 30 days after the delivery of
such Act of removal, the Trustee being removed may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Debentures.
(d) If at any time:
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(1) the Trustee shall fail to comply with Section 310(b) of
the Trust Indenture Act after written request therefor by the
Company or by any Holder of a Debenture who has been a bona fide
Holder of a Debenture for at least six months, or
(2) the Trustee shall cease to be eligible under Section
8.10 and Section 310(a) of the Trust Indenture Act and shall
fail to resign after written request therefor by the Company or
by any Holder of a Debenture who has been a bona fide Holder of
a Debenture for at least six months, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer
shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Company by a Board
Resolution may remove the Trustee with respect to all
Debentures, or (ii) subject to Section 7.14 any Holder of a
Debenture who has been a bona fide Holder of a Debenture for at
least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee with respect to all Debentures
and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
with respect to the Debentures, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the
Debentures (it being understood that at any time there shall be only one
Trustee with respect to the Debentures) and shall comply with the applicable
requirements of Section 8.8. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor
Trustee with respect to the Debentures shall be appointed by Act of the
Holders of a majority in principal amount of Outstanding Debentures delivered
to the Company and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment in accordance with
the applicable requirements of Section 8.8, become the successor Trustee with
respect to the Debentures and to that extent supersede the successor Trustee
appointed by the Company. If no successor Trustee with respect to the
Debentures shall have been so appointed by the Company or the Holders of
Debentures and accepted appointment in the manner required by Section 8.8, any
Holder of a Debenture who has been a bona fide Holder of a Debenture for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Debentures.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Debentures and each appointment of
a successor Trustee with respect to the Debentures in the manner provided in
Section 16.4. Each notice shall include the name of the successor Trustee with
respect to the Debentures and the address of its Corporate Trust Office.
SECTION 8.8 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Debentures, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but on the
written request of the Company or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers
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and trusts of the retiring Trustee and shall duly assign, transfer and deliver
to such successor Trustee all property and money held by such retiring Trustee
hereunder.
(b) Upon the written request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers
and trusts referred to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 8.9 DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject
to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 8.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall be at all times a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereunder specified in this
Article.
SECTION 8.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Debentures), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 8.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Debentures shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may
adopt such authentication and deliver the Debentures so authenticated with the
same effect as if such successor Trustee had itself authenticated such
Debentures.
SECTION 8.13 APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with
respect to Debentures which shall be authorized to act on behalf of the
Trustee to authenticate Debentures issued upon original issue or
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upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 2.6, and Debentures so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication
and delivery of Debentures by the Trustee or the Trustee's certificate of
authentication such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating
Agent. Each Authenticating Agent shall be acceptable to the Company. If such
Authenticating Agent publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, such Authenticating Agent
shall resign immediately in the manner and with the effect specified in this
Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to the corporate agency
or corporate trust business of such Authenticating Agent, shall continue to be
an Authenticating Agent provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall promptly give notice
of such appointment to all Holders of Debentures pursuant to Section 16.4. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to Debentures is made pursuant to this
Section, the Debentures may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
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This is one of the Debentures referred to in the within-mentioned
Indenture.
First Union National Bank of South Carolina
By
-----------------------------------------
Authenticating Agent
By
-----------------------------------------
Authorized Signatory
If all of the Debentures may not be originally issued at one time,
and if the Company has an Affiliate eligible to be appointed as an
Authenticating Agent hereunder or the Trustee does not have an office capable
of authenticating Debentures upon original issuance located in a Place of
Payment where the Company wishes to have Debentures authenticated upon
original issuance, the Trustee, if so requested by the Company in writing
(which writing need not comply with Section 16.1 and need not be accompanied
by an Opinion of Counsel), shall appoint in accordance with this Section an
Authenticating Agent (which if so requested by the Company, shall be such
Affiliate of the Company) having an office in a Place of Payment designated by
the Company with respect to the Debentures.
SECTION 8.14. NOTICE OF DEFAULTS.
If a Default occurs hereunder with respect to Debentures, the Trustee
shall give the Holders of Debentures notice of such Default as and to the
extent provided by the Trust Indenture Act; provided, however, that in the
case of any Default of the character specified in Section 7.1(d), no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof.
ARTICLE IX
ACTS OF HOLDERS
SECTION 9.1 ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by agent
duly appointed in writing. Except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent or proxy, or of the
holding by any Person of a Debenture, shall be sufficient for any purpose of
this Indenture and (subject to Section 8.1) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument
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or writing acknowledged to such notary public or other such officer the
execution thereof. Where such execution is by a signer acting in a capacity
other than the signer's individual capacity, such certificate or affidavit
shall also constitute sufficient proof of the signer's authority. The fact and
date of the execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other manner which
the Trustee reasonably deems sufficient.
(c) The principal amount of Debentures held by any Person, and the
date of holding the same, shall be proved by the Debenture Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of a Debenture shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Debenture.
(e) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining
the Holders of Outstanding Debentures entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action, or to vote on any action, authorized or permitted to be given or taken
by Holders. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such action, or, in the case of
any such vote, prior to such vote, the record date for any such action or vote
shall be the 30th day (or, if later, the date of the most recent list of
Holders required to be provided pursuant to Section 6.1) prior to such first
solicitation or vote, as the case may be. With regard to any record date, only
the Holders on such date (or their duly designated proxies) shall be entitled
to give or take, or vote on, the relevant action. With regard to any action
that may be given or taken hereunder only by Holders of a requisite principal
amount of Outstanding Debentures (or their duly appointed agents) and for
which a record date is set pursuant to this paragraph, the Company may, at its
option, set an expiration date after which no such action purported to be
given or taken by any Holder shall be effective hereunder unless given or
taken on or prior to such expiration date by Holders of the requisite
principal amount of Outstanding Debentures on such record date (or their duly
appointed agents). On or prior to any expiration date set pursuant to this
paragraph, the Company may, on one or more occasions at its option, extend
such date to any later date. Nothing in this paragraph shall prevent any
Holder (or any duly appointed agent thereof) from giving or taking, after any
expiration date, any action identical to, or, at any time, contrary to or
different from, any action given or taken, or purported to have been given or
taken, hereunder by a Holder on or prior to such date, in which event the
Company may set a record date in respect thereof pursuant to this clause.
ARTICLE X
MEETINGS OF HOLDERS OF DEBENTURES
SECTION 10.1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Debentures may be called at any time and from
time to time pursuant to this Article to make, give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be made, given or taken by Holders of
Debentures.
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SECTION 10.2 CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders of
Debentures for any purpose specified in Section 10.1, to be held at such time
and at such place in the Borough of Manhattan, The City of New York as the
Trustee shall determine. Notice of every meeting of Holders of Debentures
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be given, in the manner
provided in Section 16.4, not less than 21 nor more than 180 days prior to the
date fixed for the meeting (or, in the case of a meeting of Holders with
respect to Debentures all or part of which are represented by a Book-Entry
Debenture, not less than 20 nor more than 40 days).
(b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 25% in principal amount of the Outstanding
Debentures shall have requested the Trustee to call a meeting of the Holders
of Debentures for any purpose specified in Section 10.1, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have mailed the first notice of such
meeting within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the Company
or the Holders of Debentures in the amount above specified, as the case may
be, may determine the time and the place in the Borough of Manhattan, The City
of New York for such meeting and may call such meeting for such purposes by
giving notice thereof as provided in Subsection (a) of this Section.
SECTION 10.3 PERSONS ENTITLED TO VOTE AT MEETINGS.
Upon the calling of a meeting of Holders with respect to the
Debentures all or part of which are represented by a Book-Entry Debenture, a
record date shall be established for determining Holders of Outstanding
Debentures entitled to vote at such meeting, which record date shall be the
close of business on the day the notice of the meeting of Holders is given in
accordance with Section 10.2. The Holders on such record date, and their
designated proxies, and only such Persons, shall be entitled to vote at any
meeting of Holders. To be entitled to vote at any meeting of Holders a Person
shall (a) be a Holder of one or more Debentures or (b) be a Person appointed
by an instrument in writing as proxy by a Holder of one or more Debentures;
provided, however, that in the case of any meeting of Holders with respect to
the Debentures all or part of which are represented by a Book-Entry Debenture,
only Holders, or their designated proxies, of record on the record date
established pursuant to Section 10.3 hereof shall be entitled to vote at such
meeting. The only Persons who shall be entitled to be present or to speak at
any meeting of Holders shall be the Persons entitled to vote at such meeting
and their counsel and any representatives of the Trustee and its counsel and
any representatives of the Company and its counsel.
SECTION 10.4 QUORUM; ACTION.
The Persons entitled to vote a majority in principal amount of the
Outstanding Debentures shall constitute a quorum for a meeting of Holders of
Debentures; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which this Indenture expressly
provides may be given by the Holders of a specified percentage in aggregate
principal amount of Outstanding Debentures that is less or greater than a
majority in principal amount of the Outstanding Debentures, then, with respect
to such action (and only such action) the Persons entitled to vote such lesser
or greater percentage in principal amount of the Outstanding Debentures shall
constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request
of Holders of Debentures, be dissolved. In any other case the meeting may be
adjourned for a period of not less than 10 days as determined by the chairman
of the meeting prior to the adjournment of such meeting. In the absence of a
quorum at any such adjourned meeting, such adjourned meeting may be further
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adjourned for a period of not less than 10 days as determined by the chairman
of the meeting prior to the adjournment of such adjourned meeting. Notice of
the reconvening of any adjourned meeting shall be given as provided in Section
10.2(a), except that such notice need be given only once not less than five
days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage, as provided above, of the principal amount of the outstanding
Debentures which shall constitute a quorum. Notwithstanding the foregoing, no
meeting of Holders with respect to Debentures which is represented in whole or
in part by a Book-Entry Debenture, shall be adjourned to a date more than 90
days after the record date for such meeting unless the Trustee shall send out
a new notice of meeting and establish, in accordance with Section 10.3, a new
record date for Holders entitled to vote at such meeting.
Except as limited by the proviso to Section 11.2, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum
is present as aforesaid may be adopted by the affirmative vote of the Holders
of a majority in principal amount of the Outstanding Debentures; provided,
however, that, except as limited by the proviso to Section 11.2, any
resolution with respect to any consent or waiver which this Indenture
expressly provides may be given by the Holders of a specified percentage in
aggregate principal amount of Outstanding Debentures that is less or greater
than a majority in principal amount of the Outstanding Debentures may be
adopted at a meeting or an adjourned meeting duly convened and at which a
quorum is present as aforesaid only by the affirmative vote of the Holders of
such specified percentage in principal amount of the Outstanding Debentures.
Any resolution passed or decision taken at any meeting of Holders of
Debentures duly held in accordance with this Section shall be binding on all
the Holders of Debentures, whether or not present or represented at the
meeting.
SECTION 10.5 DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT
OF MEETINGS.
(a) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Holders of Debentures in regard to proof of the holding of
Debentures and of the appointment of proxies and in regard to the appointment
and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of
Debentures shall be proved in the manner specified in Section 9.1 and the
appointment of any proxy shall be proved in the manner specified in Section
9.1 or by having the signature of the person executing the proxy witnessed or
guaranteed by any trust company, bank or banker authorized by Section 9.1.
Such regulations may provide that written instruments appointing proxies,
regular on their face, may be presumed valid and genuine without the proof
specified in Section 9.1 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called
by the Company or by Holders of Debentures as provided in Section 10.2(b), in
which case the Company or the Holders of Debentures calling the meeting, as
the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected
by vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Debentures represented at the meeting.
(c) At any meeting each Holder of a Debenture or proxy shall be
entitled to one vote for each $ 50 principal amount of the Outstanding
Debentures held or represented by him; provided, however, that no vote shall
be cast or counted at any meeting in respect of any Debenture challenged as
not Outstanding
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and ruled by the chairman of the meeting to be not Outstanding. The chairman
of the meeting shall have no right to vote, except as a Holder of a Debenture
or proxy.
(d) Any meeting of Holders of Debentures duly called pursuant to
Section 10.2 at which a quorum is present may be adjourned from time to time
by Persons entitled to vote a majority in principal amount of the Outstanding
Debentures represented at the meeting; and the meeting may be held as so
adjourned without further notice.
SECTION 10.6 COUNTING VOTES AND RECORDING ACTION OF MEETINGS.
The vote upon any resolution submitted to any meeting of Holders of
Debentures shall be by written ballots on which shall be subscribed the
signatures of the Holders of Debentures or of their representatives by proxy
and the principal amounts and serial numbers of the Outstanding Debentures
held or represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary
of the meeting their verified written reports in duplicate of all votes cast
at the meeting. A record, at least in duplicate, of the proceedings of each
meeting of Holders of Debentures shall be prepared by the secretary of the
meeting and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one
or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was given as provided in
Section 10.2 and, if applicable, Section 10.4. Each copy shall be signed and
verified by the affidavits of the chairman and secretary of the meeting and
one such copy shall be delivered to the Company, and another to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting. Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders of Debentures, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time
to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Debentures; or
(b) to add to the covenants of the Company for the benefit of the
Holders of Debentures or to surrender any right or power herein
conferred upon the Company; or
(c) to add any additional Events of Default; or
(d) to evidence and provide for the acceptance of appointment
thereunder by a successor Trustee with respect to the Debentures and
to add to or change any of the provisions of this Indenture as shall
be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee, pursuant to the
requirements of Section 8.8; or
(e) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article XV; or
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(f) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action
shall not, in the opinion of the Board of Directors, adversely affect
the interests of the Holders of Debentures in any material respect;
or
(g) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if
any, to be placed on the Debentures, and all other matters required
pursuant to Section 2.5 or otherwise necessary, desirable, or
appropriate in connection with the issuance of Debentures to holders
of Trust Securities in the event of a distribution of Debentures by
the Insignia Trust if a Special Event occurs and is continuing.
SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debentures affected by such
supplemental indenture, by Act of said Holders delivered to the Company and
the Trustee, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the
rights of the Holders of Debentures under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of each Holder
of each Outstanding Debenture,
(a) change the Stated Maturity of the principal of, or (except
as contemplated by Section 2.3(c)) any installment of interest
(including any Additional Payments) on, any Debenture, or reduce the
principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the coin or
currency in which any Debenture or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date); or
(b) reduce the percentage in principal amount of the Outstanding
Debentures, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required
for any waiver of certain defaults hereunder and their consequences
provided for in this Indenture, or reduce the requirements of Section
10.4 for quorum or voting; or
(c) modify any of the provisions of this Section or Section
7.13, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding
Debenture; or
(d) make any change that adversely affects the right to convert
any Debenture into Common Stock as provided in Article XV or decrease
the conversion rate or increase the conversion price of any such
Debenture, or
(e) make any change in Article IV that adversely affects the
rights of any Holders of Outstanding Debentures.
So long as any Convertible Preferred Securities are outstanding, no
supplemental indenture shall, without the consent of each holder of
Convertible Preferred Securities, amend Section 7.16 so as to eliminate or
materially impair the right of such holders to institute Direct Actions in the
circumstances set forth therein.
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It shall not be necessary for any Act of Holders of Debentures under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 11.3 EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 8.2) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 11.4 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Debentures theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 11.5 CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act of 1939, as amended, in
effect on such date.
SECTION 11.6 REFERENCE IN DEBENTURES TO SUPPLEMENTAL INDENTURES.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Debentures so
modified as to conform, in the opinion of the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Debentures.
ARTICLE XII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
The Company shall not merge or consolidate with any other corporation
or sell or convey all or substantially all of its assets to any Person, unless
(a) either the Company shall be the continuing corporation, or the successor
corporation (if other than the Company) shall be a corporation organized under
the laws of the United States of America or any State thereof and shall
expressly assume the due and punctual payment of the principal of and interest
on all the Debentures, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed or observed by the Company, by supplemental
indenture satisfactory to the Trustee, executed and delivered to the Trustee
by such corporation, and (b) the Company or such successor corporation, as
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the case may be, shall not, immediately after such merger or consolidation, or
such sale or conveyance, be in default in the performance of any such covenant
or condition.
SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED.
In case of any such consolidation, merger, sale or conveyance, and
following such an assumption by the successor corporation, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein. Such successor corporation may cause to
be signed, and may issue either in its own name or in the name of the Company
prior to such succession any or all of the Debentures issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation instead of the
Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
securities which previously shall have been signed and delivered by the
officers of the Company, to the Trustee for authentication, and any Debentures
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All of the Debentures so issued
shall in all respects have the same legal rank and benefit under this
Indenture as the Debentures theretofore or thereafter issued in accordance
with the terms or this Indenture as though all of such Debentures had been
issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance
by way of lease) the Company or any successor corporation which shall
theretofore have become such in the manner described in this Article shall be
discharged from all obligations and covenants under this Indenture and the
Debentures and may be liquidated and dissolved.
SECTION 12.3 OPINION OF COUNSEL TO TRUSTEE.
The Trustee may receive an Opinion of Counsel, prepared in accordance
with Section 16.1, as conclusive evidence that any such consolidation, merger,
sale, lease or conveyance, and any such assumption, and any such liquidation
or dissolution, complies with the applicable provisions of this Indenture.
ARTICLE XIII
SATISFACTION AND DISCHARGE
SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Debentures herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when:
(a) either
(1) all Debentures theretofore authenticated and delivered
(other than (i) Debentures which have been destroyed, lost or
stolen and which have been replaced or paid
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as provided in Section 2.6, and (ii) Debentures for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided
in Section 5.3) have been delivered to the Trustee for
cancellation; or
(2) all such Debentures not theretofore delivered to the
Trustee for cancellation,
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose, an amount sufficient to pay and
discharge the entire indebtedness on such Debentures not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and any interest (including any
Additional Payments) to the date of such deposit (in the case of
Debentures which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 8.6, the obligations
of the Company to any Authenticating Agent under SECTION 8.13 and, if money
shall have been deposited with the Trustee pursuant to clause (a)(2) of this
Section, the obligations of the Trustee under Section 13.2 and the last
paragraph of Section 5.3 shall survive.
SECTION 13.2 APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 5.3, all
money deposited with the Trustee pursuant to Section 13.1 shall be held in
trust and applied by it, in accordance with the provisions of the Debentures
and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal (and premium,
if any) and any interest for whose payment such money has been deposited with
the Trustee.
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ARTICLE XIV
IMMUNITY OF INCORPORATORS, SHAREHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES.
No recourse under or upon any obligation, covenant or agreement of
this Indenture, or of a Debenture, or for any claim based thereon or otherwise
in respect thereof, shall be had against any incorporator, shareholder,
officer, director or employee, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the
Company, whether by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations of the Company, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
shareholders, officers, directors or employees, as such, of the Company or of
any successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations or
agreements contained in this Indenture or in any of the Debentures or implied
therefrom; and that any and all such personal liability, either at common law
or in equity or by constitution or statute, of, and any and all such rights
and claims against, every such incorporator, shareholder, officer, director or
employee, as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations or agreements contained
in this Indenture or in any of the Debentures or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for,
the execution of this Indenture and the issue of such Debentures.
All payments of interest and other amounts, if any, to be made by the
Trustee hereunder shall be made only from the money deposited with the Trustee
and only to the extent that the Trustee shall have sufficient income or
proceeds to make such payments in accordance with the terms of this Indenture,
and each Holder thereof, by its acceptance of a Debenture, agrees that it will
look solely to the income and proceeds deposited with the Trustee to the
extent available for distribution to such Holder as provided and that the
Trustee, its incorporators, shareholders, officers, directors and employees
are not personally liable in any manner to such Holder for any amounts payable
or any liability under this Indenture or any Debenture.
ARTICLE XV
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 15.1 CONVERSION RIGHTS.
Subject to and upon compliance with the provisions of this Article
XV, the Debentures are convertible, at the option of the Holder, at any time
beginning December 31, 1996 and prior to the close of business on September
30, 2016 (or, in the case of Debentures called for redemption, prior to the
close of business on the Business Day prior to the corresponding Redemption
Date) into fully paid and nonassessable shares of Common Stock at an initial
conversion rate of 1.8868 shares of Common Stock for each $50 in aggregate
principal amount of Debentures (equal to a Conversion Price of $26.50 per
share of Common Stock), subject to adjustment as described in this Article XV.
A Holder of Debentures may convert any portion of the principal amount of the
Debentures into that number of fully paid and nonassessable shares of Common
Stock obtained by dividing the principal amount of the Debentures to be
converted by such Conversion Price. All calculations under this Article XV
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be.
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SECTION 15.2 CONVERSION PROCEDURES.
(a) In order to convert all or a portion of the Debentures,
the Holder thereof shall deliver to the Conversion Agent an irrevocable Notice
of Conversion setting forth the principal amount of Debentures to be
converted, together with the name or names, if other than the Holder, in which
the shares of Common Stock should be issued upon conversion and, if such
Debentures are definitive Debentures, surrender to the Conversion Agent the
Debentures to be converted, duly endorsed or assigned to the Company or in
blank. In addition, a holder of Convertible Preferred Securities may exercise
its right under the Declaration to convert such Convertible Preferred
Securities into Common Stock by delivering to the Conversion Agent an
irrevocable Notice of Conversion setting forth the information called for by
the preceding sentence and directing the Conversion Agent (i) to exchange such
Convertible Preferred Securities for a portion of the Debentures held by the
Insignia Trust (at an exchange rate of $50 principal amount of Debentures for
each Convertible Preferred Security) and (ii) to immediately convert such
Debentures, on behalf of such holder, into Common Stock pursuant to this
Article XV and, if such Convertible Preferred Securities are in definitive
form, surrendering such Convertible Preferred Securities, duly endorsed or
assigned to the Insignia Trust or in blank. So long as any Convertible
Preferred Securities are outstanding, the Insignia Trust shall not convert any
Debentures except pursuant to a Notice of Conversion delivered to the
Conversion Agent by a holder of Convertible Preferred Securities.
If a Notice of Conversion is delivered on or after a Regular
Record Date and prior to the subsequent Interest Payment Date, the Holder on
the Regular Record Date will be entitled to receive the interest payable on
the subsequent Interest Payment Date on the portion of Debentures to be
converted notwithstanding the conversion thereof prior to such Interest
Payment Date. Except as otherwise provided in the immediately preceding
sentence, in the case of any Debenture which is converted, interest whose
payment date is after the date of conversion of such Debenture shall not be
payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest
(including Additional Payments) on the Debentures being converted, which shall
be deemed to be paid in full. Each conversion shall be deemed to have been
effected immediately prior to the close of business on the day on which the
Notice of Conversion was received (the "Conversion Date") by the Conversion
Agent from the Holder or from a holder of the Convertible Preferred Securities
effecting a conversion thereof pursuant to its conversion rights under the
Declaration, as the case may be.
The Person or Persons entitled to receive Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock as of the Conversion Date. As promptly
as practicable on or after the Conversion Date, the Company shall issue and
deliver at the office of the Conversion Agent, unless otherwise directed by
the Holder in the Notice of Conversion, a certificate or certificates for the
number of full shares of Common Stock issuable upon such conversion, together
with the cash payment, if any, in lieu of any fraction of any share to the
Person or Persons entitled to receive the same. The Conversion Agent shall
deliver such certificate or certificates to such Person or Persons.
(b) The Company's delivery upon conversion 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) shall
be deemed to satisfy the Company's obligation to pay the principal amount at
Maturity of the portion of Debentures so converted and any unpaid interest
(including Additional Payments) accrued on such Debentures at the time of such
conversion.
(c) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the Closing Price of such fractional interest on the date on which the
Debentures
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were duly surrendered to the Conversion Agent for conversion, or, if such day
is not a Trading Day, on the next Trading Day, and the Conversion Agent in
turn will make such payment, if any, to the Holder of the Debentures or the
holder of the Convertible Preferred Securities so converted.
(d) In the event of the conversion of any Debenture in part
only, a new Debenture or Debentures for the unconverted portion thereof will
be issued in the name of the Holder thereof upon the cancellation thereof in
accordance with this Section 15.2.
(e) In effecting the conversion transactions described in
this Section 15.2, the Conversion Agent is acting as agent of the holders of
Convertible Preferred Securities (in the exchange of Convertible Preferred
Securities for Debentures) and as agent of the Holders of Debentures (in the
conversion of Debentures into Common Stock), as the case may be. The
Conversion Agent is hereby authorized (i) to exchange Debentures held by the
Insignia Trust from time to time for Convertible Preferred Securities in
connection with the conversion of such Convertible Preferred Securities in
accordance with this Article XV and (ii) to convert all or a portion of the
Debentures into Common Stock and thereupon to deliver such shares of Common
Stock in accordance with the provisions of this Article XV and to deliver to
the Insignia Trust a new Debenture or Debentures for any resulting unconverted
principal amount.
SECTION 15.3 CONVERSION PRICE ADJUSTMENTS.
The Conversion Price shall be adjusted from time to time as follows:
(a) In case the Company shall, while any of the Debentures
are outstanding, (i) pay a dividend or make a distribution with respect to
Common Stock in shares of Common Stock, (ii) subdivide outstanding shares of
Common Stock, (iii) combine outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of shares of Common Stock
any shares of capital stock of the Company, the conversion privilege and the
Conversion Price for the Debentures shall be adjusted so that the Holder of
any Debenture thereafter surrendered for conversion shall be entitled to
receive the number of shares of capital stock of the Company which such Holder
would have owned immediately following such action had such Debenture been
converted immediately prior thereto. An adjustment made pursuant to this
Subsection (a) shall become effective immediately after the record date in the
case of a dividend or other distribution and shall become effective
immediately after the effective date in case of a subdivision, combination or
reclassification (or immediately after the record date if a record date shall
have been established for such event). If, as a result of an adjustment made
pursuant to this Subsection (a), the Holder of any Debenture thereafter
surrendered for conversion shall become entitled to receive shares of two or
more classes or series of capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a Board
Resolution filed with the Trustee) shall determine the allocation of the
adjusted Conversion Price for the Debentures between or among shares of such
classes or series of capital stock.
(b) In case the Company shall, while any of the Debentures
are outstanding, issue rights or warrants to all holders of Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a
price per share less than the current market price per share of Common Stock
(as determined pursuant to Subsection (g) below) on the record date mentioned
below, the Conversion Price for the Debentures shall be adjusted so that the
Conversion Price shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so
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offered for subscription or purchase would purchase at such current market
price, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not so delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect if such date
fixed for the determination of stockholders entitled to receive such rights or
warrants had not been fixed. For the purposes of this subsection, the number
of shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company. The Company shall not issue any rights or
warrants in respect of shares of Common Stock held in the treasury of the
Company. In case any rights or warrants referred to in this subsection in
respect of which an adjustment shall have been made shall expire unexercised
within 45 days after the same shall have been distributed or issued by the
Company, the Conversion Price shall be readjusted at the time of such
expiration to the Conversion Price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.
(c) Subject to the last sentence of this subsection (c), in
case the Company shall, by dividend or otherwise, distribute to all holders of
Common Stock evidences of its indebtedness, shares of any class or series of
capital stock, cash or assets or rights or warrants to subscribe for or
purchase any of its securities (excluding any rights or warrants referred to
in subsection (b), any dividend or distribution paid exclusively in cash and
any dividend or distribution referred to in subsection (a) of this Section
15.3), the Conversion Price shall be reduced so that the Conversion Price
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this subsection (c) by a fraction of which the numerator shall
be the current market price per share (determined as provided in subsection
(g)) of the Common Stock on the date fixed for the payment of such
distribution (the "Reference Date") less the fair market value (as determined
in good faith by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors), on the
Reference Date, of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed or of such subscription rights
or warrants applicable to one share of Common Stock and of which the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of
business on the day following the Reference Date; provided, however, that in
the event the numerator shall be less than one, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder of Debentures
shall have the right to receive upon conversion the amount of such
distribution such Holder would have received had such Holder converted each
Debenture immediately prior to the Reference Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not occurred. If the Board of Directors
determines the fair market value of any distribution for purposes of this
subsection (c) by reference to the actual or when issued trading market for
any securities comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing the current
market price per share of Common Stock (determined as provided in subsection
(g)). For purposes of this subsection (c), any dividend or distribution that
includes shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (i) a dividend
or distribution of the evidences of indebtedness, shares of capital stock,
cash or assets other than such shares of Common Stock or such rights or
warrants (making any Conversion Price reduction required by this subsection
(c)) immediately followed by (ii) a dividend or distribution of such shares of
Common Stock or such rights or warrants (making any further Conversion Price
reduction required by subsection (a) or (b)), except (A) the Reference Date of
such dividend or distribution as defined in this subsection (c) shall be
substituted as (1) "the record date in the case of a dividend or other
distribution," and (2) "the record date for the determination of stockholders
entitled to receive such rights or warrants" and (3) "the date fixed for
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such determination" within the meaning of subsections (a) and (b) and (B) any
shares of Common Stock included in such dividend or distribution shall not be
deemed outstanding for purposes of computing any adjustment of the Conversion
Price in subsection (a).
(d) In case the Company shall pay or make a dividend or
other distribution on the Common Stock exclusively in cash (excluding any
quarterly cash dividend on Common Stock to the extent that the aggregate cash
dividend per share of Common Stock in any quarter does not exceed the greater
of (i) the amount per share of Common Stock of the immediately preceding
quarterly dividend on Common Stock to the extent such preceding quarterly
dividend did not require an adjustment of the Conversion Price pursuant to
this subsection (d) (as adjusted to reflect subdivisions or combinations of
Common Stock), and (ii) 3.125% of the current market price per share
determined as provided in subsection (g), and excluding any dividend or
distribution in connection with the liquidation, dissolution or winding-up of
the Company), the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this subsection (d) by a fraction of which the numerator shall
be the current market price per share (determined as provided in subsection
(g)) of Common Stock on the date fixed for the payment of such distribution
less the amount of cash so distributed (and not excluded as provided above)
applicable to one share of Common Stock and of which the denominator shall be
such current market price per share of the Common Stock (determined as
provided in subsection (g)), such reduction to become effective immediately
prior to the opening of business on the day following the date fixed for the
payment of such distribution; provided, however, that in the event the portion
of the cash so distributed applicable to one share of Common Stock is equal to
or greater than the current market price per share (as defined in subsection
(g)) of Common Stock on the record date mentioned above, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Holder of
Debentures shall have the right to receive upon conversion the amount of cash
such Holder would have received had such Holder converted each Debenture
immediately prior to the record date for the distribution of the cash. If an
adjustment is required to be made pursuant to this subsection (d) as a result
of a distribution that is a quarterly dividend, such adjustment shall be based
upon the amount by which such distribution exceeds the amount of the quarterly
cash dividend permitted to be excluded as provided above. If an adjustment is
required to be made pursuant to this subsection (d) as a result of a
distribution that is not a quarterly dividend, such adjustment shall be based
upon the full amount of the distribution. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
record date had not been fixed.
(e) In case a tender or exchange offer (other than an
odd-lot offer) made by the Company or any Subsidiary of the Company for all or
any portion of the Common Stock shall expire and such tender or exchange offer
shall involve the payment by the Company or such Subsidiary of consideration
per share of Common Stock having a fair market value (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) at the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it shall have been amended) that exceeds the Closing Price
of the Common Stock on the Trading Day next succeeding the Expiration Time,
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the effectiveness of the Conversion Price reduction contemplated by this
subsection (e) by a fraction (which shall not be greater than one) of which
the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the Closing Price of Common Stock on the Trading Day next succeeding the
Expiration Time and of which the denominator shall be the sum of (i) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as
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of the Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (ii) the product of the
number of shares of the Common Stock outstanding (less any Purchased Shares)
at the Expiration Time and the Closing Price of Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become
retroactively effective immediately prior to the opening of business on the
day following the Expiration Time.
(f) In case a tender or exchange offer made by a Person
other than the Company or any Subsidiary of the Company for all or any portion
of the Common Stock shall expire and such tender or exchange offer shall
involve the payment by a Person other than the Company or any Subsidiary of
the Company of consideration per share of Common Stock having a fair market
value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors) at the applicable Expiration Time that exceeds the Closing Price
of the Common Stock on the Trading Day next succeeding the applicable
Expiration Time in which as of the closing date of the offer the Board of
Directors of the Company is not recommending rejection of the offer, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the effectiveness of the Conversion Price reduction contemplated by this
subsection (f) by a fraction (which shall not be greater than one) of which
the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the Closing Price of the Common Stock on the Trading Day next succeeding
the Expiration Time and of which the denominator shall be the sum of (i) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified
in the terms of the tender or exchange offer) of all shares validly tendered
or exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
and (ii) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the Closing Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction to become retroactively effective immediately prior to the opening
of business on the day following the Expiration Time; provided, however, that
the reduction of the Conversion Price contemplated by this subsection (f) will
only be made if the tender offer or exchange offer is made for an amount which
increases that Person's ownership of Common Stock to more than 25% of the
total shares of Common Stock outstanding and provided, further, that the
reduction of the Conversion Price contemplated by this subsection (f) will not
be made if as of the close of the offer, the offering documents with respect
to such offer disclose a plan or an intention to cause the Company to engage
in a consolidation or merger of the Company or a sale of all or substantially
all of the assets of the Company.
(g) For the purpose of any computation under subsections
(b), (c) or (d), the current market price per share of Common Stock on any
date in question shall be deemed to be the average of the daily Closing Prices
for the ten Trading Day period ending on the earlier of the day in question
and, if applicable, the day before the "ex" date with respect to the issuance
or distribution requiring such computation; provided, however, that if more
than one event occurs that would require an adjustment pursuant to subsections
(a) through (f), inclusive, the Board of Directors may make such adjustments
to the Closing Prices during such ten Trading Day period as it deems
appropriate to effectuate the intent of the adjustments in this Section 15.3,
in which case any such determination by the Board of Directors shall be set
forth in a Board Resolution and shall be conclusive. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular
way on the New York Stock Exchange or on such successor securities exchange as
the Common Stock may be listed or in the relevant market from which the
Closing Prices were obtained without the right to receive such issuance or
distribution, and (2) when used with respect to any tender or exchange offer,
means the first date on which the Common Stock trades regular way on such
securities exchange or in such market after the Expiration Time of such offer.
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(h) The Company may make such reductions in the Conversion
Price, in addition to those required by subsections (a) through (f), as the
Board of Directors considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase 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. The Company from time
to time may elect to reduce the Conversion Price by any amount for any period
of time if the period is at least 20 days, the reduction is irrevocable during
the period, and the Board of Directors shall have made a determination that
such reduction would be in the best interest of the Company, which
determination shall be conclusive. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Company shall mail to Holders of
record of the Debentures a notice of the reduction at least 15 days prior to
the date the reduced Conversion Price takes effect, and such notice shall
state the reduced Conversion Price and the period it will be in effect.
(i) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Conversion Price; provided, however, that any adjustments which by reason
of this subsection (i) are not required to be made shall be carried forward
and taken into account in determining whether any subsequent adjustment shall
be required.
(j) If any action would require adjustment of the Conversion
Price pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value to the Holder of Debentures.
SECTION 15.4 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
(a) In the event that the Company shall be a party to any
transaction, (including without limitation (i) any recapitalization or
reclassification of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination of the Common Stock), (ii) any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger
which does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company), (iii) any
sale or transfer of all or substantially all of the assets of the Company or
(iv) any compulsory share exchange), pursuant to which either shares of Common
Stock shall be converted into the right to receive other securities, cash or
other property, or, in the case of a sale or transfer of all or substantially
all of the assets of the Company, the holders of Common Stock shall be
entitled to receive other securities, cash or other property, then lawful
provision shall be made as part of the terms of such transaction whereby the
Holder of each Debenture then outstanding shall have the right thereafter to
convert such Debenture only into the kind and amount of the securities, cash
or other property that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange by a
holder of the number of shares of Common Stock issuable upon conversion of
such Debenture immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, subject to funds
being legally available for such purpose under applicable law at the time of
such conversion.
(b) The company or the Person formed by such consolidation
or resulting from such merger or which acquired such assets or which acquires
the Company's shares, as the case may be, shall make provision in its
certificate or articles of incorporation or other constituent document to
establish such right. Such certificate or articles of incorporation or other
constituent document shall provide for adjustments which, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article XV. The
above provisions shall similarly apply to successive transactions of the
foregoing type.
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SECTION 15.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Chief Financial Officer or the
Treasurer of the Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed with the Trustee and the
transfer agent for the Convertible Preferred Securities and the Debentures;
and
(b) a notice stating the Conversion Price has been adjusted
and setting forth the adjusted Conversion Price shall as soon as practicable
be mailed by the Company to all record holders of Convertible Preferred
Securities and the Debentures at their last addresses as they appear upon the
transfer books of the Insignia Trust and the Company.
SECTION 15.6 PRIOR NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) a dividend payable in cash that would not require an
adjustment pursuant to Section 15.3(c) or (d) or (ii) authorize a tender or
exchange offer that would require an adjustment pursuant to Section 15.3(e);
(b) the Company shall authorize the granting to all holders
of Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value),
or of any consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company shall be required, or of the
sale or transfer of all or substantially all of the assets of the Company or
of any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; then the Company shall (i) if any Convertible
Preferred Securities are outstanding, cause to be filed with the Trustee and
the transfer agent for the Convertible Preferred Securities, and shall cause
to be mailed to the holders of record of the Convertible Preferred Securities,
at their last addresses as they shall appear upon the transfer books of the
Insignia Trust or (ii) cause to be filed with the Trustee and mailed to all
Holders at their last addresses as they shall appear in the Debenture
Register, at least 15 days prior to the applicable record or effective date
hereinafter specified, a notice stating (A) the date on which a record (if
any) is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (B) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities,
cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or
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winding up (but no failure to mail such notice or any defect therein or in the
mailing thereof shall affect the validity of the corporate action required to
be specified in such notice).
SECTION 15.7 DIVIDEND OR INTEREST REINVESTMENT PLANS.
Notwithstanding the foregoing provisions, the issuance of any shares
of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment
of additional optional amounts in shares of Common Stock under any such plan,
and the issuance of any shares of Common Stock or options or rights to
purchase such shares pursuant to any employee benefit plan or program of the
Company or pursuant to any option, warrant, right or exercisable, exchangeable
or convertible security outstanding as of the date hereof, shall not be deemed
to constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment
provisions described above applies. There shall also be no adjustment of the
Conversion Price in case of the issuance of any stock (or securities
convertible into or exchangeable for stock) of the Company except as
specifically described in this Article XV.
SECTION 15.8 CERTAIN ADDITIONAL RIGHTS.
In case the Company shall, by dividend or otherwise, declare or make
a distribution on the Common Stock referred to in Section 15.3 (c) or 15.3(d)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 15.3(d)), the Holder of Debentures, upon the
conversion thereof subsequent to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution and
prior to the effectiveness of the Conversion Price adjustment in respect of
such distribution, shall also be entitled to receive for each share of Common
Stock into which Debentures are converted, the portion of the shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of capital stock,
cash and assets so distributed applicable to one share of Common Stock;
provided, however, that, at the election of the Company (whose election shall
be evidenced by a resolution of the Board of Directors) with respect to all
Holders so converting, the Company may, in lieu of distributing to such Holder
any portion of such distribution not consisting of cash or securities of the
Company, pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors). If any conversion of Debentures described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
holders of Common Stock which the Holder of Debentures so converted is
entitled to receive in accordance with the immediately preceding sentence, the
Company may elect (such election to be evidenced by a Board Resolution) to
distribute to such Holder a due bill for the shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock, cash or assets
to which such Holder is so entitled, provided, that such due bill (a) meets
any applicable requirements of the principal national securities exchange or
other market on which the Common Stock is then traded and (b) requires payment
or delivery of such shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets no later than the date
of payment or delivery thereof to holders of shares of Common Stock receiving
such distribution.
SECTION 15.9 RESERVATION OF SHARES OF COMMON STOCK.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock or treasury
shares, for the purpose of effecting the conversion of Debentures, the full
number of shares of Common Stock then issuable upon the conversion of all
outstanding Debentures.
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SECTION 15.10 PAYMENT OF CERTAIN TAXES UPON CONVERSION.
The Company will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
Debentures pursuant hereto. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that of the Holder
of the Debenture or Debentures to be converted, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to
the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
SECTION 15.11 NONASSESSABILITY.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Debentures will upon issue in accordance with the
terms hereof be duly and validly issued and fully paid and nonassessable.
SECTION 15.12 DUTIES OF TRUSTEE REGARDING CONVERSION.
Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of Debentures that is
convertible into Common Stock to determine whether any facts exist which may
require any adjustment of the Conversion Price, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed, whether herein or in any supplemental indenture (or whether a
supplemental indenture need be entered into), any resolutions of the Board of
Directors or written instrument executed by one or more officers of the
Company provided to be employed in making the same. Neither the Trustee nor
any Conversion Agent shall be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities or property, which may at any time be issued or delivered upon the
conversion of any Debentures and neither the Trustee nor any Conversion Agent
makes any representation with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to issue,
transfer or deliver any shares of Common Stock or stock certificates or other
securities or property upon the surrender of any Debenture for the purpose of
conversion or to comply with any of the covenants of the Company contained in
this Article XV or in the applicable supplemental indenture, resolutions of
the Board of Directors or written instrument executed by one or more duly
authorized officers of the Company. All Debentures delivered for conversion
shall be delivered to the Trustee to be canceled by or at the direction of the
Trustee, which shall dispose of the same as provided in Section 2.9.
SECTION 15.13 REPAYMENT OF CERTAIN FUNDS UPON CONVERSION.
Any funds which at any time shall have been deposited by the Company
or on its behalf with the Trustee or any other paying agent for the purpose of
paying the principal of, and premium, if any, and interest, if any, on any of
the Debentures and which shall not be required for such purposes because of
the conversion of such Debentures as provided in this Article XV shall after
such conversion be repaid to the Company by the Trustee upon the Company's
written request.
SECTION 15.14 RESTRICTIONS ON COMMON STOCK ISSUABLE UPON CONVERSION.
(a) Shares of Common Stock to be issued upon conversion of a Debenture
in respect of Restricted Preferred Securities (as defined in the Declaration)
shall bear such restrictive legends as the Company may provide in accordance
with applicable law. Neither the Trustee nor the Conversion Agent
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shall have any responsibility for the inclusion or content of any such
restrictive legend on such Common Stock; provided, however, that the Trustee
or the Conversion Agent shall have provided to the Company or to the Company's
transfer agent for such Common Stock, prior to or concurrently with a request
to the Company to deliver to such Conversion Agent certificates for such
Common Stock, written notice that the Convertible Preferred Securities
delivered for conversion are Restricted Preferred Securities.
(b) If shares of Common Stock to be issued upon conversion of a
Debenture in respect of Restricted Preferred Securities are to be registered
in a name other than that of the Holder of such Convertible Preferred
Security, then the Person in whose name such shares of Common Stock are to be
registered must deliver to the Conversion Agent a certificate satisfactory to
the Company and signed by such Person, as to compliance with the restrictions
on transfer applicable to such Convertible Preferred Security. Neither the
Trustee nor any Conversion Agent or Registrar shall be required to register in
a name other than that of the Holder shares of Common Stock or such
Certificate Preferred Securities issued upon conversion of any such
Convertible Preferred Security in respect of such Convertible Preferred
Securities not so accompanied by a properly completed certificate.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
SECTION 16.1 COMPLIANCE CERTIFICATES AND OPINIONS.
Except as otherwise expressly provided by this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or
opinion need be furnished. Every certificate or opinion by or on behalf of the
Company with respect to compliance with a condition or covenant provided for
in this Indenture, except for certificates provided for in Section 5.5, shall
include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
the individual has made such examination or investigation as is
necessary to enable such individual to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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SECTION 16.2 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of
the Company stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 16.3 NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this Indenture,
to the attention of its Treasurer, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 16.4 NOTICE TO HOLDERS OF DEBENTURES; WAIVER.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Debentures of any event, such notice shall
be sufficiently given to Holders of Debentures if in writing and mailed,
first-class postage prepaid, to each Holder of a Debenture affected by such
event, at the address of such Holder as it appears in the Debenture Register,
not earlier than the earliest date, and not later than the latest date,
prescribed for the giving of such notice.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice to
Holders of Debentures by mail, then such notification as shall be made with
the approval of the Trustee shall constitute sufficient notice to such Holders
for every purpose hereunder. In any case where notice to Holders of Debentures
is given by mail, neither the failure to mail
67
<PAGE>
such notice, nor any defect in any notice mailed to any particular Holder of a
Debenture shall affect the sufficiency of such notice with respect to other
Holders of Debentures.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice.
Waivers of notice by Holders of Debentures shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 16.5 LANGUAGE OF NOTICES, ETC.
Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of
the country of publication.
SECTION 16.6 CONFLICT WITH REQUIRED PROVISIONS OF THE TRUST
INDENTURE ACT.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included in this Indenture by any of Sections 310 to 318,
inclusive, of the Trust Indenture Act, such required provision shall control.
SECTION 16.7 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 16.8 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 16.9 SEPARABILITY CLAUSE.
In case any provision in this Indenture or the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 16.10 BENEFITS OF INDENTURE.
Nothing in this Indenture or the Debentures, express or implied,
shall give to any Person, other than the parties hereto, any Authenticating
Agent, any Paying Agent, any Debentures Registrar and their successors
hereunder and the Holders of Debentures, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
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<PAGE>
SECTION 16.11 GOVERNING LAW.
This Indenture and the Debentures shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
SECTION 16.12 LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, sinking
fund payment date, Maturity or Stated Maturity of a Debenture shall not be a
Business Day at any Place of Payment, then (notwithstanding any other
provision of this Indenture or of the Debentures other than a provision in
Debentures which specifically states that such provision shall apply in lieu
of this Section) payment of interest or principal (and premium, if any) need
not be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and
effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity, provided that no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, to such succeeding Business Day.
SECTION 16.13 EXECUTION IN COUNTERPARTS.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
INSIGNIA FINANCIAL GROUP, INC.
By /s/ Ronald Uretta
------------------------------------------
Name: Ronald Uretta
Title: Chief Operating Officer and Treasurer
FIRST UNION NATIONAL BANK OF SOUTH CAROLINA
By /s/ Rosemary M. Greco
------------------------------------------
Name: Rosemary M. Greco
Title: Vice President
70
<PAGE>
EXHIBIT A
---------
[(FORM OF FACE OF CONVERTIBLE DEBENTURE)]
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT THE FOLLOWING --
This Debenture is a Book Entry Debenture within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This Debenture is exchangeable for Convertible
Debentures registered in the name of a Person other than the Depositary or its
nominee only in the limited circumstances described in the Indenture, and no
transfer of this Debenture (other than a transfer of this Debenture as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in such limited circumstances.
Unless this Debenture is presented by an authorized representative of The
Depositary Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depositary Trust Company and
any payment hereon is made to Cede & Co. or such other person or entity so
named by The Depositary Trust Company, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER
OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES, AND
AGREES FOR THE BENEFIT OF INSIGNIA FINANCIAL GROUP, INC. (THE "COMPANY") THAT:
(I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF
<PAGE>
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE
OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS
SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES FOR SUCH
ISSUER (i) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE, AND (ii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
CUSIP No._____________________
Certificate No._______________ $_____________
INSIGNIA FINANCIAL GROUP, INC.
6 1/2% CONVERTIBLE SUBORDINATED DEBENTURE
Insignia Financial Group, Inc., a Delaware corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ______________ or
registered assigns, the principal sum of _____________ Dollars ($___________)
{ADD FOR GLOBAL DEBENTURE OR DEBENTURE ORIGINALLY ISSUED TO PROPERTY TRUSTEE:
(as increased or decreased as indicated on Schedule A attached hereto)} on
September 30, 2016, and to pay interest on said principal sum from November 1,
1996, or from the most recent interest payment date (each such date, an
"Interest Payment Date") to which interest has been paid or duly provided for,
quarterly (subject to deferral as set forth herein) in arrears on March 31,
June 30, September 30, and December 31 of each year commencing December 31,
1996, at the rate of 6 1/2% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and premium, if any, and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at
the same rate per annum compounded quarterly. The amount of interest payable
on any Interest Payment Date shall be computed on the basis of
2
<PAGE>
a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on this Convertible Debenture is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture
(referred to on the reverse hereof), be paid to the person in whose name this
Convertible Debenture (or one or more Predecessor Debentures, as defined in
said Indenture) is registered on the Regular Record Date for such interest
installment which shall be the close of business on the date 15 days prior to
such Interest Payment Date unless otherwise provided in the Indenture. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered Holders on such Regular Record
Date and may be paid to the Person in whose name this Convertible Debenture
(or one or more Predecessor Debentures) is registered at the close of business
on a special record date to be fixed by the Trustee (referred to on the
reverse hereof) for the payment of such defaulted interest, notice whereof
shall be given to the registered Holders of the Convertible Debentures not
less than 10 days prior to such special record date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Convertible Debentures may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. The principal of (and premium, if any) and the
interest on this Convertible Debenture shall be payable at the office or
agency of the Trustee maintained for that purpose in any coin or currency of
the United States of America that at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the
registered Holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long as the Holder of this Convertible
Debenture is the Property Trustee, the payment of the principal of (and
premium, if any) and interest on this Convertible Debenture will be made at
such place and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Convertible Debenture is, to the
extent provided in the Indenture, subordinate and junior in right of payment
to the prior payment in full of all Senior Indebtedness, and this Convertible
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Convertible Debenture, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives
all notice of the acceptance of the subordination provisions contained herein
and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder
upon said provisions.
This Convertible Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
3
<PAGE>
The provisions of this Convertible Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
INSIGNIA FINANCIAL GROUP, INC.
By:__________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
4
<PAGE>
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned
Indenture.
Dated:
--------------------------------
First Union National Bank of South Carolina, as Trustee
By:
----------------------------------
Authorized Signatory
[FORM OF REVERSE OF DEBENTURE]
This Convertible Debenture is one of a duly authorized series of
Debentures of the Company (herein sometimes referred to as the "Debentures"),
specified in the Indenture, all issued or to be issued in one series under and
pursuant to an Indenture (the "Indenture") dated as of November 1, 1996, duly
executed and delivered between the Company and First Union National Bank of
South Carolina, as Trustee (the "Trustee"), to which Indenture (which term
shall include, collectively, any and all indentures supplemental thereto)
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of Convertible Debentures. This series of Debentures
is limited in aggregate principal amount as specified in the Indenture and is
herein sometimes referred to as the "Convertible Debentures."
Upon the occurrence and during the continuation of a Tax Event, in
certain circumstances, this Convertible Debenture may become due and payable,
in whole or in part, at the principal amount together with any interest
accrued thereon, including Additional Payments (the "Special Redemption
Price"). The Special Redemption Price shall be paid prior to 12:00 noon, New
York time, on the date of such redemption or at such earlier time as the
Company determines.
In addition, the Company shall have the right to redeem this Convertible
Debenture at the option of the Company, upon not less than 20 nor more than 60
days' notice, in whole or in part at any time on or after November 1, 1999 (an
"Optional Redemption") at the following prices (expressed as percentages of
the principal amount of the Convertible Debentures) (the "Optional Redemption
Price") together with accrued and unpaid interest, including Additional
Payments, if any, to, but excluding, the redemption date, if redeemed during
the 12-month period beginning September 30 (or, in the case of 1999, the
period beginning November 1):
5
<PAGE>
Year Redemption Price
---- ----------------
1999 102.0%
2000 101.0%
2001 and thereafter 100.0%
If Convertible Debentures are redeemed on any March 31, June 30,
September 30, or December 31, accrued and unpaid interest shall be payable to
Holders of record on the relevant record date, instead of the Holders on the
Redemption Date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of any of the Convertible
Debentures will be used to redeem Convertible Preferred Securities.
If the Convertible Debentures are only partially redeemed by the Company
pursuant to an Optional Redemption, the Convertible Debentures will be
redeemed on a pro rata basis, in portions equal to $50 (or any integral
multiple thereof) of the principal amount of Convertible Debentures.
In the event of redemption of this Convertible Debenture in part only, a
new Convertible Debenture or Convertible Debentures for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Convertible Debentures
and all interest accrued thereon (including any Additional Payments) may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Debentures affected at the time outstanding, as
defined in the Indenture, to execute supplemental indentures for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures; provided,
however, that no such supplemental indenture shall (a) change the fixed
maturity of any Debenture, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, or make any change that adversely
affects the right to convert any Debenture or make any change in the
subordination provisions that adversely affects the rights of any Holders of
any Debenture, without the consent of the Holder of each Debenture so
affected, or (b) reduce the aforesaid percentage of Debentures, the Holders of
which are required to consent to any such supplemental indenture, without the
consent of the Holders of each Debenture then outstanding and affected
thereby. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Debentures at the time
outstanding, on behalf of all of the Holders of the Debentures, to waive any
past default in the performance of any of the covenants contained in the
Indenture, or established pursuant to the Indenture, and its consequences,
except a default in the payment of the principal of or premium, if any, or
interest on any Debentures or a default
6
<PAGE>
with respect to certain covenants concerning the Insignia Trust more fully set
forth in the Indenture or a default in respect of any provision in the
Indenture that cannot be modified without the consent of the Holders of all
Debentures affected thereby. Any such consent or waiver by the registered
Holder of this Convertible Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Convertible Debenture and of any Convertible
Debenture issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Convertible Debenture.
No reference herein to the Indenture and no provision of this Convertible
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Convertible Debenture at the time and
place and at the rate and in the money herein prescribed.
As long as an Event of Default shall not have occurred and be continuing
and certain other conditions have been satisfied, the Company shall have the
right at any time during the term of the Convertible Debentures and from time
to time to extend the interest payment period of such Convertible Debentures
for up to 20 consecutive quarters (an "Extended Interest Payment Period"), at
the end of which period the Company shall pay all interest (including
Additional Payments) then accrued and unpaid (together with interest thereon
at the rate specified for the Convertible Debentures to the extent that
payment of such interest is enforceable under applicable law) to the Holders
as they appear on the transfer records of the Company as of the first Regular
Record Date after the Extended Interest Payment Period. Before the termination
of any such Extended Interest Payment Period, the Company may further extend
such Extended Interest Payment Period, provided that such Extended Interest
Payment Period together with all such further extensions thereof shall not
exceed 20 consecutive quarters. At the termination of any such Extended
Interest Payment Period and upon the payment of all accrued and unpaid
interest (including all Additional Payments) then due, the Company may
commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Convertible Debenture is transferable by the registered Holder
hereof on the Debenture Register of the Company, upon surrender of this
Convertible Debenture for registration of transfer at the office or agency of
the Trustee in Columbia, South Carolina accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee
duly executed by the registered Holder hereof or his or her attorney duly
authorized in writing, and thereupon one or more new Convertible Debentures of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Convertible
Debenture, the Company, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered Holder hereof as the absolute
owner hereof (whether or not this Convertible Debenture shall be overdue and
notwithstanding any notice of ownership or
7
<PAGE>
writing hereon made by anyone other
than the Debenture Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and interest due hereon
and for all other purposes, and neither the Company nor the Trustee nor any
paying agent nor any Debenture Registrar shall be affected by any notice to
the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Convertible Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture,
against any incorporator, stockholder, officer or director, past, present or
future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issuance hereof, expressly waived and released.
The Holder of any Convertible Debenture has the right, exercisable at any
time beginning December 31, 1996 and prior to the close of business (New York
time) on September 30, 2016 (or, in the case of a Convertible Debenture called
for redemption, prior to the close of business on the Business Day prior to
the corresponding redemption date), to convert the principal amount thereof
(or any portion thereof that is an integral multiple of $50) into shares of
Common Stock at the initial conversion rate of 1.8868 shares of Common Stock
for each $50 in aggregate principal amount of Convertible Debenture
(equivalent to a Conversion Price of $26.50 per share of Common Stock),
subject to adjustment under certain circumstances.
To convert a Convertible Debenture, a Holder must (a) complete and sign a
conversion notice substantially in the form attached hereto, (b) surrender the
Convertible Debenture to the Conversion Agent, (c) furnish appropriate
endorsements or transfer documents if required by the Conversion Agent and (d)
pay any transfer or similar tax, if required. Upon conversion, no adjustment
or payment will be made for interest (including Additional Payments) or
dividends, but if any Holder surrenders a Convertible Debenture for conversion
on or after the Regular Record Date for the payment of an installment of
interest and prior to the opening of business on the next Interest Payment
Date, then, notwithstanding such conversion, the interest payable on such
Interest Payment Date will be paid to the registered Holder of such
Convertible Debenture on such Regular Record Date. The number of shares
issuable upon conversion of a Convertible Debenture is determined by dividing
the principal amount of the Convertible Debentures converted by the Conversion
Price in effect on the Conversion Date. No fractional shares will be issued
upon conversion but a cash adjustment will be made for any fractional
interest. The outstanding principal amount of any Convertible Debenture shall
be reduced by the portion of the principal amount thereof converted into
shares of Common Stock.
The Convertible Debentures are issuable only in registered form without
Coupons in denominations of $50 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth,
Convertible Debentures are exchangeable for a like aggregate principal amount
of Convertible Debentures of a different authorized denomination, as requested
by the Holder surrendering the same.
All terms used in this Convertible Debenture that are not defined herein
but are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
8
<PAGE>
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND
THE CONVERTIBLE DEBENTURES WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.
<PAGE>
[FORM OF ELECTION TO CONVERT]
ELECTION TO CONVERT
To: Insignia Financial Group, Inc.
The undersigned owner of this Convertible Debenture hereby irrevocably
exercises the option to convert this Convertible Debenture, or the portion
below designated, into Class A Common Stock of INSIGNIA FINANCIAL GROUP, INC.
in accordance with the terms of the Indenture referred to in this Convertible
Debenture, and directs that the shares issuable and deliverable upon
conversion, together with any check in payment for fractional shares, be
issued in the name of and delivered to the undersigned, unless a different
name has been indicated in the assignment below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Date: ,
------------ ----
in whole in part
---- ----
Portion of Convertible Debenture to be converted
($50 or integral multiples thereof):
$
------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Signature Guarantee: (1)
-------------------------
(1) Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Conversion Agent, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Conversion Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
10
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Convertible Debenture to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and irrevocably appoints
-----------------------------------------------------
agent to transfer this Convertible Debenture on the books of the Company. The
agent may substitute another to act for him or her.
Date:
-------------------------
Signature:
---------------------
(Sign exactly as your name appears on the other side of this Convertible
Debenture)
Signature Guarantee(2):
-----------------------------
(2) Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Debenture Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934,
as amended.
11
<PAGE>
[TO BE ATTACHED TO GLOBAL DEBENTURE OR DEBENTURE
ORIGINALLY ISSUED TO PROPERTY TRUSTEE]
SCHEDULE A
The original principal amount of this Debenture shall be $__________. The
following increases or decreases in the principal amount of this Debenture
have been made:
Signature of
authorized
Date of Amount of Amount of Principal amount of officer of
increase/ increase in decrease in Debenture following Trustee or
decrease principal amount principal amount increase/decrease Custodian
- -------- ---------------- ---------------- ----------------- ---------
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PREFERRED SECURITIES GUARANTEE AGREEMENT
INSIGNIA FINANCIAL GROUP, INC.
DATED AS OF NOVEMBER 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION.............................1
SECTION 1.1 Definitions and Interpretation.......................1
ARTICLE II TRUST INDENTURE ACT.......................................3
SECTION 2.1 Trust Indenture Act; Application.....................3
SECTION 2.2 Lists of Holders of Securities.......................4
SECTION 2.3 Reports by the Preferred Guarantee Trustee...........4
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee .....4
SECTION 2.5 Evidence of Compliance with Conditions Precedent.....4
SECTION 2.6 Events of Default; Waiver............................5
SECTION 2.7 Event of Default; Notice.............................5
SECTION 2.8 Conflicting Interests................................5
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED
GUARANTEE TRUSTEE................................................5
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee.5
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee........7
SECTION 3.3 Not Responsible for Recitals or Issuance of Preferred
Securities Guarantee....................................9
ARTICLE IV PREFERRED GUARANTEE TRUSTEE...............................9
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.............9
SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustee.......................................9
ARTICLE V GUARANTEE.................................................10
SECTION 5.1 Guarantee...........................................10
SECTION 5.2 Waiver of Notice and Demand.........................10
SECTION 5.3 Obligations Not Affected............................10
SECTION 5.4 Rights of Holders...................................11
SECTION 5.5 Guarantee of Payment................................12
SECTION 5.6 Subrogation.........................................12
SECTION 5.7 Independent Obligations.............................12
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION................12
SECTION 6.1 Limitation of Transactions..........................12
SECTION 6.2 Ranking.............................................13
ARTICLE VII TERMINATION.............................................13
SECTION 7.1 Termination.........................................13
ARTICLE VIII INDEMNIFICATION........................................13
SECTION 8.1 Exculpation.........................................13
SECTION 8.2 Indemnification.....................................14
ARTICLE IX MISCELLANEOUS...........................................14
SECTION 9.1 Successors and Assigns..............................14
SECTION 9.2 Amendments..........................................14
SECTION 9.3 Notices.............................................14
SECTION 9.4 Benefit.............................................15
SECTION 9.5 Governing Law.......................................15
- i -
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PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of November 1, 1996, is executed and
delivered by Insignia Financial Group, Inc., a Delaware corporation (the
"Guarantor"), and First Union National Bank of South Carolina, as trustee (the
"Preferred Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
Insignia Financing I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of November 1, 1996, among the trustees of the
Issuer named therein and the Guarantor, as sponsor, the Issuer is issuing
2,600,000 preferred securities (plus up to an additional 390,000 preferred
securities solely to cover overallotments in connection with the sale
thereof), having an aggregate liquidation amount of $130,000,000 (up to
$149,500,000 if the overallotment option is exercised in full), designated the
6 1/2% Trust Convertible Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth
herein.
WHEREAS, as of the date hereof the Guarantor is also executing and
delivering a guarantee agreement (the "Common Securities Guarantee") in
substantially identical terms to this Preferred Securities Guarantee for the
benefit of the holders of the Common Securities (as defined herein), except
that if an Event of Default (as defined in the Indenture), has occurred and is
continuing, the rights of holders of the Common Securities to receive payments
under the Common Securities Guarantee are subordinated to the rights of
Holders of Preferred Securities to receive Guarantee Payments under this
Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Preferred Securities
Guarantee but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) Terms defined in the Declaration as at the date of
execution of this Preferred Securities Guarantee have the same meaning when
used in this Preferred Securities Guarantee unless otherwise defined in this
Preferred Securities Guarantee;
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(c) a term defined anywhere in this Preferred Securities
Guarantee has the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee"
or "this Preferred Securities Guarantee" are to this Preferred Securities
Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this Preferred
Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Preferred Securities Guarantee, unless otherwise
defined in this Preferred Securities Guarantee or unless the context otherwise
requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Authorized Officer" of a Person means any Person that is authorized
to bind such Person; provided, however, that the Authorized Officer signing an
Officers' Certificate given pursuant to Section 314(a)(4) of the Trust
Indenture Act shall be the principal executive, financial or accounting
officer of such Person.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee
Trustee shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at 1441 Main
Street, Fourth Floor, Columbia, Carolina 29201.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Debentures" means the 6 1/2% Convertible Subordinated Debentures due
2016 issued pursuant to the Indenture.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent
not paid or made by the Issuer: (i) any accrued and unpaid Distributions that
are required to be paid on such Preferred Securities to the extent the Issuer
shall have funds available therefor, (ii) the Redemption Price, which includes
all accrued and unpaid Distributions to the date of the redemption, to the
extent the Issuer has funds available therefor, with respect to any Preferred
Securities called for redemption by the Issuer, and (iii) upon a voluntary or
involuntary termination, dissolution or winding-up of the Issuer (other than
in connection with the distribution of Debentures to the Holders in exchange
for Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of payment, to the extent the Issuer shall have funds available
therefor, and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer (in either case, the
"Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage
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of Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any Affiliate of the
Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of November 1, 1996, among
the Guarantor (the "Debenture Issuer") and First Union National Bank of South
Carolina, as trustee.
"Majority in liquidation amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by Holders of Preferred
Securities, voting separately as a class, representing 50% or more of the
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Preferred
Securities then outstanding.
"Preferred Guarantee Trustee" means First Union National Bank of
South Carolina, until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment pursuant to the terms of this
Preferred Securities Guarantee and thereafter means each such Successor
Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice president, any assistant vice president,
any assistant secretary, the treasurer, any assistant treasurer or other
officer of the Corporate Trust Office of the Preferred Guarantee Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Securities" means the Common Securities and the Preferred
Securities.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be
governed by such provisions; and
(b) If and to the extent that any provision of this
Preferred Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
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SECTION 2.2 LISTS OF HOLDERS OF SECURITIES
(a) The Guarantor shall provide, (i) semiannually, not later
than March 31 and September 30 of each year, a list, in such form as the
Preferred Guarantee Trustee may reasonably require, of the names and addresses
of the Holders of the Preferred Securities ("List of Holders") as of a date
not more than 15 days prior to the delivery thereof, and (ii) at any other
time within 30 days of receipt by the Guarantor of a written request for a
List of Holders as of a date no more than 15 days before such List of Holders
is given to the Preferred Guarantee Trustee; provided, however, that the
Guarantor shall not be obligated to provide such List of Holders at any time
the List of Holders does not differ from the most recent List of Holders given
to the Preferred Guarantee Trustee in its capacity as trustee under the
Declaration, and in the absence of the provision of any such List of Holders
to the Preferred Guarantee Trustee, then notice shall be deemed to have been
given to the Preferred Guarantee Trustee that the List of Holders has not
changed since the most recent List of Holders. The Preferred Guarantee Trustee
shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent under the Declaration (if acting in such
capacity), provided, however, that the Preferred Guarantee Trustee may destroy
any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE
Within 60 days after May 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders of the Preferred Securities such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Preferred Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any), for
transmission to Holders of Preferred Securities as may be required by such
Section 314, and the compliance certificate required by Section 314 of the
Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the Preferred
Guarantee Trustee is for informational purposes only and the Preferred
Guarantee Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information
contained therein, including the Guarantor's compliance with any of its
covenants hereunder (as to which the Preferred Guarantee Trustee is entitled
to rely exclusively on Officers' Certificates).
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) of the Trust
Indenture Act may be given in the form of an Officers' Certificate.
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SECTION 2.6 EVENTS OF DEFAULT; WAIVER
The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every
purpose of this Preferred Securities Guarantee, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE
(a) The Preferred Guarantee Trustee shall, within 90 days
after the occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Preferred Securities, notices of all
Events of Default actually known to a Responsible Officer of the Preferred
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, the Preferred Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer
of the Preferred Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Preferred
Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Preferred Guarantee Trustee
shall have received written notice or a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall
have obtained actual knowledge.
SECTION 2.8 CONFLICTING INTERESTS
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE
(a) This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Preferred Guarantee Trustee on acceptance by such Successor
Preferred Guarantee Trustee of its appointment to act as Successor Preferred
Guarantee Trustee. The right, title and interest of the Preferred Guarantee
Trustee shall automatically vest in any Successor Preferred Guarantee Trustee,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Preferred Guarantee Trustee.
(b) Subject to the rights of any Holder of Preferred
Securities to proceed directly against the Guarantor to enforce this Preferred
Securities Guarantee, if an Event of Default actually known to a Responsible
Officer of the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred
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Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence
of any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants
shall be read into this Preferred Securities Guarantee against the Preferred
Guarantee Trustee. In case an Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a
Responsible Officer of the Preferred Guarantee Trustee, the Preferred
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Preferred Securities Guarantee, and use the same degree of care and skill
in its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee
shall be construed to relieve the Preferred Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of Default that
may have occurred:
(A) the duties and obligations of the
Preferred Guarantee Trustee shall be determined solely by
the express provisions of this Preferred Securities
Guarantee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Preferred
Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities
Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the
part of the Preferred Guarantee Trustee, the Preferred
Guarantee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Preferred Guarantee Trustee and conforming to the
requirements of this Preferred Securities Guarantee; but in
the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished
to the Preferred Guarantee Trustee, the Preferred Guarantee
Trustee shall be under a duty to examine the same to
determine whether or not, on their face, they conform to the
requirements of this Preferred Securities Guarantee, but
shall otherwise have no duty to determine the accuracy or
completeness thereof or whether the same comply with
applicable laws;
(ii) the Preferred Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be proved
that the Preferred Guarantee Trustee was negligent in ascertaining
the pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Holders of not
less than a Majority in liquidation amount of the Preferred
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee
Trustee, or exercising any trust or power conferred upon the
Preferred Guarantee Trustee under this Preferred Securities
Guarantee; and
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(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may
conclusively rely, and shall be fully protected in acting or
refraining from acting upon, any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties;
(ii) Any direction or act of the Guarantor
contemplated by this Preferred Securities Guarantee shall be
sufficiently evidenced by an Officers' Certificate;
(iii) Whenever, in the administration of this
Preferred Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the Preferred
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt
of such request, shall be promptly delivered by the Guarantor;
(iv) The Preferred Guarantee Trustee shall have
no duty to see to any recording, filing or registration of any
instrument (or any rerecording, refiling or registration thereof);
(v) The Preferred Guarantee Trustee may consult
with counsel of its selection, and the advice or opinion of such
counsel with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion. Such counsel may be counsel to the Guarantor or
any of its Affiliates and may include any of its employees. The
Preferred Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Preferred
Securities Guarantee from any court of competent jurisdiction;
(vi) The Preferred Guarantee Trustee shall
be under no obligation to exercise any of the rights or powers vested
in it by this Preferred Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have provided to
the Preferred Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee, against
the costs, expenses (including attorneys' fees and expenses and the
expenses of the Preferred Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as
may be requested by the Preferred Guarantee Trustee; provided that,
nothing contained in this Section 3.2(a)(vi) shall be taken to
relieve the Preferred Guarantee Trustee, upon the occurrence of an
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Event of Default, from its obligations expressly created hereunder to
exercise the rights and powers vested in it by this Preferred
Securities Guarantee;
(vii) The Preferred Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit;
(viii) The Preferred Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder;
(ix) Any action taken by the Preferred Guarantee
Trustee or its agents hereunder shall bind the Holders of the
Preferred Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and effective to
perform any such action. No third party shall be required to inquire
as to the authority of the Preferred Guarantee Trustee to so act or
as to its compliance with any of the terms and provisions of this
Preferred Securities Guarantee, both of which shall be conclusively
evidenced by the Preferred Guarantee Trustee's or its agent's taking
such action;
(x) Whenever in the administration of this
Preferred Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder, the
Preferred Guarantee Trustee (i) may request instructions from the
Holders of a Majority in liquidation amount of the Preferred
Securities, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in
accordance with such instructions; and
(xi) The Preferred Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it
in good faith and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Preferred Securities Guarantee.
(b) No provision of this Preferred Securities Guarantee
shall be deemed to impose any duty or obligation on the Preferred Guarantee
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Preferred Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power
or authority available to the Preferred Guarantee Trustee shall be construed
to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF PREFERRED
SECURITIES GUARANTEE
The recitals contained in this Preferred Securities Guarantee shall
be taken as the statements of the Guarantor, and the Preferred Guarantee
Trustee does not assume any responsibility for their correctness. The
Preferred Guarantee Trustee makes no representation as to the validity or
sufficiency of this Preferred Securities Guarantee.
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ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY
(a) There shall at all times be a Preferred
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to act as
an institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by federal,
state, territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of this
Section 4.1(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee
Trustee shall immediately resign in the manner and with the effect set out in
Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEE
(a) Subject to Section 4.2(b), the Preferred Guarantee
Trustee may be appointed or removed without cause at any time by the
Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(c) The Preferred Guarantee Trustee appointed to office
shall hold office until a Successor Preferred Guarantee Trustee shall have
been appointed or until its removal or resignation. The Preferred Guarantee
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Preferred Guarantee
Trustee and delivered to the Guarantor, which resignation shall not take
effect until a Successor Preferred Guarantee Trustee has been appointed and
has accepted such appointment by instrument in writing executed by such
Successor Preferred Guarantee Trustee and delivered to the Guarantor and the
resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery of an instrument of
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resignation or removal, the Preferred Guarantee Trustee resigning or being
removed may petition any court of competent jurisdiction for appointment of a
Successor Preferred Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee
or removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all
amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE
The Guarantor irrevocably and unconditionally agrees to pay in full
to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED
The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of
all or any portion of the Distributions, Redemption Price,
Liquidation Distribution or any other sums payable under the terms of
the Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with,
the Preferred Securities (other than an extension of time for payment
of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment
period on the Debentures permitted by the Indenture);
10
<PAGE>
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the
Preferred Securities, or any action on the part of the Issuer
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor,
it being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 RIGHTS OF HOLDERS
(a) The Holders of a Majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) If the Preferred Guarantee Trustee fails to enforce this
Preferred Securities Guarantee, any Holder of Preferred Securities may
institute a legal proceeding directly against the Guarantor to enforce the
Preferred Guarantee Trustee 's rights under this Preferred Securities
Guarantee, without first instituting a legal proceeding against the Issuer,
the Preferred Guarantee Trustee or any other person or entity.
(c) Any Holder of Preferred Securities shall have the right,
which is absolute and unconditional, to proceed directly against the Guarantor
to obtain Guarantee Payments, without first waiting to determine if the
Preferred Guarantee Trustee has enforced this Preferred Security Guarantee or
instituting a legal proceeding against the Issuer, the Preferred Guarantee
Trustee or any other person or entity.
(d) The Guarantor waives any right or remedy to require that
any action be brought first against the Issuer or any other person or entity
before proceeding directly against the Guarantor.
SECTION 5.5 GUARANTEE OF PAYMENT
This Preferred Securities Guarantee creates a guarantee of payment
and not of collection.
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SECTION 5.6 SUBROGATION
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Preferred Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Preferred Securities
Guarantee; provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Preferred Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Preferred Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to
in subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS
So long as any Preferred Securities remain outstanding, if an Event
of Default or an event of default under the Declaration shall have occurred
and be continuing, then (a) the Guarantor shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock, (b) the Guarantor shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Guarantor which rank pari passu with or junior to the Debentures, and
(c) the Guarantor shall not make any guarantee payments (other than pursuant
to the Preferred Securities Guarantee) with respect to the foregoing. However,
the foregoing restriction will not apply to any dividend, redemption,
liquidation, interest, principal or guarantee payments by the Guarantor where
the payment is made by way of securities (including capital stock) that rank
junior to the securities on which such dividend, redemption, interest,
principal or guarantee payment is being made.
SECTION 6.2 RANKING
This Preferred Securities Guarantee will constitute an unsecured obligation of
the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, including the Debentures, except those
liabilities of the Guarantor made pari passu or subordinate by their terms,
(ii) pari passu with the most senior preferred stock now or hereafter issued
by the Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred stock of any subsidiary or affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock. If the
Guarantor does not make principal or interest payments on the Debentures, the
Issuer will not have sufficient funds to redeem or make distributions on the
Preferred Securities, in which event this Preferred Securities Guarantee will
not apply to such redemptions or distributions until the Issuer has sufficient
funds available therefor.
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<PAGE>
If an event of default under the Indenture has occurred and is continuing, the
rights of holders of the Common Securities to receive payments under the
Common Securities Guarantee will be subordinated to the rights of Holders of
Preferred Securities to receive Guarantee Payments.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION
This Preferred Securities Guarantee shall terminate upon (i) full
payment of the Redemption Price of all Preferred Securities, or (ii) upon the
distribution of the Debentures to the Holders, or (iii) upon full payment of
the amounts payable upon liquidation of the Issuer. Notwithstanding the
foregoing, this Preferred Securities Guarantee will continue to be effective
or will be reinstated, as the case may be, if at any time any Holder of
Preferred Securities must repay to the Issuer or the Guarantor, or their
successors, any payment of any sums paid to them under the Preferred
Securities or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage, liability, expense or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith in
accordance with this Preferred Securities Guarantee and in a manner that such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Preferred Securities Guarantee or
by law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's negligence or
willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Guarantor and upon such
information, opinions, reports or statements presented to the Guarantor by any
Person as to matters the Indemnified Person reasonably believes are within
such other Person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Guarantor, including
information, opinions, reports or statements as to the value and amount of the
assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders of
Preferred Securities might properly be paid.
SECTION 8.2 INDEMNIFICATION
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees
and expenses) of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The obligation to indemnify as set forth in this Section
8.2 shall survive the termination of this Preferred Securities Guarantee.
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<PAGE>
When the Preferred Guarantee Trustee incurs expenses or renders
services in connection with an event of default specified in Section 7.1(e) or
Section 7.1(f) of the Indenture, the expenses (including the reasonable
charges and expenses of its counsel) and the compensation for services are
intended to constitute expenses of administration under any applicable federal
or state bankruptcy, insolvency or other similar law.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.
SECTION 9.2 AMENDMENTS
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of not less than 662/3% in liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all the outstanding Preferred
Securities. The provisions of Section 12.2 of the Declaration with respect to
meetings of Holders of the Securities apply to the manner of obtaining any
such approval.
SECTION 9.3 NOTICES
All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the
Preferred Guarantee Trustee's mailing address set forth below (or such other
address as the Preferred Guarantee Trustee may give notice of to the Holders
of the Preferred Securities):
First Union National Bank of South Carolina
1441 Main Street, Fourth Floor
Columbia, South Carolina 29201
Attention: Corporate Trust Department
(b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give
notice of to the Holders of the Preferred Securities):
Insignia Financial Group, Inc.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Attention: General Counsel
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(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 BENEFIT
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION 9.5 GOVERNING LAW
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
15
<PAGE>
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first
above written.
INSIGNIA FINANCIAL GROUP, INC., as
Guarantor
By: /s/ Ronald Uretta
----------------------------------
Name: Ronald Uretta
Title: Chief Operating Officer and Treasurer
FIRST UNION NATIONAL BANK OF
SOUTH CAROLINA, as Preferred Guarantee
Trustee
By: /s/ Rosemary M. Greco
----------------------------------
Name: Rosemary M. Greco
Title: Vice President
16
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EXHIBIT 5.1
December 10, 1996
Insignia Financing I
c/o Insignia Finanical Group, Inc.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Re: Insignia Financing I
--------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Insignia Financing I,
a Delaware business trust (the "Trust"), in connection with the matters set
forth herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of the documents has been limited to the examination of originals
or copies of the following:
(a) The Certificate of Trust of the Trust, dated as of October
4, 1996 (the "Certificate"), as filed in the office of the
Secretary of State of the State of Delaware (the "Secretary
of State") on October 9, 1996;
(b) The Declaration of Trust of the Trust, dated as of
October 4, 1996, as amended by the Amended and Restated
Declaration of Trust, dated as of November 1, 1996 (including
Annex I and Exhibits A-1 and A-2 thereto) (collectively, the
"Trust Agreement"), among Insignia Financial Group, Inc.
(the "Company"), the trustees of the Trust named therein
(collectively, the "Trustees") and the holders, from time to
time, of undivided beneficial interests in the assets of the
Trust;
<PAGE>
Insignia Financing I
December 10, 1996
(c) The Registration Statement (the "Registration Statement")
on Form S-3, including a prospectus with respect to the
Trust (the "Prospectus), relating to the 6 1/2% Trust
Convertible Preferred Securities of the Trust representing
preferred undivided beneficial interests in the assets of the
Trust (each, a "Preferred Security" and collectively, the
"Preferred Securities"), filed by the Company and the Trust
with the Securities and Exchange Commission on December 10,
1996; and
(d) A Certificate of Good Standing for the Trust, dated December
10, 1996, hereof, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined
are used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed above, and we have assumed that there exists
no provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to
be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i)
the authenticity of all documents submitted to us as authentic originals, (ii)
the conformity with the originals of all documents submitted to us as copies
or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Trust Agreement and the
Certificate are in full force and effect and have not been amended, (ii)
except to the extent provided in paragraph 1 below, the due creation or due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, organization or formation, (iii) the
legal capacity of natural persons who are parties to the documents examined by
us, (iv) that each of the parties to the documents examined by us has the
power and authority to execute and deliver, and to perform its obligations
under, such documents, (v) the due authorization, execution and delivery by
all parties thereto of all documents examined by us, (vi) the receipt by each
Person to whom a Preferred
<PAGE>
Insignia Financing I
December 10, 1996
Security is to be issued by the Trust (collectively, the "Preferred Security
Holders") of a Convertible Preferred Security Certificate for such Preferred
Security and the payment for the Preferred Security acquired by it, in
accordance with the Trust Agreement and the Prospectus, and (vii) that the
Preferred Securities are issued and sold to the Preferred Security Holders in
accordance with the Trust Agreement and the Prospectus. We have not
participated in the preparation of the Prospectus and assume no responsibility
for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our
opinions are rendered only with respect to Delaware laws and rules,
regulations and orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary
or appropriate, and subject to the assumptions, qualifications, limitations
and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act.
2. The Preferred Securities represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, will be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition,
we hereby consent to the use of our name under the heading "Legal Matters" in
the Prospectus. In giving the foregoing consents, we do not thereby admit that
we come within the category of Persons whose consent is required under Section
7 of the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder. Except as stated above,
without our prior written consent, this opinion may not be furnished or quoted
to, or relied upon by, any other Person for any purpose.
<PAGE>
Insignia Financing I
December 10, 1996
Very truly yours,
/s/ Richards Layton & Finger
--------------------------------
Richards Layton & Finger
EAM
<PAGE>
EXHIBIT 5.2
December 10, 1996
Insignia Financial Group, Inc.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Insignia Financing I
c/o Insignia Financial Group, Inc.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Re: Insignia Financial Group, Inc. and Insignia Financing I - Registration
Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to Insignia Financial
Group, Inc., a Delaware corporation (the "Company"), and Insignia Financing I,
a Delaware business trust (the "Trust"), in connection with the registration
under the Securities Act of 1933 (the "Act"), of resales of: the 6 1/2% Trust
Convertible Preferred Securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of the Trust issued
pursuant to an amended and restated declaration of trust of the Trust, dated
as of November 1, 1996, among the Company, as trust sponsor, the trustees of
the Trust as named therein and the holders from time to time of undivided
beneficial interests in the assets of the Trust; the Company's 6 1/2%
Convertible Subordinated Debentures due September 30, 2016 (the "Debt
Securities") issued under the indenture, dated as of November 1, 1996, between
the Company, as Issuer, and First Union National Bank of South Carolina, as
Trustee (the "Indenture"); the Preferred Securities Guarantee Agreement, dated
as of November 1, 1996, between the Company, as Guarantor, and First Union
National Bank of South Carolina, as Preferred Guarantee Trustee for the
benefit of the holders from time to time of the Preferred Securities (the
"Guarantee"); the shares (the "Conversion Shares") of the Company's Class A
Common Stock, par value $0.01 per share (the "Common Stock"), into which the
Debt Securities are convertible; certain outstanding shares of Common Stock
(the "Registrable Shares"); and the shares of Common Stock (the "Warrant
Shares") issuable upon exercise of certain outstanding warrants (the
"Warrants"). The Preferred Securities, the Debt Securities, the Guarantee, the
Conversion Shares, the Registrable Shares and the Warrant Shares are being
registered under a registration statement of the Company and the Trust on Form
S-3 (the "Registration Statement") under the Act, which is being filed
herewith with the Securities and Exchange Commission.
<PAGE>
We have reviewed originals or copies certified or otherwise
identified to our satisfaction of all such documents and corporate records of
the Company and its subsidiaries and the Trust and such other instruments and
other certificates of public officials, officers and representatives of the
Company and its subsidiaries and the Trust and such other persons, and we have
made such investigations of law, as we have deemed necessary or appropriate as
a basis for the opinions expressed below.
In rendering the opinions expressed below, we have assumed
the legal capacity of natural persons, the genuineness of signatures on all
documents examined by us, the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to us
as copies. In addition, we have assumed and have not verified the accuracy as
to factual matters of each document we have reviewed and have assumed that
certificates of public officials dated prior to the date hereof remain
accurate as of the date hereof and that the Debt Securities have been duly
authenticated in accordance with the terms of the Indenture. We have further
assumed that all corporate and trust records or other information made
available to us by the Company and the Trust, and on which we have relied, are
complete in all respects.
Based on the foregoing, and subject to the further
assumptions and qualifications set forth below, it is our opinion that:
1. The execution and delivery of the Debt Securities have
been duly authorized by all necessary corporate action of the Company, the
Debt Securities have been duly executed and delivered by the Company and are
the legal, valid, binding and enforceable obligations of the Company and
entitled to the benefits of the Indenture.
2. The execution and delivery of the Guarantee have been
duly authorized by all necessary corporate action of the Company, and the
Guarantee has been duly executed and delivered by the Company and is a legal,
valid, binding and enforceable agreement of the Company.
3. The Conversion Shares and the Warrant Shares have been
duly authorized by all necessary corporate action of the Company and are
validly reserved for issuance upon conversion or exercise, as the case may be,
and upon issuance thereof upon such conversion of the Debt Securities in
accordance with the Indenture and the terms of the Debt Securities or upon
exercise and payment of the exercise price therefor in accordance with the
terms of the Warrants, as the case may be, at conversion prices or exercise
prices, as the case may be, at or in excess of the par value of such
Conversion Shares or Warrant Shares, will be validly issued, fully paid and
non-assessable.
4. The Registrable Shares have been duly authorized by all
necessary corporate action of the Company, have been validly issued, and are
fully paid and non-assessable.
<PAGE>
5. The discussion set forth in the Prospectus under the
heading "Certain United States Federal Income Tax Consequences" constitutes,
in all material respects, a fair and accurate summary of the United States
federal income tax consequences of the purchase, ownership and disposition of
the Preferred Securities based upon current law and the assumptions and
limitations stated or referred to therein.
Insofar as the foregoing opinions relate to the legality,
validity, binding effect or enforceability of any agreement or obligation of
the Company, we have assumed that each other party to such agreement or
obligation has satisfied those legal requirements that are applicable to it to
the extent necessary to make such agreement or obligation enforceable against
it and such opinions are subject to the provisions of Article 9 of the
certificate of incorporation of the Company regarding arrangements with
creditors and applicable bankruptcy and insolvency, fraudulent conveyance,
fraudulent transfer, reorganization and other similar laws relating to
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law) relating to the availability
of remedies, and as rights to indemnity or contribution may be limited by
state or federal securities laws and the public policy underlying such laws.
With respect to the opinion set forth in paragraph 5, we
note that the discussion referenced therein does not purport to discuss all
possible United States federal income tax consequences of the purchase,
ownership and disposition of the Preferred Securities, that such opinion is
based on the Internal Revenue Code of 1986, as amended, and other laws and
regulations, rulings and decisions in effect on the date hereof, all of which
are subject to change (which change could apply retroactively) and that we
have assumed the consummation of the transactions in the manner set forth in
the Offering Memorandum, dated December 29, 1996, relating to the Original
Offering (as defined in the Prospectus), and in full compliance with the terms
of the documents described and discussed therein.
The opinions expressed herein relate solely to the General
Corporation Law of the State of Delaware, the laws of the State of New York
and the laws of the United States of America, and no opinion is expressed with
respect to the laws of any other jurisdiction.
The opinion expressed herein is rendered solely for the
benefit of the Company in connection with the filing of the Registration
Statement. This opinion may not be used or relied upon by any other person,
nor may this letter or any copy thereof be furnished to a third party, filed
with a governmental agency or quoted, cited or otherwise referred to without
our prior written consent.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to this firm under
the heading "Legal Matters" in each Prospectus included in the Registration
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Securities and Exchange Commission issued
thereunder with respect to any part of the Registration Statement, including
this exhibit.
Very truly yours,
Proskauer Rose Goetz & Mendelsohn LLP
<PAGE>
INSIGNIA FINANCING I
6 1/2% TRUST CONVERTIBLE PREFERRED SECURITIES
(THE "CONVERTIBLE PREFERRED SECURITIES")
GUARANTEEDBY AND CONVERTIBLE INTO SHARES OF CLASS A COMMON STOCK OF
INSIGNIA FINANCIAL GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
NOVEMBER 1,1996
LEHMAN BROTHERS INC.
DILLON, READ & CO. INC.
GOLDMAN, SACHS & CO.
A.G. EDWARDS & SONS, INC.
As Initial Purchasers
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Insignia Financing I, a statutory business trust created under the
laws of the State of Delaware (the "Trust") by Insignia Financial Group, Inc.,
a Delaware corporation ("Insignia"), proposes to issue and sell to Lehman
Brothers Inc., Dillon, Read & Co. Inc., Goldman, Sachs & Co., and A.G. Edwards
& Sons, Inc. (the "Initial Purchasers"), upon the terms set forth in a
purchase agreement dated October 29, 1996 (the "Purchase Agreement"), among
the Initial Purchasers, Insignia and the Trust, 6 1/2% trust convertible
preferred securities (liquidation amount $50 per convertible preferred
security) (the "Convertible Preferred Securities"). As an inducement to the
Initial Purchasers to enter into the Purchase Agreement and in satisfaction of
a condition to the obligations of the Initial Purchasers thereunder, the Trust
and Insignia agree with you, (i) for the benefit of the Initial Purchasers,
and (ii) for the benefit of the holders from time to time of the Convertible
Preferred Securities, the 6 1/2% Convertible Subordinated Debentures Due
September 30, 2016 (the "Debt Securities"), and the Class A Common Stock, par
value $0.01 per share (the "Class A Common Stock"), of Insignia initially
issuable upon conversion of the Convertible Preferred Securities or the Debt
Securities (collectively, together with the Guarantee of Insignia of the
Convertible Preferred Securities, the "Registrable Securities"), including the
Initial Purchasers (each of the foregoing a "Holder" and together the
"Holders"), as follows:
<PAGE>
1. DEFINITIONS.
Capitalized terms used herein without definition shall have their
respective meanings set forth in or pursuant to the Purchase Agreement or the
Offering Memorandum dated October 29, 1996, in respect of the Convertible
Preferred Securities. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Act" or means the Securities Act of 1933, as amended.
"Securities Act"
"Affiliate" of any means any other person which, directly or
specified person indirectly, is in control of, is controlled by, or
is under common control with such specified
person. For purposes of this definition, control
of a person means the power, direct or indirect,
to direct or cause the direction of the
management and policies of such person whether by
contract or otherwise; and the terms
"controlling" and "controlled" have meanings
correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"DTC" means The Depository Trust Company.
"Effectiveness has the meaning set forth in Section 2(b) hereof.
Period"
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Managing means the investment banker or investment bankers
Underwriters" and manager or managers that shall administer an
underwritten offering, if any, as set forth in
Section 6 hereof.
"Person" shall mean an individual, partnership,
corporation, trust or unincorporated
organization, or a government or agency or
political subdivision thereof.
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<PAGE>
"Prospectus" means the prospectus included in any Shelf
Registration Statement (including, without
limitation, a prospectus that discloses
information previously omitted from a prospectus
filed as part of an effective registration
statement in reliance upon Rule 430A under the
Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the
offering of any portion of the Registrable
Securities.
"Shelf Registration means a "shelf" registration statement of the
Statement" Trust and Insignia pursuant to the provisions of
Section 2 hereof filed with the Commission which
covers some or all of the Registrable Securities,
as applicable, on an appropriate form under Rule
415 under the Act, or any similar rule that may
be adopted by the Commission, amendments and
supplements to such registration statement,
including post-effective amendments, in each case
including the Prospectus contained therein, all
exhibits thereto and all material incorporated by
reference therein.
"Shelf Registration" means a registration effected pursuant to Section
2 hereof.
"Underwriter" means any underwriter of Registrable Securities in
connection with an offering thereof under a Shelf
Registration Statement.
2. SHELF REGISTRATION.
(a) The Trust and Insignia shall, within 90 days following the date
of initial issuance (the "Issue Date") of the Convertible Preferred
Securities, file with the Commission a Shelf Registration Statement relating
to the offer and sale of the Registrable Securities by the Holders from time
to time in accordance with the methods of distribution elected by such Holders
and set forth in such Shelf Registration Statement and, thereafter, shall each
use its all reasonable efforts to cause such Shelf Registration Statement to
be declared effective under the Act as soon as practicable and in no event
later than 180 days after the Issue Date; provided, however, that no Holder
shall be entitled to have the Registrable Securities held by it covered by
such Shelf Registration unless such Holder is in compliance with Section 3(m)
hereof.
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<PAGE>
(b) The Trust and Insignia shall each use its all reasonable efforts
(i) to keep the Shelf Registration Statement continuously effective in order
to permit the Prospectus forming part thereof to be usable by Holders for a
period of three years from Issue Date or such shorter period that will
terminate upon the earlier of the following: (A) when all the Convertible
Preferred Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement, exchanged for Debt
Securities or converted into Class A Common Stock (B) when all Debt Securities
issued to Holders in respect of Preferred Securities that had not been sold
pursuant to the Shelf Registration Statement or converted into Class A Common
Stock have been sold pursuant to the Shelf Registration Statement, and (C)
when all shares of Class A Common Stock issued upon conversion of any such
Convertible Preferred Securities or any such Debt Securities that had not been
sold pursuant to the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or (D) when, in the written opinion of
counsel to the Trust and Insignia, all outstanding Registrable Securities held
by persons that are not affiliates of the Trust or Insignia may be resold
without registration under the Act pursuant to Rule 144(k) under the Act or
any successor provision thereto (in any such case, such period being called
the "Effectiveness Period") and (ii) after the effectiveness of the Shelf
Registration Statement, promptly upon the request of any Holder to take any
action reasonably necessary to register the sale of any Registrable Securities
of such Holder and to identify such Holder as a selling securityholder. The
Trust and Insignia shall be deemed not to have used their all reasonable
efforts to keep the Shelf Registration Statement effective during the
requisite period if either the Trust or Insignia voluntarily takes any action
that would result in Holders of Registrable Securities covered thereby not
being able to offer and sell any such Registrable Securities during that
period, unless (i) such action is required by applicable law or the rules of
any national securities exchange or other market on which any of the
Registrable Securities are then listed or quoted, (ii) upon the occurrence of
any event contemplated by paragraph 3(c)(2)(iii) below, and such action is
taken by the Trust or Insignia in good faith and for valid business reasons or
(iii) the continued effectiveness of the Shelf Registration Statement would
require Insignia to disclose a material financing, acquisition or other
corporate transaction, and the Board of Directors shall have determined in
good faith that such disclosure is not in the best interests of Insignia and
its stockholders, and, in the case of clause (i) or (ii) above, the Trust and
Insignia thereafter promptly comply with the requirements of paragraph 3(i)
below.
3. REGISTRATION PROCEDURES.
In connection with any Shelf Registration Statement, the following
provisions shall apply:
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<PAGE>
(a) The Trust and Insignia shall furnish to the Initial Purchasers,
prior to the filing thereof with the Commission, a copy of any Shelf
Registration Statement, and each amendment thereof and each amendment or
supplement, if any, to the Prospectus included therein and shall each use its
all reasonable efforts to reflect in each such document, when so filed with
the Commission, such comments as the Initial Purchasers reasonably may
propose.
(b) The Trust and Insignia shall take such action as may be necessary
so that (i) any Shelf Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any amendment or supplement thereto (and
each report or other document incorporated therein by reference in each case)
complies in all material respects with the applicable provisions of the
Securities Act and the Exchange Act and the respective rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto
does not, when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Shelf Registration Statement, and any amendment
or supplement to such Prospectus, does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not
misleading.
(c) (1) Insignia shall advise the Initial Purchasers and, in the case
of clause (i), the Holders and, if requested by the Initial Purchasers or any
such Holder, confirm such advice in writing: (i) when a Shelf Registration
Statement and any amendment thereto has been filed with the Commission and
when the Shelf Registration Statement or any post-effective amendment thereto
has become effective; and (ii) of any request by the Commission for amendments
or supplements to the Shelf Registration Statement or the Prospectus included
therein or for additional information.
(2) Insignia shall advise the Initial Purchasers and the Holders
and, if requested by the Initial Purchasers or any such Holder, confirm such
advice in writing of: (i) the issuance by the Commission of any stop order
suspending effectiveness of the Shelf Registration Statement or the initiation
of any proceedings for that purpose; (ii) the receipt by the Trust or Insignia
of any notification with respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or the initiation of
any proceeding for such purpose; and (iii) the happening of any event that
requires the making of any changes in the Shelf Registration Statement or the
Prospectus so that, as of such date, the Shelf Registration Statement and the
Prospectus do not contain an untrue statement of a material fact and do not
omit to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not
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<PAGE>
misleading (which advice shall be accompanied by an instruction to suspend the
use of the Prospectus until the requisite changes have been made).
(d) Insignia shall use its all reasonable efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of any Shelf Registration Statement at the earliest possible
time.
(e) The Trust and Insignia shall furnish to each Holder of
Registrable Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
reports, other documents and exhibits (including those incorporated by
reference).
(f) The Trust and Insignia shall, during the Effectiveness Period,
deliver to each Holder of Registrable Securities included within the coverage
of any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and each of the Trust and Insignia consents (except
upon and during the continuance of any event described in paragraph
3(c)(2)(iii) above) to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable Securities in
connection with the offering and sale of the Registrable Securities covered by
the Prospectus or any amendment or supplement thereto during the Shelf
Registration Period.
(g) Prior to any offering of Registrable Securities pursuant to any
Shelf Registration Statement, the Trust and Insignia shall register or qualify
or cooperate with the Holders of Registrable Securities included therein and
their respective counsel in connection with the registration or qualification
of such Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any such Holders reasonably request in
writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such United States jurisdictions of the
Registrable Securities covered by such Shelf Registration Statement; provided,
however, that in no event shall the Trust or Insignia be obligated to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for
this Section 3(g), (ii) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof then so subject or (iii)
subject itself to taxation in any such jurisdiction if it is not so subject.
(h) Unless any Registrable Securities shall be in book-entry only
form, the Trust and Insignia shall cooperate with the Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to any Shelf
Registration
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<PAGE>
Statement free of any restrictive legends and in such permitted denominations
and registered in such names as Holders may request in connection with the
sale of Registrable Securities pursuant to such Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by paragraph
3(c)(2)(iii) above, the Trust and Insignia shall promptly prepare a
post-effective amendment to any Shelf Registration Statement or an amendment
or supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Registrable Securities
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If the Trust or Insignia notifies the Holders of the
occurrence of any event contemplated by paragraph 3(c)(2)(iii) above, the
Holders shall suspend the use of the Prospectus until the requisite changes to
the Prospectus have been made.
(j) Not later than the effective date of any Shelf Registration
Statement hereunder, the Trust and Insignia shall provide a CUSIP number for
the Preferred Securities registered under such Shelf Registration Statement;
in the event of and at the time of any distribution of the Debt Securities to
Holders, Insignia shall provide a CUSIP number for the Debt Securities and
provide the applicable trustee with certificates for such Registrable
Securities, in a form eligible for deposit with DTC.
(k) The Trust and Insignia shall use their best efforts to comply
with all applicable rules and regulations of the Commission and shall make
generally available to their security holders or otherwise provide in
accordance with Section 11(a) of the Securities Act as soon as practicable
after the effective date of the applicable Shelf Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act.
(l) The Trust and Insignia shall cause the Indenture, the Declaration
and the Preferred Securities Guarantee to be qualified under the Trust
Indenture Act in a timely manner.
(m) The Trust and Insignia may require each Holder of Registrable
Securities to be sold pursuant to any Shelf Registration Statement to furnish
to the Trust and Insignia such information regarding the Holder and the
distribution of such Registrable Securities as the Trust and Insignia may from
time to time reasonably request for inclusion in such Shelf Registration
Statement and Insignia and the Trust may exclude from such registration the
Registrable Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(n) The Trust and Insignia shall, if requested, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to a Shelf
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<PAGE>
Registration Statement, such information as the Managing Underwriters
reasonably agree should be included therein and to which the Trust and
Insignia do not reasonably object and shall make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable after
they are notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment.
(o) The Trust and Insignia shall enter into such customary agreements
(including underwriting agreements in customary form) to take all other
appropriate actions in order to expedite or facilitate the registration or the
disposition of the Registrable Securities, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those set
forth in Section 5 (or such other provisions and procedures reasonably
acceptable to the Managing Underwriters, if any) with respect to all parties
to be indemnified pursuant to Section 5.
(p) The Trust and Insignia shall (i) make reasonably available for
inspection by the Holders of Registrable Securities to be registered
thereunder, any Underwriter participating in any disposition pursuant to such
Shelf Registration Statement, and any attorney, accountant or other agent
retained by such Holders or any such Underwriter all relevant financial and
other records, pertinent corporate documents and properties of the Trust and
Insignia and its subsidiaries; (ii) cause Insignia's officers, directors and
employees and the Regular Trustees to make reasonably available for inspection
all relevant information reasonably requested by such Holders or any such
Underwriter, attorney, accountant or agent in connection with any such Shelf
Registration Statement, in each case as is customary for similar due diligence
examinations; provided, however, that any information that is designated in
writing by the Trust and Insignia, in good faith, as confidential at the time
of delivery of such information shall be kept confidential by such Holders or
any such Underwriter, attorney, accountant or agent, unless such disclosure is
made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality; and provided further
that the foregoing inspection and information gathering shall, to the greatest
extent possible, be coordinated on behalf of the Holders and the other parties
entitled thereto by one counsel designated by and on behalf of such Holders
and other parties; (iii) make such representations and warranties to the
Holders of Registrable Securities registered thereunder and the Underwriters,
if any, in form, substance and scope as are customarily made by Insignia and
the Trust to Underwriters in primary underwritten offerings and covering
matters including, but not limited to, those set forth in the Purchase
Agreement; (iv) obtain opinions of counsel to the Trust and Insignia (who may
be the general counsel of Insignia) and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to
the Managing Underwriters, if any) in customary form
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<PAGE>
addressed to each selling Holder and the Underwriters, if any, covering such
matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
Holders and the Managing Underwriters (it being agreed that the matters to be
covered by such opinion or a written statement by such counsel delivered in
connection with such opinions shall include, without limitation, as of the
date of the opinion and as of the effective date of the Shelf Registration
Statement or most recent post-effective amendment thereto, as the case may be,
that such counsel has no actual knowledge that such Shelf Registration
Statement and the prospectus included therein, as then amended or
supplemented, including the documents incorporated by reference therein,
included an untrue statement of a material fact or omitted to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; (v) obtain "cold comfort" letters and
updates thereof from the independent public accountants of Insignia (and, if
necessary, any other independent public accountants of any subsidiary of
Insignia or of any business acquired by Insignia for which financial
statements and financial data are, or are required to be, included in the
Shelf Registration Statement), addressed to each such Holder of Registrable
Securities registered thereunder and the Underwriters, if any, in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with primary underwritten offerings; and (vi) deliver
such other customary documents and certificates as may be reasonably requested
by any such Holders and the Managing Underwriters, if any, including those to
evidence compliance with Section 3(i) and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Trust and Insignia. The foregoing actions set forth in clauses (iii), (iv),
(v) and (vi) of this Section 3(p) shall be performed at each closing under any
underwritten offering to the extent required thereunder.
(q) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Registrable Securities or participate as a member of
an underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Rules of Fair Practice and the By-Laws of the
National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as
a Holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, Insignia
shall assist such broker-dealer in complying with the requirements of such
Rules and By-Laws, including, without limitation, by (A) if such Rules or
By-Laws, including Schedule E thereto, shall so require, engaging at the
expense of the Holders a "qualified independent underwriter" (as defined in
Schedule E) to participate in the preparation of the Shelf Registration
Statement relating to such Registrable Securities and to exercise usual
standards of due diligence in respect thereto, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
Underwriters provided in Section 5 hereof and (C) providing such information
to such broker-dealer as may be reasonably required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice of
the NASD.
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<PAGE>
(r) The Trust and Insignia shall use their all reasonable efforts to
take all other steps necessary to effect the registration, offering and sale
of the Registrable Securities covered by the Shelf Registration Statement
contemplated hereby.
4. REGISTRATION EXPENSES.
Except as otherwise provided in Section 6, Insignia shall bear all
fees and expenses incurred by it and the Trust in connection with the
performance of its obligations under Sections 2 and 3 hereof and shall bear or
reimburse the Holders for the reasonable fees and disbursements of one firm of
counsel designated by Insignia and reasonably acceptable to the Holders of a
majority of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefor in connection therewith.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with any Shelf Registration Statement, Insignia
shall indemnify and hold harmless the Trust, the Initial Purchasers, each
Holder, each Underwriter who participates in an offering of Registrable
Securities, each of their respective directors, officers, employees, and
trustees, and each Person, if any, who controls the Trust, the Initial
Purchasers and any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:
(i) from and against any loss, liability, claim, damage and
expense whatsoever, including any amounts paid in settlement of any
investigation, litigation, proceeding or claim, joint or several, as incurred,
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any Shelf Registration Statement (or any amendment thereto)
covering Registrable Securities, including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged untrue statement
of a material fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, that
Insignia shall not be liable under this clause (i) for any settlement of any
action effected without its written consent, which consent shall not be
unreasonably withheld; and (ii) against any and all expenses (including
reasonable fees and disbursements of counsel chosen by the Holders, such
Holder or any Underwriter (except to the extent otherwise expressly provided
in Section 5(c) hereof)), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
court or governmental agency
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<PAGE>
or body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, as such expenses are incurred to the extent that any such expense is
not paid under subparagraph (i) of this Section 5(a); provided further, that
the indemnity provided for in this Section 5(a) shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission (i) made in
reliance upon and in conformity with written information furnished to the
Trust or Insignia by the Initial Purchasers, such Holder or any Underwriter in
writing expressly for use in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto)
or (ii) contained in any preliminary prospectus or the Prospectus if the
Initial Purchasers, such Holder or such Underwriter failed to send or deliver
a copy of the Prospectus (or any amendment or supplement thereto) to the
Person asserting such losses, claims, damages or liabilities on or prior to
the delivery of written confirmation of any sale of securities covered thereby
to such Person in any case where such Prospectus (or any amendment or
supplement thereto) corrected such untrue statement or omission. Any amounts
advanced by Insignia to an indemnified party pursuant to this Section 5 as a
result of such losses shall be returned to Insignia if it shall be finally
determined by such a court in a judgment not subject to appeal or final review
that such indemnified party was not entitled to indemnification by Insignia.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless the Trust, Insignia, the Initial Purchasers, each Underwriter who
participates in an offering of Registrable Securities and the other selling
Holders and each of their respective directors, officers (including each
officer of Insignia who signed the Shelf Registration Statement), employees
and trustees and each Person, if any, who controls the Trust, Insignia, the
Initial Purchasers, any Underwriter or any other selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any loss, liability, claim, damage and expense whatsoever
described in the indemnity contained in Section 5(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to
Insignia by such selling Holder expressly for use in the Shelf Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto); provided that the indemnity provided for in this Section
5(b) shall not apply to any loss, liability, claim, damage or expense to the
extent arising out of an untrue statement or omission or alleged untrue
statement or omission contained in any preliminary prospectus or the
Prospectus if the Initial Purchasers, such Holder or such Underwriter failed
to send or deliver a copy of the Prospectus (or any amendment or supplement
thereto) to the Person asserting such losses, claims, damages or liabilities
on or prior to the delivery of written confirmation of any sale of securities
covered thereby to such Person in any case where such
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<PAGE>
Prospectus (or any amendment or supplement thereto) corrected such untrue
statement or omission; provided, however, that no such Holder shall be liable
for any claims hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Registrable Securities pursuant to the Shelf
Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any claim or any action commenced against it in respect
of which indemnity may be sought hereunder, enclosing a copy of all papers
served on such indemnified party, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability which it
may have other than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of any such action. If
an indemnifying party so elects within a reasonable time after receipt of such
notice, such indemnifying party, jointly with any other indemnifying party,
may assume the defense of such action with counsel chosen by it and reasonably
satisfactory to the indemnified party or parties defendant in such action,
provided that if any such indemnified party reasonably determines that
representation of such indemnifying party and any indemnified party by the
same counsel would present a conflict of interest, then such indemnifying
party or parties shall not be entitled to assume such defense. If an
indemnifying party is not entitled to assume the defense of such action as a
result of the proviso to the preceding sentence, counsel for such indemnifying
party shall be entitled to conduct the defense of such indemnifying party and
counsel for each indemnified party or parties shall be entitled to conduct the
defense of such indemnified party or parties. If an indemnifying party assumes
the defense of an action in accordance with and as permitted by the provisions
of this paragraph, such indemnifying party shall not be liable for any fees
and expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying party or
parties be liable for the fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent
of the indemnifying party or if there shall be a final judgment of the
plaintiff in any such action, the indemnifying party
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<PAGE>
agrees to indemnify and hold harmless any indemnified party from and against
any loss or liability by reason of such settlement or judgment.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section 5(a) or
(b) is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, Insignia, the Initial
Purchasers and the Holders shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by Insignia, the Initial Purchasers and the
Holders, as incurred; provided that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between Insignia, the Initial Purchasers and
the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of Insignia, on the one hand, and the Initial Purchasers and
the Holders, on the other hand, with respect to the statements or omissions
which resulted in such loss, liability, claim, damage or expense, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault of Insignia, on the one hand, and of the Initial Purchasers and
the Holders, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by Insignia, on the one hand, or by or on behalf of the
Initial Purchasers or the Holders, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Insignia, the Initial Purchasers and the Holders
of the Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were to be determined by pro rata
allocation or by any other method of allocation that does not take into
account the relevant equitable considerations. For purposes of this Section
5(d), each director, officer, employee and trustee of an Initial Purchaser or
Holder, and each Person, if any, who controls an Initial Purchaser or Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as such Initial
Purchaser or Holder, and each director, officer, employee and trustee of
Insignia and the Trust, and each Person, if any, who controls Insignia or the
Trust within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, shall have the same rights to contribution as Insignia or
the Trust. No party shall be liable for contribution with respect to any
action, suit, proceeding or claim settled without its written consent.
- 13 -
<PAGE>
6. UNDERWRITTEN OFFERING.
The Holders of Registrable Securities covered by the Shelf
Registration Statement who desire to do so may sell such Registrable
Securities in an underwritten offering. In any such underwritten offering, the
investment banker or bankers and manager or managers that will administer the
offering will be selected by, and the underwriting arrangements with respect
thereto will be approved by, the Holders of a majority of the Registrable
Securities to be included in such offering; provided however, that (i) such
investment bankers and managers and underwriting arrangements (including
indemnification agreements) must be reasonably satisfactory to Insignia and
the Trust and (ii) Insignia and the Trust shall not be obligated to cooperate
with the Initial Purchasers or Holders in more than one underwritten offering
during the Effectiveness Period. No Holder may participate in the underwritten
offering contemplated hereby unless such Holder (a) agrees to sell such
Holder's Registrable Securities in accordance with any approved underwriting
arrangements, (b) completes and executes all reasonable questionnaires, powers
of attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such approved underwriting arrangements
and (c) at least 20% of the outstanding Registrable Securities are included in
such underwritten offering. The Holders participating in the underwritten
offering shall be responsible for any expenses customarily borne by selling
securityholders, including underwriting discounts and commissions and fees and
expenses of counsel to the selling securityholders, and shall reimburse the
Trust and Insignia for the fees and disbursements of their counsel, their
independent public accountants and any printing and other out-of-pocket
expenses reasonably incurred in connection with such underwritten offering.
Notwithstanding the foregoing or the provisions of Section 3(n) hereof, upon
receipt of a request from the Managing Underwriter or a representative of
Holders of a majority of the Registrable Securities outstanding to prepare and
file an amendment or supplement to the Shelf Registration Statement and
Prospectus in connection with an underwritten offering, Insignia may delay the
filing of any such amendment or supplement for up to 90 days if Insignia in
good faith has a valid business reason for such delay.
7. MISCELLANEOUS.
(a) Other Registration Rights.
Insignia may grant registration rights that would permit any Person
that is a third party the right to piggy-back on any Shelf Registration
Statement, provided that if the Managing Underwriter, if any, of such offering
delivers an opinion to the selling Holders that the total amount of securities
which they and the holders of such piggy-back rights intend to include in any
Shelf Registration Statement is so large as to materially adversely affect the
success of such offering
- 14 -
<PAGE>
(including the price at which such securities can be sold), then (except to
the extent otherwise required under the terms of any registration rights
granted by Insignia prior to the date hereof) only the amount, number or kind
of securities to be offered for the account of holders of such piggy-back
rights will be reduced to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount, number or kind
recommended by the Managing Underwriter prior to any reduction in the amount
of Registrable Securities to be included.
(b) Amendments and Waivers.
The provision of this Agreement, including the provisions of this
sentence, may not be amended, qualified, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be given, unless
the Trust and Insignia have obtained the written consent of the Initial
Purchasers. Any such written consent of the Initial Purchasers shall be
binding upon each Holder and each subsequent Holder.
(c) Notices.
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail, telex,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to Insignia in accordance with the provisions of this Section 7(c);
(2) if to the Initial Purchasers, initially at the address set
forth in the Purchase Agreement; and
(3) if to the Trust or Insignia, initially at its address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Initial Purchasers or the Trust and Insignia by notice to the
other may designate additional or different addresses for subsequent notices
or communications.
(d) Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties and the Holders, including,
without the need for an express assignment or any consent by the Trust or
Insignia thereto, subsequent Holders of Registrable Securities. The Trust and
Insignia hereby agree to extend the benefits of this Agreement to any Holder
of Registrable Securities and
- 15 -
<PAGE>
any such Holder may specifically enforce the provisions of this Agreement as
if an original party hereto.
(e) Counterparts.
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(f) Headings.
The headings herein are inserted for convenience of reference only
and are not intended to be part of, or to affect the meaning or interpretation
of this Agreement.
(g) Governing law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflicts of laws
principles thereof.
(h) Severability.
In the event that any one of more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
Please confirm that the foregoing correctly sets forth the agreement
between Insignia, the Trust and you.
- 16 -
<PAGE>
Very truly yours,
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Ronald Uretta
-------------------------------
Title: Chief Operating Officer
INSIGNIA FINANCING I
By: /s/ Ronald Uretta
-------------------------------
Title: Regular Trustee
Accepted:
LEHMAN BROTHERS INC.
DILLON, READ & CO., INC.
GOLDMAN, SACHS & CO.
A.G. EDWARDS & SONS, INC.
By: LEHMAN BROTHERS INC.
By: /s/ Todd B. Kristol
-------------------------------
Authorized Representative
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(IN THOUSANDS, EXCESS RATIO AMOUNTS)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------ ------------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated pretax income
from continuing operations....... $ (353) $ 3,259 $ 8,074 $ 12,101 $ 10,093 $ 8,840 $ 8,097
Minority interest in earnings
(loss) of consolidated
affiliates....................... - - - - 131 138 190
Share of distributed income of less than
50%-owned affiliates net of equity
earnings......................... - - - (113) 8,669 1,795 3,733
Interest........................... 1,251 932 686 716 6,586 4,625 9,057
Net amortization of debt discount and
issuance expense................. _ 70 183 26 463 312 1,187
Interest portion of rental expense. 474 519 678 903 1,575 1,150 1,493
--------- ---------- ------------ ----------- ----------- ----------- -----------
Earnings $ 1,372 $ 4,780 $ 9,621 $ 13,633 $ 27,517 $ 16,860 $ 23,757
========= ========== ============ =========== =========== =========== ===========
Interest 1,251 932 686 716 6,586 4,625 9,057
Net amortization of debt discount and
issuance expense................ - 70 183 26 463 312 1,187
Interest portion of rental expense. 474 519 678 903 1,575 1,150 1,493
Preferred stock dividends.......... - - - - 2,008 1,481 321
--------- ---------- ------------ ----------- ----------- ----------- -----------
Combined Fixed Charges
and Preferred Stock
Dividends $ 1,725 $ 1,521 $ 1,547 $ 1,645 $ 10,632 $ 7,568 $ 12,058
========= ========== ============ =========== =========== =========== ===========
Ratio of Earnings to Combined
Fixed Charges and
Preferred Stock Dividends
N/A 3.14 6.22 8.29 2.59 2.23 1.97
========= ========== ============ =========== =========== =========== ===========
</TABLE>
N/A - Earnings are inadequate to cover combined fixed charges and preferred
dividends by approximately $353,000.
<PAGE>
Exhibit 23.1(a)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in the Registration Statement (Form S-3) and related Prospectus of Insignia
Financial Group, Inc. and Insignia Financing I for the registration of
2,990,000 Convertible Preferred Securities of Insignia Financing I, certain
shares of Class A Common Stock of Insignia Financial Group, Inc. and certain
other securities, and to the incorporation by reference therein of our report
dated February 21, 1996, with respect to the consolidated financial statements
of Insignia Financial Group, Inc. included in its Annual Report (Form 10-K) for
the year ended December 31, 1995, filed with the Securities and Exchange
Commission.
Greenville, South Carolina /s/ ERNST & YOUNG LLP
December 10, 1996
<PAGE>
Exhibit 23.1(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated April 1, 1996, on our audits of the
combined financial statements of Edward S. Gordon Company, Incorporated and
Edward S. Gordon Company of New Jersey, Inc. as of December 31, 1995 and 1994
and for each of the years ended December 31, 1995, 1994 and 1993. We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
New York, New York
December 10, 1996
<PAGE>
EXHIBIT 23.1(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our report dated August 18, 1995, on our audits of the combined
consolidated balance sheets of NPI Property Management Corporation, Inc.,
National Property Investors, Inc. and NPI CL Management L.P. as of June 30,
1995 and 1994, and the related combined consolidated statements of operations
and cash flows for the years then ended, and the consolidated statements of
operations and cash flows of National Property Investors, Inc. ("NPI Florida"
see Note 1 to the financial statements referenced herein) for the year ended
June 30, 1993. We also consent to the reference to our firm under the caption
"Experts."
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Atlanta, Georgia
December 10, 1996
<PAGE>
EXHIBIT 23.1 (d)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-3) of Insignia Financial Group, Inc. and Insignia Financing I, of our
reports dated January 18, 1995, January 13, 1995, January 11, 1995, January
20, 1995, January 20, 1995, February 1, 1995, January 16, 1995, February 6,
1995, January 28, 1995, January 21, 1995, January 20, 1995, February 1, 1995,
January 20, 1995 and January 18, 1995 with respect to the financial statements
of National Property Investors II, National Property Investors III, National
Property Investors 4, National Property Investors 5, National Property
Investors 6, National Property Investors 7, National Property Investors 8,
Century Properties Fund XIV, Century Properties Fund XV, Century Properties
Fund XVI, Century Properties Fund XVII, Century Properties Funds XVIII,
Century Properties Fund XIX and Century Properties Growth Fund XXII,
respectively, included in the Current Report on Form 8-K of Insignia Financial
Group, Inc. filed with the Securities and Exchange Commission on September 1,
1995. We consent to the incorporation by reference in the Registration Statement
(From S-3) of Insignia Financial Group, Inc., and Insignia Financing I, of our
reports dated January 22, 1996, January 23, 1996, January 30, 1996, January 22,
1996, January 31, 1996, January 21, 1996, January 22, 1996, February 12, 1996,
except for Notes 10 and 11, which are dated March 7, 1996, February 4, 1996,
January 22, 1996, January 26, 1996, January 22, 1996, February 20, 1996 and
January 23, 1996 with respect to the financial statements of National Property
Investors II, National Property Investors III, National Property Investors 4,
National Property Investors 5, National Property Investors 6, National Property
Investors 7, National Property Investors 8, Century Properties Fund XIV, Century
Properties Fund XV, Century Properties Fund XVI, Century Properties Fund XVII,
Century Properties Fund XVIII, Century Properties Fund XIX and Century
Properties Growth Fund XXII, respectively included in the Current report on Form
8-K of Insignia Financial Group, Inc. filed with the Securities and Exchange
Commission December 10, 1996.
/s/ Imowitz Koenig & Co., LLP
-----------------------------
Imowitz Koenig & Co., LLP
New York, New York
December 10, 1996
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Andrew L. Farkas, James A. Aston and
John K. Lines, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to act, without the
other, for him and in his name, place, and stead, in any and all capacities as
an officer or director of Insignia Financial Group, Inc., to sign a
Registration Statement on Form S-3 of Insignia Financial Group, Inc. and
Insignia Financing I, and any or all amendments (including post-effective
amendments) thereto, relating to the 6 1/2% Trust Convertible Preferred
Securities of Insignia Financing I, the 6 1/2% Convertible Subordinated
Debentures due September 30, 2016 of Insignia Financial Group, Inc. and the
shares of Class A Common Stock of Insignia Financial Group, Inc. issuable upon
conversion thereof, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as full to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, their substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Andrew L. Farkas /s/ John F. Jacques
- ----------------------- -----------------------
Andrew L. Farkas John F. Jacques
/s/ James A. Aston /s/ Ronald Uretta
- ----------------------- -----------------------
James A. Aston Ronald Uretta
/s/ Robert I. Denison /s/ Robert G. Koen
- ----------------------- -----------------------
Robert J. Denison Robert G. Koen
/s/ Robin L. Farkas /s/ Michael L. Lipstein
- ----------------------- -----------------------
Robin L. Farkas Michael L. Lipstein
/s/ Merril M. Halpern /s/ Buck Mickel
- ----------------------- -----------------------
Merril M. Halpern Buck Mickel
<PAGE>
Exhibit 24.2
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Andrew L. Farkas, James A. Aston and
John K. Lines, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to act, without the
other, for him and in his name, place, and stead, in any and all capacities,
to sign a Registration Statement on Form S-3 of Insignia Financial Group, Inc.
and Insignia Financing I, and any or all amendments (including post-effective
amendments) thereto, relating to the 6 1/2% Trust Convertible Preferred
Securities of Insignia Financing I, the 6 1/2% Convertible Subordinated
Debentures due September 30, 2016 of Insignia Financial Group, Inc. and the
shares of Class A Common Stock of Insignia Financial Group, Inc. issuable upon
conversion thereof, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as full to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, their substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Andrew L. Farkas /s/ Ronald Uretta
- ----------------------- --------------------
Andrew L. Farkas Ronald Uretta
/s/ John K. Lines
- -----------------------
John K. Lines
<PAGE>
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2)
-------------------------
First Union National Bank of South Carolina
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
57-0405803
(STATE OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A NATIONAL BANK) IDENTIFICATION NO.)
1441 Main Street
Columbia, South Carolina 29202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Rosemary M. Greco
1441 Main Street
Columbia, South Carolina 29202
(803) 251-2516
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-------------------------
Insignia Financial Group, Inc.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware (pending)
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
Insignia Financial Group, Inc.
One Insignia Financial Plaza
75 Beattie Place
Greenville, South Carolina 29601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
-------------------------
6 1/2% Convertible Subordinated Debentures due 2016
(TITLE OF THE INDENTURE SECURITIES)
- ------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
NAME ADDRESS
---- -------
Office of the Comptroller of Currency Washington, D.C.
Federal Reserve Bank Richmond, Va.
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting
securities of the trustee:
AS OF OCTOBER 31, 1996
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
Common stock ($3.331/3/par value)* 271,311,239
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee or its parent corporation are a trustee under another
indenture under which any other securities, or certificates of
interest or participation in any other securities, of the obligor
are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other indenture.
None.
- ---------------------
* ALL OF THE OUTSTANDING VOTING SECURITIES OF FIRST UNION NATIONAL BANK OF
SOUTH CAROLINA, THE TRUSTEE, ARE OWNED BY FIRST UNION CORPORATION. ANSWERS TO
THE ITEMS HEREIN CONCERNING VOTING SECURITIES OF THE TRUSTEE OWNED BY THIRD
PARTIES RELATE TO OUTSTANDING VOTING SECURITIES OF FIRST UNION CORPORATION.
1
<PAGE>
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interests within the meaning of Section
301(b)(1) of the Act arises as a result of the trusteeship under any
such other indenture, including a statement as to how the indenture
securities will rank as compared with the securities issued under
such other indenture.
Not applicable.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or its parent corporation or any of the directors or
executive officers of the trustee or its parent corporation is a
director, officer, partner, employee, appointee, or representative
of the obligor or of any underwriter for the obligor, identify each
such person having any such connection and state the nature of each
such connection.
None.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee or its parent corporation owned beneficially by the obligor
and each director, partner, and executive officer of the obligor.
AS OF DECEMBER 6, 1996
None.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee or its parent corporation owned beneficially by each
underwriter for the obligor and each director, partner, and
executive officer of each such underwriter.
Not applicable.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in
default by the trustee or its parent corporation.
AS OF DECEMBER 6, 1996
None.
2
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OR ITS PARENT CORPORATION OWN BENEFICIALLY OR HOLD AS
COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN
UNDERWRITER FOR THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO
EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY OF WHICH ARE SO
OWNED OR HELD BY THE TRUSTEE OR ITS PARENT CORPORATION.
AS OF DECEMBER 6, 1996
None.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee or its parent corporation own beneficially or hold as
collateral security for obligations in default voting securities of
a person who, to the knowledge of the trustee or its parent
corporation, (1) owns 10 percent or more of the voting securities of
the obligor or (2) is an affiliate, other than a subsidiary, of the
obligor, furnish the following information as to the voting
securities of such person.
AS OF DECEMBER 6, 1996
None.
ITEM 11. OWNERSHIP OR HOLDING BY THE TRUSTEE OF ANY SECURITIES OF A
PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR.
If the trustee or its parent corporation own beneficially or hold as
collateral security for obligations in default any securities of a
person who, to the knowledge of the trustee or its parent
corporation, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of
securities of such person any of which are so owned or held by the
trustee or its parent corporation.
AS OF DECEMBER 6, 1996
None.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
The Obligor is indebted to the Trustee or its parent corporation as
follows:
COL. A COL. B COL. C
NATURE OF INDEBTEDNESS* AMOUNT OUTSTANDING DATE DUE
- ----------------------- ------------------ --------
Revolving Line of Credit Facility $3,500,000.00 December 11, 1998
Term Loan $2,216,673.67 December 15, 2000
3
<PAGE>
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this Indenture.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, or is trustee
for more than one outstanding series of securities under the
Indenture, state whether there has been a default under any such
indenture or series, identify the indenture or series affected, and
explain the nature of any such default.
None.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
None.
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to
be qualified under the Act.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
1. Articles of Association of First Union National Bank of South
Carolina as now in effect, incorporated to Exhibit (1) filed with
form T-1 Statement included in Registration Statement No. 33-52124.
2. Certificate of authority of the trustee to commence business,
incorporated to Exhibit (1) filed with form T-1 Statement included
in Registration Statement No. 33-52124.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the
documents specified in exhibits (1) or (2) above.
4. Existing By-laws of the trustee, or instruments corresponding
thereto, incorporated to Exhibit (1) filed with form T-1 Statement
included in Registration Statement No. 33- 52124.
5. The consent of the trustee required by Section 32(b) of the Act (see
page 5 of this form).
6. A copy of the latest report of condition of the trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
4
<PAGE>
NOTE
Inasmuch as this form T-1 is filed before ascertainment by the trustee of
all facts on which to base responsive answers to Items 2, 4, 5, 6, 7, 8, 9,
10, 12, 13, and 14, the answers to such Items are based on incomplete
information. Such Items are, however, to be considered correct unless amended
by an amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trustee Indenture Act of 1939, the
trustee, First Union National Bank of South Carolina, a national banking
association, has duly caused this statement of eligibility and qualification
to be signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Columbia, State of South Carolina, on the 5th day of December,
1996.
FIRST UNION NATIONAL BANK
OF SOUTH CAROLINA
By:/s/ Rosemary M. Greco
---------------------
Rosemary M. Greco
Vice President
5
<PAGE>
Full Title of Bank: First Union National Bank of South Carolina
Address: P.O. Box 1329
City, State, Zip: Greenville, S.C. 29602
Call Date: 9/30/96
FDIC Certificate No.: 18395
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C300
-----------
BIL MIL
DOLLAR AMOUNTS IN THOUSANDS RCON THOU
--------------------------------------------------------------------------- ------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin (1).................. 0081 133,900 1.a.
b. Interest-bearing balances (2)........................................... 0071 9 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) ............. 1754 47,552 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ........... 1773 213,204 2.b.
3. Federal funds sold and securities purchased under agreements to resell:
a. Federal funds sold ..................................................... 0276 335,251 3.a.
b. Securities purchased under agreements to resell......................... 0277 0 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C)........................ RCON 2122 2,349,196 4.a.
b. LESS: Allowance for loan and lease losses .... RCON 3123 31,866 4.b.
c. LESS: Allocated transfer risk reserve ....... RCON 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a minus 4.b and 4.c)................................. 2125 2,317,330 4.d.
5. Trading assets (from Schedule RC-D)........................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................... 2145 52,727 6.
7. Other real estate owned (from Schedule RC-M)............................... 2150 3,162 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)...................................................... 2130 872 8.
9. Customers' liability to this bank on acceptances outstanding ............. 2155 12,998 9.
10. Intangible assets (from Schedule RC-M) .................................... 2143 74,279 10.
11. Other assets (from Schedule RC-F).......................................... 2160 46,553 11.
12. Total assets (sum of items 1 through 11)................................... 2170 3,237,837 12.
------ -----------
</TABLE>
- ------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
Full Title of Bank: First Union National Bank of South Carolina
Address: P.O. Box 1329
City, State, Zip: Greenville, S.C. 29602
Call Date: 9/30/96
FDIC Certificate No.: 18395
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
THOUSANDS RCON BIL MIL THOU
- ----- --------------------------- ------------------------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A
and C from Schedule RC-E) ......................... 2200 2,463,516 13.a.
(1) Noninterest-bearing (1).. RCON 6631 454,880 13.a.(1)
(2) Interest-bearing ........ RCON 6636 2,008,636 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs ............................
(1) Noninterest-bearing ...........................
(2) Interest-bearing ..............................
14. Federal funds purchased and securities sold under
agreements to repurchase:
a. Federal funds purchased ........................... 0278 315,764 14.a.
b. Securities sold under agreements to repurchase ... 0279 69,978 14.b.
15. a. Demand notes issued to the U.S. Treasury ......... 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D) ......... 3548 0 15.b.
16. Other borrowed money:
a. With a remaining maturity of one year or less .... 2332 20,000 16.a.
b. With a remaining maturity of more than one year .. 2333 0 16.b.
17. Mortgage indebtedness and obligations under
capitalized leases ................................... 2910 0 17
18. Bank's liability on acceptances executed and
outstanding .......................................... 2920 12,998 18.
19. Subordinated notes and debentures .................... 3200 50,000 19.
20. Other liabilities (from Schedule RC-G) ............... 2930 35,226 20.
21. Total liabilities (sum of items 13 through 20) ...... 2948 2,967,482 21.
22. Limited-life preferred stock and related surplus .... 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus ....... 3838 0 23.
24. Common stock ......................................... 3230 4,575 24.
25. Surplus (exclude all surplus related to preferred
stock) ............................................... 3839 203,476 25.
26. a. Undivided profits and capital reserves ........... 3632 63,439 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities ........................ 8434 (1,135) 26.b.
27. Cumulative foreign currency translation adjustments ..
28. Total equity capital (sum of items 23 through 27) ... 3210 270,355 28.
29. Total liabilities, limited-life preferred stock, and
equity capital (sum of items 21, 22, and 28) ........ 3300 3,237,837 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent Number
external auditors as of any date during 1995 ............ RCON 6724 N/A M.1.
</TABLE>
1 = Independent audit or the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank.
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately).
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority).
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
<PAGE>
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2)
-------------------
First Union National Bank of South Carolina
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
57-0405803
(STATE OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A NATIONAL BANK) IDENTIFICATION NO.)
1441 Main Street
Columbia, South Carolina 29202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Rosemary M. Greco
1441 Main Street
Columbia, South Carolina 29202
(803) 251-2516
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-------------------
Insignia Financing I
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-35911193
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
c/o Insignia Financial Group, Inc.
One Insignia Financial Plaza
75 Beattie Place
Greenville, South Carolina 29601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
-------------------
6 1/2% Convertible Preferred Securities
(TITLE OF THE INDENTURE SECURITIES)
- ------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
NAME ADDRESS
---- -------
Office of the Comptroller of Currency Washington, D.C.
Federal Reserve Bank Richmond, Va.
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting
securities of the trustee:
AS OF OCTOBER 31, 1996
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
Common stock ($3.331/3/par value)* 271,311,239
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee or its parent corporation are a trustee under another
indenture under which any other securities, or certificates of
interest or participation in any other securities, of the obligor
are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other indenture.
None.
- -----------------
* INDEBTEDNESS IS HELD BY FIRST UNION NATIONAL BANK OF NORTH CAROLINA, WHICH
IS WHOLLY-OWNED BY FIRST UNION CORPORATION. AMOUNT OUTSTANDING REPRESENTS
PERCENTAGE INTEREST OF FIRST UNION NATIONAL BANK OF NORTH CAROLINA IN CERTAIN
CREDIT FACILITIES PROVIDED TO OBLIGOR BY VARIOUS FINANCIAL INSTITUTIONS.
1
<PAGE>
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interests within the meaning of Section
301(b)(1) of the Act arises as a result of the trusteeship under any
such other indenture, including a statement as to how the indenture
securities will rank as compared with the securities issued under
such other indenture.
Not applicable
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or its parent corporation or any of the directors or
executive officers of the trustee or its parent corporation is a
director, officer, partner, employee, appointee, or representative
of the obligor or of any underwriter for the obligor, identify each
such person having any such connection and state the nature of each
such connection.
None.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
Furnish the following information as to the voting securities of the
trustee or its parent corporation owned beneficially by the obligor
and each director, partner, and executive officer of the obligor.
AS OF DECEMBER 6, 1996
None.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee or its parent corporation owned beneficially by each
underwriter for the obligor and each director, partner, and executive
officer of each such underwriter.
Not applicable.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in
default by the trustee or its parent corporation.
AS OF DECEMBER 6, 1996
None.
2
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OR ITS PARENT CORPORATION OWN BENEFICIALLY OR HOLD AS
COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN
UNDERWRITER FOR THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO
EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY OF WHICH ARE SO
OWNED OR HELD BY THE TRUSTEE OR ITS PARENT CORPORATION.
AS OF DECEMBER 6, 1996
None.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee or its parent corporation own beneficially or hold as
collateral security for obligations in default voting securities of
a person who, to the knowledge of the trustee or its parent
corporation, (1) owns 10 percent or more of the voting securities of
the obligor or (2) is an affiliate, other than a subsidiary, of the
obligor, furnish the following information as to the voting
securities of such person.
AS OF DECEMBER 6, 1996
None.
ITEM 11. OWNERSHIP OR HOLDING BY THE TRUSTEE OF ANY SECURITIES OF A
PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR.
If the trustee or its parent corporation own beneficially or hold as
collateral security for obligations in default any securities of a
person who, to the knowledge of the trustee or its parent
corporation, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of
securities of such person any of which are so owned or held by the
trustee or its parent corporation.
AS OF DECEMBER 6, 1996
None.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
The Obligor is indebted to the Trustee or its parent corporation as
follows:
AS OF DECEMBER 6, 1996
None.
3
<PAGE>
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this Indenture.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, or is trustee
for more than one outstanding series of securities under the
Indenture, state whether there has been a default under any such
indenture or series, identify the indenture or series affected, and
explain the nature of any such default.
None.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
None.
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to
be qualified under the Act.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
1. Articles of Association of First Union National Bank of South
Carolina as now in effect, incorporated to Exhibit (1) filed with
form T-1 Statement included in Registration Statement No. 33-52124.
2. Certificate of authority of the trustee to commence business,
incorporated to Exhibit (1) filed with form T-1 Statement included
in Registration Statement No. 33-52124.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the
documents specified in exhibits (1) or (2) above.
4. Existing By-laws of the trustee, or instruments corresponding
thereto, incorporated to Exhibit (1) filed with form T-1 Statement
included in Registration Statement No. 33- 52124.
5. The consent of the trustee required by Section 32(b) of the Act (see
page 5 of this form).
6. A copy of the latest report of condition of the trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
4
<PAGE>
NOTE
Inasmuch as this form T-1 is filed before ascertainment by the trustee of
all facts on which to base responsive answers to Items 2, 4, 5, 6, 7, 8, 9,
10, 12, 13, and 14, the answers to such Items are based on incomplete
information. Such Items are, however, to be considered correct unless amended
by an amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trustee Indenture Act of 1939, the
trustee, First Union National Bank of South Carolina, a national banking
association, has duly caused this statement of eligibility and qualification
to be signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Columbia, State of South Carolina, on the 5th day of December,
1996.
FIRST UNION NATIONAL BANK
OF SOUTH CAROLINA
By:/s/ Rosemary M. Greco
--------------------------
Rosemary M. Greco
Vice President
5
<PAGE>
Full Title of Bank: First Union National Bank of South Carolina
Address: P.O. Box 1329
City, State, Zip: Greenville, S.C. 29602
Call Date: 9/30/96
FDIC Certificate No.: 18395
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C300
-----------
BIL MIL
DOLLAR AMOUNTS IN THOUSANDS RCON THOU
--------------------------------------------------------------------------- ------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin (1).................. 0081 133,900 1.a.
b. Interest-bearing balances (2)........................................... 0071 9 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) ............. 1754 47,552 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ........... 1773 213,204 2.b.
3. Federal funds sold and securities purchased under agreements to resell:
a. Federal funds sold ..................................................... 0276 335,251 3.a.
b. Securities purchased under agreements to resell......................... 0277 0 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C)........................ RCON 2122 2,349,196 4.a.
b. LESS: Allowance for loan and lease losses .... RCON 3123 31,866 4.b.
c. LESS: Allocated transfer risk reserve ....... RCON 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a minus 4.b and 4.c)................................. 2125 2,317,330 4.d.
5. Trading assets (from Schedule RC-D)........................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................... 2145 52,727 6.
7. Other real estate owned (from Schedule RC-M)............................... 2150 3,162 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)...................................................... 2130 872 8.
9. Customers' liability to this bank on acceptances outstanding ............. 2155 12,998 9.
10. Intangible assets (from Schedule RC-M) .................................... 2143 74,279 10.
11. Other assets (from Schedule RC-F).......................................... 2160 46,553 11.
12. Total assets (sum of items 1 through 11)................................... 2170 3,237,837 12.
------ -----------
</TABLE>
- ------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
Full Title of Bank: First Union National Bank of South Carolina
Address: P.O. Box 1329
City, State, Zip: Greenville, S.C. 29602
Call Date: 9/30/96
FDIC Certificate No.: 18395
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
THOUSANDS RCON BIL MIL THOU
- ----- --------------------------- ------------------------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A
and C from Schedule RC-E) ......................... 2200 2,463,516 13.a.
(1) Noninterest-bearing (1).. RCON 6631 454,880 13.a.(1)
(2) Interest-bearing ........ RCON 6636 2,008,636 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs ............................
(1) Noninterest-bearing ...........................
(2) Interest-bearing ..............................
14. Federal funds purchased and securities sold under
agreements to repurchase:
a. Federal funds purchased ........................... 0278 315,764 14.a.
b. Securities sold under agreements to repurchase ... 0279 69,978 14.b.
15. a. Demand notes issued to the U.S. Treasury ......... 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D) ......... 3548 0 15.b.
16. Other borrowed money:
a. With a remaining maturity of one year or less .... 2332 20,000 16.a.
b. With a remaining maturity of more than one year .. 2333 0 16.b.
17. Mortgage indebtedness and obligations under
capitalized leases ................................... 2910 0 17
18. Bank's liability on acceptances executed and
outstanding .......................................... 2920 12,998 18.
19. Subordinated notes and debentures .................... 3200 50,000 19.
20. Other liabilities (from Schedule RC-G) ............... 2930 35,226 20.
21. Total liabilities (sum of items 13 through 20) ...... 2948 2,967,482 21.
22. Limited-life preferred stock and related surplus .... 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus ....... 3838 0 23.
24. Common stock ......................................... 3230 4,575 24.
25. Surplus (exclude all surplus related to preferred
stock) ............................................... 3839 203,476 25.
26. a. Undivided profits and capital reserves ........... 3632 63,439 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities ........................ 8434 (1,135) 26.b.
27. Cumulative foreign currency translation adjustments ..
28. Total equity capital (sum of items 23 through 27) ... 3210 270,355 28.
29. Total liabilities, limited-life preferred stock, and
equity capital (sum of items 21, 22, and 28) ........ 3300 3,237,837 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent Number
external auditors as of any date during 1995 ............ RCON 6724 N/A M.1.
</TABLE>
1 = Independent audit or the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank.
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately).
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority).
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
<PAGE>
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2)
--------------------
First Union National Bank of South Carolina
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
57-0405803
(STATE OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A NATIONAL BANK) IDENTIFICATION NO.)
1441 Main Street
Columbia, South Carolina 29202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Rosemary M. Greco
1441 Main Street
Columbia, South Carolina 29202
(803) 251-2516
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
--------------------
Insignia Financial Group, Inc.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-35911193
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
Insignia Financial Group, Inc.
One Insignia Financial Plaza
75 Beattie Place
Greenville, South Carolina 29601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
--------------------
6 1/2% Convertible Preferred Securities
(TITLE OF THE INDENTURE SECURITIES)
- ------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
NAME ADDRESS
---- -------
Office of the Comptroller of Currency Washington, D.C.
Federal Reserve Bank Richmond, Va.
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting
securities of the trustee:
AS OF OCTOBER 31, 1996
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
Common stock ($3.331/3/par value)* 271,311,239
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee or its parent corporation are a trustee under another
indenture under which any other securities, or certificates of
interest or participation in any other securities, of the obligor
are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other indenture.
None.
- --------------------
*ALL OF THE OUTSTANDING VOTING SECURITIES OF FIRST UNION NATIONAL BANK OF
SOUTH CAROLINA, THE TRUSTEE, ARE OWNED BY FIRST UNION CORPORATION. ANSWERS TO
THE ITEMS HEREIN CONCERNING VOTING SECURITIES OF THE TRUSTEE OWNED BY THIRD
PARTIES RELATE TO OUTSTANDING VOTING SECURITIES OF FIRST UNION CORPORATION.
1
<PAGE>
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interests within the meaning of Section
301(b)(1) of the Act arises as a result of the trusteeship under any
such other indenture, including a statement as to how the indenture
securities will rank as compared with the securities issued under
such other indenture.
Not applicable
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or its parent corporation or any of the directors or
executive officers of the trustee or its parent corporation is a
director, officer, partner, employee, appointee, or representative
of the obligor or of any underwriter for the obligor, identify each
such person having any such connection and state the nature of each
such connection.
None.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee or its parent corporation owned beneficially by the obligor
and each director, partner, and executive officer of the obligor.
AS OF DECEMBER 6, 1996
None.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee or its parent corporation owned beneficially by each
underwriter for the obligor and each director, partner, and
executive officer of each such underwriter.
Not applicable.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the
obligor owned beneficially or held as collateral security
for obligations in default by the trustee or its parent
corporation.
AS OF DECEMBER 6, 1996
None.
2
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
If the trustee or its parent corporation own beneficially or hold as
collateral security for obligations in default any securities of an
underwriter for the obligor, furnish the following information as to
each class of securities of such underwriter any of which are so
owned or held by the trustee or its parent corporation.
AS OF DECEMBER 6, 1996
None.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee or its parent corporation own beneficially or hold as
collateral security for obligations in default voting securities of
a person who, to the knowledge of the trustee or its parent
corporation, (1) owns 10 percent or more of the voting securities of
the obligor or (2) is an affiliate, other than a subsidiary, of the
obligor, furnish the following information as to the voting
securities of such person.
AS OF DECEMBER 6, 1996
None.
ITEM 11. OWNERSHIP OR HOLDING BY THE TRUSTEE OF ANY SECURITIES OF A
PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR.
If the trustee or its parent corporation own beneficially or hold as
collateral security for obligations in default any securities of a
person who, to the knowledge of the trustee or its parent
corporation, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of
securities of such person any of which are so owned or held by the
trustee or its parent corporation.
AS OF DECEMBER 6, 1996
None.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
The Obligor is indebted to the Trustee or its parent corporation as
follows:
COL. A COL. B COL. C
NATURE OF INDEBTEDNESS* AMOUNT OUTSTANDING DATE DUE
----------------------- ------------------ --------
Revolving Line of Credit Facility $3,500,000.00 December 11, 1998
Term Loan $2,216,673.67 December 15, 2000
3
<PAGE>
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this Indenture.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, or is trustee
for more than one outstanding series of securities under the
Indenture, state whether there has been a default under any such
indenture or series, identify the indenture or series affected, and
explain the nature of any such default.
None.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
None.
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to
be qualified under the Act.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
1. Articles of Association of First Union National Bank of South
Carolina as now in effect, incorporated to Exhibit (1) filed with
form T-1 Statement included in Registration Statement No. 33-52124.
2. Certificate of authority of the trustee to commence business,
incorporated to Exhibit (1) filed with form T-1 Statement included
in Registration Statement No. 33-52124.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the
documents specified in exhibits (1) or (2) above.
4. Existing By-laws of the trustee, or instruments corresponding
thereto, incorporated to Exhibit (1) filed with form T-1 Statement
included in Registration Statement No. 33- 52124.
5. The consent of the trustee required by Section 32(b) of the Act (see
page 5 of this form).
6. A copy of the latest report of condition of the trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
4
<PAGE>
NOTE
Inasmuch as this form T-1 is filed before ascertainment by the trustee of
all facts on which to base responsive answers to Items 2, 4, 5, 6, 7, 8, 9,
10, 12, 13, and 14, the answers to such Items are based on incomplete
information. Such Items are, however, to be considered correct unless amended
by an amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trustee Indenture Act of 1939, the
trustee, First Union National Bank of South Carolina, a national banking
association, has duly caused this statement of eligibility and qualification
to be signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Columbia, State of South Carolina, on the 5th day of December,
1996.
FIRST UNION NATIONAL BANK
OF SOUTH CAROLINA
By:/s/ Rosemary M. Greco
-------------------------------
Rosemary M. Greco
Vice President
5
<PAGE>
Full Title of Bank: First Union National Bank of South Carolina
Address: P.O. Box 1329
City, State, Zip: Greenville, S.C. 29602
Call Date: 9/30/96
FDIC Certificate No.: 18395
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C300
-----------
BIL MIL
DOLLAR AMOUNTS IN THOUSANDS RCON THOU
--------------------------------------------------------------------------- ------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin (1).................. 0081 133,900 1.a.
b. Interest-bearing balances (2)........................................... 0071 9 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) ............. 1754 47,552 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ........... 1773 213,204 2.b.
3. Federal funds sold and securities purchased under agreements to resell:
a. Federal funds sold ..................................................... 0276 335,251 3.a.
b. Securities purchased under agreements to resell......................... 0277 0 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C)........................ RCON 2122 2,349,196 4.a.
b. LESS: Allowance for loan and lease losses .... RCON 3123 31,866 4.b.
c. LESS: Allocated transfer risk reserve ....... RCON 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a minus 4.b and 4.c)................................. 2125 2,317,330 4.d.
5. Trading assets (from Schedule RC-D)........................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................... 2145 52,727 6.
7. Other real estate owned (from Schedule RC-M)............................... 2150 3,162 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)...................................................... 2130 872 8.
9. Customers' liability to this bank on acceptances outstanding ............. 2155 12,998 9.
10. Intangible assets (from Schedule RC-M) .................................... 2143 74,279 10.
11. Other assets (from Schedule RC-F).......................................... 2160 46,553 11.
12. Total assets (sum of items 1 through 11)................................... 2170 3,237,837 12.
------ -----------
</TABLE>
- ------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
Full Title of Bank: First Union National Bank of South Carolina
Address: P.O. Box 1329
City, State, Zip: Greenville, S.C. 29602
Call Date: 9/30/96
FDIC Certificate No.: 18395
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
THOUSANDS RCON BIL MIL THOU
- ----- --------------------------- ------------------------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A
and C from Schedule RC-E) ......................... 2200 2,463,516 13.a.
(1) Noninterest-bearing (1).. RCON 6631 454,880 13.a.(1)
(2) Interest-bearing ........ RCON 6636 2,008,636 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs ............................
(1) Noninterest-bearing ...........................
(2) Interest-bearing ..............................
14. Federal funds purchased and securities sold under
agreements to repurchase:
a. Federal funds purchased ........................... 0278 315,764 14.a.
b. Securities sold under agreements to repurchase ... 0279 69,978 14.b.
15. a. Demand notes issued to the U.S. Treasury ......... 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D) ......... 3548 0 15.b.
16. Other borrowed money:
a. With a remaining maturity of one year or less .... 2332 20,000 16.a.
b. With a remaining maturity of more than one year .. 2333 0 16.b.
17. Mortgage indebtedness and obligations under
capitalized leases ................................... 2910 0 17
18. Bank's liability on acceptances executed and
outstanding .......................................... 2920 12,998 18.
19. Subordinated notes and debentures .................... 3200 50,000 19.
20. Other liabilities (from Schedule RC-G) ............... 2930 35,226 20.
21. Total liabilities (sum of items 13 through 20) ...... 2948 2,967,482 21.
22. Limited-life preferred stock and related surplus .... 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus ....... 3838 0 23.
24. Common stock ......................................... 3230 4,575 24.
25. Surplus (exclude all surplus related to preferred
stock) ............................................... 3839 203,476 25.
26. a. Undivided profits and capital reserves ........... 3632 63,439 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities ........................ 8434 (1,135) 26.b.
27. Cumulative foreign currency translation adjustments ..
28. Total equity capital (sum of items 23 through 27) ... 3210 270,355 28.
29. Total liabilities, limited-life preferred stock, and
equity capital (sum of items 21, 22, and 28) ........ 3300 3,237,837 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent Number
external auditors as of any date during 1995 ............ RCON 6724 N/A M.1.
</TABLE>
1 = Independent audit or the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank.
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately).
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority).
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
