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EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS
OF
6% CONVERTIBLE PREFERRED STOCK, SERIES A
OF
CITYSCAPE FINANCIAL CORP.
Cityscape Financial Corp., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate
of Incorporation of the Corporation, the Board of Directors duly adopted the
following resolutions, which resolutions remain in full force and effect as of
the date hereof;
RESOLVED, that, pursuant to authority granted to and vested in the Board of
Directors in accordance with the Certificate of Incorporation of the
Corporation, the Board of Directors hereby authorizes the issuance of, and fixes
the designation and preferences and relative, participating, optional and other
special rights, and qualifications, limitations and restrictions, of a series of
the Corporation's previously authorized Preferred Stock consisting of 5,000
shares, par value $0.01, to be designated "6% Convertible Preferred Stock,
Series A" (the "Series A Preferred Stock").
RESOLVED, that each of the shares of Series A Preferred Stock shall rank
equally in all respects and shall be subject to the following terms and
provisions:
1. Dividends.
(a) Cumulative. The holders of the Series A Preferred Stock shall be
entitled to receive dividends at the rate of six percent (6%) of the Liquidation
Preference of each share of Series A Preferred Stock, per annum payable
quarterly on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1997 (each a "Dividend Payment Date"), in preference and
priority to any payment of any dividend on the Common Stock (as defined below)
or any other class or series of Junior Stock (as defined below) of the
Corporation. Such dividends shall accrue on each share of Series A Preferred
Stock from the most recent date on which a dividend has been paid with respect
to such Series A Preferred Stock, or if no dividends have been paid, from the
date of the original issuance of such Series A Preferred Stock, and such
dividends shall accrue on a daily basis, determined based on the actual number
of days and months elapsed and computed on a 360-day year consisting of twelve
30-day months. If a holder of Series A Preferred Stock elects to convert all or
a portion of its Series A Preferred Stock at any time prior to a Dividend
Payment Date, dividends shall accrue with respect to such holder's Series A
Preferred Stock up to and including the day of conversion and in lieu of payment
of such dividend an amount equal to such dividend shall be added to the
Liquidation Preference (as defined below) of such shares of Series A Preferred
Stock to be converted. If at any time dividends on the outstanding Series A
Preferred Stock at the rate set forth above shall not have been paid or declared
and set apart for payment with respect to all preceding periods, the amount of
the deficiency shall be fully paid or declared and set apart for payment, before
any distribution, whether by way of dividend or otherwise, shall be declared or
paid upon or set apart for the shares of any class or series of Junior Stock of
the Corporation.
(b) Cash, Common Stock or Liquidation Preference Adjustment. Dividends on
the outstanding Series A Preferred Stock are payable to each holder of Series A
Preferred Stock registered on the books of the Corporation, at the option of the
Corporation, either (i) in cash, provided the Corporation has assets legally
available therefor, (ii) in shares of Common Stock, as determined based upon the
closing price of the Common Stock on the day immediately preceding the Dividend
Payment Date with respect to such dividend, provided that the certificates
representing such shares of Common Stock do not bear any legends restricting
their transfer or there is an effective registration statement registering the
resale by the holders of Series A Preferred Stock of such shares of Common Stock
or (iii) in lieu of payment of such dividend, an amount
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equal to such dividend shall be added to the Liquidation Preference of such
Series A Preferred Stock. The Corporation shall notify each holder within five
trading days prior to a Dividend Payment Date of the form in which the
Corporation elects to pay dividends on the Series A Preferred Stock. If the
Corporation fails to provide such notice, payments of dividends shall be in the
form of shares of Common Stock. If the Corporation (x) fails to provide timely
notice of its election of the form in which it intends to pay dividends and
fails to timely deliver shares of Common Stock with respect to a Dividend
Payment Date as provided in clause (ii) above or (y) provides timely notice of
its election to pay dividends either in cash or in shares of Common Stock as
provided in clauses (i) or (ii) above, and fails to timely deliver such cash or
shares of Common Stock with respect to a Dividend Payment Date as provided in
clauses (i) or (ii) above, then in each such case in lieu of payment of such
dividend, an amount equal to such dividend shall be added to the Liquidation
Preference of such shares of Series A Preferred Stock as provided in clause
(iii) as of such Dividend Payment Date.
(c) Dividends or Distributions. The Corporation shall not, as long as
there is an aggregate amount in excess of 500 shares (as appropriately adjusted
for any stock split or reverse stock split of the shares of Series A Preferred
Stock) of Series A Preferred Stock outstanding, declare any dividends or
distributions that, upon payment, would cause the aggregate fair market value
(as determined in good faith by the Board of Directors, whose determination
shall be conclusive) of all such dividends and distributions which have been
declared or paid on such date and during the 365-day period immediately
preceding such date exceed the product of (x) .15 times (y) the closing price of
the Common Stock on the record date for such most recent dividend or
distribution times (z) the number of shares of Common Stock outstanding on such
date.
2. Liquidation Preference; Change of Control Transactions.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), the
holders of the Series A Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders, whether such assets are capital, surplus or earnings, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any Junior Stock, an amount equal to the Liquidation Preference
(as defined below). If upon the occurrence of a Liquidation Event, the assets
and funds available for distribution among the holders of the Series A Preferred
Stock and holders of securities ranking pari passu with the Series A Preferred
Stock shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series A Preferred Stock
and the shares ranking pari passu with such Series A Preferred Stock shall be
distributed ratably among such shares in proportion to the ratio that the
Liquidation Preference payable on each such share bears to the aggregate
Liquidation Preference payable on all such shares.
(b) For purposes hereof (i) the "Liquidation Preference" with respect to
each share of Series A Preferred Stock shall mean the amount of $10,000 plus (x)
any amounts in lieu of dividends added to the Liquidation Preference in
accordance with Section 1(b)(iii) above, (y) default payments added to the
Liquidation Preference pursuant to Section 8 hereof and (z) an amount equal to
any accrued but unpaid dividends (with dividends deemed accrued on a daily basis
through the date of such Liquidation Event, conversion or other event, even if
such event or any distribution is not on a Dividend Payment Date); (ii) "Person"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization; and (iii) "Junior Stock"
shall mean the Common Stock and all other shares of capital stock of the
Corporation that do not rank pari passu with or do not have preference over the
Series A Preferred Stock in respect of dividends, redemption or distribution
upon liquidation.
(c) A "Change of Control Transaction" shall mean, (i) the sale, conveyance
or disposition of all or substantially all of the assets of the Corporation,
(ii) a consolidation or merger of the Corporation with or into any other
"Person" (whether or not the Corporation is the surviving Person, but other than
a merger or consolidation whereby the stockholders of the Corporation
immediately preceding the merger or consolidation continue to own greater than
50% of the voting power of the capital stock of the surviving Person in such
merger or consolidation that is normally entitled to vote in the election of
directors, managers or trustees, as applicable) or, (iii) any Person or any
"group" (as such term is used in Section 13(d) of the Securities
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Exchange Act of 1934, as amended (the "Exchange Act"), becomes the beneficial
owner or is deemed to beneficially own (as described in Rule 13d-3 under the
Exchange Act without regard to the 60-day exercise period) in excess of 50% of
the Corporation's voting power of the capital stock of the Corporation normally
entitled to vote in the election of directors of the Corporation (other than (A)
any group that held such voting power as of the date of this Certificate of
Designations, or (B) any group that holds such voting power subsequent to the
date of this Certificate of Designations, provided that the persons that
constitute such group include the majority of the members of, and at least 50%
of the voting power held by, a group referenced in clause (A)). The Corporation
shall promptly mail written notice of either the occurrence of, or the
announcement of the Corporation's intent to engage in, a Change of Control
Transaction (with a copy sent by facsimile), but in any event such notice (other
than, if inapplicable, in the case of a Change of Control Transaction of the
type set forth in clause (iii)) shall not be given less than twenty (20) days
prior to the effective date of such Change of Control Transaction to each record
holder of Series A Preferred Stock.
(d) Upon the notice or occurrence of, or announcement of the Corporation's
intent (or a third party's or parties' intent in the case of a Change of Control
Transaction of the type set forth in clause (iii) of the definition of a Change
of Control Transaction) to engage in, a Change of Control Transaction, then, the
Series A Preferred Stock shall thereupon be convertible in full, notwithstanding
the limitations set forth in Section 3(a) hereof; provided that a holder's
ability to convert shares of Series A Preferred Stock shall cease three (3)
trading days prior to the consummation of a Change of Control Transaction of the
type set forth in clauses (i) and (ii) of the definition thereof. In addition,
upon either the notice of, or the announcement of the Corporation's intent to
engage in, a Change of Control Transaction (of the type set forth in clauses (i)
and (ii) of the definition thereof), a holder of Series A Preferred Stock shall
have the right, up to and including the third trading day prior to the date of
effectiveness of such Change of Control Transaction, to elect redemption by the
Corporation of the shares of Series A Preferred Stock held by such holder at a
redemption price equal to 110% of the Liquidation Preference thereof, which
redemption, in the case of such Change of Control Transaction, shall be
conditioned upon and shall be effective immediately prior to consummation of
such Change of Control Transaction. If the holder does not make such an
election, such holder's shares of Series A Preferred Stock shall be deemed
automatically converted into shares of Common Stock immediately prior to the
consummation of such Change of Control Transaction, and the holder shall receive
the same consideration that a holder of Common Stock is entitled to receive in
connection with such Change of Control Transaction.
3. Conversion. Subject to the restrictions on conversion of Series A
Preferred Stock set forth in Section 3(a) hereof, each holder of the Series A
Preferred Stock shall have the right, at any time and from time to time, to
convert each share of Series A Preferred Stock into such number of fully paid,
validly issued and nonassessable shares ("Common Shares") of common stock, par
value $0.01 per share of the Corporation ("Common Stock"), free and clear of any
liens, claims or encumbrances (other than those created or suffered by such
holder), as is determined by dividing (i) the Liquidation Preference times the
number of shares of Series A Preferred Stock being converted (the "Conversion
Amount") by (ii) the Conversion Price (determined as hereinafter provided) in
effect on the Conversion Date (as defined below), on the following terms and
conditions.
(a) Conversion Restrictions. Except as otherwise provided herein, each
holder of Series A Preferred Stock may only convert such number of Series A
Preferred Stock owned by such holder as stated below:
(i) during calendar days 1 through 90 following the date of the first
issuance of the shares of Series A Preferred Stock (the "Initial
Issuance Date"), 25% of the shares of Series A Preferred Stock
owned by such holder;
(ii) during calendar days 91 through 180 following the Initial
Issuance Date, 50% (on a cumulative basis) of the shares of
Series A Preferred Stock owned by such holder;
(iii) during calendar days 181 through 270 following the Initial
Issuance Date, 75% (on a cumulative basis) of the shares of
Series A Preferred Stock owned by such holder; and
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(iv) at any time on or after the 271st calendar day following Initial
Issuance Date, 100% of the shares of Series A Preferred Stock
owned by such holder.
(b) Mechanics of Conversion. To convert Series A Preferred Stock into
Common Shares, the holder shall give written notice ("Conversion Notice") to the
Corporation in the form of Exhibit A hereto (which Conversion Notice may be
given by facsimile). The date that such Conversion Notice is received by the
Corporation (whether by facsimile or otherwise) shall be deemed to be the
"Conversion Date." As soon as reasonably practicable after delivery of the
Conversion Notice, such holder shall surrender the certificate or certificates
representing the shares of Series A Preferred Stock being converted, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, provided that the Corporation shall at all times
maintain an office or agency in New York City for such purposes. The Corporation
shall, immediately upon receipt of such Conversion Notice, issue and deliver to
or upon the order of such holder, against delivery of the certificates
representing the Series A Preferred Stock which have been converted, a
certificate or certificates for the number of Common Shares to which such holder
shall be entitled (with the number of and denomination of such certificates
designated by such holder), and the Corporation shall immediately issue and
deliver to such holder a certificate or certificates for the number of shares of
Series A Preferred Stock which such holder has not yet elected to convert
hereunder but which are evidenced in part by the certificate(s) delivered to the
Corporation in connection with such Conversion Notice; the Corporation shall
effect such issuance by delivering certificates representing the appropriate
number of Common Shares to the holder or its designee within three (3) trading
days of the Conversion Date. Conversion pursuant to this Section 3 shall be
deemed to have been made immediately prior to the close of business on the
Conversion Date, regardless of whether the Conversion Notice shall be delivered
subsequent to the close of business on such date. The person or persons entitled
to receive the Common Shares issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Common Shares at the close
of business on the Conversion Date.
(c) Determination of Conversion Price. Each share of Preferred Stock shall
be converted into the number of shares of Common Shares determined by dividing
the Liquidation Preference thereof by the Conversion Price. The "Conversion
Price" shall be equal to:
(100% minus the Applicable Percentage (as set forth below)) times the
lowest trading price (as defined below) of the Common Stock on any of the
four (4) (subject to adjustment as provided in Sections 4, 5(B), 7(B) and 9
hereof) consecutive "trading days" immediately preceding (but excluding)
the applicable Conversion Date (the "Valuation Period").
The "Applicable Percentage" shall be as follows:
0% during calendar days 1 through 90 following the Initial Issuance
Date of the Initial Shares;
2% during calendar days 91 through 180 following the Initial Issuance
Date of the Initial Shares;
3% during calendar days 181 through 270 following the Initial Issuance
Date of the Initial Shares;
and
4% commencing with the 271st calendar day following the Initial
Issuance Date of the Initial Shares.
The Applicable Percentage shall be subject to adjustment as provided in
Sections 4, 5(B), 7(B) and 9 hereof.
(i) The "lowest trading price" of the Common Stock on any trading day
shall be (A) the lowest reported sale price of the Common Stock as reported
in the consolidated transaction reporting system ("consolidated tape") if
transactions in the Common Stock are included in the consolidated tape or
(B) if the Common Stock is not included in the consolidated tape, the
lowest reported sale price of the Common Stock on the principal automated
securities price quotation system on which sale prices of the Common Stock
are reported, or (C) if the Common Stock is not included in the
consolidated tape and sale prices of the Common Stock are not reported on
an automated quotation system, the lowest bid price
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for the Common Stock as reported by National Quotation Bureau Incorporated
or similar organization; provided that in the event that a holder of Series
A Preferred Stock or any of its affiliates, or any Person acting in concert
with any of them, was a party to the trade that resulted in such lowest
reported sale price or lowest bid price, such trade shall not be recognized
and the lowest trading price with respect to any conversion of Series A
Preferred Stock by such holder or its affiliates only, shall be the next
higher lowest reported sale price or next higher lowest bid price resulting
from a trade in which no such holder or any of its affiliates or any Person
acting in concert with any of them was a party. If none of the foregoing
provisions are applicable, the "lowest trading price" of the Common Stock
on a trading day will be the fair market value of the Common Stock on that
day as determined by a member firm of the New York Stock Exchange, Inc.,
selected in good faith by the Board of Directors of the Corporation and
reasonably acceptable to the holders of more than 50% of Series A Preferred
Stock. The term "trading day" means (x) if the Common Stock is quoted on
the Nasdaq National Market ("Nasdaq"), or listed on the New York Stock
Exchange or the American Stock Exchange, a day on which there is trading on
such market or exchange, (y) if the Common Stock is not quoted on Nasdaq or
listed on either of such stock exchanges but sale prices of the Common
Stock are reported on an automated quotation system, a day on which sales
of the Common Stock are reported, or (z) if the foregoing provisions are
inapplicable, a day on which quotations are reported by National Quotation
Bureau Incorporated. Notwithstanding the foregoing, a day shall not be
considered a trading day if (i) trading of the Common Stock was suspended
during such day or (ii) no reported trades occur on such day.
(ii) In the event that during any period of consecutive trading days
provided for above, an "ex-dividend" date with respect to any dividend on
the Common Stock payable in Common Stock or in rights to acquire Common
Stock shall occur, or the Corporation shall effect a stock split or reverse
stock split, or a combination, consolidation or reclassification of the
Common Stock, then the Conversion Price shall be proportionately decreased
or increased, as appropriate, to give effect to such event.
In no event shall the Conversion Price be less than $0.01 per share.
(d) Notice of Record Date. In the event of any taking by the Corporation
of a record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or any
other distribution payable in securities of the Corporation or any of its
subsidiaries other than additional shares of Common Stock, any security or right
convertible into or entitling the holder thereof to receive additional shares of
Common Stock, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Corporation shall deliver to each holder of Series A
Preferred Stock at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution, security or right and the amount and character of
such dividend, distribution, security or right.
(e) Reservation of Common Shares Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of effecting the conversion of Series A
Preferred Stock, not less than the number of shares of its Common Stock
necessary to effect the conversion of all outstanding Series A Preferred Stock,
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all the then outstanding
Series A Preferred Stock, the Corporation will take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in best efforts to obtain any requisite stockholder
approval.
(f) Fractional Shares. No fractional shares of Common Stock shall be
issued upon the conversion of any shares of Series A Preferred Stock. All Common
Shares (including fractions thereof) issuable upon conversion of shares of
Series A Preferred Stock represented by more than one certificate held by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional shares. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a Common Share, the Corporation shall, in lieu of issuing any
fractional share, pay the holder
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otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the Conversion Date.
(g) Forced Conversion.
(1) Subject to subsection (g)(2) below, each share of Series A Preferred
Stock which shall be outstanding on the Forced Conversion Date shall be
automatically converted into Common Shares on such date pursuant to the
provisions hereof, with such Forced Conversion Date deemed to be the Conversion
Date. The "Forced Conversion Date" is the date which is the fifth (5th)
anniversary of the Initial Issuance Date of the Series A Preferred Stock,
provided that such Forced Conversion Date shall be extended by such number of
days as is equal to 1.5 times the number of days (A) after the 120th day
following the Initial Issuance Date during which the holders are unable but are
required pursuant to the Securities Act of 1933, as amended (the "Act"), to
deliver the Prospectus contained in the Registration Statement (as such term is
defined in the Registration Rights Agreement (the "Registration Rights
Agreement") between the Corporation and the initial holders of the Series A
Preferred Stock) to offer and sell Common Shares; (B) there is not a sufficient
amount of Common Shares available for conversion of all outstanding Series A
Preferred Stock for which the Corporation has received duly executed conversion
notices; (C) for any other reason the Corporation refuses or announces its
refusal to honor conversion of Series A Preferred Stock; (D) the Corporation
suspends the holder's right to convert the Series A Preferred Stock owned by
such holder, in accordance with the terms of the Registration Rights Agreement
in connection with certain public offerings of its Common Stock; (E) during
which the holders are unable but are required pursuant to the Act to deliver the
Prospectus contained in the Registration Statement to offer and sell Common
Shares after the Registration Statement has become effective under the Act
because there is any other suspension, restriction or limitation on the ability
of holders of Series A Preferred Stock to so use the Prospectus to offer and
sell Common Shares; provided, however, that in no event shall an extension of
the Forced Conversion Date pursuant to this clause (E) extend beyond such time
as there are no Registrable Securities (as defined in the Registration Rights
Agreement) outstanding; or (F) that any of the circumstances in Sections 4, 5, 6
(provided that there are Registrable Securities outstanding and if so, without
regard to the applicability of the Suspension Grace Period) or 7, to the extent
not otherwise covered above, exist.
(2) Notwithstanding the preceding subsection (g)(1), Series A Preferred
Stock shall not be automatically converted into Common Shares on the Forced
Conversion Date unless and until each of the following conditions has been
satisfied or exists, each of which shall be a condition precedent to any such
forced conversion:
(A) no material default or breach exists, and no event shall have
occurred which constitutes (or would constitute with notice or the passage
of time or both) a material default or breach of the Securities Purchase
Agreement between the Corporation and the initial holders of the Series A
Preferred Stock (the "Securities Purchase Agreement"), the Registration
Rights Agreement or this Certificate of Designations; and
(B) the Corporation and its direct and indirect subsidiaries on a
consolidated basis has assets with a net realizable fair market value
exceeding its liabilities and is able to pay all its debts as they become
due in the ordinary course of business, and the Corporation has not been
given, and is not required to give, notice of a Liquidation Event.
Such forced conversion shall be subject to and governed by all the provisions
relating to voluntary conversion of the Series A Preferred Stock contained
herein.
(h) Corporation Optional Redemption.
(1) In the event the closing sale price for the Common Stock on the
principal trading market is below $17.50 per share (as appropriately adjusted
for any stock split or reverse stock split, or a combination, consolidation, or
reclassification of the Common Stock) for ten consecutive trading days, the
Corporation, in its sole discretion, may redeem all of the outstanding Series A
Preferred Stock at a redemption price equal to 120% of the Liquidation
Preference; provided, however, that the Corporation shall deliver to all of the
holders
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of Series A Preferred Stock at least five trading days' prior written notice of
its intention to so redeem the outstanding Series A Preferred Stock.
(2) The Corporation shall have the right to redeem all or part of the
outstanding Series A Preferred Stock upon at least five trading days' prior
written notice to holders of Series A Preferred Stock at a redemption price
equal to 105% of the Liquidation Preference of such shares during calendar days
1 through 90 following the Initial Issuance Date; provided, however, that if the
Corporation redeems less than all of the outstanding shares of Series A
Preferred Stock, it shall do so on a pro-rata basis.
(3) In the event that shares of Common Stock of the Corporation are
delisted from Nasdaq (unless immediately listed on a national securities
exchange) at any time following the Initial Issuance Date, the Corporation may,
at any time during the first 30-day period following such delisting, purchase
all of the outstanding shares of Series A Preferred Stock held by the holders of
such stock at a purchase price equal to 120% of the Liquidation Preference (as
of the date of purchase by the Corporation) of such Series A Preferred Stock;
provided, however, that the Corporation shall deliver at least five trading
days' prior written notice of its intention to so purchase the outstanding
shares of Series A Preferred Stock.
(4) In the event that the Corporation fails or refuses to honor a
conversion of Series A Preferred Stock in full, in accordance with their terms
of this Certificate of Designations for any reason (including, without
limitation, as a result of failure to have a sufficient number of shares of
Common Stock available to satisfy the Corporation's obligations to any holder
upon receipt of a Conversion Notice in accordance with the terms hereof), the
Corporation may, at any time during the first 30-day period following such
failure or refusal to honor a conversion in full, purchase all of the
outstanding shares of Series A Preferred Stock held by such holder at a purchase
price equal to 120% of the Liquidation Preference (as of the date of purchase by
the Corporation) of such Series A Preferred Stock; provided, however, that the
Corporation shall deliver at least five trading days' prior written notice of
its intention to so purchase the outstanding shares of Series A Preferred Stock.
(5) In the event that the Corporation fails or refuses to pay when due any
default payment in accordance with Section 8 hereof, the Corporation may, at any
time during the first 30-day period following such failure or refusal to pay,
purchase all of the outstanding shares of Series A Preferred Stock held by such
holder at a purchase price equal to 120% of the Liquidation Preference (as of
the date of purchase by the Corporation) of such Series A Preferred Stock;
provided, however, that the Corporation shall deliver at least five trading
days' prior written notice of its intention to so purchase the outstanding
shares of Series A Preferred Stock.
(6) In the event that (1) trading in the Common Stock on Nasdaq or any
principal national securities exchange on which the Common Stock is then traded
is suspended for seven consecutive trading days or (2) the Registration
Statement has not been declared effective by the 180th day following the Initial
Issuance Date, the Corporation may, at any time during the first 30-day period
following such suspension in trading or non-effectiveness of the Registration
Statement, as the case may be, purchase all of the outstanding shares of Series
A Preferred Stock held by the holders of such stock at a purchase price equal to
120% of the Liquidation Preference (as of the date of such purchase by the
Corporation) of such Series A Preferred Stock; provided, however, that the
Corporation shall deliver at least five trading days' prior written notice of
its intention to so purchase the outstanding shares of Series A Preferred Stock.
(i) Certificate of Conversion Price Adjustment. The Corporation shall,
upon the written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a certificate prepared by the
Corporation setting forth any adjustments or readjustments of the Conversion
Price pursuant to this Section 3 or Section 4 hereof.
(j) Specific Enforcement. The Corporation agrees that irreparable damage
would occur in the event that any of the provisions of this Certificate of
Designations were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the holders of Series A
Preferred Stock shall be entitled to specific performance, injunctive relief or
other equitable remedies to prevent or cure breaches of the provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
under agreement, at law or in equity.
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4. Adjustment of Applicable Percentage. The Corporation has agreed to file
the Registration Statement as soon as practicable following the Initial Issuance
Date and shall use its best efforts to cause such Registration Statement to
become effective within 120 days from the Initial Issuance Date. In the event
that such Registration Statement has not been declared effective within 120 days
from the Initial Issuance Date, then the Applicable Percentages shall be
increased by 1.5% upon the commencement of the 30-day period ("Non-effective
Period") from and after the 120th day following the Initial Issuance Date during
any part of which such Registration Statement is not effective, and such
Applicable Percentage shall be further increased by an additional 1.5% during
and upon the commencement of each additional Non-effective Period thereafter to
a maximum increase of 6%. Any such increase in the Applicable Percentages shall
be permanent, regardless of whether the Registration Statement subsequently is
declared effective.
5. No Listing; Delisting of Common Stock.
(A) In the event that the Corporation fails, refuses or is unable to cause
the Common Shares covered by the Registration Statement to be listed upon notice
of issuance with Nasdaq or any other principal securities exchange on which the
Common Stock is then traded at all times during the period ("Listing Period")
from the 120th day following the Initial Issuance Date until the Forced
Conversion Date then the Corporation shall pay to each holder a default payment
in an amount equal to three percent (3%) of the Liquidation Preference for the
Series A Preferred Stock held by such holder for each 30-day period (pro-rated
for shorter periods) during the Listing Period from and after such failure,
refusal or inability to so list upon notice of issuance the Common Shares until
the Common Shares are so listed.
(B) In the event that shares of Common Stock of the Corporation are
delisted from Nasdaq (unless immediately listed on a national securities
exchange) at any time following the Initial Issuance Date, then the Series A
Preferred Stock shall be convertible in full, notwithstanding the limitations
set forth in Section 3(a) hereof, and holders of Series A Preferred Stock shall
thereafter (i) in accordance with Section 1, be entitled to receive dividends at
the rate of fifteen percent (15%) of the Liquidation Preference of each share of
Series A Preferred Stock until such time as the Corporation shall have listed
the Common Stock on Nasdaq or any other national securities exchange, (ii) the
Applicable Percentage with respect to all subsequent conversions of Series A
Preferred Stock shall, immediately and permanently (notwithstanding any
subsequent listing of the Common Stock on Nasdaq or any other principal
securities exchange), be ten percent (10%), and (iii) the Valuation Period with
respect to all subsequent conversions of Series A Preferred Stock shall be
permanently increased to fifteen (15) consecutive trading days (notwithstanding
any subsequent listing of the Common Stock on Nasdaq or any other principal
securities exchange).
6. Blackout Periods. During the period that holders with registration
rights under the Registration Rights Agreement are required pursuant to the Act
to deliver the Prospectus contained in the Registration Statement to offer and
sell Common Shares if such holder's ability to sell Common Shares under the
Registration Statement is suspended for more than (A) 10 consecutive trading
days in any calendar year or 30 days in the aggregate during any calendar year
(pro-rated for calendar year 1997) (in each case other than as provided in
clauses (B) and (C) below), including without limitation by reason of any
suspension or stop order with respect to the Registration Statement or the fact
that an event (other than an event covered in clauses (B) and (C) below) has
occurred as a result of which the Prospectus (including any supplements thereto)
included in such Registration Statement then in effect contains any untrue
statement of material fact or omits to state any material fact required to be
stated herein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances under
which they were made) not misleading, but other than in connection with a
Permitted Public Offering (as hereinafter defined), (B) 60 consecutive days or
150 days in the aggregate during any calendar year (pro-rated for calendar year
1997) for so long as shares of Series A Preferred Stock are outstanding, in
connection with one or more material acquisitions by the Corporation, which
acquisitions require the Corporation to present the financial statements of the
acquired business in accordance with Rule 3-05 of Regulation S-X under the
Exchange Act, or pro forma financial information in accordance with Rule 11-01
of Regulation S-X under the Exchange Act which presentation requirement shall
result in a holder's inability to use the Registration Statement to offer and
sell Common Shares, or (C) 10 days prior to, and 30 days subsequent to the
pricing of each Permitted Public Offering but not in excess of 80 days in the
aggregate in any calendar year ("Suspension Grace
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Period"), then the Corporation shall pay to each holder, a default payment in an
amount equal to three percent (3%) of the Liquidation Preference for the Series
A Preferred Stock held by such holder for each 30-day period (pro-rated for
shorter periods) from and after the last day of the Suspension Grace Period
until there are no further restrictions on the holders' ability to sell Common
Shares. With respect to any single Permitted Public Offering, the Corporation
may suspend the holder's right to convert the Series A Preferred Stock for a
period of 10 days prior to, and 30 days subsequent to the pricing of a single
Permitted Public Offering. A "Permitted Public Offering" shall mean a bona fide
public offering of shares of Common Stock which raises gross proceeds of at
least $25 million. The Corporation shall promptly notify the holders of the
filing of a registration statement with respect to a Permitted Public Offering.
7. Failure to Convert. In the event that the Corporation fails to honor a
conversion of Series A Preferred Stock in full, in accordance with the terms of
this Certificate of Designations for any reason (including without limitation as
a result of failure to have a sufficient number of shares of Common Shares
available to satisfy the Corporation's obligations to any holder upon receipt of
a Conversion Notice in accordance with the terms hereof), then:
(A) the Corporation shall pay, in accordance with Section 8, to each
holder a default payment in an amount equal to three percent (3%) of the
Liquidation Preference for the Series A Preferred Stock sought to be
converted held by such holder for each 30-day period (pro-rated for shorter
periods) from and after the Conversion Date, that the Corporation fails or
refuses to issue Common Shares in accordance with the terms hereof; and
(B) if on the 60th day after such failure, the Corporation shall not
have been able to satisfy its obligations to a holder with respect to a
Conversion Notice, then the Series A Preferred Stock shall be convertible
in full, notwithstanding the limitations set forth in Section 3(a) hereof,
and each holder of Series A Preferred Stock shall (i) in accordance with
Section 1, be entitled to receive dividends at the rate of fifteen percent
(15%) of the Liquidation Preference of each share of Series A Preferred
Stock from and after the Conversion Date that the Corporation fails or
refuses to issue Common Shares in accordance with the terms hereof until
the Corporation is able to satisfy its obligations under all outstanding
Conversion Notices, (ii) the Applicable Percentage with respect to all
conversions of Series A Preferred Stock shall, immediately and permanently
(notwithstanding any subsequent conversions by the Corporation) be ten
percent (10%), and (iii) the Valuation Period with respect to all
subsequent conversions of Series A Preferred Stock shall be permanently
increased to fifteen (15) consecutive trading days (notwithstanding the
Corporation's subsequent conversion of shares of Series A Preferred Stock
in full, in accordance with their terms).
8. Default Payments. Each default payment provided for in each of the
foregoing Sections 5 through 7 shall be in addition to each other default
payment; provided, however, that in no event shall the Corporation be obligated
to pay to any holder default payments in an aggregate amount greater than three
percent (3%) of the Liquidation Preference for the Series A Preferred Stock held
by such holder for any 30-day period. All default payments required to be made
in connection with the provisions of Sections 5 and 6 above shall be paid in
cash by the tenth (10th) day of each calendar month (which payments shall be pro
rata on a per diem basis for any period of less than 30 days). Any default
payment required to be made in connection with the provisions of Section 7
above, shall be made by adding the amount of such default payment to the
Liquidation Preference of the shares of Series A Preferred Stock that were not
converted. Default payments shall accrue on Series A Preferred Stock through the
date such shares are purchased by the Corporation in accordance with the
provisions of the Certificate of Designations. In the event that the Corporation
fails or refuses to pay any default payment provided in Sections 5 and 6 when
due, in cash, a holder may request at any time that the Corporation pay any
defaulted payment amount by adding and including the amount of such default
payment to the Liquidation Preference with respect to the Series A Preferred
Stock sought to be converted instead of in cash as required by this Section 8.
If the payment of any such default payments in the form of cash are prohibited
because of a lack of legally available funds, or are prohibited under any of the
Corporation's material credit or loan agreements, indentures or other similar
agreements, or if such default payments in the form of cash would, with the
giving of notice or otherwise, cause the acceleration of any payments due under
such agreements, then, in lieu of such default payments, an amount equal thereto
shall be added to the
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Liquidation Preference and such failure to pay such default payments in cash
shall not be deemed to be a default or a failure or refusal to pay such default
payment under this Certificate of Designations.
9. Additional Events.
(A) In the event that the Corporation fails or refuses to pay, at any time,
any default payment in accordance with Section 8 when due, then the Series A
Preferred Stock shall be convertible in full, notwithstanding the limitations
set forth in Section 3(a) hereof, and (i) each holder of Series A Preferred
Stock shall be entitled to receive dividends, in accordance with Section 1 at
the rate of fifteen percent (15%) of the Liquidation Preference of each share of
Series A Preferred Stock until such time as the Corporation makes all default
payments in accordance with Section 8, (ii) the Applicable Percentage with
respect to all subsequent conversions of Series A Preferred Stock shall,
immediately and permanently (notwithstanding the Corporation's subsequent
payment of default payments in accordance with Section 8) be ten percent (10%),
and (iii) the Valuation Period with respect to all conversions of Series A
Preferred Stock shall be permanently increased to fifteen (15) consecutive
trading days (notwithstanding the Corporation's subsequent payment of default
payments in accordance with Section 8).
(B) In addition to and without in any way limiting the foregoing, the
Corporation agrees that in the event that (1) trading in the Common Stock on
Nasdaq or any principal national securities exchange on which the Common Stock
is then traded is suspended for 7 consecutive trading days, or (2) the
Registration Statement has not been declared effective by the 180th day
following the Initial Issuance Date, then, in each case, (i) the Series A
Preferred Stock shall be convertible in full, notwithstanding the limitations
set forth in Section 3(a) hereof, (ii) each holder of Series A Preferred Stock
shall, in accordance with Section 1, be entitled to receive dividends at the
rate of fifteen percent (15%) of the Liquidation Preference of each share of
Series A Preferred Stock from and after such trading suspension event or such
180th day until such trading suspension has ceased or the Registration
Statement has become effective, and (iii) the Applicable Percentage with
respect to all subsequent conversions of Series A Preferred Stock shall,
immediately and permanently (notwithstanding the removal of any trading
suspension with respect of the Common Stock or the subsequent effectiveness of
the Registration Statement) be ten percent (10%), and (z) the Valuation Period
with respect to all subsequent conversions of Series A Preferred Stock shall be
permanently increased to fifteen (15) consecutive trading days (notwithstanding
the removal of any trading suspension with respect of the Common Stock or the
subsequent effectiveness of the Registration Statement).
10. Surrender of Stock upon Redemption. One (1) trading day prior to any
date set for the redemption of Series A Preferred Stock, each holder of shares
of Series A Preferred Stock to be redeemed, unless the holder has exercised this
right to convert the shares as provided in Section 3 hereof, shall surrender the
certificate or certificates representing such shares to the Corporation, and
thereupon the redemption price for such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and retired. In the
event less than all of the shares represented by such certificate are redeemed,
a new certificate representing the unredeemed shares shall be issued to the
holder of such shares.
11. No Senior Equity Securities. The Corporation shall not, as long as
there is an aggregate amount in excess of 500 shares (as appropriately adjusted
for any stock split or reverse stock split of the shares of Series A Preferred
Stock) of Series A Preferred Stock outstanding, issue any equity securities or
any equity securities convertible into its Common Stock, which equity securities
are senior to, or pari passu with, in respect of dividends, redemption or
liquidation, the Series A Preferred Stock.
12. Voting Rights. The affirmative vote of 75% in interest of the
Corporation's outstanding Series A Preferred Stock shall be necessary for (i)
any amendment of this Certificate of Designations, or (ii) any amendment to the
Certificate of Incorporation or By-laws of the Corporation that may adversely
affect any of the rights, preferences, or privileges of the Series A Preferred
Stock; provided, however, that holders of Series A Preferred Stock who are
affiliates of the Corporation (and the Corporation itself) shall not participate
in such vote and the Series A Preferred Stock of such holders shall be
disregarded and deemed not to be outstanding for purposes of such vote. In the
event the Corporation provides consideration to any holder in respect of the
obtaining of such affirmative vote it shall provide such consideration to all
holders of Series A Preferred Stock regardless of whether such holders provided
such affirmative vote.
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13. Notices. The Corporation shall distribute to the holders of Series A
Preferred Stock copies of all notices, materials, annual and quarterly reports,
proxy statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock of the Corporation, at such
times and by such method as such documents are distributed to such holders of
such Common Stock.
14. Replacement Certificates. The certificate(s) representing the Series A
Preferred Stock held by any holder of Series A Preferred Stock may be exchanged
by such holder at any time and from time to time for certificates with different
denominations representing an equal aggregate number of Series A Preferred
Stock, as reasonably requested by such holder, upon surrendering the same. No
service charge will be made for such registration or transfer or exchange.
15. No Reissuance. Except as provided in Section 6.16 of the Securities
Purchase Agreement, no Series A Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued.
Signed on April 8, 1997
/s/ Robert C. Patent
--------------------------------------
Name: Robert C. Patent
Title: Executive Vice President
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EXHIBIT A
(TO BE EXECUTED BY HOLDER
IN ORDER TO CONVERT SERIES A PREFERRED STOCK)
CONVERSION NOTICE
FOR
6% CONVERTIBLE PREFERRED STOCK, SERIES A
The undersigned, as a holder ("Holder") of shares of 6% Convertible
Preferred Stock, Series A ("Series A Preferred Stock") of Cityscape Financial
Corp., (the "Corporation"), hereby irrevocably elects to convert
Series A Preferred Stock for shares ("Common Shares") of common stock, par value
$0.01 per share (the "Common Stock"), of the Corporation according to the terms
and conditions of the Certificate of Designations for the Series A Preferred
Stock as of the date written below. The undersigned hereby requests that share
certificates for the Common Shares to be issued to the undersigned pursuant to
this Conversion Notice be issued in the name of, and delivered to, the
undersigned or its designee as indicated below. No fee will be charged to the
holder of Series A Preferred Stock for any conversion.
Conversion Date:
- ------------------------
Conversion Information:
NAME OF HOLDER:
--------------------------------------
By:
--------------------------------------
Print Name:
Print Title:
Print Address of Holder:
--------------------------------------
--------------------------------------
Issue Common Stock to:
--------------------------------------
at:
--------------------------------------
--------------------------------------
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COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
Number of shares of Series A Preferred Stock converted:
- ------------------------ shares
Number of shares of Series A Preferred Stock converted x Liquidation Preference
(Total dollar amount converted)
$
-----------------------------
The "low trading price"
$
- ------------------------
Date of "low trading price"
- ------------------------
Applicable Percentage as of Conversion Date
- ------------------------ %
Conversion Price $ ------------------------
Number of Common Shares = Total dollar amount converted/ $ ------------------------
-------------------------------
Conversion Price $
Number of Common Shares =
------------------------
If the conversion is not being settled through DTC, please issue and deliver
- ------------ certificate(s) for Common Shares in the following amount(s):
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
If the Holder is receiving certificate(s) for Series A Preferred Stock upon the
conversion, please issue and deliver ------------ certificate(s) for Series A
Preferred Stock in the following amounts:
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
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