<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1997
REGISTRATION NO. 333-30115
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CITYSCAPE FINANCIAL CORP.
AND OTHER REGISTRANT*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 11-2994671
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523-5200
(914) 592-6677
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JONAH L. GOLDSTEIN, ESQ.
GENERAL COUNSEL
CITYSCAPE FINANCIAL CORP.
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523-5200
(914) 592-6677
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
SEAN P. GRIFFITHS, ESQ.
GIBSON, DUNN & CRUTCHER LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 351-4000
(FACSIMILE) (212) 351-4035
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
* Other Registrant
<TABLE>
<CAPTION>
EXACT NAME OF
REGISTRANT
AS SPECIFIED IN ITS STATE OR OTHER INSTITUTION PRIMARY STANDARD INDUSTRIAL IRS EMPLOYEE
CHARTER OF INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBER IDENTIFICATION NUMBER
--------------------- -------------------------------- --------------------------- ---------------------
<S> <C> <C> <C>
Cityscape Corp. New York 6162 13-3430697
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
OFFER FOR ALL OUTSTANDING
12 3/4% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
12 3/4% SERIES A SENIOR NOTES DUE 2004 OF
LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON SEPTEMBER 8, 1997, UNLESS EXTENDED
------------------------
Cityscape Financial Corp., a Delaware corporation (the "Company"), hereby
offers to exchange an aggregate principal amount of up to $300,000,000 of its
12 3/4% Series A Senior Notes due 2004 (the "New Notes") for a like principal
amount of its 12 3/4% Senior Notes due 2004 (the "Old Notes") outstanding on the
date hereof upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"). The New Notes and the Old Notes are
collectively hereinafter referred to as the "Notes." The terms of the New Notes
are identical in all material respects to those of the Old Notes, except for
certain transfer restrictions and registration rights relating to the Old Notes.
The New Notes will be issued pursuant to, and entitled to the benefits of, the
Indenture governing the Old Notes.
The New Notes will be general senior unsecured obligations of the Company
ranking pari passu in right of payment with all other existing and future
subordinated Indebtedness (as defined herein) of the Company and senior in right
of payment to any Subordinated Obligations (as defined herein) of the Company.
Prior to the receipt of an Investment Grade Rating (as defined herein), the
Notes will be unconditionally guaranteed, on a senior basis, by all domestic
Restricted Subsidiaries (as defined herein) of the Company other than Special
Purpose Subsidiaries (as defined herein). As of the date hereof, the sole
Subsidiary Guarantor (as defined herein) will be Cityscape Corp. ("CSC"). In
addition, the Subsidiary Guarantee (as defined herein) of CSC will be secured by
a pledge of an Intercompany Note (as defined herein) from City Mortgage
Corporation Limited, the Company's wholly-owned indirect United Kingdom
subsidiary. The New Notes will be effectively subordinated in right of payment
to all secured Indebtedness of the Company and any secured Indebtedness of the
Subsidiary Guarantors, except in the case of the Subsidiary Guarantees to the
extent secured by the Intercompany Note. In addition, the New Notes will be
structurally subordinated to any indebtedness of the Company's subsidiaries that
are not Subsidiary Guarantors. As of March 31, 1997, after giving effect to the
offering of the Old Notes and the application of the net proceeds therefrom, the
Company and its subsidiaries would have had $387.1 million of unsubordinated
Indebtedness of which $87.1 million is secured Indebtedness (of which $82.5
million is Warehouse Indebtedness (as defined herein)).
The New Notes will bear interest from and including the date of consummation
of the Exchange Offer. Interest on the New Notes will be payable semiannually on
June 1 and December 1 of each year, commencing December 1, 1997. Additionally,
interest on the New Notes will accrue from the last interest payment date on
which interest was paid on the Old Notes surrendered in exchange therefor or, if
no interest has been paid on the Old Notes, from the date of original issue of
the Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
as of May 14, 1997 (the "Registration Rights Agreement"), among the Company, CSC
and the Initial Purchasers (as defined herein), with respect to the initial sale
of the Old Notes. The Company will not receive any proceeds from the Exchange
Offer. The Company will pay all the expenses incident to the Exchange Offer.
Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date (as defined herein) for the Exchange Offer. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Old Notes with respect to the Exchange Offer, the Company will promptly
return such Old Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivery of a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the Old
Notes. If a market for the New Notes should develop, such New Notes could trade
at a discount from their principal amount. The Company currently does not intend
to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system and no active public market for
the New Notes is currently anticipated. There can be no assurance that an active
public market for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS AUGUST 5, 1997
<PAGE> 3
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY'S SECRETARY AT 565 TAXTER ROAD, ELMSFORD, NEW YORK 10523 (TELEPHONE:
914-592-6677). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY AUGUST 29, 1997.
FOR NEW HAMPSHIRE RESIDENTS ONLY:
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW
HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR
RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR
CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
<PAGE> 4
AVAILABLE INFORMATION
The Company and the Subsidiary Guarantor have filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-4
(referred to herein, together with all amendments and exhibits, as the
"Registration Statement") under the Securities Act with respect to the Notes
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information relating to the Notes and
to the Company, reference is made to the Registration Statement.
The Company is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files reports, proxy statements and other
information with the Commission. For further information with respect to the
Company, reference is hereby made to such reports and other information which
can be inspected and copied (at prescribed rates) at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1025,
Washington, D.C. 20549 and at the Commission's regional offices located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and at 500 West
Madison, Suite 1400, Chicago, Illinois 60661. Copies may also be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The Commission also
maintains a Web site that contains reports, proxy and information statements and
other information regarding the Company at (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are hereby
incorporated by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997; and
3. The Company's Current Reports on Form 8-K filed on April 11, 1997,
April 30, 1997, May 20, 1997, July 23, 1997 and August 5, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the filing of the Registration
Statement of which this Prospectus forms a part and prior to the termination of
the offering of the Notes covered by this Prospectus shall be deemed to be
incorporated by reference herein and to be part hereof from the date of filing
such documents. Any statement contained herein or in a document, all or a
portion of which is incorporated or deemed to be incorporated by reference
herein, shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the oral or written
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents, unless such exhibits
are expressly incorporated by reference into such documents). Written requests
for such copies should be directed to the Company's Secretary at 565 Taxter
Road, Elmsford, New York 10523.
2
<PAGE> 5
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors."
THE COMPANY
Cityscape Financial Corp., a Delaware corporation ("Cityscape" or the
"Company"), is a consumer finance company engaged in the business of
originating, purchasing, selling and servicing mortgage loans secured primarily
by one- to four-family residences. The Company originates and purchases loans in
the US through its subsidiary Cityscape Corp., a New York corporation ("CSC"),
using a network of independent mortgage brokers and loan correspondents, and in
the United Kingdom (excluding Northern Ireland, the "UK") through its indirect
subsidiary City Mortgage Corporation Limited ("CSC-UK"), also using a network of
independent mortgage brokers. The majority of the Company's loans are made to
owners of single family residences who use the loan proceeds for such purposes
as debt consolidation, financing of home improvements and educational
expenditures. The Company focuses on lending to individuals who have impaired or
unsubstantiated credit histories and/or unverifiable income and require or seek
a high degree of personalized service and prompt response to their loan
applications. As a result, the Company's customers generally are not averse to
paying the higher interest rates that the Company charges for its loan programs
as compared to the interest rates charged by conventional mortgage sources.
The Company's principal executive office and mailing address is 565 Taxter
Road, Elmsford, New York 10523-5200 and its telephone number is (914) 592-6677.
For a more detailed discussion of the business of the Company, see the
Company's latest Annual Report on Form 10-K, which is incorporated by reference
herein.
RECENT DEVELOPMENTS
Series A Preferred Stock. In April 1997, the Company completed the private
placement of 5,000 shares of its 6% Convertible Preferred Stock, Series A (the
"Series A Preferred Stock"), with a liquidation preference (the "Liquidation
Preference") of $10,000 per share, and related five-year warrants to purchase
500,000 shares of Common Stock (the "Warrants"). The Series A Preferred Stock is
redeemable at the option of the Company at a redemption price equal to 120% of
the Liquidation Preference under certain circumstances. The Series A Preferred
Stock is convertible into shares of Common Stock, subject to certain
restrictions and redemption rights, at a conversion price equal to the lowest
daily sales price of the Common Stock during the four consecutive trading days
immediately preceding such conversion, discounted by up to 4% and subject to
certain adjustments. Through July 29, 1997, an aggregate of 1,564 shares of
Series A Preferred Stock had been converted into an aggregate of 1,219,422
shares of Common Stock. The Company has filed a registration statement with the
Commission with respect to the resale of the Common Stock issuable upon
conversion of the Series A Preferred Stock or exercise of the Warrants.
[/R]
Conversion Transactions. In April 1997, the Company induced the conversion
of $14.0 million aggregate principal amount of its 6% Convertible Subordinated
Debentures due 2006 (the "Convertible Debentures") resulting in the issuance
upon conversion of 533,332 shares of Common Stock (at a conversion price of
$26.25 per share) pursuant to the terms of the Convertible Debentures. To induce
conversion, the Company issued an additional 342,708 shares of Common Stock and
paid the holders of the induced Convertible Debentures $420,000 in cash. In the
second quarter of 1997, these transactions resulted in the reduction of
Convertible Debentures by $14.0 million, a charge to earnings in the amount of
$4.7 million related to the fair market value of such 342,708 shares ($4.4
million) and such cash payment and an increase in stockholders' equity of $18.4
million due to the issuance of the conversion shares and the inducement shares.
The net effect of these transactions was an increase of $13.7 million to
stockholders' equity in the
3
<PAGE> 6
second quarter of 1997. To date, an aggregate of $14.1 million of Convertible
Debentures have been converted into Common Stock, including the induced
conversion described above. The Company has an effective registration statement
relating to the resale of the Convertible Debentures or the Common Stock
issuable upon conversion of the Convertible Debentures.
Results of the Quarter Ended June 30, 1997. The Company reported net
earnings before extraordinary items of $3.6 million or $0.08 per share for the
quarter ended June 30, 1997, compared to $11.1 million or $0.35 per fully
diluted share in the second quarter of 1996. Absent two one-time charges, on an
operating basis, the Company earned $17.4 million or $0.52 per primary share.
The current quarter results were reduced by two one-time charges which lowered
earnings by a combined $0.44 per share. First, as disclosed above, the Company
incurred an after-tax charge of $4.7 million, or $0.15 per share, related to the
induced conversion of $14.0 million of the Convertible Debentures. Second, the
Company took an after-tax reserve of $9.1 million ($15.0 million pre-tax), or
$0.29 per share, to augment reserves for recently announced UK regulatory
guidelines. See "Risk Factors -- Risks Related to Operations in the UK -- Legal
and Regulatory Risks." Results for the second quarter of 1997 also reflect an
extraordinary gain of approximately $425,000 (net of tax), or $0.01 per share,
related to the early extinguishment of debt. See the Company's Current Report on
Form 8-K filed on August 5, 1997 and incorporated herein by reference.
THE EXCHANGE OFFER
Securities Offered.......... Up to $300,000,000 aggregate principal amount of
12 3/4% Series A Senior Notes due 2004 (the "New
Notes"). The terms of the New Notes and Old Notes
are identical in all material respects, except
for certain transfer restrictions and
registration rights relating to the Old Notes.
The Exchange Offer.......... The New Notes are being offered in exchange for a
like principal amount of Old Notes. Old Notes may
be exchanged only in integral multiples of
$1,000. The issuance of the New Notes is intended
to satisfy obligations of the Company and CSC
contained in the Registration Rights Agreements.
Expiration Date; Withdrawal
of Tender................... The Exchange Offer will expire at 5:00 p.m. New
York City time, on September 8, 1997, or such
later date and time to which it is extended by
the Company. The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Old Notes not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Certain Conditions to the
Exchange Offer............ The Company's obligation to accept for exchange,
or to issue New Notes in exchange for, any Old
Notes is subject to certain customary conditions
relating to compliance with any applicable law,
order of any governmental agency or any
applicable interpretation by the staff of the
Commission, which may be waived by the Company in
its reasonable discretion. The Company currently
expects that each of the conditions will be
satisfied and that no waivers will be necessary.
See "The Exchange Offer -- Certain Conditions to
the Exchange Offer."
Procedures for Tendering Old
Notes..................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and
4
<PAGE> 7
therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with such Old Notes and any other
required documentation, to the Exchange Agent (as
defined herein) at the address set forth herein.
See "The Exchange Offer -- Procedures for
Tendering Old Notes."
Use of Proceeds............. There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Exchange Agent.............. The Chase Manhattan Bank is serving as the
Exchange Agent in connection with the Exchange
Offer.
Federal Income Tax
Consequences.............. The exchange of Notes pursuant to the Exchange
Offer will not be a taxable event for federal
income tax purposes. See "Certain Federal Income
Tax Considerations."
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT
TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, holders of Old Notes (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) who exchange their Old Notes for New Notes pursuant to the
Exchange Offer generally may offer such New Notes for resale, resell such New
Notes, and otherwise transfer such New Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
such New Notes are acquired in the ordinary course of the holder's business and
such holders have no arrangement with any person to participate in a
distribution of such New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied with.
The Company has agreed, pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the New
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Notes reasonably requests in writing. If a
holder of Old Notes does not exchange such Old Notes for New Notes pursuant to
the Exchange Offer, such Old Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. See "The Exchange
Offer -- Consequences of Failure to Exchange; Resales of New Notes."
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading.
THE NEW NOTES
The terms of the New Notes are identical in all material respects to the
Old Notes, except for certain transfer restrictions and registration rights
relating to the Old Notes. For purposes of this Prospectus, the term "Notes"
shall refer collectively to the New Notes and the Old Notes.
Issuer...................... Cityscape Financial Corp.
Securities Offered.......... $300,000,000 principal amount of 12 3/4% Series A
Senior Notes due 2004 (the "New Notes").
5
<PAGE> 8
Maturity Date............... June 1, 2004.
Interest Rate............... The New Notes will bear interest at a rate of
12 3/4% per annum.
Interest Payment Dates...... Interest on the New Notes will be payable
semiannually on each June 1 and December 1,
commencing December 1, 1997.
Ranking..................... The New Notes will be general senior unsecured
obligations of the Company ranking pari passu in
right of payment with all other existing and
future unsubordinated Indebtedness of the Company
and senior in right of payment to any
Subordinated Obligations of the Company. The New
Notes will be effectively subordinated in right
of payment to all secured Indebtedness of the
Company and any secured Indebtedness of the
Subsidiary Guarantors, except in the case of the
Subsidiary Guarantees to the extent secured by
the Intercompany Note. In addition, the New Notes
will be structurally subordinated to any
indebtedness of the Company's subsidiaries that
are not Subsidiary Guarantors. As of March 31,
1997 after giving effect to the offering of the
Old Notes and the application of the net proceeds
therefrom, the Company and its Subsidiaries would
have had $387.1 million of unsubordinated
Indebtedness of which $87.1 million is secured
Indebtedness (of which $82.5 million is Warehouse
Indebtedness).
Guarantees by
Subsidiaries................ Prior to receipt of an Investment Grade Rating,
the New Notes will be unconditionally guaranteed,
on a senior basis, as to the payment of
principal, premium, if any, and interest (the
"Subsidiary Guarantees"), by all domestic
Restricted Subsidiaries of the Company other than
Special Purpose Subsidiaries (the "Subsidiary
Guarantors"). As of the date hereof, the sole
Subsidiary Guarantor will be CSC. In addition,
the Subsidiary Guarantee of CSC will be secured
by a pledge of an Intercompany Note from CSC-UK,
the Company's wholly-owned indirect UK
subsidiary. The Intercompany Note is a general
senior unsecured obligation of CSC-UK. See
"Description of the Notes -- Security."
Lack of Mandatory
Redemption.................. There will be no mandatory redemption
requirements with respect to the New Notes.
Optional Redemption......... The Company, at its option, may redeem in the
aggregate up to 33 1/3% of the original principal
amount of the Notes at any time and from time to
time prior to June 1, 2000 at a redemption price
equal to 112.75% of the principal amount thereof
plus accrued interest to the redemption date with
the proceeds of one or more Public Equity
Offerings, provided that at least $200.0 million
principal amount of Notes remain outstanding
immediately after the occurrence of any such
redemption.
Change of Control........... In the event of a Change of Control, the Company
will be required to make an offer to repurchase
all outstanding New Notes at a price equal to
101% of the principal amount thereof plus accrued
and unpaid interest to the date of repurchase.
See "Description of the Notes -- Change of
Control." There can be no assurance that the
Company will have sufficient funds or will be
contractually permitted by outstanding
Indebtedness to pay the required purchase price
for all New Notes tendered by holders upon a
Change of Control. See "Risk Factors -- Potential
Inability to Purchase Tendered Notes Upon a
Change of Control."
6
<PAGE> 9
Asset Sale Proceeds......... The Company will be obligated in certain
instances to make offers to repurchase the New
Notes at a purchase price in cash equal to 100%
of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of
repurchase with the net cash proceeds of certain
asset sales. See "Description of the
Notes -- Certain Covenants -- Limitation on Sales
of Assets."
Certain Covenants........... The Indenture contains covenants for the benefit
of the holders of the New Notes that, among other
things, restrict the ability of the Company and
any Restricted Subsidiaries to: (i) incur
additional Indebtedness; (ii) pay dividends and
make distributions; (iii) make certain
investments; (iv) repurchase stock; (v) create
liens; (vi) enter into transactions with
affiliates; (vii) merge or consolidate the
Company or any Subsidiary Guarantor; and (viii)
transfer and sell assets. These covenants are
subject to a number of important exceptions. See
"Description of the Notes -- Certain Covenants."
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth under "Risk Factors" in connection with the Exchange Offer.
7
<PAGE> 10
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be carefully considered by holders of Old Notes in connection
with the Exchange Offer. This Prospectus contains forward-looking statements
which involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in the following risk
factors and elsewhere in this Prospectus.
HOLDING COMPANY STRUCTURE
The Company is a holding company which derives substantially all of its
operating income from its subsidiaries. The Company must rely upon payments from
its Subsidiaries to generate the funds necessary to meet its obligations,
including the payment of interest on and principal of the Notes. The ability of
the Company's Subsidiaries to make such payments will be subject to, among other
things, applicable state and foreign laws.
Certain of the Company's Subsidiaries, through which the Company conducts
its UK operations, will not be Subsidiary Guarantors of the Notes. Claims of
creditors of such Subsidiaries, the counterparties under such Subsidiaries'
purchase and sale facilities, the purchasers of such Subsidiaries' receivables,
trade creditors, secured creditors and creditors holding indebtedness and
guarantees issued by such Subsidiaries, and claims of preferred stockholders (if
any) of such Subsidiaries generally will have priority with respect to the
assets and earnings of such Subsidiaries over the claims of creditors of the
Company, including holders of the Notes. The Notes, therefore, are effectively
subordinated to creditors (including trade creditors) and preferred stockholders
(if any) of such Subsidiaries. Although the Subsidiary Guarantees are secured by
the pledge of the Intercompany Note, the Intercompany Note is an unsecured
general obligation of CSC-UK and secured creditors of CSC-UK will generally have
priority with respect to the assets and earnings of CSC-UK over the claims of
holders of the Notes making a claim with respect to the Intercompany Note. See
"Description of the Notes -- Ranking; Holding Company Structure."
The Indenture provides that, prior to receipt of an Investment Grade
Rating, the Notes generally will be guaranteed by the Company's domestic
Restricted Subsidiaries (other than Special Purpose Subsidiaries). Although the
Subsidiary Guarantees provide the Note holders with a direct claim against the
assets of such domestic Restricted Subsidiaries, enforcement of the Subsidiary
Guarantees against any existing or future Subsidiary Guarantors would be subject
to certain defenses available to guarantors generally, and would also be subject
to certain defenses available to the Company regarding enforcement of the Notes.
See "-- Fraudulent Conveyances and Preferential Transfers." Although the
Indenture contains waivers of most of those defenses, one or more of such
waivers may not be enforced by a court in a particular case. To the extent that
the Subsidiary Guarantees are not enforceable, the Notes would be effectively
subordinated to all liabilities of the Company's Subsidiaries, including other
Senior Indebtedness, subordinated indebtedness and trade payables of such
Subsidiaries.
As of March 31, 1997, after giving effect to the offering of the Old Notes
and the application of the proceeds therefrom, CSC and its Subsidiaries would
have had approximately $87.1 million of secured Indebtedness (including $82.5
million of Warehouse Indebtedness).
LEVERAGE
The Company is significantly leveraged. As of March 31, 1997, after giving
effect to the offering of the Old Notes and the application of the net proceeds
therefrom, the total consolidated Indebtedness of (i) the Company and (ii) CSC
and its Subsidiaries was approximately $530.8 million and $87.1 million,
respectively, including in each case $82.5 million of Warehouse Indebtedness.
The Company's ability to make payments of principal or interest on, or to
refinance its indebtedness (including the Notes) depends on its future operating
performance, which to a certain extent is subject to economic, financial,
competitive and other factors beyond its control.
8
<PAGE> 11
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including (i) the Company's
vulnerability to adverse general economic and industry conditions, (ii) the
Company's ability to obtain additional financing for future working capital
expenditures, acquisitions, general corporate purposes or other purposes, and
(iii) the dedication of a substantial portion of the Company's cash flow from
operations to the payment of principal and interest on indebtedness thereby
reducing the funds available for operations and future business opportunities.
In addition, the Indenture contains certain covenants which could limit the
Company's operating and financial flexibility. See "Description of the
Notes -- Certain Covenants."
The Company's ability to sustain its growth is dependent on its ability to
secure further debt arrangements or warehouse credit facilities. See
"-- Negative Cash Flows" and "-- Uncertainty as to Availability of Funding
Sources."
NEGATIVE CASH FLOWS
Although the Company believes that cash from operations and financing
activities will be sufficient to enable it to make required interest payments on
the Notes and its other debt obligations and other required payments, there can
be no assurance in this regard, and the Company may encounter liquidity problems
which could affect its ability to meet such obligations while attempting to
withstand competitive pressures.
As a result of its increased volume of loan originations and purchases and
its growing use of securitizations, the Company has operated since March 1995,
and expects to continue to operate, on a negative cash flow basis. Prior to
1995, the Company sold loans primarily through whole loan sales which generate
immediate cash flow on the date of sale. The recognition of gain on sale of
loans through securitizations has a negative impact on the cash flow of the
Company because significant costs are incurred upon closing of the transactions
giving rise to such gain and the Company is required to pay income taxes on the
gain on sale in the period recognized, although the Company does not expect to
receive the cash representing the gain until later periods as the related loans
are repaid or otherwise collected.
The Company's principal cash requirements include the funding of loan
originations and purchases, payment of interest expenses (including interest
expenses under the Notes), funding the overcollateralization requirements for
securitizations, operating expenses, income taxes and capital expenditures. The
Company uses its cash flow from whole loan sales, loans sold through
securitizations, capital markets offerings, pre-funding mechanisms through
securitizations, loan origination fees, servicing fees, net interest income and
borrowings under its credit or warehouse facilities to meet its working capital
and other needs. For the years ended December 31, 1995 and 1996 and for the
three months ended March 31, 1997, the Company had negative cash flow from
operations of $76.0 million, $165.6 million and $51.0 million, respectively, due
primarily to the Company's sale of loans through securitizations. Also
contributing to the Company's negative cash flow is the increasing percentage of
its loan volume derived through the Wholesale Loan Acquisition Program and bulk
purchases, which have a greater negative impact on cash flows than loan volume
derived from independent mortgage brokers.
UNCERTAINTY AS TO AVAILABILITY OF FUNDING SOURCES
The Company funds substantially all of the loans which it originates and
purchases through borrowings under warehouse facilities secured by pledges of
its loans, loan purchase facilities under which the Company retains the rights
to repurchase loans sold, lines of credit secured by the residual and
interest-only interests in securitizations, a senior note issuance and
internally generated funds. These borrowings are in turn repaid with the
proceeds received by the Company from selling such loans either through
securitizations or whole loan sales. Any failure to renew or obtain adequate
funding under these credit or warehouse facilities, or other borrowings, or any
substantial reduction in the size of or pricing in the markets for the Company's
loans, could have a material adverse effect on the Company's operations. To the
extent that the Company is not successful in maintaining or replacing existing
financing, it would have to curtail its loan production activities or sell loans
earlier than is optimal, which would have a material adverse effect on the
Company's results of operations and financial condition.
9
<PAGE> 12
The type, timing and terms of financing selected by the Company will be
dependent upon the Company's cash needs, the availability of financing sources
and the prevailing conditions in the financial markets. The Company anticipates
that funds currently available will be sufficient to fund the Company's
liquidity requirements into the fourth quarter of 1997. However, the Company has
substantial capital requirements and anticipates that it will need to raise
additional cash by such time through the issuance of additional debt or equity
securities or additional bank borrowings or a combination thereof. The Company
has no commitments for additional debt, equity or bank financings other than
those described in this Prospectus and there can be no assurance that any
sources will be available to the Company at any given time or as to the
favorability of the terms on which such sources may be available.
POTENTIAL INABILITY TO PURCHASE TENDERED NOTES UPON A CHANGE OF CONTROL
Each holder of Notes has the option to cause the Company to purchase its
Notes, in whole or in part, at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon through the date of
repurchase, following a Change of Control. There can be no assurance that the
Company will be able to repurchase the Notes upon a Change of Control. See
"Description of the Notes -- Change of Control." In addition, each holder of
Convertible Debentures may elect to have the Company repurchase its Convertible
Debentures, in whole but not in part, at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon through the
date of repurchase, upon certain change of control events as set forth in the
related Indenture. Furthermore, the holders of the Series A Preferred Stock may
elect to have the Company redeem such stock at a redemption price equal to 110%
of the Liquidation Preference upon certain change of control events as set forth
in the related Certificate of Designations.
DEPENDENCE ON FUNDING SOURCE
The Company has funded substantially all of its loan origination and
purchase volume and working capital requirements in the US and the UK through
financing facilities and through loan sales pursuant to mortgage loan purchase
agreements that include working capital facilities with Greenwich Capital
Markets, Inc. (referred to herein, including its affiliates, as "Greenwich").
During 1995 and 1996, the Company sold 10.3% and 93.8%, respectively, of its
loan originations and purchases to Greenwich. The US facility (the "US Greenwich
Facility") was provided through Greenwich's affiliate, Greenwich Capital
Financial Products, Inc., and the UK facility (the "UK Greenwich Facility") is
provided through its affiliate, Greenwich International, Ltd. With certain
exceptions, the Company has been required to sell all of its loans directly or
indirectly to Greenwich. The loans are then resold through securitizations or
whole loan sales. These provisions of the US Greenwich Facility and the UK
Greenwich Facility may prevent the Company from taking advantage of other more
favorable financing sources that may become available to the Company.
Additionally, the Company expects to derive a substantial portion of its working
capital through the mortgage loan purchase agreements.
The US Greenwich Facility provided for the purchase and sale of $1.0
billion of loans. The Company and Greenwich continued to purchase and sell loans
after the facility amount was exceeded through December 1996. The Company has a
commitment from Greenwich to enter into agreements to provide a $3.0 billion
mortgage loan financing facility at a rate of LIBOR plus 150 basis points, a
$25.0 million residual financing facility at a rate of LIBOR plus 300 basis
points and a $3.0 billion securitization facility, each for a term of one year,
subject to execution of definitive documents satisfactory to Greenwich as well
as certain other conditions. The Company and Greenwich, pending the completion
of definitive documents, are operating under the terms of the US Greenwich
Facility structured consistent with the new proposed arrangement, however, as a
financing facility. No definitive agreement exists with respect to the new
arrangement nor can any assurance be given that such an agreement will be
reached. Because it is structured as a financing facility and not as a purchase
and sale facility, the new arrangement with Greenwich could affect the timing of
the Company's reported gain on sale, adversely affecting gain on sale in a
future period if the Company fails to sell or securitize the loan origination
and purchase volume for such period. To the extent that the Company is not
successful in maintaining with Greenwich or replacing existing financing, it
would have to curtail its loan production activities or sell loans earlier than
is optimal, thereby adversely affecting the Company's results of operations and
financial condition. CSC-UK paid a fee to Greenwich in connection with the UK
Greenwich Facility in the aggregate amount of $38.0 million. The Company is
amortizing this fee over the 20-year life of
10
<PAGE> 13
the facility. If the facility were to be terminated prior to its scheduled
expiration in 2015, the Company would have to write-off the fee earlier than
anticipated, resulting in a charge to earnings in the period of such write-off
of the unamortized amount of the fee at that time, which would have an adverse
effect on the Company's results of operations.
Additionally, the agreement governing the UK Greenwich Facility prohibits
the payment of dividends by CSC-UK to CSC prior to the repayment of all
outstanding balances under the working capital facility of the UK Greenwich
Facility.
DEPENDENCE ON SECURITIZATIONS
General
Since March 1995, the Company has pooled and sold through securitizations
an increasing percentage of the loans which it originates or purchases. The
Company derives a significant portion of its income by recognizing gains upon
the sale of loans through securitizations representing the fair value of the
interest-only and residual certificates received in the US and the fair value of
excess mortgage servicing receivables retained through UK securitizations and on
sales into the UK purchase facility. In determining excess mortgage servicing
receivables recognized through UK securitizations, the Company excludes normal
servicing and other ancillary fees and includes any prepayment interest due. In
loan sales through US securitizations, the Company sells loans that it has
originated or purchased to a real estate mortgage investment conduit ("REMIC")
trust for a cash purchase price and interests in such REMIC trust consisting of
interest-only regular interests and the residual interest which are represented
by the interest-only and residual certificates. The cash purchase price is
raised through an offering by the REMIC trust of pass-through certificates
representing regular interests in the REMIC trust. Following the securitization,
the purchasers of the pass-through certificates receive the principal collected
and the investor pass-through interest rate on the principal balance, while the
Company recognizes as current revenue the fair value of the interest-only and
residual certificates.
Reliance on Securitization Market
Adverse changes in the US or UK securitization market for home equity and
home improvement loans could impair the Company's ability to originate, purchase
and sell loans through securitizations on a favorable or timely basis. Any such
impairment could have a material adverse effect upon the Company's results of
operations and financial condition. Furthermore, the Company's quarterly
operating results can fluctuate significantly as a result of the timing and
level of securitizations. If securitizations do not close when expected, the
Company's results of operations may be adversely affected for that period.
Reliance on Credit Enhancements
In addition, in order to gain access to the securitization market, the
Company has relied on credit enhancements provided by monoline insurance
carriers on the majority of the Company's US securitizations to guarantee
outstanding senior interests in the related REMIC trusts to enable it to obtain
an "AAA/Aaa" rating for such interests. The cost of such credit enhancement
results in a reduction in the gain on sale of loans sold in such securitization.
Any substantial reductions in the size or availability of the securitization
market for the Company's loans, or the unwillingness of insurance companies to
guarantee the senior interests in the Company's loan pools, could have a
material adverse effect on the Company's results of operations and financial
condition.
The documents governing the Company's securitizations require the Company
to build over-collateralization levels through retention of excess servicing
distributions and application thereof to reduce the principal balances of the
senior interests issued by the related trust or to create reserve funds. This
application causes the aggregate principal amount of the loans and cash in the
related pool to exceed the aggregate principal balance of the outstanding
investor certificates. Such excess amounts serve as credit enhancement for the
related trust and therefore fund losses realized on loans held by such trust.
The Company continues to be subject to the risks of default and foreclosure
following the sale of loans through securitizations to the extent
11
<PAGE> 14
excess servicing distributions are required to be retained or applied to reduce
principal from time to time. Such retained amounts are pre-determined by the
entity issuing the guarantee of the related senior interests and are a condition
to obtaining an "AAA/Aaa" rating thereon. In addition, such retention diverts
cash which would otherwise flow to the Company through its retained interest in
the transaction represented by the interest-only and residual certificates and
excess mortgage servicing receivables the Company receives upon loan sales
through securitizations, thereby slowing, and in some circumstances, reducing
over the life of the related securitization, the flow of cash to the Company.
Availability and Cost of Pre-Funding Mechanism
In connection with the Company's pre-funding commitments in its
securitization transactions, investors deposit in cash a pre-funded amount into
the related trust to purchase loans the Company commits to sell on a forward
basis. This pre-funded amount is invested pending subsequent transfers of loans
to the trusts in short term obligations which pay a lower interest rate than the
interest rate the trust is obligated to pay the certificate investors on the
outstanding balance of the pre-funded amount. The Company is required to deposit
at the closing of the related transaction an amount sufficient to make up the
difference between these rates. The portion of the deposit that is not recovered
by the Company is recorded as an expense of the securitization transaction which
results in a reduction in the gain on sale of the loans sold in such
securitization. If the Company were unable to make such deposits, it would be
unable to access the pre-funding mechanism that allows it to sell relatively
greater volume through each securitization, which could result in an adverse
effect upon the Company's results of operations and financial condition.
POTENTIAL CHANGE IN VALUATION OF INTEREST-ONLY AND
RESIDUAL CERTIFICATES AND MORTGAGE SERVICING RECEIVABLES
The Company sells over 90% of the loans that it originates or purchases
through securitizations or into loan purchase facilities with servicing
retained. The Company derives a substantial portion of its income by recording a
gain on sale when loans are sold in such a manner. In the case of a US
securitization, the Company receives as an investment the interest-only and
residual certificates the Company receives as a result of such securitization.
In the case of a UK securitization, or the sale of loans into a loan purchase
facility, the Company retains a mortgage servicing receivable. In addition,
since it adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights," in
October 1995, the Company also recognizes as an asset the capitalized value of
mortgage servicing rights (including normal servicing and other ancillary fees)
as a mortgage servicing receivable. The Company calculates the value of its
interest-only and residual certificates and mortgage servicing receivables based
upon their fair values. The fair value of these assets is determined based on
various economic factors, including loan types, balances, interest rates, dates
of origination, terms and geographic locations. The Company also uses other
available information applicable to the types of loans the Company originates
and purchases, such as reports on prepayment rates, interest rates, collateral
value, economic forecasts and historical default and prepayment rates of the
portfolio under review. The Company estimates the expected cash flows that it
will receive over the life of a portfolio of loans. These expected cash flows
constitute the excess of the interest rate payable by the obligors of loans over
the interest rate passed through to the purchasers of the related securities,
less applicable recurring fees and credit losses. The Company discounts the
expected cash flows at a discount rate that it believes is consistent with the
required risk-adjusted rate of return to an independent third party purchaser of
the interest-only and residual certificates or mortgage servicing receivables.
As of March 31, 1997, the Company's balance sheet reflected the fair value of
interest-only and residual certificates and mortgage servicing receivables of
$155.0 million and $220.8 million (net of reserves of $31.4 million),
respectively.
Realization of the value of these interest-only and residual certificates
and mortgage servicing receivables in cash is subject to the prepayment and loss
characteristics of the underlying loans and to the timing and ultimate
realization of the stream of cash flows associated with such loans. If actual
experience differs from the assumptions used in the determination of the asset
value, future cash flows and earnings could be negatively impacted and the
Company could be required to write down the value of its interest-only and
residual certificates and mortgage servicing receivables. For example, in the
fourth quarter of 1996 the
12
<PAGE> 15
Company determined that the value of the interest-only and residual certificates
from its August 1995 securitization had been impaired in the amount of $1.4
million and accordingly wrote down the value of such certificates by that
amount. The impairment was primarily attributable to a change in the loss
assumptions with respect to such securitization to be consistent with those of
the Company's subsequent securitizations. No assurance can be given as to
whether, and in what amounts, the Company in the future will have to write down
the value of the interest-only and residual certificates from this or its other
securitizations. In addition, if prevailing interest rates rose, the required
discount rate might also rise, resulting in impairment of the value of the
interest-only and residual certificates and mortgage servicing receivables. The
Company believes that there is no active market for the sale of its
interest-only and residual certificates or its mortgage servicing receivables.
No assurance can be given that these assets could be sold at their stated value
on the balance sheet, if at all.
CONSEQUENCES OF EXCEEDING PERMITTED DELINQUENCY AND DEFAULT LIMITS
The pooling and servicing agreements relating to the Company's
securitization transactions contain provisions with respect to the maximum
permitted loan delinquency rates and loan default rates, which, if exceeded,
would require amounts otherwise payable to the Company to be retained by the
related securitization trusts and would allow the termination of the Company's
right to service the related loans. The default rates on the pools of loans sold
in the March 1995 and August 1995 securitization transactions, the Company's
first two securitization transactions, have exceeded the permitted limits set
forth in the related pooling and servicing agreements. Accordingly,
overcollateralization requirements for these two securitizations have been
increased and cash otherwise payable to the Company from such securitizations is
being retained by the related trusts. No assurance can be given when, if ever,
such amounts will be released to the Company. In addition, this condition could
result in the termination of the Company's servicing rights with respect to the
securitizations' pools of loans by the trustee or the insurance company
providing credit enhancement for those transactions. For 1996, the revenues to
the Company from mortgage servicing rights on these pools of loans were
approximately $625,000. Although none of the parties to these transactions has
indicated its intention to terminate the Company's servicing rights and the
Company has no current expectation that they will do so, no assurance can be
given that any of such parties will not exercise its right to terminate. As of
August 5, 1997, the delinquency and default rates relating to the Company's
other securitizations were within permitted limits. However, such
securitizations' loan pools are less seasoned and no assurance can be given that
such limits will not be exceeded in the future. The retention of cash by
securitization trusts or the termination of the Company's servicing rights would
have a material adverse effect on the Company's results of operations and
financial condition and could affect the Company's ability to effect
securitizations in the capital markets.
SECURITY
Prior to the receipt of an Investment Grade Rating, the Subsidiary
Guarantee of CSC will be secured by a pledge by CSC to the Trustee (for the
benefit of the holders) of the Intercompany Note (the "Intercompany Note
Collateral"). The Intercompany Note that comprises the Intercompany Note
Collateral is a general senior unsecured obligation of CSC-UK. There can be no
assurance that the proceeds of any sale of the Intercompany Note Collateral
pursuant to the Pledge Agreement would be sufficient to satisfy payments due on
the Notes. In addition, the ability of the holders to realize upon the
Intercompany Note Collateral may be subject to certain bankruptcy law
limitations in the event of a bankruptcy. In a bankruptcy proceeding, the
Intercompany Note may be subject to recharacterization as equity or subordinated
to other indebtedness of the creditor if a court determined that an unaffiliated
lender would not have made a loan on similar terms under then existing
circumstances. Under applicable federal bankruptcy laws, secured creditors are
prohibited from exercising their remedies in respect of their security from a
debtor in a bankruptcy case, or from disposing of such security, without
bankruptcy court approval. Moreover, applicable federal bankruptcy laws
generally permit the debtor to continue to use collateral (such as payments on
the Intercompany Note) even though the debtor is in default under the applicable
debt instruments, provided generally that the secured creditor is given
"adequate protection." See "Description of the Notes -- Security."
13
<PAGE> 16
FRAUDULENT CONVEYANCES AND PREFERENTIAL TRANSFERS
The ability of the holders of the Notes or the Trustee to enforce the
Subsidiary Guarantees may be limited by certain fraudulent conveyance laws.
Various fraudulent conveyance and similar laws have been enacted for the
protection of creditors and may be utilized by a court of competent jurisdiction
to avoid the Subsidiary Guarantees or to subordinate the obligations of the
Company under the Notes or the obligations of any Subsidiary Guarantor under its
Subsidiary Guarantee. The requirements for establishing a fraudulent conveyance
vary depending on the law of the jurisdiction which is being applied. Generally,
if in a bankruptcy, reorganization, rehabilitation or similar proceeding in
respect to the Company or a Subsidiary Guarantor, or in a lawsuit by or on
behalf of creditors against the Company or a Subsidiary Guarantor, a court were
to find that (i) the Company or a Subsidiary Guarantor, as the case may be,
incurred indebtedness in connection with the Notes (including the Subsidiary
Guarantees) with the intent of hindering, delaying or defrauding current or
future creditors of the Company or the Subsidiary Guarantor, as the case may be,
or (ii) the Company or a Subsidiary Guarantor, as the case may be, received less
than reasonably equivalent value or fair consideration for incurring such
indebtedness (including the Subsidiary Guarantees), as the case may be, and
either (a) was insolvent at the time of the incurrence of such indebtedness
(including the Subsidiary Guarantees), (b) was rendered insolvent by reason of
incurring such indebtedness (including the Subsidiary Guarantees), (c) was at
such time engaged or about to engage in a business or transaction for which its
assets constituted unreasonably small capital or (d) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, such court could, with respect to the Company or the Subsidiary
Guarantor, as the case may be, declare void in whole or in part the obligations
of the Company or such Subsidiary Guarantor in connection with the Notes
(including the Subsidiary Guarantees) and/or subordinate claims with respect to
the Notes (including the Subsidiary Guarantees) to all other debts of the
Company or the Subsidiary Guarantors, as applicable. If the obligations of the
Company or the Subsidiary Guarantors were subordinated, there can be no
assurance that after payment of the other debts of the Company or the Subsidiary
Guarantors, there would be sufficient assets to pay such subordinated claims
with respect to the Notes and the Subsidiary Guarantees. Generally, an entity
will be considered insolvent if the sum of its respective debts was greater than
the fair saleable value of all of its property at a fair valuation or if the
present fair saleable value of its assets is less than the amount that will be
required to pay its probable liability on its existing debts, as they become
absolute and mature.
Additionally, under federal bankruptcy or applicable state insolvency law,
if certain bankruptcy or insolvency proceedings were initiated by or against the
Company or any Subsidiary Guarantor within 90 days after any payment by the
Company or such Subsidiary Guarantor with respect to the Notes or a Subsidiary
Guarantee, respectively, or if the Company or such Subsidiary Guarantor
anticipated becoming insolvent, all or a portion of such payment could be
avoided as a preferential transfer and the recipient of such payment could be
required to return such payment.
RISK OF ADVERSE ECONOMIC CONDITIONS
The Company's business may be adversely affected by periods of economic
slowdown or recession which may be accompanied by decreased demand for consumer
credit and declining real estate values. Any material decline in real estate
values reduces the ability of borrowers to use home equity to support borrowings
and increases the loan-to-value ratios of loans previously made by the Company,
thereby weakening collateral coverage and increasing the possibility of a loss
in the event of default. Further, delinquencies, foreclosures and losses
generally increase during economic slowdowns or recessions. Because of the
Company's focus on borrowers who are unable or unwilling to obtain mortgage
financing from conventional mortgage sources, the actual rates of delinquencies,
foreclosures and losses on such loans could be higher under adverse economic
conditions than those currently experienced in the conventional mortgage lending
industry. Any sustained period of such increased delinquencies, foreclosures or
losses could adversely affect the pricing of the Company's loan sales whether
through securitizations or whole loan sales.
14
<PAGE> 17
HIGH-RISK BORROWERS
Loans made to borrowers who are unable or unwilling to obtain mortgage
financing from conventional mortgage sources may entail a higher risk of
delinquency and higher losses than loans made to borrowers who utilize
conventional mortgage sources. While the Company believes that the underwriting
criteria and collection methods it employs enable it to mitigate the higher
risks inherent in loans made to these borrowers, no assurance can be given that
such criteria or methods will afford adequate protection against such risks. In
the event that pools of loans sold and serviced by the Company experience higher
delinquencies, foreclosures or losses than anticipated, the Company's results of
operations or financial condition could be adversely affected.
LOAN DELINQUENCIES AND DEFAULTS
The Company is exposed to the risk of loan delinquencies and defaults upon
the closing of the loan. After a loan has been originated or purchased by the
Company, the loan is held as part of a portfolio of loans subject to sale either
through a securitization or on a whole loan basis. During the period a loan is
so held, the Company is at risk for loan delinquencies and defaults. Following
the sale of the loan through a securitization, the Company's direct risk with
respect to loan delinquency or default on such loan is limited to those
circumstances in which it is required to repurchase such loan due to a breach of
a representation or warranty in connection with the securitization. This risk
also exists for loans sold on a whole loan basis. On loans sold through
securitizations, the Company is also at risk of loan delinquency or default from
a first payment default and thereafter to the extent that losses are paid out of
a reserve account, or reduce the over-collateralization to the extent that funds
are available, and will result in a reduction in the value of the interest-only
and residual certificates and mortgage servicing receivables held by the
Company.
RISKS FROM INTEREST RATE FLUCTUATIONS
Profitability may be directly affected by the level of and fluctuations in
interest rates which affect the Company's ability to earn a spread between
interest received on its loans and the costs of borrowings. The profitability of
the Company is likely to be adversely affected during any period of unexpected
or rapid changes in interest rates. A substantial and sustained increase in
interest rates could adversely affect the ability of the Company to originate
and purchase loans and could reduce the gain on sale recognized by the Company
when loans are sold through securitizations. A significant decline in interest
rates could decrease the size of the Company's loan servicing portfolio by
increasing the level of loan prepayments. Additionally, to the extent servicing
spread has been capitalized on the books of the Company or the Company holds
interest-only and residual certificates received upon loan sales through
securitizations, higher than anticipated rates of loan prepayments or losses
would reduce the aggregate amount of payments received by the REMIC trusts
pursuant to the Company's securitizations which would require the Company as
holder of the residual interests in such securitizations to write down the value
of such servicing spread or the fair value of such interest-only and residual
certificates, adversely impacting earnings and the value of the Common Stock.
Fluctuating interest rates also may affect the net interest income earned by the
Company resulting from the difference between the yield to the Company on loans
held pending sale and the interest paid by the Company for funds borrowed under
the Company's warehouse facility. In addition, inverse or flattened interest
yield curves could have an adverse impact on the profitability of the Company
because the loans pooled and sold by the Company generally have long-term rates,
while the senior interests in the related REMIC trusts are priced on the basis
of intermediate rates in the US.
RISKS RELATING TO RECENT EXPANSION AND PRODUCT EXTENSION
Since January 1, 1994, the Company has originated and purchased a
significantly greater number of loans than it had in previous years. In light of
this growth, the historical performance of the Company's earnings may be of
limited relevance in predicting future performance. Any credit or other problems
associated with the larger number of loans originated and purchased in the
recent past will not become apparent until sometime in the future.
15
<PAGE> 18
The Company's significant growth and expansion have placed substantial new
and increased pressures on the Company's personnel and systems. In order to
support the growth of its business, the Company has added a significant number
of new operating procedures, facilities and personnel. There can be no assurance
that the addition of these new operating procedures and personnel will be
sufficient to enable the Company to meet its growing operating needs. Failure by
the Company to manage its growth effectively, or to sustain its historical
levels of performance in credit analysis and transaction structuring with
respect to the increased loan origination and purchase volume, could have a
material adverse effect on the Company's results of operations and financial
condition.
In addition, the Company has recently expanded its product offerings to
include conventional home improvement loans (commencing May 1996),
"Sav*-A-Loans(R)" (commencing May 1996), adjustable rate loans (commencing
October 1996), loans for occupants of government-owned residential properties in
the UK (commencing November 1996), conventional loans (commencing February 1997)
and, to a lesser extent, Title I loans (commencing December 1995), with which
the Company has relatively little experience. The Sav*-A-Loan(R) product, for
example, is offered to homeowners with little or no equity in their property but
who possess a favorable credit profile and debt-to-income ratio. The
Sav*-A-Loan(R) product has contributed and is expected to continue to contribute
an increasing percentage of the Company's US originations. The Company has
incurred certain expenses in connection with the development of these new
product offerings. No assurance can be given that the Company will be able to
develop these new product offerings successfully, or that the Company's
extension of its product offerings will not have a material adverse effect on
the Company's results of operations and financial condition.
CREDIT RISK ASSOCIATED WITH HIGH LTV LOANS
Certain of the Company's loan products have high loan-to-value ratios
("LTV") and, although secured by real property, the collateral of such loans
often will not be sufficient to cover the principal amount of the loans in the
event of default. The principal balance of such a loan, such as the Company's
"Sav*-A-Loan(R)" product, inclusive of other loans secured by the same property
often exceeds the value of the underlying property by as much as 25%.
Consequently, the Company is less likely to use foreclosure as a means to
mitigate its losses upon the default of such loans or to recover any meaningful
amounts in the event of a foreclosure. With respect to these loans, LTV
determinations are based on a value of the underlying property, which is set by
a full appraisal, a drive-by appraisal or, if owned less than 12 months, the
sale price. Accordingly, there can be no assurance that such values accurately
reflect prevailing market prices of such properties, either when made or upon a
default on the related loan. For such loans, the Company relies primarily on the
creditworthiness of the borrower and, with respect to Title I loans, also relies
on FHA co-insurance for repayment. Losses not covered by the underlying
properties, if in excess of the Company's allowance for such losses included in
the calculation of the gain on sale, could have a material adverse effect on the
Company's results of operations and financial condition.
ABILITY OF THE COMPANY TO IMPLEMENT ITS GROWTH STRATEGY
The Company's growth strategy is dependent upon its ability to increase its
loan origination and purchase volume while maintaining its customary origination
fees, interest rate spreads and underwriting criteria with respect to such
increased loan origination and purchase volume. Implementation of this strategy
will depend in large part on the Company's ability to: (i) expand its broker
network in markets with a sufficient concentration of borrowers meeting the
Company's underwriting criteria; (ii) obtain adequate financing on favorable
terms; (iii) securitize loans profitably in the secondary market on a regular
basis; (iv) hire, train and retain skilled employees; and (v) continue to expand
in the face of increasing competition from other mortgage lenders. The Company's
failure with respect to any or all of these factors could impair its ability to
successfully implement its growth strategy which could have a material adverse
effect on the Company's results of operations and financial condition. The
Company will also incur start-up costs in connection with entering new markets
including costs associated with establishing new regional infrastructures. Such
additional costs could have a material adverse effect on the Company's results
of operations and financial condition. In addition, the Company's results of
operations will be adversely affected if revenues do not increase sufficiently
to
16
<PAGE> 19
compensate for the increase in operating expenses resulting from past, current
and future growth and expansion and there can be no assurance that any expansion
will be profitable or that it will not adversely affect the Company's results of
operations.
RISKS RELATED TO ACQUISITIONS
In September 1995, the Company acquired the remaining 50% of CSC-UK not
then owned by the Company in exchange for 3.6 million shares of Common Stock. In
April 1996, CSC-UK acquired all of the outstanding capital stock of J&J
Securities Limited ("J&J") in exchange for pound sterling 15.3 million ($23.3
million based on the Noon Buying Rate on the date of such acquisition) and
548,000 shares of Common Stock valued at $9.8 million. J&J's business is
substantially similar to that of CSC-UK but with a primary focus of making loans
generally secured by second liens. In June 1996, CSC-UK acquired all of the
outstanding capital stock of Greyfriars Group Limited (formerly known as
Heritable Group Limited and referred to herein as "Greyfriars") in exchange for
pound sterling 41.8 million ($64.1 million based on the Noon Buying Rate on the
date of such acquisition) and 99,362 shares of Common Stock valued at $2.5
million. Greyfriars' business differs from that of CSC-UK in that its loans are
made primarily to borrowers with higher quality credit characteristics, are
generally secured by second liens and generally have higher loan-to-value ratios
and lower interest rates than those made by CSC-UK.
An important part of the Company's growth strategy is the acquisition of
consumer finance companies that complement or supplement the Company's existing
business in the US and in the UK, such as J&J and Greyfriars. Any acquisition
involves inherent uncertainties and risks, such as the effect on the acquired
business of integration into the Company, the availability of management
resources to oversee the operations of the acquired business, the risks of
entering markets in which the Company has no or limited direct prior experience,
operating in different geographical locations with different competitive
conditions, different demographic characteristics and different corporate
cultures and the potential loss of key employees of the acquired company.
Integrating acquired products and operations requires a significant amount of
management's time and skill and may place significant demands on the Company's
operations and financial resources. Although an acquired business may have
enjoyed profitability and growth prior to the acquisition, there can be no
assurance that such profitability or growth would continue thereafter. There can
be no assurance that the Company will be able to locate appropriate acquisition
candidates, that any identified candidates will be acquired or that acquired
operations will be effectively integrated or prove profitable. There can be no
assurance that the financing necessary to complete such acquisitions can be
obtained by the Company on favorable terms, if at all.
In addition, in connection with its acquisitions of CSC-UK, J&J and
Greyfriars, the Company has recognized $19.7 million, $5.2 million and $25.4
million, respectively, of goodwill and, as a result of a recent acquisition in
the UK of a retail mortgage broker, will recognize additional goodwill of
approximately $12.0 million. The Company may also recognize significant amounts
of goodwill in connection with future acquisitions. The Company is amortizing
goodwill recognized in its recent acquisitions over ten years, and the
relatively large amortization charge recognized in each such year may
significantly reduce earnings recorded in such period. In addition, in the event
that the Company determines that the carrying value of goodwill is impaired, it
would write down such carrying value which would result in a charge to earnings
in the period such determination is made. Any such charge could have a material
adverse effect on the Company's financial results. In connection with its
acquisitions, the Company accounted for as a cost of acquisition restructuring
charges in the aggregate amount of $5.0 million for items including charges for
terminated leases and severance payments, and may have to make similar
provisions with respect to future acquisitions. In the event that the actual
charges exceed the provisions made by the Company, such charge will have an
adverse effect on the Company's results of operations.
Future acquisitions by the Company could result in potentially dilutive
issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses of additional goodwill and other
intangible assets, which could materially affect the Company's results of
operations or financial condition.
17
<PAGE> 20
RISKS RELATED TO OPERATIONS IN THE UK
General
Since the Company commenced operations in the UK in May 1995, the Company's
UK operations have become an increasingly important contributor to the Company's
overall operating results. For the three months ended March 31, 1997, 20.4% of
the Company's total loan origination and purchase volume (as compared to 14.0%
for the prior year's period) and 50.4% of the Company's total revenues (as
compared to 46.3% for the prior year's period) were attributable to the
Company's UK operations.
The Company's operations in the UK market are subject to most of the same
risks faced by the Company's US operations as well as the additional risks
customarily associated with US corporations conducting foreign activities,
including fluctuations in foreign currency exchange rates. To the extent that
unfavorable fluctuations in foreign currency exchange rates occur, the Company's
results of operations will be adversely affected. Although the Company is
exploring possible programs for hedging this risk, the Company is not aware of
any such program currently available that is suited to the Company's risk. There
can be no assurance that the Company will adopt a program to hedge this risk.
Additional risks in the UK include fluctuations in foreign currency controls,
expropriation, nationalization and other economic, tax and regulatory policies
of the UK government as well as the laws and policies of the US affecting
foreign trade and investment. A general election was held in the UK on May 1,
1997 in which the Labour Party was elected and it is anticipated that some shift
in fiscal and social policy will result. The Company's UK operations may be
adversely affected by any such changes.
Business Prospects Risks
The Company believes that the market in the UK for borrowers who are unable
or unwilling to obtain mortgage financing from conventional mortgage sources at
competitive rates, if at all, is underserved as a result of regulatory policies
imposed on banks and building societies ("Conventional UK Lenders") in the late
1980s. Currently many of such borrowers obtain mortgage financing through
independent mortgage brokers predominantly funded by private investors. Since
commencing operations in the UK, the Company has derived its UK loan
originations primarily from mortgage brokers (with the exception of the loan
portfolios purchased as a result of the acquisitions of J&J and Greyfriars) and,
to a lesser extent, recently through direct marketing to occupants of
government-owned residential properties in the UK. Approximately 60.5% and 30.7%
of the Company's UK loans were originated through three mortgage brokers in 1995
and 1996, respectively. Although the Company believes that its products and
services will attract a consistent flow of loan origination volume from
independent mortgage brokers, there can be no assurance the Company will be able
to obtain similar levels of loan origination volume from brokers in the future.
Further, there can be no assurance that the Company, due to competition or other
factors, will be able to obtain similar terms and pricing for such loan
originations. In particular, the Company has agreed to pay increased commissions
to brokers on loans originated in connection with right of first refusal
agreements.
Legal and Regulatory Risks
The Company's mortgage lending business in the UK is subject to regulations
promulgated under the United Kingdom Consumer Credit Act 1974 (the "CCA")
applicable to loans made to individuals or partnerships with principal balances
of pound sterling 15,000 or less. Loans with principal balances in excess of
pound sterling 15,000 are not currently regulated within the UK, except in
limited circumstances. The government has announced its intention to bring
before Parliament regulations that would increase this amount. The CCA and
regulations promulgated thereunder, among other things, impose licensing
obligations on CSC-UK and its subsidiaries, define certain requirements relating
to the form, content, legibility, execution and delivery to the borrower of loan
documents, restrict communication with the borrower prior to completion of a
transaction, require information and notice of enforcement to be given to the
borrower, generally limit a lender to a one-month deferment with any
calculations of prepayment interest under the "Rule of 78s" method, require
rebates to the borrower on early settlement and create a cause of action for an
"extortionate credit bargain." A license is required to service loans in the UK
irrespective of the size of the loan. Failure to
18
<PAGE> 21
comply with the requirements of these rules and regulations can result in the
revocation or suspension of the license to do business and/or render the
mortgage unenforceable in the absence of a court order.
Although the Company believes that CSC-UK has systems and procedures to
facilitate compliance with the requirements under the CCA and is in compliance
in all material respects with applicable laws and regulations, there can be no
assurance that more restrictive laws and regulations will not be adopted in the
future that could make compliance more difficult or expensive (see discussion
regarding the Office of Fair Trading (the "OFT") initiative below).
Approximately 35.8% (as a percentage of aggregate principal balances) of the
Company's UK loans were subject to the CCA and the regulations promulgated
thereunder at March 31, 1997. Of this 35.8%, 3.1% were loans originated by
CSC-UK, 29.0% by J&J and 67.9% by Greyfriars. By way of example, if regulations
were enacted to increase the regulated amount to pound sterling 25,000, an
additional 28.3% of the Company's UK loans at March 31, 1997 would have been
regulated. The Company cannot predict the likelihood of the enactment of these
regulations or the extent of such increase or any other change to the CCA or any
other legislation. Future regulation, if enacted, could have a material adverse
effect on the Company's results of operations and financial condition.
With regard to prepayment terms, if a UK borrower redeems his loan in full
prior to the maturity date (whether voluntarily or through a default), the
equivalent of an early payment fee is incurred as result of the borrower's
contractual obligation to pay a stated amount of interest for the credit
extended. The Company's UK loans have historically provided for prepayment fees
to be determined in one of two ways. For some of the Company's UK loans, the
prepayment fee is based on an amount equal to a certain number of months'
interest; however, for the majority of the Company's UK loans, the total
principal and interest due over the full term of the loan is calculated and then
the borrower is provided a rebate for the unexpired portion of the loan term,
resulting in the equivalent of an early payment fee. The amount due on a
majority of the Company's UK loans in the case of prepayment has been based on
the amount of interest, at the Standard Rate (as defined herein) or the
Concessionary Rate (as defined herein) (whichever is in effect on the date of
prepayment), that has been "earned" and calculated in accordance with the Rule
of 78s method. Using this method, the prepayment of a loan often results in the
Company receiving substantially more than such loan's original principal
balance.
In March 1997, CSC-UK received a letter from the OFT, the Director General
of which has responsibility, under the CCA, for the granting of consumer credit
licenses to mortgage lenders and for the subsequent monitoring of their
activities to ensure continued fitness to hold such licenses. The Company
believes the letter was also sent to other lenders, as well as intermediaries
and other entities involved directly or indirectly in the non-status lending
market. The letter states that, when determining the fitness of licensees, the
OFT will consider whether the licensee or its associates have engaged in
business practices which appear to be inappropriate, regardless of their
legality. The letter specifically sets forth certain practices deemed by the OFT
to fall within such categories, including the appropriateness of
standard/concessionary rate structures, as well as the calculation of
prepayments using the Rule of 78s method. Following receipt of the letter, the
Company commenced a review and evaluation of its practices with respect to each
issue raised in the letter and entered into discussions with the OFT regarding
its concerns raised in the letter.
On July 18, 1997, the Director General of the OFT issued "Non-Status
Lending Guidelines for Lenders and Brokers" (the "Non-Status Guidelines") that
are applicable to mortgage lenders like CSC-UK that focus on lending to
individuals who are unable or unwilling to obtain mortgage financing from
conventional mortgage sources.
The new Non-Status Guidelines highlight some of the main practices that the
OFT considers to be inappropriate, whether or not lawful. The OFT has stated
that if lenders and/or brokers continue these practices, the OFT will take
regulatory action against them. The majority of these practices are either (i)
not applicable to the Company's UK operations or (ii) practices in which the
Company believes itself to be in compliance or easily able to modify its
operations in order to comply with the new Non-Status Guidelines. In the new
Non-Status Guidelines, however, the OFT has announced that (i) dual interest
rate structures involving a large differential between the two interest rates
are inappropriate and should be discontinued and (ii) the Rule of 78s method of
calculating prepayments is inappropriate in the non-status lending market,
19
<PAGE> 22
should be discontinued at the earliest opportunity and should not be applied to
existing loan agreements without some form of cap to ensure payments are not
excessive. Furthermore, the new Non-Status Guidelines stress that lenders who
wish to recoup administrative costs associated with defaults should do so in
accordance with a published scale of charges and with respect to prepayments,
charges for early redemption should do no more than cover the lender's
unrecovered administrative and other costs incurred to the date of prepayment.
Although the Company is still in the process of evaluating the new
Non-Status Guidelines and cannot at this time predict the impact of conforming
its operations to the Non-Status Guidelines, the Company believes that the
concessionary/standard rate will be eliminated in its new loan programs and
replaced with a single rate. The Company anticipates that the average single
rate that the Company will charge will be higher than the average concessionary
rate and lower than the average standard rate that the Company had charged
previously. Based on prior discussions with the OFT, the Company had previously
determined that it would discontinue originating loans that calculate
prepayments using the Rule of 78s method in August 1997. In the future, the
Company anticipates that it will calculate prepayments using alternative methods
in accordance with the new Non-Status Guidelines. The Company plans to continue
its discussions with the OFT regarding the effect of the new Non-Status
Guidelines on the Company's existing loan agreements.
The Company commenced broadening its UK product offerings with products
that calculate payments without using the Rule of 78s in anticipation of
potential regulatory initiatives like those set forth in the OFT letter. The
elimination of the concessionary/standard rate structure and Rule of 78s method
could have a negative impact on profit margins for the Company's UK loans which
could have a material adverse effect in future periods on the Company's results
of operations and financial condition, especially if the Company is unsuccessful
in its product-broadening efforts. In addition, there can be no assurance as to
the outcome of discussions with the OFT regarding the new Non-Status Guidelines
relating to Rule of 78s calculations under the Company's existing loan
agreements or that the Company will not be required to revise the terms of such
loan agreements. Such revisions, if they occur, could have a material adverse
effect on the Company's results of operations and financial condition. In
response to the announcement of the new Non-Status Guidelines, the Company took
an after-tax reserve of $9.1 million ($15.0 million pre-tax) to increase
existing reserves in the second quarter of 1997. There can be no assurance that
such additional reserve will be sufficient to offset any negative impact that
changes resulting from the new Non-Status Guidelines may have on the Company's
results of operations and financial condition.
Dependence on Secondary Market
Since March 1996, CSC-UK has pooled and sold through securitizations an
increasing percentage of the loans which it originates. Although the Company
believes that a UK secondary market exists for the type of mortgage loans it
originates in the UK, the UK secondary market for such loans is less developed
than the US secondary market for such loans. The Company believes that its March
1996 sale was the first publicly offered, London Stock Exchange listed
securitization of loans of the type originated by the Company sold in the UK
secondary market in several years. No assurances can be given that CSC-UK will
be successful in structuring, marketing and completing loan securitizations in
the UK in the future or that a viable and liquid market for whole loan sales
will develop similar to that in the US. Failure to securitize or sell mortgage
loans in the UK would have a material adverse effect on CSC-UK's, and therefore
the Company's, results of operations and financial condition.
Unseasoned Loan Portfolio
The Company has been servicing loans in the UK only since May 1995 and,
accordingly, the UK loan serviced portfolio is unseasoned. The Company has
experienced an increase in delinquency rates in connection with its UK serviced
portfolio. Further, J&J's historical delinquency experience has been higher than
that of CSC-UK, totaling 43.5% at March 31, 1997.
Potential Change in Valuation of Mortgage Servicing Receivables
Due to the relatively brief period the Company has operated in the UK and
because the UK market for the types of loans sold by the Company has been very
fragmented and underserved, the Company has limited data on which to base
certain of the assumptions, including prepayment assumptions, necessary to
determine
20
<PAGE> 23
the gain on sale recognized when the Company sells UK loans through
securitizations. A component of such gain on sale, which is capitalized on the
Company's balance sheet as mortgage servicing receivables, results from two
attributes of the Company's UK loans that are not shared by the Company's US
loans. Unlike the Company's US loans, certain UK loans to date have significant
prepayment fees and/or provide the borrower with an opportunity to pay a reduced
interest rate (the "Concessionary Rate") to the extent the borrower pays the
loan when due (as opposed to the standard interest rate (the "Standard Rate")
that would apply at any time during which any payment arrears exist). In its UK
securitizations, the Company acquires an uncertificated residual interest,
carried on the Company's balance sheet as mortgage servicing receivables, in the
excess cash flows generated by such securitizations. Following the sale of UK
loans into securitizations, the Company retains no control over the loans sold
and has no control over the borrowers' performance under such loans and no
control over the ability to realize prepayments calculated using the Rule of 78s
or other methods or interest rates in excess of the Concessionary Rate.
Accordingly, even though under the terms of the Company's UK securitizations,
the Company is entitled to such prepayments and interest in excess of the
Concessionary Rate, there can be no assurance that such prepayments or excess
interest can be achieved. In addition, in the event of a forced sale, any
proceeds would be distributed first to pay related enforcement expenses, then to
pay any aggregate outstanding concessionary interest and then to pay the holders
of the senior interests, before any proceeds were available to pay the holder of
the residual interest. To the extent that actual prepayments occur at a slower
rate than assumed on UK loans, the Company may realize lower prepayment
calculations, or realize the prepayments at a later time, than assumed at the
time the gain on sale was originally determined resulting in impairment to
mortgage servicing receivables. If more borrowers than were initially assumed
earned the opportunity to pay the Concessionary Rate, the Company will realize a
lower than expected yield on such borrowers' loans also resulting in impairment
to mortgage servicing receivables. Although the Company believes that its
assumptions with respect to UK prepayments and borrowers who will be eligible to
pay the Concessionary Rate are reasonable, no assurance can be given that actual
results will not differ substantially. Furthermore, in accordance with the OFT's
new Non-Status Guidelines, the Company has introduced new loan programs which
replace its Concessionary/Standard Rate structure with a single rate and cease
calculating prepayments using the Rule of 78s. See "-- Legal and Regulatory
Risks" above. In addition, no assurance can be given that the regulatory
environment will not further adversely change or competitors entering the UK
market will not offer to borrowers better prepayment and interest terms than
those currently offered by the Company. Either of such developments could impair
the Company's mortgage servicing receivables and would have a negative impact on
the Company's financial condition and results of operations.
Mortgage servicing receivables may also be impaired as a result of certain
adjustments in interest rates affecting UK loans. The interest rates on the
majority of the Company's UK loans may be adjusted upward by the Company based
upon a UK base borrowing rate. The Company's UK loans have generally been less
sensitive to fluctuations in interest rates than is typically the case for US
adjustable rate loans. The Company's UK securitizations and loan sales into the
UK Greenwich Facility have variable pass-through rates based on LIBOR, requiring
an increase in the rate upon a specified increase in LIBOR. To the extent that
the Company's UK loan interest rates are not adjusted upward in a timely manner
in response to increases in the variable pass-through rate relating to the
securitization, mortgage servicing receivables will be impaired. In addition, if
such interest rates are adjusted upward and borrowers are unable to make the
resulting higher payments, the Company's UK loans may experience greater
delinquencies and losses which could cause the mortgage servicing receivables to
be impaired.
CONTINGENT RISKS
Although the Company sells substantially all loans which it originates and
purchases on a nonrecourse basis, the Company retains some degree of credit risk
on substantially all loans sold. During the period of time that loans are held
pending sale, the Company is subject to the various business risks associated
with the lending business including the risk of borrower default, the risk of
foreclosure and the risk that a rapid increase in interest rates would result in
a decline in the value of loans to potential purchasers. In addition, documents
governing the UK Greenwich Facility and the Company's securitizations require
the Company to commit to repurchase or replace loans which do not conform to the
representations and warranties made by the Company at the time of sale. When
borrowers are delinquent in making monthly payments on loans included in a
21
<PAGE> 24
REMIC trust, the Company is required to advance interest payments with respect
to such delinquent loans to the extent that the Company deems such advances
ultimately recoverable. These advances require funding from the Company's
capital resources but have priority of repayment from the succeeding month's
collections.
In the ordinary course of its business, the Company is subject to claims
made against it by borrowers and private investors arising from, among other
things, losses that are claimed to have been incurred as a result of alleged
breaches of fiduciary obligations, misrepresentations, errors and omissions of
employees, officers and agents of the Company (including its appraisers),
incomplete documentation and failures by the Company to comply with various laws
and regulations applicable to its business. The Company believes that liability
with respect to any currently asserted claims or legal actions is not likely to
be material to the Company's consolidated results of operations or financial
condition; however, any claims asserted in the future may result in legal
expenses or liabilities which could have a material adverse effect on the
Company's results of operations and financial condition.
GEOGRAPHIC CONCENTRATION OF US OPERATIONS
Approximately 18.0% of the Company's US loan origination and purchase
volume for 1996 and for the three months ended March 31, 1997 was derived from
the state of New York. Although the Company is licensed or registered in 46
states and the District of Columbia and intends to continue to expand into other
markets, it is expected that the state of New York will continue to provide a
substantial portion of its loan origination and purchase activity. Consequently,
the Company's results of operations and financial condition are affected by
general trends in the New York economy and the residential real estate market.
Should a downturn occur in the New York economy or its residential real estate
market, the Company's equity position or portfolio performance relating to
existing New York loans would be adversely affected. In particular, the economy
and the residential real estate market in and around New York City, where a
significant portion of the Company's New York loans have been originated, has
historically been affected by fluctuations in the financial markets.
COMPETITION
As a consumer finance company specializing in mortgage loans, the Company
faces intense competition, primarily from mortgage banking companies, commercial
banks, credit unions, thrift institutions, credit card issuers, finance
companies and, additionally in the UK, building societies and new market
entrants who are affiliated with some of the Company's US competitors. Many of
these competitors in the financial services business are substantially larger
and have more capital and other resources than the Company. Furthermore, certain
large national finance companies and conforming mortgage originators in the US
have announced their intention to adapt their conforming origination programs
and allocate resources to the origination of non-conforming loans. In addition,
certain of these larger mortgage companies and commercial banks have begun to
offer products similar to those offered by the Company, targeting customers
similar to those of the Company. The entrance of these competitors into the
Company's market could have a material adverse effect on the Company's financial
condition and results of operations.
The UK market for the type of loans the Company originates is highly
fragmented and, for a variety of reasons, underserved by conventional lenders as
compared to the US market. The Company anticipates that it will face additional
competition in the UK in the future which will likely have a negative impact on
the average gain on sale realized upon the sale of UK loans and could have a
material adverse effect on the Company's results of operations and financial
condition.
Competition can take many forms, including convenience in obtaining a loan,
customer service, marketing and distribution channels and interest rates.
Competition may be affected by fluctuations in interest rates and general
economic conditions. During periods of rising rates, competitors that have
"locked in" low borrowing costs may have a competitive advantage. During periods
of declining rates, competitors may solicit the Company's customers to refinance
their loans. During economic slowdowns or recessions, the Company's borrowers
may have new financial difficulties and may be receptive to offers by the
Company's competitors. The current level of gains realized by the Company and
its competitors on the sale of the type of loans they
22
<PAGE> 25
originate and purchase is attracting additional competitors into this market
with the possible effect of lowering gains that may be realized on the Company's
future loan sales. During 1996, the Company experienced an increase in the
weighted average loan-to-value ratio on its Core Products and in the premiums it
paid under its Wholesale Loan Acquisition Program to its correspondents, and
experienced a slower rate of growth in originations from its independent
mortgage brokers. In the first six months of 1997, the average loan-to-value
ratio of the Company's Core Products appears to have stabilized and the premiums
the Company has paid to its correspondents under its Wholesale Loan Acquisition
Program have declined slightly. The Company is unable at this time to determine
whether these trends will continue or whether the slowing rate of growth in
originations from its independent mortgage brokers will continue through 1997.
Furthermore, as the Company expands into the market of borrowers with higher
quality credit and loan products that require more significant capital, the
Company will face additional competition with the possible effect of lowering
gains realized by the Company.
The Company depends largely on independent mortgage brokers and financial
institutions and other mortgage bankers for its originations and purchases of
new loans. The Company's competitors also seek to establish relationships with
the Company's independent mortgage brokers and financial institutions and other
mortgage bankers. In addition, the Company expects the volume of wholesale loans
purchased by the Company to increase and the relative proportion of wholesale
loans to total loans originated and purchased by the Company to expand. The
Company's future results may become more exposed to fluctuations in the volume
and cost of its wholesale loans resulting from competition from other purchasers
of such loans, market conditions and other factors.
US LEGISLATIVE AND REGULATORY RISKS
Members of Congress and government officials have from time to time
suggested the elimination of the mortgage interest deduction for federal income
tax purposes, either entirely or in part, based on borrower income, type of loan
or principal amount. Because many of the Company's loans are made to borrowers
for the purpose of consolidating consumer debt or financing other consumer
needs, the competitive advantages of tax deductible interest, when compared with
alternative sources of financing, could be eliminated or seriously impaired by
such government action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for loans of the
kind offered by the Company.
The Company's US business is subject to extensive regulation, supervision
and licensing by federal, state and local governmental authorities and is
subject to various laws and judicial and administrative decisions imposing
requirements and restrictions on part or all of its operations. The Company's
consumer lending activities are subject to the Federal Truth-in-Lending Act and
Regulation Z (including the Home Ownership and Equity Protection Act of 1994),
the Federal Equal Credit Opportunity Act and Regulation B, as amended ("ECOA"),
the Fair Credit Reporting Act of 1970, as amended, the Federal Real Estate
Settlement Procedures Act ("RESPA") and Regulation X, the Home Mortgage
Disclosure Act, the Federal Debt Collection Practices Act and the National
Housing Act of 1934, as well as other federal and state statutes and regulations
affecting the Company's activities. The Company is also subject to the rules and
regulations of, and examinations by, the Department of Housing and Urban
Development ("HUD") and state regulatory authorities with respect to
originating, processing, underwriting, selling, securitizing and servicing
loans. These rules and regulations, among other things, impose licensing
obligations on the Company, establish eligibility criteria for mortgage loans,
prohibit discrimination, provide for inspections and appraisals of properties,
require credit reports on loan applicants, regulate assessment, collection,
foreclosure and claims handling, investment and interest payments on escrow
balances and payment features, mandate certain disclosures and notices to
borrowers and, in some cases, fix maximum interest rates, fees and mortgage loan
amounts. Failure to comply with these requirements can lead to loss of approved
status, termination or suspension of servicing contracts without compensation to
the servicer, demands for indemnifications or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits and
administrative enforcement actions.
Although the Company believes that it has systems and procedures to
facilitate compliance with these requirements and believes that it is in
compliance in all material respects with applicable local, state and
23
<PAGE> 26
federal laws, rules and regulations, there can be no assurance that more
restrictive laws, rules and regulations will not be adopted in the future that
could make compliance more difficult or expensive.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
On January 1, 1997, the Company adopted the Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfer and Servicing of Financial Assets and Extinguishment of
Liabilities." SFAS No. 125 addresses the accounting for all types of
securitization transactions, securities lending and repurchase agreements,
collateralized borrowing arrangements and other transactions involving the
transfer of financial assets. SFAS No. 125 distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings. SFAS No. 125
is generally effective for transactions that occur after December 31, 1996, and
it is to be applied prospectively. SFAS No. 125 requires the Company to allocate
the total cost of mortgage loans sold to the mortgage loans sold (servicing
released), retained certificates and servicing rights based on their relative
values. The pronouncement also requires the Company to provide additional
disclosure about the retained certificates in its securitizations and to account
for these assets at fair value in accordance with SFAS No. 115. The Company does
not believe that SFAS No. 125 will have a material effect on the Company's
securitizations as currently structured; however, there can be no assurance that
SFAS No. 125 will not have a material adverse effect on future securitization
structures the Company may employ, reduce the Company's gain on sale of loans in
the future or otherwise adversely affect the Company's results of operations or
financial condition.
POSSIBLE ENVIRONMENTAL LIABILITIES
US
In the course of its business, the Company has acquired, and may acquire in
the future, properties securing loans which are in default. Under various
federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real estate may be required to
investigate and clean up hazardous or toxic substances or chemical releases at
such property, and may be held liable to a governmental entity or to third
parties for property damage, personal injury and investigation and cleanup costs
incurred by such parties in connection with the contamination. Such laws
typically impose cleanup responsibility and liability which, under such laws,
has been interpreted to be joint and several unless the harm is divisible and
there is a reasonable basis for allocation of responsibility. The costs of
investigation, remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly remediate such
property, may adversely affect the owner's ability to sell or rent such property
or to borrow using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances also may be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility, whether or not the facility is owned or operated by such
person. In addition, the owner or former owners of a contaminated site may be
subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from such property.
UK
"Owners" or "occupiers" of contaminated land in the UK are potentially
liable under UK environmental laws. Such persons can be required to clean up
affected land, cease polluting activities, obtain licenses in connection with
disposal of waste, reimburse relevant enforcement authorities for clean-up costs
related to land and controlled waters and pay fines for non-compliance with
relevant laws and regulations. The potential liability of such persons may be
substantial and the presence of any polluting substances or the failure to
properly remediate such land may adversely affect the owner's or occupier's
ability to sell or rent the property on such land or to borrow using such
property as security. In addition to liability under statute, such persons may
be liable to third parties at common law for property damage, economic loss and
personal injury.
A lender may be deemed to be an "owner" upon enforcement of its interest in
a mortgaged property following default by a borrower depending on the method of
enforcement employed. A lender may also, depending on the degree of control it
has, be liable as a person who has caused or knowingly permitted
24
<PAGE> 27
pollution to occur. A new statutory framework providing for the identification
and allocation of responsibility for costs associated with the investigation and
clean-up of contaminated land is set out in the Environmental Protection Act
1990, as amended, and is expected to be implemented during 1997. Under this
framework, local authorities will have a duty to inspect land within their
jurisdiction for the purpose of identifying contamination.
No assurance can be given in either the US or the UK that any prior owner
or tenant of a property did not create any material environmental condition not
known to the Company, that future laws, ordinances or regulations will not
impose any material environmental liability, or that a material environmental
condition does not otherwise exist as to any one or more of the properties now
owned or acquired in the future by the Company, any of which could result in a
material adverse effect on the Company's results of operations and financial
condition.
DEPENDENCE ON KEY PERSONNEL
The Company's growth and development to date have been largely dependent
upon the services of Robert Grosser, Chairman of the Board, Chief Executive
Officer and President of the Company, and Robert C. Patent, Vice Chairman of the
Board and Executive Vice President of the Company. Although the Company has been
able to hire and retain other qualified and experienced management personnel,
the loss of Mr. Grosser's or Mr. Patent's services for any reason could have a
material adverse effect on the Company. The Company has entered into employment
agreements with Messrs. Grosser and Patent and maintains key man life insurance
in the amount of $2.0 million on Mr. Grosser.
In the UK, David A. Steene, the Managing Director of CSC-UK, has played an
important role in the development of CSC-UK and the loss of his services could
have a material adverse effect on CSC-UK and therefore on the Company. CSC-UK
has entered into an employment agreement with Mr. Steene.
CONTROL BY CERTAIN STOCKHOLDERS
As of July 25, 1997, certain members of the Company's senior management and
Board of Directors beneficially owned an aggregate of 54.9% of the outstanding
shares of Common Stock. Such persons, if they were to act in concert, have
majority control of the Company, with the ability to approve certain fundamental
corporate transactions (including mergers, consolidations and sales of assets)
and to elect all members of the Board of Directors without further vote of the
minority stockholders.
LACK OF PUBLIC MARKET
The New Notes are new securities for which there currently is no market.
Although CIBC Wood Gundy Securities Corp., Bear, Stearns & Co. Inc. and
Oppenheimer & Co., Inc. (collectively the "Initial Purchasers") have been making
a market in the Old Notes and have informed the Company that they currently
intend to make a market in the New Notes, they are not obligated to do so and
any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the New Notes. The Old Notes are currently eligible for trading by
qualified buyers in the PORTAL market. The New Notes will not be eligible for
PORTAL trading. The Company does not intend to apply for listing of the New
Notes on any securities exchange or for quotation through The Nasdaq National
Market ("Nasdaq").
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes
pursuant to the Exchange Offer.
25
<PAGE> 28
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
General. Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Company will accept for exchange Old Notes
which are properly tendered on or prior to the Expiration Date and not withdrawn
as permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on September 8, 1997; provided, however, that if the Company
has extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $300.0 million aggregate principal
amount of the Old Notes was outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about August 7, 1997, to all
holders of Old Notes known to the Company. The Company's obligation to accept
Old Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "-- Certain Conditions to the Exchange Offer"
below.
Extension; Return of Old Notes not Accepted for Exchange. The Company
expressly reserves the right, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any Old Notes, by giving notice of such extension to
the holders thereof. During any such extension, all Old Notes previously
tendered will remain subject to the Exchange Offer and may be accepted for
exchange by the Company. Any Old Notes not accepted for exchange for any reason
will be returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Amendment; Termination. The Company expressly reserves the right to amend
or terminate the Exchange Offer, and not to accept for exchange any Old Notes
not theretofor accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified below under "-- Certain Conditions to
the Exchange Offer."
Notice. The Company will give notice of any extension, amendment,
non-acceptance or termination to the holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
No Appraisal or Dissenters' Rights. Holders of Old Notes do not have any
appraisal or dissenters' rights under the Delaware General Corporation Law in
connection with the Exchange Offer.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to The Chase Manhattan Bank (the
"Exchange Agent") at the address set forth below under "-- Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOM-
26
<PAGE> 29
MENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE
USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. THE
COMPANY IS NOT ASKING NOTEHOLDERS FOR A PROXY AND NOTEHOLDERS ARE REQUESTED NOT
TO SEND THE COMPANY A PROXY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
By tendering, each broker-dealer will represent to the Company that, among
other things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the holder and any beneficial
holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company. If
the holder is not a broker-dealer, the holder must represent that it is not
engaged in nor does it intend to engage in a distribution of the New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly
27
<PAGE> 30
after acceptance of the Old Notes. See "-- Certain Conditions to the Exchange
Offer" below. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if the
Company has given oral and written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required signature
guarantees and any other required documents must, in any case, be transmitted to
and received by the Exchange Agent at the address set forth below under
"-- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
28
<PAGE> 31
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), and (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates the withdrawing holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes that
have been tendered for exchange but that are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA"). In any such event, the Company is required to use its reasonable best
efforts to obtain the withdrawal of any stop order at the earliest possible
time.
29
<PAGE> 32
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
BY HAND/OVERNIGHT EXPRESS/MAIL/OVERNIGHT DELIVERY:
(insured if registered recommended)
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
Attn: Global Trust Services
Douglas Lavelle
VIA FACSIMILE:
(212) 946-8177
FOR INFORMATION CALL:
Douglas Lavelle
(212) 946-3009
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers, employees and representatives of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $250,000, which includes fees and expenses of the Trustee,
accounting, legal, printing and related fees and expenses.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer will be
capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities law. Old
30
<PAGE> 33
Notes not exchanged pursuant to the Exchange Offer will continue to accrue
interest at 12 3/4% per annum and will otherwise remain outstanding in
accordance with their terms. Holders of Old Notes do not have any appraisal or
dissenters' rights under the Delaware General Corporation Law in connection with
the Exchange Offer. In general, the Old Notes may not be offered or sold unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Notes under the Securities Act. However, (i) if any Initial Purchaser so
requests with respect to Old Notes not eligible to be exchanged for New Notes in
the Exchange Offer and held by it following consummation of the Exchange Offer
or (ii) if any holder of Old Notes is not eligible to participate in the
Exchange Offer or, in the case of any holder of Old Notes that participates in
the Exchange Offer, does not receive freely tradable New Notes in exchange for
Old Notes, the Company is obligated to file a registration statement on the
appropriate form under the Securities Act relating to the Old Notes held by such
persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than (i) any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or (ii) any
broker-dealer that purchases Notes from the Company to resell pursuant to Rule
144A or any other available exemption) without compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. The Company has not sought, and
does not intend to seek, its own interpretive letter from the Commission with
respect to the resale of the New Notes. There can be no assurance that the
Commission would make similar interpretations with respect to the Exchange
Offer. A broker-dealer who holds Old Notes that were acquired for its own
account as a result of market-making or other trading activities may be deemed
to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of New Notes. Each such broker-dealer who receives
New Notes for its own account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge in the Letter of Transmittal that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." While the Company has an obligation under the
Registration Rights Agreement to update this Prospectus by amendment or
supplement for a period of 180 days following consummation of the Exchange
Offer, the Company has no obligation thereafter to update the Prospectus and,
therefore, holders required to deliver a prospectus may not thereafter be able
to resell because they may be unable to comply with the prospectus delivery
requirements described above.
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
31
<PAGE> 34
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1997 and pro forma as adjusted to give effect to the
offering of the Old Notes and the application of the net proceeds therefrom and
to give pro forma effect to the issuance of the Series A Preferred Stock and the
induced conversion of $14.0 million of Convertible Debentures. See
"Summary -- Recent Developments." The Exchange Offer will not affect the
capitalization of the Company. This table should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto incorporated
herein by reference.
<TABLE>
<CAPTION>
AT
MARCH 31, 1997
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Warehouse financing facilities..................................... $ 98,981 $ 82,491(1)
Other short-term debt.............................................. 30,103 --(2)
-------- --------
Total short-term debt...................................... $129,084 $ 82,491
======== ========
Long-term debt:
Standby financing facility......................................... $ 7,966 $ --
Notes and loans payable............................................ 150,000 --
12 3/4% Senior Notes due 2004...................................... -- 300,000
Convertible Debentures............................................. 143,620 129,620
Other long-term debt............................................... 4,560 4,560
-------- --------
Total long-term debt....................................... 306,146 434,180
-------- --------
Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized; no
shares outstanding actual; 5,000 shares issued and outstanding
pro forma as adjusted........................................... -- --
Common Stock, $.01 par value; 50,000,000 shares authorized;
29,744,322 shares issued and outstanding, actual; 30,620,362
shares issued and outstanding, pro forma as adjusted............ 297 306
Additional paid-in capital......................................... 58,201 125,769(3)
Foreign currency translation adjustment, net of taxes.............. 4,576 4,576
Unrealized gain on available-for-sale securities, net of taxes..... 7,282 7,282
Retained earnings.................................................. 79,454 72,612(4)
-------- --------
Total stockholders' equity................................. 149,810 210,545
-------- --------
Total capitalization....................................... $455,956 $ 644,725
======== ========
</TABLE>
- ---------------
(1) Reflects the repayment of $16.5 million of amounts outstanding as of March
31, 1997 under the working capital portion of the UK Greenwich Facility.
(2) Reflects the repayment of amounts outstanding as of March 31, 1997 of $25.0
million under a note to Greenwich, $5.0 million under a facility with The
First National Bank of Boston and $103,000 under the US Greenwich Facility.
(3) Reflects $49.3 million of net proceeds received from the issuance of the
Series A Preferred Stock and the $18.4 million recorded in connection with
the induced conversion of $14.0 million of Convertible Debentures.
(4) Reflects the write-off of deferred issuance costs and prepayment fees, net
of taxes, associated with the Senior Secured Facility and the $4.8 million
charge resulting from the induced conversion of $14.0 million of Convertible
Debentures.
32
<PAGE> 35
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for the
periods indicated:
<TABLE>
<CAPTION>
CSC(1) COMPANY
--------------- ------------------------------------------
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
--------------- ------------------------ ---------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(2).... 1.15x 1.45x 2.15x 5.72x 5.09x 9.82x 2.68x
</TABLE>
- ---------------
(1) The historical financial data presented have been derived exclusively from
the financial statements of CSC, which was acquired by the Company on April
27, 1994.
(2) Represents the ratio of (i) the sum of earnings before income taxes plus
interest expense less minority interest to (ii) interest expense.
33
<PAGE> 36
DESCRIPTION OF THE NOTES
GENERAL
The New Notes are to be issued under an Indenture, dated as of May 14, 1997
(the "Indenture"), among the Company, CSC and The Chase Manhattan Bank, as
Trustee (the "Trustee").
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the TIA.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee, at 450 West 33rd Street, 15th
Floor, New York, New York 10001), except that, at the option of the Company,
payment of interest may be made by check mailed to the address of the Holders as
such address appears in the Note register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes will be general senior unsecured obligations of the Company,
limited to $300,000,000 aggregate principal amount, and will mature on June 1,
2004. The Notes will bear interest at a rate of 12 3/4% per annum from May 14,
1997 or from the most recent date to which interest has been paid or provided
for, payable semiannually to Holders of record at the close of business on the
May 15 or November 15 immediately preceding the interest payment date on June 1
and December 1 of each year, commencing December 1, 1997. The Company will pay
interest on overdue principal at 1% per annum in excess of such rate, and it
will pay interest on overdue installments of interest at such higher rate to the
extent lawful. Interest on the Notes will be computed on the basis of a 360-day
year of twelve 30-day months.
OPTIONAL REDEMPTION
Except as described in the following sentence, the Notes will not be
redeemable prior to maturity. At any time and from time to time prior to June 1,
2000, the Company may redeem in the aggregate up to 33 1/3% of the original
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings, at a redemption price (expressed as a percentage of principal amount)
of 112.75% plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least $200.0 million
aggregate principal amount of the Notes must remain outstanding after each such
redemption.
In the case of any such redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING; HOLDING COMPANY STRUCTURE
The indebtedness evidenced by the Notes will be senior obligations of the
Company, will rank pari passu in right of payment with all existing and future
unsubordinated Indebtedness of the Company and will be senior in right of
payment to all existing and future Subordinated Obligations of the Company. As
of March 31, 1997, after giving effect to the issuance of the Old Notes and the
application of the proceeds
34
<PAGE> 37
therefrom, the Company and its Subsidiaries would have had $387.1 million of
unsubordinated Indebtedness of which $87.1 million is secured Indebtedness (of
which $82.5 million is Warehouse Indebtedness).
Substantially all the operations of the Company are conducted through its
Subsidiaries. Claims of creditors of the Company's Subsidiaries that are not
Subsidiary Guarantors, the counterparties under such Subsidiaries' purchase and
sale facilities, the purchasers of such Subsidiaries' receivables, trade
creditors, secured creditors and creditors holding indebtedness and guarantees
issued by such Subsidiaries, and claims of preferred stockholders (if any) of
such Subsidiaries generally will have priority with respect to the assets and
earnings of such Subsidiaries over the claims of creditors of the Company,
including Holders. The Notes, therefore, will be effectively subordinated to
creditors (including trade creditors) and preferred stockholders (if any) of
Subsidiaries of the Company that are not Subsidiary Guarantors. Although the
Subsidiary Guarantee of CSC is secured by the pledge of the Intercompany Note,
the Intercompany Note is an unsecured general obligation of CSC-UK and secured
creditors of CSC-UK will generally have priority with respect to the assets and
earnings of CSC-UK over the claims of holders of the Notes making a claim with
respect to the Intercompany Note. As of March 31, 1997, the Company had $97.7
million of encumbered Retained Interest Receivables. The Company had no
encumbered Retained Interest Receivables as of the issue date of the Old Notes
or as of the date hereof. As of March 31, 1997, the total consolidated
Indebtedness of (i) the Company and (ii) CSC and its Subsidiaries was
approximately $530.8 million and $87.1 million, respectively, including in each
case $82.5 million of Warehouse Indebtedness. Although the Indenture limits the
incurrence of Indebtedness of the Company and certain of the Company's
Subsidiaries, such limitation is subject to a number of significant
qualifications. Moreover, the Indenture does not impose any limitation on the
incurrence of liabilities that are not considered Indebtedness under the
Indenture. See " -- Certain Covenants -- Limitation on Indebtedness."
SECURITY
Prior to the receipt of an Investment Grade Rating, the Subsidiary
Guarantee of CSC is secured by a pledge by CSC to the Trustee (for the benefit
of the Holders) of the Intercompany Note. The Trustee in its capacity as the
holder of the Intercompany Note Collateral is herein referred to as the
"Collateral Agent."
On the Issue Date, the Intercompany Note, which constitutes Senior
Indebtedness of CSC-UK, had a principal amount equal to $115.0 million,
denominated in US dollars. The Intercompany Note matures on June 1, 2004 and
bears interest not less than the rate borne by the Notes. The Indenture provides
that, so long as any Notes remain outstanding, during such time as the
Intercompany Note Collateral is pledged to the Collateral Agent, the Company
shall cause the outstanding aggregate principal amount of the Intercompany Note
to increase or decrease on a pro rata basis with other notes provided by CSC-UK
and pledged to third party lenders to reflect advances made by or repaid to CSC;
provided that the Company shall cause the outstanding aggregate principal amount
of the Intercompany Note to be no less than $115.0 million following the Issue
Date; provided, further, that CSC-UK may (i) redeem or repurchase the
Intercompany Note in connection with any optional redemption or offer to
purchase Notes on a pro rata basis in proportion to the principal amount of
Notes so redeemed or purchased and (ii) prepay the Intercompany Note in
connection with a sale of substantially all of the Capital Stock or assets of
CSC-UK pursuant to a transaction in compliance with the covenant described under
"-- Certain Covenants -- Limitation on Sales of Assets." The Notes will also be
secured by all interest and principal payments made upon or with respect to the
Intercompany Note Collateral; provided, however, that so long as no Event of
Default shall have occurred and be continuing, all interest and principal
payments made upon or with respect to the Intercompany Note Collateral shall not
constitute Intercompany Note Collateral and may be used by CSC subject to the
other terms and conditions of the Indenture. Upon the occurrence and during the
continuance of an Event of Default, all rights of CSC to receive all such
interest and principal payments shall cease, and such interest and principal
payments shall constitute Intercompany Note Collateral and shall be paid or
otherwise delivered to the Collateral Agent. The security interest in the
Intercompany Note Collateral will be a first priority security interest subject
only to certain permitted Liens; provided, however, that the Subsidiary
Guarantee of CSC will cease to be secured by the security interest in the
Intercompany Note Collateral in the event that CSC-UK (i) becomes a direct
Subsidiary of the Company and the Company becomes the holder of the Intercompany
Note or (ii) the Intercompany Note is prepaid in connection with the sale of
substantially all of the Capital
35
<PAGE> 38
Stock or assets of CSC-UK pursuant to a transaction in compliance with the
covenant described under "-- Certain Covenants -- Limitation on Sales of
Assets."
Upon the acceleration of the maturity of the Notes or the failure to pay
the principal at maturity (any such event a "Note Payment Event"), the principal
of the Intercompany Note will become immediately due and payable. Upon the
occurrence of any Note Payment Event, the Pledge Agreement provides for the
foreclosure upon the Intercompany Note Collateral by the Collateral Agent at the
direction of the Trustee. With respect to action to be taken by the Trustee in
respect of the Intercompany Note Collateral, the Trustee will act in accordance
with instructions from Holders of a majority in principal amount of the Notes
or, in the absence of such instructions, in such manner as the Trustee deems
appropriate, as provided in the Indenture. The proceeds received from the sale
of any Intercompany Note Collateral that is the subject of a foreclosure shall
be applied first to pay the expenses of such foreclosure (including those of the
Collateral Agent), second to pay amounts then payable to the Trustee and
thereafter to pay the principal of and interest on the Notes.
There can be no assurance that the proceeds of any sale of the Intercompany
Note Collateral pursuant to the Pledge Agreement would be sufficient to satisfy
payments due on the Notes. In addition, the ability of the Holders to realize
upon the Intercompany Note Collateral may be subject to certain bankruptcy law
limitations in the event of a bankruptcy. In a bankruptcy proceeding, the
Intercompany Note may be subject to recharacterization as equity or subordinated
to other indebtedness of the creditor if a court determined that an unaffiliated
lender would not have made a loan on similar terms under the then existing
circumstances. Under applicable federal bankruptcy laws, secured creditors are
prohibited from exercising their remedies in respect of their security from a
debtor in a bankruptcy case, or from disposing of such security, without
bankruptcy court approval. Moreover, applicable federal bankruptcy laws
generally permit the debtor to continue to use collateral (such as payments on
the Intercompany Note) even though the debtor is in default under the applicable
debt instruments, provided generally that the secured creditor is given
"adequate protection." The meaning of the term "adequate protection" may vary
according to the circumstances, but it is intended in general to protect the
value of the secured creditor's interest in the collateral at the commencement
of the bankruptcy case and may include cash payments or the granting of
additional security, if and at such times as the court in its discretion
determines, for any diminution in the value of the collateral as a result of the
stay of repossession or disposition or use of the collateral by the debtor
during the pendency of the bankruptcy case. In view of the lack of a precise
definition of the term "adequate protection" and the broad discretionary powers
of a bankruptcy court, it is impossible to predict if payments under the Notes
would be made following commencement of and during a bankruptcy case, whether or
when the Collateral Agent could foreclose upon or sell the Intercompany Note
Collateral or whether or to what extent Holders of the Notes would be
compensated for any delay in payment or loss of value of the Intercompany Note
Collateral through the requirement of "adequate protection."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require that the Company repurchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
A "Change of Control" shall be deemed to have occurred (i) upon any merger
or consolidation of the Company with or into any other Person or any sale,
transfer or other conveyance, whether direct or indirect, to any other Person of
all or substantially all of the assets of the Company, on a consolidated basis,
in one transaction or a series of related transactions, if, immediately after
giving effect to such transaction, any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 50% of the total
voting power of the Voting Stock of the transferee or surviving entity, other
than any such person or group that held such voting power as of the Issue Date
or any Related Party thereof, (ii) when any "person" or "group" (as such terms
are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether
or not applicable) is or becomes the "beneficial
36
<PAGE> 39
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 50% of the total voting power of the Voting Stock of
the Company, other than any such person or group that held such voting power as
of the Issue Date or any Related Party thereof, or (iii) when, during any period
of 12 consecutive months after the Issue Date, individuals who at the beginning
of any such 12-month period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (i) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of Holders of record on the relevant record
date to receive interest on the relevant interest payment date); (ii) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma results of operations, cash flow and
capitalization after giving effect to such Change of Control); (iii) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions determined by
the Company, consistent with the covenant described hereunder, that a Holder
must follow in order to have its Notes purchased.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The phrase "all or substantially all" of the assets of the Company is
likely to be interpreted by reference to applicable state law at the relevant
time, and will be dependent on the facts and circumstances existing at such
time. As a result, there may be a degree of uncertainty in ascertaining whether
a sale or transfer of "all or substantially all" of the assets of the Company
has occurred.
Except as described with respect to a Change of Control, the Indenture does
not contain any covenants or provisions that permit Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a highly
leveraged transaction, reorganization or restructuring.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the Holders of their right to require the Company to repurchase
the Notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the Holders of Notes
following the occurrence of a Change of Control may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases.
CERTAIN COVENANTS
Set forth below are descriptions of certain covenants set forth in the
Indenture.
Limitation on Indebtedness. (i) The Company shall not, and shall not
permit any Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness; provided, however, that the Company and any Restricted Subsidiary
may Incur Indebtedness if, on the date of such Incurrence and after giving
effect thereto, the Consolidated Leverage Ratio does not exceed 2.00 to 1.00.
(ii) Notwithstanding the foregoing paragraph (i), the Company and any
Restricted Subsidiary may Incur any or all of the following Indebtedness:
(a) (1) Permitted Warehouse Indebtedness and Guarantees thereof by the
Company or any Restricted Subsidiary; provided, however, that to the extent
any such Indebtedness of the Company or a
37
<PAGE> 40
Restricted Subsidiary ceases to constitute Permitted Warehouse
Indebtedness, such Indebtedness shall be deemed to be Incurred by the
Company or such Restricted Subsidiary, as the case may be, at the time such
Indebtedness ceases to constitute Permitted Warehouse Indebtedness; and (2)
additional Indebtedness to finance the general corporate needs of the
Company and its Subsidiaries in an amount not to exceed $25.0 million at
any one time outstanding;
(b) Indebtedness of the Company or a Restricted Subsidiary owed to and
held by the Company or a Restricted Subsidiary; provided, however, that any
designation of such Restricted Subsidiary as an Unrestricted Subsidiary,
any subsequent issuance or transfer of any Capital Stock which results in
any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Company or
another Restricted Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(c) the Notes and the Subsidiary Guarantees;
(d) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (a), (b) or (c) of this covenant);
(e) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (i) or pursuant to clause (c) or (d) or this clause
(e);
(f) Hedging Obligations directly related to: (1) Indebtedness
permitted to be Incurred by the Company or the Restricted Subsidiaries
pursuant to the Indenture; (2) Receivables held by the Company or its
Restricted Subsidiaries pending sale or securitization or that have been
sold pursuant to a Warehouse Facility; (3) Receivables with respect to
which the Company or any Restricted Subsidiary reasonably expects to
purchase or finance or acquire a security interest in or accept as
collateral; or (4) Retained Interest Receivables and other assets owned or
financed by the Company or any Restricted Subsidiary;
(g) Purchase Money Indebtedness and Capital Lease Obligations Incurred
to finance or refinance the construction, purchase or lease of, or repairs,
improvements or additions to, property which Indebtedness does not in the
aggregate exceed $15.0 million in aggregate principal amount at any one
time outstanding;
(h) Non-Recourse Indebtedness of any Qualifying Securitization
Subsidiary; provided, that if, but only to the extent, any such
Indebtedness ceases to constitute Non-Recourse Indebtedness or if the
Subsidiary that Incurred such Indebtedness ceases to be a Qualifying
Securitization Subsidiary, such event shall be deemed to constitute an
Incurrence of Indebtedness by such Subsidiary; and
(i) Indebtedness in an aggregate principal amount which, together with
the principal amount of all other Indebtedness of the Company and its
Restricted Subsidiaries outstanding on the date of such Incurrence (other
than Indebtedness permitted by clauses (a) through (h) above or paragraph
(i)), does not exceed $25.0 million at any one time outstanding.
(iii) For purposes of determining compliance with the foregoing covenant,
(a) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in good faith,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (b) an item
of Indebtedness may be divided and classified in more than one of the types of
Indebtedness described above.
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien (i) upon the Intercompany Note Collateral other than the Liens created by
the Notes, the Indenture and the Pledge Agreement and the Liens expressly
permitted by the Pledge Agreement and (ii) of any nature whatsoever on any of
its properties (including Capital Stock of a Restricted Subsidiary), whether
owned at the Issue Date or thereafter acquired, other than, in the case of this
clause (ii), Permitted Liens, without effectively providing that the Notes shall
be secured equally and ratably with (or prior to in the case of Subordinated
Obligations) the obligations so secured for so long as such obligations are so
secured.
38
<PAGE> 41
Limitation on Restricted Payments. (i) The Company shall not, and shall
not permit any Restricted Subsidiary, directly or indirectly, to, make a
Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment: (a) a Default or an Event of Default shall have
occurred and be continuing (or would result therefrom); (b) the Company is not
able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (i) of
the covenant described under "-- Limitation on Indebtedness"; or (c) the
aggregate amount of such Restricted Payment and all other Restricted Payments
since the Issue Date would exceed the sum of: (1) 25% of Consolidated Net Income
accrued during the period (treated as one accounting period) from the beginning
of the fiscal quarter during which the Issue Date occurs to the end of the most
recent fiscal quarter prior to the date of such Restricted Payment for which
financial statements are available (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit); (2) the aggregate Net Cash
Proceeds received by the Company from the issuance or sale of its Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale (A) occurring substantially contemporaneously with the issuance
of the Notes, (B) to a Subsidiary of the Company or (C) to an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees except to the extent that the
funds used by such plan or trust are attributable to employee contributions);
(3) the amount by which Indebtedness of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date, of any Indebtedness of the Company
convertible or exchangeable for Capital Stock (other than Disqualified Stock) of
the Company (less the amount of any cash, or the fair value of any other
property, distributed by the Company upon such conversion or exchange); and (4)
an amount equal to the sum of (A) the net reduction in Investments in any Person
resulting from dividends or repayments of loans or advances, in each case to the
Company or any Restricted Subsidiary from such Person or from the sale for cash
or other liquidation or repayment in cash, in each case the proceeds of which
are received by the Company or any Restricted Subsidiary, and (B) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum in this clause (4) shall not exceed, in the case
of any Person, the amount of Investments made since the Issue Date by the
Company or any Restricted Subsidiary in such Person and treated as a Restricted
Payment.
(ii) The provisions of the foregoing paragraph (i) shall not prohibit: (a)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by, exchanged for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the Company or any of
its Subsidiaries for the benefit of their employees except to the extent that
the funds used by such plan or trust are attributable to employee
contributions); provided, however, that (1) such purchase or redemption shall be
excluded from the calculation of the amount of Restricted Payments and (2) the
Net Cash Proceeds from such sale shall be excluded from the calculation of
amounts under clause (c)(2) of paragraph (i) above; (b) any purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value
of Subordinated Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of the Company which is permitted
to be Incurred pursuant to the covenant described under "-- Limitation on
Indebtedness"; provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be excluded from
the calculation of the amount of Restricted Payments; (c) dividends paid within
60 days after the date of declaration thereof if at such date of declaration
such dividend would have complied with the covenant described hereunder;
provided, however, that at the time of payment of such dividend, no other
Default or Event of Default shall have occurred and be continuing (or result
therefrom); provided, further, however, that such dividend shall be included in
the calculation of the amount of Restricted Payments; (d) any payments made to
holders of the Convertible Debentures for partial share redemptions in
connection with the conversion thereof into Capital Stock of the Company;
provided, however, that such payments shall be excluded from the calculation of
the amount of Restricted Payments; and (e) any purchase of Capital Stock of the
Company made from time to time to meet the Company's obligations under its
employee stock
39
<PAGE> 42
ownership and option plans; provided, however, that such purchases shall be
excluded from the calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary (i) to pay dividends or make any other
distributions on its Capital Stock to the Company or a Restricted Subsidiary or
pay any Indebtedness owed to the Company, (ii) to make any loans or advances to
the Company or (iii) to transfer any of its property or assets to the Company,
except: (a) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date and any agreement that constitutes a
Refinancing thereof permitted under the Indenture; (b) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
applicable to such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company or was designated a Restricted
Subsidiary (other than an agreement entered into in connection with, or in
anticipation of, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was acquired
by the Company) and outstanding on such date; (c) any encumbrance or restriction
with respect to a Restricted Subsidiary pursuant to any other agreement
contained in any amendment to an agreement referred to in clause (a) or (b) of
this covenant or this clause (c); provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such
agreement or amendment are not materially less favorable to the Noteholders than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in the agreements referred to in clause (a) or (b) of the covenant
described hereunder, as the case may be; (d) any such encumbrance or restriction
consisting of customary non-assignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the lease or
the property leased thereunder; (e) in the case of clause (iii) above,
restrictions contained in security agreements or mortgages securing Indebtedness
of a Restricted Subsidiary to the extent such restrictions restrict the transfer
of the property subject to such security agreements or mortgages; (f) customary
affiliate transactions provisions; (g) any restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement entered into for the sale
or disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition; and (h)
encumbrances or restrictions pursuant to Permitted Warehouse Indebtedness.
Limitation on Sales of Assets. (i) The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, consummate any
Asset Disposition in excess of $2.0 million unless (a) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the value
of any non-cash consideration), as determined in good faith by the Board of
Directors, of the shares and assets subject to such Asset Disposition and at
least 85% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents, (b) an amount
equal to 100% of the Net Available Cash from such Asset Disposition is applied
by the Company (or such Restricted Subsidiary, as the case may be) (1) first, to
the extent the Company elects, either to (A) acquire Additional Assets, either
directly or through a Restricted Subsidiary, or (B) prepay, repay, redeem or
purchase Senior Indebtedness of the Company or a Restricted Subsidiary (provided
that the proceeds of an Asset Disposition of the Company's direct assets may not
be used to prepay, repay, redeem or purchase Senior Indebtedness of a Restricted
Subsidiary that is not a Subsidiary Guarantor), as the case may be (other than
in either case Indebtedness owed to the Company or an Affiliate of the Company),
in each case within 180 days from, or prior to, the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (2) second, to the
extent of the balance of such Net Available Cash after application in accordance
with clause (1), to make an offer to the Holders (and to holders of other Senior
Indebtedness designated by the Company) to purchase Notes (and to prepay, repay
or purchase such other Senior Indebtedness) pursuant to and subject to the
conditions contained in the Indenture in the case of the Notes or the conditions
contained in the agreements governing such other Senior Indebtedness; provided,
that any such offers shall be on a pro rata basis in proportion to the
outstanding principal amounts of the Indebtedness to which such offers apply and
that to the extent any Net Available Cash remains following such pro rata offer
such Net Available Cash shall be applied to the repurchase on a pro rata basis
in proportion to the outstanding principal amount thereof of any such
Indebtedness which continues to remain outstanding
40
<PAGE> 43
after such offer has been accepted by the holder thereof; (3) third, to the
extent of the balance of such Net Available Cash after application in accordance
with clauses (1) and (2) to (A) the acquisition by the Company or any Restricted
Subsidiary of Additional Assets or (B) the prepayment, repayment or purchase of
Indebtedness designated by the Company (other than any Disqualified Stock) of
the Company or any Restricted Subsidiary (other than Indebtedness owed to an
Affiliate of the Company), in each case within 180 days from the later of the
receipt of such Net Available Cash and the date the offer described in paragraph
(ii) below is consummated; provided, however, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (1), (2) or
(3) above, the Company or such Restricted Subsidiary shall retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased unless, in the case of clause (3), at the time of such
prepayment, repayment or purchase, and to the extent, the Company would have
been able to Incur such Indebtedness pursuant to the covenant described under
"-- Limitation on Indebtedness"; and (4) fourth, to the extent of the balance of
such Net Available Cash after application in accordance with clauses (1), (2)
and (3), to any application not prohibited by the Indenture, and (c) at the time
of such Asset Disposition no Default shall have occurred and be continuing (or
would result therefrom). Notwithstanding the foregoing provisions of this
paragraph, the Company and the Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this paragraph except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
is not applied in accordance with this paragraph exceeds $5.0 million. Pending
application of Net Available Cash pursuant to this covenant, such Net Available
Cash shall be invested in Temporary Cash Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the assumption of Indebtedness or liabilities of the
Company or any Restricted Subsidiary, and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness or liabilities in
connection with such Asset Disposition; (y) securities, notes or other
obligations received by the Company or any Restricted Subsidiary from the
transferee that are promptly, but in no event more than 30 days after receipt,
converted by the Company or such Restricted Subsidiary into cash or Temporary
Cash Investments; and (z) an amount equal to the fair market value (evidenced by
a resolution of the Board of Directors) of operating assets (including
Receivables and Retained Interest Receivables) to be used or useful in any
Related Business received by the transferee in connection with such Asset
Disposition.
(ii) In the event of an Asset Disposition that requires an offer to
purchase the Notes (and other Senior Indebtedness) pursuant to clause (i)(b)(2)
above, the Company will be required to purchase Notes tendered pursuant to an
offer by the Company for the Notes (and other Senior Indebtedness) at a purchase
price of 100% of their principal amount plus accrued but unpaid interest (or, in
respect of such other Senior Indebtedness, such lesser price, if any, as may be
provided for by the terms of such Senior Indebtedness) in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
the Indenture. If the aggregate purchase price of Notes (and any other Senior
Indebtedness) tendered pursuant to such offer is less than the Net Available
Cash allotted to the purchase thereof, the Company will be permitted to apply
the remaining Net Available Cash in accordance with clause (i)(b)(3) above. The
Company shall not be required to make such an offer to purchase Notes (and other
Senior Indebtedness) pursuant to this covenant if the Net Available Cash
available therefor is less than $5.0 million (which lesser amount shall be
carried forward for purposes of determining whether such an offer is required
with respect to any subsequent Asset Disposition).
(iii) In the event of the transfer of substantially all (but not all) of
the property and assets of the Company to a Person in a transaction permitted
under "-- Merger and Consolidation" the successor corporation shall be deemed to
have sold the properties and assets of the Company not so transferred for
purposes of this covenant, and shall comply with the provisions of this covenant
with respect to such deemed sale as if it were an Asset Disposition; provided,
that this clause shall not apply to the extent that the properties and assets of
the Company not so transferred are exchanged for Additional Assets received by
the Company or held by such other Person in such transaction. In addition, the
fair market value of such properties and assets of the Company deemed to be sold
shall be deemed to be Net Available Cash.
41
<PAGE> 44
(iv) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with provisions of the covenant
described hereunder, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this clause by virtue thereof.
Limitation on Affiliate Transactions. The Company shall not, and shall not
permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof
(i) are no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate, (ii) if such Affiliate
Transaction involves an amount in excess of $2.0 million, (a) are set forth in
writing and (b) have been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction and (iii) if
such Affiliate Transaction involves an amount in excess of $5.0 million, have
been determined by a nationally recognized investment banking firm to be fair,
from a financial standpoint, to the Company and its Restricted Subsidiaries.
The provisions of the foregoing paragraph shall not apply to (i)
transactions between or among the Company and any Restricted Subsidiary or
between or among Restricted Subsidiaries, (ii) any Restricted Payment permitted
to be made under the covenant described under "-- Limitation on Restricted
Payments" or any Permitted Investment, (iii) loans or advances to employees in
the ordinary course of business, (iv) customary directors fees and indemnities,
(v) ordinary course commercial agreements or renewals thereof on such terms as
are in effect as of the Issue Date and which terms are no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained at the
time of such transaction in arm's-length dealings with a Person who is not such
an Affiliate, (vi) any Indebtedness permitted by paragraph (ii)(b) of the
covenant described under "-- Limitation on Indebtedness," (vii) any issuance of
securities, or other payments, compensation, benefits, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of Directors and
(viii) the grant of stock options or similar rights to employees and directors
of the Company or any Restricted Subsidiary pursuant to plans approved by the
Board of Directors.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
related transactions, all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and the
Successor Company (if not the Company) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness that becomes an obligation of the Successor Company or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Restricted Subsidiary at the time of
such transaction), no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of Indebtedness
pursuant to paragraph (i) of the covenant described under "-- Limitation on
Indebtedness"; (iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is not
less than the Consolidated Net Worth of the Company prior to such transaction;
and (v) the Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the Indenture.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company, in the case of a
lease, shall not be released from the obligation to pay the principal of and
interest on the Notes.
42
<PAGE> 45
Limitation on Line of Business. The Company shall not, and shall not
permit any Restricted Subsidiary to, engage in any business other than a Related
Business.
Limitation on Creation of Subsidiaries. The Company will not create or
acquire, nor permit any of its Restricted Subsidiaries to create or acquire, any
Subsidiary other than (i) a Restricted Subsidiary existing as of the Issue Date,
(ii) a Restricted Subsidiary that is acquired or created after the date hereof
or (iii) an Unrestricted Subsidiary.
Payments for Consent. Neither the Company nor any of its Subsidiaries
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered to
be paid or agreed to be paid to all Holders of the Notes which so consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
SEC Reports. Notwithstanding that the Company may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide the Trustee and
Noteholders with such annual and quarterly reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections.
Subsidiary Guarantees. Prior to the receipt of an Investment Grade Rating,
the Notes will be unconditionally guaranteed (a "Subsidiary Guarantee") by all
domestic Restricted Subsidiaries of the Company other than Special Purpose
Subsidiaries (together, the "Subsidiary Guarantors", and each of them, a
"Subsidiary Guarantor"). Each Subsidiary Guarantor's obligations under its
Subsidiary Guarantee will be senior obligations of such Subsidiary Guarantor and
will be joint and several with the obligations of each other Subsidiary
Guarantor under its Subsidiary Guarantee of the Notes.
The Indenture includes a covenant by the Company to cause each existing and
future domestic Subsidiary (other than Special Purpose Subsidiaries) to execute
a Subsidiary Guarantee, unless such Subsidiary is designated an "Unrestricted
Subsidiary" in accordance with the terms of the Indenture. The obligations of
each Subsidiary Guarantor are limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations under the Indenture, result in the obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal, state or foreign
law. Each Subsidiary Guarantor that makes a payment or distribution under a
Subsidiary Guarantee shall be entitled to a contribution from each other
Subsidiary Guarantor in a pro rata amount based on the adjusted net assets of
each Subsidiary Guarantor.
Subject to the next sentence and the next succeeding paragraph, no
Subsidiary Guarantor may consolidate or merge with or into (whether or not such
Subsidiary Guarantor is the surviving entity or Person) another Person unless
(i) the Person formed by or surviving any such consolidation or merger (if other
than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture, in a form reasonably
satisfactory to the Trustee, under the Notes and the Indenture, (ii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing and (iii) immediately after giving effect to
such transaction, the Company would have been able to incur at least $1.00 of
additional Indebtedness pursuant to paragraph (i) of the covenant described
under "-- Limitation on Indebtedness." The foregoing will not apply to prohibit
a merger between Subsidiary Guarantors or a merger between the Company and a
Subsidiary Guarantor.
In the event of a sale or other disposition of all or substantially all of
the assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of such
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by
43
<PAGE> 46
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Subsidiary Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligation
under its Subsidiary Guarantee, provided that the Net Available Cash of such
sale or other disposition is applied in accordance with the provisions of the
Indenture described under "-- Limitation on Sale of Assets." If an Investment
Grade Rating is received by the Company, each Subsidiary Guarantor will be
released and relieved of any obligation under its Subsidiary Guarantee.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note, (iii) the failure by the Company to
comply with its obligations under "-- Certain Covenants -- Merger and
Consolidation" above, (iv) the failure by the Company or any Subsidiary to
comply for 30 days after notice with any of its other obligations in respect of
the Notes or under the Indenture, (v) Indebtedness of the Company or any
Restricted Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds $5.0 million
(the "cross-acceleration provision"), (vi) the failure of a Subsidiary Guarantee
by a Subsidiary Guarantor to be in full force and effect, or the denial or
disaffirmance of a Subsidiary Guarantee by such Subsidiary Guarantor, (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions") or (viii) any final
non-appealable judgment or decree for the payment of money in excess of $5.0
million is rendered against the Company or a Restricted Subsidiary, remains
outstanding for a period of 60 days following such judgment and is not
discharged, waived or stayed within 10 days after notice (the "judgment default
provision"). However, a default under clause (iv) will not constitute an Event
of Default until the Trustee or the Holders of at least 25% in principal amount
of the outstanding Notes notify the Company of the default and the Company does
not cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders of the Notes. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no Holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
Holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such Holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder of a Note or that would involve the Trustee in personal
liability.
44
<PAGE> 47
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of, premium, if any, or interest on any Note, the
Trustee may withhold notice if and so long as a committee of its trust officers
determines that withholding notice is not opposed to the interest of the Holders
of the Notes. In addition, the Company is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Company also is required to deliver to the Trustee, within 30
days after the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action the Company is taking
or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
Holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the rate of or extend the time for
payment of interest on any Note, (iii) reduce the principal of or extend the
Stated Maturity of any Note, (iv) reduce the premium payable upon the redemption
of any Note or change the time at which any Note may be redeemed as described
under "-- Optional Redemption" above, (v) make any Note payable in money other
than that stated in the Note, (vi) impair the right of any Holders of the Notes
to receive payment of principal of, interest on and premium on, if any, such
Holders' Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holders' Notes, (vii)
waive a default on the payment of principal of, interest on, or redemption
payment with respect to any Note, or (viii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions.
Without the consent of any holders of the Notes, the Company and Trustee
may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes, provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code, to add guarantees with respect to
the Notes, to further secure the Notes, to add to the covenants of the Company
for the benefit of the Holders of the Notes or to surrender any right or power
conferred upon the Company, to release Collateral or Subsidiary Guarantees in
accordance with the terms of the Indenture, to make any change that does not
adversely affect the rights of any Holders of the Notes or to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the Trust Indenture Act.
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all Holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
45
<PAGE> 48
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "Change of
Control" and under the covenants described under "-- Certain Covenants" (other
than the covenant described under "-- Merger and Consolidation"), the operation
of the cross-acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"-- Defaults" above and the limitations contained in clauses (iii) and (iv)
under "-- Certain Covenants -- Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (v), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "-- Defaults" above or because of the
failure of the Company to comply with clause (iii) and (iv) under "-- Certain
Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to transfer or
exchange of the Notes as expressly provided for in the Indenture) and the
Trustee, at the expense of the Company, will execute proper instruments
acknowledging satisfaction and discharge of the Indenture when (i) either (a)
all the Notes theretofore authenticated and delivered (other than destroyed,
lost or stolen Notes which have been replaced or paid and Notes for whose
payment money has been deposited in trust with the Trustee or any Paying Agent
or segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust as provided for in the Indenture) have been
delivered to the Trustee for cancellation or (b) all Notes not theretofore
delivered to the Trustee for cancellation (1) have become due and payable, (2)
will become due and payable within one year of the Stated Maturity of the Notes
or (3) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for such purpose an amount sufficient to pay and
discharge the entire Indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
Notes to the date of such deposit (in the case of Notes which have become due
and payable) or to the Stated Maturity or redemption date, as the case may be;
(ii) the Company or any Guarantor has paid or caused to be paid all sums payable
under the Indenture by the Company; and (iii) the Company has delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent provided in the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with, and that such
satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, the Indenture or any other material agreement or
instrument to which the Company is a party or by which the Company is bound.
46
<PAGE> 49
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the outstanding Notes have
the right to direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee, subject to certain exceptions.
The Indenture provides that if an Event of Default occurs (and is not cured),
the Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any Holders, unless such
Holders shall have offered to the trustee security and indemnity satisfactory to
it against any loss, liability or expense and then only to the extent required
by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) used or useful in a Related Business; (ii) the
Capital Stock of a Person that is or becomes a Restricted Subsidiary as a result
of or upon the acquisition of such Capital Stock by the Company or another
Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest
in any Person to the extent in compliance with the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments."
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-- Certain Covenants -- Limitation
on Affiliate Transactions" and "-- Certain Covenants -- Limitations on Sales of
Assets" only, "Affiliate" shall also mean any beneficial owner of Capital Stock
representing 10% or more of the total voting power of the Voting Stock (on a
fully diluted basis) of the Company or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of the
definition as a "disposition") but excluding any merger, consolidation or sale
of assets of the Company subject to and permitted by the covenant described
under "-- Certain Covenants -- Merger and Consolidation," of (i) any shares of
Capital Stock of a Restricted Subsidiary (other than director's qualifying
shares or shares required by applicable law to be held by a Person other than
the Company or a Restricted Subsidiary), (ii) all or substantially all the
assets of any division or line of business of the Company or any Restricted
Subsidiary, (iii) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such Restricted
Subsidiary or (iv) any Retained Interest Receivables (other than, in the case of
(i), (ii), (iii) and (iv) above, a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary). Notwithstanding the foregoing, the following shall not be deemed to
be Asset Dispositions: (i) the sale, lease, conveyance or other disposition of
inventory or Hedging Obligations by the Company or a Restricted Subsidiary, (ii)
the sale, lease, conveyance or other disposition of property or equipment that
has become worn out, obsolete or damaged or otherwise unusable for use in
connection with the business of the Company or any Restricted Subsidiary, as the
case
47
<PAGE> 50
may be, (iii) a disposition of Receivables in the ordinary course of business,
(iv) any grant of a Permitted Lien, (v) a disposition of Temporary Cash
Investments, (vi) any disposition of the Capital Stock of City Auto Resources,
Inc. or Phoebus Software Limited held by the Company or any of its Restricted
Subsidiaries, (vii) the sale of any property (whether real, personal or mixed)
in connection with the incurrence of Capital Lease Obligations, and (viii) a
Permitted Investment or a Restricted Payment that is permitted by the covenant
described above under "-- Certain Covenants -- Limitation on Restricted
Payments."
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Leverage Ratio" as of any date of determination, means the
ratio of (i) the aggregate amount of all Indebtedness of the Company and its
Restricted Subsidiaries, excluding (a) Permitted Warehouse Indebtedness and
Guarantees thereof and (b) Hedging Obligations permitted to be Incurred pursuant
to clause (ii)(f) of the covenant described under "-- Certain
Covenants -- Limitation on Indebtedness" to (ii) the Consolidated Net Worth of
the Company.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (a) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (b) the Company's equity in a net loss of any such
Person for such period shall be included in determining such Consolidated Net
Income; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income of any Restricted Subsidiary if
such Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (a) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income to the extent that cash could have been distributed
by such Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution paid to another Restricted Subsidiary, to
the limitation contained in this clause) and (b) the Company's equity in a net
loss of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income; (iv) any gain (but not loss) realized
upon the sale or other disposition of any assets of the Company
48
<PAGE> 51
or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person; (v) extraordinary gains or
losses; and (vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from any Person to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (i)(c)(4) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company for which financial statements are available, as
(i) the par or stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (a) any accumulated deficit
and (b) any amounts attributable to Disqualified Stock.
"Convertible Debentures" means the Company's 6% Convertible Subordinated
Debentures due 2006 that were outstanding on the Issue Date.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement of other similar agreement or arrangement to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulting Subsidiary" means any Restricted Subsidiary of the Company with
respect to which an Event of Default described in clause (vi) under "Defaults"
has occurred and is continuing.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holders thereof, in each case in whole
or in part on or prior to 180 days after the Stated Maturity of the Notes;
provided, however, that Capital Stock of the Company or any Restricted
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Capital Stock in the event of a
change of control of the Company or Restricted Subsidiary or an offer to
repurchase such Capital Stock upon a disposition of assets, which provisions
have substantially the same effect as the provisions of the Indenture described
under "Change of Control" or "-- Certain Covenants -- Limitation on Sales of
Assets," as the case may be, shall not be deemed to be Disqualified Stock solely
by virtue of such provisions.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"Eligible Retained Interest Receivables" means Retained Interest
Receivables other than any Retained Interest Receivables created as the result
of the securitization or sale of other Retained Interest Receivables. For the
purposes of clause (viii)(a) of the definition of "Permitted Liens" the term
Eligible Retained Interest Receivables shall include only (i) Eligible Retained
Interest Receivables which exist on the Issue Date and are unencumbered or are
created subsequent to the Issue Date which are unencumbered by any Lien (either
directly or on the Capital Stock of any Special Purpose Subsidiary, the assets
of which are limited to Retained Interest Receivables) as of the relevant date
of determination and (ii) Eligible Retained Interest Receivables in existence on
the Issue Date which are encumbered by any Lien (either directly or on the
Capital Stock of any Special Purpose Subsidiary, the assets of which are limited
to Retained Interest Receivables), but only to the extent that the amount of any
such Eligible Retained Interest Receivable exceeds two (2) times the outstanding
principal amount of any Indebtedness secured by a Lien (either directly or on
the Capital Stock of any such Special Purpose Subsidiary) on such Eligible
Retained Interest Receivable as of the relevant date of determination.
49
<PAGE> 52
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company that is
either (i) a UK Subsidiary or (ii) is incorporated in a jurisdiction other than
the United States of America or the United Kingdom and 80% of the sales,
earnings or assets of which are located in, generated from or derive from
operations located in jurisdictions outside the United States of America.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in (i) the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (ii) statements and pronouncements of
the Financial Accounting Standards Board, (iii) such other statements by such
other entity as approved by a significant segment of the accounting profession,
and (iv) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the SEC and releases of the
Emerging Issues Task Force.
"Guarantee" means an obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply finds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any person Guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holders" or "Noteholders" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall be deemed Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium, if any,
in respect of (a) indebtedness of such Person for money borrowed and (b)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and expense accruals
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance, surety bond or similar credit transaction (other than obligations
with respect to letters of credit securing obligations (other than obligations
described in (i) through (iii) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not drawn upon
or, if and to the extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit); (v) the amount of all
obligations of such Person with respect to the redemption, repayment or other
repurchase of any Disqualified Stock (but
50
<PAGE> 53
excluding any accrued dividends); (vi) Warehouse Indebtedness; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; (viii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
secured by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount of
the obligation so secured; and (ix) to the extent not otherwise included in this
definition, Hedging Obligations of such Person. Except in the case of Warehouse
Indebtedness (the amount of which shall be determined in accordance with the
definition thereof), the amount of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date. Notwithstanding the foregoing, any securities issued in a securitization
by a special purpose owner trust or other Person, including without limitation,
any Securitization Trust, formed by or on behalf of a Person and to which
Receivables have been sold or otherwise transferred by or on behalf of such
Person or its Restricted Subsidiaries shall not be treated as Indebtedness of
such Person or its Restricted Subsidiaries under the Indenture, regardless of
whether such securities are treated as indebtedness for tax purposes.
"Intercompany Note" means the note dated as of May 14, 1997 from CSC-UK to
CSC in an initial principal amount equal to $115.0 million denominated in US
dollars, which matures on June 1, 2004 and bears interest at a rate not less
than the rate borne by the Notes.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, repurchase agreement, futures contract or other financial
agreement or arrangement designed to protect the Company or any Restricted
Subsidiary against fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as trade accounts on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by, such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (a) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (b) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Investment Grade Rating" means with respect to the Notes a rating by
Standard and Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc., of at least BBB- and a rating by Moody's Investors Service, Inc. of at
least Baa3 which is provided after assuming and giving effect to the (i)
elimination of the applicability of the proviso to clause (viii) of the
definition of "Permitted Liens" and (ii) the release of the Intercompany Note
Collateral, and (iii) the release of the obligations of the Subsidiary
Guarantors under their Subsidiary Guarantees.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means (i) any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof) and (ii) any
51
<PAGE> 54
claim (whether direct or indirect through subordination or other structural
encumbrance) against any Retained Interest Receivables sold unless the seller is
not liable for any losses thereon.
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payment received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form) in each case
net of (i) all legal, title and recording tax expenses, commissions and
investment banking and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be accrued as a liability under
GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law be,
repaid out of the proceeds from such Asset Disposition, (iii) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition and (iv)
the deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by the Company or
any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither the
Company nor any of the Restricted Subsidiaries (other than the Person incurring
such Indebtedness) (a) provides a Guarantee or other credit enhancement of any
kind (including any undertaking, agreement or instruction that would constitute
Indebtedness) or (b) is directly or indirectly liable (as the primary obligor or
otherwise); (ii) no default with respect to which would permit, upon notice,
lapse of time or both, any holder of any other Indebtedness (other than the
Notes) of the Company or any of its Restricted Subsidiaries to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and (iii) as to which the lenders or
holders thereof have been notified in writing that they will not have any
recourse to the Capital Stock or assets of the Company or any of its Restricted
Subsidiaries (other than the Person Incurring such Indebtedness).
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company or a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
however that the primary business of such Restricted Subsidiary is a Related
Business; and provided, further, except as provided in clause (xiii) below, in
the case of any Investment in a Foreign Subsidiary that is not a Subsidiary
Guarantor, such Investment shall be in the form of a loan constituting Senior
Indebtedness of such Foreign Subsidiary, evidenced by a note; (ii) another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Restricted Subsidiary; provided, however, that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables (other than Receivables) owing to the Company or
any Restricted Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(v) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business of the Company or
such Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (viii) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under "-- Certain Covenants -- Limitation on Sales of
Assets"; (ix) Receivables; (x) Interest Rate Agreements and Currency Agreements;
(xi) Retained
52
<PAGE> 55
Interest Receivables; (xii) loans to third parties for the origination of
Receivables in the ordinary course of business and any warrants, Capital Stock
or other consideration received in connection therewith; (xiii) capital
contributions to Foreign Subsidiaries not to exceed 10% of the Company's
consolidated stockholders' equity at the time of such contributions; (xiv)
Capital Stock of or in the form of a transfer of Receivables to a Qualifying
Securitization Subsidiary pursuant to a securitization of such Receivables; and
(xv) Investments (other than Investments permitted pursuant to clauses
(i) - (xiv) above) by the Company and the Restricted Subsidiaries in an
aggregate amount not to exceed $7.5 million.
"Permitted Liens" means, with respect to any Person, (i) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits or Liens to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
or Liens to secure surety, performance, appeal or other bonds with respect to
such Person, or deposits as security for contested taxes or import duties or for
the payment of rent, in each case Incurred in the ordinary course of business;
(ii) Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens, in each case for sums not yet due or being contested in good faith by
appropriate proceedings or Liens arising out of judgments or awards against such
Person with respect to which such person shall then be proceeding with an appeal
or other proceedings for review; (iii) Liens for taxes, assessments or other
governmental charges not yet subject to penalties for nonpayment or which are
being contested in good faith and by appropriate proceedings; (iv) Liens in
favor of issuers of surety bonds or letters of credit issued pursuant to the
request of and for the account of such Person in the ordinary course of its
business; provided, however, that such letters of credit do not constitute
Indebtedness; (v) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real property; or Liens incidental
to the conduct of the business of such Person or to the ownership of its
properties which were not Incurred in connection with Indebtedness and which do
not in the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person;
(vi) Liens securing Indebtedness Incurred to finance or refinance the
construction, purchase or lease of, or repairs, improvements or additions to,
property of such Person (but excluding Capital Stock of another Person);
provided, however, that the Lien may not extend to any other Property owned by
such Person or any of its Subsidiaries at the time the Lien is Incurred, and the
Indebtedness secured by the Lien may not be Incurred more than 180 days after
the later of the acquisition, completion of construction, repair, improvement,
addition or commencement of full operation of the property subject to the Lien;
(vii) Liens to secure Indebtedness permitted under the provisions described in
clause (ii)(a) or (ii)(d) (to the extent refinancing Indebtedness incurred
pursuant to clause (ii)(a)) under "-- Certain Covenants -- Limitation on
Indebtedness"; (viii) Liens on Retained Interest Receivables (or on the Capital
Stock of any Person substantially all the assets of which are Retained Interest
Receivables); provided, however, that, for so long as the Notes do not have an
Investment Grade Rating, the Company and its Restricted Subsidiaries shall have
satisfied each of the following before incurring any Lien on Eligible Retained
Interest Receivables pursuant to this clause (viii): (a) there shall be Eligible
Retained Interest Receivables at least equal to 150% of the principal amount
then outstanding of unsecured Senior Indebtedness of the Company and its
Restricted Subsidiaries falling within clause (b) of the definition of "Senior
Indebtedness"; and (b) the principal amount of any Indebtedness secured by any
such Liens incurred pursuant to this clause (viii) on any Eligible Retained
Interest Receivables shall be limited, in the aggregate, to Eligible Retained
Interest Receivables representing no more than 75% of the amount of Eligible
Retained Interest Receivables in excess of the limitations described in (a) as
shown on the balance sheet of the Company and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP after
giving pro forma effect to the incurrence of such Lien, as of the end of the
most recent fiscal quarter of the Company prior to the date on which such Lien
is first incurred for which financial statements are available; provided,
further, however, that a Lien on Eligible Retained Interest Receivables securing
Indebtedness that is a Permitted Lien at the time such Indebtedness is first
incurred shall continue to constitute a Permitted Lien, notwithstanding any
reduction in value of such Eligible Retained Interest Receivables (as a result
of their revaluation, any adverse change with respect to the underlying "pool"
of
53
<PAGE> 56
Receivables or otherwise); (ix) Liens existing on the Issue Date; (x) Liens on
property or shares of Capital Stock of another Person at the time such other
Person becomes a Subsidiary of such Person; provided, however, that such Liens
are not created, incurred or assumed in connection with, or in contemplation of,
such other Person becoming such a Subsidiary; provided further, however, that
such Lien may not extend to any other property owned by such Person or any of
its Subsidiaries; (xi) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such Person;
provided, however, that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such acquisition; provided, further,
however, that the Liens may not extend to any other property owned by such
Person or any of its Subsidiaries; (xii) Liens securing Indebtedness or other
obligations of a Subsidiary of such Person owing to such Person or a Restricted
Subsidiary of such Person; (xiii) Liens securing Hedging Obligations so long as
such Hedging Obligations relate to Indebtedness that is, and is permitted under
the Indenture to be, secured by a Lien on the same property securing such
Hedging Obligations; (xiv) Liens on property of a Special Purpose Subsidiary
otherwise in compliance with clause (viii) above; (xv) Liens to secure any
Refinancing (or successive Refinancings) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (vi),
(viii), (ix), (x) and (xi); provided, however, that (a) such new Lien shall be
limited to all or part of the same property that secured the original Lien (plus
improvements to or on such property) and (b) the Indebtedness secured by such
Lien at such time is not increased to any amount greater than the sum of (1) the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (vi), (viii), (ix), (x) or (xi), as the
case may be, at the time the original Lien became a Permitted Lien and (2) an
amount necessary to pay any fees and expenses, including premiums, related to
such refinancing, refunding, extension renewal or replacement; (xvi) any Lien in
the form of "over-collateralization" of the senior securities issued in, or
subordination of or recourse to all or a portion of Retained Interest
Receivables of the Company or any Subsidiary attributable to, a securitization
of Receivables (or similar arrangements), in each case to the extent reflected
in the book value of such Retained Interest Receivables, which Lien is in favor
of the holders of other securities issued by the trust or other Person relating
to such securitization; (xvii) judgment and attachment Liens not giving rise to
an Event of Default; (xviii) Liens in favor of the Company or any Restricted
Subsidiary; (xix) a Lien on the Intercompany Note in favor of the Trustee for
the benefit of holders of the Notes; (xx) Liens securing Indebtedness otherwise
permitted to be incurred on any note provided by a Foreign Subsidiary to the
Company or any Domestic Subsidiary initially evidencing loans made by the
Company or such Domestic Subsidiary out of the proceeds of such Indebtedness;
and (xxi) Liens securing Indebtedness of the Company or a Restricted Subsidiary
owed to and held by the Company or a Restricted Subsidiary (a) pledged to a
third party and (b) secured by Retained Interest Receivables, provided that the
Company is in compliance with clause (viii) above. Notwithstanding the
foregoing, "Permitted Liens" will not include any Lien described in clauses
(vi), (x) or (xi) above to the extent such Lien applies to any Additional Assets
acquired directly or indirectly from Net Available Cash pursuant to the covenant
described under "-- Certain Covenants -- Limitation on Sale of Assets."
"Permitted Warehouse Indebtedness" means Warehouse Indebtedness in
connection with a Warehouse Facility; provided, however, that (i) the assets as
to which such Warehouse Indebtedness relates are or, prior to any funding under
the related Warehouse Facility with respect to such assets, were eligible to be
recorded as held for sale on the consolidated balance sheet of the Company in
accordance with GAAP, (ii) such Warehouse Indebtedness will be deemed to be
Permitted Warehouse Indebtedness (a) in the case of a Purchase Facility, only to
the extent the holder of such Warehouse Indebtedness has no contractual recourse
to the Company and its Restricted Subsidiaries to satisfy claims in respect of
such Permitted Warehouse Indebtedness in excess of 20% of the advances made
thereunder, and (b) in the case of any other Warehouse Facility, only to the
extent of the lesser of (1) the amount advanced by the lender with respect to
the Receivables financed under such Warehouse Facility, and (2) 105% of the
principal amount of such Receivables and (iii) any such Indebtedness has not
been outstanding in excess of 364 days.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
54
<PAGE> 57
"Pledge Agreement" means the pledge agreement dated the Issue Date by and
among The Chase Manhattan Bank, as Collateral Agent, CSC and the Trustee, as the
same may be amended and restated, supplemented or modified from time to time as
permitted thereunder.
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act other than any such public offering occurring
substantially concurrently with the issuance of the Notes.
"Purchase Facility" means any Warehouse Facility in the form of a purchase
and sale facility pursuant to which the Company or a Restricted Subsidiary sells
Receivables to a financial institution and retains a right of first refusal upon
the subsequent resale of such Receivables by such financial institution.
"Purchase Money Indebtedness" means any Indebtedness incurred by a Person
to finance or refinance the cost of the construction or purchase of, or repairs,
improvements or additions to, an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualifying Securitization Subsidiary" means any Subsidiary of the Company
that (i) does not engage in, and whose charter prohibits it from engaging in,
any activities other than a securitization of Receivables which have been sold
or otherwise transferred to such Subsidiary by the Company or another Subsidiary
in a transaction that constitutes a "true sale" under GAAP, (ii) constitutes a
"special purpose vehicle" under rating agency guidelines, and (iii) does not
have any Indebtedness other than Non-Recourse Indebtedness.
"Receivables" means consumer and commercial loans, leases and receivables
purchased or originated by the Company or any Restricted Subsidiary; provided,
however, that for purposes of determining the amount of a Receivable at any
time, such amount shall be determined in accordance with GAAP, consistently
applied, as of the most recent practicable date.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided, further,
however, that Refinancing Indebtedness shall not include (a) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or another Subsidiary or
(b) Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any consumer or commercial finance business or any
financial service business relating thereto, including, without limitation,
businesses of the Company in existence as of the Issue Date.
55
<PAGE> 58
"Related Party" with respect to any Person means (i) any spouse, sibling,
parent or lineal descendant of such Person or any spouse of such sibling or
lineal descendant or (ii) any trust, corporation, partnership or other entity
that is controlled by Persons referred to in clause (i).
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) (other than (a) dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock), (b)
dividends or distributions payable solely to the Company or a Restricted
Subsidiary and (c) pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary (other than Capital Stock
owned by the Company or a Wholly Owned Subsidiary, excluding Disqualified Stock)
held by any Affiliate of the Company, including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the Company that is
not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance
or other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition), (iv) the making of any Investment (other than
a Permitted Investment) in any Person or (v) the forgiveness of any Indebtedness
of an Affiliate of the Company to the Company or a Restricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Retained Interest" means, over the life of a "pool" of Receivables that
have been sold or otherwise transferred by a Person to a trust or other Person
in a securitization or sale, the direct or indirect rights retained by such
Person or its Restricted Subsidiaries at or subsequent to the closing of such
securitization or sale with respect to such "pool", including any rights to
receive cash flows attributable to such pool and retained by such Person,
whether such rights are contractual, by virtue of such Person being a holder of
Capital Stock of such trust or other Person or otherwise.
"Retained Interest Receivables" of a Person means the direct or indirect
right to Retained Interest capitalized on such Person's or any of its Restricted
Subsidiaries' consolidated balance sheet (the amount of which shall be
determined in accordance with GAAP), including, without limitation, subordinated
and interest-only certificates and any such rights as a holder of Capital Stock
of a trust or other Person to which a "pool" of Receivables has been sold or
otherwise transferred in a securitization or sale.
"SEC" means the Securities and Exchange Commission.
"Securitization Trust" means any Person (whether or not a Subsidiary of the
Company) established exclusively for the purpose of issuing securities in
connection with any securitization, the obligations of which are without
recourse to the Company or any of the Subsidiary Guarantors (including, without
limitation, any Special Purpose Subsidiary of the Company), provided that such
Person is not an obligor with respect to any Indebtedness of the Company or any
Subsidiary Guarantor.
"Senior Indebtedness" means the principal of, premium and accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (i)
indebtedness of such Person for money borrowed and (ii) indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable unless, in the case of either clause
(i) or (ii), in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to the Notes; provided, however, that Senior
Indebtedness shall not include (a) any obligation of such Person to any
Subsidiary of such Person, (b) any liability for Federal, state, local or other
taxes owed or owing by such Person, (c) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
56
<PAGE> 59
guarantees thereof or instruments evidencing such liabilities), (d) any
obligation in respect of Capital Stock of such Person or (e) that portion of any
Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that, individually
or if merged with all other Defaulting Subsidiaries, would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Special Purpose Subsidiary" means (i) a Restricted Subsidiary formed in
connection with a securitization (a) all the Capital Stock of which (other than
directors' qualifying shares) is owned by the Company or one or more Restricted
Subsidiaries, (b) that has no assets other than Retained Interest Receivables
created in such securitization and (c) that conducts no business other than
holding such Retained Interest Receivables or (ii) that is a Qualifying
Securitization Subsidiary.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holders thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is, by its terms
pursuant to a written agreement, subordinate or junior in right of payment to
the Notes to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Subsidiary Guarantee" means each Guarantee given by the Subsidiary
Guarantors in accordance with the provisions of the Indenture.
"Subsidiary Guarantor" means a domestic Restricted Subsidiary of the
Company that is or becomes a Subsidiary Guarantor in accordance with the
provisions of the Indenture.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company that is not an Affiliate of the Company and
which is organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50.0 million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 180 days after the date of acquisition, issued by
a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-l" (or higher) according to Standard and Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc., and (v)
investments in securities with maturities of six months or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States of America, or by any political subdivision or taxing
authority thereof, and rated as least "A" by Standard &
57
<PAGE> 60
Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., or "A"
by Moody's Investors Service, Inc.
"UK Subsidiary" means a Restricted Subsidiary that is incorporated in the
United Kingdom and 80% of the sales, earnings or assets of which are located in,
generated from or derive from operations located in the United Kingdom.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (a) the
Subsidiary to be so designated has total assets of $1,000 or less or (b) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (i) the Company could incur $1.00 of
additional Indebtedness under paragraph (i) of the covenant described under "--
Certain Covenants -- Limitation on Indebtedness" and (ii) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced by the Company to the Trustee by promptly filing with the Trustee a
copy of the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Warehouse Facility" means any funding arrangement with a financial
institution or other lender or purchaser to the extent such agreement is to
finance the purchase or origination of Receivables by the Company or a
Subsidiary of the Company, or the making of loans to a Person for the purpose of
financing the purchase or origination by such Person of consumer or commercial
loans, leases or receivables for resale or sale to the Company or any Subsidiary
of the Company, and in each case for the purpose of pooling such Receivables
prior to securitization or sale in the ordinary course of business, including
purchase and sale facilities pursuant to which the Company or a Subsidiary of
the Company sells Receivables to a financial institution and retains a right of
first refusal upon the subsequent resale of such Receivables by such financial
institution.
"Warehouse Indebtedness" means the consideration received by the Company or
its Restricted Subsidiaries under a Warehouse Facility with respect to
Receivables until such time such Receivables are (i) securitized, (ii)
repurchased by the Company or its Restricted Subsidiaries or (iii) sold by the
counterparty under the Warehouse Facility to a Person who is not an Affiliate of
the Company.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
BOOK-ENTRY; DELIVERY AND FORM
New Notes which may be held in global form initially will be represented by
one or more notes in registered, global form without interest coupons
(collectively, the "Global Note"). The Global Note will be
58
<PAGE> 61
deposited upon issuance with the Trustee as custodian for The Depository Trust
Company ("DTC"), in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant as described below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry Notes for Certificated Notes."
Transfer of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
which may change from time to time.
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated to it with portions of the principal amount of the
Global Note and (ii) ownership of such interests in the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note).
Investors in the Global Note may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations (including Euroclear and Cedel) which are Participants in such
system. The Chase Manhattan Bank, Brussels office, will initially act as
depository for Euroclear, and Citibank, N.A., will initially act as depository
for Cedel. All interests in the Global Note, including those held through
Euroclear or Cedel, may be subject to the procedures and requirements of DTC.
Those interests held through Euroclear or Cedel may also be subject to the
procedures and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of the Participants, which in
turn act on behalf of the Indirect Participants and certain banks, the ability
of a person having beneficial interests in the Global Note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Notes, see "-- Exchange of Book-Entry
Notes for Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
59
<PAGE> 62
Payments in respect of the principal of, premium, if any, and interest on
the Global Note registered in the name of DTC or its nominee will be payable to
DTC or its nominee in its capacity as the registered holder under the Indenture.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes, including the Global Note, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Company, the Initial
Purchasers, the Trustee nor any agent of the Company, the Initial Purchasers or
the Trustee has or will have any responsibility or liability for (i) any aspect
or accuracy of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global Note, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Note, or (ii) any other
matter relating to the actions and practices of DTC or any of the Participants
or the Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will not be the responsibility of DTC,
the Trustee or the Company. Neither the Company nor the Trustee will be liable
for any delay by DTC or any of the Participants in identifying the beneficial
owners of the Notes, and the Company and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee as the
registered owner of the Global Note for all purposes.
Except for trades involving only Euroclear and Cedel participants,
interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and the Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same day funds. Transfers between
accountholders in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between the accountholders in
DTC, on the one hand, and directly or indirectly through Euroclear or Cedel
accountholders, on the other hand, will be effected through DTC in accordance
with DTC's rules on behalf of Euroclear or Cedel, as the case may be, by its
respective depository; however, such cross-market transactions will require
delivery of instructions to Euroclear or Cedel, as the case may be, by the
counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depository to take action
to effect final settlement on its behalf by delivering or receiving interests in
the Global Note in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Euroclear and
Cedel accountholders may not deliver instructions directly to the depositories
for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel accountholder purchasing an interest in the Global Note from an
accountholder in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear or Cedel) immediately
following the settlement date of DTC. Cash received in Euroclear or Cedel as a
result of sales of interests in the Global Note by or through a Euroclear or
Cedel accountholder to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or Cedel
cash account only as of the business day for Euroclear or Cedel following DTC's
settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Note are
60
<PAGE> 63
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such Participant or Participants has or have given such
direction. However, if any of the events described under "-- Exchange of Book
Entry Notes for Certificated Notes" occurs, DTC reserves the right to exchange
the Global Note for Notes in certificated form and to distribute such Notes to
its Participants.
The information in this section concerning DTC, Euroclear and Cedel and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Note among accountholders in
DTC and accountholders of Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Initial Purchasers or the
Trustee nor any agent of the Company, the Initial Purchasers or the Trustee will
have any responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants, indirect participants or accountholders of their
respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
The Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depository for the Global Note and the Company thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
61
<PAGE> 64
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the material United States federal income tax
consequences of the Exchange Offer is for general information only. It is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed Treasury regulations, and judicial and
administrative determinations, all of which are subject to change at any time,
possibly on a retroactive basis. The following relates only to Old Notes, and
New Notes received therefor, that are held as "capital assets" within the
meaning of Section 1221 of the Code by persons who are citizens or residents of
the United States. It does not discuss state, local, or foreign tax
consequences, nor does it discuss tax consequences to categories of holders that
are subject to special rules, such as foreign persons, tax-exempt organizations,
insurance companies, banks, and dealers in stocks and securities. Tax
consequences may vary depending on the particular status of an investor. No
rulings will be sought from the Internal Revenue Service ("IRS") with respect to
the federal income tax consequences of the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A HOLDER'S DECISION TO PARTICIPATE IN THE
EXCHANGE OFFER. EACH HOLDER SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING
THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS
PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO PARTICIPATE IN THE EXCHANGE
OFFER.
THE EXCHANGE OFFER
In the opinion of Gibson, Dunn & Crutcher LLP, counsel to the Company, the
exchange of Old Notes for New Notes pursuant to the Exchange Offer will not
constitute a material modification of the terms of the Notes and, accordingly,
such exchange will not constitute an exchange for federal income tax purposes.
Accordingly, such exchange will have no federal income tax consequences to
holders of Notes, either those who exchange or those who do not, and each holder
of Notes will continue to be required to include interest on the Notes in its
gross income in accordance with its method of accounting for federal income tax
purposes and the Company intends, to the extent required, to take such position.
BACKUP WITHHOLDING
Under the Code, a holder of a Note may be subject, under certain
circumstances, to "backup withholding" at a 31% rate with respect to payments in
respect of interest thereon or the gross proceeds from the disposition thereof.
This withholding generally applies only if the holder (i) fails to furnish his
or her social security or other taxpayer identification number ("TIN") within a
reasonable time after request therefor, (ii) furnishes an incorrect TIN, (iii)
is notified by the IRS that he or she has failed to report properly payments of
interest and dividends and the IRS has notified the Company that he or she is
subject to backup withholding, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's federal
income tax liability, provide that the required information is furnished to the
IRS. Corporations and certain other entities described in the Code and Treasury
regulations are exempt from such withholding if their exempt status is properly
established.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until November 3, 1997
62
<PAGE> 65
(90 days after the date of this Prospectus), all dealers effecting transactions
in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Old Notes), other than commissions or concessions of any brokers
or dealers, and will indemnify the holders of the Old Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company for the year ended
December 31, 1994 and as of and for the year ended December 31, 1996 have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The consolidated financial
statements of the Company as of and for the year ended December 31, 1995 have
been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein and upon the authority of said
firm as experts in accounting and auditing, and upon the report of BDO Stoy
Hayward, Registered Auditors, incorporated by reference herein.
The financial statements of J&J as of and for the years ended September 30,
1993, 1994 and 1995 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of BDO Stoy Hayward,
Registered Auditors, incorporated by reference herein.
The consolidated financial statements of Heritable Finance Limited
(referred to herein as Greyfriars) as of December 31, 1994 and 1995 and for each
of the years in the three-year period ended December 31, 1995 have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG, Registered Auditors, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
63
<PAGE> 66
======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Summary............................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 25
The Exchange Offer.................... 26
Capitalization........................ 32
Ratio of Earnings to Fixed Charges.... 33
Description of the Notes.............. 34
Certain Federal Income Tax
Considerations...................... 62
Plan of Distribution.................. 62
Legal Matters......................... 63
Experts............................... 63
</TABLE>
UNTIL NOVEMBER 3, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
$300,000,000
LOGO
OFFER FOR ALL OUTSTANDING
12 3/4% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
12 3/4% SERIES A SENIOR NOTES
DUE 2004
----------------------------
PROSPECTUS
----------------------------
AUGUST 5, 1997
======================================================
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the Delaware General Corporation Law (the "GCL") provides
that a Delaware corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no cause to believe his
or her conduct was unlawful.
Section 145(b) of the GCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if he or she acted under similar standards,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses as the court shall deem
proper.
Section 145 of the GCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsection (a) and (b) or in the defense of any
claim, issue or matter therein, such officer or director shall be indemnified
against expenses actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled,
and that the corporation may purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
such officer or director and incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liabilities under Section
145 of the GCL.
As permitted by Section 102(b)(7) of the GCL, the Company's Certificate of
Incorporation provides that a director shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
However, such provision does not eliminate or limit the liability of a director
for acts or omissions not in good faith or for breaching his or her duty of
loyalty, engaging in intentional misconduct or knowingly violating a law, paying
a dividend or approving a stock repurchase which was illegal, or obtaining an
improper personal benefit. A provision of this type has no effect on the
availability of equitable remedies, such as injunction or rescission, for breach
of fiduciary duty.
The Company's Bylaws require the Company to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
II-1
<PAGE> 68
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
In addition, the Company's Bylaws require the Company to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, except that no indemnification may
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the Company unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Any indemnification (unless ordered by a court) made by the Company may be
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct as set forth
above. Such determination must be made (i) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders.
To the extent that a director, officer, employee or agent of the Company
has been successful on the merits or otherwise in defense of any covered action,
suit or proceeding, or in defense of any covered claim, issue or matter therein,
he will be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
in the specific case upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Company as authorized in
this Article. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board deems appropriate.
The Company presently maintains policies of directors' and officers'
liability insurance in the amount of $15.0 million.
II-2
<PAGE> 69
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------------------
<C> <S>
3.1* Certificate of Incorporation of the Company, as amended.
3.2 Bylaws of the Company, as amended, incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 as declared effective by the Commission
on December 20, 1995.
3.3 Certificate of Designation of 6% Convertible Preferred Stock, Series A of the
Company, incorporated by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K filed with the Commission on April 11, 1997.
4.1* Indenture, dated as of May 14, 1997, among the Company, CSC and The Chase Manhattan
Bank.
4.2* Registration Rights Agreement, dated as of May 14, 1997, among the Company, CSC,
CIBC Wood Gundy Securities Corp., Bear, Stearns & Co. Inc. and Oppenheimer & Co.,
Inc.
5.1 Opinion of Gibson, Dunn & Crutcher LLP.
8.1* Opinion of Gibson, Dunn & Crutcher LLP relating to tax matters.
10.1 Lease Agreement, dated as of September 30, 1993, between CSC and Taxter Park
Associates, as amended by the First Amendment to Lease, dated as of April 19, 1994,
and the Second Amendment to Lease, dated as of May 12, 1995, incorporated by
reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
10.2 Sublease Agreement between KLM Royal Dutch Airlines and CSC, dated as of December 5,
1994, incorporated by reference to Exhibit 10.2 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20, 1995.
10.3 Employment Agreement, dated as of January 1, 1995, between CSC and Robert Grosser,
incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1 as declared effective by the Commission on December 20, 1995.
10.4 Employment Agreement, dated as of January 1, 1995, between CSC and Robert C. Patent,
incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on
Form S-1 as declared effective by the Commission on December 20, 1995.
10.5 Employment Agreement, dated as of November 1, 1992, between CSC and Robert M. Stata,
as amended by the Amendment Agreement, dated as of January 1, 1994, incorporated by
reference to Exhibit 10.5 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
10.6 Employment Agreement, dated as of July 1, 1995, between CSC and Cheryl P. Carl,
incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on
Form S-1 as declared effective by the Commission on December 20, 1995.
10.7 Employment Agreement, dated as of July 1, 1995, between CSC and Eric S. Goldstein,
incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on
Form S-1 as declared effective by the Commission on December 20, 1995.
10.8 Employment Agreement, dated as of July 1, 1995, between CSC and Steven Weiss,
incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on
Form S-1 as declared effective by the Commission on December 20, 1995.
10.9 Employment Agreement, dated as of July 1, 1995, between CSC and Jonah L. Goldstein,
incorporated by reference to Exhibit 10.10 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.10 Standby Financing and Investment Banking Services Agreement, dated as of June 24,
1994, between CSC and ContiTrade, incorporated by reference to Exhibit 10.15 to the
Company's Registration Statement on Form S-1 as declared effective by the Commission
on December 20, 1995.
</TABLE>
II-3
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.11 Revolving Credit, Security, and Term Loan Agreement, dated as of June 30, 1995 among
CSC, the Company, CoreStates Bank, N.A., Harris Trust and Savings Bank, NBD Bank and
NatWest Bank N.A., as amended by Amendment No. 1 to the Revolving Credit Agreement,
dated as of August 20, 1995, incorporated by reference to Exhibit 10.19 to the
Company's Registration Statement on Form S-1 as declared effective by the Commission
on December 20, 1995.
10.12 The Company's 1995 Stock Option Plan, incorporated by reference to Exhibit 10.20 to
the Company's Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.13 The Company's 1995 Non-Employee Directors Stock Option Plan, incorporated by
reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
10.14+ Mortgage Loan Purchase Agreement, dated as of May 26, 1995, between CSC-UK and
Greenwich, incorporated by reference to Exhibit 10.29 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20, 1995.
10.15+ Letter, dated as of May 26, 1995, from Greenwich to CSC-UK regarding purchase
commitment with respect to first and second mortgage loans located in the United
Kingdom, incorporated by reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20, 1995.
10.16+ Servicing Agreement, dated as of May 26, 1995, among CSC-UK, City Mortgage Servicing
Limited and Greenwich, incorporated by reference to Exhibit 10.31 to the Company's
Registration Statement on Form S-1 as declared effective by the Commission on
December 20, 1995.
10.17 Stock Purchase Agreement, dated as of September 29, 1995, among the Company, David
Steene, Martin Brand and Gerald Epstein, incorporated by reference to Exhibit 10.32
to the Company's Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.18 Service Agreement, dated as of April 5, 1995, between CSC-UK and David Steene,
incorporated by reference to Exhibit 10.33 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.19 Service Agreement, dated as of April 5, 1995, between CSC-UK and Martin Brand,
incorporated by reference to Exhibit 10.34 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.20 Service Agreement, dated as of April 5, 1995, between CSC-UK and Gerald Epstein,
incorporated by reference to Exhibit 10.35 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.21 Agreement, dated as of May 1, 1995, between CSC-UK and J.L.B. Equities, Inc.,
incorporated by reference to Exhibit 10.36 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.22 Stock Option Agreement, dated as of March 6, 1996, by and among the Company, CSC-UK
and Messrs. Jaye and Johnson, incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed with the Commission on March 14, 1996.
10.23 Asset Purchase Agreement, dated March 6, 1996, by and among CSC-UK, J&J, UK Credit
Corporation Limited ("UK Credit") and certain shareholders of UK Credit,
incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K
filed with the Commission on March 14, 1996.
10.24+ Letter Agreement, dated as of March 28, 1996, from Greenwich International, Ltd. to
CSC-UK regarding purchase commitment with respect to first and second mortgage loans
located in the United Kingdom, incorporated by reference to Exhibit 10.46 to the
Company's Annual Report on Form 10-K/A filed with the Commission on November 4,
1996.
10.25 Letter Agreement, dated March 28, 1996, between Greenwich and CSC-UK regarding
termination of prior agreement, incorporated by reference to Exhibit 10.46 to the
Company's Annual Report on Form 10-K filed with the Commission on April 1, 1996.
10.26 Agreement for the Sale and Purchase of the Entire Issued Share Capital of Heritable
Group Limited, dated June 14, 1996, incorporated by reference to Exhibit 2.1 to the
Company's current Report on Form 8-K filed with the Commission on June 28, 1996.
</TABLE>
II-4
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.27 Third Amendment to Lease, dated as of April 17, 1996, between CSC and Taxter Park
Associates, incorporated by reference to Exhibit 10.53 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on August 14, 1996.
10.28 Lease, dated as of April 18, 1996, among The Standard Life Assurance Company, City
Mortgage Servicing Limited and CSC-UK, incorporated by reference to Exhibit 10.54 to
the Company's Quarterly Report on Form 10-Q filed with the Commission on August 14,
1996.
10.29 Purchase and Sale Agreement, dated June 20, 1996 and effective as of February 2,
1996, between CSC and Greenwich Capital Financial Products, Inc., incorporated by
reference to Exhibit 10.55 to the Company's Quarterly Report on Form 10-Q filed with
the Commission on August 14, 1996.
10.30 Lease Agreement, dated as of July 7, 1996, between CSC and Robert Martin Company,
incorporated by reference to Exhibit 10.56 to the Company's Quarterly Report on Form
10-Q filed with the Commission on August 14, 1996.
10.31 Loan Agreement, dated as of August 6, 1996, between CSC and CoreStates, incorporated
by reference to Exhibit 10.31 to the Company's Registration Statement on Form S-3 as
declared effective by the Commission on April 18, 1997.
10.32 Employment Agreement, dated as of January 1, 1996, between CSC and Tim S. Ledwick,
incorporated by reference to Exhibit 10.32 to the Company's Registration Statement
on Form S-3 as declared effective by the Commission on April 18, 1997.
10.33 Employment Agreement, dated as of February 1, 1996, between CSC and Robert J.
Blackwell, incorporated by reference to Exhibit 10.33 to the Company's Registration
Statement on Form S-3 as declared effective by the Commission on April 18, 1997.
10.34 Amendment No. 1 dated as of August 30, 1996, to the Purchase and Sale Agreement,
dated as of February 2, 1996, between CSC and Greenwich Capital Financial Products,
Inc., incorporated by reference to Exhibit 10.63 to Amendment No. 1 to the Company's
Registration Statement on Form S-1 filed with the Commission on September 27, 1996.
10.35 Senior Secured Credit Agreement, dated October 30, 1996, among the Company and CIBC
Wood Gundy Securities Corp. and the lenders named therein, incorporated by reference
to Exhibit 10.60 to the Company's Quarterly Report on Form 10-Q filed with the
Commission on November 19, 1996.
10.36 Amendment No. 2, dated as of October 30, 1996, to the Purchase and Sale Agreement,
dated as of February 2, 1996, between CSC and Greenwich Capital Financial Products,
Inc., incorporated by reference to Exhibit 10.62 to the Company's Quarterly Report
on Form 10-Q filed with the Commission on November 19, 1996.
10.37 Registration Rights Agreement, dated as of November 22, 1996, among the Company,
Mutual Shares Fund, Mutual Qualified Fund, Mutual Beacon Fund, Mutual Discovery
Fund, Mutual European Fund, The Orion Fund Limited, Mutual Shares Securities Fund
and Mutual Discovery Securities Fund, incorporated by reference to Exhibit 10.37 to
the Company's Registration Statement on Form S-3 as declared effective by the
Commission on April 18, 1997.
10.38 Amendment No. 3, dated as of December 30, 1996, to the Purchase and Sale Agreement,
dated as of February 2, 1996, between CSC and Greenwich Capital Financial Products,
Inc., incorporated by reference to Exhibit 10.38 to the Company's Registration
Statement on Form S-3 as declared effective by the Commission on April 18, 1997.
10.39 Amendment No. 4, dated as of December 31, 1996, to the Purchase and Sale Agreement,
dated as of February 2, 1996, between CSC and Greenwich Capital Financial Products,
Inc., incorporated by reference to Exhibit 10.39 to the Company's Registration
Statement on Form S-3 as declared effective by the Commission on April 18, 1997.
10.40 Amendment No. 1, dated as of January 13, 1997, to the Senior Secured Credit
Agreement, dated October 30, 1996, among the Company and CIBC Wood Gundy Securities
Corp. and the lenders named therein, incorporated by reference to Exhibit 10.40 to
the Company's Registration Statement on Form S-3 as declared effective by the
Commission on April 18, 1997.
10.41 Lease, dated as of October 1, 1996, between CSC and Reckson Operating Partnership,
L.P., incorporated by reference to Exhibit 10.41 to the Company's Annual Report on
Form 10-K filed with the Commission on March 31, 1997.
</TABLE>
II-5
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.42 Securities Purchase Agreement dated April 9, 1997 by and among the Company and the
purchasers named therein, incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed with the Commission on April 11, 1997.
10.43 Registration Rights Agreement dated April 9, 1997 by and among the Company and the
purchasers named therein, incorporated by reference to Exhibit 4.3 to the Company's
Current Report on Form 8-K filed with the Commission on April 11, 1997.
10.44 Form of Common Stock Purchase Warrant issued in conjunction with the 6% Convertible
Preferred Stock, Series A, incorporated by reference to Exhibit 4.4 to the Company's
Current Report on Form 8-K filed with the Commission on April 11, 1997.
10.45 Indenture, dated as of May 7, 1996, between the Company and The Chase Manhattan
Bank, N.A., incorporated by reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on May 15, 1996.
10.46 Registration Rights Agreement, dated as of April 26, 1996, among the Company,
NatWest Securities Limited, Bear, Stearns & Co. Inc., CIBC Wood Gundy Securities
Corp. and Wasserstein Perella Securities, Inc., incorporated by reference to Exhibit
4.3 to the Company's Quarterly Report on Form 10-Q filed with the Commission on May
15, 1996.
10.47* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as of
July 1, 1995, between CSC and Cheryl P. Carl.
10.48* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as of
July 1, 1995, between CSC and Eric S. Goldstein.
10.49* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as of
July 1, 1995, between CSC and Jonah L. Goldstein.
10.50* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as of
November 1, 1992, between CSC and Robert M. Stata, as amended by the Amendment
Agreement, dated as of January 1, 1994.
10.51* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as of
July 1, 1995, between CSC and Steven P. Weiss.
10.52* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as of
January 1, 1996, between CSC and Tim S. Ledwick.
10.53* 1997 Stock Option Plan
12.1* Computations of ratios of earnings to fixed charges
21.1 Subsidiaries of the Company, incorporated by reference to Exhibit 21.1 to the
Company's Registration Statement on Form S-3 as declared effective by the Commission
on April 18, 1997
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG, Registered Auditors
23.3 Consent of BDO Stoy Hayward
23.4 Consent of BDO Stoy Hayward
23.5 Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1)
24.1* Power of Attorney
25.1* Statement of Eligibility of Trustee
99.1 Letter of Transmittal
</TABLE>
- ---------------
+ Confidential treatment has been granted with respect to certain provisions,
the redacted portions of which are indicated by brackets. This Exhibit has
been filed in its entirety separately with the Commission pursuant to an
application for confidential treatment.
* Previously filed.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
II-6
<PAGE> 73
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each posteffective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby further undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
(e) The undersigned registrant undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-7
<PAGE> 74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Village of
Elmsford, State of New York, on August 5, 1997.
CITYSCAPE FINANCIAL CORP.
By: /s/ ROBERT C. PATENT
------------------------------------
Robert C. Patent
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacity indicated on August 5, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -------------------------------------------------
<C> <S>
* Chairman of the Board, Chief Executive Officer,
- ------------------------------------------ President and Director (Principal Executive
Robert Grosser Officer)
/s/ ROBERT C. PATENT Vice Chairman of the Board, Executive Vice
- ------------------------------------------ President and Director
Robert C Patent
* Director
- ------------------------------------------
Asher Fensterheim
* Director
- ------------------------------------------
Jonah L. Goldstein
* Director
- ------------------------------------------
Arthur P. Gould
* Director
- ------------------------------------------
Hollis W. Rademacher
/s/ STEVEN M. MILLER Director
- ------------------------------------------
Steven M. Miller
* Director
- ------------------------------------------
David A. Steene
* Chief Financial Officer (Principal Financial and
- ------------------------------------------ Accounting Officer)
Tim S. Ledwick
*By: /s/ ROBERT C. PATENT
- ------------------------------------------
Robert C. Patent
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 75
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Village of
Elmsford, State of New York, on August 5, 1997.
CITYSCAPE CORP.
By: /s/ ROBERT C. PATENT
------------------------------------
Robert C. Patent
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacity indicated on August 5, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -------------------------------------------------
<C> <S>
* President and Director (Principal Executive
- ------------------------------------------ Officer)
Robert Grosser
/s/ ROBERT C. PATENT Executive Vice President and Director
- ------------------------------------------
Robert C Patent
* Director
- ------------------------------------------
Asher Fensterheim
* Director
- ------------------------------------------
Jonah L. Goldstein
* Director
- ------------------------------------------
Chery P. Carl
* Director
- ------------------------------------------
Steven P. Weiss
* Chief Financial Officer (Principal Financial and
- ------------------------------------------ Accounting Officer)
Tim S. Ledwick
*By: /s/ ROBERT C. PATENT
- ------------------------------------------
Robert C. Patent
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 76
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ---------------------------------------------------------------------------------
<C> <S>
3.1* Certificate of Incorporation of the Company, as amended.
3.2 Bylaws of the Company, as amended, incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement of Form S-1 as declared effective by the
Commission on December 20, 1995.
3.3 Certificate of Designation of 6% Convertible Preferred Stock, Series A of the
Company, incorporated by reference to Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the Commission on April 11, 1997.
4.1* Indenture, dated as of May 14, 1997, among the Company, CSC and The Chase
Manhattan Bank.
4.2* Registration Rights Agreement, dated as of May 14, 1997, among the Company, CSC,
CIBC Wood Gundy Securities Corp., Bear, Stearns and Co. Inc., and Oppenheimer &
Co., Inc.
5.1 Opinion of Gibson, Dunn & Crutcher LLP.
8.1* Opinion of Gibson, Dunn & Crutcher LLP relating to tax matters.
10.1 Lease Agreement, dated as of September 30, 1993, between CSC and Taxter Park
Associates, as amended by the First Amendment to Lease, dated as of April 19,
1994, and the Second Amendment to Lease, dated as of May 12, 1995, incorporated
by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1
as declared effective by the Commission on December 20, 1995.
10.2 Sublease Agreement between KLM Royal Dutch Airlines and CSC, dated as of December
5, 1994, incorporated by reference to Exhibit 10.2 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.3 Employment Agreement, dated as of January 1, 1995, between CSC and Robert
Grosser, incorporated by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.4 Employment Agreement, dated as of January 1, 1995, between CSC and Robert C.
Patent, incorporated by reference to Exhibit 10.4 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.5 Employment Agreement, dated as of November 1, 1992, between CSC and Robert M.
Stata, as amended by the Amendment Agreement, dated as of January 1, 1994,
incorporated by reference to Exhibit 10.5 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.6 Employment Agreement, dated as of July 1, 1995, between CSC and Cheryl P. Carl,
incorporated by reference to Exhibit 10.6 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.7 Employment Agreement, dated as of July 1, 1995, between CSC and Eric S.
Goldstein, incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-1 as declared effective by the Commission on
December 20, 1995.
10.8 Employment Agreement, dated as of July 1, 1995, between CSC and Steven Weiss,
incorporated by reference to Exhibit 10.8 to the Company's Registration Statement
on Form S-1 as declared effective by the Commission on December 20, 1995.
10.9 Employment Agreement, dated as of July 1, 1995, between CSC and Jonah L.
Goldstein, incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-1 as declared effective by the Commission on
December 20, 1995.
10.10 Standby Financing and Investment Banking Services Agreement, dated as of June 24,
1994, between CSC and ContiTrade, incorporated by reference to Exhibit 10.15 to
the Company's Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ---------------------------------------------------------------------------------
<C> <S>
10.11 Revolving Credit, Security, and Term Loan Agreement, dated as of June 30, 1995
among CSC, the Company, CoreStates Bank, N.A., Harris Trust and Savings Bank, NBD
Bank and NatWEST Bank N.A., as amended by Amendment No. 1 to the Revolving Credit
Agreement, dated as of August 20, 1995, incorporated by reference to Exhibit
10.19 to the Company's Registration Statement on Form S-1 as declared effective
by the Commission on December 20, 1995.
10.12 The Company's 1995 Stock Option Plan, incorporated by reference to Exhibit 10.20
to the Company's Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.13 The Company's 1995 Non-Employee Directors Stock Option Plan, incorporated by
reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 as
declared effective by the Commission on December 20, 1995.
10.14+ Mortgage Loan Purchase Agreement, dated as of May 26, 1995, between CSC-UK and
Greenwich, incorporated by reference to Exhibit 10.29 to the Company's
Registration Statement on Form S-1 as declared effective by the Commission on
December 20, 1995.
10.15+ Letter, dated as of May 26, 1995, from Greenwich to CSC-UK regarding purchase
commitment with respect to first and second mortgage loans located in the United
Kingdom, incorporated by reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.16+ Servicing Agreement, dated as of May 26, 1995, among CSC-UK, City Mortgage
Servicing Limited and Greenwich, incorporated by reference to Exhibit 10.31 to
the Company's Registration Statement on Form S-1 as declared effective by the
Commission on December 20, 1995.
10.17 Stock Purchase Agreement, dated as of September 29, 1995, among the Company,
David Steene, Martin Brand and Gerald Epstein, incorporated by reference to
Exhibit 10.32 to the Company's Registration Statement on Form S-1 as declared
effective by the Commission on December 20, 1995.
10.18 Service Agreement, dated as of April 4, 1995, between CSC-UK and David Steene,
incorporated by reference to Exhibit 10.33 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.19 Service Agreement, dated as of April 5, 1995, between CSC-UK and Martin Brand,
incorporated by reference to Exhibit 10.34 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.20 Service Agreement, dated as of April 5, 1995, between CSC-UK and Gerald Epstein,
incorporated by reference to Exhibit 10.35 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.21 Agreement, dated as of May 1, 1995, between CSC-UK and J.L.B. Equities, Inc.,
incorporated by reference to Exhibit 10.36 to the Company's Registration
Statement on Form S-1 as declared effective by the Commission on December 20,
1995.
10.22 Stock Option Agreement, dated as of March 6, 1996, by and among the Company,
CSC-UK and Messrs. Jaye and Johnson, incorporated by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K filed with the Commission on March 14,
1996.
10.23 Asset Purchase Agreement, dated March 6, 1996, by and among CSC-UK, J&J, UK
Credit Corporation Limited ("UK Credit") and certain shareholders of UK Credit,
incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form
8-K filed with the Commission on March 14, 1996.
10.24+ Letter Agreement, dated as of March 28, 1996, from Greenwich International, Ltd.
to CSC-UK regarding purchase commitment with respect to first and second mortgage
loans located in the United Kingdom, incorporated by reference to Exhibit 10.46
to the Company's Annual Report on Form 10-K/A filed with the Commission on
November 24, 1996.
10.25 Letter Agreement, dated March 28, 1996, between Greenwich and CSC-UK regarding
termination of prior agreement, incorporated by reference to Exhibit 10.46 to the
Company's Annual Report on Form 10-K filed with the Commission on April 1, 1996.
10.26 Agreement for the Sale and Purchase of the Entire Issued Share Capital of
Heritable Group Limited, dated June 14, 1996, incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission
on June 28, 1996.
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ---------------------------------------------------------------------------------
<C> <S>
10.27 Third Amendment to Lease, dated as of April 17, 1996, between CSC and Taxter Park
Associates, incorporated by reference to Exhibit 10.53 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on August 14, 1996.
10.28 Lease, dated as of April 18, 1996, among The Standard Life Assurance Company,
City Mortgage Servicing Limited and CSC-UK, incorporated by reference to Exhibit
10.54 to the Company's quarterly Report on Form 10-Q filed with the Commission on
August 14, 1996.
10.29 Purchase and Sale Agreement, dated June 20, 1996 and effective as of February 2,
1996, between CSC and Greenwich Capital Financial Products, Inc., incorporated by
reference to Exhibit 10.55 to the Company's Quarterly Report on Form 10-Q filed
with the Commission on August 14, 1996.
10.30 Lease Agreement, dated as of July 7, 1996, between CSC and Robert Martin Company,
incorporated by reference to Exhibit 10.56 to the Company's Quarterly Report on
Form 10-Q filed with the Commission on August 14, 1996.
10.31 Loan Agreement, dated as of August 6, 1996, between CSC and CoreStates,
incorporated by reference to Exhibit 10.31 to the Company's Registration
Statement on Form S-3 as declared effective by the Commission on April 18, 1997.
10.32 Employment Agreement, dated as of January 1, 1996, between CSC and Tim S.
Ledwick, incorporated by reference to Exhibit 10.32 to the Company's Registration
Statement on Form S-3 as declared effective by the Commission on April 18, 1997.
10.33 Employment Agreement, dated as of February 1, 1996, between CSC and Robert J.
Blackwell, incorporated by reference to Exhibit 10.33 to the Company's
Registration Statement on Form S-3 as declared effective by the Commission on
April 18, 1997.
10.34 Amendment No. 1 dated as of August 30, 1996, to the Purchase and Sale Agreement,
dated as of February 2, 1996, between CSC and Greenwich Capital Financial
Products, Inc., incorporated by reference to Exhibit 10.63 to Amendment No. 1 to
the Company's Registration Statement on Form S-1 filed with the Commission on
September 27, 1996.
10.35 Senior Secured Credit Agreement, dated October 30, 1996, among the Company and
CIBC Wood Gundy Securities Corp. and the lenders named therein, incorporated by
reference to Exhibit 10.60 to the Company's Quarterly Report on Form 10-Q filed
with the Commission on November 19, 1996.
10.36 Amendment No. 2, dated as of October 30, 1996, to the Purchase and Sale
Agreement, dated as of February 2, 1996, between CSC and Greenwich Capital
Financial Products, Inc., incorporated by reference to Exhibit 10.62 to the
Company's Quarterly Report on Form 10-Q filed with the Commission on November 19,
1996.
10.37 Registration Rights Agreement, dated as of November 22, 1996, among the Company,
Mutual Shares Fund, Mutual Qualified Fund, Mutual Beacon Fund, Mutual Discovery
Fund, Mutual European Fund, The Orion Fund Limited, Mutual Shares Securities Fund
and Mutual Discovery Securities Fund, incorporated by reference to Exhibit 10.37
to the Company's Registration Statement on Form S-3 as declared effective by the
Commission on April 18, 1997.
10.38 Amendment No. 3, dated as of December 30, 1996, to the Purchase and Sale
Agreement, dated as of February 2, 1996, between CSC and Greenwich Capital
Financial Products, Inc., incorporated by reference to Exhibit 10.38 to the
Company's Registration Statement on Form S-3 as declared effective by the
Commission on April 18, 1997.
10.39 Amendment No. 4, dated as of December 31, 1996, to the Purchase and Sale
Agreement, dated as of February 2, 1996, between CSC and Greenwich Capital
Financial Products, Inc., incorporated by reference to Exhibit 10.39 to the
Company's Registration Statement on Form S-3 as declared effective by the
Commission on April 18, 1997.
10.40 Amendment No. 1, dated as of January 13, 1997, to the Senior Secured Credit
Agreement, dated October 30, 1996, among the Company and CIBC Wood Gundy
Securities Corp. and the lenders named therein, incorporated by reference to
Exhibit 10.40 to the Company's Registration Statement on Form S-3 as declared
effective by the Commission on April 18, 1997.
10.41 Lease, dated as of October 1, 1996, between CSC and Reckson Operating
Partnership, L.P., incorporated by reference to Exhibit 10.41 to the Company's
Annual Report on Form 10-K filed with the Commission on March 31, 1997.
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ---------------------------------------------------------------------------------
<C> <S>
10.42 Securities Purchase Agreement dated April 9, 1997 by and among the Company and
the purchasers named therein, incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed with the Commission on April 11, 1997.
10.43 Registration Rights Agreement dated April 9, 1997 by and among the Company and
the purchasers named therein, incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed with the Commission on April 11, 1997.
10.44 Form of Common Stock Purchase Warrant issued in conjunction with the 6%
Convertible Preferred Stock, Series A, incorporated by reference to Exhibit 4.4
to the Company's Current Report on Form 8-K filed with the Commission on April
11, 1997.
10.45 Indenture, dated as of May 7, 1996, between the Company and The Chase Manhattan
Bank, N.A., incorporated by reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on May 15, 1996.
10.46 Registration Rights Agreement, dated as of April 26, 1996, among the Company,
NatWest Securities Limited, Bear, Stearns & Co. Inc., CIBC Wood Gundy Securities
Corp. and Wasserstein Perella Securities, Inc., incorporated by reference to
Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q filed with the
Commission on May 15, 1996.
10.47* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as
of July 1, 1995, between CSC and Cheryl P. Carl.
10.48* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as
of July 1, 1995, between CSC and Eric S. Goldstein.
10.49* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as
of July 1, 1995, between CSC and Jonah L. Goldstein.
10.50* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as
of November 1, 1992, between CSC and Robert M. Stata, as amended by the Amendment
Agreement, dated as of January 1, 1994.
10.51* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as
of July 1, 1995, between CSC and Steven P. Weiss.
10.52* Amendment, dated as of September 3, 1996, to the Employment Agreement, dated as
of January 1, 1996, between CSC and Tim S. Ledwick.
10.53* 1997 Stock Option Plan
12.1* Computations of ratios of earnings to fixed charges
21.1 Subsidiaries of the Company, incorporated by reference to Exhibit 21.1 to the
Company's Registration Statement on Form S-3 as declared effective by the
Commission on April 18, 1997
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG, Registered Auditors
23.3 Consent of BDO Stoy Hayward
23.4 Consent of BDO Stoy Hayward
23.5 Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1)
24.1* Power of Attorney
25.1* Statement of Eligibility of Trustee
99.1 Letter of Transmittal
</TABLE>
- ---------------
+ Confidential treatment has been granted with respect to certain provisions,
the redacted portions of which are indicated by brackets. This Exhibit has
been filed in its entirety separately with the Commission pursuant to an
application for confidential treatment.
* Previously filed.
<PAGE> 1
Exhibit 5.1
August 5, 1997
C 15566-00015
(212) 351-4000
Cityscape Financial Corp.
Cityscape Corp.
565 Taxter Road
Elmsford, New York 10523
Re: 12-3/4% Series A Senior Notes due 2004
Registration Statement on Form S-4
Ladies and Gentlemen:
At your request, we have examined the Registration Statement
on Form S-4 (the "Registration Statement") of Cityscape Financial Corp., a
Delaware corporation (the "Company") and Cityscape Corp., a New York
corporation ("CSC"), which the Company and CSC have filed with the
Securities and Exchange Commission (the "Commission") in connection with
the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of up to $300,000,000 aggregate principal amount of the
Company's 12-3/4% Series A Senior Notes due 2004 (the "Exchange Notes") and
the guarantee of the Exchange Notes by CSC. The Exchange Notes are to be
issued in exchange for an equal aggregate principal amount of the Company's
outstanding 12-3/4% Senior Notes due 2004 (the "Original Notes") pursuant
to the Registration Rights Agreement dated as of May 14, 1997 among the
Company, CSC, CIBC Wood Gundy Securities Corp., Bear, Stearns & Co. Inc.
and Oppenheimer & Co., Inc. The Exchange Notes will be guaranteed on a
senior basis by CSC (the "Guarantee"). The Exchange Notes are to be issued
by the Company pursuant to the terms of an Indenture (the "Indenture")
dated as of May 14, 1997 among the Company, CSC and The Chase Manhattan
Bank, as Trustee (the "Trustee").
For the purposes of the opinion set forth below, we have
examined the proceedings taken or proposed to be taken by the Company and
CSC in connection with the issuance of the Exchange Notes and the
Guarantee. In arriving at the following opinion, we have relied, among
other things, upon our examination of such corporate records of the Company
and CSC and such certificates of public officials and of officers of the
Company as we have deemed appropriate. In such examination, we have assumed
the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. We have also assumed with
your permission that the terms of the Original Notes and the Exchange Notes
and the Guarantee have been established in accordance with the terms of the
Indenture, and that their issuance and sale
<PAGE> 2
Cityscape Financial Corp.
Cityscape Corp.
August 5, 1997
Page 2
(i) did not and will not violate any applicable law or result in a default
under or breach of any agreement or instrument binding upon the Company or
CSC and (ii) complied and will comply with any requirement or restriction
imposed by any court or governmental body having jurisdiction over the
Company or CSC. In addition, we have assumed that the Indenture has been
duly authorized, executed and delivered by the Trustee and constitutes the
legal, valid and binding agreement of the Trustee.
Based upon the foregoing examination and in reliance thereon,
and subject to the assumptions stated and relying on statements of fact
contained in the documents that we have examined, and subject to the
completion prior to the issuance of the Exchange Notes and the Guarantee of
such proceedings now contemplated by the Company or CSC and subject to the
issuance by the Commission of an order declaring the Registration Statement
effective, it is our opinion that the Exchange Notes and the Guarantee,
when issued in accordance with the terms of the Indenture, duly executed by
the Company and CSC, respectively, and in the case of the Exchange Notes,
duly authenticated by the Trustee, and issued and delivered against
exchange of the Original Notes in accordance with the terms set forth in
the prospectus that forms a part of the Registration Statement, will
constitute valid and binding obligations of the Company and CSC,
respectively.
Our opinion is subject to: (i) the effect of applicable
bankruptcy, reorganization, insolvency, moratorium, arrangement and other
laws affecting creditors' rights, including, without limitation, the
effect of statutory or other laws regarding fraudulent conveyances,
fraudulent transfers and preferential transfers; (ii) the application of
general principles of equity whether considered in a case or proceeding at
law or in equity, including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing; (iii) the qualification that
indemnification provisions may be unenforceable to the extent that such
indemnification may be held to be in violation of or against public
policy, including, without limitation, limitations under certain
circumstances on enforceability of provisions indemnifying a party against
loss attributable to or liability for its own negligent acts; and (iv) our
assumption that there exist no agreements, understandings or negotiations
among the parties to the Indenture and the Registration Rights Agreement
that would modify the terms thereof or the respective rights or
obligations of the parties thereunder.
Furthermore, the opinion herein expressed is subject to the
qualification that we express no opinion as to:
(a) The legality, validity, binding effect or enforceability
(whether according to its terms or otherwise) of any provision of the
Exchange Notes or the Guarantee to the effect that rights or remedies are
not exclusive, that every right or remedy is cumulative and may be
exercised in addition to any other right or remedy, that the election of
some particular remedy does not preclude recourse to one or more other
remedies or that failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of any such right or remedy.
(b) The legality, validity, binding effect or enforceability
of any waiver under the Exchange Notes or the Guarantee or any consent
thereunder relating to the rights of the Company or CSC party thereto
existing, or duties owing to it, as a matter of law, except to the extent
that the Company or CSC can waive such rights or duties or give such
consent
<PAGE> 3
Cityscape Financial Corp.
Cityscape Corp.
August 5, 1997
Page 3
under applicable law and has effectively made such waiver or given
such consent. We express no opinion as to the effectiveness of any waiver
or consent contained in the Exchange Notes or the Guarantee relating to
such rights or duties that is broadly or vaguely stated or does not
describe the right or duty purportedly waived to which such consent relates
with reasonable specificity. Without limitation, we also express no opinion
as to any provision of the Exchange Notes or the Guarantee waiving the
right to object to venue or with respect to the jurisdiction of the United
States District Court for the Southern District of New York.
(c) Any provision of the Exchange Notes or the Guarantee
requiring written amendments or waivers of such document insofar as it
suggests that oral or other modifications, amendments or waivers could not
effectively be agreed upon by the parties or that the doctrine of
promissory estoppel might not apply.
(d) The legality, validity, binding effect or enforceability
of any rights of setoff, other than as provided by Section 151 of the
Debtor and Creditor Law of the State of New York, as interpreted by
applicable judicial decisions.
(e) The effect on the enforceability of the Guarantee against
CSC of any facts or circumstances that would constitute a defense to the
obligation of a surety, unless such defense has been waived effectively by
CSC, to the extent that any of CSC's obligations under such Guarantee (i)
constitute obligations to answer for the debt of another person or (ii)
result from subordination to any of the obligations to the Trustee or the
Noteholders under the Guarantee of any of its rights as against any other
person.
We render no opinion herein as to matters involving the laws
of any jurisdiction other than the law of the United States of America and
the State of New York and the General Corporation Law of the State of
Delaware, all as in effect as of the date hereof. In rendering this
opinion, we assume no obligation to revise or supplement this opinion in
the event of future changes in the law or interpretation thereof with
respect to circumstances or events that may occur subsequent to the date
hereof.
We consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under
the caption "Legal Matters" in the Registration Statement and the
prospectus which forms a part thereof. In giving these consents, we do not
admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act or the Rules and Regulations of the
Commission promulgated thereunder.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cityscape Financial Corp.:
We consent to the incorporation by reference in the Registration Statement
on Form S-4 (No. 333-30115) of our report dated February 28, 1997, which report
makes reference to the report of other auditors, relating to the consolidated
statements of financial condition of Cityscape Financial Corp. and its
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1996, which report appears in
the December 31, 1996 annual report on Form 10-K of Cityscape Financial Corp.,
and to the reference to our firm under the heading "Experts" in the Registration
Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
August 5, 1997
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cityscape Financial Corp.:
We consent to the incorporation by reference in the Registration Statement
on Form S-4 (No. 333-30115) of our report dated April 2, 1996, relating to the
consolidated statements of financial condition of Heritable Finance Limited as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995, which report appears in the December
31, 1996 annual report on Form 10-K of Cityscape Financial Corp., and to the
reference to our firm under the heading "Experts" in the Registration Statement.
/s/ KPMG
KPMG
Chartered Accountants
Registered Auditors
London, United Kingdom
August 5, 1997
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cityscape Financial Corp.:
We consent to the incorporation by reference in the Registration Statement
on Form S-4 of Cityscape Financial Corp. of our report dated November 30, 1995
for the three years ended September 30, 1995 relating to J&J Securities Limited,
which report appears in the December 31, 1996 annual report on Form 10-K of
Cityscape Financial Corp, and to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ BDO STOY HAYWARD
BDO STOY HAYWARD
London, England
August 4, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cityscape Financial Corp.:
We consent to the incorporation by reference in the Registration Statement
on Form S-4 of Cityscape Financial Corp. of our report dated March 27, 1996,
which report appears in the December 31, 1996 annual report on Form 10-K of
Cityscape Financial Corp, and to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ BDO STOY HAYWARD
BDO STOY HAYWARD
London, England
August 4, 1997
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
CITYSCAPE FINANCIAL CORP.
OFFER FOR ALL OUTSTANDING
12 3/4% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
12 3/4% SERIES A SENIOR NOTES DUE 2004
PURSUANT TO THE PROSPECTUS
DATED AUGUST 5, 1997
------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON SEPTEMBER 8, 1997, UNLESS THE OFFER IS EXTENDED.
------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT DELIVERY:
- -------------------------------------- --------------------------------------
<S> <C>
THE CHASE MANHATTAN BANK THE CHASE MANHATTAN BANK
450 WEST 33RD STREET, 15TH FLOOR 450 WEST 33RD STREET, 15TH FLOOR
NEW YORK, NEW YORK 10001-2697 NEW YORK, NEW YORK 10001-2697
ATTENTION: GLOBAL TRUST SERVICES ATTENTION: GLOBAL TRUST SERVICES
DOUGLAS LAVELLE DOUGLAS LAVELLE
</TABLE>
CONFIRM BY TELEPHONE:
-----------------------
(212) 946-3009
FACSIMILE TRANSMISSIONS:
--------------------------
(ELIGIBLE INSTITUTIONS ONLY)
(212) 946-8177
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined below) either if Old Notes are to be forwarded herewith or if tenders of
Old Notes are to be made by book-entry transfer to an account maintained by The
Chase Manhattan Bank (the "Exchange Agent") at The Depository Trust Company
("DTC") pursuant to the procedures set forth in "The Exchange
Offer -- Book-Entry Transfer" in the Prospectus and an Agent's Message (as
defined herein) is not delivered.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates and
all other required documents to the Exchange Agent on or prior to the Expiration
Date (as defined in the Prospectus) or who cannot complete the procedures for
book-entry transfer on a timely basis must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
ALL TENDERING HOLDERS COMPLETE THIS BOX:
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
IF BLANK, PLEASE PRINT NAME AND ADDRESS OLD NOTES TENDERED
OF REGISTERED HOLDER. (ATTACH ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT
PRINCIPAL AMOUNT AT MATURITY OF
CERTIFICATE AT MATURITY OF OLD NOTES TENDERED
NUMBER(S)* OLD NOTES (IF LESS THAN ALL)**
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL
AMOUNT
TENDERED:
------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Old Notes may be tendered in whole or in part in denominations of principal
amount at maturity of $1,000 and integral multiples thereof. All Old Notes
held shall be deemed tendered unless a lesser number is specified in this
column. See Instruction 4.
================================================================================
2
<PAGE> 3
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------------------------------------
DTC Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
----------------------------------------------------------------------------
Window Ticket Number (if any)
--------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------------------------------
Name of Institution which Guaranteed Delivery
----------------------------------------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
----------------------------------------------------------------------------
DTC Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
3
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby tenders to Cityscape Financial Corp., a Delaware
corporation (the "Company") the aggregate principal amount at maturity of the
Company's 12 3/4% Senior Notes due 2004 (the "Old Notes") in exchange for a like
aggregate principal amount at maturity of the Company's 12 3/4% Series A Senior
Notes due 2004 (the "New Notes") which have been registered under the Securities
Act of 1933 (the "Securities Act"), upon the terms and subject to the conditions
set forth in the Prospectus dated August 5, 1997 (as the same may be amended or
supplemented from time to time, the "Prospectus"), receipt of which is
acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, SALE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED
HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT (AS DEFINED IN THE PROSPECTUS). THE UNDERSIGNED
HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer -- Procedures for Tendering
Old Notes" in the Prospectus and in the instruction will, upon the Company's
acceptance for exchange of such tendered Old Notes, constitute a binding
agreement between the undersigned and the Company upon the terms and subject to
the conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, the Company may not be
required to accept for exchange any of the Old Notes tendered hereby.
4
<PAGE> 5
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions" below, please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY OR CITYSCAPE CORP. ("CSC") WITHIN THE MEANING OF RULE
405 UNDER THE SECURITIES ACT, (II) ANY NEW NOTES TO BE RECEIVED BY THE
UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE
UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE
IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE
RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A
BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE
IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES.
BY TENDERING OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER
OF TRANSMITTAL, A HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND
AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE
DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO
THIRD PARTIES, THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY
AS A NOMINEE, OR (B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES
AND IT WILL DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME)
MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF
SUCH NEW NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE COMPANY AND CSC HAVE AGREED THAT, SUBJECT TO THE PROVISIONS OF THE
REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS
DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR
OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING
BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING 180 DAYS AFTER THE EXPIRATION DATE
(SUBJECT TO EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE
PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH NEW NOTES HAVE BEEN DISPOSED OF BY
SUCH PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH BROKER-DEALER WHO
ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH OLD
NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR DELIVERING AN AGENT'S MESSAGE
IN LIEU THEREOF, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE
HAPPENING OF ANY EVENT OR INFORMATION BECOMING KNOWN THAT REQUIRES THE MAKING OF
ANY CHANGES IN, OR AMENDMENTS TO THE REGISTRATION STATEMENT, PROSPECTUS OR
DOCUMENTS SO THAT, IN THE CASE OF THE REGISTRATION STATEMENT, IT WILL NOT
CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL
FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN
NOT MISLEADING, AND THAT IN THE CASE OF THE PROSPECTUS, IT WILL NOT CONTAIN ANY
UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL FACT REQUIRED
TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE
OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS
AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES
PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE
PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF
THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE
COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE
CASE MAY BE. IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE NEW
NOTES, IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE DURING WHICH
PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION
WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND
INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN
PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR
AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF THE NEW NOTES OR TO AND
INCLUDING THE DATE ON WHICH THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF NEW
NOTES MAY BE RESUMED, AS THE CASE MAY BE.
5
<PAGE> 6
As a result, a Participating Broker-Dealer who intends to use the
Prospectus in connection with resales of New Notes received in exchange for Old
Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
above or may be delivered to the Exchange Agent at the address set forth in the
Prospectus under "The Exchange Offer--Exchange Agent."
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest payments on such Old Notes and the undersigned waives the right
to receive any interest payment on such Old Notes accumulated from and including
May 14, 1997. Accordingly, holders of New Notes as of the record date for the
payment of interest on December 1, 1997 will be entitled to interest accumulated
from and including May 14, 1997.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment and transfer of the Old
Notes tendered hereby. All authority herein conferred or agreed to be conferred
in this Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of the undersigned.
Except as stated in the Prospectus, this tender is irrevocable.
6
<PAGE> 7
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificates(s) for the Old Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certificates and other information as may be required by the Company or
the Exchange Agent to comply with the restrictions on transfer applicable to the
Old Notes). If signature is by an attorney-in-fact, executor, administrator,
trustee, guardian, officer of a corporation or another acting in a fiduciary
capacity or representative capacity, please set forth the signer's full title.
See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date
- --------------------------- , 1997
Name(s) ------------------------------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------------------------------
Area Code(s) and Telephone Number
---------------------------------------------------
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature
----------------------------------------------------------------
Name --------------------------------------------------------------------------
(PLEASE PRINT)
Date
- --------------------------- , 1997
Capacity or Title
-------------------------------------------------------------------
Name of Firm
---------------------------------------------------------------------
Address-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-----------------------------------------------------
7
<PAGE> 8
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES
TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX ABOVE.
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes are to be issued in the name of
someone other than the registered holder of the Old Notes whose name(s)
appear(s) above.
Issue New Notes to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes and/or any Old Notes that are not
tendered are to be sent to someone other than the registered holder of the
Old Notes whose name(s) appear(s) above, or to the registered holder(s) at
an address other than that shown above.
Mail:
[ ] New Notes to:
[ ] Old Notes not tendered to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
------------------------------------------------------------
8
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (i) tenders
are to be made pursuant to the procedures for tender by book-entry transfer set
forth in "The Exchange Offer -- Book-Entry Transfer" in the Prospectus and an
Agent's Message is not delivered or (ii) Certificates are to be forwarded
herewith. Timely confirmation of a book-entry transfer of such Old Notes into
the Exchange Agent's account at DTC (a "book-entry confirmation"), or
Certificates as well as this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be received
by the Exchange Agent at its address set forth herein on or prior to the
Expiration Date. Tenders by book-entry transfer may also be made by delivering
an Agent's Message in lieu of this Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from the DTC participant, which
acknowledgment states that such participant has received and agrees to be bound
by the Letter of Transmittal (including the representations contained herein)
and that the Company and CSC may enforce the Letter of Transmittal against such
participant. Old Notes may be tendered in whole or in part in denominations of
principal amount at maturity of $1,000 and integral multiples thereof.
Holders who wish to tender their Old Notes and (i) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, (ii) who
cannot deliver their Old Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
(iii) whose Old Notes are not immediately available may tender their Old Notes
by properly completing and duly executing a Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus. Pursuant to such
procedures: (a) such tender must be made by or through an Eligible Institution
(as defined below); (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying this Letter of
Transmittal, must be received by the Exchange Agent on or prior to the
Expiration Date; and (c) the Certificates (or a book-entry confirmation)
representing tendered Old Notes, in proper form for transfer, together with a
Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof),
properly completed and duly executed, with any required signature guarantees and
any other documents required by this Letter of Transmittal, must be received by
the Exchange Agent within three New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
9
<PAGE> 10
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Notes) of Old Notes tendered herewith, unless such holder(s) has
completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes Tendered" is inadequate, the Certificate number(s)
and/or the aggregate principal amount at maturity of Old Notes and any other
required information should be listed on a separate signed schedule which is
attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in denominations of principal amount at maturity of $1,000 and
integral multiples thereof. If less than all the Old Notes evidenced by any
Certificate submitted are to be tendered, fill in the aggregate principal amount
at maturity of Old Notes which are to be tendered in the box entitled "Principal
Amount at Maturity of Old Notes Tendered." In such case, new Certificate(s) for
the remainder of the Old Notes that were evidenced by your old Certificate(s)
will be sent to the holder of the Old Notes, promptly after the Expiration Date,
unless the appropriate boxes on this Letter of Transmittal are completed. All
Old Notes represented by Certificates delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at its address set forth above or in the Prospectus on or prior
to the Expiration Date. Any such notice of withdrawal must specify the name of
the person who tendered the Old Notes to be withdrawn, the aggregate principal
amount at maturity of Old Notes to be withdrawn, and (if Certificates for Old
Notes have been tendered) the name of the registered holder of the Old Notes as
set forth on the Certificates for the Old Notes, if different from that of the
person who tendered such Old Notes. If Certificates for the Old Notes have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Notes, the tendering holder
must submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "The Exchange
Offer -- Book-Entry Transfer," the notice of withdrawal must specify the name
and number of the account at DTC to be credited with the withdrawal of Old
Notes, in which case a notice of withdrawal will be effective if delivered to
the Exchange Agent by written, telegraphic, telex or facsimile transmission on
or prior to the Expiration Date. Withdrawals of tenders of Old Notes may not be
rescinded. Old Notes properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described in
the Prospectus under "The Exchange Offer -- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
10
<PAGE> 11
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons' authority
to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or
separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Exchange Agent may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC unless the appropriate boxes on this Letter of Transmittal are
completed. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right, in its sole and absolute discretion, to reject any and all
tenders determined by it not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company, be unlawful. The
Company also reserves the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer set forth in the Prospectus under
"The Exchange Offer -- Certain Conditions to the Exchange Offer" or any
conditions or irregularity in any tender of Old Notes of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders. The Company's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Old Notes will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived. Neither the Company, any affiliates or assigns of the Company,
the Exchange Agent, nor any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
11
<PAGE> 12
9. WAIVER OF CONDITIONS. The Company reserves the absolute right, subject
to applicable law, to waive satisfaction of any or all conditions enumerated in
the Prospectus.
10. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of Old Notes, by execution of
this Letter of Transmittal, shall waive any right to receive notice of the
acceptance of Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
12. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
13. TAX IDENTIFICATION NUMBER. Federal income tax law generally requires
that a tendering holder whose Old Notes are accepted for exchange must provide
the Company (as payer) with such holder's correct Taxpayer Identification Number
("TIN") on Substitute Form W-9 below, which in the case of a tendering holder
who is an individual, is his or her social security number. If the Company is
not provided with the current TIN or an adequate basis for an exemption, such
tendering holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to such tendering holder of New Notes may be
subject to backup withholding in an amount equal to 31% of all reportable
payments made after the exchange. If withholding results in an overpayment of
taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends, or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must provide the Company a completed Form W-8,
Certificate of Foreign Status. These forms may be obtained from the Exchange
Agent. If the Old Notes are in more than one name or are not in the name of the
actual owner, such holder should consult the W-9 Guidelines for information on
which TIN to report. If such holder does not have a TIN, such holder should
consult the W-9 Guidelines for instructions on applying for a TIN, check the box
in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
12
<PAGE> 13
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 13)
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------
PAYER'S NAME: CITYSCAPE FINANCIAL CORP.
- -------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN TIN: --------------------------------
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY Social Security Number or
SIGNING AND DATING BELOW. Employer Identification Number
------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 -- TIN Applied For [ ]
INTERNAL REVENUE SERVICE ------------------------------------------------------------------------------
CERTIFICATION:
UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me).
(2) I am not subject to backup withholding either because:
(a) I am exempt from backup withholding, or
(b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup
withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE: DATE: ______________
PAYOR'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER
("TIN") AND CERTIFICATION
- -------------------------------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the IRS that you
are subject to backup withholding because of underreporting of interest or dividends on your tax return and
you have not been notified by the IRS that you are no longer subject to backup withholding.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administrative Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide the number.
SIGNATURE: DATE: ________________________
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
=========================================================
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent
ward, minor, or incompetent person(3)
person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
- ---------------------------------------------------------
9. A valid trust, estate, or The legal entity
pension trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the valid trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 15
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempt from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A dealer in securities or commodities registered in the U.S. or a possession
of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including tax-exempt interest dividends
under section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 16
NOTICE OF GUARANTEED DELIVERY
FOR
OFFER FOR ALL OUTSTANDING
12 3/4% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
12 3/4% SERIES A SENIOR NOTES DUE 2004
OF
CITYSCAPE FINANCIAL CORP.
Registered holders of 12 3/4% Senior Notes due 2004 (the "Old Notes") who
wish to tender their Old Notes in exchange for a like principal amount of
12 3/4% Series A Senior Notes due 2004 (the "New Notes") and whose Old Notes are
not immediately available or who cannot deliver their Old Notes and Letter of
Transmittal or any other documents required by the Letter of Transmittal to The
Chase Manhattan Bank (the "Exchange Agent") prior to the Expiration Date, must
use this Notice of Guaranteed Delivery or one substantially equivalent hereto.
This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission or mail to the Exchange Agent. See "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus.
THE CHASE MANHATTAN BANK
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT DELIVERY:
THE CHASE MANHATTAN BANK THE CHASE MANHATTAN BANK
450 WEST 33RD STREET, 15TH FLOOR 450 WEST 33RD STREET, 15TH FLOOR
NEW YORK, NEW YORK 10001-2697 NEW YORK, NEW YORK 10001-2697
ATTENTION: GLOBAL TRUST SERVICES ATTENTION: GLOBAL TRUST SERVICES
DOUGLAS LAVELLE DOUGLAS LAVELLE
</TABLE>
CONFIRM BY TELEPHONE:
(212) 946-3009
FACSIMILE TRANSMISSIONS:
(ELIGIBLE INSTITUTIONS ONLY)
(212) 946-8177
----------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 17
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount at maturity of Old Notes
indicated below, upon the terms and subject to the conditions contained in the
Registration Statement on Form S-4 filed by Cityscape Financial Corp., a
Delaware corporation, with the Securities and Exchange Commission (the
"Registration Statement") and the accompanying Prospectus dated August 5, 1997
included therein (the "Prospectus") and the related Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged.
DESCRIPTION OF OLD NOTES TENDERED
<TABLE>
<S> <C> <C>
Name and address of registered Certificate number(s) of Old Principal Amount at Maturity
holder as it appears on the Notes transmitted of Old Notes transmitted
Old Notes
============================== ============================== ==============================
============================== ============================== ==============================
- ------------------------------ ------------------------------ ------------------------------
</TABLE>
<PAGE> 18
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, which is a member of a recognized
Medallion Signature Program approved by the Securities Transfer Association,
Inc. hereby guarantees to deliver to the Exchange Agent the Old Notes tendered
hereby, together with a properly completed and duly executed Letter of
Transmittal, with any required signature guarantees, or an Agent's Message (as
defined in the Letter of Transmittal), and any other required documents, within
three New York Stock Exchange, Inc. trading days after the date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Exchange Agent and must deliver the Letter of Transmittal and
the Old Notes to the Exchange Agent within the time period shown herein. Failure
to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm:
------------------------------------- --------------------------------------------
Authorized Signature
Address: Name:
- -------------------------------------------- --------------------------------------------
Please Type or Print
Title:
- -------------------------------------------- --------------------------------------------
Zip Code
Area Code and
Telephone Number:
-------------------------------- Dated:
------------------------------------- , 1997
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
