<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Cityscape Financial Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Cityscape Financial Corp.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
CITYSCAPE FINANCIAL CORP.
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 4, 1997
TO OUR STOCKHOLDERS:
The Annual Meeting of the Stockholders of Cityscape Financial Corp., a
Delaware corporation (the "Company"), will be held at Tappan Hill, 81 Highland
Avenue, Tarrytown, New York 10591, at 10:00 a.m., on Wednesday, June 4, 1997, to
consider and vote on the following matters described in this notice and the
accompanying Proxy Statement:
1. To elect two directors to hold office until the 2000 Annual Meeting
and until their successors have been elected and qualified.
2. To approve the amendment to the Company's Certificate of
Incorporation to increase the Company's authorized Common Stock, $0.01 par
value per share (the "Common Stock"), by 50,000,000 shares to an aggregate
of 100,000,000 shares and the Company's authorized Preferred Stock, par
value $0.01 per share (the "Preferred Stock"), by 5,000,000 shares to an
aggregate of 10,000,000 shares.
3. To approve the Company's 1997 Stock Option Plan and to reserve
1,500,000 shares of Common Stock for issuance thereunder (subject to
antidilution adjustments specified in the plan.).
4. To ratify the selection by the Company's Board of Directors of KPMG
Peat Marwick LLP as independent accountants of the Company for the fiscal
year ending December 31, 1997.
5. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 18, 1997 as
the record date for the determination of stockholders entitled to receive notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof, and only holders of record of Common Stock at the close of business on
that date will be entitled to receive notice of, and to vote at, the Annual
Meeting.
WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THIS WILL
ENSURE THAT YOUR SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A
QUORUM WILL BE PRESENT. YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING, AND YOU
MAY VOTE IN PERSON EVEN THOUGH YOU HAVE RETURNED YOUR PROXY.
By Order of the Board of Directors
/s/ Cheryl P. Carl
Cheryl P. Carl
Secretary
April 30, 1997
<PAGE> 3
CITYSCAPE FINANCIAL CORP.
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 4, 1997
------------------------
INTRODUCTION
This Proxy Statement is being sent on or about May 9, 1997 in connection
with the solicitation of proxies by the Board of Directors of Cityscape
Financial Corp., a Delaware corporation (the "Company"). The proxies are for use
at the 1997 Annual Meeting of the Stockholders of the Company, which will be
held at Tappan Hill, 81 Highland Avenue, Tarrytown, New York 10591, on
Wednesday, June 4, 1997, at 10:00 a.m., and at any meetings held upon
adjournment thereof (the "Annual Meeting"). The record date for the Annual
Meeting is the close of business on April 18, 1997 (the "Record Date"). Only
holders of record of the Company's Common Stock, $0.01 par value per share (the
"Common Stock"), on the Record Date are entitled to notice of the Annual Meeting
and to vote at the Annual Meeting and at any meetings held upon adjournment
thereof.
PROXY INFORMATION
A proxy card is enclosed. Whether or not you plan to attend the Annual
Meeting in person, please date, sign and return the enclosed proxy card as
promptly as possible, in the postage-prepaid envelope provided, to ensure that
your shares will be voted at the Annual Meeting. Any stockholder who returns a
proxy in such form has the power to revoke it at any time prior to its effective
use by filing an instrument revoking it or a duly executed proxy bearing a later
date with the Secretary of the Company or by attending the Annual Meeting and
voting in person. Unless contrary instructions are given, any such proxy, if not
revoked, will be voted at the Annual Meeting FOR (i) the nominees for election
as directors as set forth in this Proxy Statement, (ii) approval of the proposed
amendment to the Company's Certificate of Incorporation to increase the
authorized Common Stock by 50,000,000 shares to an aggregate of 100,000,000
shares and the Company's authorized Preferred Stock, $0.01 per share (the
"Preferred Stock"), by 5,000,000 shares to an aggregate of 10,000,000 shares,
(iii) approval of the Company's 1997 Stock Option Plan and to reserve 1,500,000
shares of Common Stock for issuance thereunder (subject to antidilution
adjustments specified in the plan), (iv) the ratification of the selection of
KPMG Peat Marwick LLP as independent accountants of the Company for the fiscal
year ending December 31, 1997 and (v) the recommendations of the Board of
Directors with regard to all other matters, in its discretion. The Company does
not currently know of any such other matters.
RECORD DATE AND VOTING
Each stockholder of record of Common Stock at the close of business on
April 18, 1997 is entitled to vote on all matters submitted to a vote of the
stockholders at the Annual Meeting. At the close of business on April 17, 1997,
there were 29,744,322 outstanding shares of the Common Stock of the Company held
of record by approximately 332 stockholders. The presence, either in person or
by proxy, of persons entitled to vote a majority of the Company's outstanding
Common Stock is necessary to constitute a quorum for the transaction of business
at the Annual Meeting. Abstentions and broker non-votes are counted for purposes
of determining a quorum, but are not considered as having voted for purposes of
determining the outcome of a vote. No other voting securities of the Company are
outstanding. Holders of Common Stock have one vote for
<PAGE> 4
each share on any matter that may be presented for consideration and action by
the stockholders at the Annual Meeting.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company may
request banks and brokers to solicit their customers who beneficially own Common
Stock listed of record in names of nominees and will reimburse such banks and
brokers for their reasonable out-of-pocket expenses of such solicitations. The
solicitation of proxies by mail may be supplemented by telephone, telegram and
personal solicitation by officers, directors and regular employees of the
Company, but no additional compensation will be paid to such individuals.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to shares of Common Stock of
the Company owned as of April 28, 1997, by (i) each person who, to the extent
known to the Company, beneficially owned more than 5% of such outstanding Common
Stock; (ii) each director who served during 1996; (iii) each nominee for
election as a director; (iv) each Named Executive Officer (as defined below) of
the Company; and (v) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
----------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
---------------------------------------------------------------- ----------- -------
<S> <C> <C>
Robert Grosser(2)............................................... 3,917,284 12.8%
Robert C. Patent(3)............................................. 3,927,192 12.8
Asher Fensterheim(4)(5)......................................... 3,727,960 12.2
Jonah L. Goldstein(6)........................................... 473,352 1.5
Arthur Gould(5)................................................. 46,000 *
Hollis W. Rademacher(5)......................................... 52,600 *
Robert M. Stata(7)(8)........................................... 818,400 2.7
David A. Steene(8).............................................. 1,216,000 4.0
Martin H. S. Brand(9)........................................... 1,210,750 4.0
Gerald Epstein(8)............................................... 1,218,200 4.0
All directors and executive officers as a group (16
persons)(10).................................................. 17,876,000 56.9
Franklin Mutual Advisers, Inc.(11).............................. 4,597,600 15.0
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned by
it. A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Proxy Statement
upon the exercise of options and warrants. Each beneficial owner's
percentage ownership is determined by assuming that options that are held by
such person (but not those held by any other person) and that are
exercisable within 60 days from the date of this Proxy Statement have been
exercised.
(2) Includes 640 shares owned by Mr. Grosser's spouse, with respect to all of
which Mr. Grosser disclaims beneficial ownership, and options to purchase
25,000 shares granted pursuant to the Company's 1995 Stock Option Plan (the
"1995 Stock Option Plan"). Mr. Grosser's business address is 565 Taxter
Road, Elmsford, New York 10523-5200.
(3) Includes 400 shares owned by Mr. Patent's spouse, with respect to all of
which Mr. Patent disclaims beneficial ownership, and options to purchase
20,000 shares granted pursuant to the 1995 Stock Option Plan. Mr. Patent's
business address is 565 Taxter Road, Elmsford, New York 10523-5200.
2
<PAGE> 5
(4) Includes 30,000 shares owned by Mr. Fensterheim's spouse, with respect to
all of which Mr. Fensterheim disclaims beneficial ownership. Mr.
Fensterheim's business address is 565 Taxter Road, Elmsford, New York
10523-5200.
(5) Includes options to purchase 46,000 shares granted pursuant to the
Company's 1995 Non-Employee Directors Stock Option Plan (the "Directors
Plan").
(6) Includes options to purchase 92,000 shares granted pursuant to the 1995
Stock Option Plan.
(7) Includes 400 shares owned by Mr. Stata's spouse, with respect to all of
which Mr. Stata disclaims beneficial ownership.
(8) Includes options to purchase 16,000 shares granted pursuant to the 1995
Stock Option Plan.
(9) Includes options to purchase 10,750 shares granted pursuant to the 1995
Stock Option Plan.
(10) See Notes (1)-(9).
(11) As agent for certain of its advisory clients. Franklin Mutual Advisors,
Inc. disclaims beneficial ownership of all securities owned by its advisory
clients. The address of Franklin Mutual Advisors, Inc. is 51 John F.
Kennedy Parkway, Short Hills, New Jersey 07078.
ITEM 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes as nearly equal in size as practicable
and provides that each class will hold office until the third annual meeting for
election of directors following the election of such class. The current terms of
the directors in Class I, Class II and Class III of the Board of Directors
expire in 1997, 1998 and 1999, respectively. Two directors, constituting all of
the authorized Class I directors, are to be elected at the Annual Meeting to
hold office until the 2000 Annual Meeting and until their successors are elected
and qualified. The nominees receiving the greatest number of votes at the Annual
Meeting up to the number of authorized directors will be elected. Each of the
nominees set forth below currently serves as a director and has consented to
continue to serve as a director if elected.
THE BOARD BELIEVES THAT THE ELECTION OF THE NOMINEES TO CLASS I OF THE
COMPANY'S BOARD OF DIRECTORS IS IN THE BEST INTEREST OF THE COMPANY AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" ELECTION THEREOF. PROXIES
WILL BE VOTED "FOR" EACH NOMINEE UNLESS OTHERWISE SPECIFICALLY INDICATED.
In the event that any of the nominees for director become unable to serve
before the Annual Meeting, it is intended that shares represented by proxies
that are executed and returned will be voted for such substitute nominees as may
be recommended by the Company's existing Board of Directors, unless other
directions are given in the proxies. To the best of the Company's knowledge, all
nominees will be available to serve.
No arrangement or understanding exists between any nominees and any other
person or persons pursuant to which any nominee was or is to be selected as a
director or nominee.
The following table sets forth certain information concerning the current
directors, including the Class I nominees to be elected at this meeting:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Class III Directors whose terms expire at the 1999 Annual Meeting of Stockholders:
Robert Grosser................. 39 Chairman of the Board, Chief Executive Officer,
Officer, President and Director; President and
Director of CSC; Director of CSC-UK
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Robert C. Patent............... 47 Vice Chairman of the Board, Executive Vice
President, Treasurer and Director; Executive Vice
President, Treasurer, Assistant Secretary and
Director of CSC; Director of CSC-UK
Asher Fensterheim.............. 67 Director; Director of CSC
Class II Directors whose terms expire at the 1998 Annual Meeting of Stockholders:
Jonah L. Goldstein............. 61 General Counsel and Director; General Counsel and
Director of CSC; Secretary and Director of CSC-UK
Arthur P. Gould................ 79 Director
Hollis W. Rademacher........... 61 Director
Class I Nominees to be elected at the 1997 Annual Meeting of Stockholders:
Robert M. Stata................ 39 Director; Senior Vice President/Originations
and Director of CSC
David A. Steene................ 37 Director; Managing Director and Director of CSC-UK
</TABLE>
Robert Grosser has been Chief Executive Officer, President and a Director
of the Company since April 1994 and its Chairman of the Board since September
1995. Mr. Grosser has also served in each of these offices of Cityscape Corp., a
wholly-owned subsidiary of the Company ("CSC"), since he founded the
organization in 1985. Mr. Grosser has served as a Director of City Mortgage
Corporation Limited, a wholly-owned subsidiary of the Company ("CSC-UK"), since
its formation in May 1995. Mr. Grosser currently serves on the board of the
National Home Equity Mortgage Association. Mr. Grosser is the son-in-law of
Asher Fensterheim.
Robert C. Patent has been Executive Vice President and a Director of the
Company since April 1994, Treasurer since June 1995 and the Vice Chairman of its
Board since September 1995. Mr. Patent also has served as Executive Vice
President and as Director of CSC since October 1990 and as Treasurer since
January 1994. Mr. Patent has served as a Director of CSC-UK since its formation
in May 1995. Mr. Patent currently serves as President of Colby Capital Corp. and
as a director of New York Federal Savings Bank, a federally chartered thrift
institution located in New York City.
Asher Fensterheim has been a Director of the Company since June 1995. Mr.
Fensterheim has served as a Director of CSC since January 1995. Mr. Fensterheim
is an attorney in the State of New York who specializes in consumer and
commercial finance, real estate, mortgage banking and related areas. From 1988
to 1993, he was a partner with Fink Weinberger P.C. Since 1994, he is the sole
stockholder of Asher Fensterheim P.C. which renders legal services to the
Company. Mr. Fensterheim is the father-in-law of Robert Grosser.
Jonah L. Goldstein has been General Counsel of the Company since September
1995 and a Director since June 1995. Mr. Goldstein served as a consultant to CSC
from December 1993 through June 1995 and has served as a Director since January
1995 and as General Counsel since January 1996. Effective July 1, 1995, Mr.
Goldstein entered into an employment agreement with the Company. Mr. Goldstein
also has served as Secretary and as a Director of CSC-UK since its formation in
May 1995. From its formation in 1980 until its acquisition by CSC in 1994, Mr.
Goldstein was President and Chairman of Astrum Funding Corp. ("Astrum"), a
mortgage banker. Mr. Goldstein currently serves as Chairman and Director of
Advance Abstract Corp., a company that sells title insurance. He is also sole
stockholder of Jonah L. Goldstein, P.C. Mr. Goldstein is the father of Eric S.
Goldstein.
Arthur P. Gould has been a Director of the Company since June 1995. Since
1973, Mr. Gould has served as President of Arthur P. Gould & Co., an investment
firm (formerly a division of Inter-Regional Financial Group Inc.). Previously,
Mr. Gould was President of Golden Shield Corporation, a subsidiary of General
4
<PAGE> 7
Telephone & Electronics Corporation and then President, Corporate Development
Division of Laidlow & Co. Incorporated and Vice President and Director of
Laidlow & Co. Incorporated.
Hollis W. Rademacher has been a Director of the Company since June 1995.
Currently, Mr. Rademacher is actively involved in a variety of financial
consulting and corporate director capacities. Mr. Rademacher serves as a
director of four suburban Chicago area banks, Hinsdale Bank and Trust, Hinsdale,
Illinois, North Shore Community Bank and Trust, Wilmette, Illinois, Lake Forest
Bank and Trust, Lake Forest, Illinois and Libertyville Bank and Trust,
Libertyville, Illinois, and several other closely held organizations in the
financial service, distribution and real estate industries. He also serves as
Director of Schawk, Inc., a public company engaged in producing molded plastic
products and pre-press services and products for printed packaging applications.
From 1988 to 1993, Mr. Rademacher served as Chief Financial Officer of
Continental Bank Corp.
Robert M. Stata has been a Director of the Company since June 1995. Mr.
Stata also has served as Vice President of CSC, responsible for lending
originations, since November 1992 and as Director and as Vice
President/Originations of CSC since January 1994. Mr. Stata was promoted to
Senior Vice President/Originations of CSC in June 1996. Mr. Stata was the
President/Founder of Suburban Equity Corp., a mortgage banker specializing in
non-conventional loans, from 1985 to 1992.
David A. Steene has been a Director of the Company since October 1995. Mr.
Steene also has served as Managing Director and as Director of CSC-UK since its
formation in May 1995. Mr. Steene was an equity partner of Brand Montague,
Solicitors from September 1985 to September 1994. Mr. Steene was an elected
member of Elstree Ward, Hertsmere Borough Council from May 1991 to May 1995,
serving as Vice Chairman of the Planning Committee in 1992 and Chairman of the
Housing Committee in 1993.
COMMITTEES AND ATTENDANCE AT MEETINGS
During fiscal 1996, the Audit Committee of the Board of Directors was
comprised of Messrs. Arthur Gould, Hollis Rademacher and Robert Patent. The
Audit Committee makes recommendations regarding the selection of independent
public accountants and reviews with them the scope and results of the audit
engagement. The Audit Committee held three meetings during 1996.
During fiscal 1996, the Compensation Committee of the Board of Directors
was comprised of Messrs. Robert Grosser, Robert Patent, Jonah Goldstein and
Robert Stata. The Compensation Committee reviews compensation of executive
officers. The Compensation Committee held three meetings during 1996. Currently,
Messrs. Arthur Gould and Hollis Rademacher are the members of such committee.
During fiscal 1996, the Stock Option Plan Committee and the Company's 1995
Stock Purchase Plan (the "Stock Purchase Plan") Committee each was comprised of
Messrs. Hollis Rademacher and Asher Fensterheim. The Stock Option Plan Committee
and the Stock Purchase Plan Committee administer the 1995 Stock Option Plan and
the Stock Purchase Plan, respectively. The Stock Option Plan Committee and the
Stock Purchase Plan Committee each held two meetings in 1996. Currently, Messrs.
Arthur Gould and Hollis Rademacher are the members of such committee.
The Board of Directors does not have a standing Nominating Committee or any
other committee which performs a similar function.
During 1996, the Board of Directors held 17 meetings. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors held during the period for which he was a director and
(ii) the total number of meetings held by all committees of the Board on which
he served during the period he served.
NON-EMPLOYEE DIRECTOR COMPENSATION
Directors who are not employees of the Company receive stock options
pursuant to the Directors Plan. The Directors Plan provides for automatic grants
of an option to purchase 40,000 shares of Common Stock to the Company's eligible
non-employee directors upon their election to the Board of Directors of the
Company.
5
<PAGE> 8
Each eligible non-employee director is granted an additional option, subject to
certain restrictions, to purchase 6,000 shares of Common Stock on each
anniversary of his or her election so long as he or she remains an eligible
non-employee director of the Company. The exercise price of any options granted
under the Directors Plan is the fair market value of the Common Stock on the
date of grant. No more than 400,000 shares of Common Stock may be issued upon
exercise of options granted under the Directors Plan, subject to adjustment to
reflect stock splits, stock dividends and similar capital stock transactions.
Options may be granted under the Directors Plan until June 1, 2005.
In addition, non-employee directors of the Company receive an annual
retainer of $10,000, are reimbursed for reasonable expenses incurred in
connection with attendance at Board of Directors' meetings or committee meetings
and, if chairman of a committee of the Board of Directors, an additional $3,000.
On June 1, 1995 and June 12, 1996, Messrs. Gould, Rademacher and
Fensterheim each were granted options to purchase 40,000 shares and 6,000
shares, respectively, of Common Stock under the Directors Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, the Compensation Committee was comprised of Messrs.
Grosser, Patent, Jonah Goldstein and Stata, all of whom are executive officers
of the Company. None of the executive officers of the Company served on the
board of directors or on the compensation committee of any other entity, any of
whose officers served either on the Board of Directors or on the Compensation
Committee of the Company.
In May 1994, the Company loaned Mr. Stata $100,000. The loan accrued
interest on the unpaid principal balance at a rate equal to 6%. This loan was
paid in full in January 1996.
In January 1996, Samboy Financial Corp., a Minnesota corporation
("Samboy"), began selling Title I and similar loans to the Company. During 1996,
Samboy sold $2.1 million of loans to the Company and, in the first three months
of 1997, sold $2.8 million of loans to the Company. Mr. Jonah Goldstein owns 20%
of the outstanding capital stock of Samboy.
Mr. Paul Goldstein, the son of Mr. Jonah Goldstein and the brother of Mr.
Eric Goldstein, is employed as an Assistant Vice President of CSC. During 1996,
he received $277,851 and was granted 21,000 incentive stock options at exercise
prices ranging from $9.88 to $10.00 per share in accordance with the 1995 Stock
Option Plan for such services and is anticipated to be similarly compensated in
1997.
None of Messrs. Grosser, Patent, Jonah Goldstein or Stata participated in
decisions regarding his own compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors and persons who own more
than 10% of the Company's Common Stock to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
(the "Commission"). Executive officers, directors and 10% stockholders are
required by the Commission to furnish the Company with copies of all Forms 3, 4
and 5 that they file.
Based solely on its review of copies of such forms and such written
representations regarding compliance with such filing requirements as were
received from its executive officers, directors and greater than 10%
stockholders, the Company believes that, other than as described in this
paragraph, all such Section 16(a) filing requirements were complied with during
1996. Mr. Ledwick failed to include in his report on Form 4 filed with the
Commission pursuant to Section 16(a) of the Exchange Act on February 5, 1996
relating to transactions which occurred in January 1996, options to purchase
100,000 shares of Common Stock that were granted to him in January 1996. Mr.
Ledwick has amended his Form 4 to include this information by filing a Form 4
amendment on March 27, 1997. Mr. Grosser failed to include in his report on Form
5 filed with the Commission pursuant to Section 16(a) of the Exchange Act on
February 13, 1997 relating to transactions which occurred in December 1996, an
aggregate of 1,600 shares of Common Stock held in trust for his two daughters,
which shares are considered indirectly owned by Mr. Grosser. Mr. Grosser has
amended his Form 4 to include this information by filing a Form 4 amendment on
March 27, 1997.
6
<PAGE> 9
MANAGEMENT
EXECUTIVE OFFICERS
The following table and discussion set forth certain information with
regard to the Company's executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
----------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Robert Grosser......... 39 Chairman of the Board, Chief Executive Officer, President and
Director; President and Director of CSC; Director of CSC-UK
Robert C. Patent....... 47 Vice Chairman of the Board, Executive Vice President, Treasurer
and Director; Executive Vice President, Treasurer, Assistant
Secretary and Director of CSC; Director of CSC-UK
Jonah L. Goldstein..... 61 General Counsel and Director; General Counsel and Director of
CSC; Secretary and Director of CSC-UK
Robert M. Stata........ 39 Director; Senior Vice President/Originations and Director of CSC
Cheryl P. Carl......... 44 Vice President and Secretary; Senior Vice President/Operations,
Secretary and Director of CSC
Steven P. Weiss........ 40 Senior Vice President/Sales and Director of CSC
Eric S. Goldstein...... 35 Senior Vice President/Loan Servicing of CSC
Tim S. Ledwick......... 39 Vice President and Chief Financial Officer; Senior Vice
President and Chief Financial Officer of CSC
Robert J. Blackwell.... 58 Senior Vice President/Specialty Products Division of CSC
Steven M. Miller....... 41 Senior Vice President/Managing Director of CSC
David A. Steene........ 37 Director; Managing Director and Director of CSC-UK
Martin H.S. Brand...... 60 Lending Director and Director of CSC-UK
Gerald Epstein......... 47 Financial Director and Director of CSC-UK
</TABLE>
Messrs. Stata and Steene are nominees to the Board of Directors. See "Item
1 -- Election of Directors" for biographical information with respect to Messrs.
Grosser, Patent, Jonah Goldstein, Stata and Steene.
Cheryl P. Carl has been Secretary of the Company since June 1994 and Vice
President since June 1996. Ms. Carl also has served as Vice President/Operations
since January 1994, Secretary of CSC since June 1994 and as Assistant Treasurer
and as Director of CSC since January 1995. Ms. Carl was promoted to Senior Vice
President/Operations of CSC in June 1996. From its formation in 1980 until its
acquisition by CSC in 1994, Ms. Carl was Executive Vice President and Director
of Astrum, a mortgage banker specializing in non-conventional loans. Ms. Carl
also is a Director and Secretary of Advance Abstract Corp., a company that sells
title insurance.
Steven P. Weiss has been Vice President/Sales of CSC since January 1994 and
a Director of CSC since January 1995. Mr. Weiss was promoted to Senior Vice
President/Sales of CSC in June 1996. From June 1993 to December 1993, Mr. Weiss
held the position of Vice President of Astrum, a mortgage banker specializing in
non-conventional loans. From 1989 to 1993, Mr. Weiss was founder and President
of Record Research, a title search company, and President of County Seat Capital
Corporation, a broker of non-conventional loans.
Eric S. Goldstein has been Vice President/Loan Servicing of CSC since
January 1994. Mr. Goldstein was promoted to Senior Vice President/Loan Servicing
of CSC in June 1996. From 1987 to 1993, Mr. Goldstein was Vice President of
Astrum, a mortgage banker specializing in non-conventional loans. Mr. Goldstein
is the son of Jonah L. Goldstein.
7
<PAGE> 10
Tim S. Ledwick has been Chief Financial Officer of the Company since March
1995 and Vice President since June 1996. Mr. Ledwick also has served as Vice
President, Chief Financial Officer of CSC since September 1994. Mr. Ledwick was
promoted to Senior Vice President of CSC in March 1997. From 1992 until 1994,
Mr. Ledwick was Vice President/Controller -- Subsidiaries and from 1989 until
1992 was Controller -- Subsidiaries for River Bank America.
Robert J. Blackwell has been Vice President/Specialty Products Division of
CSC since January 1996. In August 1996, Mr. Blackwell was promoted to Senior
Vice President/Specialty Products Division of CSC. From 1985 to 1995, Mr.
Blackwell was the Executive Vice President, Chief Operating Officer and a
Director of Alliance Funding Company, presently a division of Superior Bank
F.S.B.
Steven M. Miller has been Senior Vice President/Managing Director of CSC
since March 1997. Mr. Miller's responsibilities include direction of the
Company's securitizations and capital markets and strategic planning activities.
Previously, Mr. Miller was Senior Vice President and Co-Head of the Asset Backed
Group of Greenwich Capital Markets, Inc. Mr. Miller became a Senior Vice
President at Greenwich Capital Markets, Inc. in 1992 and also was named Co-Head
of the Asset Backed Group in May 1995. Prior to that time, Mr. Miller was a Vice
President at Greenwich Markets, Inc.
Martin H.S. Brand has been Lending Director and a Director of CSC-UK since
its formation in May 1995. Mr. Brand served as a director of Metropolitan
Mortgage Corporation Ltd. from 1986 to 1993. Mr. Brand was a partner of Brand
Montague, Solicitors from March 1960 until September 1994.
Gerald Epstein has been Financial Director and a Director of CSC-UK since
its formation in May 1995. Since 1972, Mr. Epstein has been a senior partner of
Downham Train Epstein, a general accounting practice, where he specializes in
tax and corporate finance. Mr. Epstein is also a director and stockholder of DTE
Insurance Services Limited.
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation earned by the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers whose annual
salary and bonus during the fiscal years presented exceeded $100,000 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------------------- ------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Robert Grosser......................... 1996 $268,068 $1,326,997 $ 44,997(1)
President and Chief Executive 1995 259,155 275,788 3,915(2)
Officer; President of CSC 1994 238,030 30,000 1,100(2)
Robert C. Patent....................... 1996 $226,174 $ 884,665 $ 67,990(3)
Executive Vice President and
Treasurer; 1995 219,550 183,858 3,915(2)
Executive Vice President and 1994 208,000 10,000 1,100(2)
Treasurer of CSC
David A. Steene........................ 1996 $218,359 $ 726,038 --
Managing Director of CSC-UK 1995 104,867 -- --
1994 -- -- --
Martin H.S. Brand...................... 1996 $218,359 $ 726,038 --
Lending Director of CSC-UK 1995 104,867 -- --
1994 -- -- --
Gerald Epstein......................... 1996 $218,359 $ 726,038 --
Financial Director of CSC-UK 1995 104,867 -- --
1994 -- -- --
</TABLE>
- ---------------
(1) Represents premium payments made by the Company pursuant to a split-dollar
life insurance policy that provided a benefit of $13,463.
8
<PAGE> 11
(2) Reflects amounts paid as qualified matching contributions under the
Company's employee benefit plan.
(3) Represents premium payments made by the Company pursuant to a split-dollar
life insurance policy that provided a benefit of $2,136.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of the Named Executive
Officers, as well as with certain other executive officers of the Company and
CSC. Each agreement, other than those with Mr. Epstein and Mr. Jonah Goldstein,
requires the executive officer to devote his or her full time and best efforts
to the Company during the term of the agreement.
The employment agreements with Messrs. Grosser and Patent are for a term
commencing January 1, 1995 and ending December 31, 1998. The agreements provide
for an annual salary of $260,000 and $220,000, respectively, plus increases
based on the percentage increase, if any, in the Consumer Price Index, or by a
greater amount, at the discretion of the Board of Directors. In addition, the
agreements provide for payment to Mr. Grosser and Mr. Patent of an amount equal
to 1.5% and 1.0%, respectively, of the pre-tax profits of the Company, as
determined by the Company's outside auditors in accordance with generally
accepted accounting principles, in excess of certain scheduled thresholds.
The employment agreement with Mr. Stata is for a term commencing on
November 1, 1992 and continuing through December 31, 1997. The agreement
provided for an annual salary of $225,000 plus increases of 3% to 6% per year
based on the percentage increase in the Consumer Price Index. As of September 1,
1996, the annual salary was increased to $275,000 for the remaining term of the
agreement, subject to such increases. In addition, the agreement provided for
payment to Mr. Stata of an annual bonus of $25,000 if the aggregate of loans
originated or purchased by the Company exceeds certain specified levels for each
year during the term of the agreement. Such bonus provision was amended as set
forth below. Upon a change in control, Mr. Stata may terminate the agreement if
the current senior management of the Company ceases to exercise oversight over
the operations of the Company. The Company would then be obligated to pay a
monthly payment over the balance of the remaining term of the agreement equal to
33% of Mr. Stata's monthly compensation in effect prior to his giving notice of
termination.
The employment agreements with Ms. Carl and Messrs. Weiss, Jonah Goldstein
and Eric Goldstein are for a term commencing on July 1, 1995 and continuing
through December 31, 1998. Each agreement provided for an annual salary of
$160,000, plus increases based on the percentage increase, if any, in the
Consumer Price Index, or by a greater amount, in the discretion of the Board of
Directors. As of September 1, 1996, the annual salary was increased to $210,000
for the remaining term of each agreement. In addition, each agreement provided
for payment of an annual bonus of $30,000 if the Company's gross volume of loans
originated by the Company in the case of Ms. Carl and Messrs. Weiss and Jonah
Goldstein, or the outstanding servicing portfolio of the Company in the case of
Mr. Eric Goldstein, exceeds certain specified levels for each year during the
term of the agreement. Such bonus provision was amended as set forth below. In
addition, each agreement provided for a one-time grant of 150,000 incentive
stock options at an exercise price of $2.50 per share in accordance with the
1995 Stock Option Plan. Of the options granted, 40,000 options were exercisable
upon grant, 40,000 options as of July 1, 1996, 40,000 options as of July 1, 1997
and 30,000 options as of July 1, 1998.
The employment agreement with Mr. Ledwick is for a term commencing on
January 1, 1996 and continuing until December 31, 1999. The agreement provided
for an annual salary of $150,000 plus increases based on the percentage
increase, if any, in the Consumer Price Index, or by a greater amount, in the
discretion of the Board of Directors. In January 1997, the annual salary was
increased to $200,000. In addition, the agreement provided for payment of an
annual bonus of $15,000 and an additional bonus at the option of the Board of
Directors. Such bonus provision was amended as set forth below. The agreement
also provided for a one-time grant of 100,000 incentive stock options at an
exercise price of $10.00 per share in accordance with the 1995 Stock Option
Plan. Of the options granted, 40,000 options were exercisable upon grant, 30,000
options as of January 1, 1997 and 30,000 options as of January 1, 1998.
9
<PAGE> 12
As of September 1, 1996, the Board of Directors approved a three year bonus
pool which replaced the existing bonus provisions in the employment agreements
of Messrs. Stata, Ledwick, Weiss, Eric Goldstein and Jonah Goldstein and Ms.
Carl. The pool provided that for 1996, because pre-tax profits of CSC exceeded
$16.9 million, each shared in a bonus pool of 5% of the pre-tax profits of CSC.
The participants in the pool received a pro rata portion of the pool based on
his or her annual salary up to 200% of salary with the payment of any excess
being deferred and paid over three years, one-third each year. Any deferred
payment will earn interest at the Citibank N.A. prime rate plus one percent. For
1997 and 1998, the CSC earnings threshold for providing a pool will be increased
based on the prior year's pre-tax earnings plus the percentage increase, if any,
in the Consumer Price Index.
The employment agreement with Mr. Blackwell is for a term commencing on
February 1, 1996 and continuing until January 31, 1999. The agreement provides
for an annual salary of $200,000 plus increases based on the percentage
increase, if any, in the Consumer Price Index, or by a greater amount, in the
discretion of the Board of Directors. In addition, the agreement provides for
the payment of a bonus at the option of the Board of Directors. The agreement
also provided for a one-time grant of 300,000 incentive stock options at an
exercise price of $10.00 per share in accordance with the 1995 Stock Option
Plan. Of the options granted, 100,000 options were exercisable as of January 15,
1997, 100,000 options as of January 15, 1998 and 100,000 options as of January
15, 1999.
CSC-UK entered into employment agreements dated as of April 5, 1995 with
Messrs. Steene, Brand and Epstein which extend through April 5, 1999. Each
agreement provides for an annual salary of L150,000 plus increases based on the
percentage increase, if any, in the Retail Price Index. In addition, each
agreement provides for the payment of an annual bonus related to the pre-tax
profits of CSC-UK not to exceed L500,000 in the aggregate for the term of the
agreement. As of September 1, 1996, the Board of Directors approved a three year
bonus pool which provided that for 1996, because pre-tax profits of CSC-UK
exceeded $8.2 million, each shared in a bonus pool of 3% of the pre-tax profits
of CSC-UK. The participants in the pool received a pro rata portion of the pool
based on his annual salary up to 200% of salary with the payment of any excess
being deferred and paid over three years, one-third each year. Any deferred
payment will earn interest at the Citibank N.A. prime rate plus one percent. For
1997 and 1998, the CSC-UK earnings threshold for providing a pool will be
increased based on the prior year's pre-tax earnings plus the percentage
increase, if any, in the Consumer Price Index.
OPTION GRANTS IN 1996
None of the Named Executive Officers received grants of options issued by
the Company during 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES
None of the Named Executive Officers held any options issued by the Company
during 1996.
401(k) PLAN
The Company sponsors a 401(k) plan, a savings and investment plan intended
to be qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code"). Participating employees may make pre-tax contributions,
subject to limitations under the Code, of a percentage of their total
compensation. The Company, in its sole discretion, may make matching
contributions for the benefit of all participants with at least one year of
service who make pre-tax contributions. The Board of Directors has not yet
determined the matching contribution that will be made for the 1996 plan year.
10
<PAGE> 13
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
As members of the Compensation Committee, it is our duty to monitor the
performance and compensation of executive officers and other key employees and
to review compensation plans. The Company's executive and key employee
compensation programs are designed to attract, motivate and retain the executive
talent needed to enhance stockholder value in a competitive environment. The
fundamental philosophy is to relate the amount of compensation "at risk" for an
executive directly to his or her contribution to the Company's success in
achieving superior performance objectives and to the overall success of the
Company. The Company's executive officer compensation program consists of a base
salary component and a component providing the potential for an annual bonus
based on overall Company performance, as well as individual performance. For
1996, the compensation of the executive officers of the Company was determined
pursuant to individual employment agreements between each executive officer and
the Company. The Compensation Committee conducted a review of the compensation
of the Company's executive officers and retained KPMG Peat Marwick LLP to
prepare an Executive Compensation Review.
In designing and administering its executive compensation program, the
Company attempts to strike an appropriate balance among the above-mentioned
elements, each of which is discussed in greater detail below.
BASE SALARY
It is the Compensation Committee's intention that base salary be targeted
at a percentile level consistent with comparable mortgage companies. The review
of KPMG Peat Marwick LLP provided this information to the Compensation
Committee. Salary increases are designed to reflect individual performance
consistent with the Company's overall financial performance, as well as
competitive practice. Performance reviews, to be conducted annually, will
determine an individual's salary increase.
BONUS PROGRAM
The executive officer bonus program is designed to reward Company
executives and other key employees for their contributions to corporate
objectives. Corporate and individual objectives are established as part of the
annual operating plan process. Overall corporate objectives have included and
will include target levels of net income, operating income and asset management.
Divisional goals also include business improvement and division-specific
financial goals. Based on the review of KPMG Peat Marwick LLP and on its own
information, the Compensation Committee approved three year bonus pools for
certain executives, replacing existing bonus provisions in employment agreements
for such executives. A bonus pool exists for certain US executives and is based
on profits from US operations. A separate bonus pool exists for certain UK
executives and is based on profits from UK operations.
1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan authorizes the granting of options to
purchase shares of the Company's Common Stock to officers, key employees and
consultants of the Company and its subsidiaries. The 1995 Stock Option Plan is
designed to promote the interests of the Company and its stockholders by using
investment interests in the Company to attract and retain key personnel and to
encourage and reward their contributions to the performance of the Company. The
1995 Stock Option Plan is administered by the Stock Option Plan Committee of the
Board of Directors, none of the members of which are on the Compensation
Committee.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Stock Purchase Plan authorizes the granting of options to
purchase shares of the Company's Common Stock to eligible employees of the
Company and its subsidiaries that regularly work more than 20 hours per week.
The Stock Purchase Plan is designed to provide employees of the Company with an
opportunity and incentive to acquire a proprietary interest in the Company
through the purchase of Common Stock, thereby more closely aligning the
interests of the Company's employees and stockholders.
11
<PAGE> 14
The Stock Purchase Plan is administered by the Stock Purchase Plan Committee of
the Board of Directors, none of the members of which are on the Compensation
Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee will review the Chief Executive Officer's salary
annually. In assessing whether a salary increase is warranted, the Compensation
Committee will consider the following factors: job performance, salary of the
Chief Executive Officers of the Company's competitors and achievement of annual
financial objectives. For fiscal 1996, the bonus paid to the Chief Executive
Officer was based on a percentage of the pre-tax profits of the Company.
COMPENSATION COMMITTEE
Jonah L. Goldstein, Chairman
Robert Grosser
Robert C. Patent
Robert M. Stata
12
<PAGE> 15
CERTAIN TRANSACTIONS
GENERAL
In May 1994, the Company loaned Mr. Stata $100,000. The loan accrued
interest on the unpaid principal balance at a rate equal to 6%. This loan was
paid in full in January 1996.
The Company paid $175,000 in legal fees during 1996 to Mr. Fensterheim who
acted as counsel to the Company through his professional corporation, Asher
Fensterheim, P.C. The Company anticipates that it will pay approximately
$180,000 in legal fees to Mr. Fensterheim during 1997.
Robin Fensterheim, the daughter of Mr. Fensterheim and wife of Mr. Grosser,
performs legal services in connection with the closing of loans made by the
Company for which services she receives compensation from the borrower. For
1996, Ms. Fensterheim received $13,365 for such services and is anticipated to
receive a similar amount in 1997.
During 1996, the Company engaged Mr. Jay L. Botchman to render consulting
services on a monthly basis and paid him $12,500 per month for such services
and, in connection with arranging a credit facility of the Company, paid him
$400,000 for his assistance in arranging such facility. The Company and Mr.
Botchman agreed to terminate the consulting arrangement as of December 31, 1996.
In addition, CSC-UK entered into an agreement with J.L.B. Equities, Inc., a
company owned by Mr. Botchman, pursuant to which such company is paid a fee of
one-eighth of 1.0% of the principal balance of loans originated by CSC-UK upon
the sale of such loans. For 1996, J.L.B. Equities, Inc. received $470,378 in
payment of such fees. This agreement terminates on December 31, 2015. Each of
Messrs. Grosser, Patent and Fensterheim entered into option agreements dated
March 10, 1995 with Mr. Botchman pursuant to which Mr. Botchman was granted an
option to acquire up to 1,380,000 shares of Common Stock from each of Messrs.
Grosser, Patent and Fensterheim (4,140,000 in the aggregate) at a price of $1.25
per share which represented a premium of approximately 33.0% over the bid price
of $0.94 per share on the date the option agreements were executed. The options
became exercisable on July 1, 1996 and expire on March 10, 2000. Mr. Botchman
provided strategic advisory and consulting services to Messrs. Grosser, Patent
and Fensterheim and the Company in connection with the Company's growth,
expansion and acquisition policies. In November 1996, Mr. Botchman entered into
an agreement to sell his interest in the option agreements to Franklin Mutual
Advisors, Inc., as agent for several related institutional investors, for an
aggregate purchase price of $82.3 million. Such options were exercised by
Franklin Mutual Advisors, Inc. in January 1997. The Company has granted to such
institutional investors registration rights relating to the resale of the
acquired shares of the Company's Common Stock. These registration rights
required the Company to (i) file a registration statement for the resale of the
shares of Common Stock subject to the options as soon as reasonably practicable
and (ii) use its reasonable efforts to cause the registration statement to be
declared effective as promptly as is reasonably practicable following the filing
thereof, but not prior to the earlier of the date the Commission declares
effective the first registration statement registering the Company's sale of
newly issued Common Stock and March 31, 1997.
In January 1996, Samboy began selling Title I and similar loans to the
Company. During 1996, Samboy sold $2.1 million of loans to the Company and, in
the first three months of 1997, sold 2.8 million of loans to the Company. Mr.
Jonah Goldstein owns 20% of the outstanding capital stock of Samboy.
Mr. Paul Goldstein, the son of Mr. Jonah Goldstein and brother of Mr. Eric
Goldstein, is employed as an Assistant Vice President of CSC. During 1996, Mr.
Paul Goldstein received $277,851 and was granted 21,000 incentive stock options
of exercise prices ranging from $9.88 to $10.00 per share in accordance with the
1995 Stock Option Plan for such services and is anticipated to be similarly
compensated in 1997.
During 1996, Arthur P. Gould & Co., of which Mr. Gould is President,
received $60,000 for advisory services provided to the Company.
13
<PAGE> 16
CSC-UK TRANSACTIONS
Pursuant to the acquisition by the Company of CSC-UK, the Company must
offer piggyback registration rights to Messrs. Steene, Brand and Epstein when
the Company proposes to register any shares of its Common Stock for the benefit
of Mr. Grosser, Mr. Patent or Mr. Fensterheim under the Securities Act of 1933,
as amended (the "Securities Act") (other than under a registration statement on
Form S-8). The Company also agreed to appoint Mr. Steene as a member of the
Board of Directors of the Company and agreed to indemnify Messrs. Steene, Brand
and Epstein against any amounts paid pursuant to their guarantee of a L200,000
obligation of CSC-UK. In addition, due to the fact that CSC-UK reached a certain
loan origination target in the six months following the consummation of the
acquisition, CSC-UK amended Messrs. Steene, Brand and Epstein's employment
agreements effective March 30, 1996 to provide that the annual bonus payments
due to Messrs. Steene, Brand and Epstein are no longer subject to a cash flow
requirement.
The Company believes that the terms of the respective affiliated
transactions described in this section are at least as favorable to the Company
as those that could be obtained from an unaffiliated source.
14
<PAGE> 17
PERFORMANCE GRAPH
The stock performance graph shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act,
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such Acts.
The following graph shows the Company's total return to stockholders
compared to the Nasdaq Market Value Index(1) and a Peer Group Index(2) over the
period from December 20, 1995 (the date of registration of the Common Stock
under Section 12 of the Exchange Act) to December 31, 1996.
CUMULATIVE TOTAL RETURN AMONG THE COMPANY, THE
NASDAQ MARKET INDEX AND THE PEER GROUP INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ MARKET
(FISCAL YEAR COVERED) CTYS COMMON STOCK INDEX PEER GROUP INDEX
<S> <C> <C> <C>
12/20/95 100.00 100.00 100.00
12/29/95 105.73 102.64 93.68
3/29/96 183.43 107.55 136.39
6/28/96 261.14 115.79 133.85
9/30/96 270.06 119.95 151.86
12/31/96 267.51 126.28 151.09
</TABLE>
The cumulative total return on the stock performance graph indicates
historical results only and is not necessarily indicative of future results.
Each line on the stock performance graph assumes that $100.00 was invested
in the Company's Common Stock and the respective indices on December 20, 1995.
The graph then tracks the value of these investments, assuming reinvestment of
dividends (if applicable), through the period ending December 31, 1996.
- ---------------
(1) Includes all issues trading over the Nasdaq National Market during the
period from December 20, 1995 through December 31, 1996, weighted annually
by market capitalization (shares outstanding multiplied by stock price).
(2) The Peer Group Index, compiled by the Company in consultation with a
financial advisor to the Company, consists of the following corporations:
Aames Financial Corporation, ContiFinancial Corporation, FIRSTPLUS Financial
Group, Inc., The Money Store Inc. and United Companies Financial
Corporation. Such corporations are public corporations that, like the
Company, concentrate in the non-conforming residential mortgage business.
15
<PAGE> 18
ITEM 2
APPROVAL OF THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
GENERAL
The Company's Certificate of Incorporation, as currently in effect,
provides that the Company is authorized to issue two classes of stock,
consisting of 50,000,000 shares designated as Common Stock, $0.01 par value per
share, and 5,000,000 shares designated as Preferred Stock, $0.01 par value per
share. On April 17, 1997, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Company's Certificate of Incorporation to increase
the authorized number of shares of Common Stock by 50,000,000 shares to an
aggregate of 100,000,000 shares and the authorized number of shares of Preferred
Stock by 5,000,000 shares to an aggregate of 10,000,000 shares. Accordingly, if
the amendment is approved, the aggregate number of authorized shares of capital
stock (including both Common and Preferred) would increase from 55,000,000 to
110,000,000. The proposed amendment does not affect any terms or rights of the
Company's Common Stock. As proposed to be amended, Section (a) of Article IV of
the Certificate of Incorporation would read as follows:
ARTICLE IV
AUTHORIZED CAPITAL STOCK
(a) The Corporation shall be authorized to issue two classes of
shares of stock to be designated, respectively, "Preferred Stock" and
"Common Stock;" the total number of shares which the corporation shall
have authority to issue is 110,000,000; the total number of shares of
Preferred Stock shall be 10,000,000 and each such share shall have a
par value of $0.01; and the total number of shares of Common Stock
shall be 100,000,000 and each such share shall have a par value of
$0.01.
PURPOSE AND EFFECT OF THE AMENDMENT
As of April 28, 1997, of the 50,000,000 shares of Common Stock currently
authorized by the Company's Certificate of Incorporation, approximately
30,620,362 shares were issued and outstanding, an aggregate of approximately
5,364,969 shares were issuable under the 1995 Stock Option Plan, the Directors
Plan and the Stock Purchase Plan, approximately 5,395,196 shares were issuable
upon conversion and as inducement for such conversion of the Company's 6%
Convertible Subordinated Debentures due 2006 (the "Convertible Debentures"),
approximately 3,809,523 shares were issuable upon conversion of the Company's 6%
Convertible Preferred Stock, Series A (the "Convertible Preferred Stock")
(assuming a conversion price of $13.13) and 500,000 shares were issuable upon
exercise of an outstanding warrant (the "Warrant") (the 45,690,050 sum of such
shares, the "Company's Committed Shares of Common Stock"). Accordingly, the
Company currently has available for other uses only approximately 4,309,950
shares of Common Stock. Of the 5,000,000 shares of Preferred Stock currently
authorized by the Company's Certificate of Incorporation, 5,000 shares,
designated as Convertible Preferred Stock, Series A, are outstanding.
It is the consensus of the Company's Board of Directors that the authorized
Common Stock remaining available and the authorized Preferred Stock remaining
available are not sufficient to enable the Company to respond to potential
business opportunities and to pursue important objectives that may be
anticipated. Accordingly, the Board of Directors believes that it is in the
Company's best interests to increase the number of authorized shares of Common
Stock and authorized shares of Preferred Stock as described above. The
availability of such additional authorized shares will enable the Company to
issue Common Stock or Preferred Stock for proper corporate purposes that may be
identified by the Board of Directors from time to time, including declaring
stock dividends, raising additional capital, establishing strategic business
relationships and issuing shares under management incentive or employee benefit
plans to attract and retain key personnel.
If the proposed amendment is approved by the stockholders, the Company will
file a Certificate of Amendment to its Certificate of Incorporation with the
Delaware Secretary of State promptly after the
16
<PAGE> 19
Annual Meeting, whereupon the increase in the Company's authorized Common Stock
and Preferred Stock will become effective.
If the proposed amendment is approved by stockholders, the authorized
Common Stock and Preferred Stock will be available for issuance at such times
and for such purposes as the Board of Directors may deem advisable. The Board of
Directors anticipates authorizing the issuance of additional shares from time to
time upon terms the Board of Directors deems to be in the best interests of the
Company, and does not intend to solicit further stockholder approval prior to
the issuance of any additional shares, except as may be required by applicable
law or rules of the Nasdaq National Market.
The increase in authorized Common Stock and Preferred Stock will not have
any immediate effect on the rights of the existing stockholders. Issuances of
additional authorized Common Stock in a stock dividend or a distribution would
reduce the value of outstanding shares proportionately, and issuances of
authorized Common Stock or Preferred Stock in capital-raising or other business
transactions or through management compensation and incentive programs would
dilute existing stockholders' interests in the Company. The Company's
stockholders have no preemptive rights with respect to the issuance of
additional Common Stock. The Company intends to apply to the Nasdaq National
Market for the listing of any additional shares of Common Stock if and when such
shares are to be issued.
POTENTIAL ANTI-TAKEOVER EFFECT
Although the proposed amendment to the Company's Certificate of
Incorporation is not motivated by takeover concerns and is not considered by the
Board of Directors to be an anti-takeover measure, the availability of
additional authorized shares of Common Stock and Preferred Stock could enable
the Board of Directors to issue shares defensively in response to a takeover
attempt. Such issuances could dilute the ownership and voting rights of a person
seeking to obtain control of the Company, dilute the value of outstanding shares
and increase the ownership of stockholders opposed to a takeover. Thus,
increasing the authorized Common Stock and Preferred Stock could render more
difficult and less likely a merger, tender offer or proxy contest, assumption of
control by a holder of a larger block of the Company's stock, and the removal of
incumbent management. Issuance of additional shares unrelated to any takeover
attempt could also have these effects. The Company has previously adopted
certain other measures that may have the effect of discouraging or delaying
unsolicited takeover attempts and making removal of incumbent management more
difficult, including the authority of the Board of Directors to designate and
issue series of Preferred Stock with rights superior to Common Stock, a
classified Board of Directors consisting of three classes and provisions for
acceleration of certain stock options in connection with a change in control.
Management has no current intent to propose anti-takeover measures in future
proxy solicitations.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock
outstanding is required to approve the proposed amendment to the Company's
Certificate of Incorporation.
THE BOARD BELIEVES THAT APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION IS IN THE BEST INTEREST OF THE COMPANY AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL THEREOF. PROXIES
WILL BE VOTED "FOR" THIS PROPOSAL UNLESS OTHERWISE SPECIFICALLY INDICATED.
17
<PAGE> 20
ITEM 3
APPROVAL OF THE COMPANY'S
1997 STOCK OPTION PLAN
GENERAL
On April 17, 1997, the Board of Directors adopted, subject to stockholder
approval, the 1997 Stock Option Plan (the "1997 Plan"). The 1997 Plan has been
adopted to ensure that options to purchase an adequate number of shares of
Common Stock will be available to provide appropriate incentives to key
employees and other persons who provide significant services to the Company. The
Company has found that an active program of awarding stock options to those key
employees and other persons has been, and management believes will continue to
be, an important component of their compensation arrangements in a manner that
will directly associate their interests with those of the stockholders of the
Company.
As of April 28, 1997, the Company had 138,750 shares available for future
option grants under the existing 1995 Stock Option Plan. The Company believes
that additional option shares should be made available to give the Company
maximum flexibility in providing appropriate incentives to key personnel. Upon
approval, 1,500,000 shares will be reserved for issuance under the 1997 Plan.
The number of shares available under the 1997 Plan represents 3.3% of the
Company's 45,690,050 Committed Shares of Common Stock and, together with the
5,364,969 shares issuable under the 1995 Stock Option Plan, the Directors Plan
and the Stock Purchase Plan, represent 15.0% of the Committed Shares of Common
stock.
The following is a summary of the principal features of the 1997 Plan and
is qualified by and subject to the actual provisions of the 1997 Plan, a copy of
which is attached as Appendix A hereto.
PURPOSE AND ELIGIBILITY
The purpose of the 1997 Plan is to promote the interests of the Company and
its stockholders by using investment interests in the Company to attract, retain
and motivate its management and other persons, to encourage and reward their
contributions to the performance of the Company, and to align their interests
with the interests of the Company's stockholders. Any director (other than a
non-employee director of the Company), officer, employee, consultant or advisor
designated from time to time by the 1997 Plan's administrative committee is
eligible to receive grants of stock options under the 1997 Plan. Currently, it
is estimated that approximately 900 persons are eligible for selection.
STOCK OPTIONS
Stock options granted under the 1997 Plan ("Options") may be incentive
stock options ("Incentive Stock Options"), which are intended to qualify under
the provisions of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), or non-qualified stock options, which do not so
qualify ("Non-qualified Stock Options"). The exercise price for each Option
shall be determined by the administrative committee at the date of grant. The
exercise price of each Option granted under the 1997 Plan may not be set below
the fair market value of the underlying Common Stock on the date of grant. The
exercise price of any Option may be paid in cash or any other consideration the
administrative committee deems acceptable, including delivery of capital stock
of the Company (surrendered by the optionee or withheld from the shares
otherwise deliverable upon exercise). The administrative committee may allow the
Company to loan the exercise price to the optionee and/or to allow exercise in a
broker-assisted transaction in which the exercise price will not be received
until after exercise, if the exercise of the Option is followed by an immediate
sale of some of the underlying shares and a portion of the sales proceeds is
dedicated to full payment of the exercise price.
Options granted under the 1997 Plan vest, become exercisable, and terminate
as determined by the administrative committee. All Options granted under the
1997 Plan may be exercised at any time after they vest and before their
expiration date, provided that no Option may be exercised more than ten years
after its grant. In the absence of a specific written agreement to the contrary,
an employee's Options will generally
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terminate (i) immediately upon termination of the recipient's employment with
the Company for just cause; (ii) six months after death or permanent disability
or normal retirement; and (iii) 30 days after termination of employment for any
other reason, in each case subject to earlier termination on the Option's
original expiration date. Notwithstanding the foregoing, however, the
administrative committee may designate shorter (if agreed to by the recipient)
or longer periods after termination of employment to exercise any Option.
Options cease to vest upon termination of employment, but the administrative
committee may accelerate the vesting of any or all Options that had not become
exercisable on or prior to the date of such termination.
PLAN PROVISIONS REGARDING SECTION 162(m) OF THE INTERNAL REVENUE CODE
In general, Section 162(m) of the Internal Revenue Code imposes a $1.0
million limit on the amount of compensation that may be deducted by the Company
in any tax year with respect to the Chief Executive Officer of the Company and
its other four most highly compensated employees, including any compensation
relating to Options under the 1997 Plan. If the 1997 Plan is approved,
compensation relating to Options under the 1997 Plan will not be subject to the
$1.0 million limit of Section 162(m). Under the 1997 Plan, no one person will be
granted any Options with respect to more than 500,000 shares of Common Stock in
any one calendar year if such grant would otherwise be subject to Internal
Revenue Code Section 162(m). Furthermore, if Internal Revenue Code Section
162(m) would otherwise apply and if the amount of compensation a person would
receive under an Option is not based solely on an increase in the value of the
underlying Common Stock of the Company after the date of grant, the 1997 Plan's
administrative committee will be authorized to condition the grant, vesting, or
exercisability of such an Option on the attainment of a preestablished objective
performance goal. The 1997 Plan defines a preestablished objective performance
goal to include one or more of the following performance criteria: (i) cash
flow; (ii) earnings per share (including earnings before interest, taxes and
amortization); (iii) return on equity; (iv) total stockholder return; (v) return
on capital; (vi) return on assets or net assets; (vii) income or net income;
(viii) operating income or net operating income; (ix) operating margin; (x)
return on operating revenue; (xi) attainment of stated goals related to the
Company's capitalization, costs, financial condition or results of operations;
and (xii) any other similar performance criteria.
SECURITIES SUBJECT TO THE 1997 PLAN
No more than 1,500,000 shares of Common Stock may be issued pursuant to or
upon exercise of Options granted under the 1997 Plan. Shares of Common Stock
subject to unexercised portions of any Option that expire, terminate or are
canceled, and shares of Common Stock issued pursuant to an Option that are
reacquired by the Company pursuant to the terms of the Option under which the
shares were issued, will again become eligible for the grant of further Options
under the 1997 Plan. The number and kind of shares of Common Stock in general,
as well as the number and kind of shares of Common Stock subject to outstanding
Options and the exercise price per share of such Options, may be proportionately
adjusted to reflect stock splits, stock dividends and other capital stock
transactions. If the Company is the surviving corporation in any merger or
consolidation not involving a change in control, each outstanding Option will
entitle the optionee to receive the same consideration received by holders of
the same number of shares of the Company's Common Stock in such merger or
consolidation. In the event of a change in control, the 1997 Plan and any then
outstanding Options (whether or not vested) will automatically terminate unless
(i) provision is made in connection with such transaction for the continuance of
the 1997 Plan and for the assumption of such Options, or for the substitution
for such Options of new Options covering the securities of a successor, with
appropriate adjustments as to the number and kind of securities and exercise
prices or (ii) the Board of Directors provides for adjustments as it deems
appropriate in the terms and conditions of the outstanding Options (whether or
not vested). If the Options terminate upon a change in control without provision
for any of the actions described in clause (i) or (ii), then Option holders will
have the right to exercise his or her Options, including any unvested Options.
For purposes of the 1997 Plan, a change in control includes the acquisition of
30% or more of the Company's voting securities by any person, a majority change
in Board of Director membership without Board of Director approval, a sale or
other disposition by the Company or a reorganization or merger or consolidation
of the Company in which there is a change of more than 50% of the combined
voting power of
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the Company; or a liquidation of the Company. On April 17, 1997, the market
value of the Company's Common Stock was $14.75 per share.
ADMINISTRATION, AMENDMENT AND TERMINATION
The 1997 Plan is administered by a committee (the "Stock Option Committee")
of at least two directors of the Company appointed by the Company's Board of
Directors, each of whom is required to be a "non-employee" director within the
meaning of Rule 16b-3 under the Securities Exchange Act. The Stock Option Plan
Committee has the authority to interpret the 1997 Plan and any agreements
defining the rights and obligations of recipients of Options granted under the
1997 Plan; to determine the terms and conditions of Options; to prescribe, amend
and rescind the rules and regulations of the 1997 Plan; and to make all other
determinations necessary or advisable for the administration of the 1997 Plan.
If Options are to be made to persons subject to Section 162(m) of the Internal
Revenue Code, and such Options are intended to constitute performance-based
compensation, then each of the Stock Option Plan Committee's members must be an
"outside director," as such term is defined in Section 162(m) of the Internal
Revenue Code.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax treatment
which will generally apply to Options granted under the 1997 Plan, based on
federal income tax laws in effect on the date of this Proxy Statement. The exact
federal income tax treatment of Options will depend on the specific
circumstances of the recipient. No information is provided herein with respect
to estate, inheritance, gift, state or local tax laws, although there may be
certain tax consequences upon the receipt or exercise of an Option or the
disposition of any acquired shares under those laws.
Incentive Stock Options. Generally, the optionee is not taxed and the
Company is not entitled to a deduction on the grant or the exercise of an
Incentive Stock Option. If the optionee sells the shares acquired upon the
exercise of an Incentive Stock Option ("Incentive Stock Option Shares") at any
time after the later of (i) one year after the date of transfer of shares to the
optionee pursuant to the exercise of such Incentive Stock Option or (ii) two
years after the date of grant of such Incentive Stock Option (the "Incentive
Stock Option holding period"), then the optionee will recognize capital gain or
loss equal to the difference between the sales price and the exercise price paid
for the Incentive Stock Option Shares, and the Company will not be entitled to
any deduction. If the optionee disposes of the Incentive Stock Option Shares at
any time during the Incentive Stock Option holding period, then (i) the optionee
will recognize capital gain in an amount equal to the excess, if any, of the
sales price over the fair market value of the Incentive Stock Option Shares on
the date of exercise, (ii) the optionee will recognize ordinary income equal to
the excess, if any, of the lesser of the sales price or the fair market value of
the Incentive Stock Option Shares on the date of exercise, over the exercise
price paid for the Incentive Stock Option Shares, (iii) the optionee will
recognize capital loss equal to the excess, if any, of the exercise price paid
for the Incentive Stock Option Shares over the sales price of the Incentive
Stock Option Shares and (iv) the Company will generally be entitled to a
deduction in an amount equal to the amount of ordinary income recognized by the
optionee.
For purposes of computing an optionee's "alternative minimum tax," an
Incentive Stock Option is treated as a Non-qualified Stock Option, as discussed
below. Thus, the amount by which the fair market value of Incentive Stock Option
Shares on the date of exercise (or such later date as discussed below under
"Special Rules for Insiders") exceeds the exercise price will be included as a
positive adjustment in the calculation of an optionee's "alternative minimum
taxable income" ("AMTI"). The "alternative minimum tax" imposed on individual
taxpayers is generally equal to the amount by which 26% or 28% (depending on the
optionee's AMTI) of the individual's AMTI (reduced by certain exemption amounts)
exceeds his or her regular income tax liability for the year. A taxpayer's
alternative minimum tax attributable to this spread may be credited against the
taxpayer's regular tax liability in later years to the extent that the regular
tax liability exceeds the alternative minimum tax in any such year.
Non-qualified Stock Options. The grant of a Non-qualified Stock Option is
generally not a taxable event for the optionee. Upon exercise of the option, the
optionee will generally recognize ordinary income in an
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<PAGE> 23
amount equal to the excess of the fair market value of the stock acquired upon
exercise of the Non-qualified Stock Option ("Non-qualified Stock Option Shares")
(determined as of the date of the exercise) over the exercise price of such
option, and the Company will be entitled to a deduction equal to such amount.
See "Special Rules for Insiders," below. A subsequent sale of the Non-qualified
Stock Option Shares generally will give rise to capital gain or loss equal to
the difference between the sales price and the sum of the exercise price paid
for such shares plus the ordinary income recognized with respect to such shares.
Such gain or loss will be treated as short-term or long-term depending on the
optionee's holding period for the shares involved in the disposition. If an
optionee receives a Non-qualified Stock Option having an exercise price that is
only a small fraction of the value of the underlying Non-qualified Stock Option
Shares on the date of grant, such optionee may be required to include the value
of the option in taxable income at the time of grant.
Special Rules for Insiders. If an optionee is a director, officer or
stockholder subject to Section 16 of the Exchange Act (an "Insider") and
exercises an Option within six months of the date of grant, the timing of the
recognition of any ordinary income should be deferred until (and the amount of
ordinary income should be determined based on the fair market value (or sales
price in the case of a disposition) of the Common Stock upon) the earlier of the
following two dates: (i) six months after the date of grant or (ii) a
disposition of the Common Stock, unless the Insider makes an election under
Section 83(b) of the Internal Revenue Code (an "83(b) Election") within 30 days
after exercise to recognize ordinary income based on the value of the Common
Stock on the date of exercise. In addition, special rules apply to an Insider
who exercises an option having an exercise price greater than the fair market
value of the underlying Common Stock on the date of exercise.
Miscellaneous Tax Issues. Special rules will apply in cases where an
optionee pays the exercise price of the Option or applicable withholding tax
obligations under the 1997 Plan by delivering previously owned Common Stock or
by reducing the amount of Common Stock otherwise issuable pursuant to the
Option. The surrender or withholding of such shares will in certain
circumstances result in the recognition of income with respect to such shares.
The 1997 Plan provides that, in the event of certain changes in ownership or
control of the Company, the right to exercise Options otherwise subject to a
vesting schedule may be accelerated. In the event such acceleration occurs and
depending upon the individual circumstances of the recipient, certain amounts
with respect to such Options may constitute "excess parachute payments" under
the "golden parachute" provisions of the Internal Revenue Code. Pursuant to
these provisions, a recipient will be subject to a 20% excise tax on any "excess
parachute payments" and the Company will be denied any deduction with respect to
such payment. It should be noted that while the Company's intent is to prevent
Section 162(m) of the Internal Revenue Code from limiting the deductibility of
Options, no advance determination will be obtained from the Internal Revenue
Service in this regard. For this reason, and because of possible unforeseen
future events, it is impossible to determine the precise extent to which the
Company will be entitled to a tax deduction in connection with the exercise of
Options.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock
outstanding is required to approve the 1997 Plan.
THE BOARD BELIEVES THAT APPROVAL OF THE PROPOSED 1997 STOCK OPTION PLAN IS
IN THE BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF. PROXIES WILL BE VOTED "FOR" THIS
PROPOSAL UNLESS OTHERWISE SPECIFICALLY INDICATED.
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<PAGE> 24
ITEM 4
RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has audited the Company's financial statements since
the fiscal year ended December 31, 1994. The Board of Directors has again
selected KPMG Peat Marwick LLP to serve as the Company's independent accountants
for the fiscal year ending December 31, 1997. Ratification of such appointment
requires the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock represented and voting in person or by proxy at the
Annual Meeting or any adjournment thereof. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
THE BOARD BELIEVES THAT THE SELECTION OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS IS IN THE BEST INTEREST OF THE COMPANY AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL THEREOF. PROXIES
WILL BE VOTED "FOR" THIS PROPOSAL UNLESS OTHERWISE SPECIFICALLY INDICATED.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has audited the Company's 1996 financial statements.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting to make a statement if such person so desires and to be available
to respond to appropriate questions that may be asked by stockholders.
ANNUAL REPORT
Financial Statements for the Company and its consolidated subsidiaries are
included in the Company's Annual Report for the year ended December 31, 1996
which is being mailed to stockholders. A COPY OF THE COMPANY'S 1996 ANNUAL
REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
AVAILABLE TO THOSE STOCKHOLDERS WHO WOULD LIKE MORE DETAILED INFORMATION
CONCERNING THE COMPANY. TO OBTAIN A COPY, PLEASE WRITE TO THE COMPANY AT 565
TAXTER ROAD, ELMSFORD, NEW YORK 10523-5200, ATTENTION: INVESTOR RELATIONS.
STOCKHOLDER PROPOSALS
Stockholders who wish to include proposals for action at the Company's 1998
Annual Meeting of Stockholders in next year's proxy statement must cause their
proposals to be received in writing by the Company at its address set forth on
the first page of this Proxy Statement no later than January 9, 1998. Such
proposals should be addressed to the Company's Secretary and may be included in
next year's proxy statement if they comply with certain rules and regulations
promulgated by the Commission.
OTHER MATTERS
The Board of Directors knows of no matters other than those listed in the
attached Notice of the Annual Meeting which are likely to be brought before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting or any adjournment thereof, the persons named in the enclosed
proxy will vote all proxies given to them in accordance with their best judgment
of such matters.
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STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES ON, DATE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
By Order of the Board of Directors
/s/ Cheryl P. Carl
Cheryl P. Carl
Secretary
Elmsford, New York
April 30, 1997
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APPENDIX A
CITYSCAPE FINANCIAL CORP.
1997 STOCK OPTION PLAN
APRIL 17, 1997
A-1
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I PURPOSE OF PLAN........................................................... A-3
ARTICLE II EFFECTIVE DATE AND TERM OF PLAN.......................................... A-3
2.1 Term of Plan..................................................................... A-3
2.2 Effect on Stock Options.......................................................... A-3
2.3 Stockholder Approval............................................................. A-3
ARTICLE III SHARES SUBJECT TO PLAN.................................................. A-3
3.1 Number of Shares................................................................. A-3
3.2 Source of Shares................................................................. A-3
3.3 Availability of Unused Shares.................................................... A-3
3.4 Adjustment Provisions............................................................ A-3
3.5 Reservation of Shares............................................................ A-4
ARTICLE IV ADMINISTRATION OF PLAN................................................... A-4
4.1 Administering Body............................................................... A-4
4.2 Authority of Administering Body.................................................. A-4
4.3 No Liability..................................................................... A-5
4.4 Amendments....................................................................... A-5
4.5 Other Compensation Plans......................................................... A-6
4.6 Plan Binding on Successors....................................................... A-6
4.7 References to Successor Statutes, Regulations and Rules.......................... A-6
4.8 Issuances for Compensation Purposes Only......................................... A-6
4.9 Invalid Provisions............................................................... A-6
4.10 Governing Law................................................................... A-6
ARTICLE V GENERAL AWARD PROVISIONS.................................................. A-6
5.1 Participation in the Plan........................................................ A-6
5.2 Stock Option Documents........................................................... A-6
5.3 Exercise of Stock Options........................................................ A-7
5.4 Payment for Stock Options........................................................ A-7
5.5 No Employment Rights............................................................. A-7
5.6 Restrictions Under Applicable Laws and Regulations............................... A-8
5.7 Additional Conditions............................................................ A-8
5.8 No Privileges of Stock Ownership................................................. A-9
5.9 Nonassignability................................................................. A-9
5.10 Information to Recipients....................................................... A-9
5.11 Withholding Taxes............................................................... A-9
5.12 Legends on Stock Options and Stock Certificates................................. A-9
5.13 Effect of Termination of Employment on Stock Options............................ A-10
5.14 Limits on Stock Options to Certain Eligible Persons............................. A-10
ARTICLE VI STOCK OPTIONS............................................................ A-10
6.1 Nature of Stock Options.......................................................... A-10
6.2 Option Exercise Price............................................................ A-11
6.3 Option Period and Vesting........................................................ A-11
6.4 Special Provisions Regarding Incentive Stock Options............................. A-11
ARTICLE VII REORGANIZATIONS......................................................... A-11
7.1 Corporate Transactions Not Involving a Change in Control......................... A-11
7.2 Corporate Transactions Involving a Change in Control............................. A-12
ARTICLE VIII DEFINITIONS............................................................ A-12
</TABLE>
A-2
<PAGE> 28
CITYSCAPE FINANCIAL CORP.
1997 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF PLAN
The Company has adopted this Plan to promote the interests of the Company
and its stockholders by using investment interests in the Company to attract,
retain and motivate its management and other persons, to encourage and reward
their contributions to the performance of the Company and to align their
interests with the interests of the Company's stockholders. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in Article
VIII.
ARTICLE II
EFFECTIVE DATE AND TERM OF PLAN
2.1 TERM OF PLAN. This Plan became effective as of the Effective Date and
shall continue in effect until the Expiration Date, at which time this Plan
shall automatically terminate.
2.2 EFFECT ON STOCK OPTIONS. Stock Options may be granted during the Plan
Term, but no Stock Options may be granted after the Plan Term. Notwithstanding
the foregoing, each Stock Option properly granted under this Plan during the
Plan Term shall remain in effect after termination of this Plan until such Stock
Option has been exercised, terminated or expired in accordance with its terms
and the terms of this Plan.
2.3 STOCKHOLDER APPROVAL. This Plan shall be approved by the Company's
stockholders within 12 months after the Effective Date. The effectiveness of any
Stock Options granted prior to such stockholder approval shall be subject to
such stockholder approval.
ARTICLE III
SHARES SUBJECT TO PLAN
3.1 NUMBER OF SHARES. The maximum number of shares of Common Stock that
may be issued pursuant to Stock Options granted under this Plan shall be
1,500,000, subject to adjustment as set forth in Section 3.4.
3.2 SOURCE OF SHARES. The Common Stock to be issued under this Plan will
be made available, at the discretion of the Board, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common Stock
reacquired by the Company, including without limitation shares purchased on the
open market.
3.3 AVAILABILITY OF UNUSED SHARES. Shares of Common Stock subject to
unexercised portions of any Stock Option granted under this Plan that expire,
terminate or are canceled, and shares of Common Stock issued pursuant to Stock
Options under this Plan that are reacquired by the Company pursuant to the terms
of the Stock Options under which such shares were issued, will again become
available for the grant of further Stock Options under this Plan.
3.4 ADJUSTMENT PROVISIONS.
(a) If (i) the outstanding shares of Common Stock of the Company are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the properties of
the Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (ii) the value of the
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outstanding shares of Common Stock of the Company is reduced by reason of an
extraordinary cash dividend, an appropriate and proportionate adjustment may be
made in (1) the maximum number and kind of shares subject to this Plan as
provided in Section 3.1, (2) the number and kind of shares or other securities
subject to then outstanding Stock Options and/or (3) the price for each share or
other unit of any other securities subject to then outstanding Stock Options.
(b) No fractional interests will be issued under this Plan resulting from
any adjustments.
(c) To the extent any adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Administering Body, whose
determination in that respect shall be final, binding and conclusive.
(d) The grant of Stock Options pursuant to this Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
(e) No adjustment to the terms of an Incentive Stock Option shall be made
unless such adjustment either (i) would not cause such Option to lose its status
as an Incentive Stock Option or (ii) is agreed to in writing by the
Administering Body and the Recipient.
3.5 RESERVATION OF SHARES. The Company will at all times reserve and keep
available such number of shares of Common Stock as shall equal at least the
number of shares of Common Stock subject to then outstanding Stock Options
issuable in shares of Common Stock under this Plan.
ARTICLE IV
ADMINISTRATION OF PLAN
4.1 ADMINISTERING BODY.
(a) Subject to the provisions of Section 4.1(b)(ii), this Plan shall be
administered by the Board or by the Stock Option Plan Committee of the Board
appointed pursuant to Section 4.1(b).
(b) (i) The Board in its sole discretion may from time to time appoint a
Stock Option Plan Committee of not less than two Board members to administer
this Plan and, subject to applicable law, to exercise all of the powers,
authority and discretion of the Board under this Plan. The Board may from time
to time increase or decrease (but not below two) the number of members of the
Stock Option Plan Committee, remove from membership on the Stock Option Plan
Committee all or any portion of its members, and/or appoint such person or
persons as it desires to fill any vacancy existing on the Stock Option Plan
Committee, whether caused by removal, resignation or otherwise. The Board may
disband the Stock Option Plan Committee at any time and revest in the Board the
administration of this Plan.
(ii) Notwithstanding the foregoing provisions of this Section 4.1(b) to the
contrary, as long as the Company is an Exchange Act Registered Company, (1) the
Board shall appoint the Stock Option Plan Committee, (2) this Plan shall be
administered by the Stock Option Plan Committee and (3) each member of the Stock
Option Plan Committee shall be a Non-employee Director, and, in addition, if
Stock Options are to be made to persons subject to Section 162(m) of the IRC and
such Stock Options are intended to constitute Performance-Based Compensation,
then each member of the Stock Option Plan Committee shall, in addition to being
a Non-employee Director, be an Outside Director.
(iii) The Stock Option Plan Committee shall report to the Board the names
of Eligible Persons granted Stock Options, the number of shares of Common Stock
covered by each Stock Option and the terms and conditions of each such Stock
Option.
4.2 AUTHORITY OF ADMINISTERING BODY.
(a) Subject to the express provisions of this Plan, the Administering Body
shall have the power to interpret and construe this Plan and any Stock Option
Documents or other documents defining the rights and obligations of the Company
and Recipients hereunder and thereunder, to determine all questions arising
A-4
<PAGE> 30
hereunder and thereunder, to adopt and amend such rules and regulations for the
administration hereof and thereof as it may deem desirable, and otherwise to
carry out the terms of this Plan and such Stock Option Documents and other
documents. The interpretation and construction by the Administering Body of any
provisions of this Plan or of any Stock Option shall be conclusive and binding.
Any action taken by, or inaction of, the Administering Body relating to this
Plan or any Stock Options shall be within the absolute discretion of the
Administering Body and shall be conclusive and binding upon all persons. Subject
only to compliance with the express provisions hereof, the Administering Body
may act in its absolute discretion in matters related to this Plan and any and
all Stock Options.
(b) Subject to the express provisions of this Plan, the Administering Body
may from time to time in its discretion select the Eligible Persons to whom, and
the time or times at which, Stock Options shall be granted, the nature of each
Stock Option, the number of shares of Common Stock that make up or underlie each
Stock Option, the period for the exercise of each Stock Option, and such other
terms and conditions applicable to each individual Stock Option as the
Administering Body shall determine. The Administering Body may grant at any time
new Stock Options to an Eligible Person who has previously received Stock
Options whether such prior Stock Options are still outstanding, have previously
been exercised as a whole or in part, or are canceled in connection with the
issuance of new Stock Options. The Administering Body may grant Stock Options
singly, in combination or in tandem with other Stock Options, as it determines
in its discretion. Any and all terms and conditions of the Stock Options,
including exercise price, may be established by the Administering Body without
regard to existing Stock Options.
(c) Any action of the Administering Body with respect to the administration
of this Plan shall be taken pursuant to a majority vote of the authorized number
of members of the Administering Body or by the unanimous written consent of its
members; provided, however, that (i) if the Administering Body is the Stock
Option Plan Committee and consists of two members, then actions of the
Administering Body must be unanimous and (ii) if the Administering Body is the
Board, actions taken at a meeting of the Board shall be valid if approved by
directors constituting a majority of the required quorum for such meeting.
4.3 NO LIABILITY. No member of the Board or the Stock Option Plan
Committee or any designee thereof will be liable for any action or inaction with
respect to this Plan or any Stock Option or any transaction arising under this
Plan or any Stock Option, except in circumstances constituting bad faith of such
member.
4.4 AMENDMENTS.
(a) The Administering Body may, insofar as permitted by applicable law,
rule or regulation, from time to time suspend or discontinue this Plan or revise
or amend it in any respect whatsoever, and this Plan as so revised or amended
will govern all Stock Options hereunder, including those granted before such
revision or amendment; provided, however, that no such revision or amendment
shall alter, impair or diminish any rights or obligations under any Stock Option
previously granted under this Plan, without the written consent of the Recipient
to whom such Stock Option was granted. Without limiting the generality of the
foregoing, the Administering Body is authorized to amend this Plan to comply
with or take advantage of amendments to applicable laws, rules or regulations,
including amendments to the Securities Act, Exchange Act or the IRC or any rules
or regulations promulgated thereunder. No stockholder approval of any amendment
or revision shall be required unless (i) such approval is required by applicable
law, rule or regulation or (ii) an amendment or revision to this Plan would
materially increase the number of shares subject to this Plan (as adjusted under
Section 3.4), materially modify the requirements as to eligibility for
participation in this Plan, extend the final date upon which Stock Options may
be granted under this Plan, or otherwise materially increase the benefits
accruing to Recipients in a manner not specifically contemplated herein, or
affect this Plan's compliance with Rule 16b-3 or applicable provisions of or
regulations under the IRC, and stockholder approval of the amendment or revision
is required to comply with Rule 16b-3 or applicable provisions of or rules under
the IRC.
(b) The Administering Body may, with the written consent of a Recipient,
make such modifications in the terms and conditions of a Stock Option as it
deems advisable. Without limiting the generality of the foregoing, the
Administering Body may, in its discretion with the written consent of the
Recipient, at any time and from time to time after the grant of any Stock Option
accelerate or extend the vesting or exercise period of
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any Stock Option as a whole or in part, and adjust or reduce the exercise price
of Stock Options held by such Recipient by cancellation of such Stock Options
and granting of Stock Options at lower or exercise prices or by modification,
extension or renewal of such Stock Options. In the case of Incentive Stock
Options, Recipients acknowledge that extensions of the exercise period may
result in the loss of the favorable tax treatment afforded incentive stock
options under Section 422 of the IRC.
(c) Except as otherwise provided in this Plan or in the applicable Stock
Option Document, no amendment, revision, suspension or termination of this Plan
will, without the written consent of the Recipient, alter, terminate, impair or
adversely affect any right or obligation under any Stock Option previously
granted under this Plan.
4.5 OTHER COMPENSATION PLANS. The adoption of this Plan shall not affect
any other stock option, incentive or other compensation plans in effect for the
Company, and this Plan shall not preclude the Company from establishing any
other forms of incentive or other compensation for employees, directors,
advisors or consultants of the Company, whether or not approved by stockholders.
4.6 PLAN BINDING ON SUCCESSORS. This Plan shall be binding upon the
successors and assigns of the Company.
4.7 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES. Any
reference in this Plan to a particular statute, regulation or rule shall also
refer to any successor provision of such statute, regulation or rule.
4.8 ISSUANCES FOR COMPENSATION PURPOSES ONLY. This Plan constitutes an
"employee benefit plan" as defined in Rule 405 promulgated under the Securities
Act. Stock Options to eligible employees or directors shall be granted for any
lawful consideration, including compensation for services rendered, promissory
notes or otherwise. Stock Options to consultants and advisors shall be granted
only in exchange for bona fide services rendered by such consultants or advisors
and such services must not be in connection with the offer and sale of
securities in a capital-raising transaction.
4.9 INVALID PROVISIONS. In the event that any provision of this Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision were not contained herein.
4.10 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of New York, without giving
effect to the principles of the conflicts of laws thereof.
ARTICLE V
GENERAL AWARD PROVISIONS
5.1 PARTICIPATION IN THE PLAN.
(a) A person shall be eligible to receive grants of Stock Options under
this Plan if, at the time of the grant of the Stock Option, such person is an
Eligible Person.
(b) Incentive Stock Options may be granted only to Eligible Persons meeting
the employment requirements of Section 422 of the IRC.
(c) Notwithstanding anything to the contrary herein, the Administering Body
may, in order to fulfill the purposes of this Plan, modify grants of Stock
Options to Recipients who are foreign nationals or employed outside of the
United States to recognize differences in applicable law, tax policy or local
custom.
5.2 STOCK OPTION DOCUMENTS.
(a) Each Stock Option granted under this Plan shall be evidenced by an
agreement duly executed on behalf of the Company and by the Recipient or, in the
Stock Option Plan Committee's discretion, a
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confirming memorandum issued by the Company to the Recipient, setting forth such
terms and conditions applicable to the Stock Option as the Stock Option Plan
Committee may in its discretion determine. Stock Option Documents may but need
not be identical and shall comply with and be subject to the terms and
conditions of this Plan, a copy of which shall be provided to each Recipient and
incorporated by reference into each Stock Option Document. Any Stock Option
Document may contain such other terms, provisions and conditions not
inconsistent with this Plan as may be determined by the Stock Option Plan
Committee.
(b) In case of any conflict between this Plan and any Stock Option
Document, this Plan shall control.
5.3 EXERCISE OF STOCK OPTIONS. No Stock Option shall be exercisable
except in respect of whole shares, and fractional share interests shall be
disregarded. Not less than 100 shares of Common Stock (or such other amount as
is set forth in the applicable Stock Option Documents) may be purchased at one
time and Stock Options must be exercised in multiples of 100 unless the number
purchased is the total number at the time available for purchase under the terms
of the Stock Option. A Stock Option shall be deemed to be exercised when the
Secretary or other designated official of the Company receives written notice of
such exercise from the Recipient, together with payment of the exercise price
made in accordance with Section 5.4 and any amounts required under Section 5.11.
Notwithstanding any other provision of this Plan, the Administering Body may
impose, by rule and/or in Stock Option Documents, such conditions upon the
exercise of Stock Options (including without limitation conditions limiting the
time of exercise to specified periods) as may be required to satisfy applicable
regulatory requirements, including without limitation Rule 16b-3 and Rule 10b-5
under the Exchange Act, and any amounts required under Section 5.12 or other
applicable section of or regulation under the IRC.
5.4 PAYMENT FOR STOCK OPTIONS.
(a) The exercise price or other payment for a Stock Option shall be payable
upon the exercise of a Stock Option pursuant to a Stock Option granted hereunder
by delivery of legal tender of the United States or payment of such other
consideration as the Administering Body may from time to time deem acceptable in
any particular instance.
(b) The Company may assist any person to whom Stock Options are granted
hereunder (including without limitation any officer or director of the Company)
in the payment of the exercise price or other amounts payable in connection with
the receipt or exercise of that Stock Option, by lending such amounts to such
person on such terms and at such rates of interest and upon such security (if
any) as shall be approved by the Administering Body.
(c) In the discretion of the Administering Body, Stock Options may be
exercised by capital stock of the Company delivered in transfer to the Company
by or on behalf of the person exercising the Stock Option and duly endorsed in
blank or accompanied by stock powers duly endorsed in blank, with signatures
guaranteed in accordance with the Exchange Act if required by the Administering
Body, or retained by the Company from the stock otherwise issuable upon exercise
or surrender of vested and/or exercisable Stock Options previously granted to
the Recipient and being exercised (if applicable) (in either case valued at Fair
Market Value as of the exercise date); or such other consideration as the
Administering Body may from time to time in the exercise of its discretion deem
acceptable in any particular instance; provided, however, that the Administering
Body may, in the exercise of its discretion, (i) allow exercise of Stock Options
in a broker-assisted or similar transaction in which the exercise price is not
received by the Company until promptly after exercise, and/or (ii) allow the
Company to loan the exercise price to the person entitled to exercise the Stock
Option, if the exercise will be followed by a prompt sale of some or all of the
underlying shares and a portion of the sale proceeds is dedicated to full
payment of the exercise price and amounts required pursuant to Section 5.11.
5.5 NO EMPLOYMENT RIGHTS. Nothing contained in this Plan (or in Stock
Option Documents or in any other documents related to this Plan or to Stock
Options granted hereunder) shall confer upon any Eligible Person or Recipient
any right to continue in the employ of the Company or any Affiliated Entity or
constitute any contract or agreement of employment or engagement, or interfere
in any way with the right of the Company or any Affiliated Entity to reduce such
person's compensation or other benefits or to terminate the employment or
engagement of such Eligible Person or Recipient, with or without cause. Except
as expressly
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provided in this Plan or in any statement evidencing the grant of Stock Options
pursuant to this Plan, the Company shall have the right to deal with each
Recipient in the same manner as if this Plan and any such statement evidencing
the grant of Stock Options pursuant to this Plan did not exist, including
without limitation with respect to all matters related to the hiring, discharge,
compensation and conditions of the employment or engagement of the Recipient.
Any questions as to whether and when there has been a termination of a
Recipient's employment or engagement, the reason (if any) for such termination,
and/or the consequences thereof under the terms of this Plan or any statement
evidencing the grant of Stock Options pursuant to this Plan shall be determined
by the Administering Body and the Administering Body's determination thereof
shall be final and binding.
5.6 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS.
(a) All Stock Options granted under this Plan shall be subject to the
requirement that, if at any time the Company shall determine, in its discretion,
that the listing, registration or qualification of the shares subject to Stock
Options granted under this Plan upon any securities exchange or under any
federal, state or foreign law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Stock Options or the issuance, if any, or purchase of
shares in connection therewith, such Stock Options may not be exercised as a
whole or in part unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company. During the term of this Plan, the Company will
use its reasonable efforts to seek to obtain from the appropriate regulatory
agencies any requisite qualifications, consents, approvals or authorizations in
order to issue and sell such number of shares of its Common Stock as shall be
sufficient to satisfy the requirements of this Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction thereof
the qualifications, consents, approvals or authorizations deemed by the Company
to be necessary for the lawful issuance and sale of any shares of its Common
Stock hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such requisite authorization shall
not have been obtained.
(b) The Company shall be under no obligation to register or qualify the
issuance of Stock Options or underlying shares under the Securities Act or
applicable state securities laws. Unless the issuance of Stock Options and
underlying shares have been registered under the Securities Act and qualified or
registered under applicable state securities laws, the Company shall be under no
obligation to issue any Stock Options or underlying shares of Common Stock
covered by any Stock Options unless the Stock Options and underlying shares may
be issued pursuant to applicable exemptions from such registration or
qualification requirements. In connection with any such exempt issuance, the
Administering Body may require the Recipient to provide a written representation
and undertaking to the Company, satisfactory in form and scope to the Company
and upon which the Company may reasonably rely, that such Recipient is acquiring
such Stock Options and underlying shares for such Recipient's own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares of stock, and that such person will make no
transfer of the same except in compliance with any rules and regulations in
force at the time of such transfer under the Securities Act and other applicable
law, and that if shares of stock are issued without such registration, a legend
to this effect (together with any other legends deemed appropriate by the
Administering Body) may be endorsed upon the securities so issued. The Company
may also order its transfer agent to stop transfers of such shares. The
Administering Body may also require the Recipient to provide the Company such
information and other documents as the Administering Body may request in order
to satisfy the Administering Body as to the investment sophistication and
experience of the Recipient and as to any other conditions for compliance with
any such exemptions from registration or qualification.
5.7 ADDITIONAL CONDITIONS. Any Stock Option may also be subject to such
other provisions (whether or not applicable to any other Stock Option or
Recipient) as the Administering Body determines appropriate including without
limitation provisions to assist the Recipient in financing the purchase of
Common Stock through the exercise of Stock Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Common
Stock acquired under any form of benefit, provisions giving the Company the
right to repurchase shares of Common Stock acquired under any form of benefit in
the event the Recipient
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elects to dispose of such shares, and provisions to comply with federal and
state securities laws and federal and state income tax withholding requirements.
5.8 NO PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise set forth
herein, a Recipient or a permitted transferee of a Stock Option shall have no
rights as a stockholder with respect to any shares issuable or issued in
connection with the Stock Option until the date of the receipt by the Company of
all amounts payable in connection with exercise of the Stock Option and
performance by the Recipient of all obligations thereunder. Status as an
Eligible Person shall not be construed as a commitment that any Stock Option
will be granted under this Plan to an Eligible Person or to Eligible Persons
generally. No person shall have any right, title or interest in any fund or in
any specific asset (including shares of capital stock) of the Company by reason
of any Stock Option granted hereunder. Neither this Plan (or any documents
related hereto) nor any action taken pursuant hereto shall be construed to
create a trust of any kind or a fiduciary relationship between the Company and
any person. To the extent that any person acquires a right to receive Stock
Options hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Company.
5.9 NONASSIGNABILITY. No Stock Option granted under this Plan shall be
assignable or transferable except (a) by will or by the laws of descent and
distribution or (b) subject to the final sentence of this Section 5.9, upon
dissolution of marriage pursuant to a qualified domestic relations order or, in
the discretion of the Administering Body and under circumstances that would not
adversely affect the interests of the Company, pursuant to a nominal transfer
that does not result in a change in beneficial ownership. During the lifetime of
a Recipient, Stock Options granted to such person shall be exercisable only by
the Recipient (or the Recipient's permitted transferee) or such person's
guardian or legal representative. Notwithstanding the foregoing, (a) no Stock
Option owned by a Recipient subject to Section 16 of the Exchange Act may be
assigned or transferred in any manner inconsistent with Rule 16b-3 and (b)
Incentive Stock Options (or other Stock Options subject to transfer restrictions
under the IRC) may not be assigned or transferred in violation of Section
422(b)(5) of the IRC (or any comparable or successor provision) or the
regulations thereunder, and nothing herein is intended to allow such assignment
or transfer.
5.10 INFORMATION TO RECIPIENTS.
(a) The Administering Body in its sole discretion shall determine what, if
any, financial and other information shall be provided to Recipients and when
such financial and other information shall be provided after giving
consideration to applicable federal and state laws, rules and regulations,
including without limitation applicable federal and state securities laws, rules
and regulations.
(b) The furnishing of financial and other information that is confidential
to the Company shall be subject to the Recipient's agreement that the Recipient
shall maintain the confidentiality of such financial and other information,
shall not disclose such information to third parties, and shall not use the
information for any purpose other than evaluating an investment in the Company's
securities under this Plan. The Administering Body may impose other restrictions
on the access to and use of such confidential information and may require a
Recipient to acknowledge the Recipient's obligations under this Section 5.10(b)
(which acknowledgment shall not be a condition to the Recipient's obligations
under this Section 5.10(b)).
5.11 WITHHOLDING TAXES. Whenever the granting, vesting or exercise of any
Stock Option granted under this Plan, or the transfer of any shares issued upon
exercise of any Stock Option, gives rise to tax or tax withholding liabilities
or obligations, the Administering Body shall have the right to require the
Recipient to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to issuance of such shares.
The Administering Body may, in the exercise of its discretion, allow
satisfaction of tax withholding requirements by accepting delivery of stock of
the Company or by withholding a portion of the stock otherwise issuable in
connection with Stock Options.
5.12 LEGENDS ON STOCK OPTIONS AND STOCK CERTIFICATES. Each Stock Option
Document and each certificate representing shares acquired upon or exercise of
Stock Options shall be endorsed with all legends, if any, required by applicable
federal and state securities and other laws to be placed on the Stock Option
Document and/or the certificate. The determination of which legends, if any,
shall be placed upon Stock
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Option Documents or the certificates shall be made by the Administering Body in
its sole discretion and such decision shall be final and binding.
5.13 EFFECT OF TERMINATION OF EMPLOYMENT ON STOCK OPTIONS.
(a) TERMINATION FOR JUST CAUSE. Subject to Section 5.13(c), and except as
otherwise provided in a written agreement between the Company and the Recipient
which may be entered into at any time before or after termination of employment,
in the event of a Just Cause Dismissal of a Recipient, all of the Recipient's
unexercised Stock Options, whether or not vested, shall expire and become
unexercisable as of the date of such Just Cause Dismissal.
(b) TERMINATION OTHER THAN FOR JUST CAUSE. Subject to Section 5.13(c) and
except as otherwise provided in a written agreement between the Company and the
Recipient, which may be entered into at any time before or after termination of
employment, in the event of a Recipient's termination of employment for:
(i) any reason other than for Just Cause Dismissal, death, Permanent
Disability or normal retirement, the Recipient's Stock Options, whether or not
vested, shall expire and become unexercisable as of the earlier of (A) the date
such Stock Options would expire in accordance with their terms had the Recipient
remained employed and (B) 30 days after the date of employment termination.
(ii) death, Permanent Disability or normal retirement, the Recipient's
unexercised Stock Options shall, whether or not vested, expire and become
unexercisable as of the earlier of (A) the date such Stock Options would expire
in accordance with their terms had the Recipient remained employed and (B) six
months after the date of employment termination.
(c) ALTERATION OF VESTING AND EXERCISE PERIODS. Notwithstanding anything
to the contrary in Section 5.13(a) or Section 5.13(b), the Administering Body
may in its discretion designate shorter or longer periods to exercise Stock
Options following a Recipient's termination of employment; provided, however,
that any shorter periods determined by the Administering Body shall be effective
only if provided for in the instrument that evidences the grant to the Recipient
of such Stock Options or if such shorter period is agreed to in writing by the
Recipient. Notwithstanding anything to the contrary herein, Stock Options shall
be exercisable by a Recipient (or the Recipient's successor in interest)
following such Recipient's termination of employment only to the extent that
installments thereof had become exercisable on or prior to the date of such
termination; and provided, further, that the Administering Body may, in its
discretion, elect to accelerate the vesting of all or any portion of any Stock
Options that had not become exercisable on or prior to the date of such
termination.
(d) LEAVE OF ABSENCE. In the case of any employee on an approved leave of
absence, the Administering Body may make such provision respecting continuance
of Stock Options as the Administering Body in its discretion deems appropriate,
except that in no event shall a Stock Option be exercisable after the date such
Stock Option would expire in accordance with its terms had the Recipient
remained continuously employed.
5.14 LIMITS ON STOCK OPTIONS TO ELIGIBLE PERSONS. Notwithstanding any
other provision of this Plan, in order for the compensation attributable to
Stock Options hereunder to qualify as Performance-Based Compensation, no one
Eligible Person shall be granted any Stock Options with respect to more than
500,000 shares of Common Stock in any one calendar year. The limitation set
forth in this Section 5.14 shall be subject to adjustment as provided in Section
3.4 or under Article VII, but only to the extent such adjustment would not
affect the status of compensation attributable to Stock Options hereunder as
Performance-Based Compensation.
ARTICLE VI
STOCK OPTIONS
6.1 NATURE OF STOCK OPTIONS. Stock Options may be Incentive Stock Options
or Non-qualified Stock Options.
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6.2 OPTION EXERCISE PRICE. The exercise price for each Stock Option shall
be determined by the Administering Body as of the date such Stock Option is
granted. The exercise price shall be no less than the Fair Market Value of the
Common Stock subject to the Option. The Administering Body may, with the consent
of the Recipient and subject to compliance with statutory or administrative
requirements applicable to Incentive Stock Options, amend the terms of any Stock
Option to provide that the exercise price of the shares remaining subject to the
Stock Option shall be reestablished at a price not less than 100% of the Fair
Market Value of the Common Stock on the effective date of the amendment. No
modification of any other term or provision of any Stock Option that is amended
in accordance with the foregoing shall be required, although the Administering
Body may, in its discretion, make such further modifications of any such Stock
Option as are not inconsistent with this Plan.
6.3 OPTION PERIOD AND VESTING. Stock Options granted hereunder shall vest
and may be exercised as determined by the Administering Body, except that
exercise of such Stock Options after termination of the Recipient's employment
shall be subject to Section 5.13. Each Stock Option granted hereunder and all
rights or obligations thereunder shall expire on such date as shall be
determined by the Administering Body, but not later than 10 years after the date
the Stock Option is granted and shall be subject to earlier termination as
provided herein or in the Stock Option Document. The Administering Body may, in
its discretion at any time and from time to time after the grant of a Stock
Option, accelerate vesting of such Option as a whole or part by increasing the
number of shares then purchasable, provided that the total number of shares
subject to such Stock Option may not be increased. Except as otherwise provided
herein, a Stock Option shall become exercisable, as a whole or in part, on the
date or dates specified by the Administering Body and thereafter shall remain
exercisable until the expiration or earlier termination of the Stock Option.
6.4 SPECIAL PROVISIONS REGARDING INCENTIVE STOCK OPTIONS.
(a) Notwithstanding anything in this Article VI to the contrary, the
exercise price and vesting period of any Stock Option intended to qualify as an
Incentive Stock Option shall comply with the provisions of Section 422 of the
IRC and the regulations thereunder. As of the Effective Date, such provisions
require, among other matters, that (i) the exercise price must not be less than
the Fair Market Value of the underlying stock as of the date the Incentive Stock
Option is granted, and not less than 110% of the Fair Market Value as of such
date in the case of a grant to a Significant Stockholder; and (ii) that the
Incentive Stock Option not be exercisable after the expiration of five years
from the date of grant in the case of an Incentive Stock Option granted to a
Significant Stockholder.
(b) The aggregate Fair Market Value (determined as of the respective date
or dates of grant) of the Common Stock for which one or more Options granted to
any Recipient under this Plan (or any other option plan of the Company or any of
its subsidiaries or affiliates) may for the first time become exercisable as
Incentive Stock Options under the federal tax laws during any one calendar year
shall not exceed $100,000.
(c) Any Options granted as Incentive Stock Options pursuant to this Plan
that for any reason fail or cease to qualify as such shall be treated as
Non-qualified Stock Options.
ARTICLE VII
REORGANIZATIONS
7.1 CORPORATE TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL. If the
Company shall consummate any Reorganization not involving a Change in Control in
which holders of shares of Common Stock are entitled to receive in respect of
such shares any securities, cash or other consideration (including without
limitation a different number of shares of Common Stock), each Stock Option
outstanding under this Plan shall thereafter be exercisable, in accordance with
this Plan, only for the kind and amount of securities, cash and/or other
consideration receivable upon such Reorganization by a holder of the same number
of shares of Common Stock as are subject to that Stock Option immediately prior
to such Reorganization, and any adjustments will be made to the terms of the
Stock Option in the sole discretion of the Administering Body as it may deem
appropriate to give effect to the Reorganization.
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7.2 CORPORATE TRANSACTIONS INVOLVING A CHANGE IN CONTROL. As of the
effective time and date of any Change in Control, this Plan and any then
outstanding Stock Options (whether or not vested) shall automatically terminate
unless (a) provision is made in writing in connection with such transaction for
the continuance of this Plan and for the assumption of such Stock Options, or
for the substitution for such Stock Options of new awards covering the
securities of a successor entity or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices, in
which event this Plan and such outstanding Stock Options shall continue or be
replaced, as the case may be, in the manner and under the terms so provided; or
(b) the Board otherwise shall provide in writing for such adjustments as it
deems appropriate in the terms and conditions of the then-outstanding Stock
Options (whether or not vested), including without limitation (i) accelerating
the vesting of outstanding Stock Options and/or (ii) providing for the
cancellation of Stock Options and their automatic conversion into the right to
receive the securities, cash or other consideration that a holder of the shares
underlying such Stock Options would have been entitled to receive upon
consummation of such Change in Control had such shares been issued and
outstanding immediately prior to the effective date and time of the Change in
Control (net of the appropriate option exercise prices). If, pursuant to the
foregoing provisions of this Section 7.2, this Plan and the Stock Options shall
terminate by reason of the occurrence of a Change in Control without provision
for any of the actions described in clause (a) or (b) hereof, then any Recipient
holding outstanding Stock Options shall have the right, at such time immediately
prior to the consummation of the Change in Control as the Board shall designate,
to exercise the Recipient's Stock Options to the full extent not theretofore
exercised, including any installments which have not yet become vested.
ARTICLE VIII
DEFINITIONS
Capitalized terms used in this Plan and not otherwise defined shall have
the meanings set forth below:
"ADMINISTERING BODY" shall mean the Board as long as no Stock Option Plan
Committee has been appointed and is in effect and shall mean the Stock Option
Plan Committee as long as the Stock Option Plan Committee is appointed and in
effect.
"AFFILIATED ENTITY" means any Parent Corporation or Subsidiary Corporation.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means the following and shall be deemed to occur if any
of the following events occur:
(a) Any Person becomes the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or
more of either the then outstanding shares of Common Stock or the combined
voting power of the Company's then outstanding securities entitled to vote
generally in the election of directors; or
(b) Individuals who, as of the effective date hereof, constitute the
Board of Directors of the Company (the "INCUMBENT BOARD") cease for any
reason to constitute at least a majority of the Board of Directors of the
Company, provided that any individual who becomes a director after the
effective date hereof whose election, or nomination for election by the
Company's stockholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered to be a
member of the Incumbent Board unless that individual was nominated or
elected by any Person having the power to exercise, through beneficial
ownership, voting agreement and/or proxy, twenty percent (20%) or more of
either the outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding voting securities entitled to vote
generally in the election of directors, in which case that individual shall
not be considered to be a member of the Incumbent Board unless such
individual's election or nomination for election by the Company's
stockholders is approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board; or
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(c) Consummation by the Company of the sale or other disposition by
the Company of all or substantially all of the Company's assets or a
reorganization or merger or consolidation of the Company with any other
person, entity or corporation, other than
(i) a reorganization or merger or consolidation that would result
in the voting securities of the Company outstanding immediately prior
thereto (or, in the case of a reorganization or merger or consolidation
that is preceded or accomplished by an acquisition or series of related
acquisitions by any Person, by tender or exchange offer or otherwise, of
voting securities representing five percent (5%) or more of the combined
voting power of all securities of the Company, immediately prior to such
acquisition or the first acquisition in such series of acquisitions)
continuing to represent, either by remaining outstanding or by being
converted into voting securities of another entity, more than fifty
percent (50%) of the combined voting power of the voting securities of
the Company or such other entity outstanding immediately after such
reorganization or merger or consolidation (or series of related
transactions involving such a reorganization or merger or
consolidation), or
(ii) a reorganization or merger or consolidation effected to
implement a recapitalization or reincorporation of the Company (or
similar transaction) that does not result in a material change in
beneficial ownership of the voting securities of the Company or its
successor; or
(d) Approval by the stockholders of the Company or any order by a
court of competent jurisdiction of a plan of liquidation of the Company.
Notwithstanding the foregoing, a Change in Control of the type described in
paragraph (b), (c) or (d) shall be deemed to be completed on the date it occurs,
and a Change in Control of the type described in paragraph (a) shall be deemed
to be completed as of the date the entity or group attaining thirty percent
(30%) or greater ownership has elected its representatives to the Company's
Board of Directors and/or caused its nominees to become officers of the Company
with the authority to terminate or alter the terms of employee's employment.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value $0.01 per
share, as constituted on the Effective Date of this Plan, and as thereafter
adjusted as a result of any one or more events requiring adjustment of
outstanding Stock Options under Section 3.4 above.
"COMPANY" means Cityscape Financial Corp., a Delaware corporation.
"EFFECTIVE DATE" means April 17, 1997, which is the date this Plan was
adopted by the Board.
"ELIGIBLE PERSON" shall include directors (other than non-employee
directors of the Company), officers, employees, consultants and advisors of the
Company or of any Affiliated Entity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE ACT REGISTERED COMPANY" means that the Company has any class of
any equity security registered pursuant to Section 12 of the Exchange Act.
"EXPIRATION DATE" means the tenth anniversary of the Effective Date.
"FAIR MARKET VALUE" of a share of the Company's capital stock as of a
particular date shall be: (a) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the Nasdaq National Market),
the average of the highest and lowest sale prices of the stock quoted for such
date as reported in the Transactions Index of each such exchange, as published
in The Wall Street Journal and determined by the Administering Body, or, if no
sale price was quoted in any such Index for such date, then as of the next
preceding date on which such a sale price was quoted; or (b) if the stock is not
then listed on an exchange or the Nasdaq National Market, the average of the
closing bid and asked prices per share for the stock in the over-the-counter
market as quoted on The Nasdaq Small Cap Market on such date (in the case of (a)
or (b), subject to adjustment as and if necessary and appropriate to set an
exercise price not less than 100% of the fair
A-13
<PAGE> 39
market value of the stock on the date an option is granted); or (c) if the stock
is not then listed on an exchange or quoted in the over-the-counter market, an
amount determined in good faith by the Administering Body; provided, however,
that (i) when appropriate, the Administering Body, in determining Fair Market
Value of capital stock of the Company, may take into account such other factors
as it may deem appropriate under the circumstances and (ii) if the stock is
traded on the Nasdaq Small Cap Market and both sales prices and bid and asked
prices are quoted or available, the Administering Body may elect to determine
Fair Market Value under either clause (a) or (b) above. Notwithstanding the
foregoing, the Fair Market Value of capital stock for purposes of grants of
Incentive Stock Options shall be determined in compliance with applicable
provisions of the IRC.
"INCENTIVE STOCK OPTION" means a Stock Option that qualifies as an
incentive stock option under Section 422 of the IRC, or any successor statute
thereto.
"IRC" means the Internal Revenue Code of 1986, as amended.
"JUST CAUSE DISMISSAL" shall mean a termination of a Recipient's employment
for any of the following reasons: (a) the Recipient violates any reasonable rule
or regulation of the Board, the Company's Chief Executive Officer or the
Recipient's superiors that results in damage to the Company or which, after
written notice to do so, the Recipient fails to correct within a reasonable
time; (b) any willful misconduct or gross negligence by the Recipient in the
responsibilities assigned to the Recipient; (c) any willful failure to perform
the Recipient's job as required to meet Company objectives; (d) any wrongful
conduct of a Recipient which has an adverse impact on the Company or which
constitutes a misappropriation of Company assets; (e) the Recipient's performing
services for any other person or entity which competes with the Company while
the Recipient is employed by the Company, without the written approval of the
Chief Executive Officer of the Company; or (f) any other conduct that the
Administering Body determines constitutes Just Cause for Dismissal; provided,
however, that if a Recipient is party to an employment agreement with the
Company providing for just cause dismissal (or some comparable notion) of
Recipient from Recipient's employment with the Company, "Just Cause Dismissal"
for purposes of this Plan shall have the same meaning as ascribed thereto or to
such comparable notion in such employment agreement.
"NON-EMPLOYEE DIRECTOR" means any director of the Company who qualifies as
a "non-employee director" within the meaning of Rule 16b-3.
"NON-QUALIFIED STOCK OPTION" means a Stock Option that is not an Incentive
Stock Option.
"OUTSIDE DIRECTOR" means an "outside director" as defined in the
regulations adopted under Section 162(m) of the IRC.
"PARENT CORPORATION" means any Parent Corporation as defined in Section
424(e) of the IRC.
"PERFORMANCE-BASED COMPENSATION" means performance-based compensation as
described in Section 162(m) of the IRC. If the amount of compensation an
Eligible Person will receive under any Stock Option is not based solely on an
increase in the value of Common Stock after the date of grant or award, the
Stock Option Plan Committee, in order to qualify Stock Options as
performance-based compensation under Section 162(m) of the IRC, can condition
the grant, award, vesting, or exercisability of such Stock Options on the
attainment of a preestablished, objective performance goal. For this purpose, a
preestablished, objective performance goal may include one or more of the
following performance criteria: (a) cash flow; (b) earnings per share (including
earning before interest, taxes, and amortization); (c) return on equity; (d)
total stockholder return; (e) return on capital; (f) return on assets or net
assets; (g) income or net income; (h) operating income or net operating income;
(i) operating margin; (j) return on operating revenue; (k) attainment of stated
goals related to the Company's capitalization, costs, financial condition or
results of operations; and (l) any other similar performance criteria.
"PERSON" means any person, entity or group, within the meaning of Section
13(d) or 14(d) of the Exchange Act, but excluding (a) the Company and its
subsidiaries, (b) any employee stock ownership or other employee benefit plan
maintained by the Company that is qualified under ERISA and (c) an
A-14
<PAGE> 40
underwriter or underwriting syndicate that has acquired the Company's securities
solely in connection with a public offering thereof.
"PERMANENT DISABILITY" shall mean that the Recipient becomes physically or
mentally incapacitated or disabled so that the Recipient is unable to perform
substantially the same services as the Recipient performed prior to incurring
such incapacity or disability (the Company, at its option and expense, being
entitled to retain a physician to confirm the existence of such incapacity or
disability, and the determination of such physician to be binding upon the
Company and the Recipient), and such incapacity or disability continues for a
period of three consecutive months or six months in any 12-month period or such
other period(s) as may be determined by the Stock Option Plan Committee with
respect to any Stock Option, provided that for purposes of determining the
period during which an Incentive Stock Option may be exercised pursuant to
Section 5.13(b)(ii) hereof, Permanent Disability shall mean "permanent and total
disability" as defined in Section 22(e) of the IRC.
"PLAN" means this 1997 Stock Option Plan of the Company.
"PLAN TERM" means the period during which this Plan remains in effect
(commencing on the Effective Date and ending on the Expiration Date).
"RECIPIENT" means a person who has received Stock Options under this Plan.
"REORGANIZATION" means any merger, consolidation or other reorganization.
"RULE 16b-3" means Rule 16b-3 under the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT STOCKHOLDER" is an individual who, at the time a Stock Option
is granted to such individual under this Plan, owns more than ten percent (10%)
of the combined voting power of all classes of stock of the Company or of any
Parent Corporation or Subsidiary Corporation (after application of the
attribution rules set forth in Section 424(d) of the IRC).
"STOCK OPTION" means a right to purchase stock of the Company granted under
Article VI of this Plan to an Eligible Person.
"STOCK OPTION DOCUMENT" means the agreement or confirming memorandum
setting forth the terms and conditions of Stock Options.
"STOCK OPTION PLAN COMMITTEE" means the committee appointed by the Board to
administer this Plan pursuant to Section 4.1.
"SUBSIDIARY CORPORATION" means any Subsidiary Corporation as defined in
Section 425(f) of the IRC.
A-15
<PAGE> 41
DETACH HERE CSF F
CITYSCAPE FINANCIAL CORP.
565 Taxter Road
Elmsford, New York 10523-5200
P
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
R CITYSCAPE FINANCIAL CORP.
O The undersigned hereby appoints Cheryl P. Carl and Tim S. Ledwick, and
each of them, as Proxies, each with the power to appoint his substitute,
X and hereby authorizes each of them to represent and vote as designated
below, all the shares of Common Stock as of April 18, 1997, at the Annual
Y Meeting of Stockholders to be held on June 4, 1997 and any postponements or
adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 42
DETACH HERE CSF F
Please mark
votes as in
/ X / this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS INDICATED; HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXIES WILL
VOTE THE SHARES FOR EACH OF THE NOMINEES FOR DIRECTOR AND TO THE INDICATED
CLASS, FOR THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION, FOR THE
APPROVAL OF THE COMPANY'S 1997 STOCK OPTION PLAN, FOR THE RATIFICATION OF THE
SELECTION OF INDEPENDENT ACCOUNTANTS AND IN THEIR DISCRETION ON THE MATTERS
DESCRIBED IN ITEM 5.
1. Election of Directors. Nominees:
Class I: Robert M. Stata, David A. Steene
MARK HERE
FOR WITHHELD IF YOU PLAN
TO ATTEND
/ / / / THE MEETING / /
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE BELOW / /
/ / _______________________________________
For both nominees except as noted above
2. To approve the amendment to the Company's Certificate of Incorporation to
increase the Company's authorized Common Stock, $0.01 par value per share, by
50,000,000 shares to an aggregate of 100,000,000 shares and the Company's
authorized Preferred Stock, par value $0.01 per share, by 5,000,000 shares to
an aggregate of 10,000,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve the Company's 1997 Stock Option Plan and to reserve 1,500,000
shares of the Company's Common Stock, par value $0.01 per share, for issuance
thereunder (subject to antidilution adjustments specified in the plan).
FOR AGAINST ABSTAIN
/ / / / / /
4. To ratify the selection by the Company's Board of Directors of KPMG Peat
Marwick LLP as independent accountants of the Company for the 1997 fiscal
year.
FOR AGAINST ABSTAIN
/ / / / / /
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before such meeting and any and all
postponements or adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as your name appears on the stock certificate(s). When
shares are held by joint tenants, both should sign. When signing as attorney,
executive, administrator, trustee or guardian, please give your full title as
such. If a corporation, please sign in full corporate name by the president or
other authorized officer. If a partnership, please sign the partnership's name
by an authorized person.
Signature___________________ Date______ Signature___________________ Date______
