<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-27314
AMC FINANCIAL, INC.
<TABLE>
<S> <C>
DELAWARE 11-2994671
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (IRS EMPLOYER IDENTIFICATION NO.)
</TABLE>
565 TAXTER ROAD, ELMSFORD, NEW YORK 10523-2300
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(914) 592-6677
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
CITYSCAPE FINANCIAL CORP.
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF
CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTIONS 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT.
YES X NO
IN OCTOBER 1998, THE REGISTRANT AND ITS WHOLLY-OWNED SUBSIDIARY, EACH FILED
VOLUNTARY PETITIONS FOR RELIEF UNDER CHAPTER 11 OF TITLE 11 OF THE UNITED STATES
CODE WITH THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. THE AMENDED PLAN OF REORGANIZATION BECAME EFFECTIVE ON JULY 1, 1999, AND
ON THAT DATE ALL OF ITS OLD EQUITY SECURITIES WERE CANCELLED AND NEW EQUITY
SECURITIES WERE ISSUED TO HOLDERS OF CLAIMS IN THE BANKRUPTCY.
APPLICABLE ONLY TO CORPORATE ISSUERS:
7,803,488 SHARES $.01 PAR VALUE,
OF NEW COMMON STOCK, WERE OUTSTANDING AS OF AUGUST 2, 1999
<PAGE> 2
AMC FINANCIAL, INC.
(FORMERLY KNOWN AS CITYSCAPE FINANCIAL CORP.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statements of Financial Condition at June 30, 1999 and
December 31, 1998 2
Consolidated Statements of Operations for the three months and
the six months ended June 30, 1999 and 1998 3
Consolidated Statements of Stockholders' Equity (Deficit) for the six months
ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the six months ended June 30,
1999 and 1998 5
Notes to Consolidated Financial Statements 6-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 13-19
AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20
PART II - OTHER INFORMATION 21-26
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMC FINANCIAL, INC.
(FORMERLY KNOWN AS CITYSCAPE FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
COMPANY COMPANY
JUNE 30, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 30,893,014 $ 18,405,426
Interest-only and residual certificates 12,441,939 33,660,930
Mortgage loans held for sale, net 16,490,307 123,345,783
Investment in discontinued operations, net 13,008,401 13,008,401
Income taxes receivable 1,437,288 1,550,107
Other assets 2,543,004 15,598,619
------------- -------------
Total assets $ 76,813,953 $ 205,569,266
============= =============
LIABILITIES
Warehouse financing facilities $ - $ 105,969,355
Accounts payable and other liabilities 16,397,724 19,750,504
Liabilities subject to compromise - 477,424,358
------------- -------------
Total liabilities 16,397,724 603,144,217
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value, 10,000,000 shares authorized; 5,177 shares
issued and outstanding; Liquidation Preference - Series A Preferred Stock,
$7,460,511; Series B Preferred
Stock, $65,239,541 at December 31, 1998 - 52
Common stock, $.01 par value, 25,000,000 shares authorized; 7,803,488
issued and outstanding at June 30, 1999; $.01 par value, 100,000,000
shares authorized; 64,948,969 issued and outstanding at
December 31, 1998 78,035 649,489
Treasury stock, 70,000 shares at December 31, 1998, at cost - (175,000)
Additional paid-in capital 60,338,194 175,304,103
Accumulated deficit - (573,353,595)
------------- -------------
Total stockholders' equity (deficit) 60,416,229 (397,574,951)
------------- -------------
COMMITMENTS AND CONTINGENCIES
------------- -------------
Total liabilities and stockholders' equity (deficit) $ 76,813,953 $ 205,569,266
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
AMC FINANCIAL, INC.
(FORMERLY KNOWN AS CITYSCAPE FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues
(Loss) gain on sale of loans $ (958,717) $ 3,122,835 $ 4,609,295 $ (1,302,212)
Net unrealized loss on valuation of residuals (20,847,449) (11,386,803) (20,847,449) (18,486,803)
Interest 1,046,404 2,884,477 3,328,487 6,086,405
Mortgage origination income - 554,018 - 1,453,326
Other 6,243,867 266,306 7,659,773 499,318
------------- ------------- ------------- -------------
Total revenues (14,515,895) (4,559,167) (5,249,894) (11,749,966)
------------- ------------- ------------- -------------
EXPENSES
Salaries and employee benefits 1,427,944 7,534,494 2,856,989 17,306,373
Interest expense 112,571 13,972,347 1,401,630 28,153,877
Selling expenses 115,481 1,022,648 256,407 1,992,551
Other operating expenses 3,858,852 8,649,832 6,253,145 24,334,301
Restructuring charge 790,000 - 790,000 3,233,760
------------- ------------- ------------- -------------
Total expenses 6,304,848 31,179,321 11,558,171 75,020,862
------------- ------------- ------------- -------------
Loss before reorganization charges, income taxes and
extraordinary item (20,820,743) (35,738,488) (16,808,065) (86,770,828)
Reorganization charges 989,999 - 1,644,058 -
------------- ------------- ------------- -------------
Loss before income taxes and extraordinary item (21,810,742) (35,738,488) (18,452,123) (86,770,828)
Income tax provision 60,000 150,000 67,673 300,059
------------- ------------- ------------- -------------
Loss before extraordinary item (21,870,742) (35,888,488) (18,519,796) (87,070,887)
Gain from discharge of prepetition liabilities, net of taxes 416,094,747 - 416,094,747 -
------------- ------------- ------------- -------------
Net earnings (loss) 394,224,005 (35,888,488) 397,574,951 (87,070,887)
Preferred stock dividends - increase in liquidation preference - 2,090,723 - 3,661,079
Preferred stock - default payments - 4,805,442 - 7,822,216
------------- ------------- ------------- -------------
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 394,224,005 $ (42,784,653) $ 397,574,951 $ (98,554,182)
============= ============= ============= =============
NET EARNINGS (LOSS) PER COMMON SHARE:
Basic NMF(1) NMF(1) NMF(1) NMF(1)
============= ============= ============= =============
Diluted NMF(1) NMF(1) NMF(1) NMF(1)
============= ============= ============= =============
Weighted average number of common shares outstanding:
Basic NMF(1) NMF(1) NMF(1) NMF(1)
============= ============= ============= =============
Diluted NMF(1) NMF(1) NMF(1) NMF(1)
============= ============= ============= =============
</TABLE>
(1) Not Meaningful Figure. See Note 7, "Earnings Per Share".
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
AMC FINANCIAL, INC.
(FORMERLY KNOWN AS CITYSCAPE FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
PREFERRED SHARES COMMON SHARES
------------------------------ ------------------------------ ADDITIONAL
NUMBER NUMBER PAID-IN
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 5,295 $ 53 47,648,738 $ 476,487 $ 175,477,104
Net loss - - - - -
Conversion of preferred stock (118) (1) 17,300,231 173,002 (173,001)
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1998 5,177 $ 52 64,948,969 $ 649,489 $ 175,304,103
============= ============= ============= ============= =============
Balance at December 31, 1998 5,177 $ 52 64,948,969 $ 649,489 $ 175,304,103
Net earnings - - - - -
Extinguishment of old stock (5,177) (52) (64,948,969) (649,489) (175,304,103)
Issuance of new common stock - - 7,803,488 78,035 60,338,194
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1999 0 $ - 7,803,488 $ 78,035 $ 60,338,194
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
RETAINED
EARNINGS
(ACCUMULATED TREASURY
DEFICIT) STOCK TOTAL
------------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1997 $(352,603,652) $ (175,000) $(176,825,008)
Net loss (87,070,887) - (87,070,887)
Conversion of preferred stock - - -
------------- ------------- -------------
Balance at June 30, 1998 $(439,674,539) $ (175,000) $(263,895,895)
============= ============= =============
Balance at December 31, 1998 $(573,353,595) $ (175,000) $(397,574,951)
Net earnings 397,574,951 - 397,574,951
Extinguishment of old stock 175,778,644 175,000 -
Issuance of new common stock - - 60,416,229
------------- ------------- -------------
Balance at June 30, 1999 $ - $ - $ 60,416,229
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
AMC FINANCIAL, INC.
(FORMERLY KNOWN AS CITYSCAPE FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
SIX MONTHS ENDED JUNE 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 397,574,951 $ (87,070,887)
Adjustments to reconcile net earnings (loss) from continuing
operations to net cash provided by (used in) continuing
operating activities:
Depreciation and amortization 367,453 1,365,012
Income taxes payable 210,093 2,406,057
Gain from discharge of prepetition liabilities (416,094,747) -
Decrease in mortgage servicing receivables - 4,969,162
Decrease in interest-only and residual certificates 21,218,991 41,755,338
Proceeds from sale of mortgages 104,576,347 298,107,000
Mortgage origination funds disbursed - (315,435,183)
Other, net 10,582,414 11,905,045
------------- -------------
Net cash provided by (used in) operating activities 118,435,502 (41,998,456)
------------- -------------
Cash flows from investing activities:
Sale from discontinued operations, net - 58,808,583
Sales (purchases) of equipment 21,441 (568,073)
Proceeds from sale of mortgages held for investment - 2,997,382
------------- -------------
Net cash provided by investing activities 21,441 61,237,892
------------- -------------
Cash flows from financing activities:
(Decrease) increase in warehouse financings (105,969,355) 13,666,826
------------- -------------
Net cash (used in) provided by financing activities (105,969,355) 13,666,826
------------- -------------
Net increase in cash and cash equivalents 12,487,588 32,906,262
Cash and cash equivalents at beginning of period 18,405,426 2,594,163
------------- -------------
Cash and cash equivalents at end of period $ 30,893,014 $ 35,500,425
============= =============
Supplemental disclosure of cash flow information:
Income taxes paid during the period $ - $ 1,200
============= =============
Interest paid during the period $ 1,693,980 $ 3,566,045
============= =============
Supplemental schedule of noncash investing and financing activities:
Cancellation of indebtedness $ 476,510,976 $ -
Extinguishment of old stock (175,778,644) -
Issuance of new common stock 60,416,229 -
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
AMC FINANCIAL, INC.
(FORMERLY KNOWN AS CITYSCAPE FINANCIAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
1. Organization
AMC Financial, Inc., formerly known as Cityscape Financial Corp. (the
"Company"), is a consumer finance company which, through its wholly-owned
subsidiary Cityscape Corp. ("CSC"), is in the business of selling and holding in
its portfolio mortgage loans secured primarily by one- to four-family
residences. The Company also had been in the business of originating and
purchasing mortgage loans until the Company suspended indefinitely such business
in November 1998. The majority of the Company's loans were made to owners of
single family residences who use the loan proceeds for such purposes as debt
consolidation and financing of home improvements and educational expenditures,
among others. The Company recently emerged from chapter 11 proceedings (see
Notes 2 and 3). As part of its current operating plan, the Company will be
relocating its operations from Elmsford, New York to Houston, Texas during the
third quarter of 1999.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments consisting of normal recurring accruals, considered necessary for a
fair presentation of the results for the interim period, have been included. The
accompanying consolidated financial statements and the information included
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations" should be read in conjunction with the consolidated
financial statements and related notes of the Company for the year ended
December 31, 1998.
The Company has been reorganized through a plan of reorganization under
chapter 11 of title 11 of the United States Code. Although the plan became
effective on July 1, 1999, the effective date of the plan for accounting
purposes is considered to be June 30, 1999, and accordingly, the Company has
adopted fresh start reporting as of June 30, 1999 (see Note 4). Adjustments were
recorded as of June 30, 1999 to reflect the effects of the consummation of the
plan of reorganization and the implementation of fresh start reporting.
The Company's emergence from chapter 11 proceedings has resulted in a
new reporting entity with no retained earnings or accumulated deficit as of June
30, 1999. Accordingly, the Company's consolidated financial statements for
periods prior to June 30, 1999 will not be comparable to consolidated financial
statements presented on or subsequent to June 30, 1999. A black line has been
drawn on the accompanying consolidated Statements of Financial Condition to
distinguish between the successor Company and the predecessor Company.
Operating results for the three and six months ended June 30, 1998 and
1999 are for the predecessor Company and are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. These
results will not be comparable to those of the successor Company.
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and the liquidation of liabilities and commitments in the normal course
of business. The Company had incurred significant losses from operations for the
years ended December 31, 1998 and 1997. Additionally, the Company emerged from
chapter 11 proceedings on July 1, 1999 and has not had significant operations as
a restructured entity. While a plan for the use of the reorganized Company's
cash and other assets has not been formed, such assets will be available for
general corporate purposes as determined by the Board of Directors of the
reorganized Company, including investments, acquisitions and joint ventures, all
as determined by the
6
<PAGE> 8
Board of Directors to be in the best interests of the reorganized Company. It is
expected that the reorganized Company will reenter the mortgage loan origination
business at some time in the future, based on prevailing industry conditions and
the general business climate.
The consolidated financial statements of the Company include the
accounts of CSC and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain amounts in the statements have been reclassified to conform
with the 1999 classifications.
3. Chapter 11 Proceedings
On October 6, 1998, the Company and CSC filed voluntary petitions in
the United States Bankruptcy Court for the Southern District of New York and
thereafter operated their businesses as debtors-in-possession.
On November 17, 1998, the Company suspended indefinitely all of its
loan origination and purchase activities. The Company's decision was due to its
determination, following discussions with potential lenders regarding
post-reorganization loan warehouse financing, that adequate sources of such
financing were not available. On or about December 18, 1998, the Company funded
the last of the mortgage loans for which it had issued commitments as of
November 17, 1998.
On June 16, 1999, the Bankruptcy Court entered an order confirming the
reorganization plan, as amended. The effective date of the reorganization plan
was July 1, 1999. The reorganization plan provides for substantive consolidation
of the assets of the Company and CSC and for distributions to creditors as
summarized below (which estimated distributions are based upon the Company's and
CSC's estimate of $10.0 million in general unsecured claims that would
ultimately be allowed by the Bankruptcy Court). The reorganization plan provided
that: (i) administrative claims, priority tax claims, bank claims, other secured
claims and priority claims would be paid in full; (ii) holders of the 12 3/4%
Series A Senior Notes due 2004 (the "Notes") would receive in exchange for all
of their claims, in the aggregate 92.48% of the new common stock of the
reorganized company; (iii) holders of the 6% Convertible Subordinated Debentures
due 2006 (the "Convertible Debentures") would receive in exchange for all of
their claims, in the aggregate, 5.43% of the new common stock of the reorganized
company; (iv) holders of general unsecured claims would receive 2.09% of the new
common stock of the reorganized company; and (v) common stock, preferred stock
and warrants of the predecessor Company would be extinguished and holders
thereof would receive no distributions under the reorganization plan.
4. Fresh Start Reporting
As of June 30, 1999, the Company adopted fresh start reporting in
accordance with the American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7"). Fresh start reporting assumes that a new
reporting entity has been created and assets and liabilities should be reported
at their fair values as of the effective date.
The reorganization value of $76.8 million was determined based upon the
Company's estimate of the fair value of its assets as defined in the plan of
reorganization which does not assume any future origination and loan sale
activity. Accordingly, the reorganization value approximates the fair value of
its assets before considering liabilities, which must be assumed and
extinguished pursuant to the terms of the reorganization plan, as amended, and
represents the Company's estimate of the amount a buyer would pay for the assets
after the restructuring.
7
<PAGE> 9
The Company's emergence from chapter 11 proceedings and the adoption of
fresh start reporting resulted in the following adjustments to the Company's
consolidated Statement of Financial Condition as of June 30, 1999:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
COMPANY COMPANY
JUNE 30, FRESH START ADJUSTMENTS JUNE 30,
1999 DEBIT CREDIT 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 30,893,014 $ - $ - $ 30,893,014
Interest-only and residual certificates 12,441,939 - - 12,441,939
Mortgage loans held for sale, net 16,490,307 - - 16,490,307
Investment in discontinued operations, net 13,008,401 - - 13,008,401
Income taxes receivable 1,437,288 - - 1,437,288
Other assets 2,543,004 - - 2,543,004
------------- ------------- ------------- -------------
Total assets $ 76,813,953 $ - $ - $ 76,813,953
============= ============= ============= =============
LIABILITIES
Accounts payable and other liabilities $ 16,397,724 $ - $ - $ 16,397,724
Liabilities subject to compromise 476,510,976 476,510,976 (1) - -
------------- ------------- ------------- -------------
Total liabilities 492,908,700 476,510,976 - 16,397,724
------------- ------------- ------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock 52 52 (2) - -
Common stock 649,489 649,489 (2) 78,035 (3) 78,035
Treasury stock (175,000) - 175,000 (2) -
Additional paid-in capital 175,304,103 175,304,103 (2) 60,338,194 (3) 60,338,194
Accumulated deficit (591,873,391) - 175,778,644 (2) -
416,094,747 (4)
------------- ------------- ------------- -------------
Total stockholders' equity (deficit) (416,094,747) 175,953,644 652,464,620 60,416,229
------------- ------------- ------------- -------------
Total liabilities and stockholders' equity (deficit) $ 76,813,953 $ 652,464,620 $ 652,464,620 $ 76,813,953
============= ============= ============= =============
</TABLE>
(1) To record the discharge of the debt, related interest and other
liabilities as follows:
<TABLE>
<S> <C>
Discharge/extinguishment - Notes $300,000,000
Discharge/extinguishment - Convertible Debentures 129,620,000
Accrued interest on Notes and Convertible
Debentures 39,771,220
Other liabilities discharged 7,119,756
------------
$476,510,976
============
</TABLE>
(2) To eliminate the predecessor Company's stockholder's deficit.
(3) To record the issuance of 7,803,488 shares of new common stock (par
value $0.01 per share).
8
<PAGE> 10
(4) To record the extraordinary gain resulting from the discharge of
indebtedness, calculated as follows:
<TABLE>
<S> <C>
Historical carrying value of
old debt securities $ 429,620,000
Historical carrying value of
related accrued interest 39,771,220
Historical carrying value of
other liabilities 7,119,756
New common stock (7.8 million shares to
creditors) (60,416,229)
-------------
$ 416,094,747
=============
</TABLE>
5. Discontinued Operations
The Company commenced operations in the United Kingdom in May 1995 with
the formation of City Mortgage Corporation Limited ("CSC-UK"), an English
corporation that originated, sold and serviced loans in England, Scotland and
Wales in which the Company initially held a 50% interest and subsequently
purchased the remaining 50%. CSC-UK had no operations and no predecessor
operations prior to May 1995. The Company adopted a plan in March 1998 to sell
the assets of CSC-UK and completed the sale in April 1998. As a result of the
sale, the Company received proceeds, at the time of closing, of $83.8 million,
net of closing costs and other fees. During 1998, the Company received an
additional $4.5 million related to the loan portfolio adjustments. During the
second quarter of 1999, the Company received $3.1 million in settlement of the
assumed liabilities at the date of sale.
The net assets of CSC-UK have been reclassified on the Company's
financial statements as investment in discontinued operations. As of June 30,
1999, the Company's net investment in discontinued operations totaled $13.0
million, representing cash on hand in the discontinued operation of
approximately $12.0 million and net receivables (net of liabilities) due of
approximately $1.0 million. The Company expects to maintain a balance of cash on
hand in the discontinued operations to cover existing and potential liabilities
and costs pending dissolution of CSC-UK and its subsidiaries.
6. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company has not completed its analysis of SFAS No. 133.
7. Earnings Per Share
Effective December 15, 1997, the Company adopted SFAS No. 128,
"Earnings per Share". SFAS No. 128 simplifies the standards for computing
earnings per share ("EPS") previously found in Accounting Principles Board
Opinion No. 15 and makes them comparable to international earnings per share
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator for the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
9
<PAGE> 11
Basic EPS is computed by dividing net earnings applicable to Common
Stock by the weighted average number of Common Stock outstanding during the
period. Diluted EPS is based on the net earnings applicable to Common Stock
adjusted to add back the effect of assumed conversions (e.g., after-tax interest
expense of convertible debt) divided by the weighted average number of Common
Stock outstanding during the period plus the dilutive potential Common Stock
that were outstanding during the period.
The presentation of EPS for the three and six months ended June 30,
1999 and 1998 is not meaningful due to the Company's emergence from chapter 11
proceedings and the implementation of fresh start reporting.
8. Valuation of Residuals
The interests that the Company received upon loan sales through its
securitizations are in the form of interest-only and residual certificates. The
Company's interest-only and residual certificates are comprised of interests in
home equity mortgage loans and "Sav*-A-Loan(R)" mortgage loans (loans generally
made to homeowners with little or no equity in their property but who possess a
favorable credit profile and debt-to-income ratio and who often use the proceeds
from such loans to repay outstanding indebtedness as well as make home
improvements).
In accordance with SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise", the Company accounts for the interest-only and
residual certificates as "securities available for sale" and, as such, they are
recorded at their fair value. Fair value of these certificates is determined
based on various economic factors, including loan types, sizes, interest rates,
dates of origination, terms and geographic locations. The Company also uses
other available information such as reports on prepayment rates, interest rates,
collateral value, economic forecasts and historical default and prepayment rates
of the portfolio under review. If the fair value of the interest-only and
residual certificates is different from the recorded value, the unrealized gain
or loss will be reflected on the Consolidated Statements of Operations.
The table below summarizes the value of the Company's interest-only and
residual certificates by product type:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Home Equity $ 18,838 $ 6,490,461
Sav*-A-Loan (R) 12,423,101 27,170,469
----------- -----------
$12,441,939 $33,660,930
=========== ===========
</TABLE>
The key assumptions used to value the Company's interest-only and
residual certificates at June 30, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
---------- ------------
<S> <C> <C>
Home Equity
Discount Rate 20.0% 20.0%
Constant Prepayment Rate 30.0% 30.0%
Loss Rate Range per Annum 7.3 - 33.0% 7.5 - 7.5%
Sav*-A-Loan(R)
Discount Rate 20.0% 20.0%
Constant Prepayment Rate 19.0% 16.8%
Loss Rate Range per Annum 3.0 - 10.0% 4.5% - 7.0%
</TABLE>
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During the first quarter of 1998, the Company recorded an unrealized
loss on valuation of residuals of $7.1 million which reflected an increase in
the expected loss rate on the Company's home equity securitized loans. As a
result of the increase in the volume of home equity loan liquidations during the
first quarter of 1998 resulting from the Company's increased liquidation
efforts, and corresponding higher losses experienced than previously expected on
such liquidations, the Company increased its loss rate assumption to 3.3% per
annum at March 31, 1998 from 1.7% per annum at December 31, 1997. At March 31,
1998 and December 31, 1997, the Company used a weighted average discount rate of
15% and a weighted average prepayment speed of 31.8%. In the second quarter of
1998, the Company recorded an additional $11.4 million unrealized loss on
valuation of residuals resulting from continued higher than expected losses and
increased prepayment speeds experienced on its home equity securitized loans. As
of June 30, 1998, the Company increased its weighted average loss rate to 4.35%
per annum and increased its weighted average prepayment speed to 34.8% for its
home equity securitized loans and maintained its use of a 15% discount rate.
For the three months ended June 30, 1999, the Company experienced
significant changes in the performance of the underlying pools of mortgages in
both the home equity and Sav*-A-Loan(R) securitizations. As a result of higher
than anticipated losses on all securitizations and higher prepayment speeds on
Sav*-A-Loan(R) securitizations, the Company recorded an unrealized loss on
valuation of residuals of $20.8 million. The Company's loss rate of 7.5% per
annum on its home equity securitizations at March 31, 1999 was increased to
reflect losses ranging from 7.3% to 33.0% per annum at June 30, 1999; the
discount rate of 20% and the weighted average prepayment speed of 30.0% remained
unchanged. The Company also increased its loss rates on the Sav*-A-Loan(R)
securitizations. As of June 30, 1999, the Sav*-A-Loan (R) loss rates range from
3.0% to 10.0% per annum as compared to loss rates ranging from 4.5% to 7.0% at
March 31, 1999; constant prepayment speed was increased from 16.8% to 19.0% and
the discount rate remained constant at 20%.
9. Other Revenues
In the second quarter of 1999, the Company recorded other revenue
totaling $6.1 million representing gain on the sale of its servicer advances
(i.e., claims against securitization trusts for reimbursement of advances made
to such trusts by the Company as servicer). The sale of the Company's servicer
advances was in connection with a consensual resolution of claims asserted by
Harris Trust and Savings Bank, U.S. Bank National Association, Financial
Security Assurance Inc., MBIA Insurance Corporation, The Chase Manhattan Bank
and Financial Guaranty Insurance (collectively, the "Trustees"). Under the terms
of the consensual resolution, the Company transferred a portion of its servicing
rights to Ocwen Federal Bank FSB ("Ocwen FSB") on its home equity
securitizations (95-1, 95-2, 95-3, 96-1, 96-2, 96-3 and 96-4). In June 1999, the
Company transferred these servicing rights, except for the 95-1 trust, to Ocwen
FSB and received a net amount of $14.4 million in cash, resulting in a gain of
$6.1 million, representing net funds received in excess of the Company's
carrying value of servicer advances. In July 1999, the Company transferred the
servicing on the 95-1 trust at an amount equal to the Company's carrying value
of servicer advances. The Company expects to receive the funds from this
transaction in August 1999. Additionally, as stipulated in the agreements, the
securitization trusts established reserve funds to cover existing and potential
legal and other costs to be incurred by the Trustees.
10. Restructuring
In June 1999, the Company announced a restructuring plan that included
the elimination of its servicing function and the relocation of its corporate
office from Elmsford, New York to Houston, Texas. The relocation plan is
expected to be completed during the third quarter of 1999. Accordingly, the
Company has recorded a restructuring charge totaling $790,000 in the second
quarter of 1999. Restructuring charges primarily represent severance obligations
and future lease obligations.
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<PAGE> 13
11. Income Taxes
In accordance with the provisions of Internal Revenue Code Section 382,
utilization of the Company's net operating loss carryforwards is limited in
years following a change in the Company's ownership. The net operating loss
limitation is computed by applying a percentage (approximately 5%, as determined
by the Internal Revenue Code; i.e., the long-term tax-exempt rate determined
under Internal Revenue Code Section 382(f)) to the value of the Company on the
date of the change. The Section 382 limitation limits the use of the net
operating loss carryforward as computed on the date of the change in ownership.
Net operating losses incurred after the date of the change of ownership are not
limited unless another change in ownership occurs. A change in ownership
occurred in October 1997 primarily as a result of conversions of the Company's
6% Convertible Preferred Stock, Series A into the Company's common stock.
Additionally, a change in ownership occurred upon the Company's emergence from
bankruptcy. Accordingly, the Company's use of pre-ownership change net operating
losses and certain other tax attributes (if any), to the extent remaining after
the reduction thereof as a result of the cancellation of indebtedness of the
Company, is limited and generally will not exceed each year the product of the
long-term tax-exempt rate and the value of the Company's stock increased to
reflect the cancellation of indebtedness pursuant to the reorganization plan.
For accounting purposes, the Company established a valuation allowance to offset
the value, if any, of the net operating loss carryforwards.
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<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations 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, but not limited to, the successful sale of
loans in the whole loan sales market, legal proceedings and other matters,
adverse economic conditions, competition and other risks detailed from time to
time in the Company's Securities and Exchange Commission reports. The Company
undertakes no obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of anticipated or unanticipated events.
GENERAL
The Company is a consumer finance company which, through its
wholly-owned subsidiary, CSC, is in the business of selling and holding in its
portfolio mortgage loans secured primarily by one- to four-family residences.
The Company also had been in the business of originating and purchasing such
mortgage loans until the Company indefinitely suspended such business in
November 1998. The majority of the Company's loans were made to owners of single
family residences who use the loan proceeds for such purposes as debt
consolidation and financing of home improvements and educational expenditures,
among others. As part of its current operating plan, the Company will be
relocating its operations from Elmsford, New York to Houston, Texas during the
third quarter of 1999. While a plan for the use of the reorganized Company's
cash and other assets has not been formed, such assets will be available for
general corporate purposes as determined by the Board of Directors of the
reorganized Company, including investments, acquisitions and joint ventures, all
as determined by the Board of Directors to be in the best interests of the
reorganized Company. It is expected that the reorganized Company will reenter
the mortgage loan origination business at some time in the future, based on
prevailing industry conditions and the general business climate. Additionally,
management is currently pursuing plans to re-list the Company on NASDAQ.
The Company primarily generates revenue from gain on sale of loans
recognized from premiums on loans sold through whole loan sales to institutional
purchasers, and interest earned on loans held for sale. Historically, the
Company also recognized gain on sale of loans sold through securitizations,
excess mortgage servicing receivables and fees earned on loans serviced and
origination fees received as part of the loan application process.
As a result of the Company's reorganization efforts and corresponding
bankruptcy filing, during the second quarter of 1999, the Company entered into
agreements to transfer all its servicing rights. The Company's servicing rights
were transferred in July 1999.
CHAPTER 11 PROCEEDINGS
On October 6, 1998, the Company and CSC filed voluntary petitions in
the Bankruptcy Court and thereafter operated their businesses as
debtors-in-possession.
On November 17, 1998, the Company suspended indefinitely all of its
loan origination and purchase activities. The Company's decision was due to its
determination, following discussions with potential lenders regarding
post-reorganization loan warehouse financing, that adequate sources of such
financing were not available. On or about December 18, 1998, the Company funded
the last of the mortgage loans for which it had issued commitments as of
November 17, 1998.
On June 16, 1999, the Bankruptcy Court entered an order confirming the
reorganization plan, as amended. The effective date of the reorganization plan
was July 1, 1999. The reorganization plan provides for substantive consolidation
of the assets of the Company and CSC and for distributions to creditors as
summarized below (which estimated distributions are based upon the Company's and
CSC's estimate of $10.0 million in general unsecured claims that would
ultimately be allowed by the Bankruptcy Court). The reorganization plan provided
that: (i) administrative claims, priority tax claims, bank claims,
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<PAGE> 15
other secured claims and priority claims would be paid in full; (ii) holders of
Notes would receive in exchange for all of their claims, in the aggregate 92.48%
of the new common stock of the reorganized company; (iii) holders of the
Convertible Debentures would receive in exchange for all of their claims, in the
aggregate, 5.43% of the new common stock of the reorganized company; (iv)
holders of general unsecured claims would receive 2.09% of the new common stock
of the reorganized company; and (v) common stock, preferred stock and warrants
of the predecessor Company would be extinguished and holders thereof would
receive no distributions under the reorganization plan.
Under the plan of reorganization, as of July 1, 1999, three new
directors were deemed elected to the board of directors of AMC Financial, Inc.
The three directors, which now constitute the board of directors, are D. Richard
Thompson, who will also serve as the Chief Executive Officer and President, Mark
Lasry and Mark A. Neporent.
DISCONTINUED OPERATIONS
The Company adopted a plan in March 1998 to sell the assets of CSC-UK
and completed the sale in April 1998. As a result of the sale, the Company
received proceeds, at the time of closing, of $83.8 million, net of closing
costs and other fees.
The net assets of CSC-UK have been reclassified on the Company's
financial statements as investment in discontinued operations. As of June 30,
1999, the Company's net investment in discontinued operations totaled $13.0
million, representing cash on hand in the discontinued operation of
approximately $12.0 million and net receivables (net of liabilities) due of
approximately $1.0 million. The Company expects to maintain a balance of cash on
hand in the discontinued operations to cover existing and potential liabilities
and costs pending dissolution of CSC-UK and its subsidiaries.
RESULTS OF OPERATIONS
THE RESULTS OF OPERATIONS SHOWN IN THE ACCOMPANYING FINANCIAL STATEMENTS ARE FOR
THE PREDECESSOR COMPANY. AMC FINANCIAL, INC. ADOPTED FRESH START REPORTING IN
ACCORDANCE WITH SOP 90-7 EFFECTIVE JUNE 30, 1999.
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Revenues decreased $9.9 million to negative $14.5 million for the three
months ended June 30, 1999 from negative $4.6 million for the comparable period
in 1998. This decrease was due primarily to an increase in the net unrealized
loss on valuation of residuals of $9.4 million over the prior year's loss and a
$4.1 million decrease in the gain on sale of loans, partially offset by a $6.1
million gain recognized on the transfer of the Company's servicing rights and
related servicer advances during the second quarter of 1999.
For the three months ended June 30, 1999, the Company recorded a loss
on sale of loans totaling $958,717. This loss was primarily due to a reserve of
$1 million established on amounts due from loans sold in 1999 partially offset
by a gain of $43,216 on the sale of $16.6 million of whole loans at an average
net premium of 0.3%. For the three months ended June 30, 1998, the Company
recorded a gain on sale of loans totaling $3.1 million. This gain was primarily
due to the sale of $46.9 million of whole loans at an average net premium
received of 2.6% as compared to the average premium paid on such loans of 1.1%.
Additionally, included in the gain on sale during the second quarter of 1998 was
approximately $2.4 million of gain representing the profit participation
realized during the quarter on $111.1 million of loans sold during the first
quarter of 1998 into the Company's purchase facility. Approximately $19.8
million of the whole loan sales during the second quarter represented loans sold
on a non-recourse basis into the Company's purchase facility. The Company
retained a participation in future profits on these loans but did not record any
gain related to this profit participation during the second quarter of 1998.
For the three months ended June 30, 1999, the Company recorded an
unrealized loss on the valuation of residuals of $20.8 million. The Company's
loss rate of 7.5% per annum at March 31, 1999 on its home equity securitizations
was increased at June 30, 1999 to reflect loss rates ranging from 7.3% to
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<PAGE> 16
33.0% per annum. The Company also increased its loss rates on the Sav*-A-Loan
securitizations. As of June 30, 1999, the Sav*-A-Loan loss rates range from 3.0%
to 10.0% per annum as compared to loss rates ranging from 4.5% to 7.0% at March
31, 1999 and constant prepayment speed was increased from 16.8% to 19.0%. The
unrealized loss on valuation of residuals of $11.4 million for the comparable
period in 1998 reflected an increase in its weighted average loss rate to 4.35%
per annum at June 30, 1998 from 3.3% per annum at March 31, 1998 and an increase
in its weighted average prepayment speed to 34.8% per annum at June 30, 1998
from 31.8% per annum at March 31, 1998 for its home equity securitized loans.
Interest income decreased $1.8 million or 63.7% to $1.0 million for the
three months ended June 30, 1999 from $2.9 million for the comparable period in
1998. This decrease was due primarily to lower average balances of mortgage
loans held for sale in the second quarter of 1999 as compared to the same period
in 1998 primarily resulting from the Company's cessation of loan originations
and purchase activity during the fourth quarter of 1998.
No mortgage origination income was recorded for the three months ended
June 30, 1999 as a result of the Company's decision in November 1998 to suspend
indefinitely its loan origination activity. Mortgage origination income was
$554,018 on loan originations of $119.7 million for the comparable period in
1998.
Other income increased $5.9 million to $6.2 million for the three
months ended June 30, 1999 from $266,306 for the comparable period in 1998.
During the second quarter of 1999, the Company entered into agreements to
transfer its servicing rights on all of its home equity securitizations to Ocwen
FSB and received net cash of $14.4 million (on the transfer of its 95-2, 95-3,
96-1, 96-2, 96-3 and 96-4 home equity securitizations) resulting in a net gain
of $6.1 million, representing amounts received in excess of the Company's
carrying value of servicer advances. These servicer advances represent claims
against the securitization trusts for reimbursement of advances made to such
trusts by the Company as servicer.
Total expenses decreased $24.9 million or 79.8% to $6.3 million for the
three months ended June 30, 1999 from $31.2 million for the comparable period in
1998. This decrease was due primarily to the Company's suspension of origination
and purchase activities and the corresponding reduction of its workforce.
Salaries and employee benefits decreased $6.1 million or 81.0% to $1.4
million for the three months ended June 30, 1999 from $7.5 million for the
comparable period in 1998. This decrease was due primarily to decreased staffing
levels to 42 employees at June 30, 1999 as compared to 507 employees at June 30,
1998.
Interest expense decreased $13.9 million or 99.2% to $112,571 for the
three months ended June 30, 1999 from $14.0 million for the comparable period in
1998. This decrease was due primarily to the Company ceasing to accrue interest
on the Convertible Debentures and Notes as of October 6, 1998 due to the filing
of the Petitions and a lower average balance of loans on the warehouse finance
lines as a result of the Company's decision in November 1998 to suspend
indefinitely all loan origination and purchase activities and the Company's
payoff of all warehouse related financing in April 1999.
Selling and other expenses decreased $5.7 million or 58.9% to $4.0
million for the three months ended June 30, 1999 from $9.7 million for the
comparable period in 1998. This decrease was due primarily to a decrease in
operating costs of $4.7 million or 54.4% to $3.9 million for the three months
ended June 30, 1999 from $8.6 million for the comparable period in 1998
reflecting the Company's restructuring efforts, including the suspension of its
origination and purchase activities, closing of its branch operations and
related reduction in its workforce.
Restructuring charges of $790,000 were recorded during the three months
ended June 30, 1999 as a result of the Company's plan to move its operations
from Elmsford, New York to Houston, Texas. Restructuring charges primarily
represent severance obligations and future lease obligations. There were no
restructuring charges recorded during the comparable period in 1998.
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<PAGE> 17
Net earnings applicable to common stock increased to $394.2 million for
the three months ended June 30, 1999 from a net loss applicable to common stock
of $42.8 million for the comparable period in 1998. Included in the net earnings
applicable to common stock is an extraordinary item reflecting the gain from the
discharge of prepetition liabilities, net of taxes, totaling $416.1 million.
Excluding the extraordinary gain, the decreased loss was due primarily to
significantly lower operating costs resulting from the Company's downsizing
efforts partially offset by an increase in the net unrealized loss on valuation
of residuals. The second quarter 1998 loss was due primarily to decreased loan
originations, as well as lower gain on sale of loans due to the Company's
strategy of selling loans through whole loan sales instead of through
securitizations prior to the reduction of these operating costs. An increase in
the liquidation preference of the preferred stock in lieu of dividends and
default payments of $6.9 million was recorded during the second quarter of 1998
further increasing the net loss applicable to common stock.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Revenues increased $6.5 million to negative $5.2 million for the six
months ended June 30, 1999 from negative $11.7 million for the comparable period
in 1998. This increase was due primarily to a gain recorded on its sale of loans
of $4.6 million and the Company's recognition of $6.1 million of revenues
related to the transfer of its home equity servicing rights and related servicer
advances during the first six months of 1999 compared to a net loss on loan
sales of $1.3 million during the first six months of 1998.
Gain on sale of loans increased $5.9 million to $4.6 million for the
six months ended June 30, 1999 from a loss on sale of loans of $1.3 million for
the comparable period in 1998. This increase was primarily due to the
recognition of $7.0 million related to the Company's profit participation on
loans previously sold into the Company's purchase facility, offset by the sale
of $106.6 million of loans sold at a net loss of $2.4 million. For the six
months ended June 30, 1998, the net loss on sale of loans was primarily due to
the sale of $285.2 million of whole loans at an average net premium received of
1.5% as compared to the average premium paid on such loans of 2.4%.
Approximately $45.0 million of such whole loan sales represented loans sold on a
non-recourse basis into the Company's purchase facility without any gain
recorded during the first six months of 1998.
For the six months ended June 30, 1999, the Company recorded an
unrealized loss on the valuation of residuals of $20.8 million. The Company's
loss rate of 7.5% per annum at March 31, 1999 on its home equity securitizations
was increased at June 30, 1999 to reflect loss rates ranging from 7.3% to 33.0%
per annum. The Company also increased its loss rates on the Sav*-A-Loan (R)
securitizations. As of June 30, 1999, the Sav*-A-Loan (R) loss rates range from
3.0% to 10.0% per annum as compared to loss rates ranging from 4.5% to 7.0% at
March 31, 1999 and constant prepayment speed was increased from 16.8% to 19.0%.
The unrealized loss on valuation of residuals of $18.5 million recorded for the
comparable period in 1998 reflected an increase in its weighted average loss
rate to 4.35% per annum at June 30, 1998 from 1.7% per annum at December 31,
1997 and an increase in its weighted average prepayment speed to 34.8% per annum
at June 30, 1998 from 31.8% per annum at December 31, 1997 for its home equity
securitized loans.
Interest income decreased $2.8 million or 45.3% to $3.3 million for the
six months ended June 30, 1999 from $6.1 million for the comparable period in
1998. This decrease was due primarily to lower average balances of mortgage
loans held for sale during the first six months of 1999 as compared to the same
period in 1998 primarily resulting from the Company's cessation of loan
originations and purchase activity during the fourth quarter of 1998.
No mortgage origination income was recorded for the six months ended
June 30, 1999 as a result of the Company's decision in November 1998 to suspend
indefinitely its loan origination activity. Mortgage origination income was $1.5
million on loan originations of $270.9 million for the comparable period in
1998.
Other income increased $7.2 million to $7.7 million for the six months
ended June 30, 1999 from $499,318 for the comparable period in 1998. During the
second quarter of 1999, the Company entered into agreements to transfer its
servicing rights on all of its home equity securitizations to Ocwen FSB and
received net cash of $14.4 million (on the transfer of its 95-2, 95-3, 96-1,
96-2, 96-3 and 96-4 home equity
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<PAGE> 18
securitizations) resulting in a net gain of $6.1 million, representing amounts
received in excess of the Company's carrying value of servicer advances. These
servicer advances represent claims against the securitization trusts for
reimbursement of advances made to such trusts by the Company as servicer.
Total expenses decreased $63.4 million or 84.6% to $11.6 million for
the six months ended June 30, 1999 from $75.0 million for the comparable period
in 1998. This decrease was due primarily to the Company's suspension of
origination and purchase activities and the corresponding reduction of its
workforce from 507 employees at June 30, 1998 to 42 at June 30, 1999.
Salaries and employee benefits decreased $14.4 million or 83.5% to $2.9
million for the six months ended June 30, 1999 from $17.3 million for the
comparable period in 1998. This decrease was due primarily to decreased staffing
levels to 42 employees at June 30, 1999 as compared to 507 employees at June 30,
1998.
Interest expense decreased $26.8 million or 95.0% to $1.4 million for
the six months ended June 30, 1999 from $28.2 million for the comparable period
in 1998. This decrease was due primarily to the Company ceasing to accrue
interest on the Convertible Debentures and Notes as of October 6, 1998 due to
the filing of the Petitions and a lower average balance of loans on the
warehouse finance lines as a result of the Company's decision in November 1998
to suspend indefinitely all loan origination and purchase activities and the
Company's payoff of all warehouse related financing in April 1999.
Selling and other expenses decreased $19.8 million or 75.3% to $6.5
million for the six months ended June 30, 1999 from $26.3 million for the
comparable period in 1998. This decrease was due primarily to decreased
operating costs of $18.0 million or 74.3% to $6.3 million for the six months
ended June 30, 1999 from $24.3 million for the comparable period in 1998
reflecting the Company's restructuring efforts, including the suspension of its
origination and purchase activities, closing of its branch operations and
related reduction in its workforce.
Restructuring charges of $790,000 were recorded during the six months
ended June 30, 1999 as a result of the Company's plan to move its operations
from Elmsford, New York to Houston, Texas. Restructuring charges primarily
represent severance obligations and future lease obligations. Restructuring
charges were $3.2 million for the comparable period in 1998. This charge was
related to a restructuring plan that included streamlining and downsizing the
Company's operations. The Company closed its branch operation in Virginia and
significantly reduced its correspondent originations and exited its conventional
lending business. Of the $3.2 million, $1.1 million represented severance
payments made to 142 former employees and $2.1 million represented costs
incurred in connection with lease obligations and write-offs of assets no longer
in service.
Net earnings applicable to common stock increased to $397.6 million for
the six months ended June 30, 1999 from a net loss applicable to common stock of
$98.6 million for the comparable period in 1998. Included in the net earnings
applicable to common stock is an extraordinary item reflecting the gain from the
discharge of prepetition liabilities, net of taxes, totaling $416.1 million.
Excluding the extraordinary gain, the decreased loss was due primarily to
greater revenues from gains recognized on loans sold into the Company's purchase
facility as well as significantly lower operating costs resulting from the
Company's downsizing efforts. The loss during the first six months of 1998 was
due primarily to decreased loan originations, as well as lower gain on sale of
loans due to the Company's strategy of selling loans through whole loan sales
instead of through securitizations prior to the reduction of these operating
costs. An increase in the liquidation preference of the preferred stock in lieu
of dividends and default payments of $11.5 million was recorded during the first
six months of 1998 further increasing the net loss applicable to common stock.
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FINANCIAL CONDITION
June 30, 1999 Compared to December 31, 1998
The Company's emergence from chapter 11 proceedings has resulted in a
new reporting entity with no retained earnings or accumulated deficit as of June
30, 1999. A black line has been drawn on the accompanying consolidated
Statements of Financial Condition to distinguish between the successor Company
and the predecessor Company.
Cash and cash equivalents increased $12.5 million or 67.9% to $30.9
million at June 30, 1999 from $18.4 million at December 31, 1998.
Interest-only and residual certificates decreased $21.3 million or
63.0% to $12.4 million at June 30, 1999 from $33.7 million at December 31, 1998.
This decrease was due primarily to the write-down of $20.8 million recorded
during the six months ended June 30, 1999.
Mortgage loans held for sale, net decreased $106.8 million or 86.6% to
$16.5 million at June 30, 1999 from $123.3 million at December 31, 1998. This
decrease was due primarily to no loan origination or purchase activity during
the first six months of 1999 and the volume of loans sold.
Investment in discontinued operations, net was $13.0 million at June
30, 1999, unchanged from the balance at December 31, 1998. This balance
primarily consisted of cash on hand of approximately $12.0 million and net
receivables (net of liabilities) due of approximately $1.0 million. The Company
expects to maintain a balance of cash on hand in the discontinued operations to
cover existing and potential liabilities and costs pending dissolution of CSC-UK
and its subsidiaries.
Income taxes receivable decreased $112,819 or 7.3% to $1.4 million at
June 30, 1999 from $1.6 million at December 31, 1998. This decrease was due
primarily to the receipt of state tax refunds.
Other assets decreased $13.1 million or 83.7% to $2.5 million at June
30, 1999 from $15.6 million at December 31, 1998. This decrease was due
primarily to the sale of the Company's servicer advances totaling $8.3 million.
The Company did not have any warehouse financing facilities outstanding
at June 30, 1999 as compared to $106.0 million at December 31, 1998. This
decrease was due to the Company paying off all warehouse related financing in
April 1999.
Accounts payable and other liabilities decreased $3.4 million or 17.0%
to $16.4 million at June 30, 1999 from $19.8 million at December 31, 1998. This
decrease was due primarily to the settlement of reorganization expenses totaling
$2.4 million.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1999, the Company was provided
$118.4 million from continuing operations and used $106.0 million in financing
activities. The Company's principal cash requirements include the payment of
operating expenses. The Company uses its cash flow from whole loan sales and net
interest income to meet its working capital needs. Should the full funding of
the over-collateralization accounts in connection with the Company's
securitizations occur, the Company also may receive cash payments on its
residual certificates related to its securitizations, although no assurance can
be given as to when or whether this will occur. Based upon the current and
anticipated levels of operations, the Company believes that cash flow from
operations and available cash will be adequate to meet the Company's anticipated
requirements for working capital.
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CREDIT FACILITY
Greenwich Capital Financial Products, Inc. provided a $100 million
post-petition warehouse facility which repaid the full amounts due under their
prior facility. This facility was terminated in June 1999.
LOAN SALES
The Company disposes its loan inventory through whole loan sales where
the Company receives cash at the time of sale.
During 1996 and 1997, the Company sold loans through securitizations.
As of June 30, 1999, the Company's balance sheet reflected the fair value of
interest-only and residual certificates of $12.4 million resulting from these
securitizations. Realization of the value of interest-only and residual
certificates 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 affected and the Company could be required to write
down the value of its interest-only and residual certificates. In addition, if
prevailing interest rates rise, the required discount rate might also rise,
resulting in impairment of the value of the interest-only and residual
certificates.
IMPACT OF YEAR 2000
Issues surrounding the Year 2000 arise out of the fact that many
existing computer programs use only two digits to identify a year in the date
field. With the approach of the Year 2000, computer hardware and software that
are not made Year 2000 ready might interpret "00" as Year 1900 rather than Year
2000. The Year 2000 problem is not just a technology issue; it also involves the
Company's customers, suppliers and third parties.
During the second quarter of 1999, the Company implemented Sage
BusinessWorks as its accounting and financial reporting system. BusinessWorks is
stated to be Year 2000 ready.
The costs incurred to date by the Company regarding its Year 2000
readiness have not been material; however, there can be no assurances that such
costs in the future will not be material. Even if the Company is Year 2000
ready, failures by significant third parties to address their Year 2000
readiness may disrupt the Company's operations and cause it to incur financial
losses. These third parties include financial counterparties and subservicers.
19
<PAGE> 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
prices and interest rates. The Company's market risk arises from interest rate
risk inherent in its financial instruments. The Company is not currently subject
to commodity price risk. The Company does not make use of off-balance sheet
derivative instruments to control interest rate risk.
The interests that the Company received on loan sales through its
securitizations are in the form of interest-only and residual certificates which
are classified as securities available for sale. Securities available for sale
do not have a stated maturity or amortization period. The expected amount of the
cash flow as well as the timing is dependent on the performance of the
underlying collateral supporting each securitization. The actual cash flow of
these instruments could vary substantially if the performance is different from
the Company's assumptions. The Company generally develops its assumptions by
analyzing past portfolio performance, current loan characteristics and current
market conditions. The Company currently values the interest-only and residual
certificates using a discount rate of 20%.
The Company is exposed to foreign currency exchange risk related to the
dissolution of CSC-UK and its subsidiaries. Specifically, the exchange risk
relates to certain receivables and liabilities which will be satisfied in a
foreign currency. The Company deems this exposure to be immaterial, and
therefore, has not utilized any financial instrument to mitigate any potential
exchange risk.
20
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Chapter 11 Proceedings. On October 6, 1998, the Company and CSC filed
petitions in the Bankruptcy Court. The effective date of the reorganization plan
was July 1, 1999. See "Chapter 11 Proceedings". Prior to its bankruptcy filing,
the Company was named as a defendant in a variety of lawsuits. In two of these
lawsuits, former officers and directors of the Company were also named. These
actions against the Company were discharged when the Company's plan of
reorganization became effective on July 1, 1999. Under the plan of
reorganization, as of July 1, 1999, three new directors were deemed elected to
the board of directors of AMC Financial, Inc. The three directors, which now
constitute the board of directors, are D. Richard Thompson, who will also serve
as the Chief Executive Officer and President, Mark Lasry and Mark A. Neporent.
Ceasar Action. On or about September 29, 1997, a putative class action
lawsuit (the "Ceasar Action") was filed against the Company and two of its
former officers and directors in the United States District Court for the
Eastern District of New York (the "Eastern District") on behalf of all
purchasers of the Company's common stock during the period from April 1, 1997
through August 15, 1997. Between approximately October 14, 1997 and December 3,
1997, nine additional class action complaints were filed against the same
defendants, as well as certain additional former Company officers and directors.
Four of these additional complaints were filed in the Eastern District and five
were filed in the United States District Court for the Southern District of New
York (the "Southern District"). On or about October 28, 1997, the plaintiff in
the Ceasar Action filed an amended complaint naming three additional former
officers and directors as defendants. The amended complaint in the Ceasar Action
also extended the proposed class period from November 4, 1996 through October
22, 1997. The longest proposed class period of any of the complaints is from
April 1, 1996 through October 22, 1997. On or about February 2, 1998, an
additional lawsuit brought on behalf of two individual investors, rather than on
behalf of a putative class of investors, was filed against the Company and
certain of its former officers and directors in federal court in New Jersey (the
"New Jersey Action").
In these actions, plaintiffs allege that the Company and its former
senior officers engaged in securities fraud by affirmatively misrepresenting and
failing to disclose material information regarding the lending practices of the
Company's UK subsidiary, and the impact that these lending practices would have
on the Company's financial results. Plaintiffs allege that a number of public
filings and press releases issued by the Company were false or misleading. In
each of the putative class action complaints, plaintiffs have asserted
violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Plaintiffs seek unspecified damages,
including pre-judgment interest, attorneys' and accountants' fees and court
costs.
In December 1997, the Eastern District plaintiffs filed a motion for
appointment of lead plaintiffs and approval of co-lead counsel. On September 23,
1998, the court granted this motion. On March 25, 1998, the Company and its
former officers and directors who were defendants filed a motion with the
federal Judicial Panel for Multidistrict Litigation ("JPML"), seeking
consolidation of all current and future securities actions, including the New
Jersey Action, for pre-trial purposes before Judge Sterling Johnson in the
Eastern District. On June 12, 1998, the JPML granted this motion. As a result of
the Company's chapter 11 proceedings, the action against the Company was
discharged when the Company's plan of reorganization became effective on July 1,
1999. The action is still pending against the individual defendants.
Simpson Action. In February 1998, a putative class action lawsuit (the
"Simpson Action") was filed against the Company in the U.S. District Court for
the Northern District of Mississippi (Greenville Division). The Simpson Action
is a class action brought under the anti-kickback provisions of Section 8 of the
Real Estate Settlement Procedures Act ("RESPA"). The complaint alleges that, on
November 19, 1997, plaintiff Laverne Simpson, through the services of Few
Mortgage Group ("Few"), a mortgage broker, obtained refinancing for the mortgage
on her residence in Greenville, Mississippi. Few secured financing for plaintiff
through the Company. In connection with the financing, the Company is alleged to
have paid a premium to Few in the amount of $1,280.00. Plaintiff claims that the
payment was a referral fee and
21
<PAGE> 23
duplicative payment prohibited under Section 8 of RESPA. Plaintiff is seeking
compensatory damages for the amounts "by which the interest rates and points
charges were inflated." Plaintiff also claims to represent a class consisting of
all other persons similarly situated, that is, persons (i) who secured mortgage
financing from the Company through mortgage brokers from an unspecified period
to date (claims under Section 8 of RESPA are governed by a one year statute of
limitations) and (ii) whose mortgage brokers received a fee from the Company.
Plaintiff is seeking to recover compensatory damages, on behalf of the putative
class, which is alleged to be "numerous," for the amounts that "the interest
rates and points charges were inflated" in connection with each class member's
mortgage loan transaction. The Company answered the complaint and plaintiff has
not yet moved for class certification. To date, there has not been a ruling on
the merits of either plaintiff's individual claim or the claims of the putative
class. The Company intends to proceed in Bankruptcy Court to assure that, like
other pre-chapter 11 petition claims, any claims allowed against the Company
resulting from such action would be satisfied in stock, rather than cash,
pursuant to the Company's reorganization plan.
Peaks Action. In April 1998, the Company was named as a defendant in an
Amended Complaint filed against 59 separate defendants in the Circuit Court for
Baltimore City entitled Peaks v. A Home of Your Own, Inc. et al. This action is
styled as a class action and alleges various causes of action (including
Conspiracy to Defraud, Fraud, Violation of Maryland Consumer Protection Act and
Unfair Trade Practices, Negligent Misrepresentation and Negligence) against
multiple parties relating to 89 allegedly fraudulent mortgages made on
residential real estate in Baltimore, Maryland. The Company is alleged to have
purchased at least eight of the loans (and may have purchased 15 of the loans)
at issue in the Complaint. The Company has not yet been involved in any
discovery and has yet to file its response. In August 1998, the plaintiff filed
an amended complaint in which the class action allegations were dropped and
instead the complaint was joined by 80 individual plaintiffs. The Company
believes that eight of these plaintiffs may have claims that involve loans
acquired by the Company. The Company has continued to monitor the proceedings
and has participated informally in certain settlement discussion. The Company
intends to proceed in Bankruptcy Court to assure that, like other pre-chapter 11
petition claims, any claims allowed against the Company resulting from such
action would be satisfied in stock, rather than cash, pursuant to the Company's
reorganization plan.
Elliott Action. In September 1998, Elliott Associates, L.P. and
Westgate International, L.P. filed a lawsuit against the Company and certain of
its former officers and directors in the Southern District. In the complaint,
plaintiffs describe the lawsuit as "an action for securities fraud and breach of
contract arising out of the private placement, in September 1997, of the Series
B Preferred Stock of Cityscape." Plaintiffs allege violations of Section 10(b)
of the Exchange Act (Count I); Section 20(a) of the Exchange Act (Count II); and
two breach of contract claims against the Company (Counts III and IV).
Plaintiffs allege to have purchased a total of approximately $20 million of such
preferred stock. Plaintiffs seek unspecified damages, including pre-judgment
interest, attorneys' fees, other expenses and court costs. The Company and its
former officers and directors who were defendants have moved to dismiss this
action. The action against the Company was discharged when the Company's plan of
reorganization became effective on July 1, 1999. The action against the
remaining defendants has been settled and dismissed.
Walsh Action. In January 1998, the Company commenced a breach of
contract action in the Southern District against Walsh Securities, Inc.
("Walsh"). The action alleges that Walsh breached certain obligations that it
owed to the Company under an agreement whereby Walsh sold mortgage loans to the
Company. The Company claims damages totaling in excess of $11.9 million. In
March 1998, Walsh filed a motion to dismiss, or, alternatively, for summary
judgment. In May 1998, the Company served papers that opposed Walsh's motion and
moved for summary judgment on certain of the loans. In December 1998, Judge
Stein of the Southern District denied Walsh's motion to dismiss, or,
alternatively, for summary judgment with respect to all but 69 of the loans at
issue in the litigation. With respect to those 69 loans, Judge Stein granted
Walsh's motion and dismissed the loans from the litigation. At that time, Judge
Stein also denied the Company's motion for summary judgment. On February 1,
1999, Judge Stein denied the Company's motion for reconsideration of that part
of his December 1998 order which granted Walsh's motion to dismiss with respect
to 69 of the loans at issue. The case has currently entered a pre-trial
discovery phase.
22
<PAGE> 24
Global Mortgage Action. In August 1998, the Company filed a lawsuit in
the Circuit Court for Baltimore City Maryland, entitled Cityscape and Atlas v.
Global Mortgage, et al., against various defendants seeking damages resulting
from the Company's acquisition in 1995 and 1996 of 145 fraudulent residential
mortgages. The Complaint, as amended on March 19, 1999, seeks $5.5 million in
compensatory damages, plus unspecified punitive damages, against the mortgage
broker, title company, closing agent, settlement attorney, and appraisers
involved in the fraudulent loans based on theories of negligence, malpractice,
conspiracy and fraud. The parties are engaged in the discovery phase of the
case, a pre-trial conference is set for November 8, 1999 and a trial has been
scheduled for the March 2000 term.
Wilshire Action. In March 1999, the Company commenced an adversary
proceeding before Judge Adlai S. Hardin, Jr. in the Bankruptcy Court against
Wilshire Funding Corp. and Wilshire Servicing Corporation, subsidiaries of the
Wilshire Financial Services Group, Inc. The adversary proceeding alleges breach
by Wilshire Funding Corp. of contractual obligations arising out of a January 8,
1998 Asset Purchase Agreement between Wilshire Funding Corp. and Cityscape
Funding Corporation IV and the Company, and breach by Wilshire Servicing
Corporation of contractual obligations arising out of related Assignment
Agreements. CSC seeks damages of approximately $3.7 million, plus interest,
attorneys' fees and costs. In July 1999, the parties entered into a settlement
agreement that provided for the immediate payment by Wilshire of $269,888, and
an acknowledgement by Wilshire that it was liable to repay to the Company an
additional $1.0 million in advances made by the Company, as those advances were
recovered from applicable borrowers. In accordance with the terms of the
settlement agreement, the Company filed a stipulation with the Bankruptcy Court
for the Southern District of New York discontinuing the adversary proceeding
against Wilshire.
Regulatory Matters. In April and June 1996, CSC-UK acquired J&J
Securities Limited (the "J&J Acquisition") and Greyfriars Group Limited
(formerly known as Heritable Finance Limited) (the "Greyfriars Acquisition"),
respectively. In October 1996, the Company received a request from the staff of
the SEC for additional information concerning the Company's voluntary
restatement of its financial statements for the quarter ended June 30, 1996. The
Company initially valued the mortgage loans in the J&J Acquisition and the
Greyfriars Acquisition at the respective fair values which were estimated to
approximate par (or historical book value). Upon the subsequent sale of the
mortgage portfolios, the Company recognized the fair value of the mortgage
servicing receivables retained and recorded a corresponding gain for the fair
value of such mortgage servicing receivables. Upon subsequent review, the
Company determined that the fair value of such mortgage servicing rights should
have been included as part of the fair value of the mortgage loans acquired as a
result of such acquisitions. The effect of this accounting change resulted in a
reduction in reported earnings of $26.5 million. Additionally, as a result of
this accounting change, the goodwill initially recorded in connection with such
acquisitions was reduced resulting in a reduction of goodwill amortization of
approximately $496,000 from the previously reported figure for the second
quarter. On November 19, 1996, the Company announced that it had determined that
certain additional adjustments relating to the J&J Acquisition and the
Greyfriars Acquisition should be made to the financial statements for the
quarter ended June 30, 1996. These adjustments reflect a change in the
accounting treatment with respect to restructuring charges and deferred taxes
recorded as a result of such acquisitions. This caused an increase in the amount
of goodwill recorded which resulted in an increase of amortization expense as
previously reported in the second quarter of 1996 of $170,692. The staff of the
SEC has requested additional information from the Company in connection with the
accounting related to the J&J Acquisition and the Greyfriars Acquisition. The
Company has supplied such requested information. In mid-October 1997, the SEC
authorized its staff to conduct a formal investigation which, to date, has
continued to focus on the issues surrounding the restatement of the financial
statements for the quarter ended June 30, 1996. The Company is continuing to
cooperate fully in this matter.
In the normal course of business, aside from the matters discussed
above, the Company is subject to various legal proceedings and claims, the
resolution of which, in management's opinion, will not have a material adverse
effect on the consolidated financial position or the results of operations of
the Company.
23
<PAGE> 25
ITEM 2. CHANGES IN SECURITIES
Pursuant to the plan of reorganization, all of the predecessor
Company's common stock, preferred stock and warrants were extinguished on July
1, 1999. The reorganization plan provided that: (i) administrative claims,
priority tax claims, bank claims, other secured claims and priority claims would
be paid in full; (ii) holders of senior notes would receive in exchange for all
of their claims, in the aggregate 92.48% of the new common stock of the
reorganized company; (iii) holders of subordinated debentures would receive in
exchange for all of their claims, in the aggregate, 5.43% of the new common
stock of the reorganized company; and (iv) holders of general unsecured claims
would receive 2.09% of the new common stock of the reorganized company. As a
result of the above, in July 1999, 7,803,448 shares of the new common stock of
the reorganized company were issued.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See Cityscape Financial Corp.'s Form 10-Q for the quarter ended March
31, 1999, which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The deadline for indicating acceptance or rejection of the plan of
reorganization was set at 5:00 p.m., New York City Time, on June 1, 1999.
Below are the results of the plan solicitation:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
VOTING RESULTS
- -------------------------------------------------------------------------------------------------------------
% OF DOLLAR AMOUNT OF % OF NUMBER OF HOLDERS
CLASS DESCRIPTION CLAIMS VOTING TO ACCEPT VOTING TO ACCEPT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4 Senior Note Claims 99.75% 95.09%
- -------------------------------------------------------------------------------------------------------------
4a Small Senior Note Claims 96.22% 92.22%
- -------------------------------------------------------------------------------------------------------------
5 General Unsecured Claims 91.06% 66.67%
- -------------------------------------------------------------------------------------------------------------
5a Small General Unsecured 100% 100%
Claims
- -------------------------------------------------------------------------------------------------------------
6 Subordinated Debenture 99.63% 98.72%
Claims
- -------------------------------------------------------------------------------------------------------------
6a Small Subordinated 98.15% 97.8%
Debenture Claims
- -------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3.1* Certificate of Incorporation of the Company
3.2* Bylaws of the Company
11.1+ Computation of Earnings Per Share
27.1* Financial Data Schedule
</TABLE>
* Filed herewith.
+ Not filed since it would not be meaningful as a result of the
reorganization.
24
<PAGE> 26
(b) Reports on Form 8-K
1. Form 8-K dated June 16, 1999 reporting that the bankruptcy court
entered the order confirming the reorganization plan.
25
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMC Financial, Inc.
-------------------------------
(Registrant)
Date: August 16 1999 By: /s/ D. Richard Thompson
-------------- ---------------------------
D. Richard Thompson
Title: Chief Executive
Officer and President
Date: August 16 1999 By: /s/ Michael L. Kennemer
-------------- ---------------------------
Michael L. Kennemer
Title: Chief Financial Officer
26
<PAGE> 28
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
3.1* Certificate of Incorporation of the Company
3.2* Bylaws of the Company
11.1+ Computation of Earnings Per Share
27.1* Financial Data Schedule
- -----
* Filed herewith.
+ Not filed since it would not be meaningful as a result of the
reorganization.
<PAGE> 1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CITYSCAPE FINANCIAL CORP.
I, the undersigned Chief Executive Officer of Cityscape
Financial Corp., a corporation existing under the laws of the State of Delaware
(hereinafter referred to as the "Corporation"), do hereby certify as follows:
FIRST: That the Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of
Delaware on December 16, 1988, under the name Mandi of Essex, Inc. A
certificate for the Renewal and Revival of Charter of Mandi of Essex,
Inc. was filed on April 21, 1994, a Certificate of Amendment was filed
on April 27, 1994 and was further amended by Amendment to Certificate
of Change of Registered Agent and Registered Office on June 23, 1994.
An Amendment to the Certificate of Incorporation amending the
authorized number of shares was filed by the Secretary of State of
Delaware on July 22, 1994.
SECOND: This Amended and Restated Certificate of Incorporation
restates and integrates and amends the Certificate of Incorporation of
the Corporation by restating the Certificate of Incorporation in its
entirety. This Restated Certificate of Incorporation is being filed
pursuant to Sections 242, 245 and 303 of the General Corporation Law of
the State of Delaware. The text of the Certificate of Incorporation is
in its entirety as follows:
FIRST: The name of the Company is: AMC FINANCIAL, INC.
SECOND: The address of the Company's registered office in the
State of Delaware is 1209 Orange Street, Wilmington,
County of New Castle, Delaware, 19801, and the name
of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful
act or activity for which corporations may be
organized under the General Corporation Law of
Delaware as it now exists or may hereafter be amended
and supplemented.
FOURTH: The total number of shares of stock which the Company
shall have authority to issue is 25,000,000 having a
par value of $0.01 per share. All such shares are
Common Stock.
The issuance of nonvoting equity securities is
prohibited.
<PAGE> 2
FIFTH: The personal liability of the directors of the
Company is hereby eliminated to the fullest extent
permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the
State of Delaware, as the same may be amended and
supplemented. Any repeal or modification of this
Article Fifth shall not adversely affect any right or
protection of a director of the Company existing
immediately prior to such repeal or modification.
SIXTH: The Company shall, to the fullest extent permitted or
required by Section 145 of the General Corporation
Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all
persons to whom it shall have power to indemnify
under said section from and against any and all of
the expenses, liabilities or other matters referred
to in or covered by said section, and the
indemnification provided for herein shall not be
deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law,
agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or
her official capacity and as to action in another
capacity while holding such office, and shall
continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and
administrators of such person. Any repeal or
modification of this Article Sixth shall not
adversely affect any right or protection existing
hereunder immediately prior to such repeal or
modification.
SEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered
or repealed, and other provisions authorized by the
laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the
time prescribed by said laws, and all rights at any
time conferred upon the stockholders of the Company
by this certificate of incorporation are granted
subject to the provisions of this Article Seventh.
EIGHTH: In furtherance and not in limitation of the rights,
powers, privileges and discretionary authority
granted or conferred by the General Corporation Law
of the State of Delaware or other statutes or laws of
the state of Delaware, the Board of Directors is
expressly authorized to make, alter, amend or repeal
the By-Laws of the Company, without any action on the
part of the Stockholders, but the Stockholders may
make additional By-Laws and may alter, amend or
repeal any By-Law whether adopted by them or
otherwise. The Company may in its By-Laws confer
powers upon
<PAGE> 3
its Board of Directors in addition to the foregoing
and in addition to the powers and authorities
expressly conferred upon the Board of Directors by
applicable law.
THIRD: This Amended and Restated Certificate of Incorporation
was duly adopted pursuant to the Corporation's Plan of Reorganization
as filed with the United States Bankruptcy Court for the Southern
District of New York and confirmed by such Court as of June 10, 1999
(the "Plan of Reorganization"), pursuant to Chapter 11 of Title 11 of
the United States Code and otherwise in accordance with applicable
provisions of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have subscribed this document on the
date set forth below and do hereby affirm, under the penalties of perjury, that
the statements contained therein have been examined by me and are true and
correct.
Date: June 30, 1999
CITYSCAPE FINANCIAL CORP.
--------------------------------
Name:
Title:
<PAGE> 1
AMENDED & RESTATED
BY-LAWS
OF
AMC FINANCIAL, INC.
(FORMERLY CITYSCAPE FINANCIAL CORP.)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I .................................................................................................................. 1
SECTION 1 ................................................................................................ 1
SECTION 2 ................................................................................................ 1
ARTICLE II ................................................................................................................. 1
SECTION 1 ................................................................................................ 1
SECTION 2 ................................................................................................ 1
SECTION 3 ................................................................................................ 1
SECTION 4 ................................................................................................ 2
SECTION 5 ................................................................................................ 2
SECTION 6 ................................................................................................ 2
SECTION 7 ................................................................................................ 2
SECTION 8 ................................................................................................ 3
SECTION 9 ................................................................................................ 3
ARTICLE III ................................................................................................................ 3
SECTION 1 ................................................................................................ 3
SECTION 2 ................................................................................................ 3
SECTION 3 ................................................................................................ 4
SECTION 4 ................................................................................................ 4
SECTION 5 ................................................................................................ 4
SECTION 6 ................................................................................................ 4
SECTION 7 ................................................................................................ 4
SECTION 8 ................................................................................................ 5
SECTION 9 ................................................................................................ 5
SECTION 10 ............................................................................................... 5
SECTION 11 ............................................................................................... 6
SECTION 12 ............................................................................................... 6
SECTION 13 ............................................................................................... 6
ARTICLE IV. Officers ..................................................................................................... 8
SECTION 1 ............................................................................................... 8
SECTION 2 ............................................................................................... 8
SECTION 3 ............................................................................................... 8
SECTION 4 ............................................................................................... 9
SECTION 5 ............................................................................................... 9
SECTION 6 ............................................................................................... 9
SECTION 7 ............................................................................................... 9
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
SECTION 8 ............................................................................................... 9
SECTION 9 ............................................................................................... 10
SECTION 10 .............................................................................................. 10
SECTION 11 .............................................................................................. 10
ARTICLE V. Certificates of Stock ......................................................................................... 11
SECTION 1 ............................................................................................... 11
SECTION 2 ............................................................................................... 12
SECTION 3 ............................................................................................... 12
SECTION 4 ............................................................................................... 12
SECTION 5 ............................................................................................... 12
SECTION 6 ............................................................................................... 13
SECTION 7 ............................................................................................... 13
ARTICLE VI. General Provisions ........................................................................................... 13
SECTION 1 ............................................................................................... 13
SECTION 2 ............................................................................................... 13
SECTION 3 ............................................................................................... 14
SECTION 4 ............................................................................................... 14
SECTION 5 ............................................................................................... 14
SECTION 6 ............................................................................................... 14
SECTION 7 ............................................................................................... 14
SECTION 8 ............................................................................................... 14
ARTICLE VII. Amendments .................................................................................................. 15
SECTION 1 ............................................................................................... 15
</TABLE>
ii
<PAGE> 4
AMENDED & RESTATED
BY-LAWS
OF
AMC FINANCIAL, INC.
(FORMERLY CITYSCAPE FINANCIAL CORP.)
As Amended As Of July 1, 1999
ARTICLE I.
OFFICES
SECTION 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
SECTION 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 1. Meetings of stockholders shall be held at any place
within or outside the State of Delaware designated by the Board of Directors. In
the absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
SECTION 2. The annual meeting of stockholders shall be held
each year on a date and a time designated by the Board of Directors. At each
annual meeting directors shall be elected and any other proper business may be
transacted.
SECTION 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed
<PAGE> 5
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat.
SECTION 4. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
SECTION 5. At each meeting of the stockholders, each
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article V, Section 6 hereof. All elections shall be had
and all questions decided by a plurality vote.
SECTION 6. Special meetings of the stockholders, for any
purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
SECTION 7. Whenever stockholders are required or permitted to
take any action at a meeting, a written notice of the meeting shall be given
which notice shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. The written notice of any meeting shall be given to each stockholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting. If mailed, notice is given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the corporation.
SECTION 8. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The
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<PAGE> 6
list shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III.
DIRECTORS
SECTION 1. The number of directors which shall constitute the
whole Board shall be not less than one (1) nor more than ten (10). The first
Board shall consist of three (3) directors. The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified;
provided, however, that unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, either with or without cause, from the Board of Directors at any
meeting of stockholders by a majority of the stock represented and entitled to
vote thereat.
SECTION 2. Vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
SECTION 3. The property and business of the corporation shall
be managed by or under the direction of its Board of Directors. In addition to
the powers and authorities by these By-Laws expressly conferred upon them, the
Board may exercise all such powers of the corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws directed or required to be exercised or done by the
stockholders.
3
<PAGE> 7
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4. The directors may hold their meetings and have one
or more offices, and keep the books of the corporation outside of the State of
Delaware.
SECTION 5. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be
determined by the Board.
SECTION 6. Special meetings of the Board of Directors may be
called by the President on forty-eight hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
President or the Secretary in like manner and on like notice on the written
request of two directors unless the Board consists of only one director; in
which case special meetings shall be called by the President or Secretary in
like manner or on like notice on the written request of the sole director.
SECTION 7. At all meetings of the Board of Directors a
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these By-Laws. If a quorum shall not be present at any meeting of the Board of
Directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. If only one director is authorized, such sole director shall
constitute a quorum.
SECTION 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
SECTION 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
SECTION 10. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or
4
<PAGE> 8
not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
SECTION 11. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
SECTION 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
INDEMNIFICATION
SECTION 13. (a) The corporation shall 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 he 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, 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 corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the 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 corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
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<PAGE> 9
(b) The corporation shall 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 he 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, 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 corporation and except that no such indemnification shall
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 corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the corporation shall be successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b), or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall be made by the corporation 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 set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) 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 (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors in the manner provided in paragraph (d) upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the corporation as authorized in this Section 13.
(f) The indemnification provided by this Section 13 shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
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<PAGE> 10
(g) The Board of Directors may authorize, by a vote of a
majority of a quorum of the Board of Directors, the corporation to purchase and
maintain insurance on behalf of any person who 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,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Section 13.
(h) For the purposes of this Section 13, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
ARTICLE IV.
OFFICERS
SECTION 1. The officers of this corporation shall be chosen by
the Board of Directors and shall include a President, a Secretary, and a
Treasurer. The corporation may also have at the discretion of the Board of
Directors such other officers as are desired, including a Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries and Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these By-Laws otherwise provide.
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<PAGE> 11
SECTION 2. The Board of Directors, at its first meeting after
each annual meeting of stockholders, shall choose the officers of the
corporation.
SECTION 3. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
SECTION 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
SECTION 5. The officers of the corporation shall hold office
until their successors are chosen and qualify in their stead. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
CHAIRMAN OF THE BOARD
SECTION 6. The Chairman of the Board, if such an officer be
elected, shall, if present, preside at all meetings of the Board of Directors
and exercise and perform such other powers and duties as may be from time to
time assigned to him by the Board of Directors or prescribed by these By-Laws.
If there is no President, the Chairman of the Board shall in addition be the
Chief Executive Officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article IV.
PRESIDENT
SECTION 7. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these By-Laws.
SECRETARY AND ASSISTANT SECRETARY
SECTION 8. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. He shall keep
in safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it,
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<PAGE> 12
and when so affixed it shall be attested by his signature or by the signature of
an Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 9. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the Board of
Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
TREASURER AND ASSISTANT TREASURER
Section 10. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 11. The Assistant Treasurer, or if there shall be more
than one, the Assistant Treasurers in the order determined by the Board of
Directors, or if there be no such determination, the Assistant Treasurer
designated by the Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE V.
CERTIFICATES OF STOCK
Section 1. Every holder of stock of the corporation shall be
entitled to have a certificate signed by, or in the name of the corporation by,
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
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<PAGE> 13
Section 2. Any or all of the signatures on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent, or registrar at the date of issue.
Section 3. If the corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
Section 4. The Board of Directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation, or the transfer
agent of the corporation, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 6. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise
10
<PAGE> 14
any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record date
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 7. The corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof
and accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
ARTICLE VI.
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Before payment of any dividend there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
SEAL
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<PAGE> 15
Section 5. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware". Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
NOTICES
Section 6. Whenever, under the provisions of the statutes or
of the Certificate of Incorporation or of these By-Laws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under
the provisions of the statutes or of the Certificate of Incorporation or of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed to be equivalent.
ANNUAL STATEMENT
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
ARTICLE VII.
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed
or new By-Laws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
12
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<EXTRAORDINARY> 416,094,747
<CHANGES> 0
<NET-INCOME> 397,574,951<F2>
<EPS-BASIC> 0<F3>
<EPS-DILUTED> 0<F3>
<FN>
<F1>The Company makes use of an unclassified balance sheet style due to the
nature of its business. Current Assets and Current Liabilities are therefore
reflected as zero in accordance with the instructions of Appendix E to the EDGAR
Filer Manual.
<F2>Net income represents net earnings applicable to common stock.
<F3> EPS amounts, as they relate to the Predecessor Company, are not meaningful
due to the reorganization. See Note 7, "Earnings Per Share".
</FN>
</TABLE>
