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CITYSCAPE FINANCIAL CORP.
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523
May 22, 1998
CONFIDENTIAL
Mackay Shields Financial Corp.,
as advisor to The Main Stay Funds -----------------------
9 West 57th Street -----------------------
New York, New York 10019 -----------------------
-----------------------
Attention: Steve Tananbaum Attention:
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Cerberus Partners
450 Park Avenue -----------------------
28th Floor -----------------------
New York, New York 10022 -----------------------
-----------------------
Attention: Steve Feinberg Attention:
--------------------
Re: Cityscape Financial Corp.
Ladies/Gentlemen:
This letter is submitted by Cityscape Financial Corp. ("Cityscape" and,
together with Cityscape Corp., the "Company") with respect to the proposed
financial restructuring of the Company (the "Restructuring") to you in your
capacity as a holder of 12-3/4% Senior Notes due 2004 (the "Senior Notes") of
Cityscape. This letter incorporates by reference the term sheet (the "Term
Sheet") attached as Exhibit "A" hereto.
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May 22, 1998
Page 2
This letter constitutes a statement of intent of Cityscape and each of
the signatories hereto as follows: (i) to support the Restructuring as
reflected in the Term Sheet to the fullest extent permitted by law, whether in
connection with or outside a bankruptcy proceeding, and in the event a
bankruptcy proceeding with respect to the Company is commenced, to support a
plan of reorganization embodying the Restructuring (a "Plan") and to cooperate
to obtain confirmation and consummation of a Plan, subject to the terms and
conditions set forth therein; and (ii) to proceed diligently and in good faith
to draft, negotiate and execute the definitive documents required to carry out
the Restructuring.
This letter should not, however, be understood to be a binding
contract, but only an expression of intent. A contract among the parties will
exist only upon the completion and execution of definitive documentation
containing all of the terms and conditions of the Restructuring. This letter
creates no legal obligations on the part of any of the parties hereto.
You agree to keep this letter and the Term Sheet confidential, with
disclosure on a need to know, confidential basis only to your legal and
financial advisors, and you acknowledge that this letter and the Term Sheet
shall be considered to be "confidential" (or words of similar import) for
purposes of any confidentiality agreement in effect between you and Cityscape
or any of Cityscape's affiliates or advisors; provided, however, that Cityscape
will make a public announcement regarding the execution of this letter shortly
after such execution.
You represent and acknowledge that you hold, control (including, without
limitation, power to vote on a Plan) or represent by duly authorized proxy the
principal amount of Senior Notes entered below next to your signature.
Please confirm you acceptance and acknowledgment of the foregoing by
(i) signing this letter where indicated below, and (ii) entering the principal
amount of the Senior Notes you hold, control or represent by proxy.
This letter may be executed in counterparts, each of which shall be
deemed to be an original, and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
Very truly yours,
CITYSCAPE FINANCIAL CORP.
By: /s/ STEVEN M. MILLER
------------------------
Name: Steven M. Miller
Title: President and CEO
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May 22, 1998
Page 3
Accepted and acknowledged:
MACKAY SHIELDS FINANCIAL CORP.,
as advisor to The Main Stay Funds
By: /s/ Steven A. Tananbaum Principal amount: $85,295,000
---------------------------- -------------
Name: Steven A. Tananbaum
Title: Managing Director
CERBERUS PARTNERS AND AFFILIATED ENTITIES
By: Stephen Feinberg Principal amount: $51,750,000
---------------------------- -------------
Name: General Partner
Title:
/s/ Stephen Feinberg
----------------------------
By: /s/ Jeffrey Altman Principal amount: $19,500,000
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Name:
Title: Sr. Vice President
Franklin Mutual Advisors
Our acceptance of the terms herein is conditioned on the public announcement of
the terms of this letter no later than 5 p.m. EST June 3, 1998.
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By: Principal amount: $
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Name:
Title:
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EXHIBIT "A"
TERM SHEET
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GENERAL RESTRUCTURING TERMS
SUMMARY OF TERMS
SENIOR NOTES: An exchange of the existing senior notes for $75 million
principal amount of new 9.25% Senior PIK 10 year Notes
("Senior PIK Notes") and 94% of the Reorganization Equity
on a primary basis (as defined below)
CONVERTIBLE
DEBENTURES: An exchange of the existing convertible debentures for 6%
of the Reorganization Equity on a primary basis and
Reorganization Warrants (as defined below) struck at a
total enterprise value equal to $300 million to purchase
5% of the fully diluted Reorganization Equity(1)
A PREFERRED/
B PREFERRED: Pro rata portion of Reorganization Warrants (as defined
below) struck at a total enterprise value equal to $430
million to purchase 10% of the fully diluted
Reorganization Equity(1)
COMMON STOCK AND
EXISTING WARRANTS
FOR COMMON STOCK: No Distribution
MANAGEMENT: The foregoing distributions are subject to dilution for
distributions of Reorganization Equity and/or Warrants to
management
REORGANIZATION
EQUITY: The new common stock distributed pursuant to a plan of
reorganization on the effective date of such plan
REORGANIZATION
WARRANTS: Warrants to purchase common stock issued pursuant to a
plan of reorganization struck at various enterprise values
to purchase various percentages
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(1) Distributions to the holders of the existing convertible debentures and
preferred stock set forth herein are premised upon acceptance of the terms
of this proposed restructuring by such classes. In the event that either of
such classes does not accept this proposed restructuring, the Company
reserves the right to modify the distributions which such classes would
receive.
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SENIOR PIK NOTES
SUMMARY OF TERMS
ISSUER: Cityscape Financial Corp.
ISSUE: $75 million in initial aggregate principal amount of Senior
PIK Notes.
INTEREST: 9.25% payable semi-annually at the option of the Issuer
either in cash or additional Senior PIK Notes.
MATURITY: 2008 (10 years)
OPTIONAL
REDEMPTION: The Senior PIK Notes will be redeemable at the option of
the Issuer, in whole or in part, at any time on or after
issuance in cash at 102% of par plus accrued and unpaid
interest.
RANKING: Senior unsecured obligations of the Company
GUARANTEES: Unconditional guarantee on a senior basis by all
subsidiaries existing on consummation of the restructuring
CERTAIN COVENANTS: Typical and reasonable for this instrument