<PAGE>
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 33-98972
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 13, 1996)
- -------------------------------------------------------------------------------
4,600,000 Shares
[LOGO OF THE MONEY STORE]
$1.72 Mandatory Convertible Preferred Stock
- -------------------------------------------------------------------------------
All of the shares of $1.72 Mandatory Convertible Preferred Stock, no par value
per share (the "Preferred Shares"), offered hereby (the "Offering") are being
sold by The Money Store Inc. (the "Company").
The annual dividend payable with respect to each Preferred Share is $1.72.
Dividends will be cumulative and will be payable quarterly in arrears on each
March 1, June 1, September 1 and December 1, except that the first dividend
payment will be made on December 2, 1996 and will cover the period from the
date of issuance up to but excluding December 1, 1996. The liquidation
preference applicable to each Preferred Share is equal to the sum of (i) the
per share price to the public shown below and (ii) the amount of accrued and
unpaid dividends thereon.
On December 1, 1999 (the "Mandatory Conversion Date"), unless previously
converted at the option of the holder, each outstanding Preferred Share will
mandatorily convert into (i) a number of shares of the Company's common stock,
no par value per share (the "Common Stock"), equal to the Conversion Rate and
(ii) the right to receive an amount in cash equal to all accrued and unpaid
dividends on such Preferred Shares. The "Conversion Rate" is equal to (a) if
the Current Market Price (as defined below) of the Common Stock is greater
than or equal to $31.80 per share (the "Conversion Price"), 0.833 of a share
of Common Stock per Preferred Share, (b) if the Current Market Price is less
than the Conversion Price but greater than the Initial Price (as defined
below), a fractional share of Common Stock per Preferred Share having a value
(determined at the Current Market Price) equal to the Initial Price, and (c)
if the Current Market Price is less than or equal to the Initial Price, one
share of Common Stock per Preferred Share, subject in each case to adjustments
in certain events. The "Initial Price" is $26.50 per share of Common Stock.
The "Current Market Price" means the average Closing Price (as defined herein)
per share of the Common Stock on the 20 Trading Days (as defined herein)
immediately prior to, but not including, the Mandatory Conversion Date. The
number of shares of Common Stock a holder will receive upon mandatory
conversion thereof, and the value of the shares received upon conversion, will
vary depending on the market price of the Common Stock from time to time, all
as set forth herein. See "Description of Preferred Shares--Mandatory
Conversion of Preferred Shares."
At any time prior to the Mandatory Conversion Date, each Preferred Share is
convertible at the option of the holder thereof into 0.833 of a share of
Common Stock, subject to adjustment in certain events.
Dividends on the Preferred Shares will accrue at a higher rate than the rate
at which dividends are currently paid on the Common Stock. The opportunity for
equity appreciation afforded by an investment in the Preferred Shares is less
than that afforded by an investment in the Common Stock. Holders of Preferred
Shares will realize no equity appreciation if at the Mandatory Conversion Date
the Current Market Price of the Common Stock is below the Conversion Price,
and less than all of the equity appreciation if at such time the Current
Market Price of the Common Stock is above the Conversion Price. Holders of
Preferred Shares will realize the entire decline in equity value if at such
time the Current Market Price of the Common Stock is below the price to public
shown below. See "Description of Preferred Shares--Enhanced Dividend Yield;
Less Equity Appreciation than Common Stock." For a detailed description of the
terms of the Preferred Shares, see "Description of Preferred Shares."
The Preferred Shares have been accepted for inclusion in the Nasdaq Stock
Market's National Market (the "Nasdaq National Market") under the symbol
"MONEP." The Common Stock is included in the Nasdaq National Market under the
symbol "MONE." On October 30, 1996, the last reported sale price of the Common
Stock on the Nasdaq National Market was $26.625 per share.
SEE "INVESTMENT CONSIDERATIONS" ON PAGES S-10 TO S-12 FOR A DISCUSSION OF
CERTAIN MATERIAL FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE PREFERRED SHARES OFFERED HEREBY.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Share.... $26.50 $0.86 $25.64
- ------------------------------------------------------------------------------
Total(4)............... $121,900,000 $3,956,000 $117,944,000
- ------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Plus accrued dividends, if any, from the date of issue.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be $350,000.
(4) The Company has granted the Underwriters a 30-day option to purchase up to
690,000 additional Preferred Shares on the same terms and conditions as
set forth above. If all such additional Preferred Shares are purchased by
the Underwriters, the total Price to Public will be $140,185,000, the
total Underwriting Discounts and Commissions will be $4,549,400 and the
total Proceeds to Company will be $135,635,600. See "Underwriting."
- -------------------------------------------------------------------------------
The Preferred Shares are offered by the several Underwriters subject to
delivery by the Company and acceptance by the Underwriters, to prior sale and
to withdrawal, cancellation or modification of the offer without notice.
Delivery of the Preferred Shares to the Underwriters is expected to be made at
the office of Prudential Securities Incorporated, One New York Plaza, New
York, New York, on or about November 5, 1996.
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
MONTGOMERY SECURITIES
OPPENHEIMER & CO., INC.
October 30, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OR OF THE PREFERRED SHARES OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY HAVE ENGAGED IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). SEE "UNDERWRITING."
CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE RELATED
PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN AND THEREIN
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E
OF THE EXCHANGE ACT, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR
"CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY. THE STATEMENTS IN "INVESTMENT CONSIDERATIONS" ON PAGES S-10 TO S-
12 OF THIS PROSPECTUS SUPPLEMENT CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING
IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH RESPECT TO
SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere and
incorporated by reference in the Prospectus and this Prospectus Supplement.
Unless otherwise indicated, the information in this Prospectus Supplement
assumes that the Underwriters' over-allotment option will not be exercised.
Unless the context otherwise requires, all references herein to the "Company"
include The Money Store Inc. and its wholly-owned subsidiaries.
THE COMPANY
The Company is a financial services company engaged, through its
subsidiaries, in the business of originating (including purchasing), selling
and servicing consumer and commercial loans of specified types and offering
related services. Loans originated by the Company primarily consist of fixed
and adjustable rate mortgage loans on residential real estate ("Home Equity
Loans"), loans guaranteed in part ("SBA Loans") by the United States Small
Business Administration (the "SBA") and government-guaranteed student loans
("Student Loans"). During 1995, the Company entered the business of purchasing,
selling and servicing loans secured by new and used automobiles, mini-vans,
vans and light trucks ("Auto Loans").
For the year ended December 31, 1995, the Company originated or purchased
approximately $3.8 billion of loans. Of these loans, approximately 75% by
principal amount were Home Equity Loans, approximately 12% by principal amount
were SBA Loans, approximately 10% by principal amount were Student Loans and
approximately 3% by principal amount were Auto Loans. For the six-month period
ended June 30, 1996, the Company originated or purchased approximately $2.5
billion of loans. Of these loans, approximately 76% by principal amount were
Home Equity Loans, approximately 11% by principal amount were SBA Loans,
approximately 6% by principal amount were Student Loans and approximately 7% by
principal amount were Auto Loans. Based upon government agency sources,
management believes that during each of the last 13 SBA fiscal years the
Company originated a greater principal amount of SBA Loans than any other
originator of SBA Loans in the United States.
Substantially all of the loans originated and purchased by the Company are
sold to institutional investors or pledged to the Company's lenders until the
loans can be sold and the lenders repaid. Revenue is recognized as gain on sale
of loans, which represents the present value of the difference between the
interest charged by the Company to a borrower and the interest rate received by
the investor who purchased the loan, in excess of normal loan servicing fees
(the "Excess Servicing Spread") and non-refundable fees and premiums on loans
sold. The Company recognizes such gain on sale of loans in the year that such
loans are sold, although cash (representing the Excess Servicing Spread and
servicing fees) is received by the Company over the lives of the loans. The
Company's practice of selling its loans is designed to increase the Company's
liquidity, reduce the need to access markets for capital and reduce certain
risks associated with interest rate fluctuations. For loans sold during 1995,
the Excess Servicing Spread averaged approximately 3.65% on Home Equity Loans,
2.04% on SBA Loans, 1.63% on Student Loans and 10.60% on Auto Loans. For loans
sold during the first six months of 1996, the Excess Servicing Spread averaged
approximately 3.20% on Home Equity Loans, 2.32% on SBA Loans, 1.41% on Student
Loans and 9.82% for Auto Loans.
The Company generally retains the right to service loans it sells or
pledges. In addition to the Excess Servicing Spread, the Company receives fees
in connection with its loan origination and servicing activities. The total
portfolio of loans which the Company services (the "Serviced Loan Portfolio")
was approximately $8.6 billion at December 31, 1995, consisting of $7.8 billion
of loans that had been sold with servicing rights retained, $807.7 million of
loans (the "Retained Loan Portfolio") which the Company had not sold and
approximately $29.2 million of loans (the "Repurchased Loan Portfolio") which
the Company had repurchased
S-3
<PAGE>
from investors pursuant to contractual commitments. The Serviced Loan Portfolio
was approximately $10.3 billion at June 30, 1996, consisting of $9.3 billion of
loans that had been sold with servicing rights retained, $975.5 million of
loans in the Retained Loan Portfolio and $35.2 million of loans in the
Repurchased Loan Portfolio. The Retained Loan Portfolio consists of (i) Home
Equity Loans, SBA Loans, Student Loans, Auto Loans and other loans that are
warehoused pending their sale, (ii) the unsold unguaranteed portion of SBA
Loans for which the related guaranteed portions have been sold, (iii) certain
Student Loans during the period prior to the commencement of the borrower's
repayment obligation, and (iv) loans that the Company otherwise determines to
retain.
At September 30, 1996, the Company operated out of 206 branch offices and
was doing business in 50 states, the District of Columbia and the Commonwealth
of Puerto Rico.
The Company was incorporated in New Jersey in 1974. The predecessor of the
Company, which is now a wholly-owned subsidiary of the Company, began making
Home Equity Loans in 1967. The Company's principal executive offices are
located at 2840 Morris Avenue, Union, New Jersey 07083. Its telephone number is
(908) 686-2000.
THE OFFERING
Securities.............. The Preferred Shares are a series of preferred
stock, no par value per share ("Preferred Stock"),
of the Company that rank prior to the Common Stock
as to payment of dividends and distribution of
assets upon liquidation. The Preferred Shares will
mandatorily convert into shares of Common Stock on
December 1, 1999, the Mandatory Conversion Date. In
addition, the Preferred Shares are convertible into
shares of Common Stock at the option of the holder
at any time prior to the Mandatory Conversion Date
as set forth below.
Dividends............... Holders of Preferred Shares will be entitled to
receive annual cumulative dividends at a rate per
annum of $1.72 per Preferred Share payable
quarterly in arrears on each March 1, June 1,
September 1, and December 1, or, if any such date
is not a business day, on the next succeeding
business day, with the first dividend payable on
December 2, 1996 and covering the period from the
date of issuance up to but excluding December 1,
1996. See "Description of Preferred Shares--
Dividends."
Mandatory Conversion.... On the Mandatory Conversion Date, unless previously
converted at the option of the holder, each
outstanding Preferred Share will mandatorily
convert into (i) a number of shares of Common Stock
equal to the Conversion Rate and (ii) the right to
receive an amount in cash equal to all accrued and
unpaid dividends on such Preferred Share to the
Mandatory Conversion Date. The "Conversion Rate" is
equal to (a) if the Current Market Price of the
Common Stock is greater than or equal to the
Conversion Price of $31.80 per share, 0.833 of a
share of Common Stock per Preferred Share, (b) if
the Current Market Price is less than the
Conversion Price but greater than the Initial
Price, a fractional share of Common Stock per
Preferred Share having a value (determined at the
Current Market Price) equal to the Initial Price,
and (c) if the Current Market Price is less than or
equal to the Initial Price,
S-4
<PAGE>
one share of Common Stock per share of Preferred
Share, subject in each case to adjustments in
certain events. The "Initial Price" is $26.50 per
share of Common Stock. The "Current Market Price"
means the average Closing Price per share of the
Common Stock on the 20 Trading Days immediately
prior to, but not including, the Mandatory
Conversion Date. See "Description of Preferred
Shares--Mandatory Conversion of Preferred Shares."
Conversion at the
Option of the Holder.... At any time prior to the Mandatory Conversion Date,
each Preferred Share is convertible at the option
of the holder thereof into 0.833 of a share of
Common Stock (the "Optional Conversion Rate"),
subject to adjustment as described herein. The
value of the shares received upon optional
conversion will vary depending on the market price
of the Common Stock from time to time, all as set
forth herein. See "Description of Preferred
Shares--Conversion at the Option of the Holder."
Enhanced Dividend
Yield; Less Equity
Appreciation Than
Common Stock............ Dividends will accrue on the Preferred Shares at a
higher rate than the rate at which dividends are
currently paid on the Common Stock. The opportunity
for equity appreciation afforded by an investment
in the Preferred Shares is less than that afforded
by an investment in the Common Stock. Holders of
Preferred Shares will realize no equity
appreciation if at the Mandatory Conversion Date
the Current Market Price of the Common Stock is
below the Conversion Price, and less than all of
the equity appreciation if at such time the Current
Market Price of the Common Stock is above the
Conversion Price. Holders of Preferred Shares will
realize the entire decline in equity value if at
such time the Current Market Price of the Common
Stock is below the price to public shown on the
cover page of this Prospectus Supplement. See
"Description of Preferred Shares--Enhanced Dividend
Yield; Less Equity Appreciation than Common Stock."
Voting Rights........... Whenever dividends on the Preferred Shares are in
arrears and unpaid for six quarterly dividend
periods, and in certain other circumstances, the
holders of the Preferred Shares (voting separately
as a class) will be entitled to vote, on the basis
of one vote for each Preferred Share, for the
election of two Directors of the Company, such
Directors to be in addition to the number of
Directors constituting the Board of Directors
immediately prior to the accrual of such right. In
addition, the holders of the Preferred Shares may
have voting rights with respect to certain
alterations of the Company's Restated Certificate
of Incorporation and certain other matters, voting
separately as a class. See "Description of
Preferred Shares--Voting Rights" herein and
"Description of Capital Stock--Common Stock" in the
Prospectus.
S-5
<PAGE>
Liquidation Preference
and Ranking............. The Preferred Shares will rank prior to the Common
Stock as to payment of dividends and distribution
of assets upon liquidation. The liquidation
preference of each Preferred Share is an amount
equal to the sum of (i) the per share price to the
public shown on the cover page of this Prospectus
Supplement and (ii) all accrued and unpaid
dividends thereon. See "Description of Preferred
Shares--Dividends" and "--Liquidation Rights."
Common Stock Symbol..... The Common Stock is included in the Nasdaq National
Market under the symbol "MONE."
Listing of the
Preferred Shares........ The Preferred Shares have been accepted for
inclusion in the Nasdaq National Market under the
symbol "MONEP."
Use of Proceeds......... The Company intends to use the net proceeds of the
Offering for general corporate purposes, including
the repayment of a portion of indebtedness
outstanding under the Company's Credit Facility (as
defined herein) and existing warehouse lines. See
"Recent Developments--New Credit Facility" and "Use
of Proceeds."
S-6
<PAGE>
RECENT DEVELOPMENTS
RECENT FINANCIAL RESULTS
On October 23, 1996, the Company announced its unaudited financial results
for the third quarter of 1996 and the nine months ending September 30, 1996.
The Company's net income increased 72% for the third quarter of 1996 and 79%
for the first nine months of 1996, compared with 1995 results for each period.
Net income rose to $22.7 million for the quarter ended September 30, 1996,
compared to 1995 third quarter net income of $13.2 million and to $55.8
million for the first nine months of 1996, compared to $31.2 million for the
comparable 1995 period.
Earnings per share for the third quarter of 1996 were $0.38, an increase of
46% from earnings per share of $0.26 in the third quarter of 1995. Earnings
per share for the first nine months of 1996 were $0.95, up 56% from earnings
per share of $0.61 for the same period in 1995. Per share amounts have been
adjusted to reflect the stock splits described under "Price Range of Common
Stock." The weighted average number of shares outstanding for the quarter was
up 16% to 59.1 million compared to the prior year period, primarily due to the
issuance of 5.9 million new shares of Common Stock on March 11, 1996 in an
underwritten public offering. Net income and earnings per share for the third
quarter were records in the Company's 29-year history.
The Company also declared a cash dividend of $0.03 per share payable on
December 1, 1996 to shareholders of record as of November 15, 1996. The new
quarterly rate represents a 20% increase from the prior rate of $0.025 per
share. The increase in the quarterly dividend is the sixth increase in the
last ten quarters.
Revenues for the third quarter of 1996 were $202 million, an increase of 39%
over revenues of $145 million in the third quarter of 1995. For the first nine
months of 1996, revenues were $535 million, an increase of 53% over revenues
of $350 million in the first nine months of 1995.
The Serviced Loan Portfolio increased 43% to $11.2 billion at September 30,
1996, from $7.8 billion at September 30, 1995. Home Equity Loans in the
Serviced Loan Portfolio increased 46% to $7.6 billion; SBA Loans in the
Serviced Loan Portfolio increased 19% to $2.1 billion; Student Loans in the
Serviced Loan Portfolio increased 42% to $1.1 billion; and Auto Loans in the
Serviced Loan Portfolio increased 432% to $364 million.
Loan originations for the third quarter of 1996 were a record level of $1.5
billion, a 57% increase over originations of $951 million for the third
quarter of 1995. Loan originations in the third quarter of 1996 and the
increases they represent over the third quarter of 1995 for the respective
divisions were as follows: Home Equity Loans of $1.1 billion, up 53%; SBA
Loans of $154 million, up 36%; Student Loans of $140 million, up 37%; and Auto
Loans of $127 million, up 226%.
Loan originations for the first nine months of 1996 were a Company record of
$4.0 billion, a 54% increase over originations of $2.6 billion in the 1995
period. Loan originations for the first nine months of 1996 and the increases
they represent over the first nine months of 1995 for the respective divisions
were as follows: Home Equity Loans of $3.0 billion, up 48%; SBA Loans of $428
million, up 56%; Student Loans of $310 million, up 25%; and Auto Loans of $302
million, up 308%.
Loans sold by division during the third quarter of 1996 and the first nine
months of 1996, respectively, were as follows: Home Equity Loans, $1.2 billion
and $3.0 billion; SBA Loans, $143 million and $401 million; Student Loans, $0
and $250 million; and Auto Loans, $50 million and $200 million.
The Excess Servicing Spreads for loans sold during the third quarter of 1996
and the nine months ended September 30, 1996, respectively, were as follows:
Home Equity Loans, 3.73% and 3.42%; SBA Loans, 1.23% and 1.93%; and Auto
Loans, 10.05% and 9.86%. There were no Student Loans sold in the third
quarter; year-to-date the Excess Servicing Spread for Student Loans was 1.41%.
Shareholders' equity of $418 million at September 30, 1996, was up 74% from
$241 million at the end of 1995. Of that increase, $122 million resulted from
the Common Stock offering in March 1996.
S-7
<PAGE>
Thirty day-and-over delinquencies as of September 30, 1996, increased 39
basis points to 5.74% of Home Equity Loans serviced; increased 30 basis points
to 6.00% of SBA Loans serviced; and increased 36 basis points to 3.19% of Auto
Loans serviced, from the levels at June 30, 1996. Of the Company's Serviced
Loan Portfolio, Home Equity Loans represent 67.9%; the unguaranteed portions of
SBA and Student Loans represent 5.1% and 0.2%, respectively; Auto Loans
represent 3.2%; and the government-guaranteed portions of the SBA and Student
Loans represent 14.0% and 9.6%, respectively, of the total.
For the quarter ended September 30, 1996, net Home Equity Loans charged off
were $10.4 million, which annualizes to 55 basis points of Home Equity Loans
serviced, compared with 50 basis points annualized for the third quarter of
1995. Net Home Equity Loans charged off for the first nine months of 1996 were
$26.4 million, which annualizes to 46 basis points of Home Equity Loans
serviced. For all of 1995, net Home Equity Loans charged off were $24.2
million, or 42 basis points of Home Equity Loans serviced. Net SBA Loans
charged off were $711,000 for the third quarter of 1996, or 50 basis points
annualized of unguaranteed SBA Loans serviced, compared with 46 basis points
annualized for the same period in 1995. Net SBA Loans charged off for the first
nine months of 1996 were $2.0 million, which annualizes to 48 basis points of
unguaranteed SBA Loans serviced. SBA Loans charged off were $1.7 million, or 40
basis points of unguaranteed SBA Loans serviced for all of 1995. Net Auto Loans
charged off for the third quarter of 1996 were $1.8 million, or 196 basis
points annualized of the Auto Loans serviced. Net Auto Loans charged off for
the first nine months of 1996 were $4.0 million, which annualizes to 146 basis
points of Auto Loans serviced. Auto Loans charged off for all of 1995 were
$290,000, which annualizes to 25 basis points of the Auto Loans serviced.
Collateral owned at September 30, 1996 was $36 million, including $27.6
million of collateral owned by trusts which issued asset-backed securities.
S-8
<PAGE>
CONSOLIDATED STATEMENT OF INCOME DATA:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C>
Revenues:
Gain on sale of receivables...... $ 143,701 $ 103,675 $ 359,513 $ 242,993
Finance income, fees earned and
other income.................... 58,483 41,586 175,791 106,691
---------- ---------- ---------- ----------
202,184 145,261 535,304 349,684
---------- ---------- ---------- ----------
Expenses:
Salaries/employee benefits....... 42,892 32,338 117,001 86,031
Other operating expenses......... 52,372 29,997 138,528 82,871
Provision for credit losses...... 35,870 33,800 94,891 61,752
Interest......................... 32,993 26,612 91,426 65,990
---------- ---------- ---------- ----------
164,127 122,747 441,846 296,644
---------- ---------- ---------- ----------
Income before income taxes......... 38,057 22,514 93,458 53,040
Income taxes....................... 15,337 9,281 37,637 21,797
---------- ---------- ---------- ----------
Net income......................... $ 22,720 $ 13,233 $ 55,821 $ 31,243
========== ========== ========== ==========
Net income per share(1)............ $ 0.38 $ 0.26 $ 0.95 $ 0.61
========== ========== ========== ==========
Weighted average number of common
shares outstanding................ 59,090,793 51,096,575 58,629,987 50,934,678
========== ========== ========== ==========
Cash dividends..................... $ 1,438 $ 920 $ 3,954 $ 2,411
========== ========== ========== ==========
</TABLE>
- --------
(1) Net income per share is computed based upon the weighted average shares
outstanding during the respective periods restated to reflect stock splits
effected by the Company.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DATA:
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Receivables, net of allowance for credit losses
of $19,902 and $15,591 in 1996 and 1995........ $1,339,394 $1,029,853
Excess servicing asset.......................... 706,557 524,359
Total assets.................................... 2,375,794 1,792,248
Notes payable................................... 1,378,016 1,075,892
Allowance for credit losses on loans sold....... 184,330 125,155
Subordinated debt............................... 13,000 24,000
Shareholders' equity............................ 418,408 241,126
</TABLE>
OTHER SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- ----------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Volume of loans originated or
purchased....................... $ 1,489,524 $ 950,546 $ 4,039,226 $2,626,513
Serviced loan portfolio.......... $11,174,863 $7,812,260 $11,174,863 $7,812,260
</TABLE>
NEW CREDIT FACILITY
On August 16, 1996, the Company entered into a revolving credit facility (the
"Credit Facility") with a syndicate of banks led by First National Bank of
Chicago, as administrative agent, pursuant to which the Company may borrow up
to $400 million on an unsecured basis. The Credit Facility matures on August
16, 1999, and borrowings bear interest at a floating rate. In connection with
the Credit Facility, the Company repaid and terminated certain of its smaller
secured warehouse lines.
S-9
<PAGE>
INVESTMENT CONSIDERATIONS
Prospective investors should carefully consider the following factors, in
addition to the other information contained in this Prospectus Supplement and
the accompanying Prospectus, in connection with an investment in the Preferred
Shares offered hereby.
GENERAL LENDING RISKS. Since its initial public offering in 1991, the
Company has achieved rapid growth in revenues and net income. The financial
services business is subject to various business risks, including, but not
limited to, the following: the risk that borrowers will not satisfy their
payment obligations; the risk that appraisals of property securing loans will
not reflect the property's actual value, either due to valuation errors or
fluctuations in the value of real estate and that, upon liquidation of real
estate owned or properties securing loans, the Company may suffer a loss; and
the risk that changes in interest rates after the origination of a loan and
prior to its sale may narrow the spread between the variable interest rates the
Company pays under its warehouse lines and the interest rate paid by the
borrower, and may reduce the Excess Servicing Spread, which is not locked in
until the loan is sold. A decrease in interest rates also could cause an
increase in the rate at which outstanding loans are prepaid, reducing the
period of time during which the Company receives the Excess Servicing Spread
and other servicing income with respect to such prepaid loans. See "--Impact of
Prepayment on Excess Servicing Asset." In addition, with respect to Home Equity
Loans that are junior mortgage loans, the Company's security interest in the
property securing its loan is subordinated to the interest of a senior mortgage
lender, if any. If the value of the property securing a junior mortgage loan is
not sufficient to repay the borrower's obligation to the senior mortgage
holders upon foreclosure, there will be no realizable value in such property to
satisfy the borrower's obligation to the Company. Similarly, if the value of
the property securing a senior mortgage loan declines sufficiently over time,
the realizable value in such property may be less than the borrower's
obligation to the Company. As a result of the foregoing business risks, there
can be no assurance that the Company's rapid growth will continue.
Many of the foregoing business risks become more acute in an economic
slowdown on recession, which may be accompanied by decreased demand for credit
and declining real estate and other asset values. In the mortgage business, any
material decline in real estate values reduces the ability of borrowers to use
home equity to support borrowings and increases the loan-to-value ratios of
loans previously made by the Company, thereby weakening collateral coverage and
increasing the possibility of a loss in the event of a default. Delinquencies,
foreclosures and losses generally increase during economic slowdowns or
recessions. Because certain of the Company's borrowers may have had past credit
problems, in the home equity loan market and certain other markets, the actual
rates of delinquencies, foreclosures and losses could be higher under adverse
economic conditions than those experienced in such markets in general. In
addition, in an economic slowdown or recession, the Company's servicing costs
will increase. Any sustained period of increased delinquencies, foreclosures,
losses or costs could adversely affect the Company's ability to sell loans or
other assets through securitization and could increase the cost of selling
loans or other assets through securitization, which could adversely affect the
Company's financial condition or results of operations.
IMPACT OF PREPAYMENT ON EXCESS SERVICING ASSET. Gain on sale of receivables
is the most significant component of the Company's reported revenues. Gain on
sale represents the recognition of the present value of the Excess Servicing
Spread, which is based on certain estimates made by management at the time
loans are sold, including estimates regarding prepayment rates. The rate of
prepayment of loans may be affected by a variety of economic and other factors,
including prevailing interest rates and the availability of alternative
financing. The effects of these factors may vary depending on the particular
type of loan. Estimates of prepayment rates are made based on management's
expectations of future prepayment rates, which are based, in part, on the
historic performance of the Company's loans and other considerations. There can
be no assurance of the accuracy of management's estimates. If actual
prepayments occur more quickly than was projected at the time loans were sold,
the carrying value of the excess servicing asset may have to be written down
through a charge to earnings in the period of adjustment.
NEED FOR ADDITIONAL FUNDS AND DEPENDENCE ON SECURITIZATION TO FINANCE
LENDING ACTIVITIES. The Company has a constant need for capital to finance its
lending activities. At June 30, 1996, the Company had $626.1 million of short-
term notes payable, including the current portion of long-term debt. In
addition, at such
S-10
<PAGE>
date, the Company had outstanding $637 million principal amount of senior
unsecured and senior subordinated unsecured notes (collectively, the "Unsecured
Notes"), excluding the $31 million current portion of such Unsecured Notes. The
Unsecured Notes mature on or prior to March 31, 2002, and bear interest at
rates ranging from 7.6% to 12.0%, with a weighted average interest rate of 8.6%
at June 30, 1996. While the Company believes that it will be able to refinance
or otherwise repay its short-term debt and Unsecured Notes in the normal course
of its business, there can be no assurance that the Company's existing lenders
will agree to refinance such debt, that other lenders will be willing to extend
lines of credit to the Company or that funds otherwise generated from
operations will be sufficient to satisfy such obligations. Future financing may
involve the issuance of additional Common Stock or other securities, including
securities convertible into or exercisable for Common Stock, and any such
issuance may dilute the equity interest of purchasers of the Common Stock
offered hereby.
Since 1989, the Company has pooled and sold substantially all of the loans
or other assets which it originates or purchases through securitization
transactions as a means to improve its liquidity and to repay the Company's
warehouse lenders. Accordingly, adverse changes in the securitization market
could impair the Company's ability to originate, purchase and sell loans or
other assets on a favorable or timely basis. Any such impairment could have a
material adverse effect upon the Company's business and results of operations.
Any delay in the sale of a loan or other asset pool would postpone the
recognition of gain on such loans until their sale. Such delays could cause the
Company's earnings to fluctuate from quarter to quarter.
REGULATION OF LENDING ACTIVITIES; DEPENDENCE ON FEDERAL PROGRAMS; AND
POSSIBLE ENVIRONMENTAL LIABILITIES. The operations of the Company are subject
to extensive regulation by federal, state and local governmental authorities
and are subject to various laws and judicial and administrative decisions
imposing various requirements and restrictions, including among other things,
regulating credit granting activities, establishing maximum interest rates,
insurance coverages and charges, requiring disclosures to customers, governing
secured transactions and setting collection, repossession and claims handling
procedures and other trade practices. There can be no assurance that more
restrictive laws, rules and regulations will not be adopted in the future which
could make compliance much more difficult or expensive, restrict the Company's
ability to originate or sell loans, further limit or restrict the amount of
interest and other charges earned under loans originated or purchased by the
Company, or otherwise adversely affect the business or prospects of the
Company. In addition, the elimination of or a substantial reduction in the
current home mortgage interest income tax deduction could curtail the amount of
Home Equity Loan originations, which could have an adverse effect on the
Company's results of operations or financial condition.
In the course of its business, the Company has acquired, and may in the
future acquire, properties through foreclosure. Primarily with respect to
commercial properties securing SBA Loans and other commercial loans, there is a
risk that hazardous substances or wastes could be discovered on such properties
after foreclosure. In such event, the Company might be required to remove such
substances at its sole cost and expense. There can be no assurance that the
cost of such removal would not substantially exceed the value of affected
properties or the loans secured by the properties, that the Company would have
adequate remedies against the prior owner or other responsible parties or that
the Company would not find it difficult or impossible to sell the affected
properties either prior to or following any such removal.
For the year ended December 31, 1995 and the six-month period ended June 30,
1996, respectively, of the loans originated by the Company, approximately 12%
and 11% by principal amount were SBA Loans, approximately 10% and 6% by
principal amount were Student Loans and approximately 3% and 3% by principal
amount were Title I home improvement loans insured by the Federal Housing
Authority of the United States Department of Housing and Urban Development
("HUD"). The discontinuation, elimination or significant reduction of guarantee
levels for any of these federal programs could have a material adverse effect
on the Company's operations.
In August 1995, bills were introduced in both houses of the United States
Congress that would, among other things, abolish HUD, reduce federal spending
for housing and community development activities and
S-11
<PAGE>
eliminate the Title I program. Other changes to HUD have been proposed, which,
if adopted, could affect the operation of the Title I program. Under the
Omnibus Budget Reconciliation Act of 1993, Congress made a number of changes
that may affect the financial condition of the entities which guarantee Student
Loans. In addition, that legislation greatly expanded the Federal Direct
Student Loan Program volume to a target of 60% of Student Loan demand in
academic year 1998-1999, which could result in decreasing volumes of
conventional Student Loans of the type originated by the Company. There can be
no assurance that such changes will not have an adverse effect on the Company's
volume of Student Loan originations or on its ability to securitize the Student
Loans it originates due to the potential adverse impact on the Student Loan
guarantors. Further, the level of competition in the secondary market for
Student Loans could be reduced, resulting in fewer potential buyers of Student
Loans and lower prices for loans sold in the secondary market. In addition, the
Department of Education is implementing a direct consolidation loan program,
which may further reduce the volume of Student Loans originated. Finally,
federal budget legislation being considered by Congress could modify many of
the provisions of existing federal laws relating to Student Loans. Until final
legislation is adopted, the impact on the Company, if any, is impossible to
determine.
CONCENTRATION OF VOTING CONTROL IN, AND POSSIBLE SALES OF SHARES BY,
MANAGEMENT; AND CONTINUITY OF MANAGEMENT. Marc Turtletaub, the Chief Executive
Officer and President of the Company, and Alan Turtletaub, the Chairman of the
Board of Directors of the Company, beneficially own or otherwise control an
aggregate of approximately 35.7% of the outstanding Common Stock (33.0%
assuming all of the Preferred Shares (exclusive of Preferred Shares issuable
pursuant to the Underwriters' over-allotment option) are converted at the
maximum Conversion Rate of one share of Common Stock per Preferred Share).
Therefore, the Turtletaubs can exercise significant influence with respect to
all matters submitted to shareholders, including the election of directors, and
to control the direction and future operations of the Company. As long as the
Turtletaubs are the largest shareholders of the Company, it will be difficult
for third parties to obtain control of the Company through market purchases of
Common Stock. In addition, although such shares are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"), all of such shares may be sold at any time in private
transactions or in public transactions pursuant to Rule 144 without regard to
the holding period requirements (but not the volume limitations) of such rule.
Each of Alan and Marc Turtletaub has agreed not to, directly or indirectly,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, pledge,
offer of sale, contract of sale, grant of any option to purchase or other sale
or disposition) of Common Stock or other capital stock of the Company or any
securities convertible into, or exercisable or exchangeable for, any shares of
Common Stock or other capital stock of the Company, in each case beneficially
owned by him, and not to permit any sales of any shares of Common Stock
otherwise controlled by him, for a period of 30 days following the date of this
Prospectus Supplement without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters. Any sales by the
Turtletaubs of the Common Stock held by them could have a material adverse
effect on the prevailing market price of the Common Stock. See "Underwriting."
Certain of the Company's loan agreements, including the Credit Facility and
the agreements pursuant to which the Unsecured Notes were issued (the "Note
Agreements"), prohibit Marc Turtletaub and Alan Turtletaub from beneficially
owning in the aggregate less than a specified percentage of the outstanding
voting stock of the Company, prohibit third parties from beneficially owning
more than a specified percentage of the outstanding voting stock of the Company
and/or prohibit certain changes in management of the Company. In the case of
the Note Agreements, violation of such provisions could require the Company to
offer to prepay such Unsecured Notes or could permit the holders of 50% of the
outstanding principal amount of any issue of Unsecured Notes to declare all the
outstanding Unsecured Notes of such issue immediately due and payable. A
default in any of such provisions could also cause defaults under the Credit
Facility and other loan agreements. While a majority of the executive officers
relevant to such covenants have entered into employment agreements with the
Company, there can be no assurance that any or all of such persons will remain
employed with the Company. There can be no assurance that Marc Turtletaub and
Alan Turtletaub will retain the required percentages of the voting control of
the Company necessary to avoid violating such changes in control provisions.
S-12
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Preferred Shares are estimated to be $117.6 million ($135.3 million if the
Underwriters' over-allotment option is exercised in full), after deducting
underwriting discounts and commissions and estimated offering expenses. The
Company intends to use the net proceeds from the sale of the Preferred Shares
for general corporate purposes, including the repayment of a portion of
indebtedness outstanding under the Credit Facility and existing warehouse
lines. Indebtedness was incurred under the Credit Facility for general
corporate purposes, including loan originations and purchases. Borrowings
under the Credit Facility mature in August 1999 and had a weighted average
interest rate of 6.8% at September 30, 1996. The Company's warehouse lines
generally mature within one year and had a weighted average interest rate of
6.3% at June 30, 1996.
PRICE RANGE OF COMMON STOCK
The Common Stock is included in the Nasdaq National Market under the symbol
"MONE." The following table sets forth the range of the high and low sales
prices for the Common Stock as reported by the Nasdaq National Market. All
share prices and dividends have been adjusted to reflect the following stock
splits: (i) a 5-for-2 stock split effected in December 1995; (ii) a 3-for-2
stock split effected in September 1995; and (iii) a 3-for-2 stock split
effected in March 1994.
<TABLE>
<CAPTION>
HIGH LOW
1994 ------ ------
<S> <C> <C>
First Quarter................................................... $ 5.73 $ 4.13
Second Quarter.................................................. 5.53 4.27
Third Quarter................................................... 5.93 4.20
Fourth Quarter.................................................. 5.60 4.27
1995
First Quarter................................................... 6.93 4.73
Second Quarter.................................................. 9.73 5.87
Third Quarter................................................... 19.70 9.47
Fourth Quarter.................................................. 22.10 14.20
1996
First Quarter................................................... 28.00 13.00
Second Quarter.................................................. 29.00 19.75
Third Quarter................................................... 26.63 18.00
Fourth Quarter (through October 30, 1996)....................... 30.13 26.13
</TABLE>
On September 30, 1996, the Company had approximately 163 shareholders of
record of its Common Stock. The Company believes that its Common Stock is
beneficially held by in excess of 8,900 shareholders. The reported last sales
price of the Common Stock on the Nasdaq National Market on October 30, 1996
was $26.625 per share.
DIVIDEND POLICY
The Company has paid a quarterly dividend on its Common Stock since
November 1992. The Company anticipates continuing this quarterly dividend
program. The current quarterly dividend is $0.03 per share.
The Note Agreements and the Credit Facility restrict the ability of the
Company and substantially all of its subsidiaries to pay dividends or to make
other distributions and investments. In addition, certain of the Company's
warehouse lines and term notes incorporate those restrictions or otherwise
contain similar restrictions. At June 30, 1996, $135,500,000 was available for
the payment of dividends under the most restrictive of the operating and
financial covenants contained in these agreements. All dividends paid by the
Company have been in compliance with the above-stated restrictions.
S-13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1996 and as adjusted to give effect to the receipt by the
Company of the net proceeds from the sale of the Preferred Shares and the
application of the net proceeds therefrom to reduce outstanding indebtedness.
See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Notes payable (1)....................................... $1,250,127 $1,132,533
Subordinated debt....................................... 13,000 13,000
---------- ----------
Total debt.......................................... 1,263,127 1,145,533
---------- ----------
Shareholders' equity:
$1.72 Mandatory Convertible Preferred Stock, no par
value per share; 5,290,000 shares authorized;
4,600,000 shares outstanding as adjusted;
$121,900,000 aggregate liquidation value............. -- 117,594
Common stock, no par value; 250,000,000 shares autho-
rized; 57,521,480 shares issued and outstanding (2).. 182,831 182,831
Paid in capital....................................... 1,599 1,599
Retained earnings..................................... 212,108 212,108
---------- ----------
Total shareholders' equity.......................... 396,538 514,132
---------- ----------
Total capitalization................................ $1,659,665 $1,659,665
========== ==========
</TABLE>
- --------
(1) Includes short-term notes payable.
(2) Does not include options to purchase 3,178,104 shares of Common Stock
which were outstanding at June 30, 1996.
RATIOS OF EARNINGS
The following table sets forth the ratio of earnings to fixed charges for
the Company for the six months ended June 30, 1996 and June 30, 1995 and for
each of the years in the five-year period ended December 31, 1995.
The ratio of earnings to fixed charges has been computed by dividing
earnings by fixed charges. Earnings consist of income before income taxes plus
fixed charges. Fixed charges consist of interest on all indebtedness and the
portion of rental expense considered to be representative of interest.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
----------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- ------- -------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings................ $116,092 $71,453 $180,389 $98,462 $71,429 $58,552 $56,577
-------- ------- -------- ------- ------- ------- -------
Interest expense........ 58,433 39,378 93,985 43,059 29,184 31,504 36,361
Rent expense(1)......... 2,258 1,549 3,371 2,376 1,672 1,448 1,323
-------- ------- -------- ------- ------- ------- -------
Total fixed charges..... $ 60,691 $40,927 $ 97,356 $45,435 $30,856 $32,952 $37,684
======== ======= ======== ======= ======= ======= =======
Ratio................... 1.91x 1.74x 1.85x 2.17x 2.31x 1.78x 1.50x
======== ======= ======== ======= ======= ======= =======
</TABLE>
- --------
(1) Rent expense reflects one-third of the Company's total rent expense.
S-14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected consolidated financial data with
respect to the Company for each of the six month periods ended June 30, 1996
and 1995 and each of the five years in the period ended December 31, 1995. The
data for each of the five years in the period ended December 31, 1995 are
derived in part from the audited Consolidated Financial Statements of the
Company. The data for each of the six-month periods ended June 30, 1996 and
1995 is unaudited. In the opinion of the Company, all adjustments, which
consist only of normal recurring items, necessary for a fair presentation, in
accordance with generally accepted accounting principles, of the results for
the interim periods have been included. The results of operations of any
interim period are subject to year end audit and adjustments and are not
necessarily indicative of the results of operations for the full year. See the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 and
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 1996, incorporated by reference herein.
CONSOLIDATED STATEMENT OF INCOME DATA:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Gain on sale of receiv-
ables.................. $ 215,812 $ 139,318 $ 353,995 $ 259,913 $ 159,576 $ 94,515 $ 80,663
Finance income, fees
earned and other in-
come................... 117,308 65,105 156,563 70,557 60,233 62,791 59,591
----------- ----------- ----------- ----------- ----------- ----------- -----------
333,120 204,423 510,558 330,470 219,809 157,306 140,254
----------- ----------- ----------- ----------- ----------- ----------- -----------
EXPENSES:
Salaries/employee bene-
fits................... 74,109 53,693 119,423 85,596 53,844 40,831 35,936
Other operating ex-
penses................. 86,156 52,874 123,394 96,188 53,462 33,521 31,129
Provision for credit
losses................. 59,021 27,952 90,723 52,600 42,746 25,850 17,935
Interest................ 58,433 39,328 93,985 43,059 29,184 31,504 36,361
----------- ----------- ----------- ----------- ----------- ----------- -----------
277,719 173,897 427,525 277,443 179,236 131,706 121,361
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income
taxes.................. 55,401 30,526 83,033 53,027 40,573 25,600 18,893
Income taxes............ 22,300 12,516 34,318 21,706 18,802 10,374 7,541
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.............. $ 33,101 $ 18,010 $ 48,715 $ 31,321 $ 21,771 $ 15,226 $ 11,352
=========== =========== =========== =========== =========== =========== ===========
Net income per share
(1).................... $ 0.58 $ 0.35 $ 0.95 $ 0.62 $ 0.48 $ 0.34 $ 0.33
=========== =========== =========== =========== =========== =========== ===========
Weighted average
number of common shares
outstanding(1)......... 57,070,690 50,804,963 51,023,609 50,804,963 45,347,486 45,168,750 34,624,571
=========== =========== =========== =========== =========== =========== ===========
Cash dividends.......... $ 2,516 $ 1,491 $ 3,492 $ 2,371 $ 1,688 $ 402 $ --
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
- --------
(1) Net income per share is computed based upon the weighted average shares
outstanding during the respective periods restated to reflect stock splits
effected by the Company.
S-15
<PAGE>
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DATA:
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
--------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Receivables, net........ $1,256,102 $ 921,839 $1,029,853 $ 637,017 $ 570,856 $ 348,769 $ 407,262
Excess servicing asset.. 634,324 389,668 524,359 319,605 224,892 158,229 132,042
Total assets............ 2,207,757 1,527,470 1,792,248 1,165,130 910,335 611,541 607,877
Notes payable........... 1,250,127 984,104 1,075,892 676,420 501,636 285,864 309,028
Subordinated debt....... 13,000 24,000 24,000 24,000 41,000 53,000 57,000
Shareholders' equity.... 396,538 211,633 241,126 194,263 165,313 126,155 111,331
</TABLE>
OTHER SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX
MONTHS ENDED JUNE 30, AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Volume of loans origi-
nated or purchased..... $ 2,549,702 $1,675,967 $3,822,971 $2,779,408 $1,699,010 $1,007,465 $ 944,339
Serviced loan portfolio. 10,264,272 7,117,215 8,621,467 5,898,469 3,872,708 2,963,930 2,703,143
Average shareholders'
equity to average total
assets................. 16.32% 15.25% 14.72% 17.33% 19.15% 19.48% 14.89%
Return on average assets
(net income divided by
average total assets).. N/A N/A 3.29% 3.02% 2.86% 2.50% 1.93%
Return on average equity
(net income divided by
average equity)........ N/A N/A 22.38% 17.42% 14.93% 12.82% 12.97%
Debt to equity ratio
(notes payable plus
subordinated debt
divided by
shareholders' equity).. 3.19:1 4.76:1 4.56:1 3.61:1 3.28:1 2.68:1 3.29:1
</TABLE>
S-16
<PAGE>
The following table sets forth certain selected operating data with respect
to the Company for each of the six-month periods ended June 30, 1996 and 1995
and each of the three years in the period ended December 31, 1995.
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX AS OF AND FOR THE YEARS ENDED
MONTHS ENDED JUNE 30, DECEMBER 31,
----------------------- ----------------------------------
1996 1995 1995 1994 1993
----------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Originations:
Home Equity Loans...... $ 1,931,274 $1,335,305 $2,885,044 $2,013,027 $1,127,926
SBA Loans.............. 273,998 160,413 440,728 420,416 319,025
Student Loans.......... 169,965 145,366 369,129 345,965 252,059
Auto Loans............. 174,465 34,883 128,070 -- --
----------- ---------- ---------- ---------- ----------
Total originations..... $ 2,549,702 $1,675,967 $3,822,971 $2,779,408 $1,699,010
=========== ========== ========== ========== ==========
Loan losses, net:
Home Equity Loans...... $ 15,998 $ 10,107 $24,205 $ 19,942 $ 23,861
SBA Loans.............. 1,329 699 1,732 1,293 1,607
Auto Loans............. 2,197 N/A 290 -- --
----------- ---------- ---------- ---------- ----------
Total loan losses, net. $ 19,524 $ 10,806 $ 26,227 $ 21,235 $ 25,468
=========== ========== ========== ========== ==========
Serviced Loan Portfolio:
Home Equity Loans...... $ 6,974,996 $4,712,568 $5,751,677 $3,725,918 $2,291,799
SBA Loans.............. 2,053,025 1,685,099 1,907,050 1,605,645 1,270,453
Student Loans.......... 973,391 685,570 845,501 566,906 310,456
Auto Loans............. 262,860 33,978 117,239 -- --
----------- ---------- ---------- ---------- ----------
Total Serviced Loan
Portfolio............. $10,264,272 $7,117,215 $8,621,467 $5,898,469 $3,872,708
=========== ========== ========== ========== ==========
Delinquencies:
Home Equity Loans:
30-59 days............ 1.77% 1.91% 1.76% 1.77% 2.14%
60-89 days............ 0.70 0.59 0.68 0.42 0.64
90 + days............. 2.88 1.79 2.42 1.86 3.33
----------- ---------- ---------- ---------- ----------
Total delinquencies... 5.35% 4.29% 4.86% 4.05% 6.11%
=========== ========== ========== ========== ==========
SBA Loans:
30-59 days............ 1.14% 1.07% 1.01% 0.89% 0.86%
60-89 days............ 0.66 0.60 0.35 0.41 0.36
90 + days............. 3.90 3.90 3.97 3.67 4.69
----------- ---------- ---------- ---------- ----------
Total delinquencies... 5.70% 5.57% 5.33% 4.97% 5.91%
=========== ========== ========== ========== ==========
Auto Loans:
30-59 days............ 2.19% N/A 1.60% --% --%
60-89 days............ 0.38 N/A 0.15 -- --
90 + days............. 0.26 N/A 0.04 -- --
----------- ---------- ---------- ---------- ----------
Total delinquencies... 2.83% N/A 1.79% --% --%
=========== ========== ========== ========== ==========
Collateral owned (Home
Equity, SBA and Auto
Loans) at end of peri-
od(1).................. $ 31,175 $ 26,766 $ 24,337 $ 25,592 $ 17,931
=========== ========== ========== ========== ==========
Allowance for credit
losses................. $ 181,796 $ 93,923 $ 140,746 $ 77,863 $ 45,542
=========== ========== ========== ========== ==========
</TABLE>
- --------
(1) Includes collateral owned by trusts which have issued asset-backed
securities in the amounts of $14,126,000, $13,705,000 and $9,000,000 at
December 31, 1995, 1994 and 1993, respectively, and $22,726,000 and
$15,237,000 at June 30, 1996 and 1995, respectively.
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DESCRIPTION OF PREFERRED SHARES
The following description of the terms of the Preferred Shares offered
hereby supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of the Preferred Stock set
forth in the accompanying Prospectus. The summary contained herein of the
terms of the Preferred Shares does not purport to be complete and is subject
to and qualified in its entirety by reference to all of the provisions of the
Company's Restated Certificate of Incorporation and form of Certificate of
Amendment relating to the Preferred Shares (the "Certificate of Amendment"), a
copy of each of which either has been or will be filed with the Securities and
Exchange Commission (the "Commission") as an exhibit to or incorporated by
reference into the Registration Statement of which this Prospectus Supplement
is a part.
The Company's Board of Directors has adopted resolutions authorizing the
issuance of up to 5,290,000 shares of $1.72 Mandatory Convertible Preferred
Stock, no par value per share.
DIVIDENDS
Holders of Preferred Shares will be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available therefor,
cash dividends from November 5, 1996, the date of initial issuance of the
Preferred Shares, at a rate per annum of $1.72 per Preferred Share payable
quarterly in arrears on the 1st of March, June, September and December or, if
any such date is not a business day, on the next succeeding business day. The
first dividend period will be from November 5, 1996, the date of initial
issuance of the Preferred Shares, up to but excluding December 1, 1996, and
the first dividend will be payable on December 2, 1996. Dividends will cease
to accrue in respect of the Preferred Shares on the Mandatory Conversion Date
or on the date of their earlier conversion.
Dividends will be payable to holders of record as they appear on the stock
register of the Company on each record date, which shall be a date not less
than 10 days nor more than 60 days preceding the payment date thereof, as
shall be fixed by the Board of Directors. Dividends payable on Preferred
Shares for any period less than a full quarterly dividend period will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in any period less than one month.
Dividends on the Preferred Shares will accrue whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are declared. Accrued but unpaid dividends on the Preferred
Shares shall cumulate as of the dividend payment date on which they first
become payable, but no interest shall accrue on accumulated but unpaid
dividends on the Preferred Shares.
Except as provided below with respect to any shares of Parity Preferred
Stock (as defined below) other than the Preferred Shares, as long as any
Preferred Shares are outstanding, no dividends for any dividend period (other
than dividends payable in shares of, or warrants, rights or options
exercisable for or convertible into shares of, Common Stock or any other
capital stock of the Company ranking junior to the Preferred Shares as to the
payment of dividends (collectively, "Junior Stock") and cash in lieu of
fractional shares of such Junior Stock in connection with any such dividend)
will be paid in cash or otherwise, nor will any other distribution be made
(other than a distribution payable in Junior Stock and cash in lieu of
fractional shares of such Junior Stock in connection with any such
distribution), on any series of Preferred Stock that does not constitute
Junior Stock (each such series, including the Preferred Shares, is hereinafter
referred to collectively as "Parity Preferred Stock") or on any Junior Stock
unless full dividends on the Preferred Shares have been paid, or declared and
set aside for payment, for all dividend periods terminating on or prior to the
date of such dividend or distribution payment to the extent such dividends are
cumulative. As long as any Preferred Shares are outstanding, dividends for any
dividend period or other distributions may not be paid on any shares of Parity
Preferred Stock (other than the Preferred Shares) (other than dividends or
other distributions in Junior Stock and cash in lieu of fractional shares of
such Junior Stock in connection therewith), unless either: (a) full dividends
on all outstanding shares of Parity Preferred Stock have been paid, or
declared and set aside for payment, for all dividend periods terminating on or
prior to the date of such dividend or distribution payment to the extent such
dividends are
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cumulative; or (b) any such dividends are declared and paid pro rata so that
the amounts of any dividends declared and paid per Preferred Share and each
other share of such Parity Preferred Stock will in all cases bear to each other
the same ratio that accrued and unpaid dividends (including any accumulation
with respect to unpaid dividends for prior periods, if such dividends are
cumulative) per Preferred Share and such other shares of Parity Preferred Stock
bear to each other.
In addition, as long as any Preferred Shares are outstanding, no shares of
Parity Preferred Stock nor any shares of any Junior Stock may be purchased,
redeemed, or otherwise acquired by the Company or any of its subsidiaries
(except in connection with a reclassification or exchange of any Junior Stock
through the issuance of other Junior Stock (and cash in lieu of fractional
shares of such Junior Stock in connection therewith) or the purchase,
redemption, or other acquisition of any Junior Stock with any Junior Stock (and
cash in lieu of fractional shares of such Junior Stock in connection
therewith)) nor may any funds be set aside or made available for any sinking
fund for the purchase or redemption of any such shares unless full dividends on
all outstanding shares of Parity Preferred Stock have been paid, or declared
and set aside for payment, for all dividend periods terminating on or prior to
the date of such purchase, redemption or acquisition to the extent such
dividends are cumulative.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on the shares of any Junior
Stock from time to time and Junior Stock may be purchased, redeemed or
otherwise acquired by the Company or any of its subsidiaries from time to time.
In the event of the declaration and payment of any such dividends or other
distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of any Preferred Stock, to share therein according to
their respective interests.
MANDATORY CONVERSION OF PREFERRED SHARES
Unless previously converted at the option of the holder into Common Stock,
as hereinafter described, on the Mandatory Conversion Date, each outstanding
Preferred Share will mandatorily convert into (i) a number of shares of Common
Stock equal to the Conversion Rate and (ii) the right to receive an amount in
cash equal to all accrued and unpaid dividends on such Preferred Share. The
Conversion Rate is equal to (a) if the Current Market Price of the Common Stock
is greater than or equal to the Conversion Price of $31.80 per share, 0.833 of
a share of Common Stock per Preferred Share, (b) if the Current Market Price is
less than the Conversion Price but greater than the Initial Price, a fractional
share of Common Stock per Preferred Share having a value (determined at the
Current Market Price) equal to the Initial Price, and (c) if the Current Market
Price is less than or equal to the Initial Price, one share of Common Stock per
Preferred Share, subject in each case to adjustments in certain events.
The "Initial Price" is $26.50 per share of Common Stock. The "Current Market
Price" means the average Closing Price per share of Common Stock on the 20
Trading Days immediately prior to, but not including, the Mandatory Conversion
Date. The "Closing Price" of a share of Common Stock means, on any date of
determination, the reported last sale price of a share of Common Stock on the
Nasdaq National Market on such date or if the Common Stock is not listed for
trading on the Nasdaq National Market for trading on any such date, as reported
in the composite transactions for the principal United States securities
exchange on which the Common Stock is then listed for trading, or if the Common
Stock is not so listed on any national securities exchange, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau Incorporated or similar organization, or if such bid
price is not available, the market value of a share of Common Stock on such
date as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Company. A "Trading Day" is a day on
which the Common Stock (a) is not suspended from trading on any national
securities exchange or association or over-the-counter market at the close of
business of such day and (b) has traded at least once on the national
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
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Because the price of the Common Stock is subject to market fluctuations,
the number of shares of Common Stock a holder of Preferred Shares will receive
upon mandatory conversion thereof will fluctuate and the value of the Common
Stock received upon mandatory conversion may be more or less than the amount
paid for the Preferred Shares offered hereby.
CONVERSION AT THE OPTION OF THE HOLDER
The Preferred Shares are convertible, in whole or in part, at the option of
the holders thereof, at any time prior to the Mandatory Conversion Date, into
shares of Common Stock at a rate of 0.833 of a share of Common Stock for each
Preferred Share (the "Optional Conversion Rate"), subject to adjustment as
described below.
Conversion of Preferred Shares at the option of the holder may be effected
by delivering certificates evidencing such Preferred Shares, together with
written notice of conversion and a proper assignment of such certificates to
the Company or in blank (and, if applicable, cash payment of an amount equal
to the dividend attributable to the current quarterly dividend accrued on such
shares), to the office of any transfer agent for the Preferred Shares or to
any other office or agency maintained by the Company for that purpose and
otherwise in accordance with conversion procedures established by the Company.
Each optional conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the foregoing requirements
shall have been satisfied. The conversion shall be at the Optional Conversion
Rate in effect at such time and on such date.
Holders of Preferred Shares at the close of business on a record date for
any payment of declared dividends will be entitled to receive the dividend
payable on such Preferred Shares on the corresponding dividend payment date
notwithstanding the optional conversion of such Preferred Shares following
such record date and prior to the corresponding dividend payment date.
However, Preferred Shares surrendered for conversion after the close of
business on a record date for any payment of declared dividends and before the
opening of business on the next succeeding dividend payment date must be
accompanied by payment in cash of an amount equal to the dividend attributable
to the current quarterly dividend period payable on such date. Except as
provided above, upon any optional conversion of Preferred Shares, the Company
will make no payment of or allowance for unpaid dividends, whether or not in
arrears, on such Preferred Shares, or for previously declared dividends or
distributions on the shares of Common Stock issued upon such conversion.
ENHANCED DIVIDEND YIELD; LESS EQUITY APPRECIATION THAN COMMON STOCK
Dividends will accrue on the Preferred Shares at a higher rate than the
rate at which dividends are currently paid on the Common Stock. The
opportunity for equity appreciation afforded by an investment in Preferred
Shares is less than that afforded by an investment in the Common Stock.
Holders of Preferred Shares will realize no equity appreciation if at the
Mandatory Conversion Date the Current Market Price of the Common Stock is
below the Conversion Price, and less than all of the equity appreciation if at
such time the Current Market Price of the Common Stock is above the Conversion
Price. Holders of Preferred Shares will realize the entire decline in equity
value if at such time the Current Market Price of the Common Stock is below
the price to public shown on the cover page of this Prospectus Supplement.
CONVERSION ADJUSTMENTS
The Conversion Rate and the Optional Conversion Rate are each subject to
adjustment if the Company shall (a) pay a stock dividend or make a
distribution with respect to its Common Stock in shares of Common Stock, (b)
subdivide or split its outstanding Common Stock, (c) combine its outstanding
Common Stock into a smaller number of shares, (d) issue by reclassification of
its shares of Common Stock any shares of Common Stock, (e) issue certain
rights or warrants to all holders of its Common Stock unless such rights or
warrants are issued to each holder of Preferred Shares on a pro rata basis
with the shares of Common Stock based on the Conversion Rate in effect on the
date immediately preceding such issuance (such date, solely for purposes of
determining the Conversion Rate then in effect with respect to this clause
(e), being deemed to be the
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"Mandatory Conversion Date"), or (f) pay a dividend or distribute to all
holders of its Common Stock evidences of its indebtedness, cash or other
assets (including capital stock of the Company but excluding any cash
dividends or distributions, other than Extraordinary Cash Distributions (as
defined below), and dividends or distributions referred to in clause
(a) above) unless such dividend or distribution is made to each holder of
Preferred Shares on a pro rata basis with the shares of Common Stock based on
the Conversion Rate in effect on the date immediately preceding such dividend
or distribution (such date, solely for purposes of determining the appropriate
Conversion Rate then in effect with respect to this clause (f), being deemed
to be the "Mandatory Conversion Date"). In addition, the Company will be
entitled (but will not be required) to make upward adjustments in the
Conversion Rate and the Optional Conversion Rate as the Company, in its sole
discretion, shall determine to be advisable, in order that any stock dividend,
subdivision or split of shares, distribution of rights to purchase stock or
securities, or distribution of securities convertible into or exchangeable for
stock (or any transaction which could be treated as any of the foregoing
transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as
amended (the "Code")) hereafter made by the Company to its stockholders will
not be taxable. "Extraordinary Cash Distributions" means, with respect to any
cash dividend or distribution paid on any date, the amount, if any, by which
all cash dividends and cash distributions on the Common Stock paid during the
consecutive 12-month period ending on and including such date (other than cash
dividends and cash distributions for which an adjustment to the Conversion
Rate or the Optional Conversion Rate was previously made) exceeds, on a per
share of Common Stock basis, 10% of the average of the daily Closing Prices of
the Common Stock over such consecutive 12-month period. All adjustments to the
Conversion Rate and the Optional Conversion Rate will be calculated to the
nearest 1/100th of a share of Common Stock. No adjustment in the Conversion
Rate or the Optional Conversion Rate will be required unless such adjustment
would require an increase or decrease of at least one percent in the
Conversion Rate or the Optional Conversion Rate, as the case may be; provided,
however, that any adjustments which, by reason of the foregoing, are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively.
Whenever the Conversion Rate or the Optional Conversion Rate are adjusted
as provided in the preceding paragraph, the Company will file with the
transfer agent for the Preferred Shares a certificate with respect to such
adjustment, make a prompt public announcement thereof and mail a notice to
holders of the Preferred Shares providing specified information with respect
to such adjustment. At least 10 business days prior to taking any action that
could result in certain adjustments in the Conversion Rate or the Optional
Conversion Rate, the Company will notify each record holder of Preferred
Shares concerning such proposed action.
ADJUSTMENT FOR CERTAIN CONSOLIDATIONS OR MERGERS
In the case of (i) any consolidation or merger to which the Company is a
party (other than a merger or consolidation in which the Company is the
surviving or continuing corporation and in which the Common Stock outstanding
immediately prior to the merger or consolidation remains unchanged), (ii) any
sale or transfer to another corporation of the property of the Company as an
entirety or substantially as an entirety, or (iii) any statutory exchange of
securities with another corporation (other than in connection with a merger or
acquisition), each Preferred Share shall, after consummation of such
transaction, be subject to (A) conversion at the option of the holder into the
kind and amount of securities, cash or other property receivable upon
consummation of such transaction by a holder of the number of shares of Common
Stock into which such Preferred Share might have been converted immediately
prior to consummation of such transaction, and (B) conversion on the Mandatory
Conversion Date into the kind and amount of securities, cash, or other
property receivable upon consummation of such transaction by a holder of the
number of shares of Common Stock into which such Preferred Share would have
been converted if the conversion on the Mandatory Conversion Date had occurred
immediately prior to the date of consummation of such transaction, plus the
right to receive cash in an amount equal to all accrued and unpaid dividends
on such Preferred Share (other than previously declared dividends payable to a
holder of record as of a prior date); and assuming in each case that such holder
of shares of Common Stock failed to exercise
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rights of election, if any, as to the kind or amount of securities, cash, or
other property receivable upon consummation of such transaction (provided
that, if the kind or amount of securities, cash or other property receivable
upon consummation of such transaction is not the same for each non-electing
share, then the kind and amount of securities, cash, or other property
receivable upon consummation of such transaction for each non-electing share
shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). The kind and amount of securities into
or for which the Preferred Shares shall be convertible after consummation of
such transaction shall be subject to adjustment as described above under the
caption "--Conversion Adjustments" following the date of consummation of such
transaction. The Company may not become a party to any such transaction unless
the terms thereof are consistent with the foregoing or clause (iii) of the
second paragraph under "--Voting Rights" below.
For purposes of the preceding paragraph, any sale or transfer to another
corporation of property of the Company which did not account for at least 50%
of the consolidated net income of the Company for its most recent fiscal year
ending prior to the consummation of such transaction will not in any event be
deemed to be a sale or transfer of the property of the Company as an entirety
or substantially as an entirety.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued upon conversion of
Preferred Shares. In lieu of any fractional share otherwise issuable in
respect of the aggregate number of Preferred Shares of any holder that are
converted on any mandatory conversion or any optional conversion, such holder
shall be entitled to receive an amount in cash equal to the same fraction of
the Closing Price of the Common Stock determined (A) as of the fifth Trading
Day immediately preceding the Mandatory Conversion Date, in the case of
mandatory conversion, or (B) as of the second Trading Day immediately
preceding the effective date of conversion, in the case of an optional
conversion by a holder.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, and subject to the rights of holders of any other
series of Preferred Stock, the holders of outstanding Preferred Shares are
entitled to receive an amount equal to the per share price to the public of
the Preferred Shares shown on the cover page of this Prospectus Supplement,
plus accrued and unpaid dividends thereon, out of the assets of the Company
available for distribution to stockholders, before any distribution of assets
is made to holders of Common Stock or other capital stock ranking junior to
the Preferred Shares as to distribution of assets upon liquidation,
dissolution or winding up.
If, upon any voluntary or involuntary liquidation, dissolution, or winding
up of the Company, the assets of the Company are insufficient to permit the
payment of the full preferential amounts payable with respect to Preferred
Shares and all other series of Preferred Stock ranking on a parity with the
Preferred Shares as to payments upon liquidation, the holders of Preferred
Shares and of all other series of Preferred Stock ranking on a parity with the
Preferred Shares as to payments upon liquidation will share ratably in any
distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of Preferred Shares will not be entitled to any further participation in any
distribution of assets by the Company. A consolidation or merger of the
Company with one or more corporations (whether or not the Company is the
corporation surviving such consolidation or merger), a sale, lease or transfer
or exchange of all or substantially all of the assets of the Company or a
statutory exchange of securities with another Corporation shall not be deemed
to be a voluntary or involuntary liquidation, dissolution, or winding up of
the Company.
VOTING RIGHTS
Except as indicated below and as provided by New Jersey law, the holders of
Preferred Shares have no voting rights. On matters subject to a vote by
holders of Preferred Shares, the holders are entitled to one vote per share.
If dividends on the Preferred Shares are in arrears and unpaid for six
quarterly dividend periods, the holders of the Preferred Shares (voting
separately as a class with holders of all other series of Preferred Stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of
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two Preferred Stock directors, such directors to be in addition to the number
of directors constituting the Board of Directors immediately prior to the
accrual of such right. Such right, when vested, shall continue until all
dividends in arrears on the Preferred Shares shall have been paid in full or
declared and set apart for payment, and, when so paid or declared and set
apart for payment, such voting right of the holders of the Preferred Shares
will cease. The term of office of any Preferred Stock director will terminate
on the earlier of (i) the next annual meeting of stockholders at which a
successor shall have been elected and qualified or (ii) the termination of the
right of holders of the Preferred Shares and such other series to vote for
such directors.
The Company will not, without the affirmative vote or consent of the
holders of at least 66 2/3% of the Preferred Shares actually voting (voting
separately as a class): (i) amend, alter, or repeal any of the provisions of
the Restated Certificate of Incorporation of the Company so as to affect
adversely the powers, preferences, or rights of the holders of the Preferred
Shares then outstanding or reduce the minimum time required for any notice to
which only the holders of the Preferred Shares then outstanding may be
entitled (an amendment of the Restated Certificate of Incorporation to
authorize or create, or to increase the authorized amount of, Common Stock or
Preferred Stock ranking junior to the Preferred Shares as to payment of
dividends or distribution of assets upon liquidation, dissolution or winding
up of the Company shall not be deemed to affect adversely the powers,
preferences, or rights of the holders of the Preferred Shares); (ii) authorize
or create, or increase the authorized amount of, any capital stock, or any
security convertible into capital stock, of any class ranking senior to the
Preferred Shares as to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Company; or (iii) merge or
consolidate with or into any other corporation, unless each holder of the
Preferred Shares immediately preceding such merger or consolidation shall have
the right either to (A) receive or continue to hold in the resulting
corporation the same number of shares, with substantially the same rights and
preferences, as correspond to the Preferred Shares so held or (B) convert into
shares of Common Stock at the Conversion Rate in effect on the date
immediately preceding the announcement of any such merger or consolidation
(such date, solely for purposes of determining the appropriate Conversion Rate
then in effect with respect to this clause (B), being deemed to be the
"Mandatory Conversion Date").
There is no limitation on the issuance by the Company of any class of stock
ranking junior to or on a parity with the Preferred Shares as to the payment
of dividends or distribution of assets upon liquidation.
Notwithstanding the provisions summarized in the preceding two paragraphs,
however, no such approval described therein of the holders of the Preferred
Shares shall be required to authorize an increase in the number of authorized
shares of Preferred Stock or Common Stock.
LISTING
The Preferred Shares have been approved for inclusion in the Nasdaq
National Market under the symbol "MONEP."
TRANSFER AGENT AND REGISTRAR
Registrar & Transfer Company of Cranford, New Jersey will act as transfer
agent and registrar for, and paying agent for the payment of dividends on, the
Preferred Shares.
MISCELLANEOUS
Upon issuance, the Preferred Shares will be fully paid and nonassessable.
Holders of Preferred Shares have no preemptive rights. The Company shall at
all times reserve and keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion of Preferred Shares, such
number of shares of Common Stock as shall from time to time be issuable upon
the conversion of all the Preferred Shares then outstanding. Preferred Shares
converted into Common Stock of the Company or otherwise reacquired by the
Company shall resume the status of authorized and unissued shares of Preferred
Stock, undesignated as to series, and shall be available for subsequent
issuance.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Stroock & Stroock & Lavan, special tax counsel to the
Company ("Special Tax Counsel"), the following sets forth the principal United
States Federal income tax consequences under existing law of the purchase,
ownership and disposition of Preferred Shares. A copy of that opinion has been
or will be filed with the Commission as an exhibit to or incorporated by
reference into the Registration Statement of which this Prospectus Supplement
is a part, and the following summary is qualified in its entirety by reference
thereto, including the assumptions set forth therein. The Company does not
intend to seek a ruling from the Internal Revenue Service (the "IRS") with
respect to any of these tax consequences. This summary is intended for general
information only and deals only with holders who are initial holders of shares
of Preferred Stock and who hold Preferred Shares as capital assets within the
meaning of Section 1221 of the Code. It does not address aspects of taxation
other than Federal income taxation, and it does not address tax consequences
that may be relevant to the particular circumstances of each holder (some of
which, such as dealers in securities, banks, insurance companies, tax-exempt
organizations, and persons that hold the Preferred Shares as part of an
integrated investment (including a straddle) comprised of the Preferred Shares
and one or more other investments, may be subject to special rules). Stock
having terms closely resembling those of the Preferred Shares has not been the
subject of any regulation, Revenue Ruling or judicial decision currently in
effect, and there can be no assurance that the IRS will adopt the positions
set forth below. There can be no assurance that future changes in applicable
law or administrative and judicial interpretations thereof, any of which could
have a retroactive effect, will not adversely affect the tax consequences
discussed herein or that there will not be differences of opinion as to the
interpretation of applicable law. For purposes of this section, "U.S. Holder"
means a citizen or resident of the United States, a domestic corporation or
any other entity which is subject to United States Federal income taxation on
a net income basis in respect of the Preferred Shares, and "non-U.S. Holder"
means a holder other than a U.S. Holder. Certain aspects of United States
Federal income and estate tax relevant to a non-U.S. Holder are discussed
separately below. Persons considering the purchase of shares of Preferred
Stock should consult their tax advisors with respect to the application of the
United States Federal income tax laws to their particular situations as well
as any tax consequences arising under the laws of any state, local, or foreign
taxing jurisdiction.
DIVIDENDS
Dividends paid on Preferred Shares out of the Company's current or
accumulated earnings and profits will be taxable as ordinary income. Corporate
U.S. Holders will generally qualify for the 70% intercorporate dividends-
received deduction subject to satisfaction of the minimum holding period
(generally at least 46 days) and other applicable requirements. Under certain
circumstances, a corporate holder may be subject to the alternative minimum
tax with respect to the amount of its dividends-received deduction.
Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in Section 1059(c) of the Code, is required to reduce
its stock basis by the non-taxed portion of such dividend. Generally,
quarterly dividends not in arrears paid to an original holder of Preferred
Shares will not constitute extraordinary dividends under Section 1059(c).
Under Section 1059(f), any dividend with respect to "disqualified preferred
stock" is treated as an "extraordinary dividend." While there is no authority
directly on point, and the issue is not free from doubt, based on certain
factual representations made by the Company, Special Tax Counsel believes that
Preferred Shares should not be determined to constitute "disqualified
preferred stock."
To the extent any dividends exceed the Company's current or accumulated
earnings and profits, such dividends will be applied to reduce the tax basis
of the Preferred Shares and, to the extent they exceed such tax basis, will be
recognized as capital gain.
REDEMPTION PREMIUM
Under certain circumstances, Section 305(c) of the Code requires that any
excess of the redemption price of preferred stock over its issue price be
includible in income, prior to receipt, as a constructive dividend. However,
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while there is no authority directly on point, and the issue is not free from
doubt, based on certain factual representations made by the Company, Special
Tax Counsel believes that a holder of the Preferred Shares should not be
required to include any redemption premium in income under Section 305(c).
MANDATORY OR OPTIONAL CONVERSION INTO COMMON STOCK
As a general rule, gain or loss will not be recognized by a holder upon the
conversion of Preferred Shares into shares of Common Stock if no cash is
received. In addition, a holder who receives cash in lieu of a fractional share
will be treated as having received such fractional share and as having
exchanged it for cash in a transaction subject to Section 302 of the Code and
related provisions. Such exchange should generally result in capital gain or
loss measured by the difference between the cash received for the fractional
share interest and the holder's basis in the fractional share interest.
Generally, a holder's basis in the Common Stock received upon the conversion
of Preferred Shares, other than shares of Common Stock taxed upon receipt as
discussed above, will equal the adjusted tax basis of the converted Preferred
Shares (exclusive of any basis allocable to a fractional share interest) plus
the amount of gain (if any) recognized, minus the amount of cash (if any)
received, and the holding period of such Common Stock will include the holding
period of the converted Preferred Shares. As a general rule, a holder's basis
in shares of Common Stock taxed upon receipt will equal the fair market value
thereof, and the holding period for such Common Stock will begin on the day
following the redemption or conversion.
ADJUSTMENT OF CONVERSION RATE
Holders of stock in the Company (including Preferred Shares) might be
treated as receiving a constructive distribution from the Company under Section
305(c) if (i) a conversion rate is adjusted and as a result of such adjustment
the proportionate interest of holders of such stock in the assets or earnings
and profits of the Company is increased and (ii) the adjustment is not made
pursuant to a bona fide, reasonable anti-dilution formula. An adjustment in a
conversion rate would not be considered made pursuant to such a formula if the
adjustment were made to compensate for certain taxable distributions with
respect to Common Stock. Thus, certain adjustments to the Conversion Rate and
the Optional Conversion Rate to reflect the Company's distribution of certain
rights, warrants, evidences of indebtedness, securities or other assets to
holders of Common Stock may result in constructive distributions taxable as
dividends to the holders of Preferred Shares and may constitute (and cause
other dividends to constitute) "extraordinary dividends" to corporate holders
as described above. While there is no authority directly on point, and the
issue is not free from doubt, it appears that a holder of Preferred Shares
should not be treated as receiving a constructive distribution from the Company
as a result of the fixing of the Conversion Rate.
CONVERSION OF PREFERRED SHARES AFTER DIVIDEND RECORD DATE
If a holder surrenders Preferred Shares for conversion into shares of Common
Stock after a dividend record date but before payment of the dividend, such
holder will be required to pay the Company an amount equal to such dividend
upon conversion. The holder would likely recognize the dividend payment that is
received as income, and would increase the basis of the Common Stock received
by the amount paid to the Company in connection with the receipt of such
dividend.
BACKUP WITHHOLDING
Certain U.S. Holders may be subject to backup withholding at a rate of 31%
on dividends and certain consideration received upon the conversion of
Preferred Shares unless such holders provide proof of an applicable exemption
or a correct taxpayer identification number, and otherwise comply with
applicable requirements of the backup withholding rules.
S-25
<PAGE>
NON-U.S. HOLDERS
Dividends
In general, dividends (including constructive distributions taxable as
dividends) paid to a non-U.S. Holder will be subject to United States
withholding tax at a 30% rate (or a lower rate prescribed by an applicable tax
treaty) unless the dividends are (i) effectively connected with a trade or
business carried on by the non-U.S. Holder within the United States or (ii) if
a tax treaty applies, attributable to a United States permanent establishment
maintained by the non-U.S. Holder. Dividends effectively connected with such
trade or business and attributable to such permanent establishment will
generally be subject to United States Federal income tax at regular rates and,
in the case of a non-U.S. Holder which is a corporation, may be subject to the
branch profits tax. To determine the applicability of a tax treaty providing
for a lower rate of withholding, dividends paid to an address in a foreign
country are presumed under current Treasury regulations to be paid to a
resident of that country. On April 15, 1996, the Internal Revenue Service
released proposed regulations that would, if adopted in the form proposed,
require that certain Non-U.S. Holders that seek to rely on a tax treaty to
obtain a reduction in the rate of the dividend withholding tax provide
certifications regarding their eligibility for receiving such treaty benefits.
Gain on Conversion into Common Stock
A non-U.S. Holder generally will not be subject to United States Federal
income tax on any gain recognized on a disposition or conversion (a
"disposition") of a Preferred Share unless (i) such gain is treated as
dividend income (as described above under "Dividends"); (ii) the Company is or
has been a "U.S. real property holding corporation" for United States Federal
income tax purposes (which the Company does not believe that it is or is
likely to become) and the non-U.S. Holder disposing of the share owned,
directly or constructively, at any time during the five-year period preceding
the disposition, more than five percent of the Preferred Shares or the
Preferred Shares are not regularly traded (within the meaning of applicable
Treasury Regulations) on an established securities market; (iii) the gain is
effectively connected with a trade or business carried on by the non-U.S.
Holder within the United States and, if a tax treaty applies, attributable to
a United States permanent establishment maintained by the non-U.S. Holder;
(iv) in the case of a non-U.S. Holder who is an individual, who holds the
share as a capital asset and who is present in the United States for 183 days
or more in the taxable year of the disposition, either (a) such non-U.S.
Holder has a "tax home" (as defined for U.S. Federal income tax purposes) in
the United States and the gain from the disposition is not attributable to an
office or other fixed place of business maintained by such non-U.S. Holder
outside of the United States or (b) the gain from the disposition is
attributable to an office or other fixed place of business maintained by such
non-U.S. Holder in the United States; or (v) the non-U.S. Holder is subject to
tax pursuant to provisions of the Code applicable to certain United States
expatriates.
Federal Estate Tax
Preferred Shares owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States Federal estate tax purposes)
of the United States at the time of death will be includible in the
individual's gross estate for United States Federal estate tax purposes unless
an applicable estate tax treaty provides otherwise.
Backup Withholding and Information Reporting Requirements
The Company must report annually to the IRS and to each non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, such
holder. These information reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty. Copies of
these information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities in the country in which
the non-U.S. Holder resides. United States backup withholding tax (which
generally is a withholding tax imposed at the rate of 31% on certain payments
to persons that fail to furnish the information required under the United
States information reporting requirements) will generally not apply to
dividends paid on Preferred Shares to a non-U.S. Holder at an address outside
the United States.
S-26
<PAGE>
The payment of the proceeds from the disposition of Preferred Shares to or
through the United States office of a broker will be subject to information
reporting and backup withholding at a rate of 31% unless the owner certifies,
among other things, its status as a non-U.S. Holder under penalties of perjury
or otherwise establishes an exemption. The payment of the proceeds from the
disposition of Preferred Shares to or through a non-U.S. office of a broker
will generally, except as noted below, not be subject to backup withholding
and information reporting. In the case of proceeds from a disposition of
Preferred Shares paid to or through a non-U.S. office of a U.S. broker or paid
to or through a non-U.S. office of a non-U.S. broker that is (i) a "controlled
foreign corporation" for United States Federal income tax purposes or (ii) a
person 50% or more of whose gross income from all sources for a certain three-
year period was effectively connected with a United States trade or business,
(a) backup withholding may apply if the broker has actual knowledge that the
owner is not a non-U.S. Holder and (b) information reporting will apply unless
the broker has documentary evidence in its files that the owner is a non-U.S.
Holder (unless the broker has actual knowledge to the contrary).
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. Holder will be refunded (or credited against the non-U.S. Holder's
United States Federal income tax liability, if any), provided that the
required information is furnished to the IRS.
On April 15, 1996, the Internal Revenue Service issued proposed regulations
that would change in certain respects the certification requirements in
respect of claims for exceptions from information reporting and backup
withholding in respect of payments made after December 31, 1997 on the
Preferred Shares. It is not currently possible to predict whether, or in what
form, any such regulations ultimately will be adopted.
PROPOSED LEGISLATION
This discussion does not address any tax consequences relating to the
potential or actual effect of any proposed tax legislation. For example,
legislation has been proposed that would (a) reduce the dividends-received
deduction to 50%, (b) require that the 46-day holding period for the
dividends-received deduction be satisfied for the period of time
contemporaneous with each dividend payment and (c) amend portions of Sections
302 and 1059 of the Code and characterize non-pro rata redemptions otherwise
eligible for the dividends received deduction as a sale of the stock redeemed.
The Congressional statement proposing amendments to Sections 302 and 1059
indicated that the bill retained the existing regulatory authority of the
Treasury Department to issue regulations which, among other things, would
subject certain reorganizations, including recapitalizations, and similar
transactions to the provisions of the bill. It is not possible to predict
whether and, if so, in what form any such legislation will be enacted into law
and, if enacted, whether it would affect the tax treatment of the Preferred
Shares, as discussed above.
S-27
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, Bear, Stearns & Co. Inc., Montgomery Securities and
Oppenheimer & Co., Inc. are acting as representatives (the "Representatives"),
have severally agreed, subject to the terms and conditions contained in the
Underwriting Agreement, to purchase from the Company the number of Preferred
Shares set forth below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated................................ 1,075,000
Bear, Stearns & Co. Inc. ......................................... 1,075,000
Montgomery Securities............................................. 1,075,000
Oppenheimer & Co., Inc. .......................................... 1,075,000
CS First Boston Corporation....................................... 100,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................ 100,000
Salomon Brothers Inc.............................................. 100,000
---------
Total........................................................... 4,600,000
=========
</TABLE>
The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the Preferred Shares offered hereby if any are purchased.
The Underwriters, through their Representatives, have advised the Company
that they propose to offer the Preferred Shares initially at the public
offering price set forth on the cover page of this Prospectus Supplement; that
the Underwriters may allow to selected dealers a concession of $0.50 per share;
and that such dealers may reallow a concession of $0.10 per share to certain
other dealers. After the initial public offering, the offering price and the
concessions may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement, to purchase up to 690,000
additional Preferred Shares at the initial public offering price, less
underwriting discounts and commissions, as set forth on the cover page of this
Prospectus Supplement. The Underwriters may exercise such option solely for the
purpose of covering over-allotments incurred in the sale of the Preferred
Shares offered hereby. To the extent such option to purchase is exercised each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to 690,000.
The Company has agreed that it will not, directly or indirectly, without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, pledge, contract of sale, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital stock
of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock or other capital stock of the
Company (other than the shares offered hereby) for a period of 120 days from
the date of this Prospectus Supplement; provided, however, that the foregoing
shall not prohibit the Company from issuing shares of Common Stock or other
capital stock of the Company or any securities convertible into, or exercisable
or exchangeable for, any shares of Common Stock or other capital stock of the
Company in connection with an acquisition by the Company.
In addition, the Company's executive officers and directors have agreed that
they will not, directly or indirectly, without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock of the Company or any
securities convertible
S-28
<PAGE>
into, or exercisable or exchangeable for, any shares of Common Stock or other
capital stock of the Company, in each case including any such securities
beneficially owned or otherwise controlled by them, for a period of 30 days
from the date of this Prospectus Supplement.
The Company has agreed to indemnify the several Underwriters and to
contribute to losses arising out of certain liabilities, including certain
liabilities under the Securities Act.
In connection with this Offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market, may have engaged in passive
market making transactions in the Common Stock on the Nasdaq National Market
in accordance with Rule 10b-6A under the Securities Exchange Act of 1934, as
amended, during the two business day period before commencement of offers or
sales of the Common Stock. The passive market making transactions must comply
with applicable volume and price limits and be identified as such. In general,
a passive market maker may display its bid at a price not in excess of the
highest independent bid for the security; if all independent bids are lowered
below the passive market maker's bid, however, such bid must then be lowered
when certain purchase limits are exceeded.
The Preferred Shares are a new issue of securities, and although the
Preferred Shares are expected to be included in the Nasdaq National Market,
there is no established trading market for the Preferred Shares. Each
Representative has advised the Company that it presently intends to make a
market in the Preferred Shares as permitted by applicable laws and
regulations. None of the Representatives is obligated, however, to make a
market in the Preferred Shares, and any such market making may be discontinued
at any time at the sole discretion of that Representative. Accordingly, no
assurance can be given as to the liquidity of any trading market that may
develop for the Preferred Shares.
Each of the Representatives of the Underwriters has provided, and expects
to continue to provide, investment banking services to the Company. In
addition, Prudential Securities Credit Corp., an affiliate of Prudential
Securities Incorporated, provides the Company with various warehouse lines of
credit under which the aggregate outstanding balance may not exceed $600
million, and Bear Stearns Mortgage Capital Corporation, an affiliate of Bear,
Stearns & Co. Inc., provides the Company with a mortgage warehouse line of
credit under which the outstanding balance may not exceed $250 million. None
of such warehouse lines will be repaid with the net proceeds of the Offering.
LEGAL MATTERS
The validity of the Preferred Shares offered hereby will be passed upon by
Sills Cummis Zuckerman Radin Tischman Epstein & Gross, Newark, New Jersey.
Certain other legal matters will be passed upon for the Company by Stroock &
Stroock & Lavan, New York, New York, and Corporate Counsel to the Company.
Cleary, Gottlieb, Steen & Hamilton, New York, New York, will pass upon certain
legal matters for the Underwriters. Stroock & Stroock & Lavan and Cleary,
Gottlieb, Steen & Hamilton will rely as to matters of New Jersey law upon
Corporate Counsel to the Company and Sills Cummis Zuckerman Radin Tischman
Epstein & Gross.
S-29
<PAGE>
PROSPECTUS
THE MONEY STORE INC.
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
The Money Store Inc. (the "Company") may offer from time to time, together
or separately, (i) shares of its Common Stock, no par value per share (the
"Common Stock"), (ii) shares of its preferred stock, no par value per share
(the "Preferred Stock"), (iii) its unsecured debt securities, which may be
either senior (the "Senior Debt Securities") or subordinated (the
"Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities") (the Common Stock, the Preferred Stock and the Debt
Securities are collectively referred to herein as the "Securities"), in
amounts, at prices and on terms to be determined at the time of the offering
thereof. The Subordinated Debt Securities and Preferred Stock may be
convertible or exchangeable into other series of Debt Securities or shares of
Common Stock. The Securities offered pursuant to this Prospectus by the
Company may be issued in one or more series or issuances the aggregate
offering price of which will not exceed $1,000,000,000 (or the equivalent
thereof if the Debt Securities are denominated in one or more foreign
currencies or foreign currency units).
The Selling Shareholder (as defined herein) also may offer and sell from
time to time up to an aggregate of 2,500,000 shares of Common Stock. The
Company will not receive any of the proceeds from the sale of shares by the
Selling Shareholder.
The specific terms of the Securities in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in an
accompanying supplement to this Prospectus (each, a "Prospectus Supplement"),
including, where applicable, (i) in the case of Common Stock, the aggregate
number of shares offered and whether such shares will be offered by the
Company and/or the Selling Shareholder, (ii) in the case of the Preferred
Stock, the specific designation, the aggregate number of shares offered, the
dividend rate (or method of calculation thereof), the dividend period and
dividend payment dates, whether such dividends will be cumulative or
noncumulative, the liquidation preference, the voting rights, if any, any
terms for optional or mandatory redemption, any terms for conversion or
exchange into other series of Debt Securities or Common Stock and any other
special terms, and (iii) in the case of Debt Securities, the specific
designation, the aggregate principal amount, the ranking as Senior Debt
Securities or Subordinated Debt Securities, the authorized denominations, the
maturity, any premium, rate or method of calculation of interest and dates for
payment thereof, any terms for optional or mandatory redemption, any sinking
fund provisions, any terms for conversion or exchange into other series of
Debt Securities or Common Stock and any other special terms. If so specified
in the applicable Prospectus Supplement, Debt Securities of a series may be
issued in whole or in part in the form of one or more temporary or permanent
global securities.
The Senior Debt Securities will rank equally with all other unsubordinated
and unsecured indebtedness of the Company. The Subordinated Debt Securities
will be subordinate in right of payment to all existing and future Senior
Indebtedness (as defined herein) of the Company.
The Company and the Selling Shareholder may sell the Securities (i) through
underwriting syndicates represented by managing underwriters, or by
underwriters without a syndicate, with such underwriters to be designated at
the time of sale, (ii) through agents designated from time to time, or (iii)
directly. The names of any underwriters or agents of the Company or of the
Selling Shareholder involved in the sale of the Securities, the public
offering price or purchase price thereof, any applicable commissions or
discounts, any other terms of the offering of such Securities and the net
proceeds to the Company or to the Selling Shareholder from such sale, will be
set forth in the applicable Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
----------------
February 13, 1996
<PAGE>
FOR NORTH CAROLINA PURCHASERS: THE COMMISSIONER OF INSURANCE FOR THE STATE
OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING, NOR HAS THE
COMMISSIONER ACTED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the following
public reference facilities maintained by the Commission: Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade
Center, Suite 1300, New York, New York 10048; and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material may also be obtained by mail from the Public Reference
Station of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of prescribed rates. In addition,
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the National Association of Securities Dealers,
Inc. 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and related exhibits for further
information with respect to the Company and the securities offered hereby.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference. These documents may be inspected without charge at the office
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies may be obtained at fees and charges prescribed by the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995;
(c) The Company's Proxy Statement dated April 13, 1995 in connection with
the Company's Annual Meeting of Shareholders held on May 21, 1995;
(d) The Company's Proxy Statement dated September 14, 1995 in connection
with the Company's Special Meeting of Shareholders held on October
12, 1995; and
(e) The Company's Registration Statement on Form 8-A with respect to the
Common Stock (No. 1-10785).
All reports and any definitive proxy or information statements filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified, or superseded, to
constitute a part of this Prospectus.
2
<PAGE>
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO ERIC R. ELWIN, ESQ., VICE PRESIDENT AND CORPORATE COUNSEL, 2840
MORRIS AVENUE, UNION, NEW JERSEY, 07083. TELEPHONE REQUESTS MAY BE DIRECTED TO
ERIC R. ELWIN, ESQ. AT (908) 686-2000.
3
<PAGE>
THE COMPANY
The Company is a financial services company engaged, through its
subsidiaries, in the business of originating (including purchasing), selling
and servicing consumer and commercial loans of specified types and offering
related services. Loans originated by the Company primarily consist of fixed
and adjustable rate mortgage loans on residential real estate ("Home Equity
Loans"), loans guaranteed in part ("SBA Loans") by the United States Small
Business Administration (the "SBA") and government-guaranteed student loans
("Student Loans"). During 1995, the Company entered the business of
purchasing, selling and servicing loans secured by new and used automobiles,
mini-vans, vans and light trucks ("Auto Loans").
For the year ended December 31, 1994, the Company originated or purchased
approximately $2.8 billion of loans. Of these loans, approximately 72% by
principal amount were Home Equity Loans, approximately 15% by principal amount
were SBA Loans and approximately 13% by principal amount were Student Loans.
For the nine-month period ended September 30, 1995, the Company originated or
purchased approximately $2.6 billion of loans. Of these loans, approximately
77% by principal amount were Home Equity Loans, approximately 10% by principal
amount were SBA Loans, approximately 10% by principal amount were Student
Loans and approximately 3% by principal amount were Auto Loans. Based upon
government agency sources, management believes that during each of the last 13
SBA fiscal years the Company originated a greater principal amount of SBA
Loans than any other originator of SBA Loans in the United States.
Substantially all of the loans originated and purchased by the Company are
sold to institutional investors or pledged to the Company's lenders until the
loans can be sold and the lenders repaid. Revenue is recognized as gain on
sale of loans, which represents the present value of the difference between
the interest charged by the Company to a borrower and the interest rate
received by the investor who purchased the loan, in excess of normal loan
servicing fees (the "Excess Servicing Spread") and non-refundable fees and
premiums on loans sold. The Company recognizes such gain on sale of loans in
the year that such loans are sold, although cash (representing the Excess
Servicing Spread and servicing fees) is received by the Company over the lives
of the loans. The Company's practice of selling its loans is designed to
increase the Company's liquidity, reduce the need to access markets for
capital and reduce certain risks associated with interest rate fluctuations.
For loans sold during 1994, the Excess Servicing Spread averaged approximately
2.5% on Home Equity Loans, 1.9% on SBA Loans and 1.7% on Student Loans. For
Loans sold during the first nine months of 1995, the Excess Servicing Spread
averaged 3.5% on Home Equity Loans, 2.2% on SBA Loans and 1.7% on Student
Loans. In September 1995, the Company, through a subsidiary, completed its
first Auto Loan securitization. TMS Auto Holdings, Inc. sold $54,081,780
aggregate original principal balance of 6.30% Asset Backed Certificates (the
"Certificates") of TMS Auto Grantor Trust 1995-1. The Certificates represent a
beneficial interest in a trust estate consisting of a pool of non-prime motor
vehicle retail installment sale contracts. The Excess Servicing Spread in such
securitization was 10.3%.
The Company generally retains the right to service loans it sells or
pledges. In addition to the Excess Servicing Spread, the Company receives fees
in connection with its loan origination and servicing activities. The total
portfolio of loans which the Company services (the "Serviced Loan Portfolio")
was approximately $5.9 billion at December 31, 1994, consisting of $5.4
billion of loans that had been sold with servicing rights retained, $511.5
million of loans (the "Retained Loan Portfolio") which the Company has not
sold and approximately $33.2 million of loans (the "Repurchased Loan
Portfolio") which the Company has repurchased from investors pursuant to
contractual commitments. The Serviced Loan Portfolio was $7.8 billion at
September 30, 1995, consisting of $7.1 billion of loans that had been sold
with servicing rights retained, $681 million of loans in the Retained Loan
Portfolio and approximately $29.5 million of loans in the Repurchased Loan
Portfolio. The Retained Loan Portfolio consists of (i) Home Equity Loans, SBA
Loans, Student Loans, Auto Loans and other loans that are warehoused pending
their sale, (ii) the unsold unguaranteed portion of SBA Loans for which the
related guaranteed portions have been sold, (iii) certain Student Loans during
the period prior to the commencement of the borrower's repayment obligation,
and (iv) loans that the Company otherwise determines to retain.
4
<PAGE>
At September 30, 1995, the Company operated out of 174 locations and was
doing business in 44 states, the District of Columbia and the Commonwealth of
Puerto Rico.
The Company was incorporated in New Jersey in 1974. The predecessor of the
Company, which is now a wholly-owned subsidiary of the Company, began making
Home Equity Loans in 1967. The Company's principal executive offices are
located at 2840 Morris Avenue, Union, New Jersey 07083. Its telephone number
is (908) 686-2000.
RECENT DEVELOPMENTS
On October 25, 1995, the Company announced a 16.7% increase in its cash
dividend, raising the quarterly rate from $0.045 per share to $0.0525 per
share. The fourth quarter dividend was distributed on December 1, 1995 to
shareholders of record as of November 15, 1995. During the fourth quarter of
1995, the Company also effected a 5-for-2 stock split in the form of a stock
dividend, which was distributed on December 1, 1995, to shareholders of record
as of November 15, 1995.
On January 23, 1996, the Company declared a first quarter dividend of
$0.021 per share (equivalent to a dividend of $0.0525 per share prior to the
above-described 5-for-2 stock split) that will be payable on March 1, 1996 to
shareholders of record as of February 15, 1996.
RATIOS OF EARNINGS
The following table sets forth the ratio of earnings to fixed charges for
the Company for the nine months ended September 30, 1995 and September 30,
1994 and for each of the years in the five-year period ended December 31,
1994.
The ratio of earnings to fixed charges has been computed by dividing
earnings by fixed charges. Earnings consist of income before income taxes plus
fixed charges. Fixed charges consist of interest on all indebtedness and the
portion of rental expense considered to be representative of interest.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30, YEAR ENDED DECEMBER 31,
----------------- -------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings................ $121,418 $66,782 $98,462 $71,429 $58,552 $56,577 $53,862
-------- ------- ------- ------- ------- ------- -------
Interest expense........ 65,990 28,769 43,059 29,184 31,504 36,361 39,114
Rent expense(1)......... 2,388 1,742 2,376 1,672 1,448 1,323 1,072
-------- ------- ------- ------- ------- ------- -------
Total fixed charges..... $ 68,378 $30,511 $45,435 $30,856 $32,952 $37,684 $40,186
======== ======= ======= ======= ======= ======= =======
Ratio 1.78x 2.19x 2.17x 2.31x 1.78x 1.50x 1.34x
======== ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Rent expense reflects one-third of the Company's total rent expense.
USE OF PROCEEDS
Except as may otherwise be set forth in the applicable Prospectus
Supplement, the net proceeds from the sale of the Offered Securities will be
used for general corporate purposes. The Company will not receive any of the
proceeds from the sale of shares of Common Stock by the Selling Shareholder.
5
<PAGE>
SELLING SHAREHOLDER
The Selling Shareholder is Marc Turtletaub, the President and Chief
Executive Officer and a Director of the Company. The following table sets
forth certain information with respect to the Selling Shareholder's beneficial
ownership of Common Stock, as adjusted to reflect the sale by him of the
shares registered for sale, at December 31, 1995.
<TABLE>
<CAPTION>
SHARES SHARES BENEFICIALLY
BENEFICIALLY OWNED IF ALL
OWNED PRIOR TO REGISTERED SHARES
OFFERING NUMBER OF SHARES ARE SOLD
------------------ BEING REGISTERED -----------------------
SELLING SHAREHOLDER NUMBER PERCENT FOR SALE NUMBER PERCENT
- ------------------- ---------- ------- ---------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Marc Turtletaub....... 19,936,330 38.8% 2,500,000 17,436,330 34.0%
</TABLE>
Marc Turtletaub is a general partner in a general partnership with Alan
Turtletaub, the Chairman of the Board of Directors of the Company, which has a
one-third interest in a joint venture which is the lessor of the Company's
corporate headquarters in Union, New Jersey. During the past three years, the
Company has occupied approximately 50,000 square feet in Union under a lease
recently extended to the year 2000. The annual rent under the lease, subject
to certain adjustments, is approximately $1,200,000.
From 1990 to 1993, Commercial Capital Co., Inc., a subsidiary of the
Company ("CCC"), provided a secured revolving credit facility (the "MTGB
Facility") to MTGB Partners ("MTGB"), a general partnership whose partners
were Marc Turtletaub and another individual who was neither affiliated with
the Company nor related to any Director or officer of the Company. The maximum
amount of the MTGB Facility was $5 million and such facility bore interest at
prime plus 2% per annum, adjusted quarterly. The term of the MTGB Facility
expired on the earlier to occur of September 30, 1995 or the date of sale of
all real property owned by Delta Diamond Oaks IV ("Delta Diamond"), a
California limited partnership, or of MTGB's direct or indirect interest in
Delta Diamond. MTGB repaid the facility in 1993.
DESCRIPTION OF SECURITIES
GENERAL
The following description of the terms of the Securities sets forth certain
general terms and provisions of the Securities to which any Prospectus
Supplement may relate. The particular terms of the Securities offered by any
Prospectus Supplement and the extent, if any, to which such general provisions
may apply to the Securities so offered will be described in the Prospectus
Supplement relating to such Securities.
COMMON STOCK
General
The Company has 100,000,000 shares of authorized Common Stock, no par value
per share. Holders of the Company's Common Stock are entitled to receive such
dividends as may be legally declared by the Board of Directors. The Company
has paid a quarterly dividend on its Common Stock since November 1992. The
Company anticipates continuing this quarterly dividend program. Holders of the
Common Stock are entitled to one vote for each share held of record. Action of
the stockholders may generally be taken by the affirmative vote of a majority
of the shares present or represented at a duly called meeting at which a
quorum is present or represented. Holders of Common Stock have no preemptive
or subscription rights and have no liability for further calls or assessments.
All shares of Common Stock are entitled to share ratably in the net assets of
the Company upon liquidation. The transfer agent and registrar for the Common
Stock is Registrar and Transfer Company of Cranford, New Jersey.
6
<PAGE>
DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be
described in the Prospectus Supplement relating to such Debt Securities.
The Senior Debt Securities are to be issued under an indenture dated as of
February 1, 1996, as supplemented from time to time (the "Senior Indenture"),
between the Company and Chemical Bank, N.A., as Trustee (the "Senior
Trustee"). The Subordinated Debt Securities are to be issued under an
indenture dated as of February 1, 1996, as supplemented from time to time (the
"Subordinated Indenture"), between the Company and The Bank of New York, as
Trustee (the "Subordinated Trustee"). The term "Trustee" as used herein shall
refer to either the Senior Trustee or the Subordinated Trustee, as
appropriate, for Senior Debt Securities or Subordinated Debt Securities. The
Senior Indenture and the Subordinated Indenture (being referred to herein
collectively as the "Indentures" and individually as an "Indenture") are filed
as exhibits to the Registration Statement. The Indentures are subject to and
governed by the Trust Indenture Act of 1939, as amended (the "TIA").
The statements made under this heading relating to the Debt Securities and
the Indentures are summaries of the provisions thereof, do not purport to be
complete and are qualified in their entirety by reference to the Indentures,
including the definitions of certain terms therein and in the TIA. Certain
capitalized terms used below but not defined herein have the meanings ascribed
to them in the applicable Indenture. Unless otherwise noted below, section
references below are to both Indentures.
The particular terms of the Debt Securities being offered (the "Offered
Debt Securities"), any modifications of or additions to the general terms of
the Debt Securities as described herein that may be applicable in the case of
the Offered Debt Securities and any applicable federal income tax
considerations will be described in the Prospectus Supplement relating to the
Offered Debt Securities. Accordingly, for a description of the terms of the
Offered Debt Securities, reference must be made both to the Prospectus
Supplement relating thereto and the description of Debt Securities set forth
in this Prospectus.
General
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Debt Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by the Subordinated Debt Securities will be
subordinated in right of payment to the prior payment in full of the Senior
Indebtedness of the Company (including the Senior Debt Securities) as
described under "--Debt Securities--Subordination" below. The Debt Securities
may be issued in one or more series. The respective Indentures provide that
there is no limitation on the amount of debt securities that may be issued
thereunder from time to time.
The Company primarily conducts its operations through its Subsidiaries. The
rights of the Company and its creditors, including the Holders of the Debt
Securities, to participate in the assets of any Subsidiary upon the latter's
liquidation or reorganization will be subject to the prior claims of the
Subsidiary's creditors except to the extent that the Company may itself be a
creditor with recognized claims against the Subsidiary.
The accompanying Prospectus Supplement will set forth the terms of the
Offered Debt Securities, which may include the following:
(1)The title of the Offered Debt Securities and whether they are
Senior Debt Securities or Subordinated Debt Securities.
(2)The aggregate principal amount of the Offered Debt Securities and
any limit on the aggregate principal amount of the Offered Debt
Securities.
7
<PAGE>
(3)The percentage of the principal amount at which the Offered Debt
Securities will be issued and, if other than the principal amount
thereof, the portion of the principal amount thereof payable upon
declaration of acceleration of the maturity thereof or the method by
which such portion shall be determined.
(4)The date or dates on which or periods during which the Offered Debt
Securities may be issued, and the date or dates, or the method by which
such date or dates will be determined, on which the principal of (and
premium, if any, on) the Offered Debt Securities will be payable.
(5)The rate or rates at which the Offered Debt Securities will bear
interest, if any, or the method by which such rate or rates shall be
determined, the date or dates from which such interest, if any, shall
accrue or the method by which such date or dates shall be determined, the
interest payment dates on which such interest will be payable and, if the
Offered Debt Securities are Registered Securities, the regular record
dates, if any, for the interest payable on such interest payment dates,
and, if the Offered Debt Securities are floating rate securities, the
notice, if any, to Holders regarding the determination of interest and
the manner of giving such notice.
(6)The place or places where the principal of (and premium, if any)
and interest on the Offered Debt Securities shall be payable; the extent
to which, or the manner in which, any interest payable on any Global Note
(as defined below) on an interest payment date will be paid, and the
manner in which any principal of, or premium, if any, on, any Global Note
will be paid.
(7)The obligation, if any, of the Company to redeem, repay or purchase
the Offered Debt Securities pursuant to any mandatory redemption, sinking
fund or analogous provisions or at the option of the Holder thereof and
the period or periods within which, or the dates on which, the prices at
which and the terms and conditions upon which the Offered Debt Securities
shall be redeemed, repaid or purchased, in whole or in part, pursuant to
such obligation.
(8)The right, if any, of the Company to redeem the Offered Debt
Securities at its option and the period or periods within which, or the
date or dates on which, the price or prices at which, and the terms and
conditions upon which Offered Debt Securities may be redeemed, if any, in
whole or in part, at the option of the Company or otherwise.
(9)If the coin or currency in which the Offered Debt Securities shall
be issuable is U.S. dollars, the denominations of the Offered Debt
Securities if other than denominations of $1,000 and any integral
multiple thereof.
(10)Whether the Offered Debt Securities are to be issued as original
issue discount securities ("Discount Securities") and the amount of
discount at which such Offered Debt Securities may be issued and, if
other than the principal amount thereof, the portion of the principal
amount of Offered Debt Securities which shall be payable upon declaration
of acceleration of the Maturity thereof upon an Event of Default.
(11)Provisions, if any, for the defeasance of Offered Debt Securities
or certain of the Company's obligations with respect to the Offered Debt
Securities.
(12)Whether the Offered Debt Securities are to be issued as Registered
Securities or Bearer Securities or both, and, if Bearer Securities are
issued, whether any interest coupons appertaining thereto ("Coupons")
will be attached thereto, whether such Bearer Securities may be exchanged
for Registered Securities and the circumstances under which, and the
place or places at which, any such exchanges, if permitted, may be made.
(13)Whether provisions for payment of additional amounts or tax
redemptions shall apply and, if such provisions shall apply, such
provisions; and, if any of the Offered Debt Securities are to be issued
as Bearer Securities, the applicable procedures and certificates relating
to the exchange of temporary Global Notes for definitive Bearer
Securities.
8
<PAGE>
(14)If other than U.S. dollars, the currency, currencies or currency
units (the term "currency" as used herein will include currency units) in
which the Offered Debt Securities shall be denominated or in which
payment of the principal of (and premium, if any) and interest on the
Offered Debt Securities may be made, and particular provisions applicable
thereto and, if applicable, the amount of Offered Debt Securities which
entitles the Holder of an Offered Debt Security or its proxy to one vote
for purposes of voting at a meeting of Holders of the Offered Debt
Securities.
(15)If the principal of (and premium, if any) or interest on the
Offered Debt Securities is to be payable, at the election of the Company
or a Holder thereof, in a currency other than that in which the Debt
Securities is denominated or payable without such election, in addition
to or in lieu of the applicable provisions of the Indentures, the period
or periods within which and the terms and conditions upon which, such
election may be made and the time and the manner of determining the
exchange rate or rates between the currency or currencies in which the
Offered Debt Securities are denominated or payable without such election
and the currency or currencies in which the Offered Debt Securities are
to be paid if such election is made.
(16)The date as of which any Offered Debt Securities shall be dated.
(17)If the amount of payments of principal of (and premium, if any) or
interest on the Offered Debt Securities may be determined with reference
to an index, including, but not limited to, an index based on a currency
or currencies other than that in which the Offered Debt Securities are
denominated or payable, or any other type of index, the manner in which
such amounts shall be determined.
(18)If the Offered Debt Securities are denominated or payable in
foreign currency, any other terms concerning the payment of principal of
(and premium, if any) or any interest on the Offered Debt Securities
(including the currency or currencies of payment thereof).
(19)The designation of the original Currency Determination Agent, if
any.
(20)The applicable Overdue Rate, if any.
(21)If the Offered Debt Securities do not bear interest, the
applicable dates upon which the Company will furnish or cause to be
furnished to the Trustee a list of the names and addresses of the
Registered Holders of the Offered Debt Securities.
(22)Any addition to, or modification or deletion of, any Events of
Default or covenants provided for in the applicable Indenture with
respect to the Offered Debt Securities.
(23)If any of the Offered Debt Securities are to be issued as Bearer
Securities, (x) whether interest in respect of any portion of a temporary
Offered Debt Security in global form (representing all of the Outstanding
Bearer Securities of the series) payable in respect of any interest
payment date prior to the exchange of such temporary Offered Debt
Security for definitive Offered Debt Securities shall be paid to any
clearing organization with respect to the portion of such temporary
Offered Debt Security held for its account and, in such event, the terms
and conditions (including any certification requirements) upon which any
such interest payment received by a clearing organization will be
credited to the Persons entitled to interest payable on such interest
payment date, (y) the terms upon which interests in such temporary
Offered Debt Security in global form may be exchanged for interests in a
permanent Global Note or for definitive Offered Debt Securities and the
terms upon which interests in a permanent Global Note, if any, may be
exchanged for definitive Offered Debt Securities and (z) the cities in
which the Authorized Newspapers designated for the purposes of giving
notices to Holders are published.
(24)Whether the Offered Debt Securities shall be issued in whole or in
part in the form of one or more Global Notes and, in such case, the
depositary or any common depositary for such Global Notes; and if the
Offered Debt Securities are issuable only as Registered Securities, the
manner in which and the circumstances under which Global Notes
representing Offered Debt Securities may be exchanged for Registered
Securities in definitive form.
9
<PAGE>
(25)The designation, if any, of any depositaries, trustees (other than
the applicable Trustee), paying agents, authenticating agents, security
registrars (other than the applicable Trustee) or other agents with
respect to the Offered Debt Securities.
(26)If the Offered Debt Securities are to be issuable in definitive
form only upon receipt of certain certificates or other documents or upon
satisfaction of certain conditions, the form and terms of such
certificates, documents or conditions.
(27)If the Offered Debt Securities are Subordinated Debt Securities,
whether they will be convertible or exchangeable into another series of
Debt Securities or shares of Common Stock and, if so, the terms and
conditions, which may in addition to or in lieu of the provisions
contained in the Subordinated Indenture, upon which such Offered Debt
Securities will be so convertible or exchangeable, including the
conversion or exchange price and the conversion or exchange period.
(28)Any other terms of the Offered Debt Securities not specified in
the Indenture under which such Offered Debt Securities are to be issued
(which other terms shall not be inconsistent with the provisions of such
Indenture).
The Debt Securities may be issued in one or more series under the
Indentures, in each case as authorized from time to time by the Board of
Directors of the Company, or any committee thereof or any duly authorized
officer or pursuant to any modification of an Indenture. (Section 3.01)
In the event that Discount Securities are issued, the Federal income tax
consequences and other special considerations applicable to such Discount
Securities will be described in the Prospectus Supplement relating thereto.
The general provisions of the Indentures do not contain any provisions that
would limit the ability of the Company or its Subsidiaries to incur
indebtedness or that would afford holders of Debt Securities protection in the
event of a highly leveraged or similar transaction involving the Company or
its Subsidiaries. Reference is made to the accompanying Prospectus Supplement
for information with respect to any deletions from, modifications of or
additions, if any, to the Events of Default or covenants of the Company
described below that are applicable to the Offered Debt Securities, including
any addition of covenants or other provisions providing event risk or similar
protection.
All of the Debt Securities of a series need not be issued at the same time,
and may vary as to denomination, interest rate, maturity and other provisions
and unless otherwise provided, a series may be reopened for issuance of
additional Debt Securities of such series. (Section 3.01)
Denominations, Registration and Transfer
Unless specified in the Prospectus Supplement, the Debt Securities of any
series shall be issuable only as Registered Securities in denominations of
$1,000 and any integral multiple thereof and shall be payable only in U.S.
dollars. (Section 3.02) The Indentures also provide that Debt Securities of a
series may be issuable in global form. See "--Debt Securities--Book-Entry Debt
Securities." Unless otherwise indicated in the Prospectus Supplement, Bearer
Securities (other than in global form) will have Coupons attached. (Section
2.01)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of like aggregate principal amount
and of like Stated Maturity and with like terms and conditions. If so
specified in the Prospectus Supplement, at the option of the Holder thereof,
to the extent permitted by law, any Bearer Security of any series which by its
terms is registrable as to principal and interest may be exchanged for a
Registered Security of such series of like aggregate principal amount and of a
like Stated Maturity and with like terms and conditions, upon surrender of
such Bearer Security at the corporate trust office of the applicable Trustee
or at any other office or agency of the Company designated for the purpose of
making any such exchanges. Subject to certain exceptions, any Bearer Security
issued with Coupons surrendered for exchange
10
<PAGE>
must be surrendered with all unmatured Coupons and any matured Coupons in
default attached thereto. (Section 3.05)
Notwithstanding the foregoing, the exchange of Bearer Securities for
Registered Securities will be subject to the provisions of United States
income tax laws and regulations applicable to Debt Securities in effect at the
time of such exchange. (Section 3.05)
Except as otherwise specified in the Prospectus Supplement, in no event may
Registered Securities, including Registered Securities received in exchange
for Bearer Securities, be exchanged for Bearer Securities. (Section 3.05)
Upon surrender for registration of transfer of any Registered Security of
any series at the office or agency of the Company maintained for such purpose,
the Company shall deliver, in the name of the designated transferee, one or
more new Registered Securities of the same series of like aggregate principal
amount of such denominations as are authorized for Registered Securities of
such series and of a like Stated Maturity and with like terms and conditions.
No service charge will be made for any transfer or exchange of Debt
Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. (Section
3.05)
The Company shall not be required to (i) register, transfer or exchange
Debt Securities of any series during a period beginning at the opening of
business 15 days before the day of the transmission of a notice of redemption
of Debt Securities of such series selected for redemption and ending at the
close of business on the day of such transmission, or to (ii) register,
transfer or exchange any Debt Security so selected for redemption in whole or
in part, except the unredeemed portion of any Debt Security being redeemed in
part. (Section 3.05)
Events of Default
Under the Indentures, "Event of Default" with respect to the Debt
Securities of any series means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law, pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body): (1) default in the payment of any
interest upon any Debt Security or any payment with respect to the Coupons, if
any, of such series when it becomes due and payable, and continuance of such
default for a period of 30 days; (2) default in the payment of the principal
of (and premium, if any, on) any Debt Security of such series at its Maturity;
(3) default in the deposit of any sinking fund payment, when and as due by the
terms of a Debt Security of such series; (4) default in the performance, or
breach of any covenant or warranty in the applicable Indenture (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in the applicable Indenture specifically dealt with or which
expressly has been included in the applicable Indenture solely for the benefit
of Debt Securities of a series other than such series), and continuance of
such default or breach for a period of 60 days after there has been given to
the Company by the applicable Trustee or to the Company and the applicable
Trustee by the Holders of at least 25% in principal amount of the Outstanding
Debt Securities of such series, a written notice specifying such default or
breach and requiring it to be remedied; (5) certain events of bankruptcy,
insolvency or reorganization with respect to the Company; or (6) any other
Event of Default provided with respect to Debt Securities of that series
pursuant to the applicable Indenture. (Section 5.01)
Each Indenture requires the Company to file with the applicable Trustee,
annually, an officers' certificate as to the Company's compliance with all
conditions and covenants under the applicable Indenture. (Section 12.02) Each
Indenture provides that the applicable Trustee may withhold notice to the
Holders of a series of Debt Securities of any default (except payment defaults
on such Debt Securities) if it considers such withholding to be in the
interest of the Holders of such series of Debt Securities to do so. (Section
6.02)
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, then in every case the applicable
Trustee or the Holders of not less than 25% in principal amount of
11
<PAGE>
the Outstanding Debt Securities of such series may declare the principal
amount (or, if any Debt Securities of such series are Discount Securities,
such portion of the principal amount of such Discount Securities as may be
specified in the terms of such Discount Securities) of the Debt Securities of
such series to be due and payable immediately, by a notice in writing to the
Company (and to the applicable Trustee if given by Holders), and upon any such
declaration such principal amount (or specified amount), plus accrued and
unpaid interest (and premium, if any) shall become immediately due and
payable. Upon payment of such amount in the currency in which such Debt
Securities are denominated (except as otherwise provided in the applicable
Indenture or specified in the Prospectus Supplement), all obligations of the
Company in respect of the payment of principal of the Debt Securities of such
series shall terminate. (Section 5.02)
Subject to the provisions of each Indenture relating to the duties of the
applicable Trustee, in case an Event of Default with respect to Debt
Securities of a particular series shall occur and be continuing, the
applicable Trustee shall be under no obligation to exercise any of its rights
or powers under such Indenture at the request, order or direction of any of
the Holders of Debt Securities of that series, unless such Holders shall have
offered to the applicable Trustee reasonable indemnity against the expenses
and liabilities which might be incurred by it in compliance with such request.
(Section 5.07) Subject to such provisions for the indemnification of the
applicable Trustee, the Holders of a majority in principal amount of the
Outstanding Debt Securities of such series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the applicable Trustee under such Indenture, or exercising any trust or
power conferred on the applicable Trustee with respect to the Debt Securities
of that series provided that such direction does not conflict with law or with
the applicable Indenture. (Section 5.12)
At any time after such a declaration of acceleration with respect to Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the applicable Trustee as
provided in the Indentures, the Holders of a majority in principal amount of
the Outstanding Debt Securities of such series, by written notice to the
Company and the applicable Trustee, may rescind and annul such declaration and
its consequences if (1) the Company has paid or deposited with the applicable
Trustee a sum in the currency in which such Debt Securities are denominated
(except as otherwise provided in the applicable Indenture or specified in the
Prospectus Supplement) sufficient to pay (A) all overdue installments of
interest on all Debt Securities or all overdue payments with respect to any
Coupons of such series, (B) the principal of (and premium, if any, on) any
Debt Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates
prescribed therefor in such Debt Securities, (C) to the extent that payment of
such interest is lawful, interest upon overdue installments of interest on
each Debt Security of such series or upon overdue payments on any Coupons of
such series at a rate established for such series, and (D) all sums paid or
advanced by the applicable Trustee and the reasonable compensation, expenses,
disbursements and advances of the applicable Trustee, its agents and counsel;
and (2) all Events of Default with respect to Debt Securities of such series,
other than the nonpayment of the principal of Debt Securities of such series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in the applicable Indenture. No such rescission
and waiver will affect any subsequent default or impair any right consequent
thereon. (Section 5.02)
Modification or Waiver
Without prior notice to or consent of any Holders, the Company and the
applicable Trustee, at any time and from time to time, may modify the
applicable Indenture for any of the following purposes: (1) to evidence the
succession of another corporation to the rights of the Company and the
assumption by such successor of the covenants and obligations of the Company
in the applicable Indenture and in the Debt Securities and Coupons, if any,
issued thereunder; (2) to add to the covenants of the Company for the benefit
of the Holders of all or any series of Debt Securities and the Coupons, if
any, appertaining thereto (and if such covenants are to be for the benefit of
less than all series, stating that such covenants are expressly being included
solely for the benefit of such series), or to surrender any right or power
conferred in the applicable Indenture upon the Company; (3) to add any
additional Events of Default (and if such Events of Default are to be
applicable to less than all series,
12
<PAGE>
stating that such Events of Default are expressly being included solely to be
applicable to such series); (4) to add or change any of the provisions of the
applicable Indenture to such extent as shall be necessary to permit or
facilitate the issuance thereunder of Debt Securities of any series in bearer
form, registrable or not registrable, and with or without Coupons, to permit
Bearer Securities to be issued in exchange for Registered Securities, to
permit Bearer Securities to be issued in exchange for Bearer Securities of
other authorized denominations or to permit the issuance of Debt Securities of
any series in uncertificated form, provided that any such action shall not
adversely affect the interests of the Holders of Debt Securities of any series
or any related Coupons in any material respect; (5) to change or eliminate any
of the provisions of the applicable Indenture, provided that any such change
or elimination will become effective only when there is no Outstanding Debt
Security issued thereunder or Coupon of any series created prior to such
modification which is entitled to the benefit of such provision and as to
which such modification would apply; (6) to secure the Debt Securities issued
thereunder; (7) to supplement any of the provisions of the applicable
Indenture to such extent as is necessary to permit or facilitate the
defeasance and discharge of any series of Debt Securities, provided that any
such action will not adversely affect the interests of the Holders of Debt
Securities of such series or any other series of Debt Securities issued under
such Indenture or any related Coupons in any material respect; (8) to
establish the form or terms of Debt Securities and Coupons, if any, as
permitted by the applicable Indenture; (9) to evidence and provide for the
acceptance of appointment thereunder by a successor Trustee with respect to
one or more series of Debt Securities and to add to or change any of the
provisions of the applicable Indenture as is necessary to provide for or
facilitate the administration of the trusts thereunder by more than one
Trustee; or (10) to cure any ambiguity, to correct or supplement any provision
in the applicable Indenture which may be defective or inconsistent with any
other provision therein, to eliminate any conflict between the terms of the
applicable Indenture and the Debt Securities issued thereunder and the TIA or
to make any other provisions with respect to matters or questions arising
under the applicable Indenture which will not be inconsistent with any
provision of the applicable Indenture; provided such other provisions shall
not adversely affect the interests of the Holders of Outstanding Debt
Securities or Coupons, if any, of any series created thereunder prior to such
modification in any material respect. (Section 11.01)
With the written consent of the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of each series affected by
such modification voting separately, the Company and the applicable Trustee
may modify the applicable Indenture for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
applicable Indenture or of modifying in any manner the rights of the Holders
of Debt Securities and Coupons, if any, under the applicable Indenture;
provided, however, that no such modification may, without the consent of the
Holder of each Outstanding Debt Security of each such series affected thereby
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any Debt Security, or reduce the principal amount thereof or the
interest thereon or any premium payable upon redemption thereof, or change the
Stated Maturity of or reduce the amount of any payment to be made with respect
to any Coupon, or change the currency or currencies in which the principal of
(and premium, if any) or interest on such Debt Security is denominated or
payable, or reduce the amount of the principal of a Discount Security that
would be due and payable upon a declaration of acceleration of the Maturity
thereof, or adversely affect the right of repayment or repurchase, if any, at
the option of the Holder, or reduce the amount of, or postpone the date fixed
for, any payment under any sinking fund or analogous provisions for any Debt
Security, or impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or limit the obligation of the
Company to maintain a paying agency outside the United States for payments on
Bearer Securities, or adversely affect the right to convert any Subordinated
Debt Security into shares of Common Stock as may be set forth in the
Prospectus Supplement; (2) reduce the percentage in principal amount of the
Outstanding Debt Securities of any series, the consent of whose Holders is
required for any such modification, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of the
applicable Indenture or certain defaults or Events of Default thereunder and
their consequences provided for in such Indenture; (3) modify any of the
provisions of the applicable Indenture relating to modifications and waivers
of defaults and covenants, except to increase any such percentage or to
provide that certain other provisions of the applicable Indenture cannot be
modified or waived without the consent of the Holder of each Outstanding Debt
Security of each series affected
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thereby; provided, however, that certain of such modifications may be made
without the consent of any Holder of any Debt Security; or (4) in the case of
the Subordinated Indenture, modify any of the provisions relating to the
subordination of the Subordinated Debt Securities in a manner adverse to the
Holders thereof. (Section 11.02)
A modification which changes or eliminates any covenant or other provision
of the applicable Indenture with respect to one or more particular series of
Debt Securities and Coupons, if any, or which modifies the rights of the
Holders of Debt Securities and Coupons of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
the applicable Indenture of the Holders of Debt Securities and Coupons, if
any, of any other series. (Section 11.02)
In the case of the Subordinated Indenture, no modification may adversely
affect the rights of any holder of Senior Indebtedness under the subordination
provisions of the Subordinated Indenture without the consent of such holder.
(Section 11.08 of the Subordinated Indenture)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
the Debt Securities of any such series waive, by notice to the applicable
Trustee and the Company, any past default or Event of Default under the
applicable Indenture with respect to such series and its consequences, except
a default (1) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series, or in the payment of any sinking
fund installment or analogous obligation with respect to the Debt Securities
of such series, or (2) in respect of a covenant or provision hereof which
pursuant to the second paragraph under "--Debt Securities--Modification or
Waiver" cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of such series affected. Upon any such waiver,
such default will cease to exist, and any Event of Default arising therefrom
will be deemed to have been cured, for every purpose of the Debt Securities of
such series under the applicable Indenture, but no such waiver will extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon. (Section 5.13)
The Company may omit in any particular instance to comply with certain
covenants in the applicable Indenture (including, if so specified in the
Prospectus Supplement, any covenant not set forth in the applicable Indenture
but specified in the Prospectus Supplement to be applicable to the Debt
Securities of any series issued thereunder, except as otherwise specified in
the Prospectus Supplement, and including the covenants relating to the
maintenance by the Company of its existence, rights and franchises), if before
the time for such compliance the Holders of at least a majority in principal
amount of the Outstanding Debt Securities of such series either waive such
compliance in such instance or generally waive compliance with such
provisions, but no such waiver may extend to or affect any term, provision or
condition except to the extent expressly so waived, and, until such waiver
becomes effective, the obligations of the Company and the duties of the
applicable Trustee in respect of any such provision will remain in full force
and effect. (Section 12.09 of the Senior Indenture; Section 12.07 of the
Subordinated Indenture)
Subordination
Upon any distribution of assets of the Company upon the dissolution,
winding up, liquidation or reorganization of the Company, the payment of the
principal of (and premium, if any) and interest on the Subordinated Debt
Securities will be subordinated to the extent provided in the Subordinated
Indenture in right of payment to the prior payment in full of all Senior
Indebtedness, including Senior Debt Securities (Sections 16.01 and 16.02 of
the Subordinated Indenture), but the obligation of the Company to make payment
of principal (and premium, if any) or interest on the Subordinated Debt
Securities will not otherwise be affected. (Section 16.02 of the Subordinated
Indenture) No payment on account of principal (or premium, if any), sinking
funds or interest may be made on the Subordinated Debt Securities (including,
without limitation, payment of any Coupons) unless full payment of amounts
then due for principal, premium, if any, sinking funds and interest on Senior
Indebtedness has been made or duly provided for. (Section 16.03 of the
Subordinated Indenture) In the event that, notwithstanding the foregoing, any
payment by the Company described in the foregoing sentence is received by the
Trustee under the Subordinated Indenture, any Paying Agent or the Holders of
any of the
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Subordinated Debt Securities before all Senior Indebtedness is paid in full,
such payment or distribution shall be paid over to the holders of such Senior
Indebtedness or on their behalf for application to the payment of all such
Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall
have been paid in full, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness. Subject to payment in
full of Senior Indebtedness, the Holders of the Subordinated Debt Securities
will be subrogated to the rights of the holders of the Senior Indebtedness to
the extent of payments made to the holders of such Senior Indebtedness out of
the distributive share of the Subordinated Debt Securities. (Section 16.02 of
the Subordinated Indenture)
By reason of such subordination, in the event of a distribution of assets
upon insolvency, certain general creditors of the Company may recover more,
ratably, than Holders of the Subordinated Debt Securities. The Subordinated
Indenture provides that the subordination provisions thereof shall not apply
to money and securities held in trust pursuant to the satisfaction and
discharge and the legal defeasance provisions of the Subordinated Indenture.
(Sections 4.02 and 15.02 of the Subordinated Indenture)
If this Prospectus is being delivered in connection with the offering of a
series of Subordinated Debt Securities, the accompanying Prospectus Supplement
or the information incorporated by reference therein will set forth the
approximate amount of Senior Indebtedness outstanding as of a recent date.
Discharge, Legal Defeasance and Covenant Defeasance
The applicable Indenture with respect to the Debt Securities of any series
may be discharged, subject to certain terms and conditions, when (1) either
(A) all Debt Securities and the Coupons, if any, of such series have been
delivered to the applicable Trustee for cancellation, or (B) all Debt
Securities and the Coupons, if any, of such series not theretofore delivered
to the applicable Trustee for cancellation (i) have become due and payable,
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under arrangements
satisfactory to the applicable Trustee for the giving of notice by the
applicable Trustee, and the Company, in the case of (i), (ii) or (iii) of
subclause (B), has irrevocably deposited or caused to be deposited with the
applicable Trustee as trust funds in trust for such purpose an amount in the
currency in which such Debt Securities are denominated sufficient to pay and
discharge the entire indebtedness on such Debt Securities for principal (and
premium, if any) and interest to the date of such deposit (in the case of Debt
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be; provided, however, in the event a
petition for relief under the applicable Federal or state bankruptcy,
insolvency or other similar law is filed with respect to the Company within 91
days after the deposit and the applicable Trustee is required to return the
deposited money to the Company, the obligations of the Company under the
applicable Indenture with respect to such Debt Securities will not be deemed
terminated or discharged; (2) the Company has paid or caused to be paid all
other sums payable under the applicable Indenture by the Company; (3) the
Company has delivered to the applicable Trustee an officers' certificate and
an opinion of counsel each stating that all conditions precedent therein
provided relating to the satisfaction and discharge of the applicable
Indenture with respect to such series have been complied with; and (4) the
Company has delivered to the applicable Trustee an opinion of counsel or a
ruling of the Internal Revenue Service to the effect that such deposit and
discharge will not cause the Holders of the Debt Securities of the series to
recognize income, gain or loss for Federal income tax purposes. (Section 4.01)
If provision is made for the defeasance of Debt Securities of a series, and
if the Debt Securities of such series are Registered Securities and
denominated and payable only in U.S. dollars, then the provisions of each
Indenture relating to defeasance shall be applicable except as otherwise
specified in the Prospectus Supplement for Debt Securities of such series.
Defeasance provisions, if any, for Debt Securities denominated in a foreign
currency or currencies or for Bearer Securities may be specified in the
Prospectus Supplement. (Section 15.01)
At the Company's option, either (a) the Company shall be deemed to have
been Discharged (as defined below) from its obligations with respect to Debt
Securities of any series (including, in the case of Subordinated Debt
Securities, the provisions described under "--Debt Securities--Subordination"
herein) ("legal defeasance
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option") or (b) the Company shall cease to be under any obligation to comply
with any obligation of the Company in the applicable Indenture including any
restrictive covenants described in the accompanying Prospectus Supplement and
any other covenants applicable to the Debt Securities which are subject to
covenant defeasance (including, in the case of Subordinated Debt Securities,
the provisions described under "Subordination" herein) ("covenant defeasance
option") at any time after the applicable conditions set forth below have been
satisfied: (1) the Company shall have deposited or caused to be deposited
irrevocably with the applicable Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders
of the Debt Securities of such series (i) money in an amount, or (ii) U.S.
Government Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide, not later than
one day before the due date of any payment, money in an amount, or (iii) a
combination of (i) and (ii), sufficient, in the opinion (with respect to (i)
and (ii)) of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the applicable
Trustee, to pay and discharge each installment of principal (including any
mandatory sinking fund payments) of (and premium, if any) and interest on, the
Outstanding Debt Securities of such series on the dates such installments of
interest or principal and premium are due; (2) such deposit shall not cause
the applicable Trustee with respect to the Debt Securities of that series to
have a conflicting interest with respect to the Debt Securities of any series;
(3) such deposit will not result in a breach or violation of, or constitute a
default under, the applicable Indenture or any other agreement or instrument
to which the Company is a party or by which it is bound; (4) if the Debt
Securities of such series are then listed on any national securities exchange,
the Company shall have delivered to the applicable Trustee an opinion of
counsel or a letter or other document from such exchange to the effect that
the Company's exercise of its legal defeasance option or the covenant
defeasance option, as the case may be, would not cause such Debt Securities to
be delisted; (5) no Event of Default or event (including such deposit) which,
with notice or lapse of time or both, would become an Event of Default with
respect to the Debt Securities of such series shall have occurred and be
continuing on the date of such deposit and, with respect to the legal
defeasance option only, no Event of Default under the provisions of the
applicable Indenture relating to certain events of bankruptcy or insolvency or
event which with the giving of notice or lapse of time, or both, would become
an Event of Default under such bankruptcy or insolvency provisions shall have
occurred and be continuing on the 91st day after such date; and (6) certain
other opinions, officers' certificates and other documents specified in the
applicable Indenture, including an opinion of counsel or a ruling of the
Internal Revenue Service to the effect that such deposit, defeasance or
Discharge will not cause the Holders of the Debt Securities of such series to
recognize income, gain or loss for Federal income tax purposes.
Notwithstanding the foregoing, if the Company exercises its covenant
defeasance option and an Event of Default under the provisions of the
Indentures relating to certain events of bankruptcy or insolvency or event
which with the giving of notice or lapse of time, or both, would become an
Event of Default under such bankruptcy or insolvency provisions shall have
occurred and be continuing on the 91st day after the date of such deposit, the
obligations of the Company referred to under the definition of covenant
defeasance option with respect to such Debt Securities shall be reinstated in
full. (Section 15.02)
Payment and Paying Agents
If Debt Securities of a series are issuable only as Registered Securities,
the Company will maintain in each Place of Payment for such series an office
or agency where Debt Securities of that series may be presented or surrendered
for payment, where Debt Securities of that series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Debt Securities of that series and the
applicable Indenture may be served. (Section 12.03)
If Debt Securities of a series are issuable as Bearer Securities, the
Company will maintain (A) in the Borough of Manhattan, The City and State of
New York, an office or agency where any Registered Securities of that series
may be presented or surrendered for payment, where any Registered Securities
of that series may be surrendered for registration of transfer, where Debt
Securities of that series may be surrendered for exchange or redemption, where
Subordinated Debt Securities of that series that are convertible may be
surrendered for conversion, where notices and demands to or upon the Company
in respect of the Debt Securities of that series
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and the applicable Indenture may be served and where Bearer Securities of that
series and related Coupons may be presented or surrendered for payment in the
circumstances described in the following paragraph (and not otherwise), (B)
subject to any laws or regulations applicable thereto, in a Place of Payment
for that series which is located outside the United States, an office or
agency where Debt Securities of that series and related Coupons may be
presented and surrendered for payment (including payment of any additional
amounts payable on Debt Securities of that series, if so provided in such
series; provided, however, that if the Debt Securities of that series are
listed on The Stock Exchange of the United Kingdom and the Republic of
Ireland, the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and such stock exchange shall so require, the
Company will maintain a Paying Agent for the Debt Securities of that series in
London, Luxembourg or any other required city located outside the United
States, as the case may be, so long as the Debt Securities of that series are
listed on such exchange, and (C) subject to any laws or regulations applicable
thereto, in a Place of Payment for that series located outside the United
States an office or agency where any Registered Securities of that series may
be surrendered for registration of transfer, where Debt Securities of that
series may be surrendered for exchange or redemption, where Subordinated Debt
Securities of that series that are convertible may be surrendered for
conversion and where notices and demands to or upon the Company in respect of
the Debt Securities of that series and the applicable Indenture may be served.
The Company will give prompt written notice to the applicable Trustee of the
locations, and any change in the locations, of such offices or agencies. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the applicable Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
corporate trust office of the applicable Trustee, except that Bearer
Securities of that series and the related coupons may be presented and
surrendered for payment at the offices specified in the applicable Debt
Security and the Company has appointed the applicable Trustee (or in the case
of Bearer Securities may appoint such other agent as may be specified in the
applicable Prospectus Supplement) as its agent to receive all presentations,
surrenders, notices and demands. (Section 12.03)
No payment of principal, premium or interest on Bearer Securities shall be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, that,
if the Debt Securities of a series are denominated and payable in U.S.
dollars, payment of principal of and any premium and interest on Bearer
Securities of such series, if specified in the applicable Prospectus
Supplement, shall be made at the office of the applicable Trustee or the
Company's Paying Agent in the Borough of Manhattan, the City and State of New
York, if (but only if) payment in U.S. dollars of the full amount of such
principal, premium, interest or additional amounts, as the case may be, at all
offices or agencies outside the United States maintained for the purpose by
the Company in accordance with the applicable Indenture is illegal or
effectively precluded by exchange controls or other similar restrictions.
(Section 12.03)
Book-Entry Debt Securities
The Debt Securities of a series may be issued in whole or in part in global
form that will be deposited with, or on behalf of, a depositary identified in
the Prospectus Supplement. Global Notes may be issued in either registered or
bearer form and in either temporary or permanent form (each a "Global Note").
Payments of principal of (and premium, if any) and interest on Debt Securities
represented by a Global Note will be made by the Company to the applicable
Trustee and then by such Trustee to the depositary.
If specified in the applicable Prospectus Supplement, any Global Notes will
be deposited with, or on behalf of, The Depository Trust Company, New York,
New York ("DTC"), as depositary, or such other depositary as may be specified
in the applicable Prospectus Supplement. In the event that DTC acts as
depositary with respect to any Global Notes, the Company anticipates that such
Global Notes will be registered in the name of DTC's nominee, and that the
following provisions will apply to the depositary arrangements with respect to
any such Global Notes. Additional or differing terms of the depositary
arrangements, if any, applicable to the Offered Debt Securities, will be
described in the accompanying Prospectus Supplement.
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So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole Holder of the
Debt Securities represented by such Global Note for all purposes under the
applicable Indenture. Except as provided below, owners of beneficial interests
in a Global Note will not be entitled to have Debt Securities represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery or Debt Securities in certificated form and will not
be considered the owners or Holders thereof under the applicable Indenture.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in certificated form; accordingly, such
laws may limit the transferability of beneficial interests in a Global Note.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the
Company will issue individual Debt Securities in certificated form in exchange
for the Global Notes. In addition, the Company may at any time, and in its
sole discretion, determine not to have any Debt Securities represented by one
or more Global Notes and, in such event, will issue individual Debt Securities
in certificated form in exchange for the relevant Global Notes. If Registered
Securities of any series shall have been issued in the form of one or more
Global Notes and if an Event of Default with respect to the Debt Securities of
such series shall have occurred and be continuing, the Company will issue
individual Debt Securities in certificated form in exchange for the relevant
Global Notes. (Section 3.04)
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the Banking Law of
the State of New York, a "banking organization" within the meaning of the
Banking Law of the State of New York, a member of the Federal Reserve System,
a clearing corporation within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Debt
Securities on DTC's records. The ownership interest of each actual purchaser
of each Debt Security ("Beneficial Owner") is in turn recorded on the Direct
and Indirect Participants' records. A Beneficial Owner does not receive
written confirmation from DTC of its purchase, but such Beneficial Owner is
expected to receive a written confirmation providing details of the
transaction, as well as periodic statements of its holdings, from the Direct
or Indirect Participant through which such Beneficial Owner entered into the
transaction. Transfers of ownership interests in Debt Securities are
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners do not receive certificates representing
their ownership interests in Debt Securities, except in the event that use of
the book entry system for the Debt Securities is discontinued.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co. effects
no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Debt Securities; DTC records reflect only the
identity of the Direct Participants to whose accounts Debt Securities are
credited, which may or may not be the Beneficial Owners. The Participants
remain responsible for keeping account of their holdings on behalf of their
customers.
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Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants
and Indirect Participants to Beneficial Owners are governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Debt Securities are credited on the record date
(identified on a list attached to the Omnibus Proxy).
Principal and interest payments on the Debt Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date
in accordance with their respective holdings as shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the payable
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC, the
Paying Agent or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the Company or the Paying Agent,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to the Debt Securities at any time by giving reasonable notice to the
Company or the Paying Agent. Under such circumstances, in the event that a
successor securities depositary is not appointed, Debt Security certificates
are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Debt Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
Unless stated otherwise in the applicable Prospectus Supplement, the
underwriters or agents with respect to a series of Debt Securities issued as
Global Notes will be Direct Participants in DTC.
None of the Company, any underwriter or agent, the applicable Trustee or
any applicable Paying Agent will have the responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Global Note, or for maintaining, supervising or reviewing any
records relating to such beneficial interests.
Conversion or Exchange Rights
The terms and conditions, if any, upon which Subordinated Debt Securities
being offered are convertible or exchangeable into another series of Debt
Securities or shares of Common Stock will be set forth in the Prospectus
Supplement relating thereto. Such terms will include the conversion or
exchange price, the conversion or exchange period, provisions as to whether
conversion or exchange will be at the option of the Holder or the Company, the
events requiring an adjustment of the conversion or exchange price and
provisions affecting conversions or exchanges in the event of the redemption
of such Subordinated Debt Securities.
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Concerning the Trustees
The Company may from time to time maintain deposit accounts and conduct
other banking transactions with Chemical Bank, N.A. or The Bank of New York
and their affiliated entities in the ordinary course of business.
Certain Definitions
Set forth below is summary of certain defined terms used in the applicable
Indenture. Reference is made to the applicable Indenture for the full
definition of all such terms.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Debt Securities of such series and to have satisfied all the obligations under
the applicable Indenture relating to the Debt Securities of such series,
except (i) the right of Holders of Debt Securities of such series to receive,
from the trust fund described under "Discharge, Legal Defeasance and Covenant
Defeasance" above, payment of the principal of (and premium, if any) and
interest on such Debt Securities when such payments are due, (ii) the
Company's obligations with respect to the Debt Securities of such series under
the provisions relating to exchanges, transfers and replacement of Debt
Securities, the maintenance of an office or agency of the Company and the
defeasance trust fund, the provisions relating to compensation and
reimbursement of the applicable Trustee and (iii) the rights, powers, trusts,
duties and immunities of the applicable Trustee thereunder. (Section 15.02)
"Indebtedness" means (i) any liability of any Persons (a) for borrowed
money, or (b) evidenced by a bond, note, debenture or similar instrument
(including purchase money obligations but excluding trade payables), or (c)
for the payment of money relating to a lease that is required to be classified
as a capitalized lease obligation in accordance with generally accepted
accounting principles, or (d) preferred or preference stock of a Subsidiary of
the Company held by Persons other than the Company or a Subsidiary of the
Company; (ii) any liability of others described in the preceding clause (i)
that the Person has guaranteed, that is recourse to such Person or that is
otherwise its legal liability; and (iii) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of
the types referred to in clauses (i) and (ii) above. (Section 1.01)
"Senior Indebtedness" means the principal of (and premium, if any) and
unpaid interest on (i) Indebtedness of the Company, whether outstanding on the
date of the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed, for money borrowed (other than the Indebtedness evidenced by the
Subordinated Debt Securities of any series), unless in the instrument creating
or evidencing the same pursuant to which the same is outstanding it is
provided that such Indebtedness is not senior or prior in right of payment
to the Subordinated Debt Securities or is pari passu or subordinate by its
terms in right of payment to the Subordinated Debt Securities and (ii)
renewals, extensions and modifications of any such Indebtedness. (Section 1.01
of the Subordinated Indenture)
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation, irrespective of whether or not
at the time stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency, is
at the time, directly or indirectly, owned or controlled by the Company or by
one or more Subsidiaries thereof, or by the Company and one or more
Subsidiaries thereof. (Section 1.01)
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States for the timely payment of which its full
faith and credit is pledged, or (ii) obligations of a Person controlled for
supervised by and acting as an agency or instrumentality of the United States
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States, which, in either case under clauses (i) or
(ii), are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government
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Obligation or a specific payment of interest on (or principal of) any such
U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by
such depository receipt. (Section 15.02)
PREFERRED STOCK
The description of certain provisions of the Preferred Stock set forth
below and in any Prospectus Supplement does not purport to be complete and is
subject to and qualified in its entirety by reference to the Company's
Restated Articles of Incorporation, as amended (the "Articles"), and the
Articles of Amendment relating to each such series of Preferred Stock, which
will be filed with the Commission in connection with the offering of such
series of Preferred Stock.
General
Under the Articles, the Board of Directors may, by resolution, establish
series of Preferred Stock having such voting powers, and such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as the Board of Directors
may determine.
The Preferred Stock offered hereby will have the dividend, liquidation and
voting rights set forth below unless otherwise provided in the Prospectus
Supplement relating to a particular series of Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of
Preferred Stock offered thereby for specific terms, including: (1) the
designation and stated value per share of such Preferred Stock and the number
of shares offered; (2) the amount of liquidation preference per share; (3) the
price at which such Preferred Stock will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends will be payable, whether
such dividends will be cumulative or noncumulative and, if cumulative, the
dates from which dividends will accrue; (5) any redemption or sinking fund
provisions; (6) any terms by which such series of Preferred Stock may be
convertible into or exchanged for Common Stock or Debt Securities; and (7) any
additional or other rights, preferences, privileges, limitations and
restrictions relating to such series of Preferred Stock.
The Preferred Stock offered hereby will be issued in one or more series.
The holders of Preferred Stock will have no preemptive rights. Preferred Stock
will be fully paid and nonassessable upon issuance against full payment of the
purchase price therefor. Unless otherwise specified in the Prospectus
Supplement relating to a particular series of Preferred Stock, each series of
Preferred Stock will, with respect to dividend rights and rights on
liquidation, dissolution and winding up of the Company, rank prior to the
Common Stock (the "Junior Stock") and on a parity with each other series of
Preferred Stock offered hereby (the "Parity Stock").
Dividend Rights
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of
funds legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Such rate may be fixed or variable or both. Each such
dividend will be payable to the holders of record as they appear on the stock
books of the Company on such record dates as will be fixed by the Board of
Directors of the Company. Dividends on any series of the Preferred Stock may
be cumulative or noncumulative, as provided in the Prospectus Supplement
relating thereto. If the Board of Directors of the company fails to declare a
dividend payable on a dividend payment date on any series of Preferred Stock
for which dividends are noncumulative, then the right to receive a dividend in
respect of the dividend period ending on such dividend payment date will be
lost, and the Company will have no obligation to pay the dividend accrued for
that period, whether or not
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dividends are declared for any future period. Dividends on shares of each
series of Preferred Stock for which dividends are cumulative will accrue from
the date set forth in the applicable Prospectus Supplement.
The Preferred Stock of each series will include customary provisions (1)
restricting the payment of dividends or the making of other distributions on,
or the redemption, purchase or other acquisition of, Junior Stock unless full
dividends, including, in the case of cumulative Preferred Stock, accruals, if
any, in respect of prior dividend periods, on the shares of such series of
Preferred Stock have been paid and (2) providing for the pro rata payment of
dividends on such series and other Parity Stock when dividends have not been
paid in full upon such series and other Parity Stock.
Rights Upon Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will
be entitled to receive out of assets of the Company available for distribution
to stockholders, before any distribution of assets is made to holders of
Junior Stock, liquidating distributions in the amount set forth in the
Prospectus Supplement relating to such series of Preferred Stock plus an
amount equal to accrued and unpaid dividends. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the amounts
payable with respect to the Preferred Stock of any series and any Parity Stock
are not paid in full, the holders of the Preferred Stock of such series and of
such Parity Stock will share ratably in any such distribution of assets of the
Company in proration to the full respective preferential amounts (which may
include accumulated dividends) to which they are entitled. After payment of
the full amount of the liquidating distribution to which they are entitled,
the holders of such series of Preferred Stock will have no right or claim to
any of the remaining assets of the Company. Neither the sale of all or a
portion of the Company's assets nor the merger or consolidation of the Company
into or with any other corporation shall be deemed to be a dissolution,
liquidation or winding up, voluntarily or involuntarily, of the Company.
Voting Rights
The holders of Preferred Stock of a series offered hereby will not be
entitled to vote except as indicated in the Prospectus Supplement relating to
such series of Preferred Stock or as required by applicable law. Unless
otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, when and if any such series is entitled to vote,
each share in such series will be entitled to one vote.
PLAN OF DISTRIBUTION
The Company and the Selling Shareholder may offer and sell the Securities
in one or more of the following ways: (i) through underwriters or dealers,
(ii) through agents, or (iii) directly to one or more purchasers. The
Prospectus Supplement with respect to a particular offering of a series of
Securities will set forth the terms of the offering of such Securities,
including the name or names of any underwriters or agents with whom the
Company has entered into arrangements with respect to the sale of such
Securities, the public offering or purchase price of such Securities and the
proceeds to the Company and/or the Selling Shareholder from such sales and any
underwriting discounts, agency fees or commissions and other items
constituting underwriters' compensation, the initial public offering price,
any discounts or concessions to be allowed or re-allowed or paid to dealers
and any securities exchange, if any, on which such Securities may be listed.
Dealer trading may take place in certain of the Offered Securities, including
Offered Securities not listed on any securities exchange.
If underwriters are used in the offer and sale of Offered Securities, the
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The Offered Securities may be offered to the
public either through underwriting syndicates represented by managing
underwriters, or by underwriters without a syndicate, all of which
underwriters in either case will be designated in the applicable Prospectus
Supplement. Unless otherwise set forth in the applicable Prospectus
Supplement, under the terms of the underwriting agreement, the obligations of
the underwriters to purchase
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Offered Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all of the Offered Securities if
any are purchased. Any initial public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be changed from time
to time.
Offered Securities may be offered and sold directly by the Company and the
Selling Shareholder or through agents designated by the Company and the
Selling Shareholder from time to time. Any agent involved in the offer or sale
of the Offered Securities with respect to which this Prospectus is delivered
will be named in, and any commissions payable to such agent will be set forth
in or calculable from, the applicable Prospectus Settlement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters, dealers or agents to solicit offers by certain
institutions to purchase the Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts ("Delayed Delivery Contracts") providing for payment and
delivery on the date or dates stated in the Prospectus Supplement. Each
Delayed Delivery Contract will be for an amount of the Offered Securities not
less than and, unless the Company otherwise agrees, the aggregate amount of
the Offered Securities sold pursuant to Delayed Delivery Contracts shall be
not more than the respective minimum and maximum amounts stated in the
Prospectus Supplement. Institutions with which Delayed Delivery Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies and educational and charitable
institutions, but shall in all cases be subject to the approval of the Company
in its sole discretion. The obligations of the purchaser under any Delayed
Delivery Contract to pay for and take delivery of the Offered Securities will
not be subject to any conditions except that (i) the purchase of the Offered
Securities by such institution shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such institution is subject, and
(ii) any related sale of the Offered Securities to underwriters shall have
occurred. A commission set forth in the Prospectus Supplement will be paid to
underwriters soliciting purchases of the Offered Securities pursuant to
Delayed Delivery Contracts accepted by the Company. The underwriters will not
have any responsibility in respect of the validity or performance of Delayed
Delivery Contracts.
The Debt Securities and the Preferred Stock will be new issues of
securities with no established trading market. Any underwriters to whom
Offered Securities are sold by the Company for public offering and sale may
make a market in such Offered Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for any Offered Securities.
Any underwriter, dealer or agent participating in the distribution of the
Offered Securities may be deemed to be an underwriter, as that term is defined
in the Securities Act, of the Offered Securities so offered and sold, and any
discounts or commissions received by it from the Company and any profit
realized by it on the sale or resale of the Offered Securities may be deemed
to be underwriting discounts and commissions under the Securities Act.
Under agreements entered into with the Company or the Selling Shareholder,
underwriters, dealers and agents may be entitled to indemnification by the
Company or the Selling Shareholder against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with
respect to payments which the underwriters or agents may be required to make
in respect thereof.
Underwriters, dealers and agents also may be customers of, engage in
transactions with, or perform other services for the Company in the ordinary
course of business.
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LEGAL MATTERS
Unless otherwise specified in the applicable Prospectus Supplement, the
validity of the Common Stock and the Preferred Stock offered hereby will be
passed upon by Corporate Counsel to the Company, and the validity of the Debt
Securities offered hereby will be passed upon by Stroock & Stroock & Lavan, 7
Hanover Square, New York, New York. Certain other legal matters will be passed
upon for the Company by Stroock & Stroock & Lavan. Certain legal matters in
connection with any offering of Securities involving any underwriters or
dealers will be passed upon for such underwriters or dealers by counsel to be
named in the appropriate Prospectus Supplement. Stroock & Stroock & Lavan and
such counsel may rely as to matters of New Jersey law on Corporate Counsel to
the Company.
EXPERTS
The consolidated financial statements of The Money Store Inc. and
subsidiaries as of December 31, 1994 and 1993 and for each of the years in the
three year period ended December 31, 1994 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP covering the December 31,
1994 financial statements refers to a change in accounting for income taxes in
1993.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE-
SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
ANY OF THE UNDERWRITERS. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANY-
ING PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DO THEY CONSTI-
TUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURI-
TIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SO-
LICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SO-
LICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY IN-
FORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary.............................................. S-3
Recent Developments........................................................ S-7
Investment Considerations.................................................. S-10
Use of Proceeds............................................................ S-13
Price Range of Common Stock................................................ S-13
Dividend Policy............................................................ S-13
Capitalization............................................................. S-14
Ratios of Earnings......................................................... S-14
Selected Consolidated Financial Data....................................... S-15
Description of Preferred Shares............................................ S-18
Certain Federal Income Tax Considerations.................................. S-24
Underwriting............................................................... S-28
Legal Matters.............................................................. S-29
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information....................................................... 2
Incorporation of Certain Documents By Reference............................. 2
The Company................................................................. 4
Recent Developments......................................................... 5
Ratios of Earnings.......................................................... 5
Use of Proceeds............................................................. 5
Selling Shareholder......................................................... 6
Description of Securities................................................... 6
Plan of Distribution........................................................ 22
Legal Matters............................................................... 24
Experts..................................................................... 24
</TABLE>
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4,600,000 Shares
[LOGO OF THE MONEY STORE]
$1.72 Mandatory Convertible Preferred Stock
----------------------
PROSPECTUS SUPPLEMENT
----------------------
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
MONTGOMERY SECURITIES
OPPENHEIMER & CO., INC.
October 30, 1996
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