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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 15, 1997
CITYSCAPE FINANCIAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-27314 11-2994671
STATE OR OTHER JURISDICTION COMMISSION (IRS EMPLOYER
OF INCORPORATION FILE NUMBER IDENTIFICATION NO.)
565 TAXTER ROAD, ELMSFORD, NEW YORK 10523-5200
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES) ZIP CODE
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 592-6677
----------------------------------------------------
FORMER NAME OR FORMER ADDRESS,
IF CHANGED SINCE LAST REPORT
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Item 5. Other Events.
ISSUANCE OF 6% CONVERTIBLE PREFERRED STOCK, SERIES B AND RELATED WARRANTS
On September 15, 1997, the Company completed the private placement of 5,000
shares of 6% Convertible Preferred Stock, Series B (the "Series B Preferred
Stock"), with a liquidation preference (the "Liquidation Preference") of $10,000
per share, and related Warrants, pursuant to which the Company received
aggregate net proceeds (after transaction fees and expenses) of approximately
$49 million. The net proceeds from the sale of the Series B Preferred Stock will
be used for working capital purposes.
Dividends on the Series B Preferred Stock are cumulative at the rate of 6% of
the Liquidation Preference per annum payable quarterly. Dividends are payable,
at the option of the Company, (i) in cash, (ii) in shares of Common Stock valued
at the closing price on the day immediately preceding the dividend payment date
or (iii) by increasing the Liquidation Preference in an amount equal to and in
lieu of the cash dividend payment.
The Series B Preferred Stock is redeemable at the option of the Company at a
redemption price equal to 110% of the Liquidation Preference at any time prior
to December 14, 1997. In addition, the Series B Preferred Stock is redeemable at
the option of the Company at a redemption price equal to 120% of the Liquidation
Preference within 30 days of the occurrence of any of the following events: (i)
the Common Stock ceases to be listed on Nasdaq (or a national securities
exchange); (ii) the Company is unable for any reason to issue Common Stock upon
receipt of a notice of conversion (such redemption only to the effected
holders); (iii) the Company fails to make certain cash payments when due as
described below (such redemption only to the effected holders); (iv) trading in
the Common Stock is suspended by Nasdaq (or a national securities exchange) for
more than seven consecutive trading days; and (v) the registration statement the
Company is required to file with respect to the resale of the Common Stock
issuable upon conversion of the Series B Preferred or exercise of the Warrants
(the "Preferred Registration Statement") has not been declared effective on or
before March 14, 1998. In addition, the Series B Preferred Stock is redeemable
at the option of the Company at a redemption price equal to 115% of the
Liquidation Preference upon notice of, or the announcement of Company's intent
to engage in a Change in Control (as defined below) or, if such notice or
announcement occurs on or after March 14, 1998, 125% of the Liquidation
Preference thereof.
The Series B Preferred Stock is convertible into shares of Common Stock
subject to the following restrictions: each holder is entitled to convert up to
33% of its Series B Preferred Stock after 180 days following the date of
issuance; up to 67% (on a cumulative basis) after 210 days; and up to 100% after
240 days; provided, that if the aggregate liquidation preference of the
Company's 6% Convertible Preferred Stock, Series A (the "Series A Preferred
Stock") falls below $10.0 million, then after the occurrence of such event each
holder will be entitled to convert up to 20% of its Series B Preferred Stock
immediately following such date; up to 53% (on a cumulative basis) after 180
days following the date of issuance of the Series B Preferred Stock; up to 87%
after 210 days; and up to 100% after 240 days. The conversion price for such
conversions is equal to the lowest daily sales price of the Common Stock during
the four consecutive trading days immediately preceding conversion (the
"Conversion Period"), discounted by 4% for conversions occurring 181 days after
the date of issuance of the Series B Preferred Stock. In addition to the
foregoing conversion provisions, each holder of Series B Preferred Stock is
entitled to convert on the early conversion terms described below an additional
10% of its Series B Preferred Stock on the date of issuance and up to 30%(on a
cumulative basis) after 90 days. The early conversion terms are the same as
those for a normal conversion except that the conversion price is equal to 104%
of the lowest trading price of the Common Stock during the Conversion Period and
the Liquidation Preference of the shares so converted will not include accrued
but unpaid dividends.
In connection with the issuance of the Series B Preferred Stock, the Company
waived certain existing restrictions on conversion of the Series A Preferred
Stock. For the Series A Preferred Stock conversion restriction period ending on
October 6, 1997, the Company has waived the conversion restriction to increase
the percentage (from 50% to 75% on a cumulative basis) of Series A Preferred
Stock owned by each holder that may be converted. Thereafter, the Series A
Preferred Stock will not be subject to conversion restrictions.
Upon the occurrence of any of the events that give rise to the Company's
optional redemption right described in clauses (i) through (v) of the third
paragraph above, the conversion restrictions will be lifted, the Conversion
Period will
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be increased to 15 consecutive trading days and the conversion discount will be
increased to 10%. In addition, during the continuance of such events or the
failure (beyond certain specified periods) of the Preferred Registration
Statement to remain effective and available for use, the dividend rate will be
increased to 15% and the Company will be obligated to make certain cash payments
to the holders of the Series B Preferred Stock, provided that if the Company is
prohibited from making such payments, such amounts will be added to the
Liquidation Preference. Any shares of Series B Preferred Stock outstanding on
the fifth anniversary of the original issuance date (subject to certain
extensions as provided in the Certificate of Designations) will be automatically
converted into Common Stock at the conversion price in effect on the date
thereof.
In the event of a Change of Control (as defined below), the conversion
restrictions will be lifted and, in the case of a Change of Control described in
clause (i) or (ii) below, the holders of the Series B Preferred Stock may elect,
within a specified period, to have the Company redeem such stock at a redemption
price equal to 110% of the Liquidation Preference. For purposes of the Series B
Preferred Stock, a Change of Control is defined as (i) the sale, conveyance or
disposition of all or substantially all of the assets of the Company, (ii) the
consolidation or merger of the Company, in which the stockholders of the Company
immediately preceding the merger or consolidation fail to continue to own more
than 50% of the voting power of the capital stock of the surviving entity and
(iii) the acquisition of more than 50% of the voting power of the Company's
capital stock by any entity or "group," subject to certain exceptions.
The Warrants are exercisable at any time within five years of issuance for an
aggregate of 500,000 shares of Common Stock at an exercise price per share equal
to the lesser of (i) $14.71, which is equal to 130% of the closing sale price of
the Common Stock on the trading day immediately prior to the date of original
issuance of the Warrants, or (ii) 130% of the average closing sales prices over
the 20 trading day period ending on the trading day immediately prior to the
first anniversary of the original issuance of the Warrants.
The Company has provided registration rights in connection with the resale of
the Common Stock issued upon conversion of the Series B Preferred Stock or the
exercise of the Warrants and has agreed to file the Preferred Registration
Statement.
A copy of the underlying Securities Purchase Agreement by and between the
Company and the purchasers named therein, the Certificate of Designation of the
Series B Preferred Stock, the Registration Rights Agreement and the Form of
Warrant have been filed with this Form 8-K as exhibits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
4.1 Certificate of Designation of 6% Convertible Preferred Stock, Series B.
4.2 Securities Purchase Agreement dated September 15, 1997 by and among the
Company and the purchasers named therein.
4.3 Registration Rights Agreement dated September 15, 1997 by and among the
Company and the purchasers named therein.
4.4 Form of Common Stock Purchase Warrant.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
CITYSCAPE FINANCIAL CORP.
(Registrant)
By: /s/ Robert C. Patent
-----------------------------
Name: Robert C. Patent
Title: Executive Vice President
Dated: September 15, 1997
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
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<S> <C> <C>
4.1 Certificate of Designation of 6% Convertible Preferred Stock, Series B.
4.2 Securities Purchase Agreement dated September 15, 1997 by and among the
Company and the purchasers named therein.
4.3 Registration Rights Agreement dated September 15, 1997 by and among the
Company and the purchasers named therein.
4.4 Form of Common Stock Purchase Warrant.
</TABLE>
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Exhibit 4.1
CERTIFICATE OF DESIGNATIONS
of
6% CONVERTIBLE PREFERRED STOCK, SERIES B
of
CITYSCAPE FINANCIAL CORP.
Cityscape Financial Corp., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate
of Incorporation of the Corporation, the Board of Directors duly adopted the
following resolutions, which resolutions remain in full force and effect as of
the date hereof;
RESOLVED, that, pursuant to authority granted to and vested in the
Board of Directors in accordance with the Certificate of Incorporation of the
Corporation, the Board of Directors hereby authorizes the issuance of, and fixes
the designation and preferences and relative, participating, optional and other
special rights, and qualifications, limitations and restrictions, of a series of
the Corporation's previously authorized Preferred Stock consisting of 5,000
shares, par value $0.01, to be designated "6% Convertible Preferred Stock,
Series B" (the "Series B Preferred Stock").
RESOLVED, that each of the shares of Series B Preferred Stock shall
rank equally in all respects and shall be subject to the following terms and
provisions:
1. Dividends.
(a) Cumulative. Subject to the preferential dividend rights of
holders of the Corporation's 6% Convertible Preferred Stock, Series A (the
"Series A Preferred Stock), the holders of the Series B Preferred Stock shall be
entitled to receive dividends at the rate of six percent (6%) of the Liquidation
Preference of each share of Series B Preferred Stock, per annum payable
quarterly on March 31, June 30, September 30 and December 31 of each year,
commencing December 31, 1997 (each a "Dividend Payment Date"), in preference and
priority to any payment of any dividend on the Common Stock (as defined below)
or any other class or series of Junior Stock (as defined below) of the
Corporation. Such dividends shall accrue on each share of Series B Preferred
Stock from the most recent date on which a dividend has been paid with respect
to such Series B Preferred Stock, or if no dividends have been paid, from the
date of the original issuance of such Series B Preferred Stock, and such
dividends shall accrue on a daily basis, determined based on the actual number
of days and months elapsed and computed on a 360-day year consisting of twelve
30-day months. If a holder of Series B Preferred Stock elects to convert all or
a portion of its Series B Preferred Stock at any time prior to a Dividend
Payment Date, dividends shall accrue with respect to such holder's Series B
Preferred Stock up to and
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including the day of conversion and in lieu of payment of such dividend an
amount equal to such dividend shall be added to the Liquidation Preference (as
defined below) of such shares of Series B Preferred Stock to be converted. If at
any time dividends on the outstanding Series B Preferred Stock at the rate set
forth above shall not have been paid or declared and set apart for payment with
respect to all preceding periods, the amount of the deficiency shall be fully
paid or declared and set apart for payment, before any distribution, whether by
way of dividend or otherwise, shall be declared or paid upon or set apart for
the shares of any class or series of Junior Stock of the Corporation.
(b) Cash, Common Stock or Liquidation Preference Adjustment.
Dividends on the outstanding Series B Preferred Stock are payable to each holder
of Series B Preferred Stock registered on the books of the Corporation, at the
option of the Corporation, either (i) in cash, provided the Corporation has
assets legally available therefor, (ii) in shares of Common Stock, as determined
based upon the closing price of the Common Stock on the day immediately
preceding the Dividend Payment Date with respect to such dividend, provided that
the certificates representing such shares of Common Stock do not bear any
legends restricting their transfer or there is an "Effective Registration" (as
defined in the Securities Purchase Agreement, dated as of September 15, 1997
(the "Securities Purchase Agreement") between the Corporation and the investors
named therein) registering the resale by the holders of Series B Preferred Stock
of such shares of Common Stock or (iii) in lieu of payment of such dividend, an
amount equal to such dividend shall be added to the Liquidation Preference of
such Series B Preferred Stock. The Corporation shall notify each holder within
five trading days prior to a Dividend Payment Date of the form in which the
Corporation elects to pay dividends on the Series B Preferred Stock. If the
Corporation fails to provide such notice, payments of dividends shall (if
permitted by the preceding sentence) be in the form of shares of Common Stock.
If the Corporation (x) fails to provide timely notice of its election of the
form in which it intends to pay dividends and fails to timely deliver shares of
Common Stock with respect to a Dividend Payment Date as provided in clause (ii)
above or (y) provides timely notice of its election to pay dividends either in
cash or in shares of Common Stock as provided in clauses (i) or (ii) above, and
fails to timely deliver such cash or shares of Common Stock with respect to a
Dividend Payment Date as provided in clauses (i) or (ii) above, then in each
such case in lieu of payment of such dividend, an amount equal to such dividend
shall be added to the Liquidation Preference of such shares of Series B
Preferred Stock as provided in clause (iii) as of such Dividend Payment Date.
(c) Dividends or Distributions. The Corporation shall not, as
long as there is an aggregate amount in excess of 500 shares (as appropriately
adjusted for any stock split or reverse stock split of the shares of Series B
Preferred Stock) of Series B Preferred Stock outstanding, declare any dividends
or distributions (whether in cash or property) on the Common Stock or any other
class or series of Junior Stock that, upon payment, would cause the aggregate
fair market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive) of all such dividends and distributions which
have been declared or paid on such date and during the 365-day period
immediately preceding such date exceed the product of (x) .15 times (y) the
closing price of the Common Stock on the record date for such most recent
dividend or distribution times (z) the number of shares of Common Stock
outstanding on such date; provided, however, that the Corporation shall not
declare any dividends or distributions on the Common Stock or any other class or
series of Junior Stock if there exists, at the time of such
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declaration, any breach by the Corporation under the Securities Purchase
Agreement or the Registration Rights Agreement, dated as of September 15, 1997
(the "Registration Rights Agreement") between the Corporation and the investors
named therein.
2. Liquidation Preference; Change of Control Transactions.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (a "Liquidation
Event"), the holders of the Series B Preferred Stock then outstanding shall,
subject to the preferential rights of holders of the Series A Preferred Stock
and any other class of capital stock of the Corporation ranking senior to the
Series B Preferred Stock, be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, whether such assets
are capital, surplus or earnings, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of any Junior Stock, an
amount equal to the Liquidation Preference (as defined below). If upon the
occurrence of a Liquidation Event and after distribution among the holders of
the Series A Preferred Stock and any other class of capital stock of the
Corporation ranking senior to the Series B Preferred Stock, the assets and funds
available for distribution among the holders of the Series B Preferred Stock and
holders of securities ranking pari passu with the Series B Preferred Stock shall
be insufficient to permit the payment to such holders of the preferential
amounts payable thereon, then the entire assets and funds of the Corporation
legally available for distribution to the Series B Preferred Stock and the
shares ranking pari passu with such Series B Preferred Stock shall be
distributed ratably among such shares in proportion to the ratio that the
Liquidation Preference payable on each such share bears to the aggregate
Liquidation Preference payable on all such shares.
(b) For purposes hereof (i) the "Liquidation Preference"
with respect to each share of Series B Preferred Stock shall mean the amount of
$10,000 plus (x) any amounts in lieu of dividends added to the Liquidation
Preference in accordance with Section 1(b)(iii) above, (y) default payments
added to the Liquidation Preference pursuant to Section 8 hereof and (z) an
amount equal to any accrued but unpaid dividends (with dividends deemed accrued
on a daily basis through the date of such Liquidation Event, conversion or other
event, even if such event or any distribution is not on a Dividend Payment Date)
("Accrued Dividends"); (ii) "Person" shall mean any individual, corporation,
limited liability company, partnership, association, trust or other entity or
organization; and (iii) "Junior Stock" shall mean the Common Stock and all other
shares of capital stock of the Corporation that do not rank pari passu with or
do not have preference over the Series B Preferred Stock in respect of
dividends, redemption or distribution upon liquidation.
(c) A "Change of Control Transaction" shall mean, (i) the
sale, conveyance or disposition of all or substantially all of the assets of the
Corporation, (ii) a consolidation or merger of the Corporation with or into any
other "Person" (whether or not the Corporation is the surviving Person, but
other than a merger or consolidation whereby the stockholders of the Corporation
immediately preceding the merger or consolidation continue to own greater than
50% of the voting power of the capital stock of the surviving Person in such
merger or consolidation that is normally entitled to vote in the election of
directors, managers or trustees, as applicable) or, (iii) any Person or any
"group" (as such term is used in Section 13(d) of the
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Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes the
beneficial owner or is deemed to beneficially own (as described in Rule 13d-3
under the Exchange Act without regard to the 60-day exercise period) in excess
of 50% of the Corporation's voting power of the capital stock of the Corporation
normally entitled to vote in the election of directors of the Corporation (other
than (A) any group that held such voting power as of the date of this
Certificate of Designations, or (B) any group that holds such voting power
subsequent to the date of this Certificate of Designations, provided that the
persons that constitute such group include the majority of the members of, and
at least 50% of the voting power held by, a group referenced in clause (A)). The
Corporation shall promptly mail written notice of either the occurrence of, or
the announcement of the Corporation's intent to engage in, a Change of Control
Transaction (with a copy sent by facsimile), but in any event such notice (other
than, if inapplicable, in the case of a Change of Control Transaction of the
type set forth in clause (iii)) shall not be given less than twenty (20) days
prior to the effective date of such Change of Control Transaction to each record
holder of Series B Preferred Stock.
(d) Upon the notice or occurrence of, or announcement of
the Corporation's intent (or a third party's or parties' intent in the case of a
Change of Control Transaction of the type set forth in clause (iii) of the
definition of a Change of Control Transaction) to engage in, a Change of Control
Transaction, then the Series B Preferred Stock shall thereupon be convertible in
full, notwithstanding the limitations set forth in Section 3(a) hereof; provided
that a holder's ability to convert shares of Series B Preferred Stock shall
cease three (3) trading days prior to the consummation of a Change of Control
Transaction of the type set forth in clauses (i) and (ii) of the definition
thereof. In addition, upon either the notice of, or the announcement of the
Corporation's intent to engage in, a Change of Control Transaction (of the type
set forth in clauses (i) and (ii) of the definition thereof), the holder of
Series B Preferred Stock shall have the right, up to and including the third
trading day prior to the date of effectiveness of such Change in Control
Transaction, to elect redemption by the Corporation of any or all of the shares
of Series B Preferred Stock held by such holder at a redemption price equal to
110% of the Liquidation Preference thereof, which redemption, in the case of
such Change of Control Transaction, shall be conditioned upon and shall be
effective immediately prior to consummation of such Change of Control
Transaction. In connection with a Change of Control Transaction of the type set
forth in clause (i) and (ii) of the definition thereof, if (i) the holder does
not make a redemption election, (ii) the corporation does not make a redemption
election pursuant to Section 3(h)(6) hereof or (iii) the Corporation so elects
but fails to pay the redemption price, all shares of Series B Preferred Stock
shall be deemed automatically converted into shares of Common Stock immediately
prior to the consummation of such Change of Control Transaction, and the holder
shall receive the same consideration that a holder of Common Stock is entitled
to receive in connection with such Change of Control Transaction.
(e) In the event that at the time (the "Section 2(e)
Conversion Trigger Time") of the notice or occurrence of, or announcement of the
Corporation's intent (or a third party's or parties' intent) to engage in a
Change of Control Transaction of the type set forth in clause (iii) of the
definition of a Change of Control (a "Clause (iii) Change of Control
Transaction") there is not an Effective Registration registering the resale by
the holders of the Common Stock issuable upon conversion of the Series B
Preferred Stock and such Effective Registration is required for such holders to
sell such shares free of the legend requirements set forth in Article V of the
Securities
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Purchase Agreement, dated as of September 15, 1997, by and among the Corporation
and the Investors named therein, then the Series B Preferred Stock shall
thereupon be convertible in full, notwithstanding the limitations set forth in
Section 3(a) hereof, and holders of the Series B Preferred Stock shall have the
option to elect to convert their shares of Series B Preferred Stock pursuant to
the terms of Section 3 below as modified by this Section 2(e). In the case of a
conversion election pursuant to this Section 2(e), the modifications to Section
3 below are as follows: (i) the Valuation Period (as defined in Section 3(c)
below) shall commence on the fourth trading day prior to the date of the Section
2(e) Conversion Trigger Time and shall terminate on the earlier of (A) the
trading day immediately prior to the date such Clause (iii) Change of Control
Transaction is consummated or (B) the trading day on which any offer to purchase
made to the stockholders of the Corporation in connection with such Clause (iii)
Change of Control Transaction expires including, if the offer is extended or
amended, such extension or amendment (the "Section 2(e) Valuation Period"); (ii)
the Applicable Percentage shall not be subject to the adjustments provided in
Sections 4, 5(B), 7(B) and 9 hereof; (iii) a Conversion Notice (as defined in
Section 3(b) below) pursuant to this Section 2(e) may only be given during the
Section 2(e) Valuation Period and such Conversion Notice and the conversion
elected therein shall be conditioned upon and shall be effective only
immediately prior to the consummation of such Clause (iii) Change of Control
Transaction.
3. Conversion. Subject to the restrictions on conversion of
Series B Preferred Stock set forth in Section 3(a) hereof, each holder of the
Series B Preferred Stock shall have the right, at any time and from time to
time, to convert each share of Series B Preferred Stock into such number of
fully paid, validly issued and nonassessable shares ("Common Shares") of common
stock, par value $0.01 per share of the Corporation ("Common Stock"), free and
clear of any liens, claims or encumbrances (other than those created or suffered
by such holder), as is determined by dividing (i) the Liquidation Preference
times the number of shares of Series B Preferred Stock being converted (the
"Conversion Amount") by (ii) the Conversion Price (determined as hereinafter
provided) in effect on the Conversion Date (as defined below), on the following
terms and conditions.
(a) Conversion Restrictions.
(1) Except as otherwise provided herein, each
holder of Series B Preferred Stock may only convert such number of Series B
Preferred Stock owned by such holder as follows:
during calendar days 181 through 210 following the date of the
first issuance of the shares of Series B Preferred Stock (the
"Initial Issuance Date) 33% of the shares of Series B
Preferred Stock owned by such holder;
during calendar days 211 through 240 following the Initial
Issuance Date, 67% (on a cumulative basis) of the shares of
Series B Preferred Stock owned by such holder; and
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at any time on or after the 241st calendar day following the
Initial Issuance Date, 100% of the shares of Series B
Preferred Stock owned by such holder;
provided, that, if the aggregate Liquidation Preference of all outstanding
Series A Preferred Stock is less than $10,000,000, the Corporation shall provide
notice to the holders of Series B Preferred Stock of such event and each holder
may then convert the number of Series B Preferred Stock owned by such holder as
follows:
during calendar days 1 through 180 following the Initial
Issuance Date, 20% of the shares of the Series B Preferred
Stock owned by such holder;
during calendar days 181 through 210 following the Initial
Issuance Date, 53% (on a cumulative basis) of the shares of
the Series B Preferred Stock owned by such holder; and
during calendar days 211 through 241 following the Initial
Issuance Date, 87% (on a cumulative basis) of the shares of
the Series B Preferred Stock owned by such holder; and
at any time on or after the 241st calendar day following the
Initial Issuance Date, 100% of the shares of Series B
Preferred Stock owned by such holder.
(2) Except as otherwise provided herein and in
addition to such number of Series B Preferred Stock that may be converted by
such holder as set for in Section 3(a)(1) above, each holder may convert such
additional number of Series B Preferred Stock owned by such holder (an "Early
Conversion") as follows:
during calendar days 1 through 90 following the Initial
Issuance Date, up to 10% of the shares of the Series B
Preferred Stock owned by such holder; and
at any time on or after the 91st day following the Initial
Issuance Date, up to the difference between 30% of the shares
of Series B Stock owned by such holder minus the percentage of
the shares of Series B Preferred Stock owned by such holder
that had previously been converted on an Early Conversion
basis;
provided, however, that for purposes of determining the number of Common Shares
issuable upon an Early Conversion pursuant to this Section 3(a)(2) only, the
Liquidation Preference shall be deemed to exclude any Accrued Dividends and the
Conversion Price shall be deemed to be 104% times the lowest trading price (as
defined below) during the Valuation Period (as defined below).
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(3) In determining the percentage of stock any
holder is eligible to convert in any period, such holder shall be deemed to have
converted the percentage of shares converted in such period by the transferor,
if any, from whom such holder acquired its Series B Preferred Stock. The
Corporation, upon notice to the holders of the Series B Preferred Stock, may
elect to waive in whole or in part and permanently or temporarily, or lift to
any extent, the conversion restrictions imposed on the Series B Preferred Stock
pursuant to this Section 3(a) at any time to permit additional conversions of
the Series B Preferred Stock.
(b) Mechanics of Conversion. To convert Series B
Preferred Stock into Common Shares, the holder shall give written notice
("Conversion Notice") to the Corporation in the form of Exhibit A hereto (which
Conversion Notice may be given by facsimile). The date that such Conversion
Notice is received by the Corporation (whether by facsimile or otherwise) shall
be deemed to be the "Conversion Date." As soon as reasonably practicable after
delivery of the Conversion Notice, such holder shall surrender the certificate
or certificates representing the shares of Series B Preferred Stock being
converted, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series B Preferred Stock, provided that the Corporation shall at
all times maintain an office or agency in New York City for such purposes. The
Corporation shall, immediately upon receipt of such Conversion Notice, issue and
deliver to or upon the order of such holder, against delivery of the
certificates representing the Series B Preferred Stock which have been
converted, a certificate or certificates for the number of Common Shares to
which such holder shall be entitled (with the number of and denomination of such
certificates designated by such holder), and the Corporation shall immediately
issue and deliver to such holder a certificate or certificates for the number of
shares of Series B Preferred Stock which such holder has not yet elected to
convert hereunder but which are evidenced in part by the certificate(s)
delivered to the Corporation in connection with such Conversion Notice; the
Corporation shall effect such issuance by delivering certificates representing
the appropriate number of Common Shares to the holder or its designee within
three (3) trading days of the Conversion Date. In the alternative to physical
delivery of certificates for Common Shares, if delivery of the Common Shares
pursuant to any conversion hereunder may be effectuated by electronic book-entry
through Depository Trust Company ("DTC"), then delivery of Common Shares
pursuant to such conversion shall, if requested by such holder, be closed and
settled on T+3 by book-entry transfer through DTC, and the Common Shares in
connection with such conversion shall be deemed delivered by such book-entry
transfer. The parties agree to coordinate with DTC to accomplish this objective.
Conversion pursuant to this Section 3 shall be deemed to have been made
immediately prior to the close of business on the Conversion Date, regardless of
whether the Conversion Notice shall be delivered subsequent to the close of
business on such date. The person or persons entitled to receive the Common
Shares issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Shares at the close of business on the
Conversion Date.
(c) Determination of Conversion Price. Each share of
Preferred Stock shall be converted into the number of shares of Common Shares
determined by dividing the Liquidation Preference thereof by the Conversion
Price. The "Conversion Price" shall be equal to:
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(100% minus the Applicable Percentage (as set forth below)) times the
lowest trading price (as defined below) of the Common Stock during the four (4)
(subject to adjustment as provided in Sections 4, 5(B), 7(B) and 9 hereof)
consecutive "trading days" immediately preceding (but excluding) the applicable
Conversion Date (the "Valuation Period").
The "Applicable Percentage" shall be as follows:
0% during calendar days 1 through 180 following the Initial
Issuance Date; and
4% commencing with the 181 calendar day following the Initial
Issuance Date.
The Applicable Percentage shall be subject to adjustment as provided in
Sections 4, 5(B), 7(B) and 9 hereof.
(i) The "lowest trading price" of the Common
Stock on any trading day shall be (A) the lowest reported sale price of
the Common Stock as reported in the consolidated transaction reporting
system ("consolidated tape") if transactions in the Common Stock are
included in the consolidated tape or (B) if the Common Stock is not
included in the consolidated tape, the lowest reported sale price of
the Common Stock on the principal automated securities price quotation
system on which sale prices of the Common Stock are reported, or (C) if
the Common Stock is not included in the consolidated tape and sale
prices of the Common Stock are not reported on an automated quotation
system, the lowest bid price for the Common Stock as reported by
National Quotation Bureau Incorporated or similar organization;
provided that in the event that a holder of Series B Preferred Stock or
any of its affiliates, or any Person acting in concert with any of
them, was a party to the trade that resulted in such lowest reported
sale price or lowest bid price, such trade shall not be recognized as
to such holder and the lowest trading price with respect to any
conversion of Series B Preferred Stock by such holder or its affiliates
only, shall be the next higher lowest reported sale price or next
higher lowest bid price resulting from a trade in which no such holder
or any of its affiliates or any Person acting in concert with any of
them was a party. If none of the foregoing provisions are applicable,
the "lowest trading price" of the Common Stock on a trading day will be
the fair market value of the Common Stock on that day as determined by
a member firm of the New York Stock Exchange, Inc., selected in good
faith by the Board of Directors of the Corporation and reasonably
acceptable to the holders of more than 50% of Series B Preferred Stock.
The term "trading day" means (x) if the Common Stock is quoted on the
Nasdaq National Market ("Nasdaq"), or listed on the New York Stock
Exchange ("NYSE") or the American Stock Exchange ("AMEX"), a day on
which there is trading on such market or exchange, (y) if the Common
Stock is not quoted on Nasdaq or listed on either of such stock
exchanges but sale prices of the Common Stock are reported on an
automated quotation system, a day on which sales of the Common Stock
are reported, or (z) if the foregoing provisions are inapplicable, a
day on which quotations are reported by National Quotation Bureau
Incorporated. Notwithstanding the foregoing, a day shall not be
considered a trading day if (i) trading of the Common Stock was
suspended during such day or (ii) no reported trades occur on such day.
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(ii) In the event that during any period of
consecutive trading days provided for above, an "ex-dividend" date with
respect to any dividend on the Common Stock payable in Common Stock or
in rights to acquire Common Stock shall occur, or the Corporation shall
effect a stock split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock, then the
Conversion Price shall be proportionately decreased or increased, as
appropriate, to give effect to such event.
In no event shall the Conversion Price be less than $0.01 per share.
(d) Notice of Record Date. In the event of any taking by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or any other distribution payable in securities of the Corporation or
any of its subsidiaries other than additional shares of Common Stock, any
security or right convertible into or entitling the holder thereof to receive
additional shares of Common Stock, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall deliver to each
holder of Series B Preferred Stock at least 20 days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution, security or right and the amount
and character of such dividend, distribution, security or right.
(e) Reservation of Common Shares Issuable Upon
Conversion. The Corporation shall at all times reserve and keep available out of
its authorized but unissued Common Stock, solely for the purpose of effecting
the conversion of Series B Preferred Stock, not less than the number of shares
of its Common Stock necessary to effect the conversion of all outstanding Series
B Preferred Stock, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
the then outstanding Series B Preferred Stock, the Corporation will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain any
requisite stockholder approval.
(f) Fractional Shares. No fractional shares of Common
Stock shall be issued upon the conversion of any shares of Series B Preferred
Stock. All Common Shares (including fractions thereof) issuable upon conversion
of shares of Series B Preferred Stock represented by more than one certificate
held by a holder thereof shall be aggregated for purposes of determining whether
the conversion would result in the issuance of any fractional shares. If, after
the aforementioned aggregation, the conversion would result in the issuance of a
fraction of a Common Share, the Corporation shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum in
cash equal to the fair market value of such fraction on the Conversion Date.
(g) Forced Conversion.
(1) Subject to subsection (g)(2) below, each
share of Series B Preferred Stock which shall be outstanding on the Forced
Conversion Date shall be automatically
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converted into Common Shares on such date pursuant to the provisions hereof,
with such Forced Conversion Date deemed to be the Conversion Date. The "Forced
Conversion Date" is the date which is the fifth (5th) anniversary of the Initial
Issuance Date, provided that such Forced Conversion Date shall be extended by
such number of days as is equal to 1.5 times the number of days (A) after the
120th day following the Initial Issuance Date during which the holders are
unable but are required pursuant to the Securities Act of 1933, as amended (the
"Act"), to deliver the Prospectus contained in the Registration Statement (as
such term is defined in the Registration Rights Agreement) to offer and sell
Common Shares; (B) there is not a sufficient amount of Common Shares available
for conversion of all outstanding Series B Preferred Stock for which the
Corporation has received duly executed conversion notices; (C) for any other
reason the Corporation refuses or announces its refusal to honor conversion of
Series B Preferred Stock; (D) the Corporation suspends the holder's right to
convert the Series B Preferred Stock owned by such holder, in accordance with
the terms of the Registration Rights Agreement in connection with certain public
offerings of its Common Stock; (E) during which the holders are unable but are
required pursuant to the Act to deliver the Prospectus contained in the
Registration Statement to offer and sell Common Shares after the Registration
Statement has become effective under the Act because there is any other
suspension, restriction or limitation on the ability of holders of Series B
Preferred Stock to so use the Prospectus to offer and sell Common Shares;
provided, however, that in no event shall an extension of the Forced Conversion
Date pursuant to this clause (E) extend beyond such time as there are no
Registrable Securities (as defined in the Registration Rights Agreement); or (F)
that any of the circumstances in Sections 5, 6 (provided that there are
Registrable Securities and if so, without regard to the applicability of the
Suspension Grace Period) or 7, to the extent not otherwise covered above, exist.
(2) Notwithstanding the preceding subsection
(g)(1), Series B Preferred Stock shall not be automatically converted into
Common Shares on the Forced Conversion Date unless and until each of the
following conditions has been satisfied or exists, each of which shall be a
condition precedent to any such forced conversion:
(A) no material default or breach exists, and no event
shall have occurred which constitutes (or would constitute with notice
or the passage of time or both) a material default or breach of the
Securities Purchase Agreement, the Registration Rights Agreement or
this Certificate of Designations; and
(B) the Corporation and its direct and indirect
subsidiaries on a consolidated basis has assets with a net realizable
fair market value exceeding its liabilities and is able to pay all its
debts as they become due in the ordinary course of business, and the
Corporation has not been given, and is not required to give, notice of
a Liquidation Event.
Such forced conversion shall be subject to and governed by all the provisions
relating to voluntary conversion of the Series B Preferred Stock contained
herein.
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(h) Corporation Optional Redemption.
(1) The Corporation shall have the right to redeem all or
part of the outstanding Series B Preferred Stock upon at least 10 trading days'
prior written notice to holders of Series B Preferred Stock at a redemption
price equal to 110% of the Liquidation Preference of such shares during calendar
days 1 through 90 following the Initial Issuance Date; provided, however, that
if the Corporation redeems less than all of the outstanding shares of Series B
Preferred Stock, it shall do so on a pro-rata basis.
(2) In the event that shares of Common Stock of the
Corporation are delisted from Nasdaq (unless immediately listed on the NYSE or
the AMEX at any time following the Initial Issuance Date, the Corporation may,
at any time during the first 30-day period following such delisting, purchase
all of the outstanding shares of Series B Preferred Stock held by the holders of
such stock at a purchase price equal to 120% of the Liquidation Preference (as
of the date of purchase by the Corporation) of such Series B Preferred Stock;
provided, however, that the Corporation shall deliver at least 10 trading days'
prior written notice of its intention to so purchase the outstanding shares of
Series B Preferred Stock.
(3) In the event that the Corporation fails or refuses to
honor a conversion of Series B Preferred Stock in full, in accordance with their
terms of this Certificate of Designations for any reason (including, without
limitation, as a result of failure to have a sufficient number of shares of
Common Stock available to satisfy the Corporation's obligations to any holder
upon receipt of a Conversion Notice in accordance with the terms hereof), the
Corporation may, at any time during the first 30-day period following such
failure or refusal to honor a conversion in full, purchase all of the
outstanding shares of Series B Preferred Stock held by such holder at a purchase
price equal to 120% of the Liquidation Preference (as of the date of purchase by
the Corporation) of such Series B Preferred Stock; provided, however, that the
Corporation shall deliver at least 20 trading days' prior written notice of its
intention to so purchase the outstanding shares of Series B Preferred Stock.
(4) In the event that the Corporation fails or refuses to
pay when due any default payment in accordance with Section 8 hereof, the
Corporation may, at any time during the first 30-day period following such
failure or refusal to pay, purchase all of the outstanding shares of Series B
Preferred Stock held by such holder at a purchase price equal to 120% of the
Liquidation Preference (as of the date of purchase by the Corporation) of such
Series B Preferred Stock; provided, however, that the Corporation shall deliver
at least 10 trading days' prior written notice of its intention to so purchase
the outstanding shares of Series B Preferred Stock.
(5) In the event that (1) trading in the Common Stock on
Nasdaq or any principal national securities exchange on which the Common Stock
is then traded is suspended for seven consecutive trading days or (2) the
Registration Statement has not been declared effective by the 180th day
following the Initial Issuance Date, the Corporation may, at any time during the
first 30-day period following such suspension in trading or non-effectiveness of
the Registration Statement, as the case may be, purchase all of the outstanding
shares of Series B Preferred Stock held by the holders of such stock at a
purchase price equal to 120% of the Liquidation Preference (as of the date of
such purchase by the Corporation) of such Series B
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Preferred Stock; provided, however, that the Corporation shall deliver at least
10 trading days' prior written notice of its intention to so purchase the
outstanding shares of Series B Preferred Stock.
(6) Upon either the notice of, or the
announcement of the Corporation's intent to engage in, a Change of Control
Transaction (of the type set forth in clauses (i) and (ii) of the definition
thereof), the Corporation shall, upon not less than 10 trading days notice, have
the right, to redeem any or all of the shares of Series B Preferred Stock at a
redemption price equal to 115% of the Liquidation Preference thereof or, in the
case of such notice or announcement occurring at any time on or after [six month
following the Closing Date], 1998, 125% of the Liquidation Preference thereof,
which redemption, in the case of such Change of Control Transaction, shall be
conditioned upon and shall be effective immediately prior to consummation of
such Change of Control Transaction.
(i) Certificate of Conversion Price Adjustment. The
Corporation shall, upon the written request at any time of any holder of Series
B Preferred Stock, furnish or cause to be furnished to such holder a certificate
prepared by the Corporation setting forth any adjustments or readjustments of
the Conversion Price pursuant to this Section 3 or Section 4 hereof.
(j) Specific Enforcement. The Corporation agrees that
irreparable damage would occur in the event that any of the provisions of this
Certificate of Designations were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the holders of
Series B Preferred Stock shall be entitled to specific performance, injunctive
relief or other equitable remedies to prevent or cure breaches of the provisions
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
(k) Certain Mergers or Consolidations. In the event of a
merger or consolidation of the Corporation with or into any other corporation or
corporations pursuant to which (i) the Corporation is not the surviving entity
in such merger or consolidation, (ii) the holders of Common Stock receive common
stock (or similar securities) and/or non-common stock voting securities (the
"Merger Consideration") in the surviving entity as part of the merger or
consolidation and (iii) the merger or consolidation does not constitute a Change
in Control Transaction, provisions shall be made in such merger or consolidation
whereby each holder of outstanding shares of Series B Preferred Stock will
receive in exchange for such shares preferred stock having substantially the
same rights, privileges and preferences to the Series B Preferred Stock in the
surviving entity convertible into the Merger Consideration. Unless required by
Delaware law, the holders of Series B Preferred Stock shall have no right to
vote in connection with the approval of such merger or consolidation. In
addition, the exchange of the Series B Preferred Stock described in this Section
3(k) shall not be deemed to be an amendment to this Certificate of Designations
or to the Certificate of Incorporation or By-Laws of the Corporation requiring
the vote of the holders of the Series B Preferred Stock under Section 12 hereof.
4. Adjustment of Applicable Percentage. The Corporation has
agreed to file the Registration Statement as soon as practicable following the
Initial Issuance Date and shall use its best efforts to cause such Registration
Statement to become effective within 120 days from the
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Initial Issuance Date. In the event that such Registration Statement has not
been declared effective within 120 days from the Initial Issuance Date, then the
Applicable Percentages shall be increased by 1.5% upon the commencement of the
30-day period ("Non-effective Period") from and after the 120th day following
the Initial Issuance Date during any part of which such Registration Statement
is not effective, and such Applicable Percentage shall be further increased by
an additional 1.5% during and upon the commencement of each additional
Non-effective Period thereafter to a maximum increase of 6%. Any such increase
in the Applicable Percentages shall be permanent, regardless of whether the
Registration Statement subsequently is declared effective.
5. No Listing; Delisting of Common Stock. Subject to the
preferential rights of holders of Series A Preferred Stock and any other class
of capital stock of the Corporation ranking senior to the Series B Preferred
Stock:
(A) In the event that the Corporation fails, refuses or
is unable to cause the Common Shares covered by the Registration
Statement to be listed upon notice of issuance with Nasdaq or NYSE or
AMEX on which the Common Stock is then traded at all times during the
period ("Listing Period") from the 120th day following the Initial
Issuance Date until the Forced Conversion Date then the Corporation
shall pay to each holder a default payment in an amount equal to three
percent (3%) of the Liquidation Preference for the Series B Preferred
Stock held by such holder for each 30-day period (pro-rated for shorter
periods) during the Listing Period from and after such failure, refusal
or inability to so list upon notice of issuance the Common Shares until
the Common Shares are so listed.
(B) In the event that shares of Common Stock of the
Corporation are delisted from Nasdaq (unless immediately listed on NYSE
or AMEX) at any time following the Initial Issuance Date, then the
Series B Preferred Stock shall be convertible in full, notwithstanding
the limitations set forth in Section 3(a) hereof, and holders of Series
B Preferred Stock shall thereafter (i) in accordance with Section 1, be
entitled to receive dividends at the rate of fifteen percent (15%) of
the Liquidation Preference of each share of Series B Preferred Stock
until such time as the Corporation shall have listed the Common Stock
on Nasdaq or NYSE or AMEX, (ii) the Applicable Percentage with respect
to all subsequent conversions of Series B Preferred Stock shall,
immediately and permanently (notwithstanding any subsequent listing of
the Common Stock on Nasdaq or NYSE or AMEX), be ten percent (10%), and
(iii) the Valuation Period with respect to all subsequent conversions
of Series B Preferred Stock shall be permanently increased to fifteen
(15) consecutive trading days (notwithstanding any subsequent listing
of the Common Stock on Nasdaq or NYSE or AMEX).
6. Blackout Periods. During the period that holders with
registration rights under the Registration Rights Agreement are required
pursuant to the Act to deliver the Prospectus contained in the Registration
Statement to offer and sell Common Shares if such holder's ability to sell
Common Shares under the Registration Statement is suspended for more than (A) 10
consecutive trading days in any calendar year or 30 days in the aggregate during
any calendar year
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(pro-rated for calendar year 1997) (in each case other than as provided in
clauses (B) and (C) below), including without limitation by reason of any
suspension or stop order with respect to the Registration Statement or the fact
that an event (other than an event covered in clauses (B) and (C) below) has
occurred as a result of which the Prospectus (including any supplements thereto)
included in such Registration Statement then in effect contains any untrue
statement of material fact or omits to state any material fact required to be
stated herein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances under
which they were made) not misleading, but other than in connection with a
Permitted Public Offering (as hereinafter defined), (B) 60 consecutive days or
150 days in the aggregate during any calendar year (pro-rated for calendar year
1997) for so long as shares of Series B Preferred Stock are outstanding, in
connection with one or more material acquisitions by the Corporation, which
acquisitions require the Corporation to present the financial statements of the
acquired business in accordance with Rule 3-05 of Regulation S-X under the
Exchange Act, or pro forma financial information in accordance with Rule 11-01
of Regulation S-X under the Exchange Act which presentation requirement shall
result in a holder's inability to use the Registration Statement to offer and
sell Common Shares, or (C) 10 days prior to, and 30 days subsequent to the
pricing of each Permitted Public Offering but not in excess of 80 days in the
aggregate in any calendar year ("Suspension Grace Period"), then, subject to the
preferential rights of holders of Series A Preferred Stock and any other class
of capital stock of the Corporation ranking senior to the Series B Preferred
Stock, the Corporation shall pay to each holder, a default payment in an amount
equal to three percent (3%) of the Liquidation Preference for the Series B
Preferred Stock held by such holder for each 30-day period (pro-rated for
shorter periods) from and after the last day of the Suspension Grace Period
until there are no further restrictions on the holders' ability to sell Common
Shares. With respect to any single Permitted Public Offering, the Corporation
may suspend the holder's right to convert the Series B Preferred Stock for a
period of 10 days prior to, and 30 days subsequent to the pricing of a single
Permitted Public Offering. A "Permitted Public Offering" shall mean a bona fide
public offering of shares of Common Stock which raises gross proceeds of at
least $25 million. The Corporation shall promptly notify the holders of the
filing of a registration statement with respect to a Permitted Public Offering.
7. Failure to Convert. In the event that the Corporation fails to
honor a conversion of Series B Preferred Stock in full, in accordance with the
terms of this Certificate of Designations for any reason (including without
limitation as a result of failure to have a sufficient number of shares of
Common Shares available to satisfy the Corporation's obligations to any holder
upon receipt of a Conversion Notice in accordance with the terms hereof), then:
(A) the Corporation shall pay, in accordance with Section
8, to each holder a default payment in an amount equal to three percent
(3%) of the Liquidation Preference for the Series B Preferred Stock
sought to be converted held by such holder for each 30-day period
(pro-rated for shorter periods) from and after the Conversion Date,
that the Corporation fails or refuses to issue Common Shares in
accordance with the terms hereof; and
(B) if on the 60th day after such failure, the
Corporation shall not have been able to satisfy its obligations to a
holder with respect to a Conversion Notice,
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then the Series B Preferred Stock shall be convertible in full,
notwithstanding the limitations set forth in Section 3(a) hereof, and
each holder of Series B Preferred Stock shall (i) in accordance with
Section 1, be entitled to receive dividends at the rate at the rate of
fifteen percent (15%) of the Liquidation Preference of each share of
Series B Preferred Stock from and after the Conversion Date that the
Corporation fails or refuses to issue Common Shares in accordance with
the terms hereof until the Corporation is able to satisfy its
obligations under all outstanding Conversion Notices, (ii) the
Applicable Percentage with respect to all conversions of Series B
Preferred Stock shall, immediately and permanently (notwithstanding any
subsequent conversions by the Corporation) be ten percent (10%), and
(iii) the Valuation Period with respect to all subsequent conversions
of Series B Preferred Stock shall be permanently increased to fifteen
(15) consecutive trading days (notwithstanding the Corporation's
subsequent conversion of shares of Series B Preferred Stock in full, in
accordance with their terms).
8. Default Payments. Each default payment provided for in each of
the foregoing Sections 5 through 7 shall be in addition to each other default
payment; provided, however, that in no event shall the Corporation be obligated
to pay to any holder default payments in an aggregate amount greater than three
percent (3%) of the Liquidation Preference for the Series B Preferred Stock held
by such holder for any 30-day period. All default payments required to be made
in connection with the provisions of Sections 5 and 6 above shall be paid,
subject to the preferential rights of holders of Series A Preferred Stock and
any other class of capital stock of the Corporation ranking senior to the Series
B Preferred Stock, in cash by the tenth (10th) day of each calendar month (which
payments shall be pro rata on a per diem basis for any period of less than 30
days). Any default payment required to be made in connection with the provisions
of Section 7 above, shall be made by adding the amount of such default payment
to the Liquidation Preference of the shares of Series B Preferred Stock that
were not converted. Default payments shall accrue on Series B Preferred Stock
through the date such shares are purchased by the Corporation in accordance with
the provisions of the Certificate of Designations. In the event that the
Corporation fails or refuses to pay any default payment provided in Sections 5
and 6 when due, in cash, a holder may request at any time that the Corporation
pay any defaulted payment amount by adding and including the amount of such
default payment to the Liquidation Preference with respect to the Series B
Preferred Stock sought to be converted instead of in cash as required by this
Section 8. If the payment of any such default payments in the form of cash are
prohibited because of the prior payment of default payments to holders of Series
A Preferred Stock or any other class of capital stock of the Corporation ranking
senior to the Series B Preferred Stock or a lack of legally available funds, or
are prohibited under any of the Corporation's material credit or loan
agreements, indentures or other similar agreements, or if such default payments
in the form of cash would, with the giving of notice or otherwise, cause the
acceleration of any payments due under such agreements, then, in lieu of such
default payments, an amount equal thereto shall be added to the Liquidation
Preference and such failure to pay such default payments in cash shall not be
deemed to be a default or a failure or refusal to pay such default payment under
this Certificate of Designations.
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9. Additional Events.
(A) In the event that the Corporation fails or refuses to
pay, at any time, any default payment in accordance with Section 8 when due,
then the Series B Preferred Stock shall be convertible in full, notwithstanding
the limitations set forth in Section 3(a) hereof, and (i) each holder of Series
B Preferred Stock shall be entitled to receive dividends, in accordance with
Section 1 at the rate at the rate of fifteen percent (15%) of the Liquidation
Preference of each share of Series B Preferred Stock until such time as the
Corporation makes all default payments in accordance with Section 8, (ii) the
Applicable Percentage with respect to all subsequent conversions of Series B
Preferred Stock shall, immediately and permanently (notwithstanding the
Corporation's subsequent payment of default payments in accordance with Section
8) be ten percent (10%), and (iii) the Valuation Period with respect to all
conversions of Series B Preferred Stock shall be permanently increased to
fifteen (15) consecutive trading days (notwithstanding the Corporation's
subsequent payment of default payments in accordance with Section 8).
(B) In addition to and without in any way limiting the
foregoing, the Corporation agrees that in the event that (1) trading in the
Common Stock on Nasdaq or NYSE or AMEX on which the Common Stock is then traded
is suspended for 7 consecutive trading days, or (2) the Registration Statement
has not been declared effective by the 180th day following the Initial Issuance
Date, then, in each case, (i) the Series B Preferred Stock shall be convertible
in full, notwithstanding the limitations set forth in Section 3(a) hereof, (ii)
each holder of Series B Preferred Stock shall, in accordance with Section 1, be
entitled to receive dividends at the rate at the rate of fifteen percent (15%)
of the Liquidation Preference of each share of Series B Preferred Stock from and
after such trading suspension event or such 180th day until such trading
suspension has ceased or the Registration Statement has become effective, and
(iii) the Applicable Percentage with respect to all subsequent conversions of
Series B Preferred Stock shall, immediately and permanently (notwithstanding the
removal of any trading suspension with respect of the Common Stock or the
subsequent effectiveness of the Registration Statement) be ten percent (10%),
and (z) the Valuation Period with respect to all subsequent conversions of
Series B Preferred Stock shall be permanently increased to fifteen (15)
consecutive trading days (notwithstanding the removal of any trading suspension
with respect of the Common Stock or the subsequent effectiveness of the
Registration Statement).
10. Surrender of Stock upon Redemption. One (1) trading day prior
to any date set for the redemption of Series B Preferred Stock, each holder of
shares of Series B Preferred Stock to be redeemed, unless the holder has
exercised this right to convert the shares as provided in Section 3 hereof,
shall surrender the certificate or certificates representing such shares to the
Corporation, and thereupon the redemption price for such shares shall be payable
to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event less than all of the shares represented by
such certificate are redeemed, a new certificate representing the unredeemed
shares shall be issued to the holder of such shares.
11. No Senior Equity Securities. Except for the Series A Preferred
Stock, the Corporation shall not, as long as there is an aggregate amount in
excess of 500 shares (as appropriately adjusted for any stock split or reverse
stock split of the shares of Series B Preferred
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Stock) of Series B Preferred Stock outstanding, issue any equity securities or
any equity securities convertible into its Common Stock, which equity securities
are senior to, or pari passu with, in respect of dividends, redemption or
liquidation, the Series B Preferred Stock. Except as set forth in Section 6.16
of the Securities Purchase Agreement, dated as of April 9, 1997, by and among
the Corporation and the Investors named therein, no Series A Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued. In addition, the Corporation shall not authorize
for issuance any additional shares of Series A Preferred Stock.
12. Voting Rights. Except as herein provided or as otherwise from
time to time required by law, holders of Series B Preferred Stock shall have no
voting rights. The affirmative vote of 75% in interest of the Corporation's
outstanding Series B Preferred Stock shall be necessary for (i) any amendment of
this Certificate of Designations, or (ii) any amendment to the Certificate of
Incorporation or By-Laws of the Corporation that may adversely affect any of the
rights, preferences, or privileges of the Series B Preferred Stock (including,
without limitation, any such amendment that adversely affects the convertibility
of the Series B Preferred Stock into Common Stock listed on Nasdaq or NYSE or
AMEX); provided, however, that holders of Series B Preferred Stock who are
affiliates of the Corporation (and the Corporation itself) shall not participate
in such vote and the Series B Preferred Stock of such holders shall be
disregarded and deemed not to be outstanding for purposes of such vote. In the
event the Corporation provides consideration to any holder in respect of the
obtaining of such affirmative vote it shall provide such consideration to all
holders of Series B Preferred Stock regardless of whether such holders provided
such affirmative vote.
13. Notices. The Corporation shall distribute to the holders of
Series B Preferred Stock copies of all notices, materials, annual and quarterly
reports, proxy statements, information statements and any other documents
distributed generally to the holders of shares of Common Stock of the
Corporation, at such times and by such method as such documents are distributed
to such holders of such Common Stock.
14. Replacement Certificates. The certificate(s) representing the
Series B Preferred Stock held by any holder of Series B Preferred Stock may be
exchanged by such holder at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Series B
Preferred Stock, as reasonably requested by such holder, upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
15. No Reissuance. Except as provided in Section 6.16 of the
Securities Purchase Agreement, no Series B Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued.
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Signed on September 15, 1997 By: /s/ Robert C. Patent
------------------------
Name: Robert C. Patent
Title: Executive Vice President
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<PAGE> 19
EXHIBIT A
(To be Executed by Holder
in order to Convert Series B Preferred Stock)
CONVERSION NOTICE
FOR
6% CONVERTIBLE PREFERRED STOCK, SERIES B
The undersigned, as a holder ("Holder") of shares of 6% Convertible
Preferred Stock, Series B ("Series B Preferred Stock") of Cityscape Financial
Corp., (the "Corporation"), hereby irrevocably elects to convert _________
Series B Preferred Stock for shares ("Common Shares") of common stock, par value
$0.01 per share (the "Common Stock"), of the Corporation according to the terms
and conditions of the Certificate of Designations for the Series B Preferred
Stock as of the date written below. The undersigned hereby requests that share
certificates for the Common Shares to be issued to the undersigned pursuant to
this Conversion Notice be issued in the name of, and delivered to, the
undersigned or its designee as indicated below. No fee will be charged to the
holder of Series B Preferred Stock for any conversion.
Conversion Date: ___________________
Conversion Information:
NAME OF HOLDER:
_____________________
By: ________________
Print Name:
Print Title:
Print Address of Holder:
_____________________
_____________________
Issue Common Stock to: __________
at: ____________________
_____________________
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COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
Conversion pursuant to Section 2(e) NO YES
(circle one, if none circled
then it will be deemed NO)
Number of shares of Series B Preferred Stock converted: _________ shares
Number of shares of Series B Preferred Stock converted x Liquidation Preference
(Total dollar amount converted) $_________
The "low trading price"
$__________
Date of "low trading price" _________
Applicable Percentage as of Conversion Date ________%
Conversion Price $________
Number of Common Shares = Total dollar amount converted / $________
_____________________________
Conversion Price $________
Number of Common Shares = _________
If the conversion is not being settled through DTC, please issue and deliver
_____ certificate(s) for Common Shares in the following amount(s):
_________________________________________________
_________________________________________________
_________________________________________________
If the Holder is receiving certificate(s) for Series B Preferred Stock upon the
conversion, please issue and deliver ___ certificate(s) for Series B Preferred
Stock in the following amounts:
_________________________________________________
_________________________________________________
_________________________________________________
20
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Exhibit 4.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of September
15, 1997, between Cityscape Financial Corp., a Delaware corporation
("Cityscape"), and each person executing a counterpart of the signature page of
this Agreement (each individually an "Investor" and collectively the
"Investors").
W I T N E S S E T H:
WHEREAS, Cityscape desires to issue and sell to the Investors, and the
Investors wish to purchase from Cityscape, an aggregate of 5,000 shares of
Cityscape's 6% Convertible Preferred Stock, Series B, par value $0.01 per share
(the "Series B Preferred Stock"), having the rights, designations and
preferences set forth in the Certificate of Designations of Cityscape (the
"Certificate of Designations") in form of Exhibit A attached hereto, and
warrants (the "Warrants") to purchase 500,000 shares of Common Stock (as defined
below) in the form attached as Exhibit B (the shares of Common Stock issuable
upon the exercise of Warrants are hereinafter called the "Warrant Shares"), on
the terms and conditions set forth herein; and
WHEREAS, the Series B Preferred Stock will be convertible into shares
(the "Common Shares") of common stock, par value $0.01 per share, of Cityscape
(the "Common Stock"), pursuant to the terms of the Certificate of Designations,
and the holders of Series B Preferred Stock will have registration rights with
respect to such Common Shares and Warrant Shares pursuant to the terms of the
Registration Rights Agreement to be entered into between Cityscape and the
Investors (the "Registration Rights Agreement");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SERIES B PREFERRED STOCK
Section 1.1 Purchase and Sale of Series B Preferred Stock. Subject to
the terms and conditions set forth herein (including, without limitation, the
provisions of Article IV hereof), Cityscape hereby agrees to issue and sell to
each of the Investors severally, and each of the Investors severally hereby
agrees to purchase from Cityscape on the date hereof (the "Closing Date") such
number of shares of Series B Preferred Stock as are indicated next to such
Investor's name on the counterpart of the signature page executed by such
Investor, and (ii) such number of related Warrants as are indicated next to such
Investor's name on the counterpart of the signature page executed by such
Investor against payment of the aggregate Purchase Price therefor, as provided
in Section 1.2 hereof. Cityscape shall issue and sell to the Investors an
aggregate of 5,000 shares of Preferred Stock.
<PAGE> 2
Section 1.2 Purchase Price. The purchase price for the Series B
Preferred Stock (and the related Warrants) (the "Purchase Price") shall be
$10,000 per share of Series B Preferred Stock.
Section 1.3 The Closing. (a) The closing of the purchase and sale of
the shares of Series B Preferred Stock and the Warrants (the "Closing") shall
take place at the offices of Gibson, Dunn & Crutcher LLP, at 10:00 a.m., local
time on the date hereof, provided that all of the conditions set forth in
Article IV hereof and applicable to the Closing shall have been fulfilled or
waived in accordance herewith.
(b) On the Closing Date, Cityscape shall execute, issue and deliver to
each Investor (i) certificates representing the shares of Series B Preferred
Stock purchased hereunder by such Investor registered in the name of such
Investor or its nominee and (ii) certificates representing the related Warrants
purchased hereunder by such Investor registered in the name of Investor or its
nominee, in each case in such denominations as reasonably requested by such
Investor, and such Investor shall deliver to Cityscape the aggregate Purchase
Price for the number of shares of Series B Preferred Stock (and related
Warrants) purchased by such Investor hereunder by wire transfer in immediately
available funds to an account designated in writing by Cityscape. The delivery
for payment by each Investor of the Purchase Price applicable to it shall
constitute a payment delivered to Cityscape in satisfaction of such Investor's
obligation to pay the Purchase Price hereunder. In addition, Cityscape shall
deliver evidence of filing with, and acceptance by, the Secretary of State of
the State of Delaware of the Certificate of Designations, and each party shall
deliver all documents, instruments and writings required to be delivered by such
party pursuant to this Agreement at or prior to the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of Cityscape. Cityscape
hereby makes the following representations and warranties to each of the
Investors as of the date hereof and as of the Closing Date:
(a) Organization and Qualifications; Material Adverse Effect. Each of
Cityscape and its subsidiaries is a corporation duly incorporated and existing
in good standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power to own and operate its properties and to carry on its
business as now being conducted. Each of Cityscape and its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any adverse effect on the business, operations, properties
or financial condition of Cityscape and which is material to Cityscape and its
subsidiaries taken as a whole, or any material adverse effect on Cityscape's
ability to consummate the transactions contemplated hereby, and to execute,
deliver and perform its obligations under each of this Agreement, the
Registration Rights Agreement, the Certificate of Designations and the Warrants.
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<PAGE> 3
(b) Authorization; Enforcement. (i) Cityscape has the requisite
corporate power and authority to enter into and perform its obligations under
each of this Agreement, the Registration Rights Agreement, the Certificate of
Designations and the Warrants and to issue the Series B Preferred Stock and the
Warrants in accordance with the terms hereof and thereof, (ii) the execution and
delivery of this Agreement and the Registration Rights Agreement, the issuance
and delivery of the Series B Preferred Stock and the Warrants and the filing of
the Certificate of Designations by Cityscape and the consummation and
performance by it of the transactions contemplated hereby and thereby, including
the resolutions contained in the Certificate of Designations, have been duly
authorized by all necessary corporate action, and no further consent or
authorization of Cityscape or its Board of Directors or stockholders is required
(other than any shareholder approval as may be required by the rules applicable
to companies whose common stock is traded on the Nasdaq National Market
("Nasdaq")), (iii) this Agreement, the Registration Rights Agreement, the
Warrants, the Certificate of Designations and the Series B Preferred Stock have
been duly executed and delivered by Cityscape, and (iv) this Agreement, the
Registration Rights Agreement, the Warrants, the Certificate of Designations and
the Series B Preferred Stock constitute valid and binding obligations of
Cityscape enforceable against Cityscape in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to or affecting
generally the enforcement of creditors' rights and remedies, or by other
equitable principles of general application.
(c) Capitalization. The authorized capital stock of Cityscape consists
of 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock;
there were 32,585,403 shares of Common Stock and 2,910 shares of the Company's
6% Convertible Preferred Stock, Series A (the "Series A Preferred Stock") issued
and outstanding as of August 31, 1997. Except as set forth in the SEC Documents
(defined below), Cityscape has no other authorized, issued or outstanding equity
securities or securities containing any equity features, or any other securities
convertible into, exchangeable for or entitling any person to otherwise acquire
any other securities of Cityscape containing any equity features. All of the
outstanding shares of Cityscape Common Stock have been validly issued and are
fully paid and nonassessable. The Series B Preferred Stock, the Common Shares,
the Warrants and the Warrant Shares have been duly and validly authorized. When
issued against payment therefor as provided in this Agreement, the Series B
Preferred Stock will be validly issued, fully paid and nonassessable and will
entitle the holders thereof to the rights established in the Certificate of
Designations and the Warrants will be validly issued. A sufficient number of
shares of Common Stock has been duly reserved and will remain available for
issuance upon conversion of the Series B Preferred Stock and upon the exercise
of the Warrants. Except as set forth in this Agreement and in the SEC Documents,
there are no outstanding options, warrants, agreements, conversion rights,
subscription rights, preemptive rights, rights of first refusal or other rights
or agreements of any nature outstanding to subscribe for or to purchase any
shares of capital stock of Cityscape or any other securities of the Cityscape of
any kind. Except as otherwise required by law or as set forth in the Certificate
of Designations, Cityscape's Certificate of Incorporation (the "Charter") or
Cityscape's By-Laws, as in effect on the date hereof (the "By-Laws"), there are
no restrictions upon the voting or transfer of any shares of Cityscape's capital
stock pursuant to Cityscape's organizational and other governing documents or
any agreement or other instruments to which Cityscape is a party or by which
Cityscape or its
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<PAGE> 4
properties or assets are bound. The issuance of the Series B Preferred Stock and
the Warrants is not subject to any preemptive rights, rights of first refusal or
other similar limitation. There are no agreements or other obligations
(contingent or otherwise) that may require Cityscape to repurchase or otherwise
acquire any shares of its capital stock (other than its obligations with respect
to the Series A Preferred Stock and the Series B Preferred Stock). Cityscape has
no stockholder rights plan or similar agreements that contain poison pill
provisions.
(d) Corporate Documents. Cityscape has delivered to the Investors true
and correct copies of its Charter and the Certificate of Designations, each as
in effect on the date hereof, and Cityscape has furnished or made available to
the Investors true and correct copies of its By-Laws. The Certificate of
Designations has been duly filed with, and accepted for filing by, the Secretary
of State of the State of Delaware. The terms of the Certificate of Designations
are hereby expressly incorporated by reference herein, and the form of
certificate of Series B Preferred Stock is attached as Exhibit C.
(e) Issuance of Common Shares. Each of the Common Shares issuable upon
conversion of the Series B Preferred Stock pursuant to the Certificate of
Designations or the Warrant Shares issuable upon the exercise of the Warrants
are, or prior to issuance will be, duly authorized and, prior to issuance in
accordance with the terms of the Series B Preferred Stock or the Warrants, will
be reserved for issuance and, upon conversion in accordance with the Certificate
of Designations and/or exercise in accordance with the terms of the Warrants
such Common Shares and Warrant Shares, respectively, will be validly issued,
fully paid and non-assessable, free and clear of any and all preemptive rights,
rights of first refusal, liens, claims and encumbrances (other than those
created or suffered by the holder thereof), and eligible for inclusion on
Nasdaq, and the holders of such Common Shares and Warrant Shares shall be
entitled to all rights and preferences accorded to a holder of Common Stock. The
issuance of the Series B Preferred Stock, the Common Shares, the Warrants or the
Warrant Shares will not trigger any anti-dilution rights of any holders of
Cityscape's capital stock.
(f) No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Certificate of Designation and
the Warrants by Cityscape and the consummation by Cityscape of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Series B Preferred Stock, the Common Shares and the Warrant Shares, and the
filing of the Certificate of Designations, do not and will not (i) result in a
violation of Cityscape's Charter or By-Laws, (ii) conflict with, result in a
breach of, or constitute a default (or an event that with the giving of notice
or the passage of time, or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture, or instrument to which Cityscape or any of its
subsidiaries is a party, that could reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, or (iii) result in a violation
of any federal, state, local or foreign law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations)
applicable to Cityscape or any of its subsidiaries or by which any property or
asset of Cityscape or any of its subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is Cityscape otherwise in violation of, conflict with or in
default under any of the foregoing; provided that, for purposes of such
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<PAGE> 5
representation as to federal, state, local or foreign law, rule or regulation,
no representation is made herein with respect to any of the same applicable
solely to the Investors and not to Cityscape. The business of Cityscape and its
subsidiaries is not being conducted in violation of any law, ordinance or
regulations of any governmental entity, except for violations which either
individually or in the aggregate do not and will not have a Material Adverse
Effect. Cityscape is not required under federal, state, local or foreign law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Certificate of Designations and the Warrants
or issue and sell the Series B Preferred Stock in accordance with the terms
hereof and issue the Common Shares upon conversion of the Series B Preferred
Stock or to issue and sell the Warrants in accordance with their terms or issue
the Warrants Shares upon exercise of the Warrants (other than any shareholder
approval as may be required by the rules applicable to companies whose common
stock is quoted on Nasdaq, and other than the registration statement which it is
required to file pursuant to the provisions of the Registration Rights
Agreement); provided that, for purposes of the representation made in this
sentence, Cityscape is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investors herein.
(g) SEC Documents; Financial Statements. The Common Stock of Cityscape
is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and, since December 31, 1995, Cityscape has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission ("SEC") pursuant to
the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) with the SEC (all of the foregoing including
filings incorporated by reference therein, the "SEC Documents"). Except as set
forth in the SEC Documents, as of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such SEC Documents,
and none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Cityscape's annual report on Form 10-K for
the fiscal year ended December 31, 1996 (the "1996 10-K") and Cityscape's
quarterly report on Form 10-Q for the fiscal quarter ended June 30, 1997, as
filed with the SEC, contains all material information concerning Cityscape, and
no event or circumstance has occurred or exists since the date of the 1996 10-K
would require Cityscape to disclose such event or circumstance in order to make
the statements in the SEC Documents not misleading on the Closing Date but which
has not been so disclosed. The financial statements of Cityscape included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), have been prepared
from, and are consistent with, the books and records of Cityscape and fairly
present in all material respects
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<PAGE> 6
the consolidated financial position, as at the dates thereof, and the
consolidated results of operations and cash flows of Cityscape and its
subsidiaries for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Neither Cityscape nor any of its subsidiaries had at June 30, 1997 any
material contingent liabilities, liabilities for taxes or long-term leases,
unusual forward or long-term commitments or unrealized or unanticipated losses
from any unfavorable commitments which are not reflected or reserved against in
the foregoing statements or in the notes thereto. No events that, individually
or in the aggregate, have had or could reasonably be expected to have a Material
Adverse Effect have occurred since June 30, 1997 except as reflected therein.
(h) Solvency.
(i) Cityscape's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of
Cityscape's existing debts and other liabilities (including contingent
liabilities) as they mature.
(ii) Cityscape's assets do not constitute unreasonably small
capital to carry out its business as now conducted and as proposed to
be conducted including Cityscape's capital needs taking into account
the particular capital requirements of the business conducted by
Cityscape, and projected capital requirements and capital availability
thereof.
(iii) Cityscape does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).
The cash flow together with the proceeds received from the liquidation
of Cityscape's assets after taking into account all anticipated uses of
the cash will at all times be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid.
(iv) Cityscape does not intend, and does not believe, that
final judgments against Cityscape in actions for money damages will be
rendered at a time when, or in an amount such that, Cityscape will be
unable to satisfy any such judgments promptly in accordance with their
terms (taking into account the maximum reasonable amount of such
judgments in any such actions and the earliest reasonable time at which
such judgments might be rendered). Cityscape's cash flow, after taking
into account all other anticipated uses of the cash (including the
payments on or in respect of debt referred to in paragraph (iii)
above), will at all times be sufficient to pay all such judgments
promptly in accordance with their terms.
(v) Neither Cityscape nor any of its subsidiaries is subject
to any bankruptcy, insolvency or similar proceeding.
(i) No Default. No event has occurred and is continuing that with
the giving of notice or passage of time, or both, constitutes an event of
default under any agreement to which Cityscape is a party or its assets are
bound, which default could reasonably be expected to have a Material Adverse
Effect.
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(j) Principal Market. The principal market on which the Common Stock is
currently traded is Nasdaq.
(k) No Material Adverse Change. Since December 31, 1996, no Material
Adverse Effect has occurred or exists, except as otherwise disclosed or
reflected in other SEC Documents prepared through or as of a date subsequent to
December 31, 1996.
(l) No Undisclosed Liabilities. Cityscape and its subsidiaries have no
liabilities or obligations not disclosed in the SEC Documents, other than those
liabilities incurred in the ordinary course of Cityscape's or its subsidiaries'
respective businesses since December 31, 1996, which liabilities, individually
or in the aggregate, do not or would not have a Material Adverse Effect on
Cityscape.
(m) No General Solicitation. Neither Cityscape, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"Act")) in connection with the offer or sale of the Series B Preferred Stock or
Common Shares.
(n) No Integrated Offering. Neither Cityscape, nor any of its
affiliates, nor to its knowledge any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security other than pursuant to this Agreement, under
circumstances that would require registration under the Act of the Series B
Preferred Stock to be issued under this Agreement.
(o) Form S-3. Cityscape is eligible to use Form S-3 under the Act for a
primary issuance of its securities and to file the Registration Statement (as
defined in the Registration Rights Agreement) on Form S-3 and Form S-3 is
permitted to be used for the transactions contemplated hereby under the Act and
the rules promulgated thereunder.
(p) No Litigation. No litigation or claim (including those for unpaid
taxes), or environmental proceeding against Cityscape or any of its subsidiaries
is pending, threatened or, to Cityscape's best knowledge, contemplated and no
other event has occurred, which if determined adversely would have a Material
Adverse Effect on Cityscape or would materially adversely affect the
transactions contemplated hereby. There are no outstanding injunctions or
restraining orders prohibiting consummation of any of the transactions
contemplated by this Agreement and the Registration Rights Agreement.
(q) Brokers. Cityscape has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
by any Investor relating to this Agreement or the transactions contemplated
hereby, except for amounts payable to CIBC Wood Gundy Securities Corp., which
amounts shall be paid by Cityscape pursuant to a separate agreement.
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(r) Effectiveness of SEC Filings. The SEC has not issued any stop order
or other order suspending the effectiveness of any registration involving the
securities of Cityscape or its subsidiaries.
(s) No Investment Company. Cityscape is not an "investment company", or
an "affiliated person" of an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended.
(t) Environmental Matters. Except as otherwise disclosed in the SEC
Documents, Cityscape and each of its subsidiaries is in compliance in all
material respects with all applicable state and federal environmental laws and
no event or condition has occurred that may interfere with the compliance by
Cityscape or any of its subsidiaries with any environmental law or that may give
rise to any liability under any environmental law that, individually or in the
aggregate, would have a Material Adverse Effect.
(u) Permits. Cityscape and each of its subsidiaries have such
certificates, permits (including, without limitation environmental permits),
licenses, franchises, consents, approvals, authorizations and clearances that
are material to the condition (financial or otherwise), business or operations
of Cityscape and any of its subsidiaries, taken as a whole ("Permits"), and are
in compliance in all material respects with all applicable laws of all tribunals
as are necessary to own, lease or operate their respective properties and to
conduct their businesses in the manner as presently conducted and all such
Permits are valid and in full force and effect, except for any such Permits as
would not, individually or in the aggregate, have a Material Adverse Effect.
Cityscape and each of its subsidiaries is in compliance in all material respects
with its respective obligations under such Permits and no event has occurred
that allows, or after notice or lapse of time would allow, revocation or
termination of such Permits, except for any such revocation or termination as
would not, individually or in the aggregate, have a Material Adverse Effect.
(v) Senior Securities. Except for Series A Preferred Stock, none of
Cityscape's outstanding equity securities are senior to, or pari passu with, in
respect of dividends, redemption or liquidation, the Series B Preferred Stock.
(w) No Material Nonpublic Information. Cityscape has not disclosed to
the Investors any material nonpublic information relating to Cityscape or its
subsidiaries in connection with the negotiation and execution of this Agreement.
(x) Existence of Group. To the Cityscape's knowledge, no person or
group (as such term is used in Section 13 of the Exchange Act) is the beneficial
owner or is deemed to beneficially own (as described in Rule 13d-3 under the
Exchange Act without regard to the 60-day exercise period) in excess of 50% of
Cityscape's voting power of the capital stock of Cityscape normally entitled to
vote in the election of directors of Cityscape.
Section 2.2 Representations and Warranties of the Investors. Each of
the Investors, severally and not jointly, hereby makes the following
representations and warranties to Cityscape as of the Closing Date:
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(a) Authorization; Enforcement. (i) Such Investor has the requisite
power and authority to enter into and perform this Agreement, the Registration
Rights Agreement and the Warrant delivered in connection herewith, and to
purchase the Series B Preferred Stock and the Warrants being sold hereunder and
to acquire the Common Shares and the Warrant Shares, (ii) the execution and
delivery of this Agreement and the Registration Rights Agreement by such
Investor and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership
action, and (iii) this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of such Investor enforceable against
such Investor in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of creditors' rights and remedies or by other equitable principles of general
application.
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement executed in connection herewith,
and the consummation by such Investor of the transactions contemplated hereby
and thereby, do not and will not (i) result in a violation of such Investor's
organizational documents, or (ii) conflict with any agreement, indenture or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Investor. Such Investor is not required
to obtain any consent or authorization of any governmental agency in order for
it to perform its obligations under this Agreement and the Registration Rights
Agreement.
(c) Investment Representation. Such Investor is purchasing the Series B
Preferred Stock and acquiring the Warrants solely for its own account for the
purpose of investment and not with a view to distribution in violation of any
securities laws. Such Investor has no present intention to sell the Series B
Preferred Stock, the Warrants, the Common Shares or the Warrant Shares and such
Investor has no present arrangement (whether or not legally binding) to sell the
Series B Preferred Stock, the Warrants, the Common Shares or the Warrant Shares
to or through any person or entity; provided, however, that by making the
representations herein, such Investor does not agree to hold the Series B
Preferred Stock, the Warrants, the Common Shares or the Warrant Shares for any
minimum or other specific term and reserves the right to dispose of the Series B
Preferred Stock, the Warrants, the Common Shares or the Warrant Shares at any
time in accordance with federal and state securities laws applicable to such
disposition.
(d) Accredited Investor. Such Investor is an "accredited investor" as
defined in Rule 501 under the Act. The Investor has such knowledge and
experience in financial and business matters in general and investments in
particular, so that such Investor is able to evaluate the merits and risks of an
investment in the Series B Preferred Stock and the Warrants and to protect its
own interests in connection with such investment. In addition (but without
limiting the effect of Cityscape's representations and warranties contained
herein), such Investor has received such information as it considers necessary
or appropriate for deciding whether to purchase the Series B Preferred Stock and
the Warrants.
(e) Rule 144. Such Investor understands that there is no public trading
market for the Series B Preferred Stock or the Warrants, that none is expected
to develop, and that Series B
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Preferred Stock and the Warrants must be held until such Series B Preferred
Stock and Warrants are converted pursuant to the terms of the Certificate of
Designations, or exercised in accordance with its terms, respectively, or
registered under the Act or an exemption from registration is available. Such
Investor has been advised or is aware of the provisions of Rule 144 under the
Act.
(f) Brokers. Such Investor has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by Cityscape relating to this Agreement or the transactions
contemplated hereby, except for amounts payable to CIBC Wood Gundy Securities
Corp., which amounts shall be paid by Cityscape pursuant to a separate
agreement.
(g) Manner of Sale. At no time was the Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLES III
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. Until
such time as no shares of Series B Preferred Stock, Common Shares, Warrants or
Warrant Shares are subject to resale restrictions (as to time, volume, manner or
otherwise) under Rule 144 under the Act, Cityscape shall cause the Common Stock
to continue to be registered under Section 12(g) of the Exchange Act, will
comply in all material respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such reporting and filing obligations. Until such time as there are no
shares of Series B Preferred Stock or Warrants outstanding, Cityscape shall
continue the listing or trading of the Common Stock on Nasdaq, NYSE or AMEX and
comply in all respects with Cityscape's reporting, filing and other obligations
under the bylaws or rules of Nasdaq, NYSE or AMEX, as applicable, the exchange
on which the Common Stock is then trading. Cityscape shall undertake its best
efforts to obtain the stockholder approval referenced in Section 2.1(b) and
2.1(f) as may be required for the issuance of the Common Shares issued upon
conversion of the Series B Preferred Stock or Warrant Shares issuable upon
exercise of the Warrant as promptly as practicable. As used herein and in the
Registration Rights Agreement, the Certificate of Designations and the Warrants
the term "Effective Registration" shall mean that all registration obligations
of Cityscape pursuant to the Registration Rights Agreement have been satisfied,
such registration is not subject to any suspension or stop order, the prospectus
for the resale of the Common Shares issuable upon conversion of the Series B
Preferred Stock and the Warrant Shares issuable upon exercise of the Warrants
complies in all material respects with the requirements of the Act and does not
and will not contain an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and such Common Shares and Warrant Shares are listed for trading on
Nasdaq, NYSE or AMEX, as applicable, the exchange on which the Common Stock is
then trading, and such trading has not been suspended for any reason.
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Section 3.2 Certificates on Conversion and Warrants on Exercise. (a)
Upon any conversion by an Investor (or then holder of Series B Preferred Stock)
of the Series B Preferred Stock pursuant to the Certificate of Designations,
Cityscape shall issue and deliver to such Investor (or holder) within three (3)
trading days of the Conversion Date (as defined in the Certificate of
Designations) a new certificate or certificates for the number of Series B
Preferred Stock which such Investor (or holder) has not yet elected to convert
but which are evidenced in part by the certificate(s) submitted to Cityscape in
connection with such conversion (with the number of and denomination of such new
certificate(s) designated by such Investor or holder).
(b) In the alternative to physical delivery of certificates for Common
Shares pursuant to Section 3(b) of the Certificate of Designations, if delivery
of the Common Shares pursuant to any conversion thereunder may be effectuated by
electronic book-entry through Depository Trust Company ("DTC"), then delivery of
Common Shares pursuant to such conversion shall, if requested by such Investor
(or holder of Common Shares), settle by book-entry transfer through DTC by the
third trading day following the Conversion Date. The parties agree to coordinate
with DTC to accomplish this objective.
(c) Upon any partial exercise by an Investor (or then holder of the
Warrants) of the Warrants, Cityscape shall issue and deliver to such Investor
(or holder) within three (3) trading days of the Exercise Date (as defined in
the Warrants) a new Warrant or Warrants, representing the number of adjusted
Warrant Shares, in accordance with the terms of Section 2 of the Warrants.
Section 3.3 Replacement Certificates and Warrants. (a) The
certificate(s) representing the Series B Preferred Stock held by any Investor
(or then holder) may be exchanged by such Investor (or such Holder) at any time
and from time to time for certificates with different denominations representing
an equal aggregate number of Series B Preferred Stock, as reasonably requested
by such Investor (or such holder) upon surrendering the same. No service charge
will be made for such registration or transfer or exchange.
(b) The Warrants are exchangeable at the option of the Investor (or
then holder of the Warrants) at the office of Cityscape for other Warrants of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of Warrant Shares as are purchasable under such
Warrants. No service charge will be made for such transfer or exchange.
Section 3.4 Expenses. Cityscape shall pay, at the Closing (or at such
later date as it shall be invoiced by Cahill Gordon & Reindel) and promptly upon
receipt of any further invoices relating to the Closing, all reasonable due
diligence fees and expenses and reasonable attorneys' fees and expenses of
Cahill Gordon & Reindel, including, without limitation, costs and expenses
incurred in connection with review of Cityscape's registration statement on Form
S-3 with respect to the resale of the Common Shares and the Warrant Shares, and
other due diligence activities relating to the effectiveness of such
registration statement, incurred by the Investors in connection with the
preparation, negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Certificate of Designations and the Warrants
and the related agreements and documents and the transactions contemplated
hereunder and thereunder and in connection with the Closing.
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Section 3.5 Securities Compliance. Cityscape shall notify each of the
SEC and Nasdaq, in accordance with their respective requirements, of the
transactions contemplated by this Agreement, the Certificate of Designations,
the Registration Rights Agreement and the Warrants and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Series B
Preferred Stock hereunder, the Common Shares issuable upon conversion thereof
and the Warrant Shares issuable upon exercise of the Warrants.
Section 3.6 Notices. Cityscape agrees to provide all holders of Series
B Preferred Stock with copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Stock, contemporaneously with
the delivery of such notices or information to such Common Stock holders.
Section 3.7 Use of Proceeds. Cityscape agrees that the proceeds
received by Cityscape from the sale of the Series B Preferred Stock hereunder
shall be used for working capital purposes, including the funding of future
acquisitions.
Section 3.8 Reservation of Common Stock Issuable Upon Conversion of the
Series B Preferred Stock and Upon Exercise of the Warrants. Cityscape shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the Series B
Preferred Stock and the exercise of the Warrants, free from preemptive rights
such number of shares of its Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series B Preferred Stock
and the exercise of the Warrants, and if at any time the number of authorized
but unissued shares of Common Stock reserved for such purposes shall not be
sufficient to effect the conversion of all the then outstanding Series B
Preferred Stock and the exercise of the Warrants, Cityscape will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued Common Stock to such number of shares as shall be
sufficient for such purpose, including without limitation engaging in best
efforts to obtain the requisite stockholder approval.
Section 3.9 Corporate Existence. Cityscape will take all steps
necessary to preserve and continue its corporate existence.
Section 3.10 Issue Taxes. Cityscape shall pay any and all issue and
other taxes that may be payable in respect of any issue of Common Shares upon
conversion of Series B Preferred Stock in accordance with the Certificate of
Designations.
Section 3.11 Stockholder Rights Plan. Cityscape agrees that the
acquisition of shares of Common Stock pursuant to the conversion of Series B
Preferred Stock or the exercise of the Warrants will in no event under any
circumstance trigger any poison pill provisions of any stockholders rights plan
or similar agreement.
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ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of Cityscape to Sell
the Series B Preferred Stock. The obligation hereunder of Cityscape to issue
and/or sell the Series B Preferred Stock and Warrants to the Investors is
subject to the satisfaction, at or before the Closing, of each of the conditions
set forth below. These conditions are for Cityscape's sole benefit and may be
waived by Cityscape at any time in its sole discretion.
(a) Accuracy of the Investors' Representations and Warranties. The
representations and warranties of each Investor shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).
(b) Performance by the Investors. Each Investor shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by such Investor at or prior to the Closing.
(c) Payment of Purchase Price. At the Closing, each Investor shall
deliver the Purchase Price as indicated next to such Investor's name on the
counterpart of the signature page executed by such Investor as provided in
Article I hereof.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Certificate of Designations
and the Warrants.
Section 4.2 Conditions Precedent to the Obligation of the Investors to
Purchase the Series B Preferred Stock. The obligation hereunder of each Investor
to acquire and pay for the Series B Preferred Stock and acquire the Warrants is
subject to the satisfaction, at or before the Closing, of each of the conditions
set forth below. These conditions are for the Investors' sole benefit and may be
waived by the Investors at any time in their sole discretion.
(a) Accuracy of Cityscape's Representations and Warranties. The
representation and warranties of Cityscape shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).
(b) Performance by Cityscape. Cityscape shall have performed,
satisfied, and complied in all material respects with all covenants, agreement
and conditions required to be performed or satisfied by Cityscape on or prior to
the Closing.
(c) Nasdaq. As of the Closing Date, trading in Cityscape's Common Stock
shall not have been suspended by the SEC or Nasdaq, and trading in securities
generally as reported by
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Nasdaq shall not have been suspended or limited, and the Common Stock shall not
have been delisted from any exchange or market where they are currently listed.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of or materially adversely affects any of the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Certificate of Designations or the Warrants and no proceeding shall have
been commenced which is reasonably likely to have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this Agreement, the
Registration Rights Agreement, the Certificate of Designations or the Warrants.
(e) Opinion of Counsel. At the Closing the Investors shall have
received an opinion of Gibson, Dunn & Crutcher LLP, counsel to Cityscape in the
form attached hereto as Exhibit D.
(f) Other Documents. At the Closing the Investors shall have received
such other certificates and documents as the Investors or their counsel shall
reasonably require.
(g) Registration Rights Agreement. Cityscape shall have executed and
delivered to the Investors the Registration Rights Agreement.
(h) Officer's Certificate. Cityscape shall have delivered to the
Investors a certificate in form and substance of Exhibit E executed by an
officer of Cityscape.
(i) Certificate of Designations Filed. The Investors shall have
received copies of the filed Certificate of Designations.
(j) Certificates. The Investors shall have received certificates
evidencing the Series B Preferred Stock and the Warrants.
(k) Adverse Changes. Since June 30, 1997 and except as disclosed in the
SEC Documents, no event which had or is likely to have a Material Adverse Effect
on Cityscape shall have occurred.
ARTICLE V
LEGEND; RESTRICTIONS ON TRANSFER
Each certificate representing the Series B Preferred Stock, the Common
Shares, the Warrants and the Warrant Shares shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THE SECURITIES EVIDENCED OR CONSTITUTED BY THIS CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND MAY NOT BE SOLD, OFFERED FOR SALE OR
TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT UNLESS EITHER (i) THE
COMPANY
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HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH
SECURITIES IS MADE PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT."
Each Investor agrees that it shall not sell, offer for sale, transfer,
pledge or hypothecate any of the Series B Preferred Stock, the Common Shares,
the Warrants and the Warrant Shares without registration under the Act unless
either (i) Cityscape has received an opinion of counsel, in form and substance
reasonably satisfactory to Cityscape, to the effect that registration is not
required in connection with such disposition or in connection with the
conversion or exercise of the securities so disposed or (ii) such disposition
involves the sale of Common Shares or Warrant Shares and is made pursuant to
Rule 144 promulgated under the Act. Nothing herein shall limit the Investor's
right to pledge the Series B Preferred Stock, Common Shares, Warrants or Warrant
Shares pursuant to a bona fide margin account or lending arrangement, provided
any such lender shall be subject to all of the restrictions that are applicable
to the Investor.
Cityscape agrees to reissue certificates representing the Series B
Preferred Stock, Common Shares, Warrants and Warrant Shares without the legend
set forth above at such time as (i) the holder thereof is permitted to dispose
of such Series B Preferred Stock, Common Shares, Warrants and/or Warrant Shares
pursuant to Rule 144(k) under the Act, (ii) such Series B Preferred Stock,
Common Shares, Warrants and/or Warrant Shares are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser(s), in
form and substance reasonably satisfactory to Cityscape and its counsel) are
able to dispose of such securities publicly without registration under the Act,
or (iii) such Series B Preferred Stock, Common Shares, Warrants and/or Warrant
Shares are sold in a registered offering under the Act.
If on a Conversion Date (as defined in the Certificate of
Designations), or within three (3) trading days after such Conversion Date, the
Investor notifies Cityscape that it has resold Common Shares underlying the
Series B Preferred Stock being converted, so long as the Registration Statement
(as defined in the Registration Rights Agreement) is effective, Cityscape agrees
to issue certificates representing such Common Shares resold by the Investor
without the legend set forth above to or upon the instructions of the Investor.
Upon the sale of any Common Shares sold pursuant to an effective
Registration Statement, Cityscape or its transfer agent, shall promptly, but no
later than three trading days thereafter, issue new certificates representing
such Common Shares free and clear of any legends, transfer restrictions and stop
orders. In order to facilitate this, Cityscape agrees to deliver to its transfer
agent, upon the Registration Statement being declared effective, instructions
authorizing the transfer agent to effect the transfer of, and removal of legend
from, any Common Shares sold pursuant to the Registration Statement.
Cityscape shall pay all stamp taxes levied in connection with the
issuance of the Series B Preferred Stock pursuant hereto, the Common Shares
issued upon conversion thereof and the Warrant Shares issuable upon exercise of
the Warrants.
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ARTICLE VI
MISCELLANEOUS
Section 6.1 Specific Enforcement; Consent to Jurisdiction.
(a) Cityscape and the Investors acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Cityscape and each of the Investors (i) hereby irrevocably submits
to the exclusive jurisdiction of the United States District Court, the New York
State courts and other courts of the United States sitting in New York county,
New York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Cityscape and each of the Investors consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this paragraph shall affect or limit any right to
serve process in any other manner permitted by law.
Section 6.2 Entire Agreement. This Agreement, together with the
Registration Rights Agreement, the Warrants and the Certificate of Designations
and the agreements and documents executed in connection herewith and therewith,
contains the entire understanding of the parties with respect to the matters
covered hereby and thereby and, except as specifically set forth herein or
therein, neither Cityscape nor any Investor makes any representation, warranty,
covenant or undertaking with respect to such matters.
Section 6.3 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective upon
actual receipt of such mailing, facsimile or personal delivery. The addresses
for such communications shall be:
to Cityscape: Cityscape Financial Corp.
565 Taxter Road
Elmsford, New York 10523-2300
Fax: (914) 592-7101
Attn: Chief Executive Officer
General Counsel
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with copies to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Fax: (212) 351-4035
Attn: Sean P. Griffiths, Esq.
to the Investor: at the address and/or fax number set forth
on Schedule I of this Agreement
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section 6.4 Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees but
excluding consequential damages) incurred as a result of such parties' breach of
any representation, warranty, covenant or agreement in this Agreement.
Section 6.5 Amendments; Waivers. Any term of this Agreement may be
amended and the observance of any term hereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of Cityscape and the holders of more than 66-2/3% of the
Series B Preferred Stock. Any amendment or waiver effected in accordance with
this Section shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities and
Cityscape; provided, however, that no conditions set forth in Section 4.2 may be
waived with respect to an Investor without such Investor's prior written
consent.
Section 6.6 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 6.7 Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. Cityscape may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of all Investors (which consent may be withheld for any reason in their
sole discretion), except that Cityscape may assign this Agreement in connection
with the sale of all or substantially all of its assets provided that Cityscape
is not released from any of its obligations hereunder, such assignee assumes all
obligations of Cityscape hereunder, and appropriate adjustment of the provisions
contained in this Agreement, the Registration Rights Agreement, the Certificate
of Designations and the Warrants is made, in form and substance satisfactory to
the Investors, to place the Investors in the same position as they would have
been but for such assignment, in accordance with the terms of the Certificate of
Designations and the Warrants. Any Investor may assign this Agreement (in whole
or in part) or any rights or obligations hereunder without the consent of
Cityscape in connection with any sale or transfer of all or any portion of the
Series B Preferred Stock or the Warrants held by such Investor, provided such
sale or transfer is in compliance with Article V hereof and that no
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Investor may assign this Agreement prior to the Closing Date without Cityscape's
prior written consent except to an affiliate or affiliates of such Investor,
provided such affiliate or affiliates agrees in writing to be bound by the terms
hereof.
Section 6.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 6.9 Governing Law. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with the internal
laws of the State of New York without regard to any state's principles of
conflict of laws.
Section 6.10 Survival. The representations and warranties and the
agreements and covenants of Cityscape and each Investor contained herein shall
survive the Closing.
Section 6.11 Execution. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, it being understood
that all parties need not sign the same counterpart.
Section 6.12 Publicity. Cityscape agrees that it will not disclose, and
will not include in any public announcement the name of any Investor without its
express written consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement. Except
as may be required by law, Cityscape and each Investor shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and shall not issue any press release or make any
such public statement prior to such consultation.
Section 6.13 (a) Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
(b) Obligations Several and Not Joint. The parties acknowledge and
agree that the Investors are not agents, affiliates or partners of each other,
that all representations, warranties, covenants and agreements of the Investors
hereunder are several and not joint, that no Investor shall have any
responsibility or liability for the representations, warrants, agreements, acts
or omissions of any other Investor, and that any rights granted to "Investors"
hereunder shall be enforceable by each Investor hereunder.
Section 6.14 Covenant of the Investor. Each of the Investors, severally
and not jointly, hereby covenants and agrees that if it, directly or through an
affiliate creates the "lowest trading price" (as defined in the Certificate of
Designations) for the Common Stock on any of the four (4) (or fifteen (15) if
applicable) consecutive trading days immediately preceding the day of delivery
by such Investor of a Conversion Notice (as defined in the Certificate of
Designations), then such trading price shall, as to such Investor, not be
considered in determining the Conversion Price (as
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defined in the Certificate of Designations) applicable to such Conversion
Notice; provided however, that transactions in the Common Stock (which are not
principal transactions) effected in the ordinary course of business by an
Investor or its affiliates as broker or otherwise as market marker shall be
exempt from the provisions of this Section 6.14.
Section 6.15 Limitations on Investor's Right to Convert Shares of
Series B Preferred Stock. Notwithstanding anything to the contrary contained
herein, no shares of Series B Preferred Stock may be converted by an Investor to
the extent that, after giving effect to Common Shares to be issued pursuant to a
Conversion Notice (as such term is defined in the Certificate of Designations),
the total number of Common Shares deemed beneficially owned (as such term is
defined in the Exchange Act) by such Investor (but excluding shares otherwise
deemed beneficially owned by virtue of the ownership of the Series B Preferred
Stock, the Warrants or other securities having similar limitations on the right
to acquire shares of Common Stock to the extent of such limitations), together
with all Common Shares deemed beneficially owned by the Investor's "affiliates"
(as defined in Rule 144 of the Act) that would be aggregated for purposes of
determining whether a group under Section 13(d) of the Exchange Act, would
exceed 4.9% of the total issued and outstanding shares of Cityscape's Common
Stock, provided that each Investor shall have the right to waive this
restriction, in whole or in part, immediately in the case of a pending Change of
Control Transaction (as such term is defined in the Certificate of Designations)
and in any other case upon 61 days prior notice to Cityscape. The delivery of a
Conversion Notice by any Investor shall be deemed a representation by such
Investor that it is in compliance with this paragraph.
Section 6.16 Ineffective Conversion of Shares of Series B Preferred
Stock. A conversion by an Investor of shares of Series B Preferred Stock into
Common Shares shall be deemed ineffective, pursuant to an election by such
Investor, to the extent that, during the period commencing on the date such
Common Shares are delivered to the Investor upon such conversion and ending 5
trading days thereafter (i) such Investor is unable to resell all or a portion
of such Common Shares because the Registration Statement shall, for any reason,
not be available or (ii) Cityscape notifies the Investors of its intent to
purchase, in accordance with Sections 3(h)(2) or 3(h)(5) of the Certificate of
Designations, all of the outstanding shares of Series B Preferred Stock held by
the Investors at the time of such notice. The Investor shall promptly, but no
later than 5 trading days from the end of the 5 trading day period specified in
the preceding sentence, give Cityscape notice of an election pursuant to this
Section 6.16. Cityscape shall, upon receipt of such notice of election from the
Investor, re-issue shares of Series B Preferred Stock to such Investor as
promptly as practicable upon surrender by the Investor of the Common Shares held
by such Investor which are the subject of this Section 6.16.
Section 6.17 Like Treatment of Holders. Neither Cityscape nor any of
its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, payment for redemption or
exchange of shares of Series B Preferred Stock, or otherwise, to any holder of
such shares, for, as an inducement to or in connection with the solicitation of
such holder's consent, waiver or agreement to amend, if such consent, waiver or
amendment is binding on all holders of shares of Series B Preferred Stock,
relating to any terms or provisions of the Series B Preferred Stock or this
Agreement or the Registration Rights Agreement or the Warrants, unless such
consideration is required to be paid to all holders of shares of Series B
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Preferred Stock bound by such consent, waiver or amendment, whether or not such
holders so consent, waive or agree to amend and whether or not such holders
tender their shares of Series B Preferred Stock for redemption or exchange.
Cityscape shall not, directly or indirectly, redeem any shares of Series B
Preferred Stock unless such offer of redemption is made pro rata to all holders
of Series B Preferred Stock on identical terms.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CITYSCAPE FINANCIAL CORP.
By: /s/ Robert C. Patent
--------------------------------------
Name: Robert C. Patent
Title: Executive Vice President
INVESTOR:
By:
--------------------------------------
Name:
Title:
Number of shares of Series B Preferred Stock
Purchased at the Closing:
-----------
Number of Warrants Purchased:
--------------
Address for Notices:
------------------------
Telephone:
------------------------
Facsimile:
------------------------
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EXHIBITS
Exhibit A Certificate of Designations of Cityscape
Exhibit B Form of Warrant
Exhibit C Form of Certificate of Series B Preferred Stock
Exhibit D Form of Opinion of Counsel
Exhibit E Form of Officer's Certificate
<PAGE> 23
Elliott Associates, L.P.
By: /s/ Paul Singer
Name: Paul Singer
Title: General Partner
Number of shares of Series B Preferred Stock Purchased at the Closing: 900
Shares.
Number of Warrants Purchased: 90,000
Westgate International, L.P.
By: Martley International, Inc., as Attorney-in-Fact
By: /s/ Paul Singer
Name: Paul Singer
Title: President
Number of shares of Series B Preferred Stock Purchased at the Closing: 900
Shares.
Number of Warrants Purchased: 90,000
RGC International Investors, LDC
By: Rose Glen Capital Management, L.P.
By: RGL General Partner Corp.
By: /s/ Wayne D. Block
Name: Wayne D. Block
Title: Managing Director
Number of shares of Series B Preferred Stock Purchased at the Closing: 200
Shares.
Number of Warrants Purchased: 20,000
Salomon Brothers Inc.
By: /s/ William Montgomery
Name: William Montgomery
Title: V.P.
Number of shares of Series B Preferred Stock Purchased at the Closing: 400
Shares.
Number of Warrants Purchased: 40,000
High View Fund, L.P.
By: /s/ Ernest Werlin
Name: Ernest Werlin
Title: President
Number of shares of Series B Preferred Stock Purchased at the Closing: 139
Shares.
Number of Warrants Purchased: 13,900
High View Fund
By: /s/ Ernest Werlin
Name: Ernest Werlin
Title: President
Number of shares of Series B Preferred Stock Purchased at the Closing: 53
Shares.
Number of Warrants Purchased: 5,300
High View SSFI Fund, LDC
By: /s/ Ernest Werlin
Name: Ernest Werlin
Title: President
Number of shares of Series B Preferred Stock Purchased at the Closing: 8 Shares.
Number of Warrants Purchased: 800
Greenlight Capital, L.P.
By: /s/ Jeff Kerwin
Name: Jeff Kerwin
Title: Managing Member of General Partner
Number of shares of Series B Preferred Stock Purchased at the Closing: 66
Shares.
Number of Warrants Purchased: 6,600
<PAGE> 24
Greenlight Capital Offshore, Ltd.
By: /s/ Jeff Kerwin
Name: Jeff Kerwin
Title: Managing Member of Investment Advisor
Number of shares of Series B Preferred Stock Purchased at the Closing: 29
Shares.
Number of Warrants Purchased: 2,900
The Seedling Fund, L.P.
By: /s/ Jeff Kerwin
Name: Jeff Kerwin
Title: Managing Member of Investment Advisor
Number of shares of Series B Preferred Stock Purchased at the Closing: 5 Shares.
Number of Warrants Purchased: 500
CIBC Wood Gundy Securities Corp.
By: /s/ Neal I. Thomas
Name: Neal I. Thomas
Title: Managing Director
Number of shares of Series B Preferred Stock Purchased at the Closing: 2,300
Shares.
Number of Warrants Purchased: 230,000
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<PAGE> 1
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
September 15, 1997 between Cityscape Financial Corp., a Delaware corporation
("Cityscape"), and each person executing a counterpart of the signature page of
this Agreement (each individually an "Investor" and collectively the
"Investors").
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase Agreement by and between
Cityscape and the Investors (the "Securities Purchase Agreement"), Cityscape has
agreed to sell and issue to the Investors, and the Investors have agreed to
purchase from Cityscape, up to an aggregate of 5,000 shares, par value $0.01 per
share of Cityscape's 6% Convertible Preferred Stock, Series B (the "Series B
Preferred Stock") on the terms and conditions set forth therein and five-year
warrants issued as of the date hereof exercisable from time to time from the
date of issuance (the "Warrants"), for the purchase of up to 500,000 shares of
Common Stock, par value $0.01 per share of Cityscape (the "Common Stock"), at a
price specified in such Warrants (the shares of Common Stock issuable upon the
exercise of Warrants are hereinafter called the "Warrant Shares");
WHEREAS, the Investors may convert their Series B Preferred Stock into
shares of Common Stock at a conversion price to be calculated pursuant to and
upon such terms as are provided in the Certificate of Designations (the
"Certificate of Designations") of the Series B Preferred Stock; and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Securities Purchase Agreement,
Cityscape has agreed to provide the holders of Series B Preferred Stock with
certain registration rights with respect to the shares of Common Stock to be
issued upon conversion of the Series B Preferred Stock (such shares of Common
Stock together with the Warrant Shares are hereinafter referred to as the
"Common Shares") and certain other rights and remedies with respect to the
Series B Preferred Stock as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Securities Purchase Agreement and this Agreement, Cityscape and the Investors
agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Securities Purchase
Agreement or the Certificate of Designations. As used in this Agreement, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
<PAGE> 2
"Holder" and "Holders" shall include an Investor or the Investors for
so long as they own any Registrable Securities, respectively, and any assignee
or transferee of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with this
Agreement.
"Closing" and "Closing Date" shall have the meanings ascribed to such
terms in the Securities Purchase Agreement.
"Registrable Securities" shall mean: (i) the Common Shares issued to
each Holder or its permitted transferee or designee upon conversion of the
Series B Preferred Stock or exercise of the Warrants or upon any stock split,
stock dividend, recapitalization or similar event with respect to such Common
Shares; (ii) any securities issued or issuable to each Holder upon the exchange
or conversion of any Series B Preferred Stock, Warrants or Common Shares; and
(iii) any other security of Cityscape issued as a dividend or other distribution
with respect to, in exchange of or in replacement of the securities listed in
(i) and (ii) above, until in the case of any such securities (a) a registration
statement under the Securities Act covering the offering of such Registrable
Securities has been declared effective by the Commission and such Registrable
Securities have been disposed of pursuant to such effective registration
statement, (b) such Registrable Securities are sold under circumstances in which
all of the applicable conditions of Rule 144 (or any similar provision then in
force) under the Securities Act ("Rule 144") are met, (c) such Registrable
Securities have been otherwise transferred and Cityscape has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend, or (d) such time as, such Registrable Securities may be sold
without any time, volume or manner limitation pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
The terms "register," registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to be incurred by
Cityscape in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for Cityscape, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due diligence" examination of Cityscape and review of the Registration
Statement and related documents, and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of Cityscape, which shall be paid in any event by Cityscape).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included with "Registration Expenses."
"Registration Statement" shall have the meaning set forth in Section
2(a) herein.
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<PAGE> 3
"Regulation D" shall mean regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
2. Registration Requirements. Cityscape shall use its diligent best
efforts to effect the registration of the Registrable Securities (including
without limitation the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act) as would permit or facilitate the sale or distribution
of all the Registrable Securities in the manner (including manner of sale) and
in all states reasonably requested by the Holder. Such best efforts by Cityscape
shall include the following:
(a) Cityscape shall, as expeditiously as reasonably practicable after
the Closing Date:
(i) Prepare and file within 30 days of the Closing Date with the
Commission pursuant to Rule 415 under the Securities Act a registration
statement on Form S-3 under the Securities Act (or in the event that Cityscape
is ineligible to use such form, such other form as Cityscape is eligible to use
under the Securities Act) covering the Registrable Securities ("Registration
Statement"). Thereafter, Cityscape shall use its best efforts to cause such
Registration Statement and other filings to be declared effective prior to 120
days following the Closing Date. Cityscape shall provide Holders reasonable
opportunity to review any such Registration Statement or amendment or supplement
thereto prior to filing.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for so long as there are any
Registrable Securities; cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Registrable Securities covered by such Registration Statement for so long as
there are any Registrable Securities in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to such prospectus.
(iii) Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder.
(iv) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or "Blue sky"
laws of such jurisdictions as shall be reasonably requested by each Holder and
keep each such registration or qualification effective, including through new
filings or amendments or renewals, for so long as there are any Registrable
Securities and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration
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<PAGE> 4
Statement; provided that Cityscape shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(v) For so long as there are any Registrable Securities,
notify each Holder immediately, and confirm such notice in writing, (A) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any request by the
Commission for amendments or supplements to a Registration Statement or related
prospectus or for additional information, (C) of the receipt by Cityscape of any
notification with respect to the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (D) of Cityscape's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate or that there exist circumstances not yet
disclosed to the public which make further sales under such Registration
Statement inadvisable pending such disclosure and post-effective amendment.
(vi) Notify each Holder immediately, and confirm such
notice in writing of the happening of any event as a result of which the
prospectus (including any supplements thereto or thereof) included in such
Registration Statement, as then in effect, contains any untrue statement of
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein (in the case of the prospectus or
any preliminary prospectus, in light of the circumstances under which they were
made) not misleading, and use its best efforts to promptly update and/or correct
such prospectus.
(vii) Notify each Holder immediately, and confirm such
notice in writing of the issuance by the Commission or any state securities
commission or agency of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose.
Cityscape shall use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction, at the earliest possible moment.
(viii) Permit legal counsel to each Holder to review the
Registration Statement and all amendments and supplements thereto within a
reasonable period of time prior to each filing, and shall not file any document
in a form to which such counsel reasonably objects.
(ix) Cause all Registrable Securities that are shares of
Common Stock covered by such Registration Statement to be listed, by the date of
the first sale of Registrable Securities pursuant to such Registration
Statement, with the principal securities exchange(s) and/or markets on which the
Common Stock is then listed and prepare and file any required filings with the
National Association of Securities Dealers, Inc. or any exchange or market where
the Common Shares are traded.
(x) Take all steps necessary to enable Holders to avail
themselves of the prospectus delivery mechanism set forth in Rule 153 (or
successor thereto) under the Act, if available.
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<PAGE> 5
(b) If the Holder(s) intend(s) to distribute the Registrable Securities
by means of an underwriting, the Holder(s) shall so advise Cityscape. Any such
underwriting may only be administered by investment bankers reasonably
satisfactory to Cityscape. Cityscape shall only be obligated to permit one
underwritten offering, which offering shall be determined by a 66-2/3%
majority-in-interest of the Holders.
(c) Cityscape shall enter into such customary agreements for an
underwritten secondary offering (including a customary underwriting agreement
with the underwriter or underwriters), and take all such other actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities and in such
connection:
(i) make such representations and warranties to the Holders and
the underwriter or underwriters in form, substance and scope as are customarily
made by issuers to underwriters in secondary offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters opinions of independent counsel
to Cityscape, on and dated the date of delivery of any Registrable Securities
sold pursuant to the Registration Statement, which counsel and opinion (in form,
scope and substance) shall be reasonably satisfactory to the Holders and the
underwriter(s) and their counsel and covering, without limitation, such matters
as the due authorization and issuance of the securities being registered and
compliance with securities laws by Cityscape in connection with the
authorization, issuance and registration thereof and other matters that are
customarily given to underwriters in underwritten offerings, addressed to the
Holders and each underwriter;
(iii) cause to be delivered, immediately prior to the time of
delivery of any Registrable Securities sold pursuant to the Registration
Statement, a "comfort" letter from Cityscape's independent certified public
accountants addressed to the Holders and each underwriter, stating that such
accountants are independent public accountants within the meaning of the
Securities Act and the applicable published rules and regulations thereunder,
and otherwise in customary form and covering such financial and accounting
matters as are customarily covered by letters of the independent certified
public accountants delivered in connection with secondary offerings;
(iv) any underwriting agreement entered into shall include
customary indemnification and contribution provisions to and from the Company
and the underwriters;
(v) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or the
managing underwriter or underwriters, if any, to evidence compliance with clause
(i) above and with any customary conditions contained in the underwriting
agreement, if any.
(d) Cityscape shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter all
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<PAGE> 6
financial and other records customary for purposes of the Holders' due diligence
examination of Cityscape and review of any Registration Statement, all SEC
Documents (as defined in the Securities Purchase Agreement) filed subsequent to
the Closing, pertinent corporate documents and properties of Cityscape, and
cause Cityscape's officers, directors and employees to supply all information
reasonably requested by any such representatives, underwriter, attorney or
accountant in connection with such Registration Statement, provided that such
parties agree to keep such information confidential.
(e) Cityscape may suspend the use of any prospectus used in connection
with the Registration Statement only (i) in the event, and for such period of
time as, such a suspension is required by the rules and regulations of the
Commission, or (ii) as otherwise provided in the Certificate of Designations.
Cityscape will use its best efforts to cause such suspension to terminate at the
earliest possible date.
(f) In the event Cityscape is required to file an additional
registration statement with respect to newly authorized and/or reserved shares
of Common Stock (the "New Shares") in order to comply with its obligations under
the Series B Preferred Stock or the Warrant, Cityscape shall file an additional
registration statement within five (5) business days of any shareholders meeting
authorizing the New Shares and shall use its best efforts to cause such
registration statement to become effective within sixty (60) days of such
shareholders meeting. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable Securities, to
receive any securities in respect of Registrable Securities that were already
included in a registration statement, subsequent to the date such registration
statement is declared effective, and Cityscape is unable under the securities
laws to add such securities to the then effective registration statement,
Cityscape shall promptly file, in accordance with the procedures set forth
herein, an additional registration statement with respect to such newly
Registrable Securities. Cityscape shall use its best efforts to (i) cause any
such additional registration statement, when filed, to become effective under
the Securities Act, and (ii) keep such additional registration statement
effective during the period described in Section 5 below. All registration
rights set forth in this Agreement and the Securities Purchase Agreement shall
apply to the newly reserved New Shares and the new Registrable Securities.
3. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by Cityscape, and all Selling Expenses
of a Holder shall be borne by such Holder.
4. Registration on Form S-3. Cityscape shall use its best efforts to
remain eligible for registration on Form S-3 or any comparable or successor form
or forms, or, in the event that Cityscape is ineligible to use such form, such
form as Cityscape is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration effected by
Cityscape pursuant to this Agreement, Cityscape will use its best efforts to
keep such registration effective until the Holders have completed the sales or
distribution described in the Registration Statement (or additional registration
statement filed pursuant to Section 2(f) above) relating thereto or, if earlier,
until such time as such Registrable Securities may be sold without any time,
volume or manner
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<PAGE> 7
limitation pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act (provided that Cityscape's transfer agent has accepted
an instruction from Cityscape to such effect).
6. Indemnification.
(a) Cityscape Indemnity. Cityscape will indemnify each Holder, each of
its officers, directors and partners, and each person controlling each Holder,
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by Cityscape of the Securities Act or any state
securities law or, in either case, any rule or regulation thereunder applicable
to Cityscape and relating to action or inaction required of Cityscape in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors and partners, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that Cityscape will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon and in conformity with written information furnished to Cityscape by such
Holder or the underwriter (if any) therefor and stated to be specifically for
use therein. The indemnity agreement contained in this Section 6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of Cityscape (which
consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify
Cityscape, each of its directors, officers, partners, and each underwriter, if
any, of Cityscape's securities covered by such a registration statement, each
person who controls Cityscape or such underwriter within the meaning of Section
15 of the Securities Act and the rules and regulations thereunder, each other
Holder (if any), and each of their officers, directors and partners, and each
person controlling such other Holder(s) against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse Cityscape and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage,
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<PAGE> 8
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to Cityscape by such Holder and stated to be specifically for use
therein, and provided that the maximum amount for which such Holder shall be
liable under this indemnity shall not exceed the net proceeds received by such
Holder from the sale of the Registrable Securities pursuant to such registration
statement. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. The Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Party, provided, however,
that if separate firm(s) of attorneys is (are) required due to a conflict of
interest, then the Indemnifying Party shall be liable for the reasonable fees
and expenses of each such separate firm. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between Cityscape on the one hand and any Holder on the other, in
such proportion as is appropriate to reflect the relative fault of Cityscape and
of such Holder in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of Cityscape on the one hand and of
any Holder on the other shall be determined by reference to, among other things,
whether the untrue
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<PAGE> 9
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by Cityscape or by such
Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
Cityscape and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which, (i) in
the case of any Holder, the net proceeds received by such Holder from the sale
of Registrable Securities or (ii) in the case of an underwriter, the total price
at which the Registrable Securities purchased by it and distributed to the
public were offered to the public exceeds, in any such case, the amount of any
damages that such Holder or underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of Cityscape referred to
in Section 2(c)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Securities Purchase
Agreement or any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of Cityscape, and (iii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to Cityscape such
information regarding such Holder and the distribution and/or sale proposed by
such Holder as Cityscape may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Replacement Certificates. The certificate(s) representing the
Common Stock or Warrant Shares held by any Investor (or then Holder) may be
exchanged by such Investor (or such Holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Common Stock or Warrant Shares, as reasonably
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requested by such Investor (or such Holder) upon surrendering the same. No
service charge will be made for such registration or transfer or exchange.
11. Transfer or Assignment. The rights granted to the Investors by
Cityscape under this Agreement to cause Cityscape to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Series B Preferred Stock or Warrants, and all other rights
granted to the Investors by Cityscape hereunder may be transferred or assigned
to any transferee or assignee of any Series B Preferred Stock or Warrants;
provided in each case that Cityscape must be given written notice by such
Investor at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; and provided further that the transferee or
assignee of such rights agrees in writing to be bound by the registration
provisions of this Agreement and such transfer or assignment is permitted by and
made in compliance with the Securities Purchase Agreement.
12. Miscellaneous.
(a) Remedies. Cityscape and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Jurisdiction. Cityscape and each of the Investors each (i) hereby
irrevocably submit to the exclusive jurisdiction of the United States District
Court, the New York State courts and other courts of the United States sitting
in New York County, New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby waives, and agrees
not to assert in any such suit action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Cityscape and each of the Investors each
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.
(c) Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective upon actual
receipt of such mailing. The addresses for such communications shall be:
to Cityscape: Cityscape Financial Corp.
565 Taxter Road
Elmsford, New York 10523-2300
Fax: (914) 592-7101
10
<PAGE> 11
Attn: Chief Executive Officer
General Counsel
with copies to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Fax: (212) 351-4035
Attn: Sean P. Griffiths, Esq.
to the Investors: To each Investor at the address and/or fax
number set forth on the executed counterpart
of the signature page of this Agreement.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
(d) Waivers. Any term of this Agreement may be amended and the
observance of any term hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of Cityscape and the holders of more than 66-2/3% of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
shall be binding upon each holder of any Registrable Securities at the time,
each future holder of all such securities and Cityscape.
(e) Execution. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement, it being understood that
all parties need not sign the same counterpart.
(f) Publicity. Cityscape agrees that it will not disclose, and will not
include in any public announcement, the name of any Investor without its
consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. Except as may be
required by law, Cityscape and each Investor shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement and shall not issue any press release or make any such
public statement prior to such consultation.
(g) Entire Agreement. This Agreement, together with the Securities
Purchase Agreement, the Certificate of Designations and the Warrants and the
agreements and documents contemplated hereby and thereby, contains the entire
understanding and agreement of the parties, and may not be modified or
terminated except by a written agreement signed by both parties.
(h) Governing Law. This Agreement and the validity and performance of
the terms hereof shall be governed by, interpreted under, and construed in
accordance with the laws of the State of New York, without regard to any state's
principles of conflict of laws.
(i) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement
11
<PAGE> 12
shall continue in full force and effect without said provision; provided that
such severability shall be ineffective if it materially changes the economic
benefit of this Agreement to any party.
(j) Obligations Several and Not Joint. The parties acknowledge and
agree that the Investors are not agents, affiliates or partners of each other,
that all representations, warranties, covenants and agreements of the Investors
hereunder are several and not joint, that no Investor shall have any
responsibility or liability for the representations, warrants, agreements, acts
or omissions of any other Investor, and that any rights granted to "Investors"
hereunder shall be enforceable by each Investor hereunder.
(k) Titles. The titles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
(l) Rule 144. Cityscape covenants that it will file all reports
required to be filed by it under the Securities Act and the Exchange Act and
that it will take such further action as holders of Registrable Securities may
reasonably request, all to the extent required from time to time to enable the
Investor to sell Registrable Securities without registration under the Act
within the limitation of the exemptions provided by (a) Rule 144, as such Rule
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. If at any time Cityscape is not required to file
such reports, it will, upon the request of the Investor, make publicly available
other information so long as necessary to permit sales pursuant to Rule 144.
Upon the request of the Investor, Cityscape will deliver to the Investor a
written statement as to whether it has complied with such requirements.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CITYSCAPE FINANCIAL CORP.
By: /s/ Robert C. Patent
------------------------------------
Name: Robert C. Patent
Title: Executive Vice President
INVESTOR:
By: ______________________________________
Name:
Title:
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<PAGE> 14
Elliott Associates, L.P.
By: /s/ Paul Singer
Name: Paul Singer
Title: General Partner
Westgate International, L.P.
By: Martley International, Inc., as Attorney-in-Fact
By: /s/ Paul Singer
Name: Paul Singer
Title: President
RGC International Investors, LDC
By: Rose Glen Capital Management, L.P.
By: RGL General Partner Corp.
By: /s/ Wayne D. Block
Name: Wayne D. Block
Title: Managing Director
Salomon Brothers Inc.
By: /s/ William Montgomery
Name: William Montgomery
Title: V.P.
High View Fund, L.P.
By: /s/ Ernest Werlin
Name: Ernest Werlin
Title: President
High View Fund
By: /s/ Ernest Werlin
Name: Ernest Werlin
Title: President
High View SSFI Fund, LDC
By: /s/ Ernest Werlin
Name: Ernest Werlin
Title: President
Greenlight Capital, L.P.
By: /s/ Jeff Kerwin
Name: Jeff Kerwin
Title: Managing Member of General Partner
<PAGE> 15
Greenlight Capital Offshore, Ltd.
By: /s/ Jeff Kerwin
Name: Jeff Kerwin
Title: Managing Member of Investment Advisor
The Seedling Fund, L.P.
By: /s/ Jeff Kerwin
Name: Jeff Kerwin
Title: Managing Member of Investment Advisor
CIBC Wood Gundy Securities Corp.
By: /s/ Neal I. Thomas
Name: Neal I. Thomas
Title: Managing Director
2
<PAGE> 1
Exhibit 4.4
FORM OF COMMON STOCK PURCHASE WARRENT
THE SECURITIES EVIDENCED OR CONSTITUTED BY THIS CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
AND MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED WITHOUT REGISTRATION UNDER
THE ACT UNLESS EITHER (I) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (II) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT.
Right to Purchase Shares of Common Stock
of Cityscape Financial Corp.
----------
Common Stock Purchase Warrant No. B-
Cityscape Financial Corp., a Delaware corporation (the "Company"),
hereby certifies that for $10.00 and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, (the
"Purchaser") or any other Warrant Holder is entitled, on the terms and
conditions set forth below, to purchase from the Company at any time after the
date hereof (subject to the provisions of Section 2 hereof) and ending at 5:00
p.m. (New York City time) on September 15, 2002, up to fully paid and
nonassessable shares of Common Stock, $0.01 par value, of the Company together
with any associated Common Stock Purchase Rights (the "Common Stock") at the
Purchase Price, as the same may be adjusted pursuant to Section 4 herein.
1. Definitions.
(a) The term "Warrant Holder" shall mean the Purchaser or any
permitted assignee of all or any portion of this Warrant at any given time who,
at the time of assignment, acquired the right to purchase at least 1000 Warrant
Shares (such number being subject to adjustment after the date of original
issuance of this Warrant pursuant to Section 4 herein).
(b) The term "Warrant Shares" shall mean the shares of Common
Stock or other securities (other than Common Stock), or assets issuable upon
exercise of this Warrant.
(c) The term "Purchase Price" shall mean $14.71 if this Warrant is
exercised in whole or in part prior to September 15, 1998 and, if this Warrant
is exercised in whole or in part after such date, the term "Purchase Price"
shall mean the lesser of $14.71 and an amount equal to 130% of the average of
the Fair Market Values (as defined in Section 2(b)) of the Common Stock over the
20 Trading Days immediately prior to September 15, 1998. The Purchase Price is
subject to adjustment from time to time as provided herein.
(d) Other terms used herein which are defined in the Securities
Purchase Agreement dated as of September 15, 1997 (the "Securities Purchase
Agreement"), the Registration Rights
<PAGE> 2
Agreement, dated as of September 15, 1997 (the "Registration Rights Agreement"),
or in the Certificate of Designations (the "Certificate of Designations")
establishing the terms of the Company's 6% Convertible Preferred Stock, Series
B, shall have the same meanings herein as therein.
2. Exercise or Exchange of Warrant. This Warrant may be exercised
by Warrant Holder, in whole or in part, at any time and from time to time, by
surrender of this Warrant, together with the Purchase Price (as defined in
Section 1) for each share of Common Stock as to which the Warrant is exercised,
and the form of subscription attached hereto as Exhibit A duly executed by
Warrant Holder, to the Company at its principal office or any transfer agent of
the Common Stock. This Warrant is exchangeable in whole or in part, at any time
and from time to time, for its value in Common Stock based upon the Fair Market
Value of the Common Stock on the date of notice of exercise. In the event the
Warrant is exchanged for Warrant Shares, by surrender of the Warrant to the
Company at its principal office or any transfer agent of the Common Stock, the
value of the Warrant (or portion thereof) so exchanged shall equal the Fair
Market Value on the date of delivery of notice of exercise, less the Purchase
Price multiplied by the number of Warrant Shares included in such notice of
exercise. In the event that the Warrant is not exercised or exchanged in full,
the number of Warrant Shares shall be reduced by the number of such Warrant
Shares for which this Warrant is exercised or exchanged, as applicable, and the
Company, at its expense, shall forthwith issue and deliver to the Warrant Holder
a new Warrant of like tenor in the name of the Warrant Holder or as Warrant
Holder (upon payment by the Warrant Holder of any applicable transfer taxes) may
request, reflecting such adjusted Warrant Shares.
(a) Subject to the terms and conditions of this Warrant, as soon
as practicable after the exercise or exchange of this Warrant in full or in
part, and in any event within three (3) Trading Days thereafter, the Company at
its expense (including, without limitation, the payment by it of any applicable
issue taxes) will cause to be issued in the name of and delivered to Warrant
Holder, or as Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may lawfully direct, certificate or certificates for the number
of fully paid and non-assessable shares of Common Stock to which Warrant Holder
shall be entitled on such exercise or exchange, together with any other stock or
other securities or property (including cash, where applicable) to which Warrant
Holder is entitled upon such exercise or exchange. In the alternative to
physical delivery of certificates for shares, if delivery of the Warrant Shares
pursuant to any exercise hereunder may be effectuated by electronic book-entry
through the Depository Trust Company ("DTC") then delivery of Warrant Shares
pursuant to such exercise shall, if requested by such holder, be closed and
settled on T + 3 by book-entry transfer through DTC, and the Warrant Shares in
connection with such exercise shall be deemed delivered by such book-entry
transfer.
(b) This Warrant may not be exercised or exchanged as to
fractional shares of Common Stock. In the event that the exercise or exchange of
this Warrant, in full or in part, would result in the issuance of any fractional
share of Common Stock, then in such event the Warrant Holder shall be entitled
to cash equal to the Fair Market Value of such fractional share. For purposes of
this Warrant, Fair Market Value equals the closing sale price of the Common
Stock on the Nasdaq National Market, the New York Stock Exchange or the American
Stock Exchange whichever is the principal trading exchange or market for the
Common Stock (the
2
<PAGE> 3
"Principal Market") on the date of determination or, if the Common Stock is not
listed or quoted in the Nasdaq National Market or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices on
the over-the-counter market as furnished by any New York Stock Exchange member
firm that makes a market in the Common Stock reasonably selected from time to
time by the Company for that purpose, or, if the Common Stock is not listed or
quoted on the Nasdaq National Market or admitted to trading on any national
securities exchange or traded over-the-counter and the average price cannot be
determined as contemplated above, the Fair Market Value of the Common Stock
shall be as reasonably determined in good faith by the Company's Board of
Directors.
(c) Notwithstanding any provision of this Section 2, as of any
date of exercise or exchange of this Warrant or any portion thereof, the
aggregate number of shares of Common Stock into which this Warrant, all other
warrants and all other securities convertible into or exchangeable for Common
Stock held by the Warrant Holder and its affiliates shall be convertible or
exchangeable, together with the shares of Common Stock then beneficially owned
(as such term is defined in the Exchange Act) by such Warrant Holder and its
affiliates (but excluding any shares otherwise deemed beneficially owned by
virtue of the ownership of any securities having limitations on conversion,
exercise or exchange similar to those set forth herein to the extent of such
limitations), shall not exceed 4.9% of the total outstanding shares of Common
Stock as of such date, provided that the Warrant Holder shall have the right to
waive this restriction, in whole or in part, from time to time, immediately in
the case of a pending "Change in Control Transaction" described in Paragraph
2(c) of the Certificate of Designations and in any other case upon 61 prior days
notice to the Company. For purposes of this paragraph, "affiliates" shall mean
"affiliates" as defined in Rule 144 of the Act that would be aggregated with the
Warrant Holder for purposes of determining whether a group under Section 13(d)
of the Securities Exchange Act of 1934 exists.
In order to assure the availability of an exemption from registration
under federal or applicable state securities laws, the Company may condition the
exercise of this Warrant upon the Warrant Holder (other than the Purchaser)
delivering to the Company a letter confirming that it has acquired the Warrant
in a transaction exempt from the registration requirements of the Act. It is
further understood that certificates for the Warrant Shares, if any, to be used
upon exercise of the Warrant may contain legends to the extent contemplated by
Article V of the Securities Purchase Agreement.
3. Covenants of the Company.
(a) The Company shall use its reasonable best efforts to insure
that a Registration Statement under the Securities Act covering the resale of
other disposition thereof of the Warrant Shares by Warrant Holder is effective
to the extent as provided in the Registration Rights Agreement.
(b) The Company shall take all necessary actions and proceedings
as may be required and permitted by applicable law, rule and regulation,
including, without limitation the notification of the Nasdaq National Market,
for the legal and valid issuance of this Warrant and the Warrant Shares to the
Warrant Holder under this Warrant.
3
<PAGE> 4
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps reasonably necessary
and within its control to insure that the Common Stock remains listed on the
Principal Market and shall not amend its Certificate of Incorporation or Bylaws
so as to constitute a breach of the Company's obligations hereunder.
(d) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Common Stock as shall from time to time be issuable as Warrant Shares.
(e) The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in accordance with
the terms hereof, shall be validly issued, fully paid and non-assessable. The
Company has, and will continue to have, authorized and reserved for issuance to
the Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant.
(f) With a view to making available to the Warrant Holder the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit the Warrant Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its reasonable best efforts to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and
Exchange Act; and
(iii) furnish to any Warrant Holder forthwith upon request
a written statement by the Company that it has complied with the
reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of
the Company, and such other reports and document so filed by the
Company as may be reasonably requested to permit any such Warrant
Holder to take advantage of any rule or regulation of the SEC
permitting the selling of any such securities without registration.
4. Adjustment of Purchase Price and Number of Shares. The number
of, and kind of, securities purchasable upon exercise of this Warrant and the
Purchase Price shall be subject to adjustment from time to time as follows
(provided, however, that in no event shall the Purchase Price be less than $0.01
per share of Common Stock):
(a) Subdivisions, Combinations and Other Transactions. If the
Company shall at any time after the date of original issuance of this Warrant
subdivide its outstanding securities as to which purchase rights under this
Warrant exist, by split-up, spin-off, or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant exist, the number of
Warrant Shares as to which this Warrant is exercisable as of the date of such
subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a split-up or spin-off or
proportionately decreased in the case of a combination, as applicable.
Appropriate
4
<PAGE> 5
adjustments shall also be made to the Purchase Price payable per share, but the
aggregate Purchase Price payable for the total number of Warrant Shares issuable
under this Warrant as of such date shall remain the same.
(b) Stock Dividend. If at any time after the date of original
issuance of this Warrant the Company declares a dividend or other distribution
on Common Stock payable in Common Stock or other securities or rights
convertible into Common Stock ("Common Stock Equivalents") without payment of
any consideration by holders of Common Stock for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon exercise or conversion thereof), then the number of shares
of Common Stock for which this Warrant may be exercised shall be increased as of
the record date (or the date of such dividend distribution if no record date is
set) for determining the holders of Common Stock entitled to receive such
dividends, in proportion to the increase in the number of outstanding shares
(and shares of Common Stock issuable upon conversion of all such securities
convertible into Common Stock) of Common Stock as a result of such dividend, and
the Purchase Price per share shall be adjusted so that the aggregate Purchase
Price payable for the total number of Warrant Shares issuable hereunder
immediately after the record date (or on the date of such distribution, if
applicable), for such dividend shall equal the aggregate Purchase Price payable
for the total number of Warrant Shares issuable under this Warrant immediately
before such record date (or on the date of such distribution, if applicable).
(c) Other Distributions. If at any time after the date of original
issuance of this Warrant the Company distributes to holders of its Common Stock,
other than as part of its dissolution, liquidation or the winding up of its
affairs, any shares of its capital stock, any evidence of indebtedness or any of
its assets (other than cash, Common Stock or securities convertible into or
exchangeable for Common Stock), then the Company shall decrease the per share
Purchase Price of this Warrant and increase the number of shares of Common Stock
for which this Warrant may be exercised by an appropriate amount based upon the
value distributed on each share of Common Stock as determined in good faith by
the Company's Board of Directors such that the Warrant Holder is in an
economically equivalent position immediately subsequent to such distribution
(or, if applicable, the record date therefore) as such Warrant Holder was in
immediately prior to such distribution (or, if applicable, the record date
therefor).
(d) Merger, Etc. If at any time after the date hereof there shall
be a merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Warrant Holder shall be entitled to receive upon payment of the aggregate
Purchase Price then in effect, the number of shares or other securities or
property of the Company or of the successor corporation resulting from such
merger or consolidation, which would have been received by Warrant Holder for
the total number of Warrant Shares issuable under this Warrant had this Warrant
been exercised just prior to such transfer, merger or consolidation becoming
effective or to the applicable record date thereof, as the case may be;
provided, however, that if the consideration being paid to the holders of Common
Stock in such merger or consolidation or such transfer of all or substantially
all of the assets of the Company consists primarily of cash (a "Cash-Out
Transaction"), then provision shall be made in the agreements for such Cash-Out
Transaction to the effect that upon consummation thereof, the Warrant Holder
shall be entitled to receive cash in an amount equal to the excess, if any, of
the
5
<PAGE> 6
cash consideration (plus the fair market value of any non-cash consideration)
per share of Common Stock over the Purchase Price multiplied by the total number
of Warrant Shares issuable under this Warrant and, following the consummation of
such Cash-Out Transaction, this Warrant shall only represent the right to
receive such cash.
(e) Reclassification, Etc. If at any time after the date hereof
there shall be a reorganization or reclassification of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the Warrant Shares issuable under this Warrant had this
Warrant at such time been exercised.
5. No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Share above the
amount payable therefor on such exercise and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise or
exchange of this Warrant and the payment of the Purchase Price, if applicable.
6. Notice of Adjustments. Whenever the Purchase Price or number
of Warrant Shares issuable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall execute and deliver to the Warrant Holder a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated and the Purchase Price and number of shares issuable hereunder
after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (by first class mail, postage prepaid) to the Warrant
Holder.
7. Rights as Stockholder. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
6
<PAGE> 7
8. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Specific Enforcement; Consent to Jurisdiction; Waiver of Jury
Trial.
(a) The Company and the Warrant Holder acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
(b) Each of the Company and the Warrant Holder hereby (i) agree
that all actions or proceedings arising directly or indirectly from or in
connection with this Warrant shall be litigated only in the Supreme Court of the
State of New York or the United States District Court for the Southern District
of New York located in New York County, New York, (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper and (iii) to the extent permitted by applicable
law, consent to the jurisdiction and venue of the foregoing courts and consent
that any process or notice of motion or other application to either of said
courts or a judge thereof may be served inside or outside the State of New York
or the Southern District of New York by registered mail, return receipt
requested, directed to such party at its address, set forth in this Warrant (and
service so made shall be deemed complete five (5) days after the same has been
posted as aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said courts. The parties hereby waive any right
to a jury trial in connection with any litigation pursuant to this Warrant.
10. Entire Agreement; Amendments. This Warrant, the Securities
Purchase Agreement, the Registration Rights Agreement and the Certificate of
Designations contain the entire understanding of the parties with respect to the
matters covered hereby and thereby and except as specifically set forth herein
and therein. This Warrant and any term thereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
11. Restricted Securities. Article V of the Securities Purchase
Agreement is incorporated herein by reference and hereby made a part hereof.
12. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correction answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
7
<PAGE> 8
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
to the Company: Cityscape Financial Corp.
565 Taxter Road
Elmsford, New York 10523-2300
Fax: (914) 592-7101
Attn: Chief Executive Officer
General Counsel
with copies to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Fax: (212) 351-4035
Attn: Sean P. Griffiths, Esq.
and to each Warrant Holder at the address set forth on the signature
page.
Either party hereto may from time to time change its address for
notices under this Section 12 by giving written notice of such changed address
to the other party hereto.
13. Miscellaneous. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of New York without regard
to any other state's principles of conflict of laws. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provisions.
14. Expiration. The right to exercise this Warrant shall expire at
5:00 p.m. (New York City time) on September 15, 2002.
8
<PAGE> 9
Dated: September 15, 1997 CITYSCAPE FINANCIAL CORP.
By:______________________________________
Name: Robert C. Patent
Title: Executive Vice President
Attest:
By: ____________________
Name: Cheryl P. Carl
Its: Secretary
WARRANT HOLDER:
By:______________________________________
Name:
Title:
Address for Notices:________________________
________________________
________________________
9
<PAGE> 10
EXHIBIT A
FORM OF WARRANT EXERCISE
(To be signed only on exercise of Warrant)
TO: ____________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to [exercise] [exchange] this Warrant for, and to purchase thereunder,
_______ shares of Common Stock of Cityscape Financial Corp., a Delaware
corporation (the "Company"), and herewith makes payment [in full in cash of $
__________ therefor] [in full in the form of this Warrant in an amount equal to
the amount set forth in the Warrant [or such portion thereof] to be canceled in
connection with such exchange], and requests that the certificates for such
shares be issued in the name of, and delivered to ____________________, whose
address is ________________________________________.
Dated: ___________________ ____________________________________
(Signature must conform to name of
holder as specified on the face of
the Warrant)
____________________________________
Address
<PAGE> 11
EXHIBIT B
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
________________________ the right represented by the within Warrant to purchase
______ shares of Common Stock of Cityscape Financial Corp., a Delaware
corporation, to which the within Warrant relates, and appoints
____________________ Attorney to transfer such right on the books of Cityscape
Financial Corp., a Delaware corporation, with full power of substitution the
premises.
Dated: ___________________ ____________________________________
(Signature must conform to name of
holder as specified on the face of
the Warrant)
____________________________________
Address
Signed in the presence of:
____________________
