AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
======================
FORM S-3
REGISTRATION STATEMENT
AND
POST-EFFECTIVE AMENDMENT
UNDER
THE SECURITIES ACT OF 1933
======================
THE MONEY STORE INC.
and the Guarantors listed on Schedule A
(Exact name of registrant as specified in its charter)
See Schedule A See Schedule A
(State of jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2840 Morris Avenue Eric R. Elwin, Esq.
Union, New Jersey 07083 Vice President and Corporate Counsel
(908) 686-2000 2840 Morris Avenue
Union, New Jersey 07083
(Address, including zip code, (908) 686-2000
and telephone number, including
area code, of registrant's (Name, address, including zip code,
principal executive offices) and telephone number, including
area code, of agent for service)
======================
Copies to:
JAMES R. TANENBAUM, ESQ.
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK 10038-4982
======================
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of
this Registration Statement.
======================
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
------------------
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-----------------
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
=======================================================================================================================
| |
| Proposed Maximum |
| Aggregate Offering | Amount of
Title of Each Class of Securities to be Registered | Price | Registration Fee
- --------------------------------------------------------------------------|---------------------|----------------------
Guarantees of Guarantors................................................. | (1) | $100
=======================================================================================================================
(1) No additional consideration is being paid for the Guarantees. A registration
fee of $361,802 was previously paid upon the filing of The Money Store
Inc.'s Registration Statement on Form S-3 (File No. 33-98972). $734,146,250
of securities to be offered by The Money Store Inc. under such Registration
Statement and 1,250,000 shares of common stock of The Money Store Inc. to be
offered by the Selling Shareholder under such Registration Statement are
being carried forward to the prospectus included in this Registration
Statement.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT IS THE
COMBINED PROSPECTUS THAT RELATES TO THE SECURITIES THAT MAY BE ISSUED PURSUANT
TO THIS REGISTRATION STATEMENT AND ALSO TO CERTAIN SECURITIES PREVIOUSLY
REGISTERED AND REMAINING UNISSUED UNDER THE MONEY STORE INC.'S REGISTRATION
STATEMENT ON FORM S-3 (FILE NO. 33-98972). THIS REGISTRATION STATEMENT
CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION NO. 33-98972, WHICH
POST-EFFECTIVE AMENDMENT SHALL HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE
EFFECTIVENESS OF THIS REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION 8(c)
OF THE SECURITIES ACT.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
SCHEDULE A
----------
State of jurisdiction
of incorporation or I.R.S. Employer
organization Identification Number
- --------------------- ---------------------
New Jersey The Money Store Inc. 22-2293022
- -----------------------------------------------------------------------------------------------
State of jurisdiction
of incorporation or I.R.S. Employer
organization Guarantors Identification Number
- ---------------------- ---------- ----------------------
Virginia The Money Store/D.C. Inc. 22-2133027
Kentucky The Money Store/Kentucky Inc. 22-2459832
Minnesota The Money Store/Minnesota Inc. 22-3003495
Delaware The Money Store Auto Finance Inc. 22-3331186
Delaware Class Notes Inc. 22-3400682
New Jersey Dyna-Mark, Inc. 22-1920775
New Jersey Equity Insurance Agency, Inc. 22-1936537
New Jersey Major Brokerage Co., Inc. 22-1902811
California Princeton Escrow 95-3427953
Kentucky The Money Store Home Equity Corp. 22-2522232
New Jersey The Money Store Investment Corporation 22-2293019
New York The Money Store of New York Inc. 22-3143559
California The Commerce Group 68-0103196
New Jersey The Money Store Commercial Mortgage Inc. 22-2378261
New Jersey The Money Store Service Corp. 22-2293016
New Jersey TMS Mortgage Inc. 22-3217781
Delaware The Money Store U.K Inc. 91-1784015
California The Money Store Realty Inc. 68-0379803
Delaware TMS Venture Holdings, Inc. 91-1771259
SUBJECT TO COMPLETION, DATED APRIL 9, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL , 1997)
$250,000,000
THE MONEY STORE(R)[LOGO]
% SENIOR NOTES DUE 2002
% SENIOR NOTES DUE 2004
---------------
The % Senior Notes Due 2002 (the "Five Year Notes") of The Money Store Inc.
(the "Company") will mature on , 2002 and are not redeemable prior to
maturity. The % Senior Notes Due 2004 (the "Seven Year Notes" and,
collectively with the Five Year Notes, the "Notes") of the Company will mature
on , 2004 and are not redeemable prior to maturity. Each of the Five
Year Notes and the Seven Year Notes are sometimes referred to herein as a
"Series." Interest on each Series of Notes will be payable semiannually on
and each year, commencing , 1997. The Notes of each Series
will constitute unsecured and unsubordinated senior indebtedness of the
Company and will rank equally in right of payment, on a pari passu basis, with
the other Series of Notes and with all existing and future unsecured and
unsubordinated senior indebtedness and guarantees of the Company. Each Series
of Notes will be fully and unconditionally guaranteed (the "Subsidiary
Guarantees") on a senior unsecured basis by certain of the Company's
subsidiaries (the "Guarantors"), jointly and severally, although the
Subsidiary Guarantees may terminate prior to maturity of the Notes upon the
occurrence of certain circumstances set forth herein. The Subsidiary
Guarantees will rank equally in right of payment, on a pari passu basis, with
all existing and future unsecured and unsubordinated indebtedness and
guarantees of the Guarantors. See "Description of the Notes."
Each Series of Notes will be represented by one or more Global Notes
registered in the name of the nominee of The Depository Trust Company ("DTC").
Beneficial interests in the Global Notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described herein, Notes in definitive form will not be
issued. Each Series of Notes will trade in DTC's Same-Day Funds Settlement
System until maturity, and secondary market trading activity for the Notes
will, therefore, settle in immediately available funds. All payments of
principal and interest will be made by the Company in immediately available
funds. See "Description of the Notes--Same-Day Settlement and Payment."
-------------------
SEE "INVESTMENT CONSIDERATIONS" ON PAGES S-6 TO S-9 FOR A DISCUSSION OF
CERTAIN MATERIAL FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE NOTES 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- --------------------------------------------------------------------------------
Per Five Year Note......................... % % %
- --------------------------------------------------------------------------------
Per Seven Year Note........................ % % %
- --------------------------------------------------------------------------------
Total...................................... $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from April , 1997.
(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 $ .
-------------------
The Notes are offered subject to receipt and acceptance by the Underwriters,
to prior sale and to the Underwriters' right to reject any order in whole or
in part and to withdraw, cancel or modify the offer without notice. It is
expected that delivery of the Global Notes will be made through the facilities
of DTC on or about April , 1997.
-------------------
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
APRIL , 1997
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
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.
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 SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (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 NEGATIVES
THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE STATEMENTS
IN "INVESTMENT CONSIDERATIONS" ON PAGES S-6 TO S-9 OF THIS PROSPECTUS
SUPPLEMENT CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS,
INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH RESPECT TO SUCH 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
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 the context otherwise requires, all references herein to the "Company"
include The Money Store Inc. and its wholly-owned subsidiaries. Capitalized
terms used in this Prospectus Supplement but not defined herein shall have the
meanings set forth in the Prospectus unless otherwise provided herein.
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 (i)
fixed and adjustable rate mortgage loans on residential real estate ("Home
Equity Loans"), which include FHA Title I home improvement loans insured by the
Federal Housing Authority (the "FHA") of the United States Department of
Housing and Urban Development ("HUD") and other home improvement loans not
insured by the FHA, (ii) loans guaranteed in part ("SBA Loans") by the United
States Small Business Administration (the "SBA") and commercial loans generally
secured by first mortgages ("Small Business Loans" and, together with SBA
Loans, "Commercial Loans"), (iii) government-guaranteed student loans ("Student
Loans") and (iv) motor vehicle retail installment sale contracts purchased from
automotive dealers ("Auto Loans").
For the years ended December 31, 1996 and 1995, the Company originated or
purchased approximately $5.7 billion and $3.8 billion of loans, respectively.
Of these loans, approximately 73% and 75%, respectively, by principal amount
were Home Equity Loans, approximately 11% and 12%, respectively, by principal
amount were Commercial Loans, approximately 8% and 10%, respectively, by
principal amount were Student Loans and approximately 8% and 3%, respectively,
by principal amount were Auto Loans. Management believes that during 1996 the
Company was among the largest originators, by principal amount, of Home Equity
Loans and Student Loans in the United States. Based upon government agency
sources, management believes that during each of the last 14 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 receivables, 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 receivables
in the year that the 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 1996 and 1995, the Excess Servicing Spread averaged approximately
3.68% and 3.65%, respectively, on Home Equity Loans, 2.09% and 2.04%,
respectively, on Commercial Loans, 1.90% and 1.63%, respectively, on Student
Loans and 10.09% and 10.60%, respectively, on 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 $12.2 billion and $8.6 billion at December 31, 1996 and 1995,
respectively, consisting of approximately $11.2 billion and $7.8 billion,
respectively, of loans that had been sold with servicing rights retained,
approximately $1.0 billion and $807.7 million, respectively, of loans (the
"Retained Loan Portfolio") which the Company had not sold and approximately
$24.4 million and $29.2 million, respectively, of loans (the "Repurchased Loan
S-3
Portfolio") which the Company had repurchased from investors pursuant to
contractual commitments. At December 31, 1996 and 1995, the Company's allowance
for credit losses was $240.0 million and $140.7 million, respectively. The
Retained Loan Portfolio consists of (i) Home Equity Loans, Commercial 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 December 31, 1996, the Company operated out of 217 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 Offered:
Five Year Notes............ $ aggregate principal amount of %
Senior Notes due 2002.
Seven Year Notes........... $ aggregate principal amount of %
Senior Notes due 2004.
Maturity:
Five Year Notes............ , 2002.
Seven Year Notes........... , 2004.
Interest Payment Dates...... and of each year, commencing
, 1997.
Sinking Fund................ There will be no sinking fund payments for
either Series of Notes.
Optional Redemption......... Neither Series of Notes will be redeemable
prior to maturity.
Ranking..................... The Notes of each Series will be unsecured
obligations and will rank equally in right of
payment, on a pari passu basis, with the
other Series of Notes and with all existing
and future unsecured and unsubordinated
senior indebtedness and guarantees of the
Company. Each Series of Notes will be fully
and unconditionally guaranteed on a senior
unsecured basis by the Guarantors, jointly
and severally, although the Subsidiary
Guarantees may terminate prior to maturity of
either Series of Notes upon the occurrence of
certain circumstances set forth herein. The
Subsidiary Guarantees will rank equally in
right of payment, on a pari passu basis, with
all existing and future unsecured and
unsubordinated indebtedness and guarantees of
the Guarantors. See "Description of the
Notes--General" and "--Ranking."
S-4
Covenants................... Each Series of Notes contains certain
covenants which, subject to certain
limitations described herein, limit the
Company's ability to incur liens on the stock
of certain subsidiaries and restrict certain
mergers and consolidations of the Company
with other corporations and the sale of all
or substantially all of the Company's assets.
See "Description of the Notes--Covenants."
Neither Series of Notes contains any other
provisions which will restrict the Company or
any of its subsidiaries (including the
Guarantors) from incurring, assuming or
becoming liable with respect to any
indebtedness or other obligations, whether
secured or unsecured, or from paying
dividends or making other distributions on
its or their capital stock or purchasing or
redeeming its or their capital stock. Neither
Series of Notes contains any financial ratios
or specified levels of liquidity to which the
Company must adhere. In addition, neither
Series of Notes contains any provision which
requires the Company to repurchase, redeem or
modify the terms of the Notes upon a change
of control or other events involving the
Company which may adversely affect the
creditworthiness of the Notes or the
Subsidiary Guarantees.
Use of Proceeds.............
The Company intends to use the net proceeds
from the sale of the Notes for general
corporate purposes, including the repayment
of a portion of indebtedness outstanding
under the Credit Facility (as defined herein)
and existing warehouse lines. See "Use of
Proceeds."
S-5
INVESTMENT CONSIDERATIONS
Prospective investors should carefully consider the following factors, in
addition to the other information contained in this Prospectus Supplement, the
accompanying Prospectus and the documents incorporated by reference herein, in
connection with an investment in the Notes 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, in the case of Home Equity Loans and
Commercial Loans secured by real property, 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; the risk that, in the case of Auto Loans, upon a default by the
borrower, the Company may not be able to repossess the related vehicle and, if
it is able to repossess the vehicle, the value of the vehicle may be
insufficient to satisfy the loan in full; 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; and Other Accounting Developments." 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 Home Equity
Loan that is 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.
Many of the foregoing business risks become more acute in an economic
slowdown or recession, which may be accompanied by decreased demand for credit
and declining real estate and other asset values. Specifically, 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, repossessions 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, the auto loan market and certain other markets, the actual rates
of delinquencies, foreclosures, repossessions and losses, as applicable, 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 may increase. Any sustained period of increased
delinquencies, foreclosures, repossessions, 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; AND OTHER ACCOUNTING
DEVELOPMENTS. Gain on sale of receivables is the most significant component of
the Company's reported revenues. Gain on sale of receivables includes 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
S-6
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.
There can be no assurance that the implementation by the Company of
Financial Accounting Standard No. 125, which was effective January 1, 1997 and
is to be applied prospectively, will not reduce the Company's gain on sale of
receivables in the future or otherwise adversely affect the Company's results
of operations or financial condition.
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 December 31, 1996, the Company had outstanding $1.3
billion of notes payable, $796.2 million of which will mature in 1997. The
notes payable include $637.0 million principal amount of senior unsecured
notes (the "Senior Unsecured Notes"), $250.0 million of borrowings outstanding
under the Company's $400.0 million unsecured revolving credit facility (the
"Credit Facility") and $408.2 million outstanding under various warehouse
lines of credit. While the Company believes that it will be able to refinance
or otherwise repay its outstanding indebtedness, including short-term debt, 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 debt
securities, Common Stock or other securities, including securities convertible
into or exercisable for Common Stock.
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 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, 1996, of the loans originated by the
Company, approximately 11% by principal amount were Commercial Loans and
approximately 8% by principal amount were Student Loans. The
S-7
discontinuation, elimination or significant reduction of guarantee levels for
the related federal programs could have a material adverse effect on the
Company's operations.
From time to time legislation has been 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
eliminate the Title I program. Other changes to HUD have been proposed, which,
if adopted, could affect the operation of the Title I program. No assurance
can be given that the Title I program will continue in existence or that HUD
will continue to receive sufficient funding for 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 United States Department of Education is
implementing a direct consolidation loan program, which may further reduce the
volume of Student Loans originated. Finally, federal legislation considered by
Congress from time to time 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.
STRUCTURAL SUBORDINATION; AND UNSECURED NATURE OF THE NOTES. The Company is
a holding company whose principal assets are the capital stock of its
subsidiaries. Since the Company is a holding company, its rights and the
rights of its creditors, including the holders of the Notes, except to the
extent the Company or the holders of the Notes may be creditors with
recognized claims against such subsidiaries (including under the Subsidiary
Guarantees), will rank junior to the claims of creditors of the subsidiaries
with respect to the assets and earnings of the subsidiaries. Because the
Subsidiary Guarantees may terminate prior to maturity of the Notes, there can
be no assurance that the holders of Notes will continue to have the right to
participate on a pari passu basis with the Guarantors' creditors in the assets
and earnings of any Guarantor.
In addition, as a holding company the Company's ability to meet debt service
obligations and pay operating expenses and dividends depends on receipt of
sufficient funds from its subsidiaries. There can be no assurance that the
Company's subsidiaries will not enter into financing arrangements in the
future that may restrict their ability to pay dividends to the Company.
Since the Notes are unsecured obligations of the Company, in the event of a
bankruptcy, reorganization or liquidation of the Company, there may not be
sufficient assets remaining to satisfy the claims of the holders of the Notes
after satisfying the claims of holders of the Company's indebtedness having
priority over the Notes. The Company has available warehouse lines of credit,
which are subject to renewal periodically, for warehousing of loans of $2.6
billion at December 31, 1996. The Company had outstanding $412.0 million of
secured notes payable at December 31, 1996, all of which will be effectively
senior to the Notes, of which $408.2 million was outstanding under its
warehouse lines of credit. See "Description of the Notes--Ranking."
OBLIGATIONS OF THE COMPANY UPON CERTAIN CHANGES IN CONTROL. 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 35.5% of the outstanding
Common Stock of the Company (32.5% assuming all of the shares of the Company's
$1.72 Mandatory Convertible Preferred Stock (the "Preferred Shares") are
converted at the maximum conversion rate of one share of Common Stock per
Preferred Share). Certain of the Company's loan agreements, including the
Credit Facility and the agreements pursuant to which the Senior 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
S-8
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 Senior Unsecured Notes or could permit the holders of 50%
of the outstanding principal amount of any issue of Senior Unsecured Notes to
declare all the outstanding Senior 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.
ABSENCE OF PUBLIC MARKET FOR THE NOTES. Each Series of Notes is a new issue
of securities with no established trading market. The Company does not intend
to apply for listing of either Series of Notes on a national securities
exchange but has been advised by the Underwriters that they presently intend
to make a market in the Notes, as permitted by applicable laws and
regulations. The Underwriters are not obligated, however, to make a market in
either Series of Notes and any such market making may be discontinued at any
time at the sole discretion of the Underwriters. Accordingly, no assurance can
be given as to the liquidity of or trading markets for either Series of Notes
or that an active public market for either Series of Notes will develop. If
active public markets for the Notes do not develop, the market prices and
liquidity of the Notes may be adversely affected.
S-9
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes
are estimated to be $ million, after deducting underwriting discounts and
estimated offering expenses. The Company intends to use the net proceeds from
the sale of the Notes for general corporate purposes, including the repayment
of a portion of indebtedness outstanding under the Credit Facility and
existing warehouse lines. See "Underwriting." 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. At December 31, 1996, outstanding advances under the Credit
Facility were $250.0 million with a weighted average interest rate of 5.98%.
The Company's warehouse lines generally mature within one year and had a
weighted average interest rate of 7.48% at December 31, 1996.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1996 and as adjusted to give effect to the receipt by
the Company of the net proceeds from the sale of the Notes and the application
of the net proceeds therefrom to reduce outstanding indebtedness. See "Use of
Proceeds."
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
Notes payable(1)........................................ $1,319,197 $
% Senior Notes due 2002............................... --
% Senior Notes due 2004............................... --
Subordinated debt....................................... 2,000 2,000
---------- ---------
Total debt.......................................... 1,321,197
---------- ---------
Shareholders' equity:
$1.72 Mandatory Convertible Preferred Stock, no par
value;
5,290,000 shares authorized; 5,215,000 shares issued
and outstanding; $144,064,000 aggregate liquidation
value................................................ 133,363 133,363
Common stock, no par value; 250,000,000 shares
authorized;
57,791,436 shares issued and outstanding(2).......... 188,276 188,276
Retained earnings..................................... 260,870 260,870
---------- ---------
Total shareholders' equity.......................... 582,509 582,509
---------- ---------
Total capitalization................................ $1,903,706 $
========== =========
- --------
(1) Includes short-term notes payable.
(2) Does not include options to purchase 3,351,226 shares of Common Stock
which were outstanding at December 31, 1996.
S-10
RATIOS OF EARNINGS
The following table sets forth the ratio of earnings to fixed charges for
the Company for each of the years in the five-year period ended December 31,
1996.
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.
YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
Earnings......................... $273,357 $180,389 $98,462 $71,429 $58,552
-------- -------- ------- ------- -------
Interest expense................. 124,076 93,985 43,059 29,184 31,504
Rent expense(1).................. 4,741 3,371 2,376 1,672 1,448
-------- -------- ------- ------- -------
Total fixed charges.............. $128,817 $ 97,356 $45,435 $30,856 $32,952
======== ======== ======= ======= =======
Ratio............................ 2.12x 1.85x 2.17x 2.31x 1.78x
======== ======== ======= ======= =======
- --------
(1) Rent expense reflects one-third of the Company's total rent expense.
S-11
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth consolidated financial data with respect to
the Company for each of the five years in the period ended December 31, 1996.
The data for each of the five years in the period ended December 31, 1996 are
derived in part from the audited Consolidated Financial Statements of the
Company. See the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, incorporated by reference herein.
CONSOLIDATED STATEMENTS OF INCOME DATA:
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
REVENUES:
Gain on sale of
receivables............ $ 544,451 $ 353,995 $ 259,913 $ 159,576 $ 94,515
Finance income, fees
earned and other....... 234,211 156,563 70,557 60,233 62,791
---------- ---------- ---------- ---------- ----------
778,662 510,558 330,470 219,809 157,306
---------- ---------- ---------- ---------- ----------
EXPENSES:
Salaries and employee
benefits............... 170,296 119,423 85,596 53,844 40,831
Other operating
expenses............... 194,098 123,394 96,188 53,462 33,521
Provision for credit
losses................. 145,652 90,723 52,600 42,746 25,850
Interest................ 124,076 93,985 43,059 29,184 31,504
---------- ---------- ---------- ---------- ----------
634,122 427,525 277,443 179,236 131,706
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 144,540 83,033 53,027 40,573 25,600
Income taxes............ 58,885 34,318 21,706 18,802 10,374
---------- ---------- ---------- ---------- ----------
Net income.............. $ 85,655 $ 48,715 $ 31,321 $ 21,771 $ 15,226
========== ========== ========== ========== ==========
Net income per common
share(1):
Primary............... $ 1.44 $ 0.95 $ 0.62 $ 0.48 $ 0.34
========== ========== ========== ========== ==========
Fully diluted......... $ 1.41 $ 0.95 $ 0.62 $ 0.48 $ 0.34
========== ========== ========== ========== ==========
Weighted average number
of common shares
outstanding(1):
Primary............... 59,085,322 51,023,609 50,804,963 45,347,486 45,168,750
========== ========== ========== ========== ==========
Fully diluted......... 60,821,321 51,023,609 50,804,963 45,347,486 45,168,750
========== ========== ========== ========== ==========
Cash dividends.......... $ 6,308 $ 3,492 $ 2,371 $ 1,688 $ 402
========== ========== ========== ========== ==========
- --------
(1) Net income per common share is computed using the weighted average number
of shares of common stock outstanding during the period, after giving
effect to common stock equivalents arising from the issuance and the
assumed conversion of the Preferred Shares and the assumed exercise of
stock options. In addition, all share and per share amounts have been
restated to reflect stock splits effected by the Company.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION DATA:
AT DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- --------- -------- --------
(IN THOUSANDS)
Receivables, net............. $1,385,934 $1,029,853 $ 637,017 $570,856 $348,769
Excess servicing asset....... 806,385 524,359 319,605 224,892 158,229
Total assets................. 2,612,025 1,792,248 1,165,130 910,335 611,541
Notes payable................ 1,319,197 1,075,892 676,420 501,636 285,864
Subordinated debt............ 2,000 24,000 24,000 41,000 53,000
Shareholders' equity......... 582,509 241,126 194,263 165,313 126,155
S-12
OTHER SELECTED FINANCIAL DATA:
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
----------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
Volume of loans
originated or
purchased.............. $ 5,693,054 $3,822,971 $2,779,408 $1,699,010 $1,007,465
Serviced loan
portfolio.............. $12,192,432 $8,621,467 $5,898,469 $3,872,708 $2,963,930
Average shareholders'
equity to average total
assets................. 18.70% 14.72% 17.33% 19.15% 19.48%
Return on average assets
(net income divided by
average total assets).. 3.89% 3.29% 3.02% 2.86% 2.50%
Return on average equity
(net income divided by
average equity)........ 20.80% 22.38% 17.42% 14.93% 12.82%
Debt to equity ratio
(notes payable plus
subordinated debt
divided by
shareholders' equity).. 2.27:1 4.56:1 3.61:1 3.28:1 2.68:1
The following table sets forth certain selected operating data with respect
to the Company for each of the three years in the period ended December 31,
1996:
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
Originations:
Home Equity Loans............... $ 4,150,992 $ 2,885,044 $ 2,013,027
Commercial Loans................ 635,498 440,728 420,416
Student Loans................... 458,459 369,129 345,965
Auto Loans...................... 448,105 128,070 --
-------------- ------------- -------------
Total originations.............. $ 5,693,054 $ 3,822,971 $ 2,779,408
============== ============= =============
Serviced Loan Portfolio:
Home Equity Loans............... $ 8,230,776 $ 5,751,677 $ 3,725,918
Commercial Loans................ 2,282,384 1,907,050 1,605,645
Student Loans................... 1,203,739 845,501 566,906
Auto Loans...................... 475,533 117,239 --
-------------- ------------- -------------
Total Serviced Loan Portfolio... $ 12,192,432 $ 8,621,467 $ 5,898,469
============== ============= =============
Charge-offs, net:
Home Equity Loans............... $ 37,039 $ 24,205 $ 19,942
Percent of total (1)........... 0.45% 0.42% 0.54%
Commercial Loans................ $ 2,553 $ 1,732 $ 1,293
Percent of total (2)........... 0.41% 0.40% 0.37%
Auto Loans...................... $ 7,474 $ 290 --
Percent of total (3)........... 1.57% 0.25% --
-------------- ------------- -------------
Total charge-offs, net.......... $ 47,066 $ 26,227 $ 21,235
============== ============= =============
- --------
(1) Represents the amount of Home Equity Loans charged-off, net, as a
percentage of the Home Equity Loans in the Serviced Loan Portfolio.
(2) Represents the amount of Commercial Loans charged-off, net, as a
percentage of the unguaranteed portion of the Commercial Loans in the
Serviced Loan Portfolio.
(3) Represents the amount of Auto Loans charged-off, net, as a percentage of
the Auto Loans in the Serviced Loan Portfolio.
S-13
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
Delinquencies:
Home Equity Loans:
30-59 days................... 1.31% 1.76% 1.77%
60-89 days................... 0.81 0.68 0.42
90 + days.................... 3.83 2.42 1.86
-------------- -------------- -------------
Total delinquencies.......... 5.95% 4.86% 4.05%
============== ============== =============
Commercial Loans:
30-59 days................... 1.08% 1.01% 0.89%
60-89 days................... 0.60 0.35 0.41
90 + days.................... 4.21 3.97 3.67
-------------- -------------- -------------
Total delinquencies.......... 5.89% 5.33% 4.97%
============== ============== =============
Auto Loans(1):
30-59 days................... 2.15% 1.60% --%
60-89 days................... 0.47 0.15 --
90 + days.................... 0.41 0.04 --
-------------- -------------- -------------
Total delinquencies.......... 3.03% 1.79% --%
============== ============== =============
Collateral owned or serviced
for others (Home Equity,
Commercial and Auto Loans) at
end of period(2).............. $ 44,785 $ 24,337 $ 25,592
============== ============== =============
Allowance for credit losses.... $ 19,895 $ 15,591 $14,014
Allowance for credit losses and
loans sold.................... 220,085 125,155 63,849
-------------- -------------- -------------
Total allowance for credit
losses...................... $ 239,980 $ 140,746 $ 77,863
============== ============== =============
- --------
(1) The Company began originating Auto Loans in 1995.
(2) Includes collateral owned by trusts which have issued asset-backed
securities in the amounts of $37,586,000, $14,126,000 and $13,705,000 at
December 31, 1996, 1995 and 1994, respectively.
S-14
DESCRIPTION OF THE NOTES
Each Series of Notes is to be issued under a Senior Indenture dated as of
, 1997 entered into by the Company and The Chase Manhattan Bank, as
trustee (the "Trustee"), as supplemented by the first and second supplemental
indentures (the "Indenture"). The following summaries of certain provisions of
the Notes and the Indenture, a copy of which has been incorporated by
reference as an exhibit to the Registration Statement of which the Prospectus
is a part, do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions of the Notes and the
Indenture, including the definitions therein of certain terms. Capitalized
terms used in "Description of the Notes" have the meanings attributed to them
in the Notes or the Indenture unless otherwise defined herein.
The following description of the particular terms of each Series of Notes
offered hereby supplements and, to the extent inconsistent therewith, replaces
the description of the general terms and provisions of the Debt Securities and
the Indenture set forth in the Prospectus, to which reference is hereby made.
GENERAL
The Five Year Notes will be limited to $ million aggregate principal
amount and will mature on , 2002. The Seven Year Notes will be limited to
$ million aggregate principal amount and will mature on , 2004. Each
Series of Notes will bear interest at the rate set forth on the front cover of
this Prospectus Supplement from April , 1997, payable semi-annually on
and of each year, commencing , 1997, to the registered holders at
the close of business on the or preceding such or , whether
or not such day is a business day. Interest on each Series of Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
RANKING
The Notes of each Series will be general unsecured obligations and will rank
equally in right of payment, on a pari passu basis, with the other Series of
Notes and with all existing and future unsecured and unsubordinated senior
indebtedness and guarantees of the Company. Each Series of Notes will be fully
and unconditionally guaranteed on a senior unsecured basis by the Guarantors,
jointly and severally, although the Subsidiary Guarantees may terminate prior
to the maturity of the Notes upon the occurrence of certain circumstances
described below. The Subsidiary Guarantees will rank equally in right of
payment, on a pari passu basis, with all existing and future unsecured and
unsubordinated indebtedness and guarantees of the Guarantors. At December 31,
1996, the Company had outstanding $907.2 million of unsecured notes payable
and $412.0 million of secured notes payable, the latter of which will be
effectively senior to the Notes. At December 31, 1996, the Guarantors had
outstanding guarantees with respect to substantially all of the unsecured
notes payable.
The Subsidiary Guarantees will terminate upon repayment in full of, or upon
any earlier termination for any other reason of the guarantees by the
Guarantors of, the Senior Unsecured Notes.
The Company is a holding company whose principal assets are the capital
stock of its subsidiaries. Since the Company is a holding company, its rights
and the rights of its creditors, including the holders of the Notes, except to
the extent the Company or the holders of the Notes may be creditors with
recognized claims against such subsidiaries (including under the Subsidiary
Guarantees), will rank junior to the claims of creditors of the subsidiaries
with respect to the assets and earnings of the subsidiaries. Because the
Subsidiary Guarantees may terminate prior to maturity of the Notes, there can
be no assurance that the holders of Notes will continue to have the right to
participate on a pari passu basis with the Guarantors' creditors, including
the banks under guarantees by the Guarantors of the Company's obligations
under the Credit Facility, in the assets and earnings of any Guarantor.
In addition, as a holding company the Company's ability to meet debt service
obligations and pay operating expenses and dividends depends on receipt of
sufficient funds from its subsidiaries. There can be no assurance that the
Company's subsidiaries will not enter into financing arrangements in the
future that may restrict their ability to pay dividends to the Company.
S-15
Since the Notes are unsecured obligations of the Company, in the event of a
bankruptcy, reorganization or liquidation of the Company, there may not be
sufficient assets remaining to satisfy the claims of the holders of the Notes
after satisfying the claims of holders of the Company's indebtedness having
priority over the Notes. The Company has available warehouse lines of credit,
which are subject to renewal periodically, for warehousing of loans of $2.6
billion at December 31, 1996. The Company had outstanding $412.0 million at
December 31, 1996, all of which will be effectively senior to the Notes, of
which $408.2 million was outstanding under its warehouse lines of credit. See
"Investment Considerations--Structural Subordination; and Unsecured Nature of
the Notes."
The ability of the holders of the Notes or the Trustee to enforce the
Subsidiary Guarantees may be limited by certain fraudulent conveyance and
similar laws that have been enacted for the protection of creditors. The
requirements for establishing a fraudulent conveyance vary depending on the
law of the jurisdiction which is being applied. Generally, if in a bankruptcy,
reorganization, liquidation or similar proceeding in respect of a Guarantor,
or in a lawsuit by or on behalf of creditors against a Guarantor, a court were
to find that (i) a Guarantor incurred the Subsidiary Guarantee with the intent
of hindering, delaying or defrauding current or future creditors of such
Guarantor or (ii) a Guarantor received less than reasonably equivalent value
or fair consideration for incurring a Subsidiary Guarantee and either (a) was
insolvent at the time of the incurrence of such Subsidiary Guarantee, (b) was
rendered insolvent by reason of incurring such Subsidiary Guarantee, (c) was
at such time engaged or about to engage in a business or transaction for which
its assets constituted unreasonably small capital or (d) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as
they matured, such court could declare void, in whole or in part, the
obligations of such Guarantor in connection with the Subsidiary Guarantee
and/or subordinate claims with respect to the Subsidiary Guarantee to all
other debts of such Guarantor. If the obligations of a Guarantor under its
Subsidiary Guarantee were subordinated, there can be no assurance that after
payment of the other debts of such Guarantor, there would be sufficient assets
to pay such subordinated claims with respect to its Subsidiary Guarantee.
OPTIONAL REDEMPTION
Neither Series of Notes will be redeemable prior to maturity.
SINKING FUND
There will be no sinking fund payments for either Series of Notes.
COVENANTS
Each Series of Notes contains, among others, the following covenants:
Limitation upon Merger or Consolidation. The Company may not consolidate
with or merge into any other corporation, or convey all or substantially all
of its assets as an entirety to any Person, unless (i) the corporation formed
by such consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, all or substantially all
of the assets of the Company as an entirety (the "successor corporation") is a
corporation organized and existing under the laws of the United States or any
State or the District of Columbia and expressly assumes, by a supplemental
indenture, the due and punctual payment of the principal of (and premium, if
any) and interest on all the Notes and the performance of every covenant in
the Indenture on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction, no Event of Default, and
no event which, after notice or lapse of time, or both, would become an Event
of Default, shall have happened and be continuing; and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
each stating that such consolidation, merger, conveyance, transfer or lease
and such supplemental indenture comply with the Indenture provisions and that
all conditions precedent therein provided for relating to such transaction
have been complied with.
For purposes of the preceding paragraph, assets 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
shall not in any event be deemed to be all or substantially all of the assets
of the Company.
S-16
Limitation upon Liens. The Company may not create or assume, except in favor
of the Company or a Wholly-Owned Subsidiary, any pledge, lien or encumbrance
upon any stock of any Subsidiary directly owned by the Company without equally
and ratably securing the Notes.
For purposes of the preceding paragraph, Subsidiary shall mean a Subsidiary
which accounted for at least 25% of the consolidated net income of the Company
for its most recent fiscal year ending prior to the creation or assumption of
such pledge, lien or encumbrance.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the outstanding
voting stock (other than directors' qualifying shares) is at the time,
directly or indirectly, owned by the Company, or by one or more Wholly-Owned
Subsidiaries of the Company or by the Company and one or more Wholly-Owned
Subsidiaries of the Company.
Neither the Notes nor the Indenture contain any provisions other than the
foregoing which will restrict the Company or any of its subsidiaries
(including the Guarantors) from incurring, assuming or becoming liable with
respect to any indebtedness or other obligations, whether secured or
unsecured, or from paying dividends or making other distributions on its or
their capital stock or purchasing or redeeming its or their capital stock.
Neither the Notes nor the Indenture contain any financial ratios or specified
levels of liquidity to which the Company must adhere. In addition, neither the
Notes nor the Indenture contain any provision which requires the Company to
repurchase, redeem or modify the terms of the Notes upon a change in control
or other events involving the Company which may adversely affect the
creditworthiness of the Notes or the Subsidiary Guarantees.
EVENTS OF DEFAULT
Each Series of Notes shall be subject to the Events of Default set forth in
the Prospectus.
DEFEASANCE
Each Series of Notes is subject to the Company's legal defeasance option and
covenant defeasance option as set forth under "Description of Securities--Debt
Securities--Discharge, Legal Defeasance and Covenant Defeasance" in the
Prospectus.
BOOK-ENTRY, DELIVERY AND FORM
Each Series of Notes initially will be represented by one or more Global
Notes deposited with The Depository Trust Company ("DTC") and registered in
the name of DTC's nominee. Except as described in the Prospectus, each Series
of Notes will be available for purchase in denominations of $1,000 principal
amount, and integral multiples thereof, in book-entry form only. Unless and
until certificated Notes are issued under the limited circumstances described
in the Prospectus, no beneficial owner of a Note shall be entitled to receive
a definitive certificate representing a Note. So long as the Notes are
represented by the Global Notes, any payments in respect of the Notes will be
made to DTC or its nominee, as the registered owner of the Global Notes. See
"Description of Securities--Debt Securities--Book-Entry Debt Securities" in
the Prospectus.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for each Series of Notes will be made by the Underwriters in
immediately available funds. All payments of principal and interest will be
made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in same-day funds. The Notes will trade in DTC's Same-Day
Funds Settlement System until maturity, and secondary market trading activity
in the Notes will therefore be required by DTC to settle in immediately
available funds.
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with respect to each
Series of Notes.
S-17
UNDERWRITING
The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions contained in the Underwriting Agreement,
to purchase from the Company the principal amount of Notes set forth below
opposite their respective names:
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF FIVE YEAR NOTES OF SEVEN YEAR NOTES TOTAL
----------- ------------------ ------------------- ------------
Bear, Stearns & Co.
Inc. .................. $ $ $
Lehman Brothers Inc. ...
Prudential Securities
Incorporated...........
Salomon Brothers Inc....
----------- ----------- ------------
Total................. $ $ $250,000,000
=========== =========== ============
The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the Notes offered hereby if any are purchased.
The Underwriters have advised the Company that they propose to offer each
Series of Notes initially at the respective public offering prices set forth
on the cover page hereof and to certain dealers at a price that represents a
concession not in excess of % and % of the principal amount of the Five
Year Notes and the Seven Year Notes, respectively. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of % and % of the
principal amount of the Five Year Notes and the Seven Year Notes,
respectively, to certain other dealers. After the initial public offering, the
public offering price and the concessions may be changed by the Underwriters.
The Company has agreed to indemnify the several Underwriters, or to
contribute to losses arising out of certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended.
Each Series of Notes is a new issue of securities with no established
trading market. The Company does not intend to apply for listing of the either
Series of Notes on a national securities exchange but has been advised by the
Underwriters that they presently intend to make a market in the Notes, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in either Series of Notes and any such
market making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of or
trading markets for either Series of Notes or that an active public market for
either Series of Notes will develop. If active public markets for the Notes do
not develop, the market prices and liquidity of the Notes may be adversely
affected.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934, as amended. Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specific
maximum. Syndicate covering transactions involve purchases of the Notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriters to reclaim a
selling concession from a syndicate member when the Notes originally sold by
such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Notes to be
higher than it would otherwise be in the absence of such transactions.
The Underwriters receive customary fees for ordinary brokerage transactions
with the Company and its affiliates. The Underwriters and their affiliates
have performed investment banking services in the ordinary course of their
respective businesses for the Company and its affiliates in the past, for
which they have received customary compensation, and may continue to do so in
the future.
S-18
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 $450 million. 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. Lehman Commercial
Paper Inc., an affiliate of Lehman Brothers Inc., provides the Company with a
warehouse line of credit under which the outstanding balance may not exceed
$750 million. The Company may use all or a portion of the net proceeds of the
offering of the Notes to repay some or all of the amounts outstanding under
one or more of such warehouse lines.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Stroock & Stroock & Lavan LLP, New York, New York. Certain other legal
matters will be passed upon for the Company by Stroock & Stroock & Lavan LLP
and Corporate Counsel to the Company. Sills Cummis Zuckerman Radin Tischman
Epstein & Gross, P.A., New York, New York will pass upon certain legal matters
for the Underwriters. Stroock & Stroock & Lavan LLP will rely as to matters of
New Jersey law upon Corporate Counsel to the Company. Sills Cummis Zuckerman
Radin Tischman Epstein & Gross, P.A. represents the Company in certain matters
from time to time.
S-19
SUBJECT TO COMPLETION, DATED APRIL 9, 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
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 Debt Securities
may be guaranteed by certain wholly-owned subsidiaries of the Company named
herein. 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 $734,146,250 (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 1,250,000 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.
------------
April , 1997
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 Citibank 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, such materials may
be accessed electronically at the Commission's site on the World Wide Web
located at http://www.sec.gov. Reports, proxy statements and other information
concerning the Company also 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, 1996;
(b) The Company's Current Report on Form 8-K dated April 9, 1997; and
(c) The Company's Registration Statements on Form 8-A with respect to the
Common Stock and the $1.72 Mandatory Convertible Preferred 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
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
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 (i)
fixed and adjustable rate mortgage loans on residential real estate ("Home
Equity Loans"), (ii) loans guaranteed in part ("SBA Loans") by the United
States Small Business Administration (the "SBA") and commercial loans
generally secured by first mortgages ("Small Business Loans" and, together
with SBA Loans, "Commercial Loans"), (iii) government-guaranteed student loans
("Student Loans") and (iv) motor vehicle retail installment sale contracts
purchased from automotive dealers ("Auto Loans").
For the year ended December 31, 1996, the Company originated or purchased
approximately $5.7 billion of loans. Of these loans, approximately 73% by
principal amount were Home Equity Loans, approximately 11% by principal amount
were Commercial Loans, approximately 8% by principal amount were Student Loans
and approximately 8% by principal amount were Auto Loans. Based upon
government agency sources, management believes that during each of the last 14
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 receivables, 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
receivables in the year that the 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 1996, the Excess Servicing Spread averaged
approximately 3.68% on Home Equity Loans, 2.09% on Commercial Loans, 1.90% on
Student Loans and 10.09% on 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 $12.2 billion at December 31, 1996, consisting of $11.2
billion of loans that had been sold with servicing rights retained, $1.0
billion of loans (the "Retained Loan Portfolio") which the Company has not
sold and approximately $24.4 million of loans (the "Repurchased Loan
Portfolio") which the Company has repurchased from investors pursuant to
contractual commitments. The Retained Loan Portfolio consists of (i) Home
Equity Loans, Commercial 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 December 31, 1996, the Company operated out of 217 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.
4
RATIOS OF EARNINGS
The following table sets forth the ratio of earnings to fixed charges for
the Company for each of the years in the five-year period ended December 31,
1996.
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.
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
Earnings.......................... $273,357 180,389 $98,462 $71,429 $58,552
-------- ------- ------- ------- -------
Interest expense.................. 124,076 93,985 43,059 29,184 31,504
Rent expense(1)................... 4,741 3,371 2,376 1,672 1,448
-------- ------- ------- ------- -------
Total fixed charges............... $128,817 $97,356 $45,435 $30,856 $32,952
======== ======= ======= ======= =======
Ratio 2.12x 1.85x 2.17x 2.31x 1.78x
======== ======= ======= ======= =======
- --------
(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
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 February 1, 1997.
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
- ------------------- ---------- ------- ---------------- ------------ ----------
Marc Turtletaub....... 19,969,750 34.5% 1,250,000 18,719,750 32.3%
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
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, as
supplemented from time to time (the "Senior Indenture"), between the Company
and The Chase Manhattan Bank, as Trustee (the "Senior Trustee"). The
Subordinated Debt Securities are to be issued under an indenture 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
(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
(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
(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).
(29)Whether the Offered Debt Securities will be guaranteed by the
Subsidiary Guarantors named herein under "--Subsidiary Guarantees."
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
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
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
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
13
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
14
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
15
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
16
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.
17
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 of 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.
18
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.
19
Concerning the Trustees
The Company may from time to time maintain deposit accounts and conduct
other banking transactions with The Chase Manhattan Bank 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
20
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)
SUBSIDIARY GUARANTEES
The Subsidiary Guarantors named below may, jointly and severally, fully and
unconditionally guarantee the due and punctual payment of principal of (and
premium, if any) and interest on one or more series of Debt Securities, on
such terms and conditions as may be set forth in the applicable Prospectus
Supplement.
The "Subsidiary Guarantors" will consist of the following wholly-owned
subsidiaries of the Company: The Money Store/D.C. Inc., The Money
Store/Kentucky Inc., The Money Store/Minnesota Inc., The Money Store Auto
Finance Inc., ClassNotes Inc., Dyna-Mark, Inc., Equity Insurance Agency, Inc.,
Major Brokerage Co., Inc., Princeton Escrow, The Money Store Home Equity
Corp., The Money Store Investment Corporation, The Money Store of New York
Inc., The Commerce Group, The Money Store Commercial Mortgage Inc., The Money
Store Service Corp., TMS Mortgage Inc., The Money Store U.K. Inc., The Money
Store Realty Inc., and TMS Venture Holdings, Inc.
As of the date of this Prospectus, the Subsidiary Guarantors conduct all of
the Company's operations other than its Student Loan business and the holding
of its excess servicing asset.
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
21
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
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.
22
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 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.
23
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.
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 and the Subsidiary Guarantees offered hereby will be passed upon by
Stroock & Stroock & Lavan LLP, New York, New York. Certain other legal matters
will be passed upon for the Company by Stroock & Stroock & Lavan LLP. 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 LLP 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, 1996 and 1995 and for each of the years in the
three year period ended December 31, 1996 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
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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 IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRO-
SPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTA-
TIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
OF THE UNDERWRITERS. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
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 CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITA-
TION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITA-
TION 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 INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Prospectus Supplement Summary.............................................. S-3
Investment Considerations.................................................. S-6
Use of Proceeds............................................................ S-10
Capitalization............................................................. S-10
Ratios of Earnings......................................................... S-11
Selected Consolidated Financial Data....................................... S-12
Description of the Notes................................................... S-15
Underwriting............................................................... S-18
Legal Matters.............................................................. S-19
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents By Reference............................ 2
The Company................................................................ 4
Ratios of Earnings......................................................... 5
Use of Proceeds............................................................ 5
Selling Shareholder........................................................ 6
Description of Securities.................................................. 6
Plan of Distribution....................................................... 23
Legal Matters.............................................................. 24
Experts.................................................................... 24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$250,000,000
THE MONEY STORE(R)[LOGO]
% SENIOR NOTES DUE 2002
% SENIOR NOTES DUE 2004
----------------------------
PROSPECTUS SUPPLEMENT
----------------------------
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
APRIL , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the offering all of which will be borne by The
Money Store Inc. are as follows (all amounts are estimates except for the SEC
Registration Fee):
SEC Registration Fee............... $ 361,902*
Printing Expenses.................. 150,000
Legal Fees and Expenses............ 200,000
Accounting Fees and Expenses....... 50,000
Blue Sky Fees and Expenses......... 40,000
Indenture Trustees Expenses........ 75,000
Rating Agency Fees and Expenses.... 50,000
Transfer Agent and Registrar Fees.. 10,000
Listing Fees....................... 50,000
Miscellaneous...................... 27,585
----------
Total............................ $1,014,487
==========
- -----------------
* $361,802 was previously paid upon the filing of The Money Store Inc.'s
Registration Statement on Form S-3 (File No. 33-98972).
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 14A:3-5 of the New Jersey Business Corporation Act provides that
New Jersey corporations such as The Money Store Inc. may indemnify any director,
officer, employee or agent against expenses and liabilities in connection with
any proceeding involving the director, officer, employee or agent by reason of
him or her acting in such capacity if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, did not have reasonable cause to believe such conduct was unlawful.
Section Fifth of The Money Store Inc.'s Amended and Restated Certificate of
Incorporation and Article VIII of The Money Store Inc.'s Amended and Restated
By-Laws entitle officers, directors, employees and agents to indemnification to
the fullest extent permitted by Section 14A:3-5 of the New Jersey Business
Corporation Act.
Section Sixth of The Money Store Inc.'s Amended and Restated Certificate of
Incorporation provides that no director or officer shall have any personal
liability to The Money Store Inc. or its shareholders for any damages for breach
of fiduciary duty as a director, except that such provision does not limit or
eliminate the liability of any director or officer (i) for breach of such
director's or officer's duty of loyalty to The Money Store Inc. or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or (iii) for any
transaction from which such director or officer derived an improper personal
benefit.
The Money Store Inc. maintains directors' and officers' liability insurance
which covers the directors and officers of The Money Store Inc. with policy
limits of $10,000,000, with excess coverage of an additional $10,000,000.
II-1
ITEM 16. LIST OF EXHIBITS
1.1 Form of Underwriting Agreement for Debt Securities. (Incorporated by
reference to Exhibit 1.1 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
1.2 Form of Underwriting Agreement for Preferred Stock. (Incorporated by
reference to Exhibit 1.2 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
1.3 Form of Underwriting Agreement for Common Stock. (Incorporated by
reference to Exhibit 1.3 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
4.1 Specimen Common Stock Certificate of The Money Store Inc.
(Incorporated by reference to Exhibit 4.1 to The Money Store
Inc.'s Registration Statement on Form S-1 (No. 33-41172)).
4.2* Senior Indenture.
4.3* Form of Senior Note (included in Exhibit 4.2).
4.4 Subordinated Indenture. (Incorporated by reference to Exhibit 4.4 to
The Money Store Inc.'s Registration Statement on Form S-3
(No. 33-98972)).
4.5 Form of Subordinated Note (included in Exhibit 4.4).
4.6 Form of Articles of Amendment for Preferred Stock. (Incorporated by
reference to Exhibit 4.6 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
4.7 Specimen Preferred Stock Certificate. (Incorporated by reference to
Exhibit 4.7 to The Money Store Inc.'s Registration Statement on
Form S-3 (No. 33-98972)).
5.1* Opinion of Eric R. Elwin, Corporate Counsel to The Money Store Inc.
regarding legality of Preferred Stock and Common Stock.
5.2* Opinion of Stroock & Stroock & Lavan LLP regarding legality of Debt
Securities and the Subsidiary Guarantees.
12.1* Statement of Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.2).
23.2* Consent of Eric R. Elwin, Esq. (included in Exhibit 5.1).
23.3* Consent of KPMG Peat Marwick LLP.
24.1* Powers of Attorney (included in Part II to this Registration
Statement).
25.1* Statement of Eligibility of Senior Trustee on Form T-1.
- --------------------
* Filed herewith
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
II-2
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that for purposes of determining
any liability under the Act, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering hereof.
The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act of 1939, as amended (the "Trust
II-3
Indenture Act"), in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture Act.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Union, State of New Jersey, on the 8th day of April,
1997.
THE MONEY STORE INC. ("TMS") AND THE
GUARANTORS LISTED ON ANNEX A
(THE "GUARANTORS")
By: /s/ Morton Dear
------------------------------
Morton Dear
Executive Vice President of TMS
and each of the Guarantors, other than The Money
Store Service Corp. of which he is President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Morton Dear, Harry Puglisi or Eric Elwin,
or any of them, his true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to any offering made in connection with the offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
426(b) under the Securities Act of 1933, as amended, and to file the same with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on April 8, 1997.
SIGNATURE TITLE
- --------- -----
/s/ Alan Turtletaub
_______________________ Chairman of the Board of Directors and Executive
Alan Turtletaub Vice President of TMS, Director and Executive
Vice President of each Guarantor listed on Annex B,
and Director and President (Principal Executive
Officer) of Equity Insurance Agency, Inc. and Major
Brokerage Co., Inc.
/s/ Marc Turtletaub
_______________________ President, Chief Executive Officer (Principal
Marc Turtletaub Executive Officer) and Director of TMS, Dyna-Mark,
Inc., The Money Store Realty Inc. and TMS Venture
Holdings, Inc., and Executive Vice President and
Director of each Guarantor listed on Annex C.
/s/Morton Dear
_______________________ Chief Financial Officer (Principal Financial Officer),
Morton Dear Director and Executive Vice President of TMS and each
Guarantor listed on Annex D, and Chief Financial
Officer (Principal Financial Officer), Director and
President (Principal Executive Officer) of The Money
Store Service Corp.
/s/ Harry Puglisi Treasurer and Director of TMS,
_______________________ Dyna-Mark, Inc. and The Money Store Service
Harry Puglisi Corp.
II-5
SIGNATURE TITLE
- --------- -----
/s/ William S. Templeton Director and Executive Vice President
- ------------------------ of TMS, President (Principal Executive Officer)
William S. Templeton of each Guarantor listed on Annex E and
Director of each Guarantor listed on Annex F.
/s/ Paul Leliakov President (Principal Executive Officer) and
- ------------------------- Director of The Money Store Investment
Paul Leliakov Corporation, The Money Store of New York Inc.,
The Money Store Commercial Mortgage Inc. and The
Commerce Group.
/s/ Alexander C. Schwartz, Jr. Director of TMS
- -----------------------------
Alexander C. Schwartz, Jr.
/s/ Anthony L. Watson Director of TMS
- -----------------------------
Anthony L. Watson
/s/James K. Ransom Vice President and Principal Accounting Officer
- ----------------------------- of TMS and each Guarantor
James K. Ransom
/s/ Paul Eber President (Principal Executive Officer) and
- ----------------------------- Director of ClassNotes Inc.
Paul Eber
/s/ J. Tom Jones President (Principal Executive Officer) and
- ----------------------------- Director of The Money Store Auto Finance Inc.
J. Tom Jones
II-6
ANNEX A
The Money Store/D.C. Inc.
The Money Store/Kentucky Inc.
The Money Store/Minnesota Inc.
The Money Store Auto Finance Inc.
ClassNotes Inc.
Dyna-Mark, Inc.
Equity Insurance Agency, Inc.
Major Brokerage Co., Inc.
Princeton Escrow
The Money Store Home Equity Corp.
The Money Store Investment Corporation
The Money Store of New York Inc.
The Commerce Group
The Money Store Commercial Mortgage Inc.
The Money Store Service Corp.
TMS Mortgage Inc.
The Money Store U.K. Inc.
The Money Store Realty Inc.
TMS Venture Holdings, Inc.
II-7
ANNEX B
The Money Store/D.C. Inc.
The Money Store/Kentucky Inc.
The Money Store/Minnesota Inc.
The Money Store Auto Finance Inc.
ClassNotes Inc.
Dyna-Mark, Inc.
Princeton Escrow
The Money Store Home Equity Corp.
The Money Store Investment Corporation
The Money Store of New York Inc.
The Commerce Group
The Money Store Commercial Mortgage Inc.
The Money Store Service Corp.
TMS Mortgage Inc.
The Money Store Realty Inc.
TMS Venture Holdings, Inc.
II-8
ANNEX C
The Money Store/D.C. Inc.
The Money Store/Kentucky Inc.
The Money Store/Minnesota Inc.
The Money Store Auto Finance Inc.
ClassNotes Inc.
Equity Insurance Agency, Inc.
Major Brokerage Co., Inc.
Princeton Escrow
The Money Store Home Equity Corp.
The Money Store Investment Corporation
The Money Store of New York Inc.
The Commerce Group
The Money Store Commercial Mortgage Inc.
The Money Store Service Corp.
TMS Mortgage Inc.
II-9
ANNEX D
The Money Store/D.C. Inc.
The Money Store/Kentucky Inc.
The Money Store/Minnesota Inc.
The Money Store Auto Finance Inc.
ClassNotes Inc.
Dyna-Mark, Inc.
Equity Insurance Agency, Inc.
Major Brokerage Co., Inc.
The Money Store Home Equity Corp.
The Money Store Investment Corporation
The Money Store of New York Inc.
The Commerce Group
The Money Store Commercial Mortgage Inc.
TMS Mortgage Inc.
The Money Store Realty Inc.
The Money Store U.K. Inc.
TMS Venture Holdings, Inc.
II-10
ANNEX E
The Money Store/D.C. Inc.
The Money Store/Kentucky Inc.
The Money Store/Minnesota Inc.
Princeton Escrow
The Money Store Home Equity Corp.
TMS Mortgage Inc.
The Money Store U.K. Inc.
II-11
ANNEX F
The Money Store/D.C. Inc.
The Money Store/Kentucky Inc.
The Money Store/Minnesota Inc.
Dyna-Mark, Inc.
Equity Insurance Agency, Inc.
Major Brokerage Co., Inc.
The Money Store Home Equity Corp.
TMS Mortgage Inc.
The Money Store Auto Finance Inc.
The Money Store U.K. Inc.
II-12
EXHIBIT INDEX
EXHIBIT
NUMBERS
1.1 Form of Underwriting Agreement for Debt Securities. (Incorporated by
reference to Exhibit 1.1 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
1.2 Form of Underwriting Agreement for Preferred Stock. (Incorporated by
reference to Exhibit 1.2 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
1.3 Form of Underwriting Agreement for Common Stock. (Incorporated by
reference to Exhibit 1.3 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
4.1 Specimen Common Stock Certificate of The Money Store Inc.
(Incorporated by reference to Exhibit 4.1 to The Money Store
Inc.'s Registration Statement on Form S-1 (No. 33-41172)).
4.2* Senior Indenture.
4.3* Form of Senior Note (included in Exhibit 4.2).
4.4 Subordinated Indenture. (Incorporated by reference to Exhibit 4.4 to
The Money Store Inc.'s Registration Statement on Form S-3
(No. 33-98972)).
4.5 Form of Subordinated Note (included in Exhibit 4.4).
4.6 Form of Articles of Amendment for Preferred Stock. (Incorporated by
reference to Exhibit 4.6 to The Money Store Inc.'s Registration
Statement on Form S-3 (No. 33-98972)).
4.7 Specimen Preferred Stock Certificate. (Incorporated by reference to
Exhibit 4.7 to The Money Store Inc.'s Registration Statement on
Form S-3 (No. 33-98972)).
5.1* Opinion of Eric R. Elwin, Corporate Counsel to The Money Store Inc.
regarding legality of Preferred Stock and Common Stock.
5.2* Opinion of Stroock & Stroock & Lavan LLP regarding legality of Debt
Securities and the Subsidiary Guarantees.
12.1* Statement of Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.2).
23.2* Consent of Eric R. Elwin, Esq. (included in Exhibit 5.1).
23.3* Consent of KPMG Peat Marwick LLP.
24.1* Powers of Attorney (included in Part II to this Registration
Statement).
25.1* Statement of Eligibility of Senior Trustee on Form T-1.
- --------------------
* Filed herewith