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Registration Nos. 333-17595
333-17595-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3/A (1)
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 57-6176373
(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. |_|
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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. |_|
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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 13, 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
September 1, 1995, 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 combined consolidated
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 (v) 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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<PAGE>
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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<PAGE>
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
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
=========
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<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
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<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.
The combined consolidated balance sheets of NPI Property Management
Corporation, Inc. and Subsidiaries, National 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 for the
years then ended and the consolidated statements of operations and cash flows
of National Property Investors, Inc. 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.
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 13, 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
September 1, 1995, 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 combined consolidated 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
P-5
<PAGE>
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.
P-12
<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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<PAGE>
<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, National 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 for the
years then ended and the consolidated statements of operations and cash flows
of National Property Investors, Inc. 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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<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 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
- -----------------
* Previously filed.
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 this Amendment to Form S-3 and has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Greenville, State of South Carolina,
on December 13, 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 this Amendment to Form S-3 and has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Greenville, State of South Carolina,
on December 13, 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
has been signed by the following persons in the capacities indicated, on
December 13, 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>
Exhibit 23.1(a)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in Amendment No. 1 to 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 11, 1996
<PAGE>
Exhibit 23.1(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
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 12, 1996
<PAGE>
EXHIBIT 23.1(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
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 Amendment No. 1 to 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 Amendment
No. 1 to the Registration Statement (Form 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 22, 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 on December 10, 1996. We also consent to the reference to
our firm under the caption "Experts."
/s/ Imowitz Koenig & Co., LLP
-----------------------------
Imowitz Koenig & Co., LLP
New York, New York
December 12, 1996
