<PAGE>   1

THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE FIRST AMENDED JOINT
PLAN OF REORGANIZATION OF CITYSCAPE FINANCIAL CORP. AND CITYSCAPE CORP.
ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED BY THE DEBTORS UNTIL A DISCLOSURE
STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT
IS BEING SUBMITTED FOR APPROVAL BUT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY
COURT.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK

____________________________________x
                                    :
In re:                              :    Chapter 11
                                    :
CITYSCAPE FINANCIAL CORP.,          :    Case Nos. 98-13-22569 (ASH)
and CITYSCAPE CORP.,                :    and 98-B-22570 (ASH)
                                    :    Jointly Administered
                                    :
                   Debtors.         :
                                    :
____________________________________x

                     DEBTORS' FIRST AMENDED JOINT DISCLOSURE
                       STATEMENT PURSUANT TO SECTION 1125
                             OF THE BANKRUPTCY CODE

Dated: March 26,1999
                                         LATHAM & WATKINS
                                         885 Third Avenue
                                         New York, New York 10022
                                         (212) 906-1200
                                         Robert J. Rosenberg (RJR 9585)
                                         A. Brent Truitt (ABT 3799)
                                         Rachael Fink (RF 3321)

                                         Attorneys for Cityscape Financial Corp.
                                         and Cityscape Corp. 
                                         Debtors and Debtors-in-Possession

IMPORTANT: THIS DISCLOSURE STATEMENT CONTAINS INFORMATION THAT MAY BEAR UPON
YOUR DECISION TO ACCEPT OR REJECT THE DEBTORS' PROPOSED FIRST AMENDED JOINT PLAN
OF REORGANIZATION. PLEASE READ THIS DOCUMENT WITH CARE.
<PAGE>   2

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

I. INTRODUCTION ..............................................................3

II. PLAN SUMMARY AND KEY CONSIDERATIONS ......................................5
      A. Plan Summary ........................................................5
      B. Recommendation .....................................................10
      C. Certain Risk Factors ...............................................10
      D. Voting Instructions ................................................11

III. GENERAL INFORMATION ....................................................13
      A. The Debtors ........................................................13
      B. Events Leading to the Chapter 11 Filing ............................14
      C. Significant Events During the Chapter 11 Cases .....................16

IV. THE PLAN OF REORGANIZATION ..............................................22
      A. Overview of the Plan ...............................................22
      B. Treatment of Claims and Interests Under the Plan ...................25
      C. Waiver of Conditions to Confirmation and Effective Date ............34
      D. The Reorganized Company ............................................35
      E. Issuance of New Common Stock .......................................37
      F. Distributions Under the Plan .......................................39
      G. General Information Concerning the Plan ............................44

V. CONFIRMATION AND CONSUMMATION PROCEDURES .................................50
      A. Solicitation of Acceptances ........................................50
      B. Confirmation Hearing ...............................................51
      C. Confirmation .......................................................51
      D. Consummation .......................................................55
      E. Conditions to Effective Date .......................................55

VI. CERTAIN RISK FACTORS ....................................................56
      A. Risks Relating to the Projections ..................................56
      B. Assumptions Regarding Value of Cityscape's and CSC's Assets ........56
      C. Business and Competition ...........................................56
      D. Nature of Mortgages ................................................57
      E. Environmental Risks ................................................58
      F. Certain Other Legal Considerations Regarding Loans .................58
      G. Sale of CSC-UK .....................................................59
      H. Certain Federal Income Tax Considerations; Reduction and 
            Limitation of Corporate Tax Benefits ............................59
      I. Certain Risks of Non-Confirmation ..................................59
      J. Government Regulations .............................................60
      K. Restrictions on Resale of New Common Stock of the Reorganized 
            Company .........................................................60
      L. Lack of Trading Market; Volatility .................................60
      M. Possible Dilution of New Common Stock ..............................60
      N. Assumption Regarding Business of the Reorganized Company ...........61


                                        i
<PAGE>   3

                                                                           Page
                                                                           ----

VII. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS ..............................61

VIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN .............67
      A. Alternative Chapter 11 Plans .......................................67
      B. Liquidation Under Chapter 7 ........................................67

IX. CONCLUSION AND RECOMMENDATION ...........................................68

                                    EXHIBITS

                                                                            Page

Exhibit A   First Amended Joint Plan of Reorganization of Cityscape
            Financial Corp. and Cityscape Corp. Under Chapter 11 of
            the Bankruptcy Code ............................................A-1

Exhibit B   Examiner Report Pursuant to Order of October 20, 1998 ..........B-1

Exhibit C   Unaudited Proforma Consolidated Balance Sheet and
            Projected Financial Information ................................C-1

Exhibit D   Liquidation Analysis ...........................................D-1


                                 ii
<PAGE>   4

I.    INTRODUCTION

      On October 6, 1998, Cityscape Financial Corp. ("Cityscape") and Cityscape
Corp. ("CSC" together with Cityscape, the "Debtors") filed voluntary petitions
for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). The Debtors hereby submit this First Amended Joint
Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code (the
"Disclosure Statement") in connection with their solicitation of acceptances of
their First Amended Joint Plan of Reorganization (the "Plan"), a copy of which
is annexed hereto as Exhibit A. The purpose of this Disclosure Statement, in
accordance with the requirements of Section 1125 of the Bankruptcy Code, is to
provide "adequate information" concerning the Plan, of a kind and in sufficient
detail to enable a hypothetical, reasonable investor, typical of holders of the
classes of claims or interests being solicited, to make an informed judgment
whether to accept or reject the Plan. This Disclosure Statement should be read
in conjunction with the Plan and the other exhibits to this Disclosure Statement
and to the Plan.

      The Plan is being distributed, with Ballots, to holders of Claims in
Classes 4, 4a, 5, 5a, 6 and 6a, the Classes of Claims that are Impaired and
entitled to vote under the Plan, in order to solicit their acceptance of the
Plan. Holders of Claims in Classes 1, 2a et seq. and 3 are deemed to have
accepted the Plan because their respective Claims are not Impaired, and such
Holders are therefore not entitled to vote on the Plan. Accordingly, the votes
of Holders of Claims in such Classes are not being solicited. For a description
of the Classes of Claims and Interests and their treatment under the Plan, see
Section IV, "THE PLAN OF REORGANIZATION -- Treatment of Claims and Interests
Under the Plan."

      The Debtors are seeking the acceptance of the Plan by Holders of Claims in
Classes 4, 4a, 5, 5a, 6 and 6a. The Debtors have prepared this Disclosure
Statement in connection with their solicitation of acceptances of the Plan. The
Bankruptcy Court has entered an order dated ____ ___, 1999 approving this
Disclosure Statement as containing information of a kind and in sufficient
detail to enable a hypothetical, reasonable investor, typical of each of the
holders of Classes of Claims being solicited, to make an informed judgment
whether to accept the Plan. Such approval by the Bankruptcy Court does not
constitute a recommendation of the Plan by the Bankruptcy Court.

      Section 1129(a) of the Bankruptcy Code allows the Bankruptcy Court to
confirm a plan if certain conditions have been met and if each class of claims
and interests that is impaired under the plan has voted to accept the plan.
Under Section 1126(c) of the Bankruptcy Code, a class of claims has accepted a
plan if such plan has been accepted by creditors in that class that hold at
least two-thirds in dollar amount and more than one-half in number of the
allowed claims of such class held by creditors that have voted to accept or
reject such plan, excluding holders whose acceptances or rejections were found
not to be in good faith. Under Section 1126(d) of the Bankruptcy Code, a class
of equity interests has accepted a plan if such plan has been accepted by
holders of such interests that hold at least two-thirds in amount of the allowed
interests of such class held by holders of such interests that have voted to
accept or reject such plan, excluding holders whose acceptances or rejections
were found not to be in good faith.

      Under the Bankruptcy Code, only those Claims, the holders of which vote to
accept or reject the Plan, will be counted for purposes of determining
acceptance or rejection by any Impaired Class of Claims. Therefore, the Plan
could be approved by any Impaired Class of Claims with the affirmative vote of
significantly less than two-thirds in total dollar amount and one-half in total
number of such Claims. However, even if the Holders of all Claims in Classes
Impaired and entitled to vote under the Plan accept or are deemed to have
accepted the Plan, the Plan is subject to certain requirements under the
Bankruptcy Code and might not be confirmed by the Bankruptcy Court. Any voting
class that fails to accept the Plan will be deemed to have rejected the Plan.

      Section 1129(b) of the Bankruptcy Code permits the confirmation of a plan
notwithstanding the non-acceptance of such plan by one or more of the classes of
claims or interests impaired thereunder if (i) at least one impaired class of
claims accepts the plan (such acceptance to be determined without giving effect
to any acceptances of "insiders," as such term is defined in Section 101 of the
Bankruptcy Code) and (ii) the Bankruptcy Court finds that, with respect to the
non-accepting class or classes, the plan does not discriminate unfairly and is
fair and equitable. The Debtors reserve the right to seek confirmation of the
Plan under Section 1129(b) of the Bankruptcy Code if any class of Claims
entitled to vote on the Plan votes to reject the Plan.


                                        3
<PAGE>   5

      The Debtors are soliciting votes for the acceptance of the Plan from the
Holders of Claims in Classes 4, 4a, 5, 5a, 6 and 6a. The Debtors believe that
the Plan provides the best possible result for all Holders of Claims. The
Debtors believe further that, under the Plan, Holders of Claims will receive a
greater recovery than such Holders would receive if the Debtors' chapter 11
cases were converted to cases under chapter 7 of the Bankruptcy Code or if the
Debtors' assets were sold incident to a chapter 11 plan.

      All capitalized terms contained in this Disclosure Statement shall, unless
otherwise defined herein, have the meanings ascribed to such capitalized terms
in the Plan.

                              IMPORTANT INFORMATION

      TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED BY 5:00 P.M. NEW YORK CITY
TIME, ON [____ ___,] 1999. BALLOTS SHOULD BE MAILED OR DELIVERED TO: CITYSCAPE
FINANCIAL CORP. AND CITYSCAPE CORP., C/O [___].

      THE DEBTORS BELIEVE THAT THE PLAN PROVIDES THE BEST POSSIBLE RESULT FOR
ALL HOLDERS OF CLAIMS AND INTERESTS.

      THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY STATE OF OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED.

      THIS DISCLOSURE STATEMENT IS PROVIDED FOR USE SOLELY BY HOLDERS OF CLAIMS
AND INTERESTS, AND THEIR ADVISORS, IN CONNECTION WITH THEIR DETERMINATION TO
ACCEPT OR REJECT THE PLAN.

      NONE OF THE NEW COMMON STOCK TO BE ISSUED ON THE EFFECTIVE DATE HAS BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR
BY ANY STATE SECURITIES COMMISSION OR SIMILAR PUBLIC, GOVERNMENTAL OR REGULATORY
AUTHORITY, AND NEITHER THE SEC NOR ANY SUCH AUTHORITY HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT
OR UPON THE MERITS OF THE PLAN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

      HOLDERS OF CLAIMS AND INTERESTS SHOULD NOT CONSTRUE THE CONTENTS OF THIS
DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE.
EACH SUCH HOLDER SHOULD, THEREFORE, CONSULT WITH HIS, HER OR ITS OWN LEGAL,
BUSINESS, FINANCIAL AND/OR TAX ADVISORS AS TO ANY SUCH MATTERS CONCERNING THE
PLAN AND THE TRANSACTIONS CONTEMPLATED THEREBY.

THE SUMMARY OF THE PLAN CONTAINED HEREIN DOES NOT PURPORT TO BE COMPLETE AND IS
SUBJECT, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE PROVISIONS OF THE
PLAN, WHICH IS ATTACHED HERETO AS EXHIBIT A.


                                       4
<PAGE>   6

II.   PLAN SUMMARY AND KEY CONSIDERATIONS.

      The following summary is qualified in its entirety by reference to the
more detailed information appearing elsewhere in this Disclosure Statement, to
the Plan and to the exhibits to this Disclosure Statement and to the Plan. This
summary does not purport to be complete and should not be relied upon for voting
purposes. A more complete description of the Plan is provided in Section IV,
"THE PLAN OF REORGANIZATION."

      All Holders of Claims whose votes are being solicited are hereby advised
and encouraged to read this Disclosure Statement, the Plan and the exhibits to
this Disclosure Statement and to the Plan in their entirety before voting to
accept or reject the Plan.

A.    Plan Summary

      As described more fully below, the Plan provides for substantive
consolidation of the assets of Cityscape and CSC and for distributions to
creditors as summarized below. Estimated recoveries are based upon (i) principal
of and accrued and unpaid interest on Old Senior Notes and Old Subordinated
Debentures as of the Petition Date, and (ii) an estimated, aggregate amount of
Allowed Claims in Classes 5 and 5a of $10,000,000.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                                       Estimated
Class           Description                    Treatment               Recovery
-----           -----------                    ---------               --------
--------------------------------------------------------------------------------
<S>     <C>                          <C>                                 <C>
N/A     Administrative Claims        Each Holder will be paid Cash      100%
        (Unclassified)               equal to the full amount of its
                                     Claim on, or as soon as        
                                     practicable after, the later of
                                     the Effective Date and the day 
                                     on which such Claim becomes an 
                                     Allowed Claim, unless (i) the  
                                     Holder and the Debtors or the  
                                     Reorganized Company agree to   
                                     other treatment, or (ii) an    
                                     order of the Bankruptcy Court  
                                     provides for other terms.      
--------------------------------------------------------------------------------
N/A     Priority Tax Claims          Each Holder will receive, at the   100%
        (Unclassified)               sole option of the Reorganized       
                                     Company (i) Cash equal to the   
                                     unpaid portion of such Holder's 
                                     Claim, or (ii) equal quarterly  
                                     cash payments in an aggregate   
                                     amount equal to such Claim,     
                                     together with interest at a     
                                     fixed annual rate to be         
                                     determined by the Bankruptcy    
                                     Court or otherwise agreed to by 
                                     the Holder and the Reorganized  
                                     Company over a period through   
                                     the sixth anniversary of the    
                                     date of assessment of such      
                                     Claim, or upon other terms      
                                     approved by the Bankruptcy      
                                     Court.                          
--------------------------------------------------------------------------------
1       Bank Claims                  Unimpaired. To the extent there    100%
                                     are any Allowed Bank Claims as
                                     of the Effective Date, each
                                     Holder of an Allowed Bank Claim
                                     will be paid in full in Cash on
                                     the Effective Date. Class 1 is
                                     Unimpaired and, accordingly, is
                                     not entitled to vote on the
                                     Plan.
--------------------------------------------------------------------------------
</TABLE>


                                       5
<PAGE>   7

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                                       Estimated
Class           Description                    Treatment               Recovery
-----           -----------                    ---------               --------
--------------------------------------------------------------------------------
<S>     <C>                          <C>                                 <C>
2a et   Other Secured Claims         Unimpaired. Either (i) the Claim   100%
seq.    (other than Secured          will be left unaltered, (ii) any  
        Claims in Class 1)           default with respect thereto
                                     (other than a default of a kind 
                                     specified in Section 365(b)(2)  
                                     of the Bankruptcy Code) will be 
                                     cured, the maturity thereof will
                                     be reinstated and the Holder    
                                     thereof will be compensated for 
                                     any damages, or (iii) the Claim 
                                     will receive such other         
                                     treatment to which the Holder   
                                     consents. Class 2a et seq. is   
                                     Unimpaired and, accordingly, is 
                                     not entitled to vote on the     
                                     Plan.                           
--------------------------------------------------------------------------------
3       Priority Claims              Unimpaired. Each Holder will       100%
                                     receive cash equal to the amount
                                     of such Claim, or such other
                                     treatment, as determined by the
                                     Bankruptcy Court, required to
                                     render such Claim Unimpaired.
                                     Class 3 is Unimpaired and,
                                     accordingly, is not entitled to
                                     vote on the Plan.
--------------------------------------------------------------------------------
4 and   Senior Note Claims           Impaired. Each Holder of an        18.9%
4a      and Small Senior Note        Allowed Class 4 Claim will        
        Claims                       receive a Pro Rata portion of       
                                     6,288,564 shares of New Common    
                                     Stock (i.e., one share of New     
                                     Common Stock for every $52.88 in  
                                     principal of and accrued          
                                     interest on such Holder's Old     
                                     Senior Notes). Each Holder of a   
                                     Class 4a Claim (i.e., Claims      
                                     represented by Old Senior Notes   
                                     of a principal amount of $5,000   
                                     or less) will receive Cash in an  
                                     amount equal to (i) $10.00,       
                                     multiplied by (ii) the number of  
                                     shares of New Common Stock that   
                                     such Holder would have been       
                                     entitled to receive as a Holder   
                                     of an Allowed Class 4 Claim;      
                                     provided, however, that any       
                                     Holder of a Class 4a Claim may    
                                     elect on a Ballot or otherwise    
                                     in writing to receive the         
                                     treatment afforded by Class 4     
                                     (i.e., New Common Stock) rather   
                                     than Class 4a (i.e., Cash).       
                                     Class 4 and Class 4a are          
                                     Impaired and, accordingly,        
                                     Holders of such Claims will be    
                                     entitled to vote on the Plan.     
--------------------------------------------------------------------------------
</TABLE>


                                       6
<PAGE>   8

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                                       Estimated
Class           Description                    Treatment               Recovery
-----           -----------                    ---------               --------
--------------------------------------------------------------------------------
<S>     <C>                          <C>                                 <C>
5 and   General Unsecured Claims     Impaired. Each Holder of an        14.2%
5a      and Small Unsecured          Allowed Class 5 Claim will          
        Claims                       receive on account of such           
                                     Allowed Claim one share of New     
                                     Common Stock for every $70.47 of   
                                     such Holder's Allowed Claim.       
                                     Each Holder of an Allowed Class    
                                     5a Claim (i.e., General            
                                     Unsecured Claims of $8,000 or      
                                     less) will receive Cash in an      
                                     amount equal to (i) $10.00,        
                                     multiplied by (ii) the number of   
                                     shares of New Common Stock that    
                                     such Holder would have been        
                                     entitled to receive as a Holder    
                                     of an Allowed Class 5 Claim;       
                                     provided, however, that any        
                                     Holder of a Class 5a Claim may     
                                     elect on a Ballot or otherwise     
                                     in writing to receive the          
                                     treatment afforded by Class 5      
                                     (i.e., New Common Stock) rather    
                                     than Class 5a (i.e., Cash).        
                                     Class 5 and Class 5a are           
                                     Impaired and, accordingly,         
                                     Holders of such Claims will be     
                                     entitled to vote on the Plan.      
--------------------------------------------------------------------------------
</TABLE>


                                       7
<PAGE>   9

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                                       Estimated
Class           Description                    Treatment               Recovery
-----           -----------                    ---------               --------
--------------------------------------------------------------------------------
<S>     <C>                          <C>                                 <C>
6 and   Subordinated Debenture       Impaired. Each Holder of an        2.7%
  6a    Claims and Small             Allowed Class 6 Claim will                
        Subordinated Debenture       receive a Pro Rata portion of             
        Claims                       369,524 shares of New Common
                                     Stock (i.e., one share of New         
                                     Common Stock for every $369.82        
                                     in principal of and accrued           
                                     interest on such Holder's Old         
                                     Subordinated Debentures);             
                                     provided, however, that if Class      
                                     6 and Class 6a do not accept the      
                                     Plan, no New Common Stock (or         
                                     any other property) will be           
                                     distributed to Holders of             
                                     Allowed Class 6 Claims and any        
                                     New Common Stock that would have      
                                     been distributed to the Holders       
                                     of Class 6 Claims will be             
                                     distributed Pro Rata to the           
                                     Holders of Class 4 Claims. Each       
                                     Holder of an Allowed Class 6a         
                                     Claim (i.e., Claims represented       
                                     by Old Subordinated Debentures        
                                     of a principal amount of $50,000      
                                     or less) will receive Cash in an      
                                     amount equal to (i) $10.00,           
                                     multiplied by (ii) the number of      
                                     shares of New Common Stock that       
                                     such Holder would have been           
                                     entitled to receive as a Holder       
                                     of an Allowed Class 6 Claim;          
                                     provided, however, that (i) any       
                                     Holder of a Class 6a Claim may        
                                     elect on a Ballot or otherwise        
                                     in writing to receive the             
                                     treatment afforded by Class 6         
                                     (i.e., New Common Stock) rather       
                                     than Class 6a (i.e., Cash), and       
                                     (ii) if Class 6 and Class 6a do       
                                     not accept the Plan, no Cash (or      
                                     any other property) will be           
                                     distributed to Holders of             
                                     Allowed Class 6a Claims. Class 6      
                                     and Class 6a are Impaired and,        
                                     accordingly, Holders of such          
                                     Claims will be entitled to vote       
                                     on the Plan.                          
--------------------------------------------------------------------------------
7       Old Debt Securities          Impaired. Holders will not         0%
        Claims                       receive or retain any interest    
                                     or property under the Plan and  
                                     are, therefore, deemed to have  
                                     rejected the Plan. Accordingly, 
                                     Class 7 will not be entitled to 
                                     vote on the Plan.               
--------------------------------------------------------------------------------
8       Interests of Holders         Impaired. Holders will not         0%
        of Old Series A              receive or retain any interest  
        Preferred Stock              or property under the Plan and             
                                     are, therefore, deemed to have  
                                     rejected the Plan. Accordingly, 
                                     Class 8 will not be entitled to 
                                     vote on the Plan.               
--------------------------------------------------------------------------------
9       Old Series A Preferred       Impaired. Holders will not         0%
        Stock Securities Claims      receive or retain any interest   
                                     or property under the Plan and  
                                     are, therefore, deemed to have  
                                     rejected the Plan. Accordingly, 
                                     Class 9 will not be entitled to 
                                     vote on the Plan.               
--------------------------------------------------------------------------------
</TABLE>


                                       8
<PAGE>   10

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                                       Estimated
Class           Description                    Treatment               Recovery
-----           -----------                    ---------               --------
--------------------------------------------------------------------------------
<S>     <C>                          <C>                                 <C>
10      Interests of Holders of      Impaired. Holders will not receive  0%
        Old Series B Preferred       or retain Plan and are,              
        Stock                        therefore, deemed to have any      
                                     interest or property under the    
                                     rejected the Plan. Accordingly,   
                                     Class 10 will not be entitled to  
                                     vote on the Plan.                 
--------------------------------------------------------------------------------
11      Old Series B Preferred       Impaired. Holders will not         0%
        Stock Securities Claims      receive or retain any interest   
                                     or property under the Plan and  
                                     are, therefore, deemed to have  
                                     rejected the Plan. Accordingly, 
                                     Class 11 will not be entitled to
                                     vote on the Plan.               
--------------------------------------------------------------------------------
12      Interests of Holders of      Impaired. Holders will not         0%
        Old Cityscape Common         receive or retain any interest    
        Stock                        or property under the Plan and 
                                     are, therefore, deemed to have   
                                     rejected the Plan. Accordingly,  
                                     Class 12 will not be entitled to 
                                     vote on the Plan.                
--------------------------------------------------------------------------------
13      Interests of Holders of      Impaired. Holders will not         0%
        Old Stock Rights in          receive or retain any interest    
        Cityscape and all Claims     or property under the Plan and    
        Arising Out of Such Old      are, therefore, deemed to have    
        Stock Rights                 rejected the Plan. Accordingly,   
                                     Class 13 will not be entitled to  
                                     vote on the Plan.                 
--------------------------------------------------------------------------------
14      Old Cityscape Common Stock   Impaired. Holders will not         0%
        and Old Warrant Securities   receive or retain any interest             
        Claims                       or property under the Plan and
                                     are, therefore, deemed to have  
                                     rejected the Plan. Accordingly, 
                                     Class 14 will not be entitled to
                                     vote on the Plan.
--------------------------------------------------------------------------------
</TABLE>

Other Terms of the Plan

      The Plan provides for certain releases by the Debtors of claims against
various parties (including the Debtors' officers and directors) which claims
relate in any way to Cityscape, CSC, the Company's trust indentures, the CIT
Facility (defined below), the Greenwich Facility (defined below), the DIP
Facilities (defined below), the Debtors, the Reorganization Cases, the Plan or
the Disclosure Statement. The Plan also provides for releases of such claims by
Holders of Class 4, 4a, 6 and 6a Claims provided that such Classes vote to
accept the Plan.

      It is anticipated that the Board of Directors of Reorganized Cityscape
will consist of one to ten members. The Debtors have been advised by the
Unofficial Senior Noteholders' Committee that the members of the Board of
Directors will include D. Richard Thompson, Mark Lasry and Mark A. Neporent. Mr.
Thompson is a principal of Moulton (defined below) which is currently providing
consulting services to the Debtors, and a principal of Aegis Mortgage
Corporation, a mortgage banking firm headquartered in Houston, Texas. Mr. Lasry
is executive vice president at New York-based Amroc Investments. Mr. Neporent is
a former partner of the law firm of Schulte Roth & Zabel LLP ("Schulte Roth")
and is currently the Chief Operating Officer of Cerberus Capital Management L.P.
Schulte Roth has represented and continues to represent, Cerberus Partners,
L.P., a member of the Unofficial Senior Noteholders' Committee, in various
matters. The Debtors have been advised that Mr. Thompson has performed services
on behalf of Cerberus Partners, L.P. pursuant to a contractual relationship
between the parties. It is anticipated that the Board of Directors of
Reorganized CSC will consist of no less than one member. The Debtors have been
advised by the Unofficial Senior Noteholders' Committee that the members will be
the same as the members of Reorganized Cityscape's Board of Directors.


                                       9
<PAGE>   11

      The Debtors presently intend to seek to consummate the Plan and to cause
the Effective Date to occur on or about May 31, 1999. There can be no assurance,
however, as to when the Effective Date actually will occur Procedures for the
distribution of securities pursuant to the Plan, including matters that are
expected to affect the timing of the receipt of distributions by Holders and
that could affect the amount of distributions ultimately received by such
Holders, are described in Section IV.F, "THE PLAN OF REORGANIZATION --
Distributions Under the Plan."

      Except as set forth in this paragraph, none of the Directors, executive
officers or affiliates of the Debtors or holders of 5% or more of the Old
Cityscape Common Stock, to the knowledge of the Company, hold any Old Senior
Notes, Old Subordinated Debentures or Old Cityscape Preferred Stock.

      In making investment decisions, Holders of Claims in Classes 4, 4a, 5, 5a,
6 and 6a must rely on their own examination of the Debtors and the terms of the
reorganization, including the merits and risks involved. Each Holder in a
Solicited Class should consult with its own legal, business, financial and tax
advisors with respect to any such matters concerning this Disclosure Statement,
the Plan and the transactions contemplated hereby and thereby.

B.    Recommendation

      The Debtors and the Unofficial Committees strongly recommend that each
entity entitled to vote on the Plan vote to accept the Plan.

      The Debtors and the Unofficial Committees believe that:

      1. the Plan provides the best possible result for the Holders of Claims
and Interests;

      2. with respect to each Impaired Class of Claims and Interests, the
distributions under the Plan are the same as or greater than the amounts that
would be received if the Debtors were liquidated under chapter 7 of the
Bankruptcy Code; and

      3. acceptance of the Plan is in the best interests of the Holders of
Claims and Interests.

C.    Certain Risk Factors

      Prior to deciding whether to vote in favor of the Plan, Holders of Claims
in the Solicited Classes should consider carefully all of the information
contained in this Disclosure Statement, especially the factors mentioned in the
following paragraph and more fully described in Section VI "CERTAIN RISK
FACTORS."

      Holders should consider that: (i) the projections contained herein (in
Exhibit C) are forward-looking and, as such, are inherently uncertain and,
although considered reasonable by management as of the date hereof, are subject
to significant risks that could cause actual results to differ materially from
those projected; (ii) upon consummation of the Plan and the transactions
contemplated thereby, the financial conditions and operating results of the
Reorganized Company may not be comparable to that reflected in the Debtors'
historical financial statements; (iii) the Debtors' loan origination, purchasing
and sale operations, if and when recommenced, and servicing operations, if
continued, are subject to substantial competition from a variety of national,
regional and local companies, some of which have substantially greater financial
resources than the Debtors; (ix) the Debtors' loan origination, purchasing and
sale operations, if and when recommenced, and servicing operations, if
continued, are subject to changes in interest rates, national, regional and
local economic conditions and demographic trends; (v) there is no existing
market for the New Common Stock and no assurance that one will develop following
the reorganization; (vi) the Debtors are highly regulated in each state in which
they do business and there can be no assurance that they will be allowed to
continue to do business in all such states; (vii) there are various factors that
could adversely affect the value of the properties securing the mortgages held
by the Debtors or held by the securitization trusts in which the Debtors hold
residual interests including various environmental risks; (viii) the sale of the
UK operations (described below) did not include the assumption of all
liabilities and, therefore, there may be claims asserted against the Debtors in
the future arising out of the former UK operations; and (ix) the value of


                                       10
<PAGE>   12

distributions to Holders of Allowed Class 4, 4a, 5, 5a, 6 and 6a Claims
estimated herein could be diluted if more than $10,000,000 Class 5 and 5a Claims
are ultimately Allowed by the Bankruptcy Court.

D.    Voting Instructions

      The Debtors are seeking the acceptance of the Plan by holders of Senior
Note Claims (Class 4), General Unsecured Claims (Class 5) and Subordinated
Debenture Claims (Class 6).

      A Ballot (Senior Note Claims -- [blue] ballot; General Unsecured Claims --
[pink] ballot; Subordinated Debenture Claims -- [gray] ballot), to be used to
accept or reject the Plan has been enclosed with all copies of this Disclosure
Statement mailed to Holders of Claims whose Claims are Impaired by provisions of
the Plan and who are entitled to vote on the Plan. Accordingly, this Disclosure
Statement (and the exhibits hereto), together with the accompanying Ballot and
the related materials delivered together herewith, are being furnished to
Holders of Senior Note Claims, General Unsecured Claims and Subordinated
Debenture Claims and may not be relied upon or used for any purpose other than
to determine whether or not to vote to accept or reject the Plan. 
Notwithstanding the foregoing, any Claim that is the subject of an objection
filed on or before the Voting Deadline (defined below), which Claim has not been
determined or estimated for voting purposes by the Bankruptcy Court shall be
disallowed, for voting purposes, except to the extent and in the manner that the
Debtors indicate in their objection the Claim should be allowed for voting or
other purposes.

      Ballots with respect to the Plan will be accepted by the Debtors until
5:00 p.m., New York City Time, on ____ __, 1999 (the "Voting Deadline"). Except
to the extent the Debtors so determine or as permitted by the Bankruptcy Court
pursuant to Bankruptcy Rule 3018, Ballots that are received after the Voting
Deadline will not be accepted or used by the Debtors in connection with the
Debtors' request for confirmation of the Plan.

      The Debtors have retained [_____] as their voting and tabulation agent in
connection with the Plan (the "Voting Agent").

      Consistent with the provisions of Rule 3018 of the Bankruptcy Rules, the
Debtors have fixed the Voting Record Date (the close of business, New York City
Time, on ____ _, 1999) as the time and date for the determination of Holders of
record of Claims in Classes 4, 4a, 6 and 6a who are entitled to vote on the
Plan. If the Holder of record of any Claim is not also the beneficial owner of
such Claim or Interest, the vote to accept or reject the Plan must be cast by
the beneficial owner of such Claim of Interest.

      For purposes of voting by Classes 4, 4a, 6 and 6a to accept or reject the
Plan, the term "Holder" means a beneficial owner of Old Senior Notes or Old
Subordinated Debentures on the Record Date. A "beneficial owner" is the person
who enjoys the benefits of ownership of the securities (i.e., has a pecuniary
interest in the securities) even though title of the securities may be in
another name. The term "Holder" with respect to other Claims and Interests means
the person who holds such Claim or Interest in such Person's capacity as the
holder of such Claim or Interest. Only beneficial owners (or their authorized
signatories) of the Old Senior Notes and the Old Subordinated Debentures
(collectively, the "Voting Securities") and Holders of Class 5 and Class 5a
Claims as of the Petition Date (or transferees thereof) are eligible to vote on
the Plan.

      All votes to accept or reject the Plan must be cast by using a Ballot.
Votes which are cast in any manner other than by using a Ballot will not be
counted.

      Procedures For Classes 4, 4a, 6 and 6a:

      For purposes of voting to accept or reject the Plan, if you hold Voting
Securities in physical certificated form that are registered in your own name,
you can vote on the Plan by completing the information requested on the ballot,
signing, dating, and indicating your vote on the ballot, and returning the
completed original ballot in the enclosed, pre-addressed, postage-paid envelope
so that it is actually received by the Voting Agent before the Voting Deadline.
Any beneficial owner holding Voting Securities in "street name" can vote on the
Plan in one of the two following ways:


                                       11
<PAGE>   13

      If your ballot has already been signed (or "prevalidated") by your nominee
(your broker, banker, bank, other nominee or their agent): You can vote on the
Plan by completing the information requested on the ballot, indicating your vote
on the ballot, and returning the completed original ballot in the enclosed,
preaddressed, postage-paid envelope so that it is actually received by the
Voting Agent before the Voting Deadline.

      If your ballot has NOT been signed (or "prevalidated") by your nominee
(broker, bank, other nominee, or their agent): You can vote on the Plan by
completing the information requested on the ballot, signing, dating and
indicating your vote on the ballot, and returning the completed original ballot
to your nominee in sufficient time for your nominee then to forward your vote to
the Voting Agent so that it is actually received by the Voting Agent before the
Voting Deadline.

      With respect to Voting Securities that are bearer securities held through
Euroclear (as defined below) or Cedel (as defined below), see the special
procedures for such Voting Securities set forth below.

      If you are a brokerage firm, commercial bank, trust company or other
nominee which is the registered holder of Voting Securities, please forward a
copy of this Disclosure Statement, the appropriate ballot or ballots, and any
other enclosed materials to each beneficial owner, AND;

      If you have signed (or "prevalidated") the ballot, the ballot should be
completed by the beneficial owner and returned by the beneficial owner directly
to the Voting Agent so that such ballot is actually received by the Voting Agent
before the Voting Deadline.

      If you have NOT signed (or "prevalidated") the ballot, you must collect
the ballot and complete the master ballot, and deliver the completed original
master ballot to the Voting Agent so that it is actually received by the Voting
Agent before the Voting Deadline.

      With respect to Voting Securities that are bearer securities held through
Euroclear or Cedel, see the special procedures for such Voting Securities set
forth below.

      The Voting Agent will distribute Disclosure Statements, ballots, and other
materials to Euroclear and Cedel with a request that such Clearing Systems (as
defined below) distribute such materials to the beneficial owners of Voting
Securities through the participant firms holding accounts in such Clearing
Systems.

      Participants in Euroclear and Cedel should generally follow the procedures
set forth in the immediately preceding section ("Brokerage Firms, Banks and
Other Nominees") by either "prevalidating" ballots or using master ballots, with
two exceptions, as follows:

      (i) The party executing the ballot or master ballot (either the Clearing
      System participant or the beneficial owner) should send the original
      signed copy of the ballot, upon execution, by overnight courier and a copy
      by telecopy to the Voting Agent. However, to be counted for purposes of
      acceptance or rejection of the Plan the original of the ballot or master
      ballot (not merely a telecopy thereof) must be actually received by the
      Voting Agent before the Voting Deadline. The party executing the ballot
      should retain a copy of the ballot.

      (ii) Each participant in Euroclear and Cedel should also send a custody
      instruction to Euroclear or Cedel, as applicable, that repeats the
      substance of the information contained in each executed ballot. Euroclear
      and Cedel will forward summaries of the substance of such custody
      instructions to the Voting Agent thus confirming the validity of the
      signed ballots.

      Clearing Systems should arrange for their respective participants to vote
by executing an omnibus proxy, assignment letter form, or similar document, in
such participants' favor.

      If your Ballot is damaged or lost, or if you do not receive a Ballot, you
may request a replacement by contacting:

      [CONTACT INFORMATION FOR VOTING AGENT TO BE INSERTED]


                                       12
<PAGE>   14

      General Instructions for Classes 4, 4a, 5, 5a, 6 and 6a:

      After carefully reviewing the Plan, including all exhibits thereto, and
this Disclosure Statement and its exhibits, please indicate your vote on the
enclosed Ballot and return it in the envelope provided. In voting to accept or
reject the Plan, please use only the Ballot sent to you with this Disclosure
Statement. Please complete and sign your Ballot in accordance with the
instructions set forth on the Ballot and return it in the enclosed envelope.

      Any Ballot received which does not indicate either an acceptance or
rejection of the Plan or which indicates both an acceptance and rejection of the
Plan shall be deemed to be an acceptance of the Plan.

      This Disclosure Statement has been approved by order of the Bankruptcy
Court dated _______ ___, 1999, as containing information of a kind and in
sufficient detail to enable a hypothetical, reasonable investor, typical of a
holder of a Claim, to make an informed judgment whether to accept or reject the
Plan. Approval of this Disclosure Statement by the Bankruptcy Court does not
constitute a ruling as to the fairness or merits of the Plan.

      No statements or information concerning the Debtors or the Reorganized
Company or any of the assets or the business of the Debtors may be made or
should be relied upon, other than as set forth in this Disclosure Statement or
as may hereafter be authorized by the Bankruptcy Court. The statements and
information about the Debtors in this Disclosure Statement have been prepared by
the Debtors.

      The Bankruptcy Court will hold a confirmation hearing at which the
Bankruptcy Court will consider objections to confirmation, if any, commencing at
__ __.m., New York City Time, on ______ __, 1999, United States Bankruptcy
Court, Southern District of New York, 300 Quarropas Street, White Plains, New
York 10601 (the "Confirmation Hearing"). The Confirmation Hearing may be
adjourned from time to time without notice other than the announcement of an
adjourned date at the Confirmation Hearing. Objections to Confirmation of the
Plan, if any, must be in writing and served and filed as described in Section
V.B, "CONFIRMATION AND CONSUMMATION PROCEDURES -- Confirmation Hearing."

      IN ORDER FOR YOUR BALLOT TO BE COUNTED, YOUR BALLOT MUST BE COMPLETED AS
SET FORTH ABOVE AND RECEIVED BY THE VOTING DEADLINE (5:00 P.M., NEW YORK CITY
TIME, ON _____ __, 1999). BALLOTS SHOULD BE MAILED TO:

      [______]


OR IF DELIVERED BY COURIER OR BY HAND, TO:

      [______]

      THE FOREGOING IS A SUMMARY. THIS DISCLOSURE STATEMENT AND THE EXHIBITS
HERETO SHOULD BE READ IN THEIR ENTIRETY BY ALL HOLDERS OF CLAIMS IN DETERMINING
WHETHER TO ACCEPT OR REJECT THE PLAN.

III.  GENERAL INFORMATION

      The Debtors have prepared this Disclosure Statement in connection with
their solicitation of acceptances of the Plan. No statements or information
concerning the Debtors or the Reorganized Company or their operations, or with
respect to the distributions to be made under the Plan, may be made or should be
relied upon other than as set forth in this Disclosure Statement or as may
hereafter be authorized by the Bankruptcy Court.

A.    The Debtors

      Cityscape is a consumer finance company that has been engaged in the
business of originating, purchasing, selling and servicing mortgage loans
secured primarily by one- to four-family residences. Through its wholly-owned
subsidiary CSC, Cityscape is licensed or registered to do business in 46 states
and the District of Columbia.


                                       13
<PAGE>   15

      The majority of Cityscape's loans were made to owners of single family
residences who used the loan proceeds for such purposes as debt consolidation
and financing of home improvements and educational expenditures, among others.

      Cityscape was incorporated under the laws of the state of Delaware in
December 1988. CSC, Cityscape's principal operating subsidiary, was incorporated
under the laws of the state of New York in 1985. In January 1994, CSC acquired
Astrum Funding Corp. ("Astrum") which had operated as a mortgage banker in 11
states. In April 1994, Cityscape acquired all of the capital stock of CSC in an
acquisition in which the shareholders of CSC acquired beneficial ownership of
approximately 92% of the common stock (the "Old Cityscape Common Stock") of
Cityscape (the "CSC Acquisition"). In connection with the CSC Acquisition, the
Company changed its name to Cityscape Financial Corp.

      The Debtors' principal executive offices are located at 565 Taxter Road,
Elmsford, New York 10523-2300. The Debtors' telephone number is (914) 592-6677.

B.    Events Leading to the Chapter 11 Filing

      In December 1997, the Debtors hired Jay Alix & Associates as their
restructuring consultants to review their business operations including
immediate liquidity needs. With the assistance of Jay Alix & Associates and the
Debtors' other professionals, the Debtors began a number of initiatives and
strategic alternatives to improve the Debtors' cash flow and liquidity which had
been adversely affected by their inability to issue debt securities and to
access the capital markets in general. These initiatives included the disposal
of loans through whole loan sales and an increased focus on the Debtors' higher
margin product lines. The Debtors also began to implement a restructuring plan
that included streamlining and downsizing their operations.

      In order to raise cash to continue funding operations, the Debtors
completed the divestiture of certain of their interest-only and residual
certificates in January 1998. Additionally, and with the assistance of its
advisors, the Debtors negotiated and secured a new revolving credit facility
with The CIT Group/Equipment Financing, Inc. (as amended, the "CIT Facility") to
finance the origination and purchase of mortgage loans, repay certain
indebtedness and, subject to certain limitations, fund other general corporate
obligations. The CIT Facility was in addition to a secured "warehouse" credit
facility (the "Greenwich Facility") already provided by Greenwich Capital
Financial Products, Inc., an affiliate of Greenwich Capital Markets, Inc.
(together with any such affiliates, "Greenwich")

      In addition, as a result of liquidity constraints, the Debtors adopted a
plan in March 1998 to sell the assets of City Mortgage Corporation Limited
("CSC-UK"), an English Corporation that originated, sold and serviced loans in
England, Scotland and Wales. In April 1998, pursuant to an Agreement for the
Sale and Purchase of the Business of CSC-UK and its Subsidiaries and the Entire
Issued Share Capital of City Mortgage Receivables 7 Plc, dated March 31, 1998
(the "UK Sale Agreement") the Debtors completed the sale to Ocwen Financial
Corporation ("Ocwen") and Ocwen Asset Investment Corp. ("Ocwen Asset") of
substantially all of the assets, and certain liabilities, of the UK operations
of CSC-UK (the "UK Sale"). The sale did not include the assumption by Ocwen of
all of CSC-UK's liabilities, and therefore, no assurances can be given that
claims will not be made against the Debtors or the Reorganized Company in the
future arising out of the former UK operations. Such claims could have a
material adverse effect on the Debtors or Reorganized Company's financial
condition and results of operations. The UK Sale included the acquisition by
Ocwen of CSC-UK's whole loan portfolio and loan origination and servicing
businesses for a price of (pound)249.6 million, the acquisition by Ocwen Asset
of CSC-UK's securitized loan residuals for a price of (pound)33.7 million and
the assumption by Ocwen of (pound)7.2 million of CSC-UK's liabilities. The price
paid by Ocwen was subject to adjustment to account for the actual balances on
the closing date of the loan portfolio, cash and the assumed liabilities. As a
result of the sale, the Debtors received net proceeds at the time of the closing
of $83.8 million, net of closing costs and other fees.

      In addition, the Debtors and CSC-UK had included in their net receivables
approximately $10 million due from Ocwen under the terms of the UK Sale
Agreement. Cityscape and CSC-UK, however, received a letter from Ocwen in which
Ocwen took the position that it was owed approximately $21.4 million in
connection with the transaction. The Debtors, CSC-UK and Ocwen have reached a
proposed settlement of the dispute, which proposed settlement provides for
distribution of approximately (pound)3.5 million, which was held back from the
purchase price


                                       14
<PAGE>   16

under the U.K. Sale Agreement, as follows: (pound)1.5 million plus interest to
Ocwen and (pound)2.0 million to CSC-UK (in addition to (pound)1,744,228.71
already paid by Ocwen to CSC-UK in connection with the settlement of their
disputes). [The proposed settlement has been submitted to the Bankruptcy Court
for approval.]

      While the foregoing actions might have enhanced the short-term financial
position of the Debtors, management concluded that the best alternative for
recapitalizing the Debtors over the long-term and maximizing the recovery for
creditors and senior equity interest holders was through a prepackaged plan. As
a result, the Debtors conducted intensive negotiations with various creditors in
an effort to enable the Debtors to restructure their indebtedness through a
prepackaged plan.

      In connection with such negotiations, in April and May of 1998, three
Holders of the Old Senior Notes, (i) MacKay-Shields Financial Corporation, as
investment advisor to various funds, (ii) Cerberus Partners, L.P., and (iii)
Franklin Mutual Advisers, Inc., formed an informal group which became the
Unofficial Senior Noteholders' Committee. As of the date hereof, Franklin Mutual
Advisers, Inc. is no longer a member of the Unofficial Senior Noteholders'
Committee. The Unofficial Senior Noteholders' Committee retained Kasowitz,
Benson, Torres & Friedman LLP to serve as its special legal counsel. Throughout
May 1998, the Debtors engaged in discussions and negotiations with the
Unofficial Senior Noteholders' Committee on the terms of a proposed
restructuring for the Debtors. The Debtors were assisted in preparing for such
discussions and negotiations by Latham & Watkins (its restructuring counsel);
Gibson Dunn & Crutcher LLP (its corporate and litigation counsel); Jay Alix &
Associates (its consultant); and CIBC Oppenheimer (its financial advisor).

      During the period of negotiations with the Unofficial Senior Noteholders'
Committee, the Debtors entered into agreements with members of the Unofficial
Senior Noteholders' Committee providing, among other things, that the Debtors
would supply the committee and its counsel with confidential information and
that the committee members would maintain the confidentiality of such
information. Negotiations between the Debtors and the Unofficial Senior
Noteholders' Committee culminated in the members' entering into a non-binding
letter of intent (the Letter of Intent") that outlined the terms of a plan of
reorganization that would be acceptable to the committee. The Debtors disclosed
the terms of the Letter of Intent to the public on June 1, 1998.

      Immediately upon entering into the Letter of Intent, the Debtors entered
into negotiations concerning the restructuring with representatives of the Old
Subordinated Debentures, who formed the Unofficial Subordinated
Debentureholders' Committee. The Unofficial Subordinated Debentureholders'
Committee consisted of (i) Forest Investment Management, (ii) Bear, Stearns &
Co. Inc., (iii) KA Management (now known as Deephaven Market Neutral Trading
Limited), (iv) Tamar Securities Inc., (v) Aristeia Capital LLC, (vi) Zazove
Associates, LLC, (vii) J. Robbins Securities, LLC, (viii) RAS Securities Corp.,
(ix) D.A. Davidson & Co., (x) Donaldson, Lufkin & Jenrette Securities
Corporation, (xi) Mercantile Bank, (xii) Mellon Bank, as trustee for General
Motors Employees Domestic Group Pension Trust, and (xiii) Ramat Securities Ltd.
As of the date hereof, Zazove Associates, LLC is no longer a member of the
Unofficial Subordinated Debentureholders' Committee. The Unofficial Subordinated
Debentureholders' Committee retained Kramer Levin Naftalis & Frankel LLP to
serve as its special legal counsel. As with the Unofficial Senior Noteholders'
Committee, the Debtors entered into agreements with members of the Unofficial
Subordinated Debentureholders' Committee providing, among other things, that the
Debtors would supply the committee and its counsel with confidential information
and that the committee members would maintain the confidentiality of such
information.

      After extensive negotiations among various combinations of the Unofficial
Subordinated Debentureholders' Committee, the Unofficial Senior Noteholders'
Committee and the Debtors, the three parties achieved agreement on the terms of
a restructuring for the Debtors which formed the basis for the original plan of
reorganization (the "Original Plan"). That agreement was reflected in the
Agreement Concerning Voting dated as of July 29, 1998 by and between the
Debtors, each member of the Unofficial Senior Noteholders' Committee and each
member of the Unofficial Subordinated Debentureholders' Committee which
agreement provided for, among other things, the support by the members of such
committees for a plan of reorganization embodying the agreed upon terms. The
Debtors agreed to reimburse both Unofficial Committees for the reasonable fees
and expenses of their respective counsel.


                                       15
<PAGE>   17

      The Debtors' objective was to recapitalize the Debtors through a
prepackaged chapter 11 bankruptcy filing in which all necessary consents would
be solicited and received in accordance with applicable law prior to commencing
the chapter 11 cases. Accordingly, the Debtors prepared a Solicitation and
Disclosure Statement dated August 28, 1998. On August 29, 1998, the Debtors
commenced a solicitation of votes on the Original Plan (the "Prepetition
Solicitation"). After receiving overwhelming acceptance of the Original Plan by
all but one of the classes entitled to vote on the Original Plan, the Debtors
filed the reorganization cases and requested that the Court schedule a hearing
on confirmation of the Original Plan as soon as possible. The Court granted the
relief requested and set a hearing on confirmation of the Original Plan for
November 13, 1998 (the "Original Confirmation Hearing"). Although the Debtors
and other parties with an economic stake in the reorganization anticipated that
the Original Plan would be confirmed at the Original Confirmation Hearing,, the
Original Plan was not confirmed due primarily to fluctuating market conditions
and the Debtors' inability to obtain necessary exit financing to allow them to
emerge from chapter 11. As a result, the Debtors have revised the Original Plan,
as reflected in the First Amended Joint Plan of Reorganization attached as
Exhibit A hereto.

      In accordance with an agreement with CIBC Oppenheimer, effective January
15, 1998, and in contemplation of and shortly before the commencement of the
Prepetition Solicitation, the Debtors paid a success fee to CIBC Oppenheimer of
$1,132,000 (in addition to prior payment of a fee in connection with the UK Sale
of $768,000, payment of monthly advisory fees totaling $800,000 since January
15, 1998 and reimbursement of out-of-pocket expenses). In addition, the Debtors'
agreement with Jay Alix & Associates ("JA&A"), dated December 19, 1997, provided
for payment of a success fee under certain circumstances (in addition to
periodic payment of fees at their normal hourly rates and reimbursement of their
out-of-pocket expenses. The success fee was based upon (i) reduction in domestic
operating expenses, (ii) the elimination of the need for funding Cityscape's
U.K. operations, and/or (iii) confirmation of a plan of reorganization within
twelve months. In settlement of any claim JA&A might have had with respect to
any and all components of the success fee (which claim could have exceeded $1.25
million), JA&A agreed to accept $450,000 prior to the filing of the chapter 11
cases (which amount has been paid) and to defer payment of an additional
$450,000, which claim was assigned to System Advisory Group, LLC, a wholly-owned
subsidiary of JA&A.

      Prior to the filing of the chapter 11 cases, the Debtors entered into a
consulting agreement with Moulton, Inc. ("Moulton"). The agreement provides that
Moulton will assist the Debtors by providing consulting services related to the
Debtors' mortgage banking operations. Such services are being provided by the
principal of Moulton, D. Richard Thompson. While performing under the terms of
the agreement, Moulton devotes a substantial portion of its full time and
attention to the business and affairs of the Debtors. Pursuant to the agreement,
the Debtors pay Moulton a $50,000 per month consulting fee plus reimbursement
for reasonable expenses actually incurred in accordance with the Debtors'
standard policies. In addition, services of Karen Thompson, Mr. Thompson's
associate who is also his wife, as well as-other associates, are billed at
additional, appropriate hourly rates.

C.    Significant Events During the Chapter 11 Cases

      Filing of the Chapter Ii Petitions

      Cityscape and CSC filed voluntary petitions for relief under chapter 11 of
the Bankruptcy Code on October 6, 1998 in the United States Bankruptcy Court for
the Southern District of New York. The Bankruptcy Court has ordered that
Cityscape's and CSC's cases be jointly administered for procedural purposes.

      Retention of Professionals by the Debtors

      The Debtors have retained the following professionals to represent and
advise them in connection with their chapter 11 cases:

      Bankruptcy Counsel

      Latham & Watkins
      885 Third Avenue, Suite 1000
      New York, New York 10022


                                       16
<PAGE>   18

      Special Litigation and Corporate Counsel

      Gibson, Dunn & Crutcher LLP
      200 Park Avenue
      New York, NY 10166

      Restructuring Advisors

      Jay Alix & Associates
      575 Fifth Avenue, 21st Floor
      New York, NY 10017
      (not currently providing services)

                  - and -

      Independent Auditors

      (Proposed but not yet approved by the Bankruptcy Court)

      [KPMG LLP
      757 Third Avenue
      New York, NY 10017]

      Appointment of Official Committees

      To date, no official committees have been appointed in the Debtors'
chapter 11 cases. However, two unofficial committees have been participating in
these cases, including in the negotiations of the terms of the Plan. The members
of the unofficial committees and their respective attorneys, as of the date of
the filing of this Disclosure Statement, are set forth below:

      Unofficial Senior Noteholders' Committee

      MacKay Shields Financial Corp.,
       as advisor to The Main Stay Funds
      9 West 57th Street
      New York, NY 10019

      Cerberus Partners, L.P.
      450 Park Avenue
      28th Floor
      New York, New York 10022

      Attorneys

      Kasowitz, Benson, Torres & Friedman, LLP
      1301 Avenue of the Americas
      New York, NY 10019

      Unofficial Subordinated Debentureholders' Committee

      Aristeia Capital LLC
      277 Park Avenue, 27th Fl.
      New York, NY 10172


                                       17
<PAGE>   19

      Bear Stearns
      245 Park Avenue
      New York, NY 10167

      Commonwealth Associates
      830 Third Avenue
      New York, NY 10022

      D.A. Davidson & Co.
      P.O. Box 423
      Spokane, WA 99210

      Donaldson, Lufkin & Jenrette
      277 Park Avenue
      New York, NY 10172

      Forest Investment Management
      53 Forest Avenue
      Old Greenwich, CT 06870

      J. Robbins Securities, LLC
      5353 N. 16th Street, #19
      Phoenix, AZ 85016

      Deephaven Market Neutral Trading Limited
      1712 Hopkins Crossroad
      Minnetonka, MN 55305

      Mellon Bank Trustee for General
      Motors Employees Domestic Group Pension Trust
      767 Fifth Avenue
      New York, NY 10153

      Mercantile Bank
      P.O. Box 524
      St. Louis, MO 63166

      Mercantile Bank
      Tram 20-4
      Seventh & Washington
      St. Louis, MO 63101

      Ramat Securities Ltd.
      23811 Chagrin Blvd.
      Suite 200
      Beachwood, OH 44122

      RAS Securities Corp.
      50 Broadway
      New York, NY 10004

      Tamar Securities Inc.
      23811 Chagrin Blvd., Suite 200
      Beachwood, OH 44122


                                       18
<PAGE>   20

      Attorneys

      Kramer Levin Naftalis & Frankel LLP
      919 Third Avenue
      New York, New York 10022

      The DIP Facilities

      The Debtors received separate commitments for debtor-in-possession
financing in the aggregate amount of up to $250 million from two lenders.
Greenwich committed to provide up to $100 million and CIT (together with Nomura
Securities International, Inc.) committed to provide up to $150 million in the
form of two separate revolving credit facilities. On October 27, 1998, the
Bankruptcy Court signed final orders approving the two debtor-in-possession
financing facilities. The Debtors used the funds provided by Greenwich to repay
all amounts outstanding under the prepetition Greenwich Facility and to operate
their business during the pendency of the Reorganization Cases. The Debtors used
the funds provided by CIT to repay all amounts outstanding under the prepetition
CIT Facility and to operate their business during the pendency of the
Reorganization Cases.

      Under each DIP Facility, the borrower was CSC with its obligations
guaranteed by Cityscape. The obligations under each DIP Facility were secured
and constituted an allowed administrative expense of the Reorganization Cases
having priority over all administrative expenses of the kind specified in
Sections 503(b) or 507(b) of the Bankruptcy Code and all unsecured claims other
than a "carve-out" for certain expenses pertaining to the administration the
Reorganization Cases, such carve-out to be limited in dollar amount after the
occurrence and during the continuance of an event of default under the
applicable DIP Facility (the "Carve-Out"). As to priority of payment, the DIP
Facilities rank pari passu with each other. The DIP Facilities provided to the
Debtors, in the case of CIT, an amount not to exceed $150 million and, in the
case of Greenwich, an amount not to exceed $100 million on a revolving basis
with the amount available under either facility calculated based upon separate
borrowing base formulas which each took into account the quality and amount of
the collateral available to secure the obligations thereunder. Each DIP Facility
was secured by liens on substantially all of the assets of the Debtors (as well
as the capital stock of CSC held by Cityscape), subject to the Carve-Out and to
pre-existing valid and perfected liens (including the liens securing the
Greenwich Facility and the CIT Facility). The relative priority of Greenwich and
CIT with respect to the various elements of collateral was the subject of
intercreditor arrangements between Greenwich and CIT. The DIP Facilities also
contained covenants and events of default that are customarily found in credit
agreements involving mortgage lenders and debtors-in-possession.

      After the Debtors suspended originating loans on or about December 18,
1998 (discussed below), their need for drawing on the DIP Facilities diminished.
Thereafter, as the Debtors sold their "warehoused" loans, they used the proceeds
to repay their indebtedness under the DIP Facilities and anticipate repaying
such indebtedness in full prior to the time of the Confirmation Hearing.

      Suspension of Loan Originations

      On November 17, 1998, the Debtors decided to suspend indefinitely all of
their loan origination and purchase activities. The Debtors notified their
brokers that they had ceased funding mortgage loans, other than loans that were
in their origination pipeline for which they had issued commitments. The
Debtors' decision was based upon their determination, following discussions with
potential lenders regarding post-reorganization "warehouse" financing, that
adequate sources of such financing were not available. With no adequate sources
of such financing, the Debtors determined that they were unable to continue to
originate and purchase mortgage loans. On or about December 18, 1998, the
Debtors funded the last of the mortgage loans for which they had issued
commitments as of November 17, 1998.

      Other Relief Granted

      In addition to obtaining Bankruptcy Court approval of the
debtor-in-possession financing, the Debtors, in conjunction with filing their
petitions, filed various motions seeking orders that were entered by the
Bankruptcy Court. The relief sought included:


                                       19
<PAGE>   21

      Application for Order Authorizing the Debtors to Honor their Prepetition
Commitments to Fund Customer Loans, Granting Superpriority Administrative
Expense Status to Amounts Advanced by CIT to Honor Obligations to Customers, and
Authorizing Debtors to Continue Certain Interest Advance/Repayment Procedures,
to Sell Portfolios of Loans and to Honor Customary Representations and
Warranties Given by the Debtors in Connection with the Sale of Loans: The
Bankruptcy Court entered an order authorizing the Debtors, among other things,
to honor their prepetition commitments to fund customer loans, to sell
portfolios of loans and to honor customary representations and warranties given
by the Debtors in connection with the sale of loans in the ordinary course of
business.

      Application for Authority to Pay Prepetition Trade Creditors in the
Ordinary Course: The Debtors obtained authority from the Bankruptcy Court to pay
Trade Claims in the ordinary course of their business with respect to those
vendors that continued to ship goods on customary trade terms.

      Assumption and Rejection of Executory Contracts and Unexpired Leases

      Since the Petition Date, the Debtors have undertaken a comprehensive
review and evaluation of their various unexpired, nonresidential real property
leases and various executory contracts. Based on this review and because of the
substantial downsizing of the Debtors' business, the Debtors have rejected four
leases of nonresidential real property and six leases relating to equipment,
maintenance and information systems software. In the likely event the Debtors
determine, in their business judgment, that they no longer need other leases and
contracts, the Debtors will file the appropriate motion(s) to reject such leases
and contracts with the Bankruptcy Court.

      Deadline to File Proofs of Claim

      On February 11, 1999, the Debtors filed a motion requesting that the
Bankruptcy Court enter an order (the "Bar Date Order") setting March 22, 1999,
at 5:00 p.m., New York City Time (the "Bar Date"), as the date and time by which
proofs of claim against the Debtors' chapter 11 estates had to be filed, which
order was granted on February 22, 1999. The Bar Date Order required each person
or entity (including, without limitation, each individual, partnership, joint
venture, corporation, estate, trust and governmental unit) that asserted a
"claim" (as such term is defined in Section 101(5) of the Bankruptcy Code)
against one or both of the Debtors which claim arose on or prior to the Petition
Date to file an original written proof of claim so as to be received on or
before March 22, 1999, at 5:00 p.m. New York City Time by the Clerk of the
United States Bankruptcy Court for the Southern District of New York (the "Clerk
of the Court"), United States Courthouse, 300 Quarropas Street, 2nd Floor, White
Plains, New York 10601-5008.

      The Bar Date Order further provides that the following persons or entities
were not required to file a proof of claim by the Bar Date: (i) any person or
entity whose claim already has been fully paid by the Debtors; (ii) any person
or entity that already has filed a proof of claim against the Debtors with the
Clerk of the United States Bankruptcy Court for the Southern District of New
York, using a form which conforms substantially to Official Form Number 10;
(iii) any person or entity whose claim has already been allowed by order of the
Court entered on or before the Bar Date; (iv) any person or entity whose claim
is listed on the Debtors' schedules filed with the Court which claim is not
listed as "contingent," "unliquidated," or "disputed," and who does not dispute
the listed amount or priority of such claim; (v) any person or entity whose
claim has arisen from the Debtors' rejection of an executory contract or
unexpired lease (the assertion of which claims has been or will be subject to
separate orders of the Court); (vi) any person or entity holding a claim for an
administrative expense, as such term is used in Sections 503(b) and 507(a)(1) of
the Bankruptcy Code; (vii) any holder of a claim against the Debtors that, if
allowed, would fall within Class A7 (Old Debt Securities Claims), Class A9 (Old
Series A Preferred Stock Securities Claims), Class A11 (Old Series B Preferred
Stock Securities Claims), Class A13 (Claims Arising Out of Old Stock Rights)
and Class A14 (Old Cityscape Common Stock and Old Warrant Securities Claims)
under the Original Plan; and (viii) any Holder of Old Senior Notes, or Old
Subordinated Debentures whose claim is based upon the principal of or accrued
interest on such Holders' Old Senior Notes or Old Subordinated Debentures.

      At the beginning of the chapter 11 cases, the Debtors requested the entry
of an order setting the last day for filing proofs of claim by any holder of a
claim against the Debtors that, if allowed, would fall within Class A7 (Old Debt
Securities Claims), Class A9 (Old Series A Preferred Stock Securities Claims),
Class A11 (Old Series B


                                       20
<PAGE>   22

Preferred Stock Securities Claims), Class A13 (Claims Arising Out of Old Stock
Rights) and Class A14 (Old Cityscape Common Stock and Old Warrant Securities
Claims) under the Original Plan. The Bankruptcy Court signed such an order on or
about October 9, 1998, setting November 9, 1998 as the last day for filing
proofs of such claims.

      Appointment of Examiner

      On October 7, 1998 Elliott Associates, L.P. and Westgage International,
L.P. (together "Elliott") moved, pursuant to Section 1104(c) of the Bankruptcy
Code for entry of an order appointing an examiner. On October 20, 1998, the
Bankruptcy Court held a hearing and entered an order authorizing the appointment
of an examiner setting guidelines and time limits for the examiner's
investigation ("Examiner Order").

      Pursuant to the Examiner Order, the examiner was charged with conducting
an investigation and reporting on the following issues by 5:00 p.m. New York
City time on November 9, 1998:

            (a) Whether the facts relating to the Debtors' restatements of their
      financial statements and write-downs of assets for the period beginning
      with the quarter ended June 30, 1996 may give rise to potential claims of
      the Debtors' Estates against certain parties, (or any other of the
      Debtors' current and former officers and directors) and/or the Debtors'
      financial advisors and other professionals (a "Potential Claim");

            (b) The results of any investigations with regard to the
      restatements of the Debtor's financial statements and writedowns of assets
      performed by the Debtors, any special committee of the Debtors' boards of
      directors or any independent third-party;

            (c) The extent to which, if at all, any person who may be liable on
      a Potential Claim and who is being released under the Plan is contributing
      to the Plan;

            (d) The facts and circumstances with respect to alleged short sales
      of the Debtors' common stock during 1997 and 1998 by certain parties (or
      any other of the Debtors' current and former officers and directors)
      and/or the Debtors' financial advisors and other professionals;

            (e) The extent to which the proceeds of insurance policies of the
      Debtors that might cover a Potential Claim are being used to fund payments
      under the Plan

            (f) The extent to which the proceeds of insurance policies of the
      Debtors might be available to satisfy Potential Claims.

      On October 22, 1998 the Court approved the appointment of Harrison J.
Goldin as Examiner. The Examiner issued a report on November 9, 1998. A copy of
the "Examiner Report Pursuant to Order of October 20, 1998" is attached hereto
as Exhibit "B".

      Inability to Confirm Original Plan

      Although the Debtors and other parties with an economic stake in the
Debtors' reorganization anticipated that the Original Plan would be confirmed at
a confirmation hearing originally scheduled for November 13, 1998, the Original
Plan was not confirmed, due primarily to fluctuating market conditions and the
Debtors' inability to obtain necessary exit financing to allow them to emerge
from chapter 11. As a result, the Debtors have revised the Original Plan, as
reflected in the First Amended Joint Plan of Reorganization attached as Exhibit
A hereto.


                                       21
<PAGE>   23

IV.   THE PLAN OF REORGANIZATION

A.    Overview of the Plan

      Brief Explanation of Chapter 11

      Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under chapter 11 of the Bankruptcy Code, a debtor is authorized
to reorganize its business for the benefit of itself and its creditors and
stockholders. In addition to permitting rehabilitation of the debtor, another
goal of chapter 11 is to promote equality of treatment of creditors and equity
security holders, respectively, who hold substantially similar claims or
interests with respect to the distribution of the value of a debtor's assets. In
furtherance of these two goals, upon the filing of a petition for relief under
chapter 11, Section 362 of the Bankruptcy Code generally provides for an
automatic stay of substantially all acts and proceedings against the debtor and
its property, including all attempts to collect claims or enforce liens that
arose prior to the commencement of the debtor's chapter 11 case.

      The consummation of a plan of reorganization is the principal objective of
a chapter 11 case. A plan of reorganization sets forth the means for satisfying
claims against and interests in a debtor. Confirmation of a plan of
reorganization by the Bankruptcy Court makes the plan binding upon the debtor,
any issuer of securities under the plan, any person or entity acquiring property
under the plan and any creditor of or equity security holder in the debtor,
whether or not such creditor or equity security holder (i) is impaired under or
has accepted the plan or (ii) receives or retains any property under the plan.
Subject to certain limited exceptions and other than as provided in the plan
itself or the confirmation order, the confirmation order discharges the debtor
from any debt that arose prior to the date of confirmation of the plan and
substitutes therefor the obligations specified under the confirmed plan, and
terminates all rights and interests of prepetition equity security holders.

      The following is an overview of certain material provisions of the Plan of
the Debtors, which is attached hereto as Exhibit A. The following summaries of
the material provisions of the Plan do not purport to be complete and are
qualified in their entirety by reference to all the provisions of the Plan,
including all exhibits thereto, all documents described therein and the
definitions therein of certain terms used below. Wherever defined terms of the
Plan not otherwise defined in this Disclosure Statement are used, such defined
terms shall have the meanings assigned to them in the Plan.

      Solicitation of Acceptances of the Plan

      Under the Plan, all Claims and Interests have been separated into fourteen
(14) classes, and each Class has been determined to be either Impaired or
Unimpaired by the Plan's terms. Except as discussed below under Section V.C,
"CONFIRMATION AND CONSUMMATION PROCEDURES -- Confirmation," as a condition to
confirmation, Section 1129(a) of the Bankruptcy Code requires that (i) each
impaired class of claims and interests that receives or retains property under a
plan of reorganization vote to accept the plan and (ii) the plan meets the other
requirements of Section 1129(a). Classes of claims and interests that do not
receive or retain any property under a plan on account of such claims and
interests are deemed to have rejected the plan and are not entitled to vote, and
classes of claims and interests that are not impaired under a plan are deemed to
have accepted the plan and are not entitled to vote. Therefore, acceptances of
the Plan are being solicited only from those who hold Claims in an Impaired
Class that is receiving a distribution under the Plan. An Impaired Class of
Claims will be deemed to have accepted the Plan if it is accepted by Holders of
at least two-thirds in dollar amount and a majority in number of Claims of such
class held by Holders who cast timely votes with respect to the Plan. Holders of
Claims or Interest who fail to vote or who abstain from voting on the Plan are
not counted for purposes of determining either acceptance or rejection of the
Plan by any Impaired Class of Claims or Interests. Therefore, the Plan could be
accepted by any Impaired Class of Claims with the affirmative vote of
significantly less than two-thirds in dollar amount and a majority in number of
the Class of Claims.

      If at least one Impaired Class of Claims votes to accept a plan of
reorganization (not counting the votes of insiders), the Plan may be confirmed
despite rejection by the other impaired Classes if the "cramdown" provisions of
Section 1129(b) of the Bankruptcy Code are satisfied. The "cramdown" provisions
of Section 1129(b) essentially


                                       22
<PAGE>   24

provide that a plan may be confirmed over the rejection of an impaired class of
claims or interests if the plan "does not discriminate unfairly" and is "fair
and equitable" with respect to such rejecting impaired class.

      Pooling of Assets and Liabilities and Cancellation of Intercompany Claims

      On the Effective Date, the assets and liabilities of the Debtors will be
pooled to the extent specified in the Plan. The legal rights and priorities of
each Holder of a Claim will be treated as having a single recourse against such
pooled assets. Each Holder of a Claim who has asserted a Claim against both of
the Debtors arising from or related to the same underlying obligation or cause
of action, whether the basis for the asserted liability of the Debtors arises by
contract, guarantee (including CSC's guarantee of Cityscape's obligations under
the Old Senior Notes), or by operation of law, will likewise be treated as
having a single Claim against the assets of the pooled estate.

      On the Effective Date, as part of such pooling, each of the Debtors will
be deemed to have fully and finally compromised and settled all Intercompany
Claims. As a result of giving effect to such pooling of assets and liabilities
and such compromise and settlement, all Intercompany Claims will be treated as
extinguished immediately upon the Effective Date and will receive no
distribution pursuant to the Plan.

      The pooling of assets and liabilities provided for under Section III of
the Plan will be only for purposes of distributions under the Plan. Nothing in
this Plan or the Confirmation Order will effect a merger or any other
combination of Cityscape and CSC, or Reorganized Cityscape and Reorganized CSC.

      The Reorganized Company

      In general, the Plan provides that (i) Administrative Claims, Priority Tax
Claims, Bank Claims, Other Secured Claims and Priority Claims will be paid in
full, (ii) holders of Old Senior Notes, General Unsecured Claims and (provided
that they vote to accept the Plan) Old Subordinated Debentures will receive all
of the New Common Stock in the Reorganized Company (with Holders of such Claims
in relatively small amounts having the option to receive cash in lieu of New
Common Stock). Based upon the Debtors' estimate of $10,000,0000 in claims that
will ultimately be Allowed Claims in Classes 5 and 5a, the New Common Stock (in
the aggregate of approximately 6,800,000 shares) would be distributed as
follows: (i) 92.48% to Holders of Old Senior Notes (or 97.91% if Class 6 or
Class 6a votes to reject the Plan); (ii) 2.09% to holders of General Unsecured
Claims; and (iii) 5.43% to holders of Old Subordinated Debentures (or 0% if
Class 6 or Class 6a votes to reject the Plan).

      As reflected in the projected financial information contained in Exhibit C
hereto (the "Projections"), the Debtors estimate that the Reorganized Company
will have net assets with an approximate carrying value of $68 million,
consisting primarily of mortgage residual certificates, receivables related to
such certificates and cash.

      It is assumed that the Reorganized Company will invest such cash and
operate its business in such a manner that it will not be required to register
as an investment company under the Investment Company Act of 1940, and the rules
and regulations thereunder. While a plan as to the use of the Reorganized
Company's cash and other assets has not been formed, such assets will be
available for general corporate purposes as determined by the Board of Directors
of the Reorganized Company, including investments, acquisitions, joint ventures
and dividends and other distributions on equity securities, all as determined by
the Board of Directors to be in the best interests of the Reorganized Company.

      There are no present plans for the Reorganized Company to pay dividends on
its New Common Stock. Any such dividends will be determined by the Board of
Directors of the Reorganized Company in light of the financial condition, cash
flow, results of operations, and legal dividend capacity of the Reorganized
Company, and other factors. Following the Effective Date, it is expected that
the Reorganized Company will invest its available cash and manage its business
with a view to maximizing values to holders of its equity securities. It is
expected that the Reorganized Company should be able to invest such available
cash in a manner which will create higher returns than the 5% rate assumed in
the Projections. However, there is no assurance that this will be the case or
that such investments, if made, will create returns sufficient to allow the
Reorganized Company to pay dividends at any time in the future.


                                       23
<PAGE>   25

      It is expected that the Reorganized Company will reenter the mortgage loan
origination business at some time in the future, based on prevailing industry
conditions and the general business climate. Because the Reorganized Company
will be relatively liquid, it is expected that management of the Reorganized
Company will examine various acquisition prospects in the subprime and high-LTV
organization and servicing markets. Due to a deterioration of the capital
markets supporting the subprime and high-LTV origination businesses, a number of
potential acquisition or merger candidates may be available. However, there can
be no assurance that the Reorganized Company will identify suitable acquisition
or merger candidates, or that if such candidates are identified, acceptable
business transactions will be structured and concluded.

      Specifically, Aegis Mortgage Corporation ("Aegis") may be a potential
acquisition or merger candidate. Aegis is owned solely by D. Richard Thompson,
the prospective Chairman and Chief Executive Officer of the Reorganized Company.
Aegis is involved principally in the origination and servicing of single-family
mortgage loans, concentrating primarily on the conforming marketplace for FRA,
VA, and conventional mortgages. In the year concluding December 31, 1998, Aegis
originated approximately $875 million of single-family mortgage loans. At
December 31, 1998, Aegis serviced approximately $150 million in mortgage loans
from its Oklahoma City location. Aegis is headquartered in Houston, Texas, and
maintains wholesale and retail production offices in seven states. In 1998,
Aegis originated mortgage loans in a total of 28 states. The Debtors have been
advised that, in December 1998, to facilitate Mr. Thompson's purchase of 62.5%
of the capital stock of Aegis from certain individuals, Cerberus Partners, L.P.
loaned $2.25 million to Mr. Thompson, $1.7 million of which Mr. Thompson
simultaneously loaned to Aegis as subordinated debt, and Mr. Thompson pledged
Aegis' note to him for $1.7 million to Cerberus Partners, L.P. as collateral to
secure his payment obligation to Cerberus Partners, L.P.

      Aegis may be an attractive acquisition or merger candidate because of its
efficient loan production operation and management synergies. The Reorganized
Company could expand Aegis's loan production operations through application of
capital to support additional branch facilities and warehouse lines.

      A number of obstacles could impede the acquisition or merger of Aegis with
the Reorganized Company. First, an acquisition or merger with Aegis represents a
conflict of interest for Mr. Thompson, and if such an acquisition or merger is
considered, Mr. Thompson would be required not to participate in any discussions
or from representing the Reorganized Company with respect to any resulting
transaction with Aegis. Accordingly, the Reorganized Company may be at a
disadvantage in discussing, structuring or concluding any such transaction.
Second, pricing and terms are integral to any acquisition or merger transaction,
and there can be no assurance that Aegis and the Reorganized Company can reach
agreement on mutually agreeable pricing and terms of any proposed acquisition or
merger transaction. Third, the disinterested management and directors of the
Reorganized Company may feel that companies with subprime and/or high-LTV
origination and servicing operations represent more attractive acquisition or
merger candidates than does Aegis.

      Summary of Classes and Treatment of Claims and Interests

      Section 1123 of the Bankruptcy Code provides that a plan of reorganization
shall classify the claims and interests of a debtor's creditors and equity
interest holders. In compliance therewith, the Plan divides Claims and Interests
into Classes and sets forth the treatment for each Class. In accordance with
Section 1123(a)(1), Administrative Claims and Priority Tax Claims have not been
classified. The Debtors also are required, under Section 1122 of the Bankruptcy
Code, to classify Claims against and Interests in Cityscape and CSC into Classes
that contain Claims and Interests that are substantially similar to the other
Claims and Interests in such Classes.

      The classification of Claims and Interests and the nature of distributions
to Holders of Impaired Claims or Impaired Interests in each Class are summarized
below. See Section IV.B, "Additional Information Regarding Treatment of Certain
Claims - Allocation of New Common Stock Among Classes 4, 5 and 6" for a
description of the manner in which the number of shares of New Common Stock will
be determined and Section VI, "CERTAIN RISK FACTORS" for a discussion of various
other factors that could materially affect the value of the New Common Stock
distributed pursuant to the Plan.

      In consideration for the distributions and other benefits provided under
the Plan, the provisions of the Plan will constitute a good faith compromise and
settlement of all claims or controversies relating to amounts and


                                       24
<PAGE>   26

allowability of: (i) Senior Note Claims and Small Senior Note Claims (Classes 4
and 4a), (ii) General Unsecured Claims and Small Unsecured Claims (Classes 5 and
5a) and (iii) Subordinated Debenture Claims and Small Subordinated Debenture
Claims (Classes 6 and 6a), and a good faith compromise and settlement of all
claims or controversies relating to the termination of all contractual, legal,
and equitable subordination rights that a Holder of a Claim or Interest may have
with respect to any Allowed Claim or Interest, or any distribution to be made
pursuant to the Plan on account of such Claim or Interest. The entry of the
Confirmation Order will constitute the Bankruptcy Court's approval of the
compromise or settlement of all such claims or controversies and the Bankruptcy
Court's finding that such compromise or settlement is in the best interests of
the Company, Reorganized Cityscape, Reorganized CSC and their respective
property and Claim and Interest Holders, and is fair, equitable and reasonable.

      Except for Disputed Claims, distributions will be made on the Effective
Date or as soon as practicable thereafter. See Section IV.F, "THE PLAN OF
REORGANIZATION -- Distributions Under the Plan" for a discussion of Plan
provisions that may affect the timing of distributions under the Plan.
Distributions on account of Claims that become Allowed Claims after the
Effective Date will be made pursuant to Section V.B of the Plan (relating to
timing and calculation of amounts to be distributed under the Plan) and Section
V.H of the Plan (relating to distributions on account of Disputed Claims once
they are allowed). See Section IV.B, "THE PLAN OF REORGANIZATION --
Distributions Under the Plan Timing and Methods of Distribution."

      The treatment of Claims described below is subject to the Plan provisions
described in Section IV, "THE PLAN OF REORGANIZATION -- Treatment of Claims and
Interests Under the Plan -- Additional Information Regarding Treatment of
Certain Claims."

B.    Treatment of Claims and Interests Under the Plan

      Description of Claims or Interests

      Unclassified Claims

      Administrative Claims. Subject to certain additional requirements for
professionals and certain other entities, each Holder of an Allowed
Administrative Claim will receive on account of its Administrative Claim and in
full satisfaction thereof, Cash equal to the amount of such Allowed
Administrative Claim on, as soon as practicable after, the later of the
Effective Date and the day on which such Claim becomes an Allowed Claim, unless
the Holder and the Debtors or the Reorganized Company agree or will have agreed
to other treatment of such Claim, or an order of the Bankruptcy Court provides
for other terms; provided, that if incurred in the ordinary course of business
or otherwise assumed by the Debtors pursuant to the Plan (including
Administrative Claims of governmental units for taxes), an Allowed
Administrative Claim will be assumed on the Effective Date and paid, performed
or settled by the Reorganized Company when due in accordance with the terms and
conditions of the particular agreement(s) governing the obligation in the
absence of the Reorganization Cases. In addition, on or before the Effective
Date, all fees payable pursuant to 28 U.S.C. ss.1930, as determined by the
Bankruptcy Court at the Confirmation Hearing, will be paid in Cash equal to the
amount of such Administrative Claim.

      The Debtors are not currently in a position to determine the amount of
Administrative Claims, Priority Tax Claims and other Priority Claims for which
they will be liable as of the Effective Date. However, solely for purposes of
preparing the projections attached hereto as Exhibit C and the liquidation
analysis attached hereto as Exhibit D and of estimating recoveries for creditors
under the Plan, they have assumed (they believe conservatively) that the
aggregate amount of such Claims will not exceed $10,000,000.

      Priority Tax Claims. Unless otherwise agreed to by the Debtors or the
Reorganized Company and the Holder of a Priority Tax Claim, each Holder of an
Allowed Priority Tax Claim will receive, at the sole option of the Reorganized
Company (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim
on the later of the Effective Date and the date on which such Claim becomes an
Allowed Priority Tax Claim, or as soon thereafter as is practicable, or (ii)
equal quarterly cash payments in an aggregate amount equal to such Allowed
Priority Tax Claim, together with interest at a fixed annual rate to be
determined by the Bankruptcy Court or otherwise agreed to by the Reorganized
Company and such Holder, over a period through the sixth anniversary of the date
of assessment of


                                       25
<PAGE>   27

such Allowed Priority Tax Claim, or upon such other terms determined by the
Bankruptcy Court to provide the Holder of such Allowed Priority Tax Claim
deferred cash payments having a value, as of the Effective Date, equal to such
Allowed Priority Tax Claim.

      The Debtors are not currently in a position to determine the amount of
Administrative Claims, Priority Tax Claims and other Priority Claims for which
they will be liable as of the Effective Date. However, solely for purposes of
preparing the projections attached hereto as Exhibit C and the liquidation
analysis attached hereto as Exhibit D and of estimating recoveries for creditors
under the Plan, they have assumed (they believe conservatively) that the
aggregate amount of such Claims will not exceed $10,000,000.

      Classified Claims Against and Interests In Cityscape

      Class 1 -- Bank Claims. Class 1 consists of all Allowed Bank Claims, if
any, against the Debtors arising from the Prepetition Credit Facilities
including all Claims arising pursuant to any guarantee thereof and any pledge of
assets as security therefor. Pursuant to the Financing Orders, proceeds from the
DIP Facilities have been used, among other things, to pay all Allowed Bank
Claims against the Debtors in full in Cash. Therefore, it is contemplated that
there will not be any Bank Claims in Class 1 as of the Effective Date. However,
to the extent that there are any Bank Claims in Class 1 as of the Effective
Date, (i) each such Claim will be deemed allowed as an Allowed Class 1 Claim in
the aggregate amount equal to the sum of (A) the unpaid principal and interest
as of the Petition Date less all payments thereon received and retained by the
respective Holder thereof during the period from the Petition Date to the
Effective Date, (B) all accrued and unpaid interest from the Petition Date
through and including the Effective Date at the rates provided for in the
Financing Orders, and (C) all other amounts due and owing as of the Effective
Date in respect of the respective Bank Claims pursuant to the Financing Orders
and pursuant to the Greenwich Facility or the CIT Facility, as the case may be,
and (ii) on the Effective Date, each Holder will receive, on account thereof, a
payment in Cash by wire transfer equal to the amount of such Allowed Class 1
Claim. Therefore, Class 1 is Unimpaired and, accordingly, is not entitled to
vote on the Plan.

      The Debtors expect that there will be no Allowed Bank Claims against the
Debtors as of the Effective Date.

      Class 2a et seq. -- Other Secured Claims. All Allowed Secured Claims
against the Debtors that are not included in Class 1 (defined in the Plan as
"Other Secured Claims") are classified in Class 2a et seq. These Classes will be
further divided into subclasses designated by letters of the alphabet (Class 2a,
Class 2b, and so on) so that each Holder of any Other Secured Claim against the
Debtors is in a Class by itself, except to the extent that there are Other
Secured Claims that are substantially similar to each other and may be included
within a single Class. The Debtors will File a schedule of each Other Secured
Claim, if any, against the Debtors on or before ten (10) days prior to the
commencement of the Confirmation Hearing. Each Allowed Other Secured Claim
against the Debtors will be treated as follows: either (a) the Plan will leave
unaltered the legal, equitable and contractual rights to which such Claim
entitles the Holder; (b)(i) the Debtors will cure any default with respect to
such Claim that occurred before or after the Petition Date (other than a default
of a kind specified in Section 365(b)(2) of the Bankruptcy Code), (ii) the
maturity of such Claim will be reinstated as such maturity existed before any
such default, (iii) the Holder of such Claim will be compensated for any damages
incurred as a result of any reasonable reliance by the Holder on any right to
accelerate its Claim, and (iv) the legal, equitable, and contractual rights of
such Holder will not otherwise be altered; or (c) such Claim will receive such
other treatment to which the Holder consents. The Holder of each Allowed Other
Secured Claim against the Debtors which is treated as set forth in clause (a),
(b) or (c) of this paragraph will be Unimpaired and will not be entitled to vote
for or against the Plan. Cityscape is not aware of any Class 2a Claims.

      The Debtors expect that there will be no Allowed Other Secured Claims
against the Debtors as of the Effective Date.

      Class 3 -- Priority Claims. Class 3 Claims are Unimpaired. Class 3
consists of the Allowed Priority Claims against the Debtors. A Priority Claim is
a Claim for an amount entitled to priority under Sections 507(a)(3), 507(a)(4),
507(a)(5), 507(a)(6), 507(a)(7), or 507(a)(9) of the Bankruptcy Code, and does
not include any Priority Tax Claim. These unsecured Priority Claims include,
among others: (a) unsecured Claims for accrued employee compensation earned
within 90 days prior to the Petition Date, to the extent of $4,000 per employee;
(b)


                                       26
<PAGE>   28

contributions to employee benefit plans arising from services rendered within
180 days prior to the Petition Date, but only to the extent of (i) the number of
employees covered by such plans multiplied by $4,000, less (ii) the aggregate
amount paid to such employees under Section 507(a)(3) of the Bankruptcy Code,
plus the aggregate amount paid by the estate on behalf of such employees to any
other employee benefit plan.

      The Plan provides that unless otherwise agreed to by the parties, each
Holder of an Allowed Class 3 Claim will be entitled to receive (i) Cash equal to
the amount of such Claim on the latest of (a) the Effective Date or as soon as
practicable thereafter, (b) the date such Claim becomes an Allowed Priority
Claim, and (c) the date that such Claim would be paid in accordance with any
terms and conditions of any agreements or understandings relating thereto
between the Debtors and the Holder of such Claim, and/or (ii) such other
treatment, as determined by the Bankruptcy Court, required to render such Claim
Unimpaired. Allowed Claims in Class 3 are Unimpaired under the Plan and Holders
of Allowed Claims in Class 3 will be deemed to have accepted the Plan.

      The Debtors are not currently in a position to determine the amount of
Administrative Claims, Priority Tax Claims and other Priority Claims for which
they will be liable as of the Effective Date. However, solely for purposes of
preparing the projections attached hereto as Exhibit C and the liquidation
analysis attached hereto as Exhibit D and of estimating recoveries for creditors
under the Plan, they have assumed (they believe conservatively) that the
aggregate amount of such Claims will not exceed $10,000,000.

      Class 4 -- Senior Note Claims and Class 4a -- Small Senior Note Claims.
Class 4 consists of the Allowed Unsecured Claims against the Debtors of Holders
of Old Senior Notes (including all Claims and causes of action arising therefrom
or in connection therewith and all guarantees related thereto). The Claim of
each Holder of Old Senior Notes (including Holders of Small Senior Note Claims)
as of the Distribution Record Date will be allowed in the aggregate amount of
the unpaid principal of such Holder's Old Senior Notes plus unpaid interest
(calculated in accordance with the provisions of the indenture governing the Old
Senior Notes) which accrued prior to the Petition Date. Class 4 is Impaired and,
accordingly, Holders of Allowed Class 4 Claims are entitled to vote on the Plan.

      On the Effective Date or as soon as practicable thereafter, each Holder of
an Allowed Class 4 Claim will receive on account of such Allowed Claim a Pro
Rata portion of 6,288,564 shares of New Common Stock (i.e., one share of New
Common Stock for every $52.88 in principal of and accrued interest on such
Holder's Old Senior Notes).

      Class 4a consists of the Allowed Small Senior Note Claims, which are
Allowed Senior Note Claims whose principal amounts are equal to or less than
$5,000.00 or whose Holders agree on a Ballot or otherwise in writing to reduce
the principal amounts of such Allowed Senior Note Claims to $5,000.00 and to
release and waive any further or additional Claims against the Debtors. Class 4a
is Impaired and, accordingly, Holders of Allowed Class 4a Claims are entitled to
vote on the Plan. On the Effective Date or as soon as practicable thereafter,
each Holder of an Allowed Class 4a Claim will receive on account of such Allowed
Claim Cash in an amount equal to (i) $10.00, multiplied by (ii) the number of
shares of New Common Stock that such Holder would have been entitled to receive
as a Holder of an Allowed Class 4 Claim (after giving effect to the voluntary
reduction by the Holder of a Class 4 Claim of the principal amount of such
Holder's Claim to $5,000.00); provided, however, that any Holder of a Class 4a
Claim may elect on a Ballot or otherwise in writing to receive the treatment
afforded by Class 4 (i.e., New Common Stock) rather than this Class 4a (i.e.,
Cash).

      To the extent, if any, that the classification and manner of satisfying
Claims and Interests under the Plan do not take into consideration all
contractual, legal and equitable subordination rights that Holders of Allowed
Class 4 and Class 4a Claims may have against Holders of Claims or Interests with
respect to distributions made pursuant to this Plan, each Holder of an Allowed
Class 4 or Class 4a Claim will be deemed, upon the Effective Date, to have
waived all contractual, legal or equitable subordination rights that such Holder
might have, including, without limitation, any such rights arising out of the
Old Senior Notes, the Old Subordinated Debentures, the indentures governing such
Old Securities or otherwise.

      (For a description of how amounts of New Common Stock to be distributed
under the Plan to Holders of Allowed Claims in Classes 4, 5 and 6 were
calculated, see "Additional Information Regarding Treatment of Certain Claims -
Allocation of New Common Stock Among Classes 4, 5 and 6" below.)


                                       27
<PAGE>   29

      There will be approximately $332,512,500 in Allowed Class 4 and Class 4a
Claims as of the Effective Date.

      Class 5 -- General Unsecured Claims and Class 5a -- Small Unsecured
Claims. Class 5 consists of all Allowed General Unsecured Claims against the
Debtors, including, but not limited to, Claims resulting from the rejection of
leases or executory contracts (other than such Claims that fall within Class 5a
or Class 13). Class 5 is Impaired and, accordingly, Holders of Allowed Class 5
Claims are entitled to vote on the Plan.

      On the Effective Date, or as soon as practicable thereafter, each Holder
of an Allowed Class 5 Claim will receive on account of such Allowed Claim one
share of New Common Stock for every $70.47 of such Holder's Allowed Claim.

      Class 5a consists of the Allowed Small Unsecured Claims, which are Allowed
General Unsecured Claims that are equal to or less than $8,000.00 or whose
Holders agree on a Ballot or otherwise in writing to reduce such Allowed
Unsecured Claims to $8,000.00 and to release and waive any further or additional
Claims against the Debtors. Class 5a is Impaired and, accordingly, Holders of
Allowed Class 5a Claims are entitled to vote on the Plan. On the Effective Date
or as soon as practicable thereafter, each Holder of an Allowed Class 5a Claim
will receive on account of such Allowed Claim Cash in an amount equal to (i)
$10.00, multiplied by (ii) the number of shares of New Common Stock that such
Holder would have been entitled to receive as a Holder of an Allowed Class 5
Claim (after giving effect to the voluntary reduction by the Holder of a Class 5
Claim of such Holder's Claim to $8,000.00); provided, however, that any Holder
of a Class 5a Claim may elect on a Ballot or otherwise in writing to receive the
treatment afforded by Class 5 (i.e., New Common Stock) rather than this Class 5a
(i.e., Cash).

      Classes 5 and 5a also includes Trade Claims. At the outset of their
chapter 11 cases, the Debtors sought and obtained Bankruptcy Court approval to
pay in the ordinary course of business all outstanding Trade Claims to trade
creditors who continue to provide normal trade credit terms to, or have
reinstated normal trade credit terms for, the Debtors or who have previously
agreed to compromise their Claims in a manner acceptable to the Debtors. To the
extent that any payments made by the Debtors to Holders of Trade Claims pursuant
to such Order resulted in such Holders' receiving greater distributions on
account of their Trade Claims than that to which they are entitled under Section
V.B.5 of the Plan, any claim of the Debtors for recovery of such overpayments to
such Holders will be assigned by the Debtors to Reorganized Cityscape or
Reorganized CSC, as applicable, pursuant to Section XI.F of the Plan.

      (For a description of how amounts of New Common Stock to be distributed
under the Plan to Holders of Allowed Claims in Classes 4, 5 and 6 were
calculated, see "Additional Information Regarding Treatment of Certain Claims -
Allocation of New Common Stock Among Classes 4, 5 and 6" below.)

      The Debtors expect that there will be approximately $8.0 million in
Allowed Class 5 and Class 5a Claims but, for purposes of estimating recoveries
for Holders of Allowed Claims under the Plan, have assumed that Allowed Class 5
and 5a Claims will total $10,000,000.

      Class 6 -- Subordinated Debenture Claims and Class 6a -- Small
Subordinated Debenture Claims. Class 6 consists of Allowed Unsecured Claims
against Cityscape of Holders of Old Subordinated Debentures (including all
Claims and causes of action arising therefrom or in connection therewith). The
Claim of each Holder of Old Subordinated Debentures (including Holders of Small
Subordinated Debenture Claims) as of the Distribution Record Date will be
allowed in the aggregate amount of the unpaid principal of such Holder's Old
Subordinated Debentures plus unpaid interest (calculated in accordance with the
provisions of the indenture governing the Old Subordinated Debentures) which
accrued prior to the Petition Date. Class 6 is Impaired and, accordingly,
Holders of Allowed Class 6 Claims are entitled to vote on the Plan.

      On the Effective Date or as soon as practicable thereafter, each Holder of
an Allowed Class 6 Claim will receive on account of such Allowed Claim a Pro
Rata portion of 369,524 shares of New Common Stock (i.e., one share of New
Common Stock for every $369.82 in principal of and accrued interest on such
Holder's Old Subordinated Debentures); provided, however, that if Class 6 and
Class 6a do not accept the Plan, no New Common Stock (or any other property)
will be distributed to Holders of Allowed Class 6 Claims pursuant to the Plan,
and any


                                       28
<PAGE>   30

New Common Stock that would have been distributed to the Holders of Class 6
Claims will be distributed Pro Rata to the Holders of Class 4 Claims as part of
their distribution pursuant to Section V.B.4 of the Plan.

      Class 6a consists of the Allowed Small Subordinated Debenture Claims,
which are Allowed Subordinated Debenture Claims whose principal amounts are
equal to or less than $50,000.00 or whose Holders agree on a Ballot or otherwise
in writing to reduce the principal amounts of such Allowed Subordinated
Debenture Claims to $50,000.00 and to release and waive any further or
additional Claims against the Debtors. Class 6a is Impaired and, accordingly,
Holders of Allowed Class 6a Claims are entitled to vote on the Plan. On the
Effective Date or as soon as practicable thereafter, each Holder of an Allowed
Class 6a Claim will receive on account of such Allowed Claim Cash in an amount
equal to (i) $10.00, multiplied by (ii) the number of shares of New Common Stock
that such Holder would have been entitled to receive as a Holder of an Allowed
Class 6 Claim (after giving effect to the voluntary reduction by the Holder of a
Class 6 Claim of the principal amount of such Holder's Claim to $50,000.00);
provided, however, that (i) any Holder of a Class 6a Claim may elect on a Ballot
or otherwise in writing to receive the treatment afforded by Class 6 (i.e., New
Common Stock) rather than this Class 6a (i.e., Cash), and (ii) if Class 6 and
Class 6a do not accept the Plan, no Cash (or any other property) will be
distributed to Holders of Allowed Class 6a Claims pursuant to the Plan.

      (For a description of how amounts of New Common Stock to be distributed
under the Plan to Holders of Allowed Claims in Classes 4, 5 and 6 were
calculated, see "Additional Information Regarding Treatment of Certain Claims -
Allocation of New Common Stock Among Classes 4, 5 and 6" below.)

      There will be approximately $136,658,720 in Allowed Class 6 and Class 6a
Claims as of the Effective Date.

      Class 7 -- Old Debt Securities Claims. Class 7 consists of all Allowed
Securities Claims on account of Old Debt against the Debtors. The Holders of
Allowed Class 7 Claims, if any, will not receive or retain any interest or
property under the Plan and, therefore, Class 7 is Impaired and is deemed to
have rejected the Plan. Accordingly, votes of Holders of Allowed Class 7 Claims
are not being solicited. If there are any Allowed Class 7 Claims, the Debtors
intend to seek to confirm the Plan pursuant to the "cramdown" provisions of
Section 1129(b) of the Bankruptcy Code.

      Class 8 -- Interests of Holders of Old Series A Preferred Stock. Class 8
consists of Allowed Interests (aggregating 626 shares) of Old Series A Preferred
Stock. The Holders of Allowed Class 8 Interests will not receive or retain any
interest or property under the Plan and, therefore, Class 8 is Impaired and is
deemed to have rejected the Plan. Accordingly, votes of Holders Allowed Class 8
Interests are not being solicited. The Debtors intend to seek to confirm the
Plan as to Class 8 pursuant to the "cramdown" provisions of Section 1129(b) of
the Bankruptcy Code.

      Class 9 -- Old Series A Preferred Stock Securities Claims. Class 9
consists of all Allowed Securities Claims on account of Old Series A Preferred
Stock against the Debtors. The Holders of Allowed Class 9 Claims, if any, will
not receive or retain any interest or property under the Plan and, therefore,
Class 9 is Impaired and is deemed to have rejected the Plan. Accordingly, votes
of Holders of Allowed Class 9 Claims are not being solicited. If there are any
Allowed Class 9 Claims, the Debtors intend to seek to confirm the Plan pursuant
to the "cramdown" provisions of Section 1129(b) of the Bankruptcy Code.

      Class 10 -- Interests of Holders of Old Series B Preferred Stock. Class 10
consists of Allowed Interests (aggregating 4,551 shares) of Holders of Old
Series B Preferred Stock. The Holders of Allowed Class 10 Interests will not
receive or retain any interest or property under the Plan and, therefore, Class
10 is Impaired and is deemed to have rejected the Plan. Accordingly, votes of
Allowed Class 10 Interests are not being solicited. The Debtors intend to seek
to confirm the Plan as to Class 10 pursuant to the "cramdown" provisions of
Section 1129(b) of the Bankruptcy Code.

      Class 11 -- Old Series B Preferred Stock Securities Claims. Class 11
consists of all Allowed Securities Claims on account of Old Series B Preferred
Stock against the Debtors. The Holders of Allowed Class 11 Claims, if any, will
not receive or retain any interest or property under the Plan and, therefore,
Class 11 is Impaired and is


                                       29
<PAGE>   31

deemed to have rejected the Plan. Accordingly, votes of Holders of Allowed Class
11 Claims are not being solicited. If there are any Allowed Class A11 Claims,
the Debtors intend to seek to confirm the Plan pursuant to the "cramdown"
provisions of Section 1129(b) of the Bankruptcy Code.

      Class 12 -- Interests of Holders of Old Cityscape Common Stock. Class 12
consists of the Allowed Interests of Holders of Old Cityscape Common Stock. The
Holders of Allowed Class 12 Interests will not receive or retain any interest or
property under the Plan and, therefore, Class 12 is Impaired and is deemed to
have rejected the Plan. Accordingly, votes of Holders of Allowed Class A12
Interests are not being solicited. The Debtors intend to seek to confirm the
Plan as to Class 12 pursuant to the "cramdown" provisions of Section 1129(b) of
the Bankruptcy Code.

      Class 13 -- Interests of Holders of Old Stock Rights in Cityscape and all
Claims Arising Out of Such Old Stock Rights. Class 13 consists of all Allowed
Interests in Cityscape of Holders of Old Stock Rights and all Allowed Claims
arising out of any such Old Stock Rights, including, without limitation, all
Claims arising out of the rejection of Old Stock Rights. The Holders of Allowed
Class 13 Interests and Claims will not receive or retain any interest or
property under the Plan and, therefore, Class 13 is Impaired and is deemed to
have rejected the Plan. Accordingly, votes of Holders of Allowed Class 13
Interests and Claims are not being solicited. The Debtors intend to seek to
confirm the Plan as to Class 13 pursuant to the "cramdown" provisions of Section
1129(b) of the Bankruptcy Code.

      Class 14 -- Old Cityscape Common Stock and Old Warrant Securities Claims.
Class 14 consists of all Allowed Securities Claims on account of Old Cityscape
Common Stock or Old Warrants against the Debtors. The Holders of Allowed Class
14 Claims, if any, will not receive or retain any interest or property under the
Plan and, therefore, Class 14 is Impaired and is deemed to have rejected the
Plan. Accordingly, votes of Holders of Allowed Class 14 Claims are not being
solicited. If there are any Allowed Class 14 Claims, the Debtors intend to seek
to confirm the Plan pursuant to the "cramdown" provisions of Section 1129(b) of
the Bankruptcy Code.

      Additional Information Regarding Treatment of Certain Claims

      Allocation of New Common Stock Among Classes 4,5 and 6

Background and Assumptions

      As of the Effective Date, there will be (i) approximately $332,512,500 in
Allowed Class 4 Claims, and (ii) approximately $136,658,720 in Allowed Class 6
Claims (each including principal and accrued and unpaid interest as of the
Petition Date). The Debtors have estimated that there will ultimately be
$8,000,000 in Allowed Class 5 Claims; however, for purposes of performing the
following calculations and estimating recoveries for Holders of Allowed Claims
in Classes 4, 5 and 6, they have assumed (conservatively) that Allowed Class 5
Claims will ultimately total $10,000,000.

      For purposes of making distributions required under the Plan and based
upon, among other things, the Debtors' estimate that Allowed Class 5 Claims will
total $10,000,000, the Debtors have estimated that approximately 6,800,000
shares of New Common Stock will be issued by Reorganized Cityscape, although the
certificate of incorporation of Reorganized Cityscape will authorize the
issuance of a number of shares significantly in excess of that amount.

      The Plan reflects a distribution of 94.45% (6,288,564 shares) and 5.55%
(369,524 shares) of the New Common Stock to the Holders of Allowed Claims in
Classes 4 and 6, respectively, before giving effect to any distributions of New
Common Stock on account of Allowed Class 5 Claims. (The 5.55% of the New Common
Stock to be distributed to Class 6 represents New Common Stock that would have
otherwise been distributed to Class 4, but which Class 4 is, in effect,
contributing to Class 6.) Thus, for every dollar of Claim that is allowed in
Class 5, the percentages of New Common Stock held by Holders of Claims in
Classes 4 and 6 will be diluted in proportionate amounts. The calculations set
forth below reflect the effect of such dilution when Allowed Claims in Class 5
equal the estimated amount of $10,000,000.


                                       30
<PAGE>   32

      For purposes of the following calculations, the Debtors have assumed that
no Holders of Allowed Claims in Classes 4, 5 and 6 elect to receive Cash in lieu
of New Common Stock and that, therefore, there are no Allowed Claims in Classes
4a, 5a and 6a.

Class 4 Distribution

      Of the estimated 6,800,000 shares of New Common Stock to be issued,
Holders of Old Senior Notes will be entitled to a distribution of 6,288,564
shares, calculated as follows:

      Allowed Amount of Class 4 Claims ($332,512,500) +
      Allowed Amount of Class 6 Claims ($136,658,720)
      -----------------------------------------------
      Allowed Amount of Class 4 Claims ($332,512,500)+
      Allowed Amount of Class 6 Claims ($136,658,720)+
      Allowed Amount of Class 5 Claims (estimated at $10,000,000)

      x 6,800,000 shares

      - Amount of shares contributed by Class 4 to Class 6 (as set forth
        above) (369,524 shares)

      = 6,288,564 shares (or 92.48% of the 6,800,000 shares).

      Based upon the aggregate, allowed amount of Class 4 Claims (approximately
$332,512,500), this means that each Holder of a Class 4 Claim will receive one
share of New Common Stock for each $52.88 of the amount of such Holder's Claim
(including both principal and unpaid interest as of the Petition Date).

      Note that if Class 6 or Class 6a votes to reject the Plan, Class 4 will
receive an additional 369,524 shares that would otherwise have been distributed
to Class 6.

Class 6 Distribution

      Of the estimated 6,800,000 shares of New Common Stock to be issued,
Holders of Old Subordinated Debentures will be entitled to a distribution of
369,524 shares, or 5.43% of the 6,800,000 shares (provided that Classes 6 and 6a
vote to accept the Plan). Based upon the aggregate, allowed amount of Class 6
Claims (approximately $136,658,720), this means that each Holder of a Class 6
Claim will receive one share of New Common Stock for each $369.82 of the amount
of such Holder's Claim (including both principal and unpaid interest as of the
Petition Date).

      Note that if Class 6 or Class 6a votes to reject the Plan, Class 6 will
not receive any shares of New Common Stock.

Class 5 Distribution

      Of the estimated 6,800,000 shares of New Common Stock to be issued,
Holders of Allowed General Unsecured Claims will be entitled to a distribution
of approximately 141,912 shares, calculated as follows:

      Allowed Amount of Class 5 Claims (estimated at $10,000,000)
      -----------------------------------------------------------
      Allowed Amount of Class 4 Claims ($332,512,500) +
      Allowed Amount of Class 6 Claims ($136,658,720) +
      Allowed Amount of Class 5 Claims (estimated at $10,000,000)

      x 6,800,000 shares

      = 141,912 shares (or 2.09% of the 6,800,000 shares).


                                       31
<PAGE>   33

      Based upon the estimated, allowed amount of Class 5 Claims ($l0,000,000),
this means that each Holder of a Class 5 Claim will receive one share of New
Common Stock for each $70.47 of such Holder's Allowed Claim.

Effect of Variations in Aggregate Class 5 Claim Amount

      In the event Allowed Class 5 Claims total less than $10,000,000, fewer
than 141,912 shares will be distributed to Class 5, and the percentages of the
outstanding New Common Stock held by each of Class 4 and Class 6 will exceed
92.48% and 5.43%, respectively, in proportionate amounts. In the event Allowed
Class 5 Claims total more than $10,000,000, (a) more than 6,800,000 shares of
New Common Stock will be issued and outstanding (in an amount equal to (i) the
aggregate amount of Allowed Class 5 Claims in excess of $10,000,000, divided by
(ii) $70.47), (b) such excess shares will distributed to the Holders of Allowed
Class 5 Claims at the rate of one share per $70.47 in Allowed Claim amount, and
(c) the percentages of the outstanding New Common Stock held by each of Class 4
and Class 6 will be diluted below 92.48% and 5.43%, respectively, in
proportionate amounts.

      Treatment of Unclassified Claims

      The Bankruptcy Code does not require classification of certain priority
claims against a debtor. In this case, these unclassified claims include
Administrative Claims and Priority Tax Claims. All distributions referred to
below that are scheduled for the Effective Date will be made on the Effective
Date or as soon as practicable thereafter.

      Administrative Claims. An "Administrative Claim" is a claim for payment of
an administrative expense of a kind specified in Section 503(b) of the
Bankruptcy Code and referred to in Section 507(a)(1) of the Bankruptcy Code,
including, without limitation, the actual and necessary costs and expenses
incurred after the commencement of a chapter 11 case of preserving the estate or
operating the business of the company (including wages, salaries and commissions
for services), loans and advances to the company made after the petition date,
compensation for legal and other services and reimbursement of expenses awarded
or allowed under Section 330(a) or 331 of the Bankruptcy Code, certain retiree
benefits, certain reclamation claims, and all fees and charges against the
estate under Section 1930 of title 28, United States Code. Under the Plan, each
Holder of an Allowed Administrative Claim will receive on account of its
Administrative Claim and in full satisfaction thereof, Cash equal to the amount
of such Allowed Administrative Claim on, as soon as practicable after, the later
of the Effective Date and the day on which such Claim becomes an Allowed Claim,
unless the Holder and the Debtors or the Reorganized Company agree or will have
agreed to other treatment of such Claim, or an order of the Bankruptcy Court
provides for other terms; provided, that if incurred in the ordinary course of
business or otherwise assumed by the Debtors pursuant to the Plan (including
Administrative Claims of governmental units for taxes), an Allowed
Administrative Claim will be assumed on the Effective Date and paid, performed
or settled by the Reorganized Company, when due in accordance with the terms and
conditions of the particular agreement(s) governing the obligation in the
absence of the Reorganization Cases. Except as provided below for (i) non-tax
liabilities incurred in the ordinary course of business by the Debtors, (ii)
Post-Petition Tax Claims, and (iii) DIP Claims, requests for payment of
Administrative Claims must be Filed and served on counsel for the Debtors and
the Reorganized Company no later than (x) sixty (60) days after the Effective
Date, or (y) such later date, if any, as the Bankruptcy Court orders upon
application made prior to the end of such 60-day period. Holders of
Administrative Claims (including, without limitation, professionals requesting
compensation or reimbursement of expenses and the Holders of any Claims for
federal, state or local taxes) that are required to File a request for payment
of such Claims and that do not File such requests by the applicable bar date
will be forever barred from asserting such Claims against the Debtors, the
Reorganized Company, or any of their respective properties. No request for
payment will be required in connection with the DIP Claims, which,
notwithstanding anything to the contrary in the Plan, will be paid in full in
Cash on the Effective Date, as provided in the DIP Facilities and the Financing
Orders.

      Claims by Professionals. Professionals or other Persons requesting
compensation or reimbursement of expenses pursuant to Section 327, 328, 330,
331, 503(b) or 1103 of the Bankruptcy Code for services rendered on or before
the Effective Date (including, without limitation, any compensation requested
pursuant to Section 503(b)(4) of the Bankruptcy Code by any professional or
other entity for making a substantial contribution in the Reorganization Cases)
shall file and serve on the Reorganized Company and counsel for the Reorganized
Company, an application for final allowance of compensation and reimbursement of
expenses no later than


                                       32
<PAGE>   34

(i) 60 days after the Effective Date, or (ii) such later date, if any, as the
Bankruptcy Court orders order upon application made prior to the end of such
60-day period; provided, however, that any professional who may receive
compensation or reimbursement of expenses pursuant to the Ordinary Course
Professionals' Order without having filed an application may continue to receive
compensation or reimbursement for services rendered before the Effective Date
without further Bankruptcy Court review or approval to the extent provided in
the Ordinary Course Professionals' Order. Objections to applications of
professionals or other Persons for compensation or reimbursement of expenses
must be Filed and served on the Reorganized Company, counsel for the Reorganized
Company and the requesting professional or other Person on or before the later
of (x) ninety (90) days after the Effective Date and (y) thirty (30) days after
such date as the Bankruptcy Court establishes as the deadline for Filing such
applications. The professionals of the Debtors and any Committee shall be
entitled to reasonable compensation by, and reimbursement of expenses from, the
Reorganized Company for services rendered or costs incurred by such
professionals after the Effective Date promptly after submission of appropriate
invoices to the Reorganized Company. In the event of a dispute over any such
invoices, the Reorganized Company will promptly pay any amount not in dispute
and, if such dispute cannot be resolved among the parties, such dispute will be
resolved by the Bankruptcy Court.

      Subject to the approval of the Bankruptcy Court, unpaid fees and expenses
of counsel to each of the Unofficial Committees incurred through and including
the Effective Date will be paid on or as soon as practicable after the Effective
Date. The Debtors acknowledge that the Unofficial Committees and their counsel
have made a substantial contribution to the Debtors' chapter 11 cases and will
support applications for payment of the reasonable fees and expenses of counsel
to each of the Unofficial Committees.

      Claims by Indenture Trustees. On or as soon as practicable after the
Effective Date, the Reorganized Company will pay the contractual claims of the
Indenture Trustees for their fees and expenses including their reasonable
attorneys' fees and expenses. To the extent, after being furnished with normal
supporting documents for such fees and expenses, the Reorganized Company
disputes the reasonableness of any such fees and expenses, the Reorganized
Company will pay such fees and expenses as are not disputed, and will submit to
the Indenture Trustee a written list of specific fees and expenses viewed by the
Reorganized Company as not being reasonable. To the extent that the Reorganized
Company and the Indenture Trustee are unable to resolve the dispute, the dispute
will be resolved by the Bankruptcy Court. Pending the resolution of any such
dispute by consent or by Final Order of the Bankruptcy Court, an amount of Cash
equal to the disputed portion of the Indenture Trustee's request for fees and
expenses will be held in trust in one or more segregated bank accounts in the
name of the applicable Disbursing Agent for the benefit of the applicable
Indenture Trustee, accounted for separately, and paid to the Indenture Trustee
and/or returned to the Reorganized Company, as required by the agreement of the
Reorganized Company and the Indenture Trustee or the Final Order of the
Bankruptcy Court, as the case may be. The Indenture Trustees will not attach or
set off any of their fees and expenses against distributions to Holders of Old
Senior Notes or Old Subordinated Debentures and will not otherwise withhold or
delay any such distributions.

      Priority Tax Claims. A Priority Tax Claim is a claim for an amount
entitled to priority under Section 507(a)(8) of the Bankruptcy Code. Unless
otherwise agreed to by the Debtors or the Reorganized Company and a Holder of a
Priority Tax Claim, each Holder of an Allowed Priority Tax Claim will receive,
at the sole option of the Reorganized Company, (i) Cash equal to the unpaid
portion of such Allowed Priority Tax Claim on the later of the Effective Date
and the date on which such Claim becomes an Allowed Priority Tax Claim or as
soon thereafter as is practicable, or (ii) equal quarterly cash payments in an
aggregate amount equal to such Allowed Priority Tax Claim, together with
interest at a fixed annual rate to be determined by the Bankruptcy Court or
otherwise agreed to by the Reorganized Company, and such Holder, over a period
through the sixth anniversary of the date of assessment of such Allowed Priority
Tax Claim, or upon such other terms determined by the Bankruptcy Court to
provide the Holder of such Allowed Priority Tax Claim deferred cash payments
having a value, as of the Effective Date, equal to such Allowed Priority Tax
Claim. The foregoing treatment of Allowed Priority Tax Claims is consistent with
the provisions of Section 1129(a)(9)(C) of the Bankruptcy Code, and the Holders
of Allowed Priority Tax Claims are not entitled to vote on the Plan. Pursuant to
Section 1123(a)(1) of the Bankruptcy Code, Priority Tax Claims are not
designated as a Class of Claims for purposes of the Plan.


                                       33
<PAGE>   35

      Cramdown

      The so-called "cramdown" provisions of Section 1129(b) of the Bankruptcy
Code permit confirmation of a chapter 11 plan of reorganization in certain
circumstances even if the plan is not accepted by all impaired classes of claims
and interests. In the event that at least one impaired Class of Claims votes to
accept the Plan (and at least one impaired Class either votes to reject the Plan
or is deemed to have rejected the Plan), the Debtors reserve the right to
request that the Bankruptcy Court confirm the Plan under the cramdown provisions
of the Bankruptcy Code. In that event, the Debtors have reserved the right to
modify the Plan to the extent, if any, that Confirmation pursuant to Section
1129(b) of the Bankruptcy Code requires or permits modification of the Plan.

      At a minimum, the Debtors will request Confirmation of the Plan over the
deemed rejection of Classes 7, 8, 9, 10, 11, 12, 13 and 14 under the Plan.

      Sources of Cash to Make Plan Distributions

      Except as otherwise provided in the Plan or the Confirmation Order, all
cash necessary for the Reorganized Company to make the payments pursuant to the
Plan will be obtained from the Reorganized Company's cash balances or the
operations of the Debtors or the Reorganized Company.

      Conditions Precedent to Confirmation and Consummation of the Plan

      Conditions to Confirmation

      Confirmation of the Plan cannot occur until all of the substantive
confirmation requirements under the Bankruptcy Code have been satisfied pursuant
to Section 1129 of the Bankruptcy Code. In addition, the Bankruptcy Court will
not enter the Confirmation Order unless the Confirmation Order is acceptable in
form and substance to the Debtors and the Confirmation Order expressly
authorizes and directs the Debtors, Reorganized Cityscape and Reorganized CSC to
perform those actions specified in the Plan. Finally, it will be a condition to
Confirmation that each of the events and actions required by the Plan to occur
or to be taken prior to Confirmation will have occurred or been taken, or the
Debtors, or the party whose obligations are conditioned upon such occurrences or
actions, as applicable, have waived such occurrences or actions and the
Bankruptcy Court confirms the Plan without such occurrence or action.

      Conditions to Effective Date

      The Effective Date will not occur and the Plan will not be consummated
unless and until each of the following conditions has been satisfied or waived
by the Debtors:

            (i) The Confirmation Order authorizes and directs that the Debtors,
      Reorganized Cityscape and Reorganized CSC take all actions necessary or
      appropriate to enter into, implement and consummate the contracts,
      instruments, releases, leases and other agreements or documents created in
      connection with the Plan, including those actions contemplated by the
      provisions of the Plan set forth in Section XI of the Plan.

            (ii) The statutory fees owing the U.S. Trustee have been paid in
      full.

            (iii) All other actions and documents necessary to implement the
      provisions of the Plan have been effected or executed or, if waivable,
      waived by the Person or Persons entitled to the benefit thereof.

C.    Waiver of Conditions to Confirmation and Effective Date

      Each of the conditions to Confirmation and the Effective Date, other than
the condition set forth in Section X.B.2 of the Plan (requiring payment in full
of statutory fees owed to the U.S. Trustee), may be waived in whole or in part
by Cityscape and CSC at any time, without notice or an Order of the Bankruptcy
Court. The failure to satisfy or to waive any condition may be asserted by
Cityscape and CSC regardless of the circumstances giving rise to the failure of
such condition to be satisfied (including any action or inaction by Cityscape
and CSC). The


                                       34
<PAGE>   36

failure of Cityscape and CSC to exercise any of the foregoing rights will not be
deemed a waiver of any other rights and each such right will be deemed an
ongoing right that may be asserted at any time.

      Modification or Revocation of the Plan; Severability

      The Debtors reserve the right to modify the Plan at any time prior to the
Confirmation Date in the manner provided for by Section 1127 of the Bankruptcy
Code or as otherwise permitted by law without additional disclosure pursuant to
Section 1125 of the Bankruptcy Code, except as the Bankruptcy Court may
otherwise order. The potential impact of any such amendment or modification on
the Holders of Claims and Interests cannot presently be foreseen, but may
include a change in the economic impact of the Plan on some or all of the
Classes or a change in the relative rights of such Classes.

      The Debtors reserve the right after the Confirmation Date and before the
Effective Date to modify the terms of the Plan or waive any conditions to the
effectiveness thereof if and to the extent the Debtors determine that such
modifications or waivers are necessary or desirable in order to consummate the
Plan. The Debtors will give such Holders of Claims and Interests notice of such
modifications or waivers as may be required by applicable law and the Bankruptcy
Court, and any such modifications will be subject to the approval of the
Bankruptcy Court to the extent required by, and in accordance with, Section 1127
of the Bankruptcy Code. The Debtors will give notice to any Committee, each of
the Unofficial Committees and each of the DIP Lenders of any modification of the
Plan.

      The Debtors reserve the right to revoke or withdraw the Plan prior to the
Confirmation Date. If the Debtors revoke or withdraw the Plan, or if
Confirmation does not occur, then the Plan will be null and void, and all of the
Debtors' respective obligations with respect to the Claims and Interest will
remain unchanged and nothing contained in the Plan or in this Disclosure
Statement will be deemed an admission or statement against interest or
constitute a waiver or release of any claims by or against either Debtor or any
other Person or to prejudice in any manner the rights of either Debtor or any
Person in any further proceedings involving either Debtor or any Person in any
further proceedings involving either Debtor of any Person.

      If, prior to Confirmation, any term or provision of the Plan is held by
the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court
will have the power, upon the request of the Company, to alter and interpret
such term or provision to make it valid or enforceable to the maximum extent
practicable, consistent with the original purpose of the term or provision held
to be invalid, void or unenforceable, and such term or provision will then be
applicable as altered or interpreted. Notwithstanding any such holding,
alteration or interpretation, the remainder of the terms and provisions of the
Plan will remain in full force and effect and will in no way be affected,
impaired or invalidated by such holding, alteration or interpretation. The
Confirmation Order will constitute a judicial determination and will provide
that each term and provision of the Plan, as it may have been altered or
interpreted in accordance with the foregoing, is valid and enforceable pursuant
to its terms.

D.    The Reorganized Company

      A description of various matters relating to the Reorganized Company
including (i) information relating to the business to be conducted by
Reorganized Cityscape and Reorganized CSC following the Effective Date, (ii) the
proposed management of Reorganized Cityscape and Reorganized CSC and proposed
compensation and other arrangements relating thereto, and (iii) certain
corporate governance matters, is set forth or referenced below.

      Corporate Structure

      On the Effective Date, Cityscape will become Reorganized Cityscape, CSC
will become Reorganized CSC, and Reorganized CSC will be a wholly-owned
subsidiary of Reorganized Cityscape.

      Business of the Reorganized Company

      Following the Effective Date, the Debtors estimate that the Reorganized
Company will have net assets with an approximate carrying value of $68 million,
consisting primarily of mortgage residual certificates, receivables related to
such certificates, and cash. The use of such assets (including the possibility
of reentering the mortgage


                                       35
<PAGE>   37

loan origination business and/or combining with one or more other businesses)
will be left to the discretion of the Boards of Directors of the Reorganized
Company

      Directors and Management of Reorganized Cityscape and Reorganized CSC

      Board of Directors

      It is anticipated that the Board of Directors of Reorganized Cityscape
will consist of one to ten members. The Debtors have been advised by the
Unofficial Senior Noteholders' Committee that the members of the Board of
Directors will include D. Richard Thompson, Mark Lasry and Mark A. Neporent. Mr.
Thompson is a principal of Moulton, which is currently providing consulting
services to the Debtors, and a principal of Aegis Mortgage Corporation, a
mortgage banking firm headquartered in Houston Texas. Mr. Lasry is executive
vice president at New York-based Amroc Investments. Mr. Neporent is a former
partner of the law firm of Schulte Roth and is currently the Chief Operating
Officer of Cerberus Capital Management, L.P. Schulte Roth has represented and
continues to represent, Cerberus Partners, L.P., a member of the Unofficial
Senior Noteholders' Committee, in various matters. The Debtors have been advised
that Mr. Thompson has performed services on behalf of Cerberus Partners, L.P.
pursuant to a contractual relationship between the parties.

      It is anticipated that the Board of Directors of Reorganized CSC will
consist of no less than one member. The Debtors have been advised by the
Unofficial Senior Noteholders' Committee that the members will be the same as
the members of Reorganized Cityscape's Board of Directors.

      Executive Officers

      The initial officers of Reorganized Cityscape will be selected by the
Board of Directors of Reorganized Cityscape. The Debtors have been advised by
the Unofficial Senior Noteholders' Committee that D. Richard Thompson will be
the chief executive of Reorganized Cityscape. Mr. Thompson is currently
President of Aegis Mortgage Corporation, a mortgage banking firm headquartered
in Houston, Texas that originates and services loans. Prior to his involvement
in the business side of the mortgage banking industry, Mr. Thompson practiced
corporate law with the Houston law firm of Liddell, Sapp & Zivtey where he
specialized in thrift and mortgage banking matters. In 1987, Mr. Thompson began
working for North American Mortgage Company and, since then, has served as
President of Troy & Nichols and First Gibraltar Mortgage. Currently Mr. Thompson
is secretary and treasurer of the Texas Mortgage Bankers Association. To the
extent that initial officers have been selected, their names will be disclosed
in a schedule to be Filed with the Bankruptcy Court on or prior to the
Confirmation Date. Reorganized Cityscape will negotiate compensation packages
with its officers that are consistent with the compensation packages in the
industry. The compensation packages are expected to include a base salary and
possibly incentive compensation, each in accordance with industry norms.

      The initial officers of Reorganized CSC will be selected by the Board of
Directors of Reorganized CSC. The Debtors have been advised by the Unofficial
Senior Noteholders' Committee that D. Richard Thompson will also be the chief
executive of Reorganized CSC. To the extent that initial officers have been
selected, their names will be disclosed in a schedule to be Filed with the
Bankruptcy Court on or prior to the Confirmation Date. Reorganized CSC will
negotiate compensation packages with its officers that are consistent with the
compensation packages in the industry. The compensation packages are expected to
include a base salary and possibly incentive compensation, each in accordance
with industry norms.

      Certain Corporate Governance Matters

      Reorganized Cityscape Certificate of Incorporation and Reorganized
Cityscape Bylaws

      The forms of the Reorganized Cityscape Certificate of Incorporation and
the Reorganized Cityscape Bylaws are attached to the Plan as Exhibits "A" and
"B", respectively.


                                       36
<PAGE>   38

      Reorganized CSC Certificate of Incorporation and Reorganized CSC Bylaws

      The forms of the Reorganized CSC Certificate of Incorporation and the
Reorganized CSC Bylaws are attached to the Plan as Exhibits "C" and "D",
respectively.

E.    Issuance of New Common Stock

      On the Effective Date or as soon as practicable thereafter, Reorganized
Cityscape will, in accordance with the Plan, issue the New Common Stock to
Holders of Allowed Class 4, 5 and 6 Claims. On the Effective Date, all
securities, instruments and agreements entered into pursuant to the Plan,
including, without limitation the New Common Stock and any security, instrument
or agreement entered into in connection therewith, will become effective and
binding in accordance their respective terms and conditions upon the parties
thereto without further act or action under applicable law, regulation, order or
rule, and will be deemed to become effective simultaneously.

      Applicability of Federal and Other Securities Laws

      In reliance upon the exemption provided by Section 1145(a)(1) of the
Bankruptcy Code, the Debtors have not filed a registration statement under the
Securities Act or any other federal or state securities laws with respect to the
New Common Stock that will be offered pursuant to the Plan.

      Section 1145(a)(1). Section 1145(a)(1) exempts the offer or sale of
securities pursuant to a plan of reorganization from the registration
requirements of Section 5 of the Securities Act and from registration under
state and local securities laws if the following conditions are satisfied: (i)
the securities are issued by a debtor (or its affiliate or successor) under a
plan of reorganization; (ii) the recipients of the securities hold claims
against, interests in, or claims for administrative expenses against, the
debtor; and (iii) the securities are issued in exchange for the recipients'
claims against or interests in the debtor, or principally in such exchange and
partly for cash or property.

      The New Common Stock issued pursuant to the Plan will not be "restricted
securities" within the meaning of Rule 144 under the Securities Act and may be
freely transferred by Holders of Allowed Class 4, Class 5 and Class 6 Claims
under the Securities Act and their successors and assigns. Accordingly, all
resales and subsequent transactions in the New Common Stock are exempt from
registration under the Securities Act pursuant to Section 4(1) of the Securities
Act, unless the Holder is deemed to be an "underwriter" with respect to such
securities or an "affiliate" of an issuer. Section 1145(b) of the Bankruptcy
Code defines four types of "underwriters":

            (i) persons who purchase a claim against, an interest in, or a claim
      for administrative expense against the debtor with a view to distributing
      any security received in exchange for such a claim or interest;

            (ii) persons who offer to sell securities offered under a plan for
      the holders of such securities;

            (iii) persons who offer to buy securities from the holders of such
      securities, if the offer to buy is (a) with a view to distributing such
      securities and (b) made under a distribution agreement; and

            (iv) a person who is an issuer" with respect to the securities, as
      the term "issuer" is defined in Section 2(11) of the Securities Act.

      Under Section 2(11) of the Securities Act, an "issuer" includes any
"affiliate" of the issuer, which means any person directly or indirectly through
one or more intermediaries controlling, controlled by or under common control
with the issuer. Any Holder of an Allowed Claim or Interest (or group of Holders
of such Claims and/or Interests who act in concert) who receives a substantial
amount of New Common Stock pursuant to the Plan may be deemed to be an
"affiliate" of an issuer and therefore an "issuer" and therefore an
"underwriter" under the foregoing definitions.

      Whether or not any particular person would be deemed to be an
"underwriter" or an "affiliate" with respect to any security to be issued
pursuant to the Plan would depend upon various facts and circumstances
applicable to


                                       37
<PAGE>   39

that person. Accordingly, the Debtors express no view as to whether any person
would be an "underwriter" or an "affiliate" with respect to any security to be
issued pursuant to the Plan.

      GIVEN THE COMPLEX NATURE OF THE QUESTION OF WHETHER A PARTICULAR PERSON
MAY BE AN UNDERWRITER OR AN AFFILIATE, THE DEBTORS MAKE NO REPRESENTATIONS
CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE SECURITIES TO BE TRANSFERRED
PURSUANT TO THE PLAN. THE DEBTORS RECOMMEND THAT HOLDERS OF ALLOWED CLAIMS
CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH
SECURITIES.

      Rule 144A, promulgated under the Securities Act, provides a non-exclusive
safe harbor exemption from the registration requirements of the Securities Act
for resales to certain "qualified institutional buyers" of securities which are
"restricted securities" within the meaning of the Securities Act, irrespective
of whether the seller of such securities purchased its securities with a view
towards reselling such securities under the provisions of Rule 144A. Under Rule
144A, a "qualified institutional buyer" is defined to include, among other
persons (e.g., "dealers" registered as such pursuant to Section 15 of the
Exchange Act and "banks" as defined in Section 3(a)(2) of the Securities Act),
any entity which purchases securities for its own account or for the account of
another qualified institutional buyer and which (in the aggregate) owns and
invests on a discretionary basis at least $100 million in the securities of
unaffiliated issuers. Subject to certain qualifications, Rule 144A does not
exempt the offer or sale of securities which, at the time of their issuance,
were securities of the same class of securities then listed on a national
securities exchange (registered as such under Section 6 of the Exchange Act) or
quoted in a U.S. automated interdealer quotation system (e.g., Nasdaq). Holders
of such securities who are deemed to be "underwriters" within the meaning of
Section 1145(b)(1) of the Bankruptcy Code or who may otherwise be deemed to be
"underwriters" of, or to exercise "control" over, the Company within the meaning
of Rule 405 of Regulation C under the Securities Act should, assuming that all
other conditions of Rule 144A are met, be entitled to avail themselves of the
safe harbor resale provisions thereof.

      To the extent that Rule 144A is unavailable, holders may, under certain
circumstances, be able to sell their securities pursuant to the more limited
safe harbor resale provisions of Rule 144 under the Securities Act. Generally,
Rule 144 provides that if certain conditions are met (e.g., volume limitations,
manner of sale, availability of current information about the issuer, etc.), any
"affiliate" of the issuer of the securities sought to be resold will not be
deemed to be an "underwriter" as defined in Section 2(11) of the Securities Act.
Under paragraph (k) of Rule 144, the aforementioned conditions to resale will no
longer apply to restricted securities sold for the account of a holder who is
not an affiliate of the Company at the time of such resale and who has not been
such during the three-month period next preceding such resale, so long as a
period of at least two years has elapsed since the later of (i) the Effective
Date and (ii) the date on which such holder acquired his or its securities from
an affiliate of the Company.

      THE NEW COMMON STOCK TO BE ISSUED ON THE EFFECTIVE DATE HAS NOT BEEN
APPROVED OR DISAPPROVED BY THE SEC OR BY ANY STATE SECURITIES COMMISSION OR
SIMILAR PUBLIC, GOVERNMENTAL OR REGULATORY AUTHORITY AND NEITHER THE SEC NOR
SUCH AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT OR UPON THE MERITS OF THE PLAN. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

F.    Distributions Under the Plan

      General

      Except as otherwise provided in the Plan with respect to any particular
Class or Claim, property to be distributed under the Plan on account of Allowed
Claims and Allowed Interests in an Impaired Class (a) will be distributed on the
Effective Date or as soon as practicable thereafter to each Holder of an Allowed
Claim or an Allowed Interest in that Class that is an Allowed Claim or an
Allowed Interest as of the Effective Date, and (b) will be distributed to each
Holder of an Allowed Claim or an Allowed Interest of that Class that becomes an
Allowed Claim or Allowed Interest after the Effective Date, as soon as
practicable after the Order of the Bankruptcy Court allowing such Claim or
Interest becomes a Final Order. Except as otherwise provided in the Plan with
respect to any


                                       38
<PAGE>   40

particular Class or Claim, property to be distributed under the Plan on account
of Claims in a Class that are not Impaired or on account of an Administrative
Claim will be distributed on the later of (i) the Effective Date or as soon as
practicable thereafter, or if any Claim is not an Allowed Claim as of the
Effective Date, on the date the Order allowing such Claim becomes a Final Order
or as soon as practicable thereafter, and (ii) the date on which the
distribution to the Holder of the Claim would have been due and payable in the
ordinary course of business or under the terms of the Claim.

      Except as otherwise provided in the Plan or the Confirmation Order, all
cash necessary for Reorganized Cityscape and Reorganized CSC to make payments
pursuant to the Plan will be obtained from Cityscape's and CSC's existing cash
balances or the operations of the Debtors or the Reorganized Company, as
applicable. See Section IV.A, "THE PLAN OF REORGANIZATION -- Overview of the
Plan -- Summary of Classes and Treatment of Claims and Interests" and "--
Overview of the Plan -- Sources of Cash to Make Plan Distributions." Reorganized
Cityscape, Reorganized CSC or such Person(s) as Cityscape and CSC may employ in
their sole discretion, will serve as Disbursing Agent(s). Each Disbursing Agent
will make all distributions of Cash and securities required to be distributed
under the applicable provisions of the Plan. Any Disbursing Agent may employ or
contract with other entities to assist in or make the distributions required by
the Plan. Each Disbursing Agent will serve without bond, and each Disbursing
Agent, other than Reorganized Cityscape or Reorganized CSC, will receive,
without further Bankruptcy Court approval, reasonable compensation for
distribution services rendered pursuant to the Plan and reimbursement of
reasonable out-of-pocket expenses incurred in connection with such services from
the Reorganized Company on terms acceptable to the Reorganized Company.

      Cash payments made pursuant to the Plan will be in U.S. dollars. Cash
payments to foreign creditors may be made, at the option of Cityscape and CSC or
the Reorganized Company, in such funds and by such means as are necessary or
customary in a particular foreign jurisdiction. Cash payments made pursuant to
the Plan in the form of checks issued by Reorganized Cityscape or Reorganized
CSC will be null and void if not cashed within 90 days of the date of the
issuance thereof. Requests for reissuance of any check will be made directly to
the Disbursing Agent as set forth below and in Section VI.G of the Plan. All
payments in respect of Bank Claims will be by wire transfer.

      The Plan provides that the Disbursing Agent will make all distributions
required under the applicable provisions of the Plan. No distributions under the
Plan will be made to or on behalf of any Holder of any Allowed Claim or Allowed
Interest evidenced by the instruments, securities or other documentation
canceled pursuant to Section IX.B.1 of the Plan, unless such Holder first
tenders the applicable instruments, securities or other documentation to the
Disbursing Agent. See "THE PLAN OF REORGANIZATION -- Distributions Under the
Plan -- Surrender of Canceled Voting Securities and Exchange for New Securities"
below.

      Timing and Methods of Distributions

      Transfers of New Common Stock

      Notwithstanding any other provision of the Plan, only whole numbers of
shares of New Common Stock will be issued or transferred, as the case may be,
pursuant to the Plan. When any distribution on account of an Allowed Claim
pursuant to the Plan would otherwise result in the issuance or transfer of a
number of shares of New Common Stock that is not a whole number, the actual
distribution of such New Common Stock will be rounded to the next higher or
lower whole number as follows: (a) fractions of 1/2 or greater will be rounded
to the next higher whole number and (b) fractions of less than 1/2 will be
rounded to the next lower whole number. The total number of shares of New Common
Stock to be distributed to a Class of Claims will be adjusted as necessary to
account for the rounding provided for in Section VI.C.2 of the Plan. No
consideration will be provided in lieu of fractional shares that are rounded
down (including in connection with calculating the amount of Cash that a Holder
of an Allowed Class 4a, 5a or 6a Claim is entitled to receive).

      Compliance With Tax Requirements

      In connection with the Plan, to the extent applicable, the Disbursing
Agent must comply with all tax withholding and reporting requirements imposed on
it by any governmental unit, and all distributions pursuant to the Plan will be
subject to such withholding and reporting requirements. The Disbursing Agent
will be authorized to


                                       39
<PAGE>   41

take any and all actions that may be necessary or appropriate to comply with
such withholding and reporting requirements. Notwithstanding any other provision
of the Plan: (i) each Holder of an Allowed Claim that is to receive a
distribution of Cash or New Common Stock pursuant to the Plan will have sole and
exclusive responsibility for the satisfaction and payment of any tax obligations
imposed by any governmental unit, including income, withholding and other tax
obligations, on account of such distribution; and (ii) no distribution will be
made to or on behalf of such Holder pursuant to the Plan unless and until such
Holder has made arrangements reasonably satisfactory to the Disbursing Agent for
the payment and satisfaction of such tax obligations. Any Cash or New Common
Stock to be distributed pursuant to the Plan will, pending the implementation of
such arrangements, be treated as an undeliverable distribution pursuant to
Section VI.G of the Plan.

      Distribution Record Date

      As of the close of business on the Distribution Record Date, the transfer
registers for the Old Securities maintained by the Debtors, or their respective
agents, will be closed. The Disbursing Agent and its respective agents and the
Indenture Trustees will have no obligation to recognize the transfer of the Old
Securities occurring after the Distribution Record Date, and will be entitled
for all purposes relating to the Plan to recognize and deal only with those
Holders of record as of the close of business on the Distribution Record Date.

      Surrender of Cancelled Voting Securities and Exchange for New Securities

      Tender of Voting Securities

      The mechanism by which Holders of Allowed Claims in Class 4 or 6 surrender
their Voting Securities and exchange such Voting Securities for New Common Stock
will be determined based upon the manner in which the Voting Securities were
issued and the mode in which they are held, as set forth below.

      Voting Securities Held in Book-Entry Form. Voting Securities held in
book-entry form through bank and broker nominee accounts will be mandatorily
exchanged for the New Common Stock through the facilities of such nominees and
the systems of the applicable securities depository or Clearing System (as
described below and in Section VI.F.2 of the Plan) holding such Voting
Securities on behalf of the brokers or banks.

      Voting Securities in Physical, Registered, Certificated Form. Each Holder
of Voting Securities in physical, registered, certificated form will be
required, promptly after the Confirmation Date, to deliver his, hers or its
physical certificates (the "Tendered Certificates") to the Disbursing Agent,
accompanied by a properly executed letter of transmittal, to be distributed by
the Information Agent or Disbursing Agent, as the case may be, promptly after
the Confirmation Date and containing such representations and warranties as are
described herein (a "Letter of Transmittal"). Any New Common Stock to be
distributed pursuant to the Plan on account of any Allowed Claim in Class 4 or 6
represented by a Voting Security held in physical, registered, certificated form
will, pending such surrender, be treated as an undeliverable distribution
pursuant to Section VI.G of the Plan.

      Signatures on a Letter of Transmittal must be guaranteed by an Eligible
Institution (as defined below), unless the Voting Securities tendered pursuant
thereto are tendered for the account of an Eligible Institution. If signatures
on a Letter of Transmittal are required to be guaranteed, such guarantees must
be by a member firm of a registered national securities exchange in the United
States, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or a correspondent in the
United States (each of which is an "Eligible Institution"). If Voting Securities
are registered in the name of a Person other than the Person signing the Letter
of Transmittal, the Voting Securities, in order to be tendered validly, must be
endorsed or accompanied by a properly completed power of authority, with
signature guaranteed by an Eligible Institution.

      All questions as to the validity, form, eligibility (including time of
receipt), and acceptance of Letters of Transmittal and Tendered Certificates
will be resolved by the applicable Disbursing Agent, whose determination will be
final and binding, subject only to review by the Bankruptcy Court upon
application with due notice to any affected parties in interest. Cityscape
reserves the right, on behalf of itself and the Disbursing Agent, to reject any
and all Letters of Transmittal and Tendered Certificates not in proper form, or
Letters of Transmittal and Tendered


                                       40
<PAGE>   42

Certificates, the Disbursing Agent's acceptance of which would, in the opinion
of the Disbursing Agent or its counsel, be unlawful.

      Voting Securities in Bearer Form Held Through a Broker or Bank Participant
in a Clearing System. Voting Securities held in bearer form through a broker or
bank participant in a Clearing System will be mandatorily exchanged for the New
Common Stock through the facilities of such nominees and the securities
depositary holding such Voting Securities on behalf of the broker or bank.

      Delivery of New Securities in Exchange for Voting Securities

      On the Effective Date, Reorganized Cityscape or the Disbursing Agent will
issue and authenticate the New Common Stock and will apply to DTC (as defined
below) to make the New Common Stock eligible for deposit at DTC. With respect to
Holders of Voting Securities who hold such Voting Securities through nominee
accounts at bank and broker participants in DTC, Euroclear and Cedel
(collectively, the "Clearing Systems"), the Disbursing Agent will deliver the
New Common Stock to DTC or to the registered address specified by the Clearing
Systems. The Clearing System (or its depositary) will return the applicable
Voting Securities to the Disbursing Agent for cancellation. The Disbursing Agent
will request that DTC effect a mandatory exchange of the applicable Voting
Securities for the applicable New Common Stock by crediting the accounts of its
participants with the New Common Stock in exchange for the Voting Securities. On
the effective date of such exchange, each DTC participant will effect a similar
exchange for accounts of the beneficial owners holding Voting Securities through
such firms. Neither the Reorganized Company nor the Disbursing Agent will have
any responsibility or liability in connection with the Clearing Systems' or such
participants' effecting, or failure to effect, such exchanges.

      Holders of Voting Securities holding such Voting Securities outside a
Clearing System will be required to surrender their Voting Securities by
delivering them to the Disbursing Agent, along with properly executed Letters of
Transmittal (as described above and in Section VI.F.1.b of the Plan). The
Disbursing Agent will forward applicable New Common Stock on account of such
Voting Securities to such Holders.

      Other Matters with Respect to the Surrender of Voting Securities

      By participating in any of the above procedures, each Holder of the Voting
Securities will be representing and warranting (and the Letters of Transmittal
will so provide) that, among other things, the Holder has full power and
authority to tender, exchange, sell, assign and transfer the Voting Securities
and that when such Voting Securities are accepted for exchange by the Debtors or
the Reorganized Company, the Debtors or the Reorganized Company will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and that the Voting Securities are not
subject to any adverse claims or proxies. The Holder also agrees that he, she or
it will, upon request, execute and deliver any additional documents deemed by
the Disbursing Agent, the Debtors or the Reorganized Company to be necessary or
desirable to complete the exchange, sale, assignment and transfer of the Voting
Securities exchanged. All authority conferred by participating in the above
procedures will survive the death or incapacity of the Holder, and all
obligations of the Holder will be binding upon the heirs, personal
representatives, successors and assigns of the Holder.

      The surrender of Voting Securities pursuant to any one of the procedures
described in this Solicitation Statement, upon the Debtors' or the Reorganized
Company's acceptance for exchange of such Voting Securities, constitutes a
binding agreement between the Holder and the Debtors or the Reorganized Company
upon the terms, and subject to the conditions, of the Plan.

      Special Procedures for Lost, Stolen, Mutilated or Destroyed Instruments

      Any Holder of a Claim or Interest evidenced by an Instrument that has been
lost, stolen, mutilated or destroyed will, in lieu of surrendering such
Instrument, deliver to the Disbursing Agent: (a) an affidavit of loss or other
evidence reasonably satisfactory to the Disbursing Agent of the loss, theft,
mutilation or destruction; and (b) such security or indemnity as may reasonably
be required by the Disbursing Agent to hold the Disbursing Agent harmless from
any damages, liabilities or costs incurred in treating such individual as a
Holder of an Instrument. Upon compliance with Section V.F.3 of the Plan, the
Holder of a Claim or Interest evidenced by such an Instrument


                                       41
<PAGE>   43

will, for all purposes under the Plan and notwithstanding anything to the
contrary contained herein, be deemed to have surrendered such Instrument.

      Failure to Surrender Canceled Instrument

      Any Holder of Voting Securities holding such Voting Securities in
physical, registered or certificated form who has not properly completed and
returned to the Disbursing Agent a Letter of Transmittal, together with the
applicable Tendered Certificates, within two years after the Effective Date will
have its claim for a distribution pursuant to the Plan on account of such
Instrument discharged and will be forever barred from asserting any such claim
against Reorganized Cityscape, Reorganized CSC or their properties. In such
cases, any New Common Stock held for distribution on account of such claim will
be disposed of pursuant to the provisions of Section VI.G of the Plan.

      Delivery of Distributions; Undeliverable or Unclaimed Distributions

      Any Person that is entitled to receive a Cash distribution under the Plan
but that fails to cash a check within 90 days of its issuance will be entitled
to receive a reissued check from Reorganized Cityscape or Reorganized CSC, as
the case may be, for the amount of the original check, without any interest, if
such Person requests the Disbursing Agent to reissue such check and provides the
Disbursing Agent with such documentation as the Disbursing Agent reasonably
requests to verify that such Person is entitled to such check, prior to the
second anniversary of the Effective Date. If a Person fails to cash a check
within 90 days of its issuance and fails to request reissuance of such check
prior to the second anniversary of the Effective Date, such Person will not be
entitled to receive any distribution under the Plan.

      Subject to Bankruptcy Rule 9010, all distributions to any Holder of an
Allowed Claim or an Allowed Interest will be made to the address of such Holder
on the books and records of Cityscape and CSC or their agents, unless either
Debtor, Reorganized Cityscape or Reorganized CSC, as applicable, has been
notified in writing of a change of address. If the distribution to any Holder of
an Allowed Claim or Allowed Interest is returned to a Disbursing Agent as
undeliverable, such Disbursing Agent will use reasonable efforts to determine
the current address of such Holder, but no distribution will be made to such
Holder unless and until the applicable Disbursing Agent has determined or is
notified in writing of such Holder's then-current address, at which time such
distribution will be made to such Holder without interest. Undeliverable
distributions will remain in the possession of the Disbursing Agent pursuant to
Section VI.A of the Plan until such time as a distribution becomes deliverable.
Undeliverable cash will be held in trust in segregated bank accounts in the name
of the Disbursing Agent for the benefit of the potential claimants of such
funds, and will be accounted for separately. Any Disbursing Agent holding
undeliverable cash will invest such cash in a manner consistent with Cityscape's
and CSC's investment and deposit guidelines. Any interest paid, and any other
amounts earned, with respect to such undeliverable Cash pending its distribution
in accordance with the Plan shall be property of Reorganized Cityscape or
Reorganized CSC, as the case may be. Undeliverable New Common Stock will be held
in trust for the benefit of the potential claimants of such securities by the
Disbursing Agent in principal amounts or numbers of shares or warrants
sufficient to fund the unclaimed amounts of such securities and will be
accounted for separately. Any unclaimed or undeliverable distributions
(including Cash and New Common Stock) will be deemed unclaimed property under
Section 347(b) of the Bankruptcy Code at the expiration of two years after the
Effective Date and, after such date, all such unclaimed property will revert to
Reorganized Cityscape or Reorganized CSC, as the case may be, and the Claim or
Interest of any Holder with respect to such property will be discharged and
forever barred.

      Pending the distribution of any New Common Stock, pursuant to the Plan,
the Disbursing Agent will cause the New Common Stock held by it in its capacity
as Disbursing Agent to be: (A) represented in person or by proxy at each meeting
of the stockholders of Reorganized Cityscape; and (B) voted with respect to any
matter of Reorganized Cityscape, proportionally with the votes cast by other
stockholders of Reorganized Cityscape.

      Procedures for Treating Disputed Claims

      Except insofar as a Claim or Interest is allowed under the Plan,
Reorganized Cityscape and Reorganized CSC will be entitled and reserve the right
to object to Claims and Interests. Except as otherwise provided in


                                       42
<PAGE>   44

Section VI.H.3 of the Plan and except as may otherwise be ordered by the
Bankruptcy Court, objections to any Claim or Interest, including, without
limitation, Administrative Claims will be Filed and served upon the Holder of
such Claim or Interest no later than the later of (a) 60 days after the
Effective Date, and (b) 60 days after a proof of claim, request for payment of
such Claim or proof of interest is Filed, unless such period is extended by the
Bankruptcy Court, which extension may be granted on an ex parte basis without
notice or hearing. After the Confirmation Date, only Cityscape, CSC, Reorganized
Cityscape and Reorganized CSC will have the authority to File, settle,
compromise, withdraw or litigate to judgment objections to Claims and Interests.
From and after the Confirmation Date, Cityscape, CSC, Reorganized Cityscape and
Reorganized CSC may settle or compromise any Disputed Claim or Disputed Interest
without approval of this Bankruptcy Court. Except as (i) specified otherwise in
the Plan, or (ii) ordered by the Bankruptcy Court, all Disputed Claims or
Disputed Interests will be resolved by the Bankruptcy Court.

      Among other things, either Debtor may elect, at its sole option, to object
or seek estimation under Section 502 of the Bankruptcy Code with respect to any
proof of claim filed by or on behalf of a Holder of a Claim or a proof of
interest filed by or on behalf of a Holder of an Interest.

      All Tort Claims are Disputed Claims. Any unliquidated Tort Claim that is
not otherwise settled or resolved pursuant to Section VI.H.1.a of the Plan will
be determined and liquidated in the Bankruptcy Court. Any Tort Claim determined
and liquidated pursuant to a judgment obtained in accordance with Section
VI.H.1.b of the Plan that is no longer subject to appeal or other review will be
deemed to be an Allowed Claim in Class 5 or Class 5a in such liquidated amount
and satisfied in accordance with this Plan. Nothing contained in Section
VI.H.1.b of the Plan will constitute or be deemed a waiver of any claim, right
or cause of action that the Debtors or the Reorganized Company may have against
any Person in connection with or arising out of any Tort Claim, including,
without limitation, any rights under Section 157(b) of title 28, United States
Code.

      Except as otherwise ordered by the Bankruptcy Court, objections to the
Claims of professionals will be governed by the provisions of Section V.A.3.b of
the Plan. Objections to Administrative Claims based on ordinary course
liabilities, Trade Claims and Employee Claims will be governed by applicable
law.

      Within 30 days after the end of each calendar quarter following the
Effective Date, the applicable Disbursing Agent will make all distributions on
account of any Disputed Claim or Disputed Interest that has become an Allowed
Claim or Allowed Interest during the preceding calendar quarter. Such
distributions will be made pursuant to the provisions of the Plan governing the
applicable Class. Holders of Disputed Claims or Disputed Interests that are
ultimately allowed will also be entitled to receive, on the basis of the amount
ultimately allowed: (i) matured and payable interest, if any, at the rate
provided for the Class to which such Claim belongs; and (ii) any dividends or
other payments made on account of New Common Stock, if any, provided to the
Class to which such Claim or Interest belongs, but held pending distribution.

      Set offs

      Except with respect to Claims allowed pursuant to the Plan or claims of
Cityscape, CSC, Reorganized Cityscape or Reorganized CSC released pursuant to
the Plan or any contract, instrument, release, indenture or other agreement or
document created in connection with the Plan, Cityscape, CSC, Reorganized
Cityscape or Reorganized CSC, as the case may be, may, pursuant to Section 553
of the Bankruptcy Code or applicable nonbankruptcy law, set off against any
Allowed Claim and the distributions to be made pursuant to the Plan on account
of such Claim (before any distribution is made on account of such Claim), the
claims, rights and causes of action of any nature that Cityscape, CSC,
Reorganized Cityscape or Reorganized CSC may hold against the Holder of such
Allowed Claim; provided, however, that neither the failure to effect such a
setoff nor the allowance of any Claim under the Plan will constitute a waiver or
release by Cityscape, CSC, Reorganized Cityscape or Reorganized CSC of any such
claims, rights and causes of action that Cityscape, CSC, Reorganized Cityscape
or Reorganized CSC may possess against such Holder.


                                       43
<PAGE>   45

      Termination of Subordination

      The classification and manner of satisfying all Claims and Interests under
the Plan and the distributions thereunder take into consideration all
contractual, legal and equitable subordination rights, whether arising under any
agreement, general principles of equitable subordination, Section 510(c) of the
Bankruptcy Code or otherwise, that a Holder of a Claim or Interest may have
against other Claim or Interest Holders with respect to any distribution made
pursuant to the Plan. On the Effective Date, all contractual, legal or equitable
subordination rights that such Holder may have with respect to any distribution
to be made pursuant to the Plan will be deemed to be waived, discharged and
terminated, and all actions related to the enforcement of such subordination
rights will be permanently enjoined. Accordingly, distributions pursuant to the
Plan to Holders of Allowed Claims and Allowed Interests will not be subject to
payment to a beneficiary of such terminated subordination rights, or to levy,
garnishment, attachment or other legal process by any beneficiary of such
terminated subordination rights.

G.    General Information Concerning the Plan

      The following is a summary of certain additional information concerning
the Plan. This summary is qualified in its entirety by reference to the
provisions of the Plan. For a discussion of the classification and treatment of
Claims and Interests under the Plan, see Section IV.A, "THE PLAN OR
REORGANIZATION -- Overview of the Plan -- Summary of Classes and Treatment of
Claims and Interests."

      Treatment of Executory Contracts and Unexpired Leases

      Under Section 365 of the Bankruptcy Code, the Debtors have the right,
subject to Bankruptcy Court approval, to assume or reject any executory
contracts or unexpired leases. If an executory contract or unexpired lease
entered into before the Petition Date is rejected by the Debtors, it will be
treated as if the Debtors breached such contract or lease on the date
immediately preceding the Petition Date, and the other party to the agreement
may assert an Unsecured Claim for damages incurred as a result of the rejection.
In the case of the rejection of employment agreements and real property leases,
damages are subject to certain limitations imposed by Sections 365 and 502 of
the Bankruptcy Code.

      Assumptions

      To the extent that any of the contracts listed on a schedule to be Filed
and served on the parties thereto prior to the Confirmation Hearing is an
executory contract, the Debtors will assume each such contract pursuant to
Section 365 of the Bankruptcy Code on the Effective Date. Listing a contract or
lease on such schedule does not constitute an admission by the Debtors,
Reorganized Cityscape or Reorganized CSC that such contract or lease is an
executory contract or unexpired lease or that the Debtors, Reorganized Cityscape
or Reorganized CSC has any liability thereunder. The Confirmation Order will
constitute an Order of the Bankruptcy Court approving the assumptions described
in Section VII.A of the Plan, pursuant to Section 365 of the Bankruptcy Code, as
of the Effective Date.

      Cure of Defaults in Connection with Assumption

      Any monetary amounts by which each executory contract and unexpired lease
to be assumed pursuant to the Plan is in default will be satisfied, pursuant to
Section 365(b)(1) of the Bankruptcy Code, at the option of Cityscape, CSC,
Reorganized Cityscape or Reorganized CSC: (a) by payment of the default amount
in cash on the Effective Date or (b) on such other terms as are agreed to by the
parties to such executory contract or unexpired lease. If there is a dispute
regarding: (i) the amount of any cure payments; (ii) the ability of Reorganized
Cityscape or Reorganized CSC, as the case may be, to provide "adequate assurance
of future performance" (within the meaning of Section 365 of the Bankruptcy
Code) under the contract or lease to be assumed; or (iii) any other matter
pertaining to assumption, the cure payments required by Section 365(b)(1) of the
Bankruptcy Code will be made following the entry of a Final Order of the
Bankruptcy Court resolving the dispute and approving the assumption.


                                       44
<PAGE>   46

      Rejections

      Except as otherwise provided in (i) Section VII.A of the Plan (providing
for the filing and service of a schedule of contracts to be assumed), (ii) any
previous Orders authorizing the assumption or rejection of any of the Debtors'
executory contracts or unexpired leases or (iii) or in any contract, instrument,
release, indenture or other agreement or document entered into in connection
with the Plan, on the Effective Date, pursuant to Section 365 of the Bankruptcy
Code, Cityscape and CSC will reject each of the executory contracts and
unexpired leases to which either of them is a party. The Confirmation Order will
constitute an Order of the Bankruptcy Court approving such rejections, pursuant
to Section 365 of the Bankruptcy Code, as of the Effective Date.

      Bar Date for Rejection Damages

      If the rejection of an executory contract or unexpired lease pursuant to
Section VII.C of the Plan gives rise to a Claim by the other party or parties to
such contract or lease, such Claim will be forever barred and will not be
enforceable against Cityscape, CSC, Reorganized Cityscape, Reorganized CSC,
their respective successors or their respective assets or properties unless (a)
a stipulation with respect to the amount and nature of such claim has been
entered into by any of Cityscape, CSC, Reorganized Cityscape or Reorganized CSC,
as applicable, and the Holder of such Claim in connection with the rejection of
such executory contract or unexpired lease or (b) a proof of Claim is filed and
served on Reorganized Cityscape or Reorganized CSC, as the case may be, and
counsel for Reorganized Cityscape or Reorganized CSC, as the case may be, within
30 days after the Effective Date or such earlier date as established by the
Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court, all Allowed
Claims arising from the rejection of executory contracts and unexpired leases
will be treated as Claims in Class 5 or 13 as applicable.

      Continuation of Certain Retirement and Other Benefits

      All employment, retirement and other related agreements and incentive
compensation programs to which Cityscape or CSC is a party are treated as
executory contracts under the Plan and will be assumed or rejected pursuant to
Section VII of the Plan and Sections 365 and 1123 of the Bankruptcy Code.

      Executory Contracts and Unexpired Leases Entered Into and Other
Obligations Incurred After the Petition Date

      Executory contracts and unexpired leases entered into and other
obligations incurred after the Petition Date by the Debtors will be performed by
the Debtors or the Reorganized Company, in the ordinary course of their
businesses. Accordingly, such executory contracts, unexpired leases and other
obligations will survive and remain unaffected by entry of the Confirmation
Order.

      Legal Effects of the Plan

      Continued Corporate Existence; Vesting of Assets in Reorganized Cityscape
      and Reorganized CSC

      Reorganized Cityscape will exist after the Effective Date as a separate
corporate entity, with all the powers of a corporation under the general
corporate law of Delaware. Reorganized CSC will exist after the Effective Date
as a separate corporate entity, with all the powers of a corporation under the
general corporate law of New York. Except as otherwise provided in the Plan or
the Confirmation Order, on the Effective Date, all property of Cityscape's
Estate will vest in Reorganized Cityscape and all property of CSC's Estate will
vest in Reorganized CSC, all free and clear of all Claims, liens, encumbrances
and Interests of Holders of Claims and Holders of Old Securities and Old Stock
Rights. From and after the Effective Date, Reorganized Cityscape and Reorganized
CSC may operate their business and use, acquire, and dispose of property and
settle and compromise claims or interests arising on or after the Effective Date
without supervision by the Bankruptcy Court and free of any restrictions of the
Bankruptcy Code, the Bankruptcy Rules or the Local Bankruptcy Rules, other than
those restrictions expressly imposed by the Plan or the Confirmation Order.


                                       45
<PAGE>   47

      Cancellation of Old Securities and Related Agreements

      On the Effective Date, all securities, instruments and agreements
governing any Claims or Interests Impaired by the Plan, including, without
limitation, (i) the Old Securities, (ii) the indentures governing the Old Debt,
(iii) the agreements governing the Old Warrants and (iv) any security,
instrument or agreement entered into in connection with any of the foregoing, in
each case will be deemed terminated, cancelled and extinguished, and except as
otherwise provided in the Plan, Cityscape and CSC, on the one hand, and the
Indenture Trustees, on the other hand, will be released from any and all
obligations under the applicable indenture except with respect to the payments
required to be made to each such Indenture Trustee as provided in the Plan or
with respect to such other rights of such Indenture Trustee that, pursuant to
the terms of such indenture, survive the termination of such indenture.
Termination of the indentures will not impair the rights of the Holders of Old
Debt to receive distributions on account of Old Debt pursuant to the Plan.

      Preservation of Rights of Action Held by Cityscape, CSC, Reorganized
      Cityscape or Reorganized CSC

      Except as provided in the Plan, or in any contract, instrument, release or
other agreement entered into in connection with the Plan, in accordance with
Section 1123(b) of the Bankruptcy Code, Reorganized Cityscape and Reorganized
CSC will retain (and may enforce) any claims, rights and causes of action that
the Debtors or their Estates may hold against any Person, including, among other
things, (i) any claims, rights or causes of action under Sections 544 through
550 of the Bankruptcy Code or any similar provisions of State law, or any other
statute or legal theory, and (ii) any claims for recovery against present or
former Holders of Trade Claims who received payments from the Debtors during the
pendency of the Debtors' chapter 11 cases on account of Trade Claims to the
extent that such payments resulted in such Holders' receiving greater
distributions on account of their Trade Claims than that to which they are
entitled under Section V.B.5 of the Plan; provided, however, that (i) in the
event that Class 4 and Class 4a vote to accept the Plan, any such claims, rights
or causes of action against Holders of Allowed Claims in such Class (solely in
their capacities as such) will be released, discharged and extinguished on the
Effective Date, whether or not then pending, and (ii) in the event that Class 6
and Class 6a vote to accept the Plan, any such claims, rights or causes of
action against Holders of Allowed Claims in such Class (solely in their
capacities as such) will be released, discharged and extinguished on the
Effective Date, whether or not then pending.

      Discharge of Debtors and Injunction

      Except as otherwise provided in the Plan or the Confirmation Order: (i) on
the Effective Date, the Debtors will be deemed discharged and released to the
fullest extent permitted by Section 1141 of the Bankruptcy Code from all Claims
and Interests, including, but not limited to, demands, liabilities, Claims and
Interests that arose before the Effective Date and all debts of the kind
specified in Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether
or not (A) a proof of Claim or proof of Interest based on such debt or Interest
is Filed or deemed Filed pursuant to Section 501 of the Bankruptcy Code, (B) a
Claim or Interest based on such debt or Interest is allowed pursuant to Section
502 of the Bankruptcy Code, or (C) the Holder of a Claim or Interest based on
such debt or Interest has accepted the Plan; and (ii) all Persons will be
precluded from asserting against Reorganized Cityscape, Reorganized CSC, their
respective successors, or their respective assets or properties any other or
further Claims or Interests based upon any act or omission, transaction, or
other activity of any kind or nature that occurred prior to the Effective Date.
Except as otherwise provided in the Plan or the Confirmation Order, the
Confirmation Order will act as a discharge of any and all Claims against and all
debts and liabilities of the Debtors, as provided in Sections 524 and 1141 of
the Bankruptcy Code, and such discharge will void any judgment against the
Debtors at any time obtained to the extent that it relates to a Claim
discharged.

      Except as otherwise provided in the Plan or the Confirmation Order, on and
after the Effective Date, all Persons who have held, currently hold or may hold
a debt, Claim or Interest discharged pursuant to the terms of the Plan are
permanently enjoined from taking any of the following actions on account of any
such discharged debt, Claim or Interest: (i) commencing or continuing in any
manner any action or other proceeding against the Debtors, Reorganized Cityscape
or Reorganized CSC, or their respective successors or their respective
properties; (ii) enforcing, attaching, collecting or recovering in any manner
any judgment, award, decree or order against the Debtors, Reorganized Cityscape
or Reorganized CSC, or their respective successors or their respective
properties;


                                       46
<PAGE>   48

(iii) creating, perfecting or enforcing any lien or encumbrance against the
Debtors, Reorganized Cityscape or Reorganized CSC, or their respective
successors or their respective properties; and (iv) commencing or continuing any
action, in any manner, in any place that does not comply with or is inconsistent
with the provisions of the Plan or the Confirmation Order. Any Person injured by
any willful violation of such injunction will recover actual damages, including
costs and attorneys' fees, and, in appropriate circumstances, may recover
punitive damages, from the willful violator.

      Limitation of Liability

      None of the Debtors, Reorganized Cityscape, Reorganized CSC, the members
of the Unofficial Senior Noteholders' Committee, the members of the Unofficial
Subordinated Debentureholders' Committee, the members of the Creditors'
Committee, the Indenture Trustees or any of their respective employees,
officers, directors, agents, or representatives, or any professional persons
employed by any of them (including, without limitation, their respective
Designated Professionals), will have any responsibility, or have or incur any
liability, to any Person whatsoever (i) for any matter expressly approved or
directed by the Confirmation Order or (ii) under any theory of liability (except
for any claim based upon willful misconduct or gross negligence) for any act
taken or omission made in good faith directly related to formulating,
implementing, confirming, or consummating the Plan, the Disclosure Statement, or
any contract, instrument, release, or other agreement or document created in
connection with the Plan; provided, that nothing in Section XI.B of the Plan
will limit the liability of any Person for breach of any express obligation it
has under the terms of the Plan or under any agreement or other document entered
into by such Person either post-Petition Date or in accordance with the terms of
the Plan (except to the extent expressly provided in the Confirmation Order) or
for any breach of a duty of care owed to any other Person occurring after the
Effective Date.

      The limitation of liability described above is in addition to the
so-called "safe harbor" provision of Section 1125(e) of the Bankruptcy Code.
Section 1125(e) provides in general that a person who, in good faith and in
compliance with the applicable provisions of the Bankruptcy Code, either (i)
solicits acceptance or rejection of a plan of reorganization, or (ii)
participates in the offer, issuance, sale or purchase of a security under a
plan, is not liable on account of such solicitation or participation for
violation of any applicable law governing solicitation of acceptance or
rejection of a plan of reorganization or the offer, issuance, sale or purchase
of securities under a plan.

      Releases

      On the Effective Date, each of the Debtors will release unconditionally
(i) each of the Debtors' then-current and former officers, directors,
shareholders, employees, consultants, attorneys, accountants, financial advisors
and other representatives (solely in their capacities as such) (collectively,
the "Debtor Releasees"), (ii) the Creditors' Committee and, solely in their
capacity as members or representatives of the Creditors' Committee, each member,
consultant, attorney, accountant or other representative of the Creditors'
Committee (including, without limitation, their respective Designated
Professionals), (iii) the Unofficial Senior Noteholders' Committee and, solely
in their capacity as members or representatives of the Unofficial Senior
Noteholders' Committee, each member, consultant, attorney, accountant or other
representative of the Unofficial Senior Noteholders' Committee (including,
without limitation, their respective Designated Professionals), (iv) the
Unofficial Subordinated Debentureholders' Committee and, solely in their
respective capacity as members or representatives of the Unofficial Subordinated
Debentureholders' Committee, each member, consultant, attorney, accountant or
other representative of the Unofficial Subordinated Debentureholders' Committee
(including, without limitation, their respective Designated Professionals), (v)
the Indenture Trustees, in their respective capacities as Indenture Trustee, and
each of their then-current and former officers, directors, shareholders,
employees, consultants, attorneys, accountants, financial advisors and other
representatives (solely in their capacities as such) from any and all claims,
obligations, suits, judgments, damages, rights, causes of action and liabilities
whatsoever, whether known or unknown, foreseen or unforeseen, existing or
hereafter arising, in law, equity or otherwise, based in whole or in part upon
any act or omission, transaction, event or other occurrence taking place on or
prior to the Effective Date in any way relating to Cityscape, CSC, the Company's
trust indentures, the CIT Facility, the Greenwich Facility, the DIP Facilities,
the Debtors, the Reorganization Cases, the Plan or the Disclosure Statement.


                                       47
<PAGE>   49

      On the Effective Date, (i) provided that Class 4 and Class 4a vote to
accept the Plan, each Holder of a Class 4 or Class 4a Claim, and (ii) provided
that Class 6 and Class 6a vote to accept the Plan, each Holder of a Class 6 or
Class 6a Claim will be deemed to have unconditionally released the Debtor
Releasees from any and all claims, obligations, suits, judgments, damages,
rights, causes of action and liabilities whatsoever which any such Holder may be
entitled to assert, whether known or unknown, foreseen or unforeseen, existing
or hereafter arising, in law, equity or otherwise, based in whole or in part
upon any act or omission, transaction, event or other occurrence taking place on
or prior to the Effective Date in any way relating to Cityscape, CSC, the
Company's trust indentures, the Debtors, the Reorganization Cases, the Plan or
the Disclosure Statement.

      Indemnification

      The Debtors will fully indemnify and Reorganized Cityscape or Reorganized
CSC, as the case may be, will assume the Debtors' obligations to indemnify any
person by reason of the fact that he or she is or was a director officer,
employee, agent, Designated Professional, member, or other authorized
representative (in each case, as applicable) of either of the Debtors, the
Creditors' Committee, the Unofficial Senior Noteholders' Committee, the
Unofficial Subordinated Debentureholders' Committee or the Indenture Trustees
(collectively, the "Indemnitees") against any claims, liabilities, actions,
suits, damages, fines, judgments or expenses (including reasonable attorney's
fees and expenses), arising during the course of, or otherwise in connection
with or in any way related to, the negotiation, preparation, formulation,
solicitation, dissemination, implementation, confirmation and consummation of
the Plan and the transactions contemplated thereby and the Disclosure Statement
in support thereof; provided, however, that the foregoing indemnification will
not apply to any liabilities arising from the gross negligence or willful
misconduct of any Indemnitee. If any claim, action or proceeding is brought or
asserted against an Indemnitee in respect of which indemnity may be sought from
Reorganized Cityscape or Reorganized CSC, the Indemnitee will promptly notify
Reorganized Cityscape or Reorganized CSC, as the case may be, in writing and
Reorganized Cityscape or Reorganized CSC, as the case may be, will assume the
defense thereof including the employment of counsel reasonably satisfactory to
the Indemnitee, and the payment of all expenses of such Indemnitee. The
Indemnitee will have the right to employ separate counsel in any such claim,
action or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel will be at the expense of the Indemnitee unless (a)
Reorganized Cityscape or Reorganized CSC, as the case may be, has agreed to pay
the fees and expenses of such counsel, or (b) Reorganized Cityscape or
Reorganized CSC, as the case may be, will have failed to assume promptly the
defense of such claim, action or proceeding or to employ counsel reasonably
satisfactory to the Indemnitee in any such claim, action or proceeding, or (c)
the named parties in any such claim, action or proceeding (including any
impleaded parties) include both the Indemnitee and Reorganized Cityscape or
Reorganized CSC, as the case may be, and the Indemnitee believes, in the
exercise of its business judgment and in the opinion of its legal counsel,
reasonably satisfactory to Reorganized Cityscape or Reorganized CSC, as the case
may be, that the joint representation of Reorganized Cityscape or Reorganized
CSC, as the case may be, and the Indemnitee will likely result in a conflict of
interest (in which case, if the Indemnitee notifies Reorganized Cityscape or
Reorganized CSC, as the case may be, in writing that it elects to employ
separate counsel at the expense of Reorganized Cityscape or Reorganized CSC,
Reorganized Cityscape or Reorganized CSC, as the case may be, will not have the
right to assume the defense of such action or proceeding on behalf of the
Indemnitee). In addition, neither Reorganized Cityscape nor Reorganized CSC will
effect any settlement or release from liability in connection with any matter
for which the Indemnitee would have the right to indemnification from
Reorganized Cityscape or Reorganized CSC unless such settlement contains a full
and unconditional release of the Indemnitee, or a release of the Indemnitee
reasonably satisfactory in form and substance to the Indemnitee.

      Retention of Bankruptcy Court Jurisdiction

      To the maximum extent permitted by the Bankruptcy Code or other applicable
law, the Bankruptcy Court will have jurisdiction of all matters arising out of,
and related to, the Reorganization Cases and the Plan pursuant to, and for the
purpose of, Sections 105(a) and 1142 of the Bankruptcy Code, including, without
limitation, jurisdiction to:

            (i) Allow, disallow, determine, liquidate, classify, estimate or
      establish the priority or secured or unsecured status of any Claim or
      Interest, including the resolution of any request for payment of


                                       48
<PAGE>   50

      any Administrative Claim, the resolution of any objections to the
      allowance or priority of Claims or Interests and the resolution of any
      dispute as to the treatment necessary to reinstate a Claim pursuant to the
      Plan;

            (ii) Grant or deny any applications for allowance of compensation or
      reimbursement of expenses authorized pursuant to the Bankruptcy Code or
      the Plan, for periods ending before the Effective Date;

            (iii) Resolve any matters related to the assumption or rejection of
      any executory contract or unexpired lease to which Cityscape or CSC is a
      party or with respect to which Cityscape or CSC may be liable, and to
      hear, determine and, if necessary, liquidate any Claims arising therefrom;

            (iv) Ensure that distributions to Holders of Allowed Claims or
      Allowed Interests are accomplished pursuant to the provisions of the Plan;

            (v) Decide or resolve any motions, adversary proceedings, contested
      or litigated matters and any other matters and grant or deny any
      applications involving Cityscape, CSC, Reorganized Cityscape or
      Reorganized CSC that may be pending on the Effective Date;

            (vi) Enter such Orders as may be necessary or appropriate to
      implement or consummate the provisions of the Plan and all contracts,
      instruments, releases, indentures and other agreements or documents
      created in connection with the Plan, the Solicitation Statement or the
      Confirmation Order, except as otherwise provided herein;

            (vii) Resolve any cases, controversies, suits or disputes that may
      arise in connection with the consummation, interpretation or enforcement
      of the Plan or the Confirmation Order, including the release and
      injunction provisions set forth in and contemplated by the Plan and the
      Confirmation Order, or any entity's rights arising under or obligations
      incurred in connection with the Plan or the Confirmation Order;

            (viii) Subject to any restrictions on modifications provided in the
      Plan or in any contract, instrument, release, indenture or other agreement
      or document created in connection with the Plan, modify the Plan before or
      after the Effective Date pursuant to Section 1127 of the Bankruptcy Code
      or modify the Solicitation Statement, the Confirmation Order or any
      contract, instrument, release, indenture or other agreement or document
      created in connection with the Plan, the Solicitation Statement or the
      Confirmation Order; or remedy any defect or omission or reconcile any
      inconsistency in any Bankruptcy Court Order, the Plan, the Solicitation
      Statement, the Confirmation Order or any contract, instrument, release,
      indenture or other agreement or document created in connection with the
      Plan, the Solicitation Statement or the Confirmation Order, in such manner
      as may be necessary or appropriate to consummate the Plan, to the extent
      authorized by the Bankruptcy Code;

            (ix) Issue injunctions, enter and implement other Orders or take
      such other actions as may be necessary or appropriate to restrain
      interference by any entity with consummation, implementation or
      enforcement of the Plan or the Confirmation Order;

            (x) Enter and implement such Orders as are necessary or appropriate
      if the Confirmation Order is for any reason modified, stayed, reversed,
      revoked or vacated;

            (xi) Except as otherwise provided in the Plan, or with respect to
      specific matters, in the Confirmation Order or any other Order entered in
      connection with the Reorganization Cases, determine any other matters that
      may arise in connection with or relating to the Plan, the Solicitation
      Statement, the Confirmation Order or any contract, instrument, release,
      indenture or other agreement or document created in connection with the
      Plan, the Solicitation Statement or the Confirmation Order;

            (xii) Hear and dispose of any claims assigned to, and asserted by,
      Reorganized Cityscape or Reorganized CSC pursuant to Section XI.F of the
      Plan;


                                       49
<PAGE>   51

            (xiii) Resolve any disputes relating to the Indenture Trustees'
      requests for payment of their fees and expenses, as provided in Section
      V.A.3.b of the Plan;

            (xiv) Resolve any disputes over invoices submitted by professionals
      to the Reorganized Company for compensation for services rendered or
      reimbursement of expenses incurred after the Effective Date, as provided
      in Section V.A.3.b of the Plan; and

            (xv) Enter an Order or Orders closing the Reorganization Cases.

V.    CONFIRMATION AND CONSUMMATION PROCEDURES

A.    Solicitation of Acceptances

      As permitted by the Bankruptcy Code, the Debtors are soliciting, in good
faith and in compliance with the applicable provisions of the Bankruptcy Code,
the acceptance of the Plan by all Classes of Claims that are "Impaired" under
the Plan and that are entitled to vote on the Plan. The solicitation of
acceptances from Holders of Claims in unimpaired Classes is not required under
the Bankruptcy Code. The following Classes are Impaired and are entitled to vote
on the Plan:

      Class 4 and 4a - Senior Note Claims and Small Senior Note Claims;

      Class 5 and 5a - General Unsecured Claims and Small Unsecured Claims; and

      Class 6 and 6a - Subordinated Debenture Claims and Small Subordinated
Debenture Claims.

      A plan is accepted by an impaired class of claims if holders of at least
two-thirds in dollar amount and more than one-half in number of claims of that
class vote to accept the plan. Only those holders of claims or interests who
actually vote count in these tabulations.

      In addition to this voting requirement, Section 1129 of the Bankruptcy
Code requires that a plan be accepted by each holder of a claim or interest in
an impaired class or that the plan otherwise be found by the bankruptcy court to
be in the best interests of each holder of a claim or interest in such class. In
addition, each impaired class must accept the plan for the plan to be confirmed
without application of the "fair and equitable" and "unfair discrimination"
tests in Section 1129(b) of the Bankruptcy Code discussed below.

      Any Holder of an Impaired Claim in Class 5 or Class 5a (i) whose Claim has
been scheduled by the Debtors in the schedules of assets and liabilities filed
with the Bankruptcy Court (provided that such Claim has not been scheduled as
disputed, contingent or unliquidated) or (ii) who has file a proof of Claim on
or before the deadline for filing proofs of claim, as applicable to such Claim,
with respect to which the Debtors' have not filed an objection on or before the
Voting Deadline or the amount of which has been determined or estimated for
voting purposes by the Bankruptcy Court is entitled to accept or reject the Plan
(unless such Claim has been disallowed by the Bankruptcy Court for purposes of
accepting or rejecting the Plan). Class 4, 4a, 6 and 6a Claims are deemed
allowed pursuant to the Plan. The Voting Record Date for determining which
Holders of Claims in Classes 4, 4a, 6 and 6a are entitled to accept or reject
the Plan is __________ ___, 1999, which is the date that the order approving
this Disclosure Statement was entered.

B.    Confirmation Hearing

      The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a
hearing on the Confirmation of the Plan. The Confirmation Hearing has been
scheduled for __:__ __, New York City Time, on _________ __, 1999. The
Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court
without further notice other than an announcement of the adjourned date made at
the Confirmation Hearing. Any objection to Confirmation of the Plan must be made
in writing and filed with the Bankruptcy Court and served upon the following or
before __:__ __,New York City Time, on _______ ___, 1999:


                                       50
<PAGE>   52

      LATHAM & WATKINS
      Attorneys for the Debtors
      885 Third Avenue, Suite 1000
      New York, NY 10027
      Attn.: Robert J. Rosenberg, Esq.

      CITYSCAPE FINANCIAL CORP.
      CITYSCAPE CORP.
      565 Taxter Road
      Elmsford, NY 10523-2300
      Attn.: Steven M. Miller

      KASOWITZ, BENSON, TORRES & FRIEDMAN, LLP
      Attorneys for the Unofficial Senior Noteholders' Committee
      1301 Avenue of the Americas
      New York, NY 10019
      Attn.: David M. Friedman, Esq.

      KRAMER LEVIN NAFTALIS & FRANKEL LLP
      Attorneys for the Unofficial Subordinated Debentureholders' Committee
      919 Third Avenue
      New York, NY 10022
      Attn.: Kenneth H. Eckstein, Esq.

      OFFICE OF THE UNITED STATES TRUSTEE
      33 Whitehall Street, 21st Floor
      New York, New York 10004

C.    Confirmation

      At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan
only if the Plan satisfies all of the requirements of Section 1129 of the
Bankruptcy Code. The requirements, in relevant part, are the following:

            a) The Plan and the Debtors must comply with the applicable
      provisions of the Bankruptcy Code.

            b) The Plan must have been proposed in good faith and not by any
      means forbidden by law.

            c) Any payment made or to be made by the Debtors, or by an entity
      issuing securities, or acquiring property under the Plan, for services or
      for costs and expenses in, or in connection with, the chapter 11 cases or
      in connection with the Plan and incident to the chapter 11 cases must have
      been approved by or be subject to, the approval of the Bankruptcy Court as
      reasonable.

            d) The Debtors must have disclosed the identity and affiliations of
      any individual proposed to serve, after the Confirmation of the Plan, as a
      director or officer of the Debtors under the Plan, and the appointment to
      or continuance in such office by such individual must be consistent with
      the interests of creditors and equity security holders and with public
      policy. The Debtors must have disclosed the identity of any "insider" (as
      defined in Section 101 of the Bankruptcy Code) who will be employed or
      retained by Reorganized Cityscape and Reorganized CSC and the nature of
      any compensation for such insider.

            e) Any government regulatory commission with jurisdiction, after the
      Confirmation Date, over the rates of the Debtors has approved any rate
      change provided for in the Plan, or such rate change is expressly
      conditioned upon such approval.

            f) With respect to each Impaired Class of Claims or Interests, each
      Holder of a Claim or Interest in such class must either accept the Plan or
      receive or retain under the Plan on account of such Claim or Interest,


                                       51
<PAGE>   53

      property of a value, as of the Effective Date that is not less than the
      amount that such Holder would receive or retain if the Debtors were
      liquidated on the Effective Date under chapter 7 of the Bankruptcy Code.

            g) Each Class of Claims or Interests must either accept the Plan or
      not be Impaired under the Plan. If this requirement is not met, the Plan
      may still be confirmed pursuant to Section 1129(b) of the Bankruptcy Code.

            h) Except to the extent that the Holder of a particular Claim has
      agreed to a different treatment of such Claim, the Plan must provide that
      (i) Administrative Expenses will be paid in full in Cash on the Effective
      Date, (ii) Priority Claims will be paid in full in Cash on the Effective
      Date, or if the Class of Priority Claims accepts the Plan, the Plan may
      provide for deferred Cash payments, of a value, as of the Effective Date,
      equal to the Allowed amount of such Priority Claims, and (iii) the Holder
      of a Priority Tax Claim will receive on account of such Claim deferred
      Cash payments over a period not exceeding six (6) years after the date of
      assessment of such Claim, of a value as of the Effective Date, equal to
      the Allowed amount of such Claim.

            i) If a class of Claims is Impaired under the Plan, at least one
      Class of Claims that is Impaired by the Plan must accept the Plan, such
      acceptance to be determined without giving effect to any acceptance of the
      Plan by an "insider."

            j) Confirmation of the Plan must not be likely to be followed by the
      liquidation, or the need for further financial reorganization, of the
      Debtors or any successor of the Debtors under the Plan.

            k) All fees payable under Section 1930 of title 28, United States
      Code, as determined by the Bankruptcy Court at the Confirmation Hearing,
      must have been paid or the Plan must provide for the payment of all such
      fees on the Effective Date.

            l) The Plan provides for the continuation after the Effective Date
      of payment of all retiree benefits, as that term is defined in Section
      1114 of the Bankruptcy Code, and at the level established pursuant to
      Section 1114, at any time prior to the Confirmation Date, for the duration
      of the period the Debtors have obligated themselves to provide such
      benefits.

      The Debtors believe that the Plan satisfies all of the statutory
requirements of chapter 11 of the Bankruptcy Code. Certain of these requirements
are discussed in greater detail below.

      Best Interests Test. In order to the meet the "best interests" test of
Section 1129(a)(7) of the Bankruptcy Code, the Debtors must establish that each
holder of a Claim or Interest in an Impaired class either (A) has accepted the
Plan or (B) will receive or retain under the Plan in respect of its Claim or
Interest, property of a value, as of the Effective Date, that is not less than
the amount such holder would receive or retain if the Debtors were liquidated
under chapter 7 of the Bankruptcy Code.

      To determine the recovery that Creditors and Holders of Interests would
receive if the Debtors were to be liquidated, the Bankruptcy Court must
determine the amount of cash that would be generated from the liquidation of the
assets and properties of the Debtors in a chapter 7 liquidation case. The dollar
amount that would be available for satisfaction of Claims and Interests would
consist of the proceeds resulting from the disposition of the assets of the
Debtors in a liquidation case plus the cash held by the Debtors at the time of
the commencement of the liquidation case and any interest earned on the
investment thereof minus the costs and expenses of the liquidation and any
additional administrative and priority claims that may result from the
termination of the Debtors' business and the completion of its liquidation under
chapter 7.

      The Debtors' costs of liquidation under chapter 7 of the Bankruptcy Code
would include the fees payable to a trustee (or trustees) in bankruptcy and to
any additional attorneys and other professionals engaged by such trustee (or
trustees) plus any unpaid expenses incurred by the Debtors during the chapter 11
cases including compensation to and reimbursement of expenses of, attorneys,
financial advisors and accountants and costs and expenses of members of the
Unofficial Committees that are allowed. The foregoing types of Claims and such
other Claims as may arise in the liquidation case or result from the chapter 11
cases would be paid in full from the


                                       52
<PAGE>   54

liquidation proceeds before the balance of those proceeds would be available to
pay Unsecured Claims. In addition, additional Claims would arise by reason of
the rejection of unexpired leases and executory contracts.

      Under the "best interest" test, all entities holding Unsecured Claims in a
particular class having the same rights upon liquidation would be treated as a
single class for purposes of determining the potential distribution of the
proceeds from the liquidation of the assets of the Debtors under chapter 7. The
distributions payable to each of the creditors in a Class from the liquidation
proceeds would be calculated pro rata according to the amount of the Claim in
such Class held be each Creditor. The Debtors believe that the most likely
outcome of liquidation proceeding under chapter 7 would be the application of
the rule of absolute priority of distributions. Under this rule, (A) no holders
of Unsecured Claims would receive any distribution until all holders of
Administrative Expenses, Priority Claims and Priority Tax Claims were paid in
full with interest and (B) no holder of an Interest would receive any
distribution until all Holders of General Unsecured Claims were paid in full
with interest.

      The Debtors have carefully considered the probable effects of liquidation
under chapter 7 of the Bankruptcy Code on the ultimate proceeds available for
distribution to creditors and holders of Interests, including the following:

            a) the probable costs and expenses of such liquidation;

            b) the possible adverse effect of liquidation under chapter 7 on the
      realizable values of the Debtors' assets and properties;

            c) the possible adverse effect of liquidation under chapter 7 on the
      salability of the Debtors' business on a going-concern basis as a result
      of the possible loss of key employees, the goodwill of customers, vendors
      and suppliers and the negative effect on the Debtors' reputation; and

            d) the possible substantial increase in Claims which would rank
      prior to or on a parity with those of unsecured creditors.

      After considering these factors, among others, the Debtors have prepared
an analysis, "The Liquidation Analysis" (set forth in Exhibit D attached
hereto), of the projected proceeds of a hypothetical chapter 7 liquidation and
the resulting distributions of such proceeds to the various Classes of Claims
and Holders of Interests. The Liquidation Analysis demonstrates that the value
of the distributions to each Class of Claims and Interests pursuant to the Plan
is equal to or greater than the value of the distributions to such Class in a
chapter 7 liquidation.

      Although the Liquidation Analysis assumes that full distributions to
creditors of the liquidation proceeds would occur within five months of the
commencement of the hypothetical chapter 7 case, the Debtors also believe that
distributions of the proceeds of the liquidation could be delayed for a
significantly greater period, because of the time necessary to complete the
liquidation, the possibility of litigation among the Holders of various Classes
of Claims of Interests and the additional time required thereafter to litigate
and resolve Disputed Claims and prepare for distributions. If such further delay
were to occur, the present value of future distributions to creditors under
chapter 7 would be further reduced.

      Feasibility. In order to meet the "feasibility" test under Section
1129(a)(11) of the Bankruptcy Code, the Debtors must establish that Confirmation
of the Plan is not likely to be followed by the liquidation, or the need for
further financial reorganization, of the Debtors. To determine whether the Plan
meets this requirement, the Debtor has prepared projected financial statements
for Reorganized Cityscape and Reorganized CSC through fiscal year 2003 which are
attached hereto as Exhibit C.

      In preparing the Projections, the Debtors have assumed for clarity of
presentation that the Plan will be confirmed by the Bankruptcy Court and that
the Effective Date will occur on or before May 31, 1999; however, the Debtors
believe that its operating results will not vary materially from the Projections
as a result of the Effective Date occurring earlier or later than May 31, 1999.


                                       53
<PAGE>   55

      Although the Projections are based upon the Debtors' best estimates, no
representations are made with respect to the accuracy thereof or the ability of
Reorganized Cityscape and Reorganized CSC to achieve the Projections. The
Projections are based upon a number of assumptions, many of which are subject to
substantial uncertainty. Some assumptions inevitably will not materialize and
unanticipated events and circumstances occurring subsequent to the date of
preparation of the Projections may affect actual results. Therefore, actual
operating results may vary materially from the projected operating results set
forth in the Projections.

      In addition, the Projections were prepared based upon the Debtors'
unaudited financial information as of November 30, 1998; the 1998 year-end audit
had not been completed as of the time the Projections were prepared.
Consequently, the actual audited operating results and financial information for
the Debtors may materially differ from the unaudited financial information upon
which the Projections are based because of, among other things, adjustments, if
any, resulting from completion of a 1998 year-end audit of the Debtors.

      Based upon the Projections, the Debtors believe the Plan is feasible and
will be prepared to so demonstrate at the Confirmation Hearing.

      Each creditor is urged to carefully examine the Projections and the
related assumptions in evaluating the feasibility of the Plan.

      Confirmation Over a Dissenting Class

      The Bankruptcy Code contains provisions authorizing the confirmation of a
plan even if it is not accepted by all impaired classes, as long as at least one
impaired class of claims (without including any acceptance of the plan by an
insider) has accepted it. These so-called "cramdown" provisions are set forth in
Section 1129(b) of the Bankruptcy Code. As indicated above, a plan may be
confirmed under the cramdown provisions if, in addition to satisfying the other
requirements of Section 1129 of the Bankruptcy Code, it (i) is "fair and
equitable" and (ii) "does not discriminate unfairly" with respect to each class
of claims or interests that is impaired under, and has not accepted, the plan.
The "fair and equitable" standard, also known as the "absolute priority rule,"
requires, among other things, that unless a dissenting class of claims or a
class of interests receives full compensation for its allowed claims or allowed
interests, no holder of claims or interests in any junior class may receive or
retain any property on account of such claims. The Bankruptcy Code establishes
different "fair and equitable" tests for secured creditors, unsecured creditors
and equity holders, as follows:

            Secured Creditors: either (i) each impaired secured creditor retains
      its liens securing its secured claim and receives on account of its
      secured claim deferred cash payments having a present value equal to the
      amount of its allowed secured claim, (ii) each impaired secured creditor
      realizes the "indubitable equivalent" of its allowed secured claim, or
      (iii) the property securing the claim is sold free and clear of liens with
      such liens to attach to the proceeds, and the liens against such proceeds
      are treated in accordance with clause (i) or (ii) of this subparagraph
      (a).

            Unsecured Creditors: either (i) each impaired unsecured creditor
      receives or retains under the plan of reorganization property of a value
      equal to the amount of its allowed claim, or (ii) the holders of claims
      and equity interests that are junior to the claims of the nonaccepting
      class do not receive any property under the plan of reorganization on
      account of such claims and equity interests.

            Equity Holders: either (i) each equity holder will receive or retain
      under the plan of reorganization property of a value equal to the greater
      of (a) the fixed liquidation preference or redemption price, if any, of
      such stock or (b) the value of the stock, or (ii) the holders of interests
      that are junior to the nonaccepting class will not receive any property
      under the plan of reorganization.

      The "fair and equitable" standard has also been interpreted to prohibit
any class senior to a dissenting class from receiving under a plan more than
100% of its allowed claims. The requirement that a plan not "discriminate
unfairly" means, among other things, that a dissenting class must be treated
substantially equally with respect to other classes of equal rank.


                                       54
<PAGE>   56

      The Debtors believe that, if necessary, the Plan may be crammed down over
the dissent of Classes of certain Claims and Interests, in view of the treatment
proposed for such Classes. See Section IV.B, "THE PLAN OF REORGANIZATION --
Treatment of Claims and Interests Under the Plan" for information concerning the
treatment of various Classes depending on which Classes vote to accept or reject
the Plan. If necessary and appropriate, the Debtors intend to amend the Plan to
permit cramdown of dissenting Classes of Claims or Interests. There can be no
assurance, however, that the requirements of Section 1129(b) of the Bankruptcy
Code would be satisfied even if the Plan treatment provisions were amended or
withdrawn as to one or more Classes. The Debtors believe that the treatment
under the Plan of the Holders of Allowed Claims and Allowed Interests, if any,
in each of Class 7, 8, 9, 10, 11, 12, 13 and 14 will satisfy the "fair and
equitable" test because, although no distribution will be made in respect of
Claims and Interests in such Classes and, as a result, such Classes will be
deemed, pursuant to Section 1126 of the Bankruptcy Code, to have rejected the
Plan, no Class junior to any such non-accepting Class will receive or retain any
property under the Plan.

      In addition, the Debtors do not believe that the Plan unfairly
discriminates against any Class that may not accept or otherwise consent to the
Plan. A plan of reorganization "does not discriminate unfairly" if (i) the legal
rights of a nonaccepting class are treated in a manner that is consistent with
the treatment of other classes whose legal rights are similarly situated to
those of the nonaccepting class, and (ii) no class receives payments in excess
of that which it is legally entitled to receive for its claims or equity
interests. The Company believes the Plan does not discriminate unfairly.

      THE DEBTORS RESERVE THE ABSOLUTE RIGHT TO SEEK CONFIRMATION OF THE PLAN
UNDER SECTION 1129(B) OF THE BANKRUPTCY CODE IN THE EVENT THE PLAN IS NOT
ACCEPTED BY ALL IMPAIRED CLASSES. AT A MINIMUM, THE DEBTORS WILL SEEK
CONFIRMATION OF THE PLAN PURSUANT TO SECTION 1129(B) OF THE BANKRUPTCY CODE AS
TO CLASSES 7 THROUGH 14 AS SUCH CLASSES WILL NOT RECEIVE OR RETAIN ANY INTEREST
OR PROPERTY UNDER THE PLAN AND WILL, THEREFORE, BE DEEMED TO HAVE REJECTED THE
PLAN.

      Subject to the conditions set forth in the Plan, a determination by the
Bankruptcy Court that the Plan is not confirmable, pursuant to Section 1129 of
the Bankruptcy Code, will not limit or affect the Debtors' ability to modify the
Plan to satisfy the Confirmation requirements of Section 1129 of the Bankruptcy
Code.

D.    Consummation

      If the Plan is confirmed, the Plan will be consummated and distributions
will be made on or shortly after the Effective Date, except as otherwise
provided in the Plan.

E.    Conditions to Effective Date

      The Effective Date will not occur and the Plan will not be consummated
unless and until each of the following conditions has been satisfied or waived
by the Debtors:

      1. The Confirmation Order shall authorize and direct that the Debtors,
      Reorganized Cityscape and Reorganized CSC take all actions necessary or
      appropriate to enter into, implement and consummate the contracts,
      instruments, releases, leases and other agreements or documents created in
      connection with the Plan, including those actions contemplated by the
      provisions of this Plan set forth in Section XI hereof.

      2. The statutory fees owing the U.S. Trustee shall have been paid in full.

      3. All other actions and documents necessary to implement the provisions
      of the Plan shall have been effected or executed or, if waivable, waived
      by the Person or Persons entitled to the benefit thereof.

      The foregoing conditions, other than those set forth in clause 2, may be
waived by the Debtors at any time, without notice, without leave or order of the
Bankruptcy Court and without any formal action other than proceeding to
consummate the Plan.


                                       55
<PAGE>   57

VI.   CERTAIN RISK FACTORS

      The New Common Stock to be issued pursuant to the Plan is subject to a
number of material risks, including those enumerated below. The risk factors
enumerated below generally assume the confirmation and consummation of the Plan
and all transactions contemplated thereby, and, except as indicated, do not
generally include matters that could prevent or delay confirmation. See Section
IV.B, "THE PLAN OF REORGANIZATION -- Treatment of Claims and Interests Under the
Plan -- Conditions Precedent to Confirmation and Consummation of the Plan" and
"-- Voting and Confirmation of the Plan" for a discussion of such matters. Prior
to deciding whether and how to vote on the Plan, each Holder of a Claim in a
solicited class should carefully consider all of the information contained in
this Disclosure Statement, especially the factors mentioned in the following
paragraphs.

A.    Risks Relating to the Projections

      The management of the Debtors have prepared the projected financial
information attached to this Disclosure Statement as Exhibit C relating to
Reorganized Cityscape and Reorganized CSC (the "Projections") in connection with
the development of the Plan and in order to present the anticipated effects of
the Plan and the transactions contemplated thereby. The Projections assume the
Plan and the transactions contemplated thereby will be implemented in accordance
with their terms and represent management's best estimate of the results of the
Reorganized Company's operations following the Effective Date. The assumptions
and estimates underlying such Projections are forward-looking and, as such, are
inherently uncertain and, although considered reasonable by management as of the
date hereof, are subject to significant business, economic and competitive risks
and uncertainties that could cause actual results to differ materially from
those projected, including, among others, (1) interest rate volatility; (2) the
ability of the Company to staff an adequate number and mix of employees; (3)
adverse economic conditions and competition; and (4) the Company's ability to
regain the confidence of; among others, investors, borrowers, correspondents,
vendors and mortgage bankers and brokers. Accordingly, the Projections are not
necessarily indicative of the future financial condition or results of
operations of Reorganized Cityscape and Reorganized CSC. Consequently, the
projected financial information contained herein should not be regarded as a
representation by the Debtors, the Debtors' advisors or any other person that
the Projections can or will be achieved.

B.    Assumptions Regarding Value of Cityscape's and CSC's Assets

      It has been generally assumed in the preparation of the Pro Forma
Financial Statements and the Projections that the book value of the Debtors'
assets approximates the fair value thereof; except for specific adjustments. For
financial reporting purposes, the fair value of the assets of the Debtors must
be determined as of the Effective Date. Such determination will be based on an
independent valuation. Although such valuation is not presently expected to
result in values that are materially greater or less than the values assumed in
the preparation of such Pro Forma Financial Statements and the Projections,
there can be no assurance with respect thereto.

C.    Business and Competition

      As a consumer finance company, the Debtors face intense competition.
Negative recent developments within the Debtors (including the suspension of
their loan origination and purchase business) have caused the Debtors to be
competitively disadvantaged. Competitors use information about the Debtors'
losses and market valuation to attract customers away from the Debtors.
Traditional competitors in the financial services business include other
mortgage banking companies, commercial banks, credit unions, thrift
institutions, credit card issuers and finance companies. Many of these
competitors in the consumer finance business are substantially larger and have
considerably greater financial, technical and marketing resources than the
Debtors. In addition, many financial service organizations have formed national
networks for loan originations substantially similar to the Debtors' loan
programs. Furthermore, certain large national finance companies and conforming
mortgage originators have announced their intention to adapt their conforming
origination programs and allocate resources to the origination of non-conforming
loans. In addition, certain of these larger mortgage companies and commercial
banks have begun to offer products similar to those offered by the Debtors,
targeting customers similar to those of the Debtors (if the Debtors recommence
originating loans). Competition can take many forms including convenience in
obtaining a loan, customer service, marketing and distribution channels, amount
and term of the loan and interest rates.


                                       56
<PAGE>   58

D.    Nature of Mortgages

      There are several factors that could adversely affect the value of
properties securing the mortgages owned by the Debtors or held by the
securitization trusts in which the Debtors hold residual interests (the
"Properties") such that the outstanding balance of the related loans, together
with any senior financing on the Properties, if applicable, would equal or
exceed the value of the Properties. Among the factors that could adversely
affect the value of the Properties are an overall decline in the residential
real estate market in the areas in which the Properties are located or a decline
in the general condition of the Properties as a result of the failure of
borrowers to maintain adequately the Properties or of natural disasters that are
not necessarily covered by insurance, such as earthquakes and floods. In the
case of closed-end and/or home equity loans secured primarily by subordinate
liens on one- to four-family residential properties (the "Home Equity Loans"),
such decline could extinguish the value of the interest of a junior mortgagee in
the Property before having any effect on the interest of the related senior
mortgagee. If such a decline occurs, the actual rates of delinquencies,
foreclosures and losses on all loans could be higher than those currently
experienced in the mortgage lending industry in general.

      Even assuming that the Properties provide adequate security for the loans,
substantial delays could be encountered in connection with the liquidation of
defaulted loans and corresponding delays in the receipt of related proceeds by
the Debtors could occur. An action to foreclose on a Property securing a loan is
regulated by state statutes and rules and is subject to many of the delays and
expenses of other lawsuits if defenses or counterclaims are interposed,
sometimes requiring several years to complete. Furthermore, in some states an
action to obtain a deficiency judgment is not permitted following a nonjudicial
sale of a property. In the event of a default by a borrower, these restrictions,
among other things, may impede the ability of the party servicing the loan to
foreclose on or sell the Property or to obtain liquidation proceeds sufficient
to repay all amounts due on the related loan. In addition, the party servicing
the loan will be entitled to deduct from related liquidation proceeds all
expenses reasonably incurred in attempting to recover amounts due on defaulted
loans and not yet repaid, including payments to senior lienholders, legal fees
and costs of legal action, real estate taxes and maintenance and preservation
expenses.

      Liquidation expenses with respect to defaulted loans do not necessarily
vary directly with the outstanding principal balance of the loan at the time of
default. Therefore, assuming that a servicer took the same steps in realizing
upon a defaulted loan having a small remaining principal balance as it would in
the case of a defaulted loan having a large remaining principal balance, the
amount realized after expenses of liquidation would be smaller as a percentage
of the outstanding principal balance of the small loan than would be the case
with the defaulted loan having a large remaining principal balance. Since the
mortgages and deeds of trust securing the Home Equity Loans are primarily junior
liens subordinate to the rights of the mortgagee under the related senior
mortgage(s) or deed(s) of trust, the proceeds from any liquidation, insurance or
condemnation proceedings will be available to satisfy the outstanding balance of
such junior lien only to the extent that the claims of such senior mortgagees
have been satisfied in full, including any related foreclosure costs. In
addition, a junior mortgagee may not foreclose on the property securing a junior
mortgage unless it forecloses subject to any senior mortgage, in which case it
must either pay the entire amount due on any senior mortgage to the related
senior mortgagee at or prior to the foreclosure sale or undertake the obligation
to make payments on any such senior mortgage in the event the mortgagor is in
default thereunder.

      Applicable state laws generally regulate interest rates and other charges,
require certain disclosures and require licensing of certain originators and
servicers of loans. In addition, most states have other laws, public policy and
general principles of equity relating to the protection of consumers, unfair and
deceptive practices and practices which may apply to the origination, servicing
and collection of the loans. Depending on the provisions of the applicable law
and the specific facts and circumstances involved, violations of these laws,
policies and principles may limit the ability of the party servicing the loans
to collect all or part of the principal of or interest on the loans, may entitle
the borrower to a refund of amounts previously paid and, in addition, could
subject the party servicing the loans to damages and administrative sanctions.


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<PAGE>   59

E.    Environmental Risks

      Federal, state and local laws and regulations impose a wide range of
requirements on activities that may affect health, safety and the environment.
In certain circumstances, these laws and regulations impose obligations on
owners or operators of residential properties such as those subject to the
loans. The failure to comply with such laws and regulations may result in fines
and penalties.

      Under various federal, state and local laws and regulations, an owner or
operator of real estate may be liable for the costs of addressing hazardous
substances on, in or beneath such property and related costs. Such liability
could exceed the value of the property and the aggregate assets of the owner or
operator. In addition, persons who transport or dispose of hazardous substances,
or arrange for the transportation, disposal or treatment of hazardous
substances, at off-site locations may also be held liable if there are releases
or threatened releases of hazardous substances at such off-site locations.

      Under the laws of some states and under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), contamination
of property may give rise to a lien on the property to assure the payment of the
costs of clean-up. In several states, such a lien has priority over the lien of
an existing mortgage against such property.

      Under the laws of some states, and under CERCLA and the federal Solid
Waste Disposal Act, there is a possibility that a lender may be held liable as
an "owner" or "operator" for costs of addressing releases or threatened releases
of hazardous substances at a property, or releases of petroleum from an
underground storage tank, under certain circumstances.

F.    Certain Other Legal Considerations Regarding Loans

      Loans may also be subject to federal laws, including: (i) the Federal
Truth in Lending Act and Regulation Z promulgated thereunder, which require
certain disclosures to the borrowers regarding the terms of loans; (ii) the
Equal Credit Opportunity Act and Regulation B promulgated thereunder, which
prohibit discrimination on the basis of age, race, color, sex, religion, marital
status, national origin, receipt of public assistance or the exercise of any
right under the Consumer Credit Protection Act, in the extension of credit;
(iii) the Fair Credit Reporting Act, which regulates the use and reporting of
information related to the borrower's credit experience; and (iv) for loans that
were originated or closed after November 7, 1989, the Home Equity Loan Consumer
Protection Act of 1988, which requires additional application disclosures,
limits changes that may be made to the loan documents without the borrower's
consent and restricts a lender's ability to declare a default or to suspend or
reduce a borrower's credit limit to certain enumerated events.

      The Riegle Act. Certain mortgage loans are subject to the Riegle Community
Development and Regulatory Improvement Act of 1994 (the "Riegle Act") which
incorporates the Home Ownership and Equity Protection Act of 1994. These
provisions impose additional disclosure and other requirements on creditors with
respect to nonpurchase money mortgage loans with high interest rates or high
up-front fees and charges. The provisions of the Riegle Act apply on a mandatory
basis to all mortgage loans originated on or after October 1, 1995. These
provisions can impose specific statutory liabilities upon creditors who fail to
comply with their provisions and may affect the enforceability of the related
loans. In addition, any assignee of the creditor would generally be subject to
all claims and defenses that the consumer could assert against the creditor,
including, without limitation, the right to rescind the mortgage loan.

      Home improvement installment sales contracts and installment loan
agreements that are either unsecured or secured primarily by subordinate liens
on one- to four-family residential properties or by purchase money security
interests in the home improvements financed thereby are subject to the
Preservation of Consumers' Claims and Defenses regulations of the Federal Trade
Commission and other similar federal and state statutes and regulations
(collectively, the "Holder in Due Course Rules"), which protect the homeowner
from defective craftsmanship or incomplete work by a contractor. These laws
permit the obligor to withhold payment if the work does not meet the quality and
durability standards agreed to by the homeowner and the contractor. The Holder
in Due Course Rules


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<PAGE>   60

have the effect of subjecting any assignee of the seller in a consumer credit
transaction to all claims and defenses which the obligor in the credit sale
transaction could assert again St the seller of the goods.

      Violations of certain provisions of these federal laws may limit the
ability of the party servicing the loans to collect all or part of the principal
of or interest on the loans and in addition could subject the Reorganized
Company to damages and administrative enforcement.

C.    Sale of CSC-UK

      The sale of CSC-UK to Ocwen did not include the assumption by Ocwen of all
of CSC-UK's liabilities and, therefore, no assurances can be given that claims
will not be made against the Debtors or the Reorganized Company in the future
arising out of the former CSC-UK operations. Such claims could have a material
adverse effect on the Debtors' or the Reorganized Company's financial condition
and results of operations.

H.    Certain Federal Income Tax Considerations; Reduction and Limitation of
      Corporate Tax Benefits

      Generally, Holders of Old Senior Notes should not recognize any gain or
loss for federal income tax purposes upon their receipt of New Common Stock
pursuant to the Plan (except to the extent such New Common Stock is attributable
to accrued but unpaid interest, which generally will be treated as a payment of
interest includible in income in accordance with the Holder's method of
accounting for tax purposes). Holders of Small Senior Note Claims who receive
Cash should recognize gain or loss in an amount equal to the difference between
the amount of Cash received and their tax basis in the Old Senior Notes
exchanged therefor. Holders of Old Subordinated Debentures should not recognize
any gain or loss for federal income tax purposes upon their receipt of New
Common Stock pursuant to the Plan (except to the extent such New Common Stock is
attributable to accrued but unpaid interest, which generally will be treated as
a payment of interest includible in income in accordance with the Holder's
method of accounting for tax purposes). Holders of Small Subordinated Debenture
Claims who receive Cash should recognize gain or loss in an amount equal to the
difference between the amount of cash received and their tax basis in the Old
Subordinated Debentures exchanged therefor. Holders of other Claims should
generally recognize gain or loss in an amount equal to the difference between
the value of any property received pursuant to the Plan and their tax basis in
their Claims exchanged therefor.

      The Debtors will not recognize any cancellation of indebtedness income
upon consummation of the Plan but will be required to reduce certain of their
separate tax attributes (including, to the extent applicable, net operating and
capital losses and loss carryforwards, tax credits and tax basis in assets) by
the amount of their cancellation of indebtedness income not recognized as
taxable income (subject to certain modifications). As a result, the Debtors
believe that most, if not all, of Cityscape's net operating losses and loss
carryforwards (and certain other losses, credits and carryforwards, if any) will
be eliminated upon consummation of the Plan. In addition, Reorganized Cityscape
may be required to reduce its tax basis in its assets as of the beginning of the
taxable year following consummation of the Plan (but not below the amount of
liabilities (if any) remaining immediately after the consummation of the Plan)
to the extent that Cityscape's cancellation of indebtedness income exceeds the
amount of net operating losses and any other losses, credits and carryovers so
reduced (subject to certain modifications). CSC will also have to reduce its net
operating losses (if any, and possibly certain other losses, credits, carryovers
and tax basis in assets) by the amount of its cancellation of indebtedness
income not recognized as taxable income (subject to certain modifications).
Consummation of the Plan should trigger an "ownership change" of the Company
consolidated group for purposes of Section 382 of the Internal Revenue Code of
1986, as amended, so that, if the Reorganized Company retains any pre-ownership
change net operating losses and loss carryforwards after the Effective Date, its
use of such losses and carryforwards will be limited annually to a statutorily
prescribed amount. See "Certain Federal Income Tax Considerations."

I.    Certain Risks of Non-Confirmation

      Even if the requisite acceptances are received, there can be no assurance
that the Bankruptcy Court will confirm the Plan. If the Bankruptcy Court were to
determine that the disclosure and the balloting procedures and results were
appropriate, the Bankruptcy Court could still decline to confirm the Plan if it
were to find that any statutory conditions to confirmation had not been met.
Section 1129 of the Bankruptcy Code sets forth the


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<PAGE>   61

requirements for confirmation and requires, among other things, a finding by the
Bankruptcy Court that the confirmation of the Plan is not likely to be followed
by a liquidation or a need for further financial reorganization and that the
value of distributions to non-accepting creditors and Interest Holders will not
be less than the value of distributions such creditors and Interest Holders
would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy
Code. While there can be no assurance that the Bankruptcy Court will conclude
that these requirements have been met, the Debtors believe that the Plan will
not be followed by a need for further financial reorganization and that
non-accepting creditors and Interest Holders will receive distributions at least
as great as would be received following a liquidation pursuant to chapter 7 of
the Bankruptcy Code.

J.    Government Regulations

      The Debtors' business is subject to extensive regulation, supervision and
licensing by federal, state and local governmental authorities and is subject to
various laws and judicial and administrative decisions imposing requirements and
restrictions on part or all of its operations. The Debtors' consumer lending
activities are subject to the Federal Truth-in-Lending Act and Regulation Z
(including the Home Ownership and Equity Protection Act of 1994), the Federal
Equal Credit Opportunity Act and Regulation B, as amended, the Fair Credit
Reporting Act of 1970, as amended, the Federal Real Estate Settlement Procedures
Act, and Regulation X, the Home Mortgage Disclosure Act, the Federal Debt
Collection Practices Act and the National Housing Act of 1934, as well as other
federal and state statutes and regulations affecting the Debtors' activities.
The Debtors are also subject to the rules and regulations of, and examinations
by, the Department of Housing and Urban Development and state regulatory
authorities with respect to originating, purchasing, processing, underwriting,
selling, securitizing and servicing loans. These rules and regulations, among
other things, impose licensing obligations on the Debtors, establish eligibility
criteria for mortgage loans, prohibit discrimination, provide for inspections
and appraisals of properties, require credit reports on loan applicants,
regulate assessment, collection, foreclosure and claims handling, investment and
interest payments on escrow balances and payment features, mandate certain
disclosures and notices to borrowers and, in some cases, fix maximum interest
rates, fees and mortgage loan amounts. Failure to comply with these requirements
can lead to loss of approved status, termination or suspension of servicing
contracts without compensation to the servicer, demands for indemnifications or
mortgage loan repurchases, certain rights of rescission for mortgage loans,
class action lawsuits and administrative enforcement actions.

K.    Restrictions on Resale of New Common Stock of the Reorganized Company

      Any person (or group of persons who act in concert) who receives a
substantial amount of New Common Stock of the Reorganized Company pursuant to
the Plan may be deemed to be an "affiliate." Absent registration under the
Securities Act, any person deemed to be an affiliate of the Reorganized Company
or an underwriter would be subject to the resale restrictions imposed by the
Commission's Rule 144, under the Securities Act, which would allow affiliates
and underwriters to sell, exchange, transfer or otherwise dispose of only
specified limited quantities of securities of the Reorganized Company, and only
subject to compliance with the other requirements imposed on "affiliates" under
Rule 144.

L.    Lack of Trading Market; Volatility

      There can be no assurance that an active market for the New Common Stock
will develop or, if any such market does develop, that it will continue to
exist, or as to the degree of price volatility in any such market that does
develop. Accordingly, no assurance can be given as to the liquidity of the
market for any of the New Common Stock or the price at which any sales may
occur.

M.    Possible Dilution of New Common Stock

      In the event Allowed Class 5 Claims total more than $10,000,000 (the
amount assumed for calculating distributions for Classes 4, 5 and 6 under the
Plan in Section IV.B above and for estimating recoveries by such Classes in the
chart set forth in Section 11 above), the percentages of the outstanding New
Common Stock held by each of Class 4 and Class 6 will be diluted below 92.48%
and 5.43%, respectively, in proportionate amounts. In addition, the value per
share of New Common Stock distributed to Holders of Allowed Claims in Classes 4,
5 and 6 (estimated at $10.00 per share based upon 6,800,000 issued and
outstanding shares) will be less than $10.00 per


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<PAGE>   62

share if Allowed Class 5 Claims total more than $10,000,000. There can be no
assurance that the aggregate amount of Allowed Class 5 Claims will not exceed
$10,000,000.

N.    Assumption Regarding Business of the Reorganized Company

      For the purpose of the Plan and this Disclosure Statement and the
information contained therein and herein including, but not limited to, the
projected financial information, the Debtors have defined their business as
mortgage banking and related operating and investment activities, including but
not limited to the origination, ownership, sale, and servicing of mortgage
loans. Although it is expected that the Reorganized Company will reenter the
mortgage loan origination business at some time in the future based on
prevailing industry conditions and the general business climate, there can be no
assurance of such reentry. Because the Reorganized Company will be relatively
liquid, it is expected that management of the Reorganized Company will examine
various consumer finance acquisition prospects including, but not limited to,
those in the subprime and high-LTV origination and servicing markets. Because of
a deterioration of the capital markets supporting the subprime and high-LTV
origination businesses, a number of potential acquisition or merger candidates
may be available. However, there can be no assurance that the Reorganized
Company will identify suitable acquisition or merger candidates, or that if such
candidates are identified, acceptable business transactions will be structured
and concluded. All decisions concerning reentry into the mortgage loan
origination business, as well as all other business transactions including, but
not limited to, investments, acquisitions, joint ventures and the declaration of
dividends and other distributions on equity securities, will be made by the
Boards of Directors of the Reorganized Company, as determined to be in the best
interests of the Reorganized Company. Consequently, there can be no certainty as
to the business decisions that will be made by the Boards of Directors of the
Reorganized Company.

VII.  CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

      The following discussion summarizes the material federal income tax
consequences expected to result from the consummation of the Plan. This
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended (the "Tax Code"), applicable Treasury Regulations, judicial authority
and current administrative rulings and pronouncements of the Internal Revenue
Service (the "Service"). There can be no assurance that the Service will not
take a contrary view, and no ruling from the Service has been or will be sought.

      Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to Holders, the Company and the Reorganized
Company. It cannot be predicted at this time whether any tax legislation will be
enacted or, if enacted, whether any tax law changes contained therein would
affect the tax consequences to the Holders, the Company and the Reorganized
Company.

      The following summary is for general information only. The tax treatment
of a Holder may vary depending upon such Holder's particular situation. This
discussion assumes that Holders of Old Securities have held such property as
"capital assets" within the meaning of Section 1221 of the Tax Code (generally,
property held for investment) and will also hold the New Common Stock as
"capital assets." This summary does not address all of the tax consequences that
may be relevant to a Holder, nor does it address the federal income tax
consequences to Holders subject to special treatment under the federal income
tax laws, such as brokers or dealers in securities or currencies, certain
securities traders, tax-exempt entities, financial institutions, insurance
companies, foreign corporations, Holders who are not citizens or residents of
the United States, Holders that hold the Old Securities as a position in a
"straddle" or as part of a "synthetic security," "hedging,"" conversion" or
other integrated instrument, Holders that have a "functional currency" other
than the United States dollar and Holders that have acquired Old Securities or
Old Stock Rights in connection with the performance of services. EACH HOLDER
SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO IT OF
THE PLAN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS.


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<PAGE>   63

Federal Income Tax Consequences to the Company

      Cancellation of Indebtedness and Reduction of Tax Attributes

      Cityscape and CSC generally will each realize cancellation of indebtedness
("COI") income to the extent that the fair market value of any property
(including New Common Stock) received by holders of indebtedness of such entity
is less than the adjusted issue price (plus the amount of any accrued but unpaid
interest) of such indebtedness discharged thereby. Under Section 108 of the Tax
Code, however, COI income will not be recognized if the COI income occurs in a
case brought under the Bankruptcy Code, provided the taxpayer is under the
jurisdiction of a court in such case and the cancellation of indebtedness is
granted by the court or is pursuant to a plan approved by the court.
Accordingly, because the cancellation of the indebtedness of the Debtors will
occur in a case brought under the Bankruptcy Code, the Debtors will each be
under the jurisdiction of the court in such case and the cancellation of the
indebtedness will be pursuant to the Plan, the Debtors should not be required to
recognize any COI income realized as a result of the implementation of the Plan.

      Under Section 108(b) of the Tax Code, the Debtors will be required to
reduce certain tax attributes, including net operating losses and loss
carryforwards ("NOLs") (and certain other losses, credits and carryforwards, if
any) and tax basis in assets (but not below the amount of liabilities remaining
immediately after the discharge of indebtedness), in an amount equal to the
amount of COI income excluded from income as described in the preceding
paragraph (subject to certain modifications). Any reduction in tax attributes
should occur on a separate company basis even though Cityscape and CSC file a
federal consolidated income tax return. The Service has held in private letter
rulings that where a member of a consolidated group is permitted to exclude from
income COI income pursuant to Section 108 of the Tax Code, Section 108(b) only
requires that such member reduce its own separate company tax attributes without
having to reduce the tax attributes of any other member of the consolidated
group. Although such rulings may not be relied upon by other taxpayers as
binding authority, they do provide some indication of the Service's position
regarding an issue. In addition, there does not appear to be any contrary
authority with respect to this issue. Thus, although not entirely free from
doubt, because the Old Senior Notes and Old Subordinated Debentures are
obligations of Cityscape (although guaranteed by CSC), only Cityscape's separate
company tax attributes should have to be reduced pursuant to Section 108(b) of
the Tax Code with regard to the debt forgiveness relating to the Old Senior
Notes and Old Subordinated Debentures. Similarly, only CSC's separate company
attributes should have to be reduced with regard to CSC's COI.

      The Company believes that at the Effective Date the Debtors may have NOLs
remaining from their 1997 tax years (the use of most of which the Company has
determined is subject to a significant annual limitation under Section 382 of
the Tax Code as a result of an "ownership change" of the Company in October of
1997) and that the Debtors may have generated additional NOLs for their 1998 tax
years and for the portion of their 1999 tax years that will precede the
Effective Date. Any such NOLs, however, are subject to audit and possible
challenge by the Service.

      As a result of the application of Section 108(b) of the Tax Code, the
Company believes that most, if not all, of Cityscape's NOLs (and certain other
losses, credits and carryforwards, if any) will be eliminated after consummation
of the Plan, and Reorganized Cityscape may be required to reduce its tax basis
in its assets as of the beginning of the taxable year following consummation of
the Plan (but not below the amount of liabilities (if any) remaining immediately
after the consummation of the Plan) to the extent that Cityscape's COI income
exceeds the amount of NOLs and any other losses, credits and carryovers so
reduced (subject to certain modifications). In addition, as a result of the
Plan, CSC will have to reduce its NOLs (if any, and possibly certain other
losses, credits and carryforwards, if any, and its tax basis in assets) by the
amount of its COI income that is excluded from income.

      Section 382 Limitations on NOLs

      Under Section 382 of the Tax Code, if a corporation with NOLs (a "Loss
Corporation") undergoes an "ownership change," the use of such NOLs (and certain
other tax attributes) will generally be subject to an annual limitation as
described below. In general, an "ownership change" occurs if the percentage of
the value of the Loss Corporation's stock owned by one or more direct or
indirect "five percent shareholders" has increased by more than 50 percentage
points over the lowest percentage of that value owned by such five percent
shareholder or


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<PAGE>   64

shareholders at any time during the applicable "testing period" (generally, the
shorter of (i) the three-year period preceding the testing date or (ii) the
period of time since the most recent ownership change of the corporation).

      A Loss Corporation's use of NOLs (and certain other tax attributes) after
an "ownership change" will generally be limited annually to the product of the
long-term tax-exempt rate (published monthly by the Service) and the value of
the Loss Corporation's outstanding stock immediately before the ownership change
(excluding certain capital contributions) (the "Section 382 Limitation").
However, the Section 382 Limitation for a taxable year any portion of which is
within the five-year period following the Effective Date will be increased by
the amount of any "recognized built-in gains" for such taxable year. The
increase in a year cannot exceed the "net unrealized built-in gain" (if such
gain exists immediately before the "ownership change" and exceeds a
statutorily-defined threshold amount) reduced by recognized built-in gains from
prior years ending during such five-year period. In addition, any "recognized
built-in losses" for a taxable year any portion of which is within the five-year
period following the Effective Date will be subject to limitation in the same
manner as if such loss was an existing NOL to the extent such recognized
built-in losses do not exceed the "net unrealized built-in loss" (if such loss
exists immediately before the "ownership change" and exceeds a
statutorily-defined threshold amount) reduced by recognized built-in losses for
prior taxable years ending during such five-year period. At this time, the
Company is unable to predict whether it will have a "net unrealized built-in
gain" or a "net unrealized built-in loss" that will exceed the
statutorily-defined threshold amount at the Effective Date. Finally, if the
Reorganized Company does not continue the Company's historic business or use a
significant portion of the Company's business assets in a new business for two
years after the "ownership change," the Section 382 Limitation would be zero
(except as increased by recognized built-in gains, as described above).

      Two alternative bankruptcy exceptions for Loss Corporations undergoing an
ownership change pursuant to a bankruptcy proceeding are provided for in the Tax
Code. The first exception, Section 382(1)(5) of the Tax Code, applies where
qualified (so-called "old and cold") creditors of the debtor receive at least
50% of the vote and value of the stock of the reorganized debtor in a case under
the Bankruptcy Code. Under this exception, a debtor's prechange NOLs are not
subject to the Section 382 Limitation but are instead reduced by the amount of
any interest deductions allowed during the three taxable years preceding the
taxable year in which the ownership change occurs, and during the part of the
taxable year prior to and including the effective date of the bankruptcy
reorganization, in respect of the debt converted into stock in the
reorganization. Moreover, if this exception applies, any further ownership
change of the debtor within a two-year period will preclude the debtor's
utilization of any pre-change losses at the time of the subsequent ownership
change against future taxable income.

      An "old and cold" creditor includes a creditor who has held the debt of
the debtor for at least eighteen months prior to the date of the filing of the
case or who has held "ordinary course indebtedness" at all times it has been
outstanding. However, any debt owned immediately before an ownership change by a
creditor who does not become a direct or indirect 5% shareholder of the
reorganized debtor generally will be treated as always having been owned by such
creditor, except in the case of any creditor whose participation in formulating
the plan of reorganization makes evident to the debtor that such creditor has
not owned the debt for such period. Because the Old Senior Notes have been
outstanding for less than eighteen months before the Petition Date and because
such Old Senior Notes do not appear to constitute "ordinary course
indebtedness," the Company should not be eligible to use the Section 382(1)(5)
exception.

      The second bankruptcy exception, Section 382(1)(6) of the Tax Code,
requires no reduction of preownership change NOLs but provides relief in the
form of a relaxed computation of the Section 382 Limitation. In that regard,
Section 382(1)(6) of the Tax Code provides that the value of the Loss
Corporation's outstanding stock for purposes of computing the Section 382
Limitation will be increased to reflect the cancellation of indebtedness in the
bankruptcy case (but the value of such stock as adjusted may not exceed the
value of the Company's gross assets immediately before the ownership change
(subject to certain adjustments)).

      The Plan should trigger an ownership change of the Company consolidated
group on the Effective Date. Due to the inapplicability of Section 382(1)(5),
the Company intends to apply Section 382(1)(6) to such "ownership change."
Accordingly, the Reorganized Company's use of pre-ownership change NOLs and
certain other tax attributes (if any), to the extent remaining after the
reduction thereof as a result of the cancellation of indebtedness


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of the Debtors, will be limited and generally will not exceed each year the
product of the long-term tax-exempt rate and the value of the Reorganized
Company's stock increased to reflect the cancellation of indebtedness pursuant
to the Plan.

Federal Income Tax Consequences to Holders of Old Senior Notes

      Exchange of Old Senior Notes for New Common Stock

      Whether the exchange of Old Senior Notes for New Common Stock pursuant to
the Plan will be a nontaxable recapitalization under the Tax Code will depend in
part upon whether the Old Senior Notes are considered to be "securities" within
the meaning of the provisions of the Tax Code governing reorganizations. The
test as to whether a debt instrument is a "security" involves an overall
evaluation of the nature of the debt instrument, with the term of the debt
instrument usually regarded as one of the most significant factors. Generally,
debt instruments with a term of five years or less have not qualified as
"securities," whereas debt instruments with a term often years or more generally
have qualified as "securities."

      Although the treatment of the Old Senior Notes is not entirely certain
because the stated term of such instrument is less than ten years, the Old
Senior Notes should be treated as "securities" for federal income tax purposes.
Accordingly, the exchange of Old Senior Notes for New Common Stock should
constitute a recapitalization for federal income tax purposes and, as a result,
exchanging Holders should not recognize any gain or loss (except to the extent
the New Common Stock is attributable to accrued but unpaid interest on the Old
Senior Notes, in which event Holders would generally be required to treat such
amounts as payment of interest includible in income in accordance with the
Holder's method of accounting for tax purposes (see "-- Accrued Interest"
below)). A Holder's adjusted tax basis in the New Common Stock will be equal to
the Holder's adjusted tax basis in the Old Senior Notes. The Holder's holding
period for the New Common Stock will include the Holder's holding period for the
Old Senior Notes.

      If the Old Senior Notes were determined not to constitute "securities" for
federal income tax purposes, then an exchanging Holder would recognize gain or
loss equal to the difference between the fair market value of the New Common
Stock received and the Holder's adjusted tax basis in the Old Senior Notes
exchanged therefor. Any such gain or loss would generally be long-term capital
gain or loss (subject to the market discount rules discussed below) if the Old
Senior Notes had been held for more than one year. In this event, a Holder's tax
basis in the New Common Stock would be equal to its fair market value on the
Effective Date, and the holding period for the New Common Stock would begin on
the day immediately after the Effective Date.

      Holders of Small Senior Note Claims who receive Cash instead of New Common
Stock should recognize gain or loss equal to the difference between the amount
of Cash received and a Holder's adjusted tax basis in the Old Senior Notes
exchanged therefor. Any such gain or loss would generally be long-term capital
gain or loss (subject to the market discount rules discussed below) if the Old
Senior Notes had been held for more than one year.

      Market Discount

      The Tax Code generally requires holders of "market discount bonds" to
treat as ordinary income any gain realized on the disposition of such bonds
(including in certain non-recognition transactions, such as a gift) to the
extent of the market discount accrued during the holder's period of ownership. A
"market discount bond" is a debt obligation purchased at a market discount
subject to a statutorily-defined de minimis exception. For this purpose, a
purchase at a market discount includes a purchase at or after the original issue
at a price below the stated redemption price at maturity of the debt instrument,
or, in the case of a debt instrument issued with original issue discount, at a
price below (i) its "issue price," plus (ii) the amount of original issue
discount includible in income by all prior holders of the debt instrument, minus
(iii) all cash payments (other than payments constituting qualified stated
interest) received by such previous holders.

      A holder of a debt instrument acquired at a market discount may elect to
include the market discount in income as the discount accrues, either on a
straight line basis or, if elected, on a constant interest rate basis. If a


                                       64
<PAGE>   66

holder of a market discount bond elects to include market discount in income on
a current basis, the foregoing rule with respect to the recognition of ordinary
income on a sale or other disposition of such bond would not apply.

      In the case of certain non-recognition transactions, such as the exchange
of the Old Senior Notes for the New Common Stock (and the exchange of the Old
Subordinated Debentures for the New Common Stock), special rules apply. Any
accrued (but unrecognized) market discount on the Old Debt will not have to be
recognized as income at the time of the non-recognition transaction, however, on
a subsequent taxable disposition of the stock received in such non-recognition
transaction, gain is treated as ordinary income to the extent of market discount
accrued prior to the non-recognition transaction.

      New Common Stock

      Dividends

      A Holder generally will be required to include in gross income as ordinary
dividend income the amount of any distributions paid on the New Common Stock to
the extent that such distributions are paid out of the Reorganized Company's
current or accumulated earnings and profits as determined for federal income tax
purposes. Distributions in excess of such earnings and profits will reduce the
Holder's tax basis in its New Common Stock and, to the extent such excess
distributions exceed such tax basis, will be treated as gain from a sale or
exchange of such New Common Stock. Corporate Holders may be entitled to a
dividends received deduction (generally at a 70% rate) with respect to
distributions out of earnings and profits and are urged to consult their tax
advisors in this regard.

      Sale or Other Taxable Disposition

      Upon the sale or other disposition of New Common Stock, a Holder generally
will recognize capital gain or loss equal to the difference between the amount
of cash and fair market value of any property received on the sale and such
Holder's adjusted tax basis in the New Common Stock. Capital gain or loss
recognized upon the disposition of the New Common Stock will be long-term if, at
the time of the disposition, the holding period for the New Common Stock exceeds
one year.

      However, pursuant to Section 108(e)(7) of the Tax Code, a creditor that
receives stock in exchange for debt is required, to the extent that gain is
recognized upon a subsequent disposition of such stock, to "recapture" as
ordinary income any bad debt deductions taken by the creditor with respect to
such debt and any ordinary loss claimed by the creditor upon the receipt of the
stock in satisfaction of such debt, reduced by any amount included in income
upon the receipt of the stock. In addition, as discussed above, if any Old Debt
held by a Holder has accrued (but unrecognized) market discount at the Effective
Date, then any gain recognized by such Holder upon the disposition of New Common
Stock would have to be treated as ordinary income to the extent of such accrued
market discount on the Effective Date.

Federal Income Tax Consequences to Holders of Old Subordinated Debentures

      Exchange of Old Subordinated Debentures for New Common Stock

      Whether the exchange of Old Subordinated Debentures for New Common Stock
pursuant to the Plan will be a nontaxable recapitalization under the Tax Code
will depend in part upon whether the Old Subordinated Debentures are considered
to be "securities" within the meaning of the provisions of the Tax Code
governing reorganizations. The test as to whether a debt instrument is a
"security" involves an overall evaluation of the nature of the debt instrument,
with the term of the debt instrument usually regarded as one of the most
significant factors. Generally, debt instruments with a term of five years or
less have not qualified as "securities," whereas debt instruments with a term
often years or more generally have qualified as "securities."

      Because the term of the Old Subordinated Debentures exceeds ten years, the
Old Subordinated Debentures should be treated as "securities" for federal income
tax purposes. Accordingly, the exchange of Old Subordinated Debentures for New
Common Stock should constitute a recapitalization for federal income tax
purposes and, as a


                                       65
<PAGE>   67

result, exchanging Holders should not recognize any gain or loss (except to the
extent the New Common Stock is attributable to accrued but unpaid interest on
the Old Subordinated Debentures, in which event Holders would generally be
required to treat such amounts as payment of interest includible in income in
accordance with the Holder's method of accounting for tax purposes (see "--
Accrued Interest" below)). A Holder's adjusted tax basis in the New Common Stock
will be equal to the Holder's adjusted tax basis in the Old Subordinated
Debentures. The Holder's holding period for the New Common Stock will include
the Holder's holding period for the Old Subordinated Debentures.

      If the Old Subordinated Debentures were determined not to constitute
"securities" for federal income tax purposes, then an exchanging Holder would
recognize gain or loss equal to the difference between the fair market value of
the New Common Stock received and the Holder's adjusted tax basis in the Old
Subordinated Debentures exchanged therefor. Any such gain or loss generally
would be (subject to the market discount rules discussed above) long-term
capital gain or loss if the Old Subordinated Debentures had been held for more
than one year. In this event, a Holder's tax basis in the New Common Stock
received would be equal to its fair market value on the Effective Date, and the
holding period for the New Common Stock would begin for a Holder on the day
immediately after the Effective Date.

      Holders of Small Subordinated Debenture Claims who receive Cash instead of
New Common Stock should recognize gain or loss equal to the difference between
the amount of cash received and a Holder's adjusted tax basis in the Old
Subordinated Debentures exchanged therefor. Any such gain or loss would
generally be long-term capital gain or loss (subject to the market discount
rules discussed above) if the Old Subordinated Debentures had been held for more
than one year.

      New Common Stock

      For the tax consequences of holding and disposing of New Common Stock, see
generally " -- Federal Income Tax Consequences to Holders of Old Senior Notes --
New Common Stock" above.

Federal Income Tax Consequences to Holders of Other Claims

      A Holder of a Claim in a Class not discussed above should generally
recognize gain or loss equal to the amount of any Cash received (plus the fair
market value of any other property received, including New Common Stock) with
respect to its Claim (other than for accrued but unpaid interest) less its
adjusted basis in its Claim (other than for accrued but unpaid interest). The
character of such gain or loss as long-term or short-term capital gain or loss
or as ordinary income or loss will be determined by a number of factors,
including the tax status of the Holder, whether the Claim constitutes a capital
asset in the hands of the Holder, whether the Claim has been held for more than
one year, whether the Claim was purchased at a discount, and whether and to what
extent the Holder had previously claimed a bad debt deduction or a worthless
security deduction.

Accrued Interest

      Holders will be treated as receiving a payment of interest (includible in
income in accordance with the Holder's method of accounting for tax purposes) to
the extent that any Cash or other property received pursuant to the Plan is
attributable to accrued but unpaid interest, if any, on such Claims. The extent
to which the receipt of Cash or other property should be attributable to accrued
but unpaid interest is unclear. The Company intends to take the position that
such Cash or property distributed pursuant to the Plan will first be allocable
to the principal amount of a Claim and then, to the extent necessary, to any
accrued but unpaid interest thereon. Each Holder should consult its own tax
advisor regarding the determination of the amount of consideration received
under the Plan that is attributable to interest (if any). A Holder generally
will be entitled to recognize a loss to the extent any accrued interest was
previously included in its gross income and is not paid in full.

      If any property received pursuant to the Plan is considered attributable
to accrued but unpaid interest, a Holder's basis in such property should be
equal to the amount of interest income treated as satisfied by the receipt of
such property. The holding period in such property should begin on the day
immediately after the Effective Date.


                                       66
<PAGE>   68

Backup Withholding and Information Reporting

      A Holder of New Common Stock may be subject to backup withholding at the
rate of 31% with respect to dividends paid on, and gross proceeds from a sale
of, the New Common Stock unless (i) such Holder is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(ii) provides a correct taxpayer identification number, certifies as to no loss
of exemption from backup withholding and complies with applicable requirements
of the backup withholding rules. A Holder of New Common Stock who does not
provide the Reorganized Company (or its paying agent) with his or her correct
taxpayer identification number may be subject to penalties imposed by the
Service. Amounts withheld under the backup withholding rules may be credited
against a Holder's tax liability, and a Holder may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the Service.

      The Reorganized Company will report to Holders of the New Common Stock and
to the Service the amount of any "reportable payments" on, and any amount
withheld with respect to, the New Common Stock during the calendar year.

      THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS IS
FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
HOLDER SHOULD CONSULT ITS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF
THE PLAN DESCRIBED HEREIN AND THE CONTINUING OWNERSHIP AND DISPOSITION OF THE
NEW COMMON STOCK AND THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
NEITHER THE PROPONENTS NOR THEIR PROFESSIONALS SHALL HAVE ANY LIABILITY TO ANY
PERSON OR HOLDER ARISING FROM OR RELATED TO THE FEDERAL, STATE OR LOCAL TAX
CONSEQUENCES OF THE PLAN OR THE FOREGOING DISCUSSION.

VIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN

      If the Plan is not confirmed and consummated, the alternatives include (a)
preparation and presentation of an alternative chapter 11 plan or (b) conversion
of the chapter 11 case to a liquidation under chapter 7 of the Bankruptcy Code.

A.    Alternative Chapter 11 Plans

      If the Plan is not confirmed, the Debtors or any other party in interest,
could attempt to formulate an alternative chapter 11 plan or plans. In
formulating and developing the Plan, the Debtors have explored numerous other
alternatives and engaged in negotiations with various parties holding disparate
interests. The consideration of these plan alternatives resulted in the
formulation of the Plan. The Debtors believe that the Plan deals fairly with the
rights of Holders of the various classes of Claims and enables creditors to
realize the greatest recovery possible under the circumstances. The Debtors
further believe that rejection of the Plan in favor of some alternative method
of restructuring the Claims of the various classes will not result in a better
recovery for any Class and will require, at the very least, an extensive and
time-consuming negotiation process.

B.    Liquidation Under Chapter 7

      Another alternative to confirmation and consummation of the Plan is
liquidation of the Debtors under chapter 7 of the Bankruptcy Code. Section
1129(a) of the Bankruptcy Code provides that the Bankruptcy Court may confirm a
plan only if the requirements contained in such section are met. One of these
requirements is that each non-accepting holder of an allowed claim or an allowed
interest in an impaired class must receive or retain under the plan on account
of such claim or interest property having a value as of the effective date of
the plan at least equal to the value that such holder would receive if the
debtor were liquidated under chapter 7 of the Bankruptcy Code on the effective
date of the Plan. The Debtors have prepared the Liquidation Analysis attached
hereto as Exhibit D. Based upon such Liquidation Analysis and after taking into
account the settlements and compromises contained in the Plan, the Debtors do
not believe that Holders of Claims and Interests would receive greater
recoveries if the Debtor were to be liquidated under chapter 7 of the Bankruptcy
Code.


                                       67
<PAGE>   69

IX.   CONCLUSION AND RECOMMENDATION

      The Debtors believe that confirmation and implementation of the Plan is
preferable to any of the alternatives described above because it will provide
the greatest recoveries to Holders of Claims. In addition, other alternatives
would involve significant delay, uncertainty and substantial additional
administrative costs. The Debtors and the Unofficial Committees urge Holders of
Impaired Claims in Classes 4, 4a, 5, 5a, 6 and 6a to vote in favor of the Plan.

Dated: March 26, 1999

                                Respectfully submitted,

                                CITYSCAPE FINANCIAL CORP.,
                                a Delaware Corporation

                                By: /s/ Steven M. Miller
                                    --------------------------------------------
                                    Name:  Steven M. Miller
                                    Title: President and Chief Executive Officer


                                CITYSCAPE CORP.,
                                a New York corporation

                                By: /s/ Steven M. Miller
                                    --------------------------------------------
                                    Name:  Steven M. Miller
                                    Title: Senior Vice President


                                LATHAM & WATKINS

                                By: /s/ Robert J. Rosenberg
                                    --------------------------------------------
                                    Robert J. Rosenberg (RJR 9585)
                                    885 Third Avenue, Suite 1000
                                    New York, New York 10022
                                    (212) 906-1200

                                    Counsel for the Debtors
                                    and Debtors-in-Possession


                                       68
<PAGE>   70

         Exhibit A to Debtors' First Amended Joint Disclosure Statement
                Pursuant to Section 1125 of the Bankruptcy Code

       First Amended Joint Plan of Reorganization of Cityscape Financial
       Corp. and Cityscape Corp. Under Chapter 11 of the Bankruptcy Code
<PAGE>   71

LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
(212) 906-1200
Robert J. Rosenberg (RJR 9585)
A. Brent Truitt (ABT 3799)
Rachael Fink (RF 3321)

Counsel for Debtors
and Debtors-in-Possession

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK

------------------------------------X
In re:                              :     Chapter 11
                                    :
CITYSCAPE FINANCIAL CORP.,          :     Case Nos. 98-B-22569 (ASH)
and CITYSCAPE CORP.,                :     and 98-B-22570 (ASH)      
                                    :     Jointly Administered      
                                    :
            Debtors.                :
------------------------------------X

                        CITYSCAPE FINANCIAL CORP.'S AND
                   CITYSCAPE CORP.'S FIRST AMENDED JOINT PLAN
                  OF REORGANIZATION DATED AS OF MARCH 26, 1999

Dated: March 26, 1999
<PAGE>   72

                               TABLE OF CONTENTS

I.    INTRODUCTION ...........................................................1

II.   DEFINITIONS, INTERPRETATION AND RULES OF CONSTRUCTION ..................1

      A. Definitions .........................................................1

      B. Interpretation and Computation of Time .............................12
            1. Defined Terms ................................................12
            2. Rules of Interpretation ......................................12
            3. Time Periods .................................................12

III.  POOLING OF ASSETS AND LIABILITIES AND CANCELLATION OF 
      INTERCOMPANY CLAIMS ...................................................12

IV.   DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS ........................13

V.    GENERAL PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS ..............15

            A. Unclassified Claims ..........................................15
                  1. Administrative Claims ..................................15
                  2. Priority Tax Claims ....................................16
                  3. Bar Date for Administrative Claims .....................16

            B. Treatment of Claims and Interests ............................18
                  1. Class 1 (Bank Claims) ..................................18
                  2. Class 2a et seq. (Other Secured Claims) ................19
                  3. Class 3 (Priority Claims) ..............................19
                  4. Class 4 (Senior Note Claims) and Class 4a (Small 
                        Senior Note Claims) .................................19
                  5. Class 5 (General Unsecured Claims) and Class 5a 
                        (Small Unsecured Claims) ............................20
                  6. Class 6 (Subordinated Debenture Claims) and Class 6a 
                        (Small Subordinated Debenture Claims) ...............21
                  7. Class 7 (Old Debt Securities Claims) ...................22
                  8. Class 8 (Interests of Holders of Old Series A 
                        Preferred Stock) ....................................22
                  9. Class 9 (Old Series A Preferred Stock Securities 
                        Claims) .............................................22
                  10. Class 10 (Interests of Holders of Old Series B 
                        Preferred Stock) ....................................22
                  11. Class 11 (Old Series B Preferred Stock Securities
                        Claims) .............................................22
                  12. Class 12 (Interests of Holders of Old Cityscape 
                        Common Stock) .......................................23
                  13. Class 13 (Interests of Holders of Old Stock Rights in
                        Cityscape and all Claims Arising Out of Such Old 
                        Stock Rights) .......................................23


                                       i
<PAGE>   73

                  14. Class 14 (Old Cityscape Common Stock and Old Warrant
                        Securities Claims) ..................................23

            C. Modification of Treatment of Claims ..........................23

VI.   DISTRIBUTIONS UNDER THE PLAN ..........................................24

            A. Disbursing Agent .............................................24

            B. Timing of Distributions ......................................24

            C. Methods of Distributions .....................................24
                  1. Cash Payments  24 ......................................24 
                  2. Issuance and Transfers of New Common Stock .............25
                  3. Compliance with Tax Requirements .......................25

            D. Pro Rata Distribution ........................................25

            E. Distribution Record Date .....................................26

            F. Surrender of Cancelled Voting Securities and Exchange 
               for New Securities ...........................................26
                  1. Tender of Voting Securities ............................26
                  2. Delivery of New Common Stock in Exchange for 
                        Voting Securities ...................................27
                  3. Special Procedures for Lost, Stolen, Mutilated 
                        or Destroyed Instruments ............................28
                  4. Failure to Surrender Cancelled Instrument ..............28

            G. Delivery of Distributions; Undeliverable or Unclaimed
                  Distributions .............................................28

            H. Procedures for Treating Disputed Claims Under Plan of
                  Reorganization ............................................29
                  1. Disputed Claims and Objections to Claims and 
                        Interests ...........................................29
                  2. Professionals, Administrative Claims, Trade Claims 
                        and Employee Claims .................................30
                  3. No Distributions Pending Allowance .....................30
                  4. Distributions on Account of Disputed Claims and
                        Interests Once They are Allowed .....................30

            I. Setoffs ......................................................31

            J. Termination of Subordination .................................31

VII.  TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES .................31

            A. Assumptions ..................................................31

            B. Cure of Defaults in Connection with Assumption ...............32


                                       ii
<PAGE>   74

            C. Rejections ...................................................32

            D. Bar Date for Rejection Damages ...............................32

VIII. ACCEPTANCE OR REJECTION OF THIS PLAN ..................................33

            A. Voting Classes ...............................................33

            B. Presumed Acceptances of Plan .................................33

            C. Presumed Rejections of Plan ..................................33

            D. Voting Instructions ..........................................33

            E. Voting Deadline and Extensions ...............................33

            F. Confirmability of Plan and Cramdown ..........................33

IX.   MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN ....................34

            A. Corporate Structure ..........................................34

            B. Corporate Action .............................................34
                  1. Cancellation of Old Securities and Related 
                        Agreements ..........................................34
                  2. Certificate of Incorporation and Bylaws for 
                        Reorganized Cityscape ...............................34
                  3. Certificate of Incorporation and Bylaws for 
                        Reorganized CSC .....................................34
                  4. Directors and Management of Reorganized Cityscape ......35
                  5. Directors and Management of Reorganized CSC ............35

            C. Implementation ...............................................36

            D. Other Documents and Actions ..................................36

            E. Payment of Statutory Fees ....................................36

            F. Payment of Fees and Expenses of Unofficial Committees'
                  Counsel ...................................................36

            G. Term of Injunctions or Stays .................................36

            H. No Interest ..................................................36

            I. Retiree Benefits .............................................36

            J. Issuance of New Common Stock .................................37

X.    CONFIRMATION AND EFFECTIVE DATE CONDITIONS ............................37

            A. Conditions to Confirmation ...................................37


                                      iii
<PAGE>   75

            B. Conditions to Effective Date .................................37

            C. Waiver of Conditions to Confirmation and Effective Date ......38

XI.   EFFECTS OF PLAN CONFIRMATION ..........................................38

            A. Discharge of Debtors and Injunction ..........................38

            B. Limitation of Liability ......................................39

            C. Releases .....................................................39

            D. Indemnification ..............................................40

            E. Vesting of Assets ............................................41

            F. Preservation of Causes of Action .............................41

            G. Retention of Bankruptcy Court Jurisdiction ...................42

            H. Failure of Bankruptcy Court to Exercise Jurisdiction .........43

            I. Committees ...................................................44

XII.  MISCELLANEOUS PROVISIONS ..............................................44

            A. Final Order ..................................................44

            B. Modification of the Plan .....................................44

            C. Revocation of the Plan .......................................45

            D. Severability of Plan Provisions ..............................45

            E. Successors and Assigns .......................................45

            F. Saturday, Sunday or Legal Holiday ............................45

            G. Post-Effective Date Effect of Evidences of Claims or
                  Interests .................................................45

            H. Governing Law ................................................46

            I. No Liability for Solicitation or Participation ...............46

            J. No Admissions or Waiver of Objections ........................46


                                       iv
<PAGE>   76

                                       I.

                                  INTRODUCTION

            Cityscape Financial Corp. (defined herein as "CITYSCAPE") and its
wholly-owned subsidiary Cityscape Corp. (defined herein as "CSC" and,
collectively with Cityscape, as "DEBTORS") hereby propose the following First
Amended Plan of Reorganization (defined herein as the "PLAN") for the resolution
of the Debtors' outstanding creditor claims and equity interests and request
Confirmation of the Plan pursuant to Section 1129 of the Bankruptcy Code.

            All Holders of Claims and Interests are encouraged to read the Plan
and the accompanying solicitation materials in their entirety.

            No materials, other than the accompanying solicitation materials and
any exhibits and schedules attached thereto or referenced therein, have been
approved by the Debtors for use in soliciting acceptances or rejections of the
Plan.

            NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, ALL STATEMENTS IN
THIS PLAN AND THE ACCOMPANYING SOLICITATION MATERIALS CONCERNING THE HISTORY OF
THE DEBTORS' BUSINESSES, THE PAST OR PRESENT FINANCIAL CONDITION OF THE DEBTORS,
TRANSACTIONS TO WHICH THE DEBTORS WERE OR ARE PARTY, OR THE EFFECT OF
CONFIRMATION OF THE PLAN ON SECURED CREDITORS, UNSECURED CREDITORS OR EQUITY
SECURITY HOLDERS ARE ATTRIBUTABLE EXCLUSIVELY TO THE DEBTORS AND NOT TO ANY
OTHER PARTY.

                                      II.

             DEFINITIONS, INTERPRETATION AND RULES OF CONSTRUCTION

A.    Definitions.

            In addition to such other terms as are defined in other sections of
the Plan, the following terms (which appear in the Plan as capitalized terms)
have the following meanings as used in the Plan:

1. "ADMINISTRATIVE CLAIM" means a Claim for payment of an administrative expense
of a kind specified in Section 503(b) of the Bankruptcy Code and referred to in
Section 507(a)(1) of the Bankruptcy Code, including, without limitation, the
actual and necessary costs and expenses incurred after the commencement of a
chapter 11 case of preserving the estate or operating the business of the
Company (including wages, salaries and commissions for services), loans and
advances to the Company made after the Petition Date, compensation for legal and
other services and reimbursement of expenses awarded or allowed under Section
330(a) or 331 of the Bankruptcy Code, certain retiree benefits, certain
reclamation claims (if any), and all fees and charges against the estate under
Section 1930 of title 28, United States Code.
<PAGE>   77

2. "ALLOWED CLAIM" or "ALLOWED INTEREST" means a Claim against or Interest in
the Debtors:

      (1) to the extent that a proof of such Claim or Interest was timely Filed
      and served upon the Debtors and no objection to the Claim or Interest, or
      motion to estimate the Claim or Interest for purposes of allowance, is
      Filed within the time fixed by the Bankruptcy Court for such objections;
      or

      (2) to the extent that a proof of such Claim or Interest is deemed Filed
      under applicable law or pursuant to a Final Order of the Bankruptcy Court
      and no objection to the Claim or Interest is Filed within the time fixed
      by the Bankruptcy Court for such objections; or

      (3) that is allowed pursuant to this Plan; or

      (4) to the extent that a proof of such Claim or Interest is allowed
      pursuant to the following sentence of this definition.

If the Debtors File an objection to a proof of Claim or Interest within a time
fixed by the Bankruptcy Court, the Claim or Interest shall be Allowed to the
extent of:

      (1) any amount of such Claim or Interest to which the Debtors did not
      object;

      (2) any amount otherwise authorized by Final Order or the Plan; and

      (3) any amount temporarily allowed by an Order for purposes of voting on
      the Plan (which amount shall not be binding with respect to distributions
      to which the Holder of such Claim or Interest shall be entitled under the
      Plan).

"ALLOWED ADMINISTRATIVE CLAIM," "ALLOWED PRIORITY TAX CLAIM," "ALLOWED SECURED
CLAIM" and "ALLOWED UNSECURED CLAIM" have correlative meanings.

3. "ALLOWED CLASS ... CLAIM" means an Allowed Claim in the particular Class
described.

4. "ALLOWED CLASS ... INTEREST" means an Allowed Interest in the particular
Class described.

5. "BALLOT" means a ballot or master ballot to be used for voting to accept or
reject the Plan.

6. "BANK CLAIMS" means all Claims represented by, relating to or arising under
or in connection with the Greenwich Facility or the CIT Facility.

7. "BANKRUPTCY CODE" means title 11 of the United States Code, as now in effect
or hereafter amended if such amendments are made applicable to the
Reorganization Cases.


                                      A-2
<PAGE>   78

8. "BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern
District of New York, or such other court or adjunct thereof that exercises
jurisdiction over the Reorganization Cases.

9. "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy Procedure, as
applicable from time to time in the Reorganization Cases.

10. "BUSINESS DAY" means any day other than a Saturday, a Sunday or a "LEGAL
HOLIDAY" (as defined in Bankruptcy Rule 9006(a)).

11. "CASH" means currency, a certified check, a cashier's check or a wire
transfer of immediately available funds from any source, or a check drawn on a
domestic bank from Reorganized Cityscape, Reorganized CSC or other Person making
any distribution under the Plan.

12. "CEDEL" means Cedel Bank, societe anonyme.

13. "CIT FACILITY" means that certain revolving credit facility entered into by
CSC with The CIT Group/Equipment Financing, Inc. on February 3, 1998, as amended
through the date hereof, which facility is guaranteed by Cityscape.

14. "CITYSCAPE" means Cityscape Financial Corp., a Delaware corporation.

15. "CLAIM" means a claim against either of the Debtors, whether or not asserted
or allowed, as defined in Section 101(5) of the Bankruptcy Code, including,
without limitation, Administrative Claims.

16. "CLASS" means a class of Claims or Interests designated pursuant to the
Plan.

17. "CLEARING SYSTEMS" shall have the meaning ascribed to such term in Section
VI.F.2 of the Plan.

18. "CLERK" means the Clerk of the Bankruptcy Court.

19. "COMMITTEE" means any statutory committee of creditors or equity interest
Holders of the Debtors appointed by the United States Trustee pursuant to
Section 1102 of the Bankruptcy Code, including the Creditors' Committee, if one
is appointed.

20. "COMPANY" means Cityscape and CSC, collectively and individually as
appropriate from the context, as Debtors.

21. "CONFIRMATION" means the entry by the Bankruptcy Court of the Confirmation
Order.

22. "CONFIRMATION DATE" means the date on which the Clerk enters the
Confirmation Order on the Docket.


                                      A-3
<PAGE>   79

23. "CONFIRMATION HEARING" means the hearing on confirmation of the Plan, as the
Plan may be modified hereafter.

24. "CONFIRMATION ORDER" means the Order of the Bankruptcy Court confirming the
Plan under Section 1129 of the Bankruptcy Code.

25. "CREDITORS' COMMITTEE" means any Official Committee of Creditors of
Cityscape and/or CSC appointed by the United States Trustee pursuant to Section
1102 of the Bankruptcy Code.

26. "CSC" means Cityscape Corp., a New York corporation and wholly-owned
subsidiary of Cityscape.

27. "DEBTOR RELEASEES" shall have the meaning ascribed to such term in Section
XI.C. of the Plan.

28. "DEBTORS" means, collectively, Cityscape and CSC, as debtors and Debtors In
Possession.

29. "DEBTORS IN POSSESSION" means the Debtors, when acting in the capacity of
representatives of the Estates in the Reorganization Cases.

30. "DESIGNATED PROFESSIONAL" means: (i) Latham & Watkins; (ii) Gibson, Dunn &
Crutcher LLP; (iii) Kasowitz, Benson, Torres & Friedman; (iv) Kramer Levin
Naftalis & Frankel LLP and (v) Jay Alix & Associates.

31. "DIP CLAIMS" means all Claims arising under the DIP Facilities.

32. "DIP FACILITIES" means the debtor in possession credit agreements and any
related agreements between the Debtors and the DIP Lenders.

33. "DIP LENDERS" means, collectively, The CIT Group/Equipment Financing, Inc.,
Greenwich Capital Financial Products, Inc. and any other lenders participating
in the DIP Facilities.

34. "DISBURSING AGENT" means, collectively, one or more Persons responsible for
making distributions under the Plan. The Reorganized Company or such Person(s)
as the Debtors may employ in their sole discretion will serve as Disbursing
Agent.

35. "DISCLOSURE STATEMENT" means the disclosure statement (including any prior
version thereof) pursuant to Section 1125 of the Bankruptcy Code with respect to
the Plan (and all exhibits and schedules annexed thereto or referred to
therein), as it may be amended or supplemented from time to time.

36. "DISPUTED CLAIM" means a Claim, not otherwise Allowed or paid pursuant to
the Plan, to the extent such Claim is the subject of a pending application,
motion, complaint, objection or other legal proceeding seeking to disallow,
subordinate or estimate such Claim.


                                      A-4
<PAGE>   80

37. "DISPUTED INTEREST" means an Interest to the extent such Interest is the
subject of a pending application, motion, complaint, objection or other legal
proceeding seeking to disallow, subordinate or estimate such Interest.

38. "DISTRIBUTION RECORD DATE" means the date or dates fixed by the Bankruptcy
Court as the record date for determining the Holders of Old Senior Notes and Old
Subordinated Debentures, respectively, who are entitled to receive distributions
under this Plan and, if no such date is fixed, means the Confirmation Date.

39. "DOCKET" means the docket or dockets in the Reorganization Cases maintained
by the Clerk.

40. "DTC" means The Depository Trust Company.

41. "EFFECTIVE DATE" means the first Business Day, as determined by the Debtors,
on which (i) all conditions to the Effective Date set forth herein have been
satisfied or, if permitted, waived by the Debtors, and on which no stay of the
Confirmation Order is in effect, and (ii) the Plan has been "substantially
consummated," as such term is defined in Section 1101(2) of the Bankruptcy Code.

42. "ELIGIBLE INSTITUTION" shall have the meaning ascribed to such term in
Section V.F.1.b of the Plan.

43. "EMPLOYEE CLAIMS" means Claims which are asserted by employees of the
Debtors in connection with their employment, including, without limitation,
Claims arising from or relating to salaries or wages, accrued paid vacation,
health-related benefits, severance benefits, field management and
executive/administrative management incentive plans and similar employee
benefits.

44. "ESTATES" means the estates created in the Debtors' Reorganization Cases
under Section 541 of the Bankruptcy Code.

45. "EUROCLEAR" means Morgan Guaranty Trust Company of New York, as operator of
the Euroclear system.

46. "FILE," "FILED" or "FILING" means filed, or filing, with the Bankruptcy
Court in the Reorganization Cases.

47. "FINAL ORDER" means an order or judgment of the Bankruptcy Court, as entered
on the Docket in the Reorganization Cases, which has not been reversed, stayed,
modified or amended, and as to which (a) the time to appeal, seek certiorari or
request reargument or further review or rehearing has expired and no appeal,
petition for certiorari or request for reargument or further review or rehearing
has been timely filed, or (b) any appeal that has been or may be taken or any
petition for certiorari or request for reargument or further review or rehearing
that has been or may be filed has been resolved by the highest court to which
the order or judgment was appealed, from which certiorari was sought or to which
the request was made.


                                      A-5
<PAGE>   81

48. "FINANCING ORDERS" means, collectively, the interim and final orders entered
by the Bankruptcy Court in connection with the DIP Facilities.

49. "GENERAL UNSECURED CLAIMS" shall have the meaning ascribed to such term in
Article IV of the Plan.

50. "GREENWICH FACILITY" means that certain Master Loan and Security Agreement
dated as of January 1, 1997 between CSC and Greenwich Capital Financial
Products, Inc., as subsequently extended, amended or otherwise modified from
time to time through the date hereof, which facility is guaranteed by Cityscape.

51. "HOLDER" means a Person who holds a Claim or Interest in such Person's
capacity as the holder of such Claim or Interest. Where the identity of the
Holder of a Claim or Interest is set forth on a register or other record
maintained by or at the direction of the Debtors, the Holder of such Claim or
Interest shall be deemed to be the Holder as identified on such register or
record unless the Debtors are otherwise notified in a writing authorized by such
Holder.

52. "IMPAIRED" shall have the definition given to it in Section 1124 of the
Bankruptcy Code. Section 1124 states in principal part:

            [A] class of claims or interests is impaired under a plan unless,
            with respect to each claim or interest of such class, the plan --

            (1) leaves unaltered the legal, equitable, and contractual rights to
            which such claim or interest entitles the holder of such claim or
            interest; or

            (2) notwithstanding any contractual provision or applicable law that
            entitles the holder of such claim or interest to demand or receive
            accelerated payment of such claim or interest after the occurrence
            of a default --

            (A) cures any such default that occurred before of after the
            commencement of the case under this title, other than a default of a
            kind specified in section 365(b)(2) of this title;

            (B) reinstates the maturity of such claim or interest as such
            maturity existed before such default;

            (C) compensates the holder of such claim or interest for any damages
            incurred as a result of any reasonable reliance by such holder on
            such contractual provision or such applicable law; and

            (D) does not otherwise alter the legal, equitable, or contractual
            rights to which such claim or interest entitles the holder of such
            claim or interest.

An Impaired Class is entitled to vote on the Plan; provided, however, that
Classes of Claims and Interests that do not receive or retain any property under
the Plan on account of such Claims and Interests are deemed to have rejected the
Plan and are not entitled to vote.


                                      A-6
<PAGE>   82

53. "INDEMNITEES" shall have the meaning ascribed to such term in Section XI.D
of the Plan.

54. "INDENTURE TRUSTEES" means (i) The Chase Manhattan Bank, as original
indenture trustee for the Old Senior Notes, (ii) Norwest Bank of Minnesota,
N.A., as successor indenture trustee for the Old Senior Notes, or any successor
thereto, and (iii) The Chase Manhattan Bank, N.A., as indenture trustee for the
Old Subordinated Debentures, or any successor thereto.

55. "INSTRUMENT" means any share of stock, security, promissory note or other
"INSTRUMENT," within the meaning of that term, as defined in Section 9-105(1)(i)
of the UCC.

56. "INTERCOMPANY CLAIMS" means any and all Claims and causes of action which
either of the Debtors holds against the other Debtor.

57. "INTEREST" means the interest of any equity security Holder of the Debtors,
whether or not asserted, as defined in Section 101(17) of the Bankruptcy Code.

58. "LETTER OF TRANSMITTAL" shall have the meaning ascribed to such term in
Section VI.F.1.b of the Plan.

59. "LOCAL BANKRUPTCY RULES" means the local rules of the Bankruptcy Court, as
applicable from time to time in the Reorganization Cases.

60. "NEW COMMON STOCK" means common stock of Reorganized Cityscape, par value
$0.01 per share, which may be issued by Reorganized Cityscape on and after the
Effective Date pursuant to the Plan or otherwise.

61. "OLD CITYSCAPE COMMON STOCK" means the common stock of Cityscape, par value
$.0l per share.

62. "OLD CITYSCAPE PREFERRED STOCK" means Old Series A Preferred Stock and the
Old Series B Preferred Stock.

63. "OLD DEBT" means, collectively, the Old Senior Notes and Old Subordinated
Debentures.

64. "OLD SECURITIES" means, collectively, the Old Debt, the Old Cityscape Common
Stock, the Old Cityscape Preferred Stock and the Old Warrants.

65. "OLD SENIOR NOTES" means the 12 3/4% Series A Senior Notes due 2004 issued
by Cityscape.

66. "OLD SERIES A PREFERRED STOCK" means Cityscape's 6% Convertible Preferred
Stock, Series A, with an initial liquidation preference of $10,000 per share, of
which 626 shares remain outstanding as of the date hereof.


                                      A-7
<PAGE>   83

67. "OLD SERIES B PREFERRED STOCK" means Cityscape's 6% Convertible Preferred
Stock, Series B, with an initial liquidation preference of $10,000 per share, of
which 4,551 shares remain outstanding as of the date hereof.

68. "OLD SERIES A WARRANTS" means the five-year warrants (which relate to the
Old Series A Preferred Stock) to purchase 500,000 shares of Old Cityscape Common
Stock with an exercise price of $20.625 per share.

69. "OLD SERIES B WARRANTS" means the five-year warrants (which relate to the
Old Series B Preferred Stock) to purchase 500,000 shares of Old Cityscape Common
Stock with an exercise price per share equal to the lesser of (i) $14.71 and
(ii) 130% of the average closing sales prices over the 20 trading day period
ending on the trading day immediately prior to the first anniversary of the
original issuance of such warrants.

70. "OLD STOCK RIGHTS" means, collectively, any Old Warrants, and any other
rights or options, to purchase or otherwise acquire Old Securities, and any
stock appreciation or similar rights relating to Old Securities, existing prior
to the Effective Date, including, without limitation, such rights under
Cityscape's 1995 Non-Employee Directors Stock Option Plan, Cityscape's 1995
Stock Option Plan, Cityscape's Stock Purchase Plan, Cityscape's 1997 Stock
Option Plan, and Cityscape's Stock Option Program for certain executive
officers, and registration rights granted by Cityscape to Franklin Mutual
Advisers, Inc. "Old Stock Rights" do not include any rights arising out of the
ownership of Old Securities other than the Old Warrants.

71. "OLD SUBORDINATED DEBENTURES" means the 6% Convertible Subordinated
Debentures due 2006 issued by Cityscape.

72. "OLD WARRANTS" means the Old Series A Warrants and the Old Series B
Warrants.

73. "ORDER" means an order or judgment of the Bankruptcy Court as entered on the
Docket.

74. "ORDINARY COURSE PROFESSIONALS' ORDER" means the order which, if entered by
the Clerk, will authorize the Debtors to (a) retain and employ various
professionals who are not working directly to implement the Reorganization Cases
and (b) pay such professionals without need for application, hearing and Final
Order.

75. "OTHER SECURED CLAIM" means any Allowed Secured Claim not classified in
Class 1. Other Secured Claims are classified in Class 2a et seq.

76. "PERSON" means any individual, corporation, general partnership, limited
partnership, limited liability partnership, limited liability company,
association, joint stock company, joint venture, government or political
subdivision, official committee appointed by the United States Trustee,
unofficial committee of creditors or equity Holders, or other "entity" (as
defined in the Bankruptcy Code).


                                      A-8
<PAGE>   84

77. "PETITION DATE" means October 6, 1998, the date on which the Reorganization
Cases were Filed.

78. "PLAN" means this plan of reorganization (including any prior version
thereof) for the Debtors in the Reorganization Cases and all exhibits and
schedules annexed hereto, as such may be amended, modified or supplemented from
time to time.

79. "POST-PETITION TAX CLAIMS" means Administrative Claims and other Claims by a
governmental unit for taxes (and for interest and/or penalties related to such
taxes) for any tax year or period, to the extent such Claim accrues within the
period from and including the Petition Date through and including the Effective
Date.

80. "PREPETITION CREDIT FACILITIES" means the CIT Facility and the Greenwich
Facility.

81. "PRIORITY CLAIM" means an Allowed Claim entitled to priority under Sections
507(a)(3) through 507(a)(7) or 507(a)(9) of the Bankruptcy Code, but excludes
Priority Tax Claims.

82. "PRIORITY TAX CLAIM" means an Allowed Claim for an amount entitled to
priority under Section 507(a)(8) of the Bankruptcy Code.

83. "PRO RATA" means proportionately so that, with respect to any Class, the
ratio of (a) the amount of consideration distributed on account of a particular
Allowed Claim or Allowed Interest to (b) the amount of such particular Allowed
Claim or Allowed Interest, is the same as the ratio of (x) the amount of
consideration distributed on account of all Allowed Claims or Allowed Interests
of the Class in which the particular Allowed Claim or Allowed Interest is
included to (y) the aggregate amount of all Allowed Claims or Allowed Interests
of that Class.

84. "REINSTATED," means, with respect to any Allowed Claim or Allowed Interest,
that such Claim or Interest shall be treated as Unimpaired as of the Effective
Date.

85. "REORGANIZATION CASES" means the Debtors' cases under chapter 11 of the
Bankruptcy Code.

86. "REORGANIZED CITYSCAPE" means Cityscape, as it will be reorganized as of the
Effective Date in accordance with this Plan and having such name as shall be
determined prior to the Confirmation Date by the Board of Directors of
Cityscape.

87. "REORGANIZED CITYSCAPE BYLAWS" means the amended and restated bylaws of
Reorganized Cityscape that will be effective on the Effective Date, in
substantially the form annexed as Exhibit "B" hereto.

88. "REORGANIZED CITYSCAPE CERTIFICATE OF INCORPORATION" means the amended and
restated certificate of incorporation of Reorganized Cityscape that will be
effective on the Effective Date, in substantially the form annexed as Exhibit
"A" hereto.


                                      A-9
<PAGE>   85

89. "REORGANIZED CSC" means CSC, as it will be reorganized as of the Effective
Date in accordance with this Plan and having such name as shall be determined
prior to the Confirmation Date by the Board of Directors of CSC.

90. "REORGANIZED CSC BYLAWS" means the amended and restated bylaws of
Reorganized CSC that will be effective on the Effective Date, in substantially
the form annexed as Exhibit "D" hereto.

91. "REORGANIZED CSC CERTIFICATE OF INCORPORATION" means the amended and
restated certificate of incorporation of Reorganized CSC that will be effective
on the Effective Date, in substantially the form annexed as Exhibit "C" hereto.

92. "REORGANIZED COMPANY" means Reorganized Cityscape and Reorganized CSC,
collectively and individually, as appropriate from the context.

93. "SECURED CLAIM" means any Claim that is secured by a lien on property in
which the Estates have an interest or that is subject to setoff under Section
553 of the Bankruptcy Code, to the extent of the value of the Claim Holder's
interest in the Estates' interest in such property or to the extent of the
amount subject to setoff, as applicable, as determined pursuant to Section
506(a) or 1111(b) of the Bankruptcy Code.

94. "SECURITIES CLAIM" means (a) any Claim arising from rescission of a purchase
or sale of Old Securities or for damages arising from the purchase or sale of
Old Securities, or (b) any Claim for indemnity, reimbursement, or contribution
on account of any such Claim.

95. "SENIOR NOTE CLAIMS" means Claims arising from the Old Senior Notes
(including all Claims and causes of action arising therefrom or in connection
therewith).

96. "SMALL SENIOR NOTE CLAIMS" shall have the meaning ascribed to such term in
Article IV of the Plan.

97. "SMALL SUBORDINATED DEBENTURE CLAIMS" shall have the meaning ascribed to
such term in Article IV of the Plan.

98. "SMALL UNSECURED CLAIMS" shall have the meaning ascribed to such term in
Article IV of the Plan.

99. "SUBORDINATED DEBENTURE CLAIMS" means Claims arising from the Old
Subordinated Debentures (including all Claims and causes of action arising
therefrom or in connection therewith).

100. "TENDERED CERTIFICATES" shall have the meaning ascribed to such term in
Section VI.F.1.b of the Plan.

101. "TORT CLAIM" means any Claim related to personal injury, property damage or
loss, products liability or other similar Claims against either Debtor, and
shall not include Securities Claims or Claims arising under, based upon or
related to Old Stock Rights.


                                      A-10
<PAGE>   86

102. "TRADE CLAIMS" means any unsecured Claim against either Cityscape or CSC
arising from (i) the delivery of goods or services in the ordinary course of
business or (ii) insurance-related service (including insurance premiums).
"Trade Claim" excludes (i) Claims arising under Section 502(e) or 502(g) of the
Bankruptcy Code, (ii) Claims of the type described in Section 726(a)(4) of the
Bankruptcy Code, and (iii) Tort Claims.

103. "UCC" means the Delaware Uniform Commercial Code, as in effect at any
relevant time.

104. "UNIMPAIRED" means, with reference to a Class of Claims or Interests, that
the Class is not Impaired. An Unimpaired Class is not entitled to vote on the
Plan.

105. "UNOFFICIAL COMMITTEES" means the Unofficial Senior Noteholders' Committee
and the Unofficial Subordinated Debentureholders' Committee.

106. "UNOFFICIAL SENIOR NOTEHOLDERS' COMMITTEE" means (i) MacKay-Shields
Financial Corporation, as investment advisor to various funds, (ii) Cerberus
Partners, L.P., and such other representatives of the Senior Note Claims as may
be designated from time to time.

107. "UNOFFICIAL SUBORDINATED DEBENTUREHOLDERS' COMMITTEE" means (i) Forest
Investment Management, (ii) Bear, Stearns & Co. Inc., (iii) Deephaven Market
Neutral Trading Limited (f/k/a KA Management), (iv) Tamar Securities Inc., (v)
Aristeia Capital LLC, (vi) J. Robbins Securities, LLC, (vii) RAS Securities
Corp., (viii) D.A. Davidson & Co., (ix) Donaldson, Lufkin & Jenrette Securities
Corporation, (x) Mercantile Bank, (xi) Mellon Bank, as trustee for General
Motors Employees Domestic Group Pension Trust, (xii) Ramat Securities Ltd., and
such other representatives of the Subordinated Debenture Claims as may be
designated from time to time.

108. "UNSECURED CLAIM" means any Claim that is not an Administrative Claim,
Priority Claim, Priority Tax Claim or Secured Claim.

109. "VOTING AGENT" shall have the meaning ascribed to such term in Section
VIII.E of the Plan.

110. "VOTING DEADLINE" means the date on which Ballots must be received by the
Voting Agent at the address set forth on the applicable Ballot. For purposes of
the Plan, the Voting Deadline is 5:00 p.m., New York City Time, _______________,
1999.

111. "VOTING RECORD DATE" means _____.

112. "VOTING SECURITIES" means, collectively, the Old Senior Notes and the Old
Subordinated Debentures.


                                      A-11
<PAGE>   87

B.    Interpretation and Computation of Time.

      1.    Defined Terms.

            Any term used in the Plan that is not defined in the Plan, either in
Article II (Definitions) or elsewhere, but that is defined in the Bankruptcy
Code, the Bankruptcy Rules or the Local Bankruptcy Rules, shall have the meaning
assigned to that term in the Bankruptcy Code, the Bankruptcy Rules or the Local
Bankruptcy Rules, as the case may be.

      2.    Rules of Interpretation.

            For purposes of the Plan: (a) whenever it appears appropriate from
the context, each term, whether stated in the singular or the plural, shall
include both the singular and the plural; (b) any reference in the Plan to a
contract, instrument, release or other agreement or document being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions; provided, however, that any change to such form, terms, or
conditions which is material to a party to such document shall not be made
without such party's consent; (c) any reference in the Plan to an existing
document or exhibit Filed or to be Filed means such document or exhibit, as it
may have been or (to the extent otherwise permitted, hereafter) may be amended,
modified or supplemented from time to time; (d) unless otherwise specified in a
particular reference, all references in the Plan to paragraphs, sections,
articles and exhibits are references to paragraphs, sections, articles and
exhibits of or to the Plan; (e) the words "herein," "hereof" "hereto,"
"hereunder" and others of similar import refer to the Plan in its entirety
rather than to a particular portion of the Plan only; (f) captions and headings
to articles and paragraphs are inserted for convenience of reference only and
are not intended to be a part of or to affect the interpretations of the Plan;
(g) the rules of construction set forth in Section 102 of the Bankruptcy Code
shall apply; and (h) all exhibits to the Plan are incorporated into the Plan,
and shall be deemed to be included in the Plan.

      3.    Time Periods.

            In computing any period of time prescribed or allowed by the Plan,
the provisions of Bankruptcy Rule 9006(a) shall apply.

                                      III.

                     POOLING OF ASSETS AND LIABILITIES AND
                      CANCELLATION OF INTERCOMPANY CLAIMS

            On the Effective Date, the assets and liabilities of the Debtors
shall be pooled to the extent specified in this Plan. The legal rights and
priorities of each Holder of a Claim shall be treated as having a single
recourse against such pooled assets. Each Holder of a Claim who has asserted a
Claim against both of the Debtors arising from or related to the same underlying
obligation or cause of action, whether the basis for the asserted liability of
the Debtors arises by contract, guarantee (including CSC's guarantee of
Cityscape's obligations under the Old Senior


                                      A-12
<PAGE>   88

Notes), or by operation of law, shall likewise be treated as having a single
Claim against the assets of the pooled estate.

            On the Effective Date, as part of such pooling, each of the Debtors
shall be deemed to have fully and finally compromised and settled all
Intercompany Claims. As a result of giving effect to such pooling of assets and
liabilities and such compromise and settlement, all Intercompany Claims shall be
treated as extinguished immediately upon the Effective Date and shall receive no
distribution pursuant to this Plan.

            The pooling of assets and liabilities provided for under this
Article III shall be only for purposes of distributions under this Plan. Nothing
in this Plan or the Confirmation Order shall effect a merger or any other
combination of Cityscape and CSC, or Reorganized Cityscape and Reorganized CSC.

                                       IV.

                 DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS

            The following is a designation of the Classes of Claims and
Interests under the Plan. In accordance with Section 1123(a)(1) of the
Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been
classified and are excluded from the following Classes. A Claim or Interest is
classified in a particular Class only to the extent that the Claim or Interest
qualifies within the description of that Class, and is classified in another
Class or Classes to the extent that any remainder of the Claim or Interest
qualifies within the description of such other Class or Classes. A Claim or
Interest is classified in a particular Class only to the extent that the Claim
or Interest is an Allowed Claim or Allowed Interest in that Class and has not
been paid, released or otherwise satisfied before the Effective Date; a Claim or
Interest which is not an Allowed Claim or Allowed Interest is not in any Class.
A Disputed Claim or Disputed Interest, to the extent that it subsequently
becomes an Allowed Claim or Allowed Interest, shall be included in the Class for
which it would have qualified had it not been disputed. Notwithstanding anything
to the contrary contained in the Plan, no distribution shall be made on account
of any Claim or Interest to the extent such Claim or Interest is not an Allowed
Claim or an Allowed Interest.

Class 1--Bank Claims                    Class 1 consists of all Allowed Bank
                                        Claims against the Debtors.

Class 2a et seq.--Other Secured Claims  Class 2 consists of all Allowed Secured
                                        Claims against the Debtors other than
                                        Secured Claims specified in Class 1.

Class 3--Priority Claims                Class 3 consists of all Allowed Priority
                                        Claims against the Debtors.


                                      A-13
<PAGE>   89

Class 4--Senior Note Claims and         Class 4 consists of all Allowed Claims
Class 4a--Small Senior Note Claims      against the Debtors of Holders of Old
                                        Senior Notes, including Claims based
                                        upon CSC's guarantee of Cityscape's
                                        obligations under the Old Senior Notes.
                                        Class 4a consists of each Allowed Senior
                                        Note Claim whose principal amount is
                                        equal to or less than $5,000.00 or whose
                                        Holder agrees on a Ballot or otherwise
                                        in writing to reduce the principal
                                        amount of such Allowed Senior Note Claim
                                        to $5,000.00 and to release and waive
                                        any further or additional Claim(s)
                                        against the Debtors ("SMALL SENIOR NOTE
                                        CLAIMS").

Class 5--General Unsecured Claims and   Class 5 consists of all Allowed
Class 5a--Small Unsecured Claims        Unsecured Claims against the Debtors
                                        other than the Unsecured Claims in
                                        Classes 4, 4a, 6, 6a, 7, 9, 11, 13 and
                                        14 ("GENERAL UNSECURED CLAIMS"). Class
                                        5a consists of each Allowed General
                                        Unsecured Claim that is equal to or less
                                        than $8,000.00 or whose Holder agrees on
                                        a Ballot or otherwise in writing to
                                        reduce such Allowed Unsecured Claim to
                                        $8,000.00 and to release and waive any
                                        further or additional Claim(s) against
                                        the Debtors ("SMALL UNSECURED CLAIMS").

Class 6--Subordinated Debenture Claims  Class 6 consists of all Allowed Claims  
and                                     against the Debtors of Holders of Old   
Class 6a--Small Subordinated Debenture  Subordinated Debentures. Class 6a       
Claims                                  consists of each Allowed Subordinated   
                                        Debenture Claim whose principal amount  
                                        is equal to or less than $50,000.00 or  
                                        whose Holder agrees on a Ballot or      
                                        otherwise in writing to reduce the      
                                        principal amount of such Allowed        
                                        Subordinated Debenture Claim to         
                                        $50,000.00 and to release and waive any 
                                        further or additional Claim(s) against  
                                        the Debtors ("Small Subordinated        
                                        Debenture Claims").                     

Class 7--Old Debt Securities Claims     Class 7 consists of all Allowed
                                        Securities Claims on account of Old Debt
                                        against the Debtors.

Class 8--Old Series A Preferred Stock   Class 8 consists of all Allowed
                                        Interests in Cityscape of Holders of Old
                                        Series A Preferred Stock.


                                      A-14
<PAGE>   90

Class 9--Old Series A Preferred Stock   Class 9 consists of all Allowed
Securities Claims                       Securities Claims on account of Old
                                        Series A Preferred Stock against the
                                        Debtors.

Class 10--Old Series B Preferred Stock  Class 10 consists of all Allowed
                                        Interests in Cityscape of Holders of Old
                                        Series B Preferred Stock.

Class 11--Old Series Securities Claims  Class 11 consists of all Allowed
B Preferred Stock                       Securities Claims on account of Old
                                        Series B Preferred Stock against the
                                        Debtors.

Class 12 --Old Cityscape Common Stock   Class 12 consists of all Allowed
                                        Interests in Cityscape of Holders of Old
                                        Cityscape Common Stock.

Class 13--Old Stock Rights              Class 13 consists of all Allowed
                                        Interests in Cityscape of Holders of Old
                                        Stock Rights and all Allowed Claims
                                        arising out of any such Old Stock
                                        Rights, including, without limitation,
                                        all Allowed Claims arising out of the
                                        rejection of Old Stock Rights.

Class 14--Old Cityscape Common Stock    Class 14 consists of all Allowed
and Old Warrant Securities Claims       Securities Claims on account of Old
                                        Cityscape Common Stock or Old Warrants 
                                        against the Debtors.

                                       V.

            GENERAL PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS

A.    Unclassified Claims.

      1.    Administrative Claims.

            a.    General.

            Subject to certain additional requirements for professionals and
certain other entities set forth below, the Reorganized Company shall pay to
each Holder of an Allowed Administrative Claim, on account of its Administrative
Claim and in full satisfaction thereof, Cash equal to the amount of such Allowed
Administrative Claim on, as soon as practicable after, the later of the
Effective Date and the day on which such Claim becomes an Allowed Claim, unless
the Holder and the Debtors or the Reorganized Company agree or shall have agreed
to other treatment of such Claim, or an order of the Bankruptcy Court provides
for other terms; provided, that if incurred in the ordinary course of business
or otherwise assumed by the Debtors


                                      A-15
<PAGE>   91

pursuant to the Plan (including Administrative Claims of governmental units for
taxes), an Allowed Administrative Claim will be assumed on the Effective Date
and paid, performed or settled by the Reorganized Company, when due in
accordance with the terms and conditions of the particular agreement(s)
governing the obligation in the absence of the Reorganization Cases.

            b.    Payment of Statutory Fees.

            On or before the Effective Date, all fees payable pursuant to 28
U.S.C. ss.1930, as determined by the Bankruptcy Court at the Confirmation
Hearing, shall be paid in Cash equal to the amount of such Administrative Claim.

      2.    Priority Tax Claims.

            Unless otherwise agreed to by the Debtors or the Reorganized
Company, and a Holder of a Priority Tax Claim, each Holder of an Allowed
Priority Tax Claim shall receive, at the sole option of the Reorganized Company
(i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim on the
later of the Effective Date and the date on which such Claim becomes an Allowed
Priority Tax Claim, or as soon thereafter as is practicable, or (ii) equal
quarterly cash payments in an aggregate amount equal to such Allowed Priority
Tax Claim, together with interest at a fixed annual rate to be determined by the
Bankruptcy Court or otherwise agreed to by the Reorganized Company and such
Holder, over a period through the sixth anniversary of the date of assessment of
such Allowed Priority Tax Claim, or upon such other terms determined by the
Bankruptcy Court to provide the Holder of such Allowed Priority Tax Claim
deferred cash payments having a value, as of the Effective Date, equal to such
Allowed Priority Tax Claim. The Holders of Allowed Priority Tax Claims are not
entitled to vote on the Plan. Pursuant to Section 1123(a)(1) of the Bankruptcy
Code, Priority Tax Claims are not designated a Class of Claims for purposes of
the Plan.

      3.    Bar Date for Administrative Claims.

            a.    General Provisions.

            Except as provided below for (i) non-tax liabilities incurred in the
ordinary course of business by the Debtors in Possession, (ii) Post-Petition Tax
Claims, and (iii) DIP Claims, requests for payment of Administrative Claims must
be Filed and served on counsel for the Debtors and Reorganized Cityscape or
Reorganized CSC, as the case may be, no later than (x) sixty (60) days after the
Effective Date, or (y) such later date, if any, as the Bankruptcy Court shall
order upon application made prior to the end of such 60-day period. Holders of
Administrative Claims (including, without limitation, professionals requesting
compensation or reimbursement of expenses and the Holders of any Claims for
federal, state or local taxes) that are required to File a request for payment
of such Claims and that do not File such requests by the applicable bar date
shall be forever barred from asserting such Claims against the Debtors,
Reorganized Cityscape, Reorganized CSC, or any of their respective properties.
No request for payment shall be required in connection with the DIP Claims,
which, notwithstanding anything to the contrary in this Plan, shall be paid in
full in Cash on the Effective Date, as provided in the DIP Facilities and the
Financing Orders.


                                      A-16
<PAGE>   92

            b.    Professionals.

            All professionals or other Persons requesting compensation or
reimbursement of expenses pursuant to Section 327, 328, 330, 331, 503(b) or 1103
of the Bankruptcy Code for services rendered on or before the Effective Date
(including, without limitation, any compensation requested by any professional
or any other Person for making a substantial contribution in the Reorganization
Cases) shall File and serve on the Reorganized Company and counsel for the
Reorganized Company an application for final allowance of compensation and
reimbursement of expenses no later than (i) sixty (60) days after the Effective
Date, or (ii) such later date, if any, as the Bankruptcy Court shall order upon
application made prior to the end of such 60-day period; provided, however, that
any professional who may receive compensation or reimbursement of expenses
pursuant to the Ordinary Course Professionals' Order without having filed an
application may continue to receive compensation or reimbursement for services
rendered before the Effective Date without further Bankruptcy Court review or
approval to the extent provided in the Ordinary Course Professionals' Order.
Objections to applications of professionals or other Persons for compensation or
reimbursement of expenses must be Filed and served on the Reorganized Company,
counsel for the Reorganized Company and the requesting professional or other
Person on or before the later of (x) ninety (90) days after the Effective Date
and (y) thirty (30) days after such date as the Bankruptcy Court shall establish
as the deadline for Filing such applications. The professionals of the Debtors
and any Committee shall be entitled to reasonable compensation by, and
reimbursement of expenses from, the Reorganized Company for services rendered or
costs incurred by such professionals after the Effective Date promptly after
submission of appropriate invoices to the Reorganized Company. In the event of a
dispute over any such invoices, the Reorganized Company shall promptly pay any
amount not in dispute and, if such dispute cannot be resolved among the parties,
such dispute shall be resolved by the Bankruptcy Court.

            c.    Indenture Trustees.

            On or as soon as reasonably practicable after the Effective Date,
the Reorganized Company shall pay the contractual claims of the Indenture
Trustees for their fees and expenses including their reasonable attorneys' fees
and expenses. To the extent, after being furnished with normal supporting
documents for such fees and expenses, the Reorganized Company disputes the
reasonableness of any such fees and expenses, the Reorganized Company shall pay
such fees and expenses as are not disputed, and shall submit to the Indenture
Trustee a written list of specific fees and expenses viewed by the Reorganized
Company as not being reasonable. To the extent that the Reorganized Company and
the Indenture Trustee are unable to resolve the dispute, the dispute shall be
resolved by the Bankruptcy Court. Pending the resolution of any such dispute by
consent or by Final Order of the Bankruptcy Court, an amount of Cash equal to
the disputed portion of the Indenture Trustee's request for fees and expenses
shall be held in trust in one or more segregated bank accounts in the name of
the applicable Disbursing Agent for the benefit of the applicable Indenture
Trustee, accounted for separately, and paid to the Indenture Trustee and/or
returned to the Reorganized Company, as required by the agreement of the
Reorganized Company and the Indenture Trustee or the Final Order of the
Bankruptcy Court, as the case may be. The Indenture Trustees shall not attach or
set off any of their fees and expenses against


                                      A-17
<PAGE>   93

distributions to Holders of Old Senior Notes or Old Subordinated Debentures and
shall not otherwise withhold or delay any such distributions.

            d.    Ordinary Course Liabilities.

            Except as provided herein, holders of Administrative Claims based on
liabilities incurred in the ordinary course of the Debtors' businesses (other
than Claims of governmental units for taxes or Claims and/or penalties related
to such taxes) shall not be required to File any request for payment of such
Claims. Such Administrative Claims shall be assumed and paid by the Reorganized
Company pursuant to the terms and conditions of the particular transactions
giving rise to such Administrative Claims, without any further action by the
Holders of such Claims.

            e.    Tax Claims.

            All requests for payment of Post-Petition Tax Claims, for which no
bar date has otherwise been previously established, must be Filed on or before
the later of (i) sixty (60) days following the Effective Date, and (ii) 120 days
following the filing of the tax return for such taxes for such tax year or
period with the applicable governmental unit. Any Holder of any Post-Petition
Tax Claim that is required to File a request for payment of such taxes and that
does not File such a Claim by the applicable bar date shall be forever barred
from asserting any such Post-Petition Tax Claim against either of the Debtors,
Reorganized Cityscape, Reorganized CSC, or any of their respective properties,
whether any such Post-Petition Tax Claim is deemed to arise prior to, on, or
subsequent to, the Effective Date.

B.    Treatment of Claims and Interests.

      1.    Class 1 (Bank Claims).

            Class 1 consists of all Allowed Bank Claims, if any, against the
Debtors arising from the Prepetition Credit Facilities including all Claims
arising pursuant to any guarantee thereof and any pledge of assets as security
therefor. Pursuant to the Financing Orders, proceeds from the DIP Facilities
have been used, among other things, to pay all Allowed Bank Claims against the
Debtors in full in Cash. Therefore, it is contemplated that there will not be
any Bank Claims in Class 1 as of the Effective Date. However, to the extent that
there are any Bank Claims in Class 1 as of the Effective Date, (i) each such
Claim shall be deemed allowed as an Allowed Class 1 Claim in the aggregate
amount equal to the sum of (A) the unpaid principal and interest as of the
Petition Date less all payments thereon received and retained by the respective
Holder thereof during the period from the Petition Date to the Effective Date,
(B) all accrued and unpaid interest from the Petition Date through and including
the Effective Date at the rates provided for in the Financing Orders, and (C)
all other amounts due and owing as of the Effective Date in respect of the
respective Bank Claims pursuant to the Financing Orders and pursuant to the
Greenwich Facility or the CIT Facility, as the case may be, and (ii) on the
Effective Date, each Holder shall receive, on account thereof, a payment in Cash
by wire transfer equal to the amount of such Allowed Class 1 Claim. Therefore,
Class 1 is Unimpaired and, accordingly, is not entitled to vote on the Plan.


                                      A-18
<PAGE>   94

      2.    Class 2a et seq. (Other Secured Claims).

            Class 2a et seq. consists of all Allowed Secured Claims against the
Debtors other than Secured Claims in Class 1. These Classes will be further
divided into subclasses designated by letters of the alphabet (Class 2a, Class
2b, and so on) so that each Holder of any Other Secured Claim against the
Debtors is in a Class by itself, except to the extent that there are Other
Secured Claims that are substantially similar to each other and may be included
within a single Class. The Debtors shall File a schedule of each Other Secured
Claim, if any, against the Debtors on or before ten (10) days prior to the
commencement of the Confirmation Hearing. Each Allowed Other Secured Claim
against the Debtors will be treated as follows: either (a) the Plan shall leave
unaltered the legal, equitable and contractual rights to which such Claim
entitles the Holder; (b)(i) the Debtors shall cure any default with respect to
such Claim that occurred before or after the Petition Date (other than a default
of a kind specified in Section 365(b)(2) of the Bankruptcy Code), (ii) the
maturity of such Claim shall be reinstated as such maturity existed before any
such default, (iii) the Holder of such Claim shall be compensated for any
damages incurred as a result of any reasonable reliance by the Holder on any
right to accelerate its Claim, and (iv) the legal, equitable, and contractual
rights of such Holder will not otherwise be altered; or (c) such Claim shall
receive such other treatment to which the Holder shall consent. The Holder of
each Allowed Other Secured Claim against the Debtors which is treated as set
forth in clause (a), (b) or (c) of this paragraph will be Unimpaired and will
not be entitled to vote for or against the Plan.

      3.    Class 3 (Priority Claims).

            Class 3 consists of the Allowed Priority Claims against the Debtors.
Class 3 Claims are Unimpaired and, accordingly, Holders of Allowed Class 3
Claims are not entitled to vote on the Plan. Each Holder of an Allowed Class 3
Claim shall be entitled to receive (i) Cash equal to the amount of such Claim,
unless the Holder of such Claim and Reorganized Cityscape agree to a different
treatment, on the latest of (a) the Effective Date or as soon as practicable
thereafter, (b) the date such Claim becomes an Allowed Priority Claim, and (c)
the date that such Claim would be paid in accordance with any terms and
conditions of any agreements or understandings relating thereto between the
Debtors and the Holder of such Claim, and/or (ii) such other treatment, as
determined by the Bankruptcy Court, required to render such Claim Unimpaired.

      4.    Class 4 (Senior Note Claims) and Class 4a (Small Senior Note
            Claims).

            Class 4 consists of the Allowed Unsecured Claims against the Debtors
of Holders of Old Senior Notes (including all Claims and causes of action
arising therefrom or in connection therewith and all guarantees related
thereto). The Claim of each Holder of Old Senior Notes (including Holders of
Small Senior Note Claims) as of the Distribution Record Date shall be allowed in
the aggregate amount of the unpaid principal of such Holder's Old Senior Notes
plus unpaid interest (calculated in accordance with the provisions of the
indenture governing the Old Senior Notes) which accrued prior to the Petition
Date. Class 4 is Impaired and, accordingly, Holders of Allowed Class 4 Claims
are entitled to vote on the Plan.


                                      A-19
<PAGE>   95

            On the Effective Date or as soon as practicable thereafter, each
Holder of an Allowed Class 4 Claim shall receive on account of such Allowed
Claim a Pro Rata portion of 6,288,564 shares of New Common Stock (i.e., one
share of New Common Stock for every $52.88 in principal of and accrued interest
on such Holder's Old Senior Notes).

            Class 4a consists of the Allowed Small Senior Note Claims. Class 4a
is Impaired and, accordingly, Holders of Allowed Class 4a Claims are entitled to
vote on the Plan. On the Effective Date or as soon as practicable thereafter,
each Holder of an Allowed Class 4a Claim shall receive on account of such
Allowed Claim Cash in an amount equal to (i) $10.00, multiplied by (ii) the
number of shares of New Common Stock that such Holder would have been entitled
to receive as a Holder of an Allowed Class 4 Claim (after giving effect to the
voluntary reduction, if any, by the Holder of a Class 4 Claim of the principal
amount of such Holder's Claim to $5,000,00); provided, however, that any Holder
of a Class 4a Claim may elect on a Ballot or otherwise in writing to receive the
treatment afforded by Class 4 (i.e., New Common Stock) rather than this Class 4a
(i.e., Cash).

            To the extent, if any, that the classification and manner of
satisfying Claims and Interests under the Plan do not take into consideration
all contractual, legal and equitable subordination rights that Holders of
Allowed Class 4 Claims may have against Holders of Claims or Interests with
respect to distributions made pursuant to this Plan, each Holder of an Allowed
Class 4 Claim shall be deemed, upon the Effective Date, to have waived all
contractual, legal or equitable subordination rights that such Holder might
have, including, without limitation, any such rights arising out of the Old
Senior Notes, the Old Subordinated Debentures, the indentures governing such Old
Securities or otherwise.

      5.    Class 5 (General Unsecured Claims) and Class 5a (Small Unsecured
            Claims).

            Class 5 consists of all Allowed General Unsecured Claims against the
Debtors, including, but not limited to, Claims resulting from the rejection of
leases or executory contracts (other than such Claims that fall within Class 5a
or Class 13). Class 5 is Impaired and, accordingly, Holders of Allowed Class 5
Claims are entitled to vote on the Plan.

            On the Effective Date, or as soon as practicable thereafter, each
Holder of an Allowed Class 5 Claim shall receive on account of such Allowed
Claim one share of New Common Stock for every $70.47 of such Holder's Allowed
Claim.

            Class 5a consists of the Allowed Small Unsecured Claims. Class 5a is
Impaired and, accordingly, Holders of Allowed Class 5a Claims are entitled to
vote on the Plan. On the Effective Date or as soon as practicable thereafter,
each Holder of an Allowed Class 5a Claim shall receive on account of such
Allowed Claim Cash in an amount equal to (i) $10.00, multipled by (ii) the
number of shares of New Common Stock that such Holder would have been entitled
to receive as a Holder of an Allowed Class 5 Claim (after giving effect to the
voluntary reduction, if any, by the Holder of a Class 5 Claim of such Holder's
Claim to $8,000.00); provided, however, that any Holder of a Class 5a Claim may
elect on a Ballot or otherwise in writing to receive the treatment afforded by
Class 5 (i.e., New Common Stock) rather than this Class 5a (i.e., Cash).


                                      A-20
<PAGE>   96

            Class 5 and Class 5a also include Trade Claims. At the outset of
their chapter 11 cases, the Debtors sought and obtained Bankruptcy Court
approval to pay in the ordinary course of business all outstanding Trade Claims
to trade creditors who continue to provide normal trade credit terms to, or have
reinstated normal trade credit terms for, the Debtors or who have previously
agreed to compromise their Claims in a manner acceptable to the Debtors. To the
extent that any payments made by the Debtors to Holders of Trade Claims pursuant
to such Order resulted in such Holders' receiving greater distributions on
account of their Trade Claims than that to which they are entitled under this
Section V.B.5, any claim of the Debtors for recovery of such overpayments to
such Holders shall be assigned by the Debtors to Reorganized Cityscape or
Reorganized CSC, as applicable, pursuant to Section XI.F of this Plan.

      6.    Class 6 (Subordinated Debenture Claims) and Class 6a (Small
            Subordinated Debenture Claims).

            Class 6 consists of Allowed Unsecured Claims against Cityscape of
Holders of Old Subordinated Debentures (including all Claims and causes of
action arising therefrom or in connection therewith). The Claim of each Holder
of Old Subordinated Debentures (including Holders of Small Subordinated
Debenture Claims) as of the Distribution Record Date shall be allowed in the
aggregate amount of the unpaid principal of such Holder's Old Subordinated
Debentures plus unpaid interest (calculated in accordance with the provisions of
the indenture governing the Old Subordinated Debentures) which accrued prior to
the Petition Date. Class 6 is Impaired and, accordingly, Holders of Allowed
Class 6 Claims are entitled to vote on the Plan.

            On the Effective Date or as soon as practicable thereafter, each
Holder of an Allowed Class 6 Claim shall receive on account of such Allowed
Claim a Pro Rata portion of 369,524 shares of New Common Stock (i.e., one share
of New Common Stock for every $369.82 in principal of and accrued interest on
such Holder's Old Subordinated Debentures); provided, however, that if Class 6
and Class 6a do not accept the Plan, no New Common Stock (or any other property)
shall be distributed to Holders of Allowed Class 6 Claims pursuant to the Plan,
and any New Common Stock that would have been distributed to the Holders of
Class 6 Claims shall be distributed Pro Rata to the Holders of Class 4 Claims as
part of their distribution pursuant to Section V.B.4 above.

            Class 6a consists of the Allowed Small Subordinated Debenture
Claims. Class 6a is Impaired and, accordingly, Holders of Allowed Class 6a
Claims are entitled to vote on the Plan. On the Effective Date or as soon as
practicable thereafter, each Holder of an Allowed Class 6a Claim shall receive
on account of such Allowed Claim Cash in an amount equal to (i) $10.00,
multiplied by (ii) the number of shares of New Common Stock that such Holder
would have been entitled to receive as a Holder of an Allowed Class 6 Claim
(after giving effect to the voluntary reduction, if any, by the Holder of a
Class 6 Claim of the principal amount of such Holder's Claim to $50,000.00);
provided, however, that (i) any Holder of a Class 6a Claim may elect on a Ballot
or otherwise in writing to receive the treatment afforded by Class 6 (i.e., New
Common Stock) rather than this Class 6a (i.e., Cash), and (ii) if Class 6 and
Class 6a do not accept the Plan, no Cash (or any other property) shall be
distributed to Holders of Allowed Class 6a Claims pursuant to the Plan.


                                      A-21
<PAGE>   97

      7.    Class 7 (Old Debt Securities Claims).

            Class 7 consists of all Allowed Securities Claims on account of Old
Debt against the Debtors. The Holders of Allowed Class 7 Claims, if any, shall
not receive or retain any interest or property under the Plan and, therefore,
Class 7 is Impaired and is deemed to have rejected the Plan. Accordingly, votes
of Holders of Allowed Class 7 Claims are not being solicited. The Debtors are
not aware of any Class 7 Claims. If there are any Allowed Class 7 Claims, the
Debtors intend to seek to confirm the Plan pursuant to the "cramdown" provisions
of Section 1129(b) of the Bankruptcy Code.

      8.    Class 8 (Interests of Holders of Old Series A Preferred Stock).

            Class 8 consists of the Allowed Interests of Holders of Old Series A
Preferred Stock. The Holders of Allowed Class 8 Interests shall not receive or
retain any interest or property under the Plan and, therefore, Class 8 is
Impaired and is deemed to have rejected the Plan. Accordingly, votes of Holders
of Allowed Class 8 Interests are not being solicited. The Debtors intend to seek
to confirm the Plan as to Class 8 pursuant to the "cramdown" provisions of
Section 1129(b) of the Bankruptcy Code.

      9.    Class 9 (Old Series A Preferred Stock Securities Claims).

            Class 9 consists of all Allowed Securities Claims on account of Old
Series A Preferred Stock against the Debtors. The Holders of Allowed Class 9
Claims, if any, shall not receive or retain any interest or property under the
Plan and, therefore, Class 9 is Impaired and is deemed to have rejected the
Plan. Accordingly, votes of Holders of Allowed Class 9 Claims are not being
solicited. The Debtors are not aware of any Class 9 Claims. If there are any
Allowed Class 9 Claims, the Debtors intend to seek to confirm the Plan pursuant
to the "cramdown" provisions of Section 1129(b) of the Bankruptcy Code.

      10.   Class 10 (Interests of Holders of Old Series B Preferred Stock).

            Class 10 consists of all Allowed Interests of Holders of Old Series
B Preferred Stock. The Holders of Allowed Class 10 Interests shall not receive
or retain any interest or property under the Plan and, therefore, Class 10 is
Impaired and is deemed to have rejected the Plan. Accordingly, votes of Holders
of Allowed Class 10 Interests are not being solicited. The Debtors intend to
seek to confirm the Plan as to Class 10 pursuant to the "cramdown" provisions of
Section 1129(b) of the Bankruptcy Code.

      11.   Class 11 (Old Series B Preferred Stock Securities Claims).

            Class 11 consists of all Allowed Securities Claims on account of Old
Series B Preferred Stock against the Debtors. The Holders of Allowed Class 11
Claims, if any, shall not receive or retain any interest or property under the
Plan and, therefore, Class 11 is Impaired and is deemed to have rejected the
Plan. Accordingly, votes of Holders of Allowed Class 11 Claims are not being
solicited. The Debtors are not aware of any Class 11 Claims. If there are any


                                      A-22
<PAGE>   98

Allowed Class 11 Claims, the Debtors intend to seek to confirm the Plan pursuant
to the "cramdown" provisions of Section 1129(b) of the Bankruptcy Code.

      12.   Class 12 (Interests of Holders of Old Cityscape Common Stock).

            Class 12 consists of the Allowed Interests of Holders of Old
Cityscape Common Stock. The Holders of Allowed Class 12 Interests shall not
receive or retain any interest or property under the Plan and, therefore, Class
12 is Impaired and is deemed to have rejected the Plan. Accordingly, votes of
Holders of Allowed Class 12 Interests are not being solicited. The Debtors
intend to seek to confirm the Plan as to Class 12 pursuant to the "cramdown"
provisions of Section 1129(b) of the Bankruptcy Code.

      13.   Class 13 (Interests of Holders of Old Stock Rights in Cityscape and
            all Claims Arising Out of Such Old Stock Rights).

            Class 13 consists of all Allowed Interests in Cityscape of Holders
of Old Stock Rights and all Allowed Claims arising out of any such Old Stock
Rights, including, without limitation, all Claims arising out of the rejection
of Old Stock Rights. The Holders of Allowed Class 13 Interests and Claims shall
not receive or retain any interest or property under the Plan and, therefore,
Class 13 is Impaired and is deemed to have rejected the Plan. Accordingly, votes
of Holders of Allowed Class 13 Interests and Claims are not being solicited. The
Debtors intend to seek to confirm the Plan as to Class 13 pursuant to the
"cramdown" provisions of Section 1129(b) of the Bankruptcy Code.

      14.   Class 14 (Old Cityscape Common Stock and Old Warrant Securities
            Claims).

            Class 14 consists of all Allowed Securities Claims on account of Old
Cityscape Common Stock or Old Warrants against the Debtors. The Holders of
Allowed Class 14 Claims, if any, shall not receive or retain any interest or
property under the Plan and, therefore, Class 14 is Impaired and is deemed to
have rejected the Plan. Accordingly, votes of Holders of Allowed Class 14 Claims
are not being solicited. If there are any Allowed Class 14 Claims, the Debtors
intend to seek to confirm the Plan pursuant to the "cramdown" provisions of
Section 1129(b) of the Bankruptcy Code.

C.    Modification of Treatment of Claims.

            The Debtors reserve for themselves and the Reorganized Company the
right to modify the treatment of any Allowed Claim or Interest in any manner
adverse only to the Holder of such Claim or Interest at any time after the
Effective Date upon the consent of the creditor or interest holder whose Allowed
Claim or Interest, as applicable, is being adversely affected.


                                      A-23
<PAGE>   99

                                      VI.

                          DISTRIBUTIONS UNDER THE PLAN

A.    Disbursing Agent.

            Reorganized Cityscape, Reorganized CSC, or such Person(s) as the
Debtors may employ in their sole discretion, will act as Disbursing Agent under
the Plan. The Disbursing Agent shall make all distributions of Cash and New
Common Stock required to be distributed under the applicable provisions of the
Plan. Any Disbursing Agent may employ or contract with other entities to assist
in or make the distributions required by the Plan. Each Disbursing Agent will
serve without bond, and each Disbursing Agent, other than Reorganized Cityscape
or Reorganized CSC, will receive, without further Bankruptcy Court approval,
reasonable compensation for distribution services rendered pursuant to the Plan
and reimbursement of reasonable out-of-pocket expenses incurred in connection
with such services from the Reorganized Company on terms acceptable to the
Reorganized Company.

B.    Timing of Distributions.

            Except as otherwise provided in this Plan with respect to any
particular Class or Claim, property to be distributed hereunder on account of
Allowed Claims and Allowed Interests in an Impaired Class (a) shall be
distributed on the Effective Date or as soon as practicable thereafter to each
Holder of an Allowed Claim or an Allowed Interest in that Class that is an
Allowed Claim or an Allowed Interest as of the Effective Date, and (b) shall be
distributed to each Holder of an Allowed Claim or an Allowed Interest of that
Class that becomes an Allowed Claim or Allowed Interest after the Effective
Date, as soon as practicable after the Order of the Bankruptcy Court allowing
such Claim or Interest becomes a Final Order. Except as otherwise provided in
this Plan with respect to any particular Class or Claim, property to be
distributed under the Plan on account of Claims in a Class that are not Impaired
or on account of an Administrative Claim shall be distributed on the later of
(i) the Effective Date or as soon as practicable thereafter, or if any Claim is
not an Allowed Claim as of the Effective Date, on the date the Order allowing
such Claim becomes a Final Order or as soon as practicable thereafter, and (ii)
the date on which the distribution to the Holder of the Claim would have been
due and payable in the ordinary course of business or under the terms of the
Claim.

C.    Methods of Distributions.

      1.    Cash Payments.

            Cash payments made pursuant to the Plan will be in U.S. dollars.
Cash payments to foreign creditors may be made, at the option of the Debtors or
the Reorganized Company, in such funds and by such means as are necessary or
customary in a particular foreign jurisdiction. Cash payments made pursuant to
the Plan in the form of checks issued by Reorganized Cityscape or Reorganized
CSC shall be null and void if not cashed within 90 days of the date of the
issuance thereof. Requests for reissuance of any check shall be made directly to
the Disbursing


                                      A-24
<PAGE>   100

Agent as set forth in Section VI.G below. All payments in respect of Bank Claims
shall be by wire transfer.

      2.    Issuance and Transfers of New Common Stock.

            Notwithstanding any other provision of the Plan, only whole numbers
of shares of New Common Stock will be issued or transferred, as the case may be,
pursuant to the Plan. When any distribution on account of an Allowed Claim
pursuant to the Plan would otherwise result in the issuance or transfer of a
number of shares of New Common Stock that is not a whole number, the actual
distribution of such New Common Stock will be rounded to the next higher or
lower whole number as follows: (a) fractions of 1/2 or greater will be rounded
to the next higher whole number and (b) fractions of less than 1/2 will be
rounded to the next lower whole number. The total number of shares of New Common
Stock to be distributed to a Class of Claims will be adjusted as necessary to
account for the rounding provided for in this Section. No consideration will be
provided in lieu of fractional shares that are rounded down (including in
connection with calculating the amount of Cash that a Holder of an Allowed Class
4a, 5a or 6a Claim is entitled to receive).

      3.    Compliance with Tax Requirements.

            In connection with the distributions set forth herein, to the extent
applicable, the Disbursing Agent shall comply with all tax withholding and
reporting requirements imposed on it by any governmental unit, and all
distributions pursuant to this Plan shall be subject to such withholding and
reporting requirements. The Disbursing Agent shall be authorized to take any and
all actions that may be necessary or appropriate to comply with such withholding
and reporting requirements.

            Notwithstanding any other provision contained herein: (i) each
Holder of an Allowed Claim that is to receive a distribution of Cash or New
Common Stock pursuant to the Plan shall have sole and exclusive responsibility
for the satisfaction and payment of any tax obligations imposed by any
governmental unit, including income, withholding and other tax obligations, on
account of such distribution; and (ii) no distribution shall be made to or on
behalf of such Holder pursuant to the Plan unless and until such Holder has made
arrangements reasonably satisfactory to the Disbursing Agent for the payment and
satisfaction of such tax obligations. Any Cash or New Common Stock to be
distributed pursuant to the Plan will, pending the implementation of such
arrangements, be treated as an undeliverable distribution pursuant to Section
V.G of the Plan.

D.    Pro Rata Distribution.

            Where the Plan provides for Pro Rata distribution, the property to
be distributed under this Plan shall be divided Pro Rata among the Holders of
Allowed Claims of the relevant Class.


                                      A-25
<PAGE>   101

E.    Distribution Record Date.

            As of the close of business on the Distribution Record Date, the
transfer registers for the Voting Securities maintained by the Debtors, or their
respective agents, will be closed. The Disbursing Agent and its respective
agents and the Indenture Trustees will have no obligation to recognize the
transfer of any Voting Securities occurring after the Distribution Record Date,
and will be entitled for all purposes relating to this Plan to recognize and
deal only with those Holders of record as of the close of business on the
Distribution Record Date.

F.    Surrender of Cancelled Voting Securities and Exchange for New Securities.

      1.    Tender of Voting Securities.

            The mechanism by which Holders of Allowed Claims in Class 4 or 6
surrender their Voting Securities and exchange such Voting Securities for New
Common Stock shall be determined based upon the manner in which the Voting
Securities were issued and the mode in which they are held, as set forth below.

            a.    Voting Securities Held in Book-Entry Form

            Voting Securities held in book-entry form through bank and broker
nominee accounts shall be mandatorily exchanged for the New Common Stock through
the facilities of such nominees and the systems of the applicable securities
depository or Clearing System (as defined below in Section VI.F.2) holding such
Voting Securities on behalf of the brokers or banks.

            b.    Voting Securities in Physical, Registered, Certificated Form

            Each Holder of Voting Securities in physical, registered,
certificated form will be required, promptly after the Confirmation Date, to
deliver its physical certificates (the "TENDERED CERTIFICATES") to the
Disbursing Agent, accompanied by a properly executed letter of transmittal, to
be distributed by the Disbursing Agent or Information Agent promptly after the
Confirmation Date and containing such representations and warranties as are
described in the Disclosure Statement (a "LETTER OF TRANSMITTAL").

            Any New Common Stock to be distributed pursuant to this Plan on
account of any Allowed Claim in Class 4 or 6 represented by a Voting Security
held in physical, registered, certificated form shall, pending such surrender,
be treated as an undeliverable distribution pursuant to Section VI.G below.

            Signatures on a Letter of Transmittal must be guaranteed by an
Eligible Institution (as defined below), unless the Voting Securities tendered
pursuant thereto are tendered for the account of an Eligible Institution. If
signatures on a Letter of Transmittal are required to be guaranteed, such
guarantees must be by a member firm of a registered national securities exchange
in the United States, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or a
correspondent in the United States


                                      A-26
<PAGE>   102

(each of which is an "ELIGIBLE INSTITUTION"). If Voting Securities are
registered in the name of a Person other than the Person signing the Letter of
Transmittal, the Voting Securities, in order to be tendered validly, must be
endorsed or accompanied by a properly completed power of authority, with
signature guaranteed by an Eligible Institution.

            All questions as to the validity, form, eligibility (including time
of receipt), and acceptance of Letters of Transmittal and Tendered Certificates
will be resolved by the applicable Disbursing Agent, whose determination shall
be final and binding, subject only to review by the Bankruptcy Court upon
application with due notice to any affected parties in interest. Cityscape
reserves the right, on behalf of itself and the Disbursing Agent, to reject any
and all Letters of Transmittal and Tendered Certificates not in proper form, or
Letters of Transmittal and Tendered Certificates, the Disbursing Agent's
acceptance of which would, in the opinion of the Disbursing Agent or its
counsel, be unlawful.

            c.    Voting Securities in Bearer Form Held Through a Broker or Bank
                  Participant in a Clearing System

            Voting Securities held in bearer form through a broker or bank
participant in a Clearing System (as defined below in Section VI.F.2) shall be
mandatorily exchanged for the New Common Stock through the facilities of such
nominees and the securities depository holding such Voting Securities on behalf
of the broker or bank.

      2.    Delivery of New Common Stock in Exchange for Voting Securities.

            On the Effective Date, Reorganized Cityscape or the Disbursing Agent
shall issue and authenticate the New Common Stock, and shall apply to DTC to
make the New Common Stock eligible for deposit at DTC. With respect to Holders
of Voting Securities who hold such Voting Securities through nominee accounts at
bank and broker participants in DTC, Euroclear and Cedel (collectively, the
"CLEARING SYSTEMS"), the Disbursing Agent shall deliver the New Common Stock to
DTC or to the registered address specified by the Clearing Systems. The Clearing
System (or its depositary) shall return the applicable Voting Securities to the
Disbursing Agent for cancellation.

            The Disbursing Agent will request that DTC effect a mandatory
exchange of the applicable Voting Securities for the New Common Stock by
crediting the accounts of its participants with the New Common Stock in exchange
for the Voting Securities. On the effective date of such exchange, each DTC
participant will effect a similar exchange for accounts of the beneficial owners
holding Voting Securities through such firms. Neither the Reorganized Company
nor the Disbursing Agent shall have any responsibility or liability in
connection with the Clearing Systems' or such participants' effecting, or
failure to effect, such exchanges.

            Holders of Voting Securities holding such Voting Securities outside
a Clearing System will be required to surrender their Voting Securities by
delivering them to the Disbursing Agent, along with properly executed Letters of
Transmittal (as described above in Section VI.F. 1 .b). The Disbursing Agent
shall forward New Common Stock on account of such Voting Securities to such
Holders.


                                      A-27
<PAGE>   103

      3.    Special Procedures for Lost, Stolen, Mutilated or Destroyed
            Instruments.

            Any Holder of a Claim or an Interest evidenced by an Instrument that
has been lost, stolen, mutilated or destroyed will, in lieu of surrendering such
Instrument, deliver to the Disbursing Agent: (a) an affidavit of loss or other
evidence reasonably satisfactory to the Disbursing Agent of the loss, theft,
mutilation or destruction; and (b) such security or indemnity as may reasonably
be required by the Disbursing Agent to hold the Disbursing Agent harmless from
any damages, liabilities or costs incurred in treating such individual as a
Holder of an Instrument. Upon compliance with this Section, the Holder of a
Claim or Interest evidenced by any such lost, stolen, mutilated or destroyed
Instrument shall, for all purposes under the Plan and notwithstanding anything
to the contrary contained herein, be deemed to have surrendered such Instrument.

      4.    Failure to Surrender Cancelled Instrument.

            Any Holder of Voting Securities holding such Voting Securities in
physical, registered or certificated form who has not properly completed and
returned to the Disbursing Agent a Letter of Transmittal, together with the
applicable Tendered Certificates, within two years after the Effective Date
shall have its claim for a distribution pursuant to the Plan on account of such
Instrument discharged and shall be forever barred from asserting any such claim
against Reorganized Cityscape, Reorganized CSC or their properties. In such
cases, any New Common Stock held for distribution on account of such claim shall
be disposed of pursuant to the provisions of Section VI.G hereof.

G.    Delivery of Distributions; Undeliverable or Unclaimed Distributions.

            Any Person that is entitled to receive a Cash distribution under
this Plan but that fails to cash a check within 90 days of its issuance shall be
entitled to receive a reissued check from Reorganized Cityscape or Reorganized
CSC, as the case may be, for the amount of the original check, without any
interest, if such Person requests the Disbursing Agent to reissue such check and
provides the Disbursing Agent with such documentation as the Disbursing Agent
reasonably requests to verify that such Person is entitled to such check, prior
to the second anniversary of the Effective Date. If a Person fails to cash a
check within 90 days of its issuance and fails to request reissuance of such
check prior to the second anniversary of the Effective Date, such Person shall
not be entitled to receive any distribution under this Plan.

            Subject to Bankruptcy Rule 9010, all distributions to any Holder of
an Allowed Claim or an Allowed Interest shall be made to the address of such
Holder on the books and records of the Debtors or their agents, unless either
Debtor, Reorganized Cityscape or Reorganized CSC, as applicable, has been
notified in writing of a change of address. If the distribution to any Holder of
an Allowed Claim or Allowed Interest is returned to a Disbursing Agent as
undeliverable, such Disbursing Agent shall use reasonable efforts to determine
the current address of such Holder, but no distribution shall be made to such
Holder unless and until the applicable Disbursing Agent has determined or is
notified in writing of such Holder's then-current address, at which time such
distribution shall be made to such Holder without interest.


                                      A-28
<PAGE>   104

Undeliverable distributions shall remain in the possession of the applicable
Disbursing Agent pursuant to Section VI.A of the Plan until such time as a
distribution becomes deliverable. Undeliverable Cash shall be held in trust in
segregated bank accounts in the name of the applicable Disbursing Agent for the
benefit of the potential claimants of such funds, and will be accounted for
separately. Any Disbursing Agent holding undeliverable Cash shall invest such
Cash in a manner consistent with the Debtors' investment and deposit guidelines.
Any interest paid, and any other amounts earned, with respect to such
undeliverable Cash pending its distribution in accordance with this Plan shall
be property of Reorganized Cityscape or Reorganized CSC, as the case may be.
Undeliverable New Common Stock will be held in trust for the benefit of the
potential claimants of such securities by the applicable Disbursing Agent in
principal amounts or numbers of shares or warrants sufficient to fund the
unclaimed amounts of such securities and shall be accounted for separately. Any
unclaimed or undeliverable distributions (including Cash and New Common Stock)
shall be deemed unclaimed property under Section 347(b) of the Bankruptcy Code
at the expiration of two years after the Effective Date and, after such date,
all such unclaimed property shall revert to Reorganized Cityscape or Reorganized
CSC, as the case may be, and the Claim or Interest of any Holder with respect to
such property shall be discharged and forever barred.

            Pending the distribution of any New Common Stock pursuant to the
Plan, the Disbursing Agent shall cause the New Common Stock held by it in its
capacity as Disbursing Agent to be: (A) represented in person or by proxy at
each meeting of the stockholders of Reorganized Cityscape; and (B) voted with
respect to any matter of Reorganized Cityscape proportionally with the votes
cast by other stockholders of Reorganized Cityscape.

H.    Procedures for Treating Disputed Claims Under Plan of Reorganization.

      1.    Disputed Claims and Objections to Claims and Interests.

            a.    Process.

            Except insofar as a Claim or Interest is allowed hereunder,
Reorganized Cityscape and Reorganized CSC shall be entitled and reserve the
right to object to Claims and Interests. Except as otherwise provided in Section
VI.H.3 below and except as otherwise ordered by the Bankruptcy Court, objections
to any Claim or Interest, including, without limitation, Administrative Claims,
shall be Filed and served upon the Holder of such Claim or Interest no later
than the later of (a) 60 days after the Effective Date, and (b) 60 days after a
proof of claim, request for payment of such Claim or proof of interest is Filed,
unless such period is extended by the Bankruptcy Court, which extension may be
granted on an ex parte basis without notice or hearing. After the Confirmation
Date, only the Debtors, Reorganized Cityscape and Reorganized CSC shall have the
authority to File, settle, compromise, withdraw or litigate to judgment
objections to Claims and Interests. From and after the Confirmation Date, the
Debtors, Reorganized Cityscape and Reorganized CSC may settle or compromise any
Disputed Claim or Disputed Interest without approval of the Bankruptcy Court.
Except as (i) specified otherwise herein, or (ii) ordered by the Bankruptcy
Court, all Disputed Claims or Disputed Interests shall be resolved by the
Bankruptcy Court.


                                      A-29
<PAGE>   105

            Among other things, either Debtor may elect, at its sole option, to
object or seek estimation under Section 502 of the Bankruptcy Code with respect
to any proof of claim filed by or on behalf of a Holder of a Claim or any proof
of interest filed by or on behalf of a Holder of an Interest.

            b.    Tort Claims.

            All Tort Claims are Disputed Claims. Any unliquidated Tort Claim
that is not otherwise settled or resolved pursuant to Section VI.H.l.a above
shall be determined and liquidated in the Bankruptcy Court. Any Tort Claim
determined and liquidated pursuant to a judgment obtained in accordance with
this Section VI.H.1.b that is no longer subject to appeal or other review shall
be deemed to be an Allowed Claim in Class 5 or Class 5a in such liquidated
amount and satisfied in accordance with this Plan. Nothing contained in this
Section VI.H.l.b shall constitute or be deemed a waiver of any claim, right or
cause of action that the Debtors or the Reorganized Company may have against any
Person in connection with or arising out of any Tort Claim, including, without
limitation, any rights under Section 157(b) of title 28, United States Code.

      2.    Professionals, Administrative Claims, Trade Claims and Employee
            Claims.

            Except as otherwise ordered by the Bankruptcy Court, objections to
Claims of professionals shall be governed by the provisions of Section V.A.3.b
hereof. Objections to Administrative Claims based upon ordinary course
liabilities, Trade Claims and Employee Claims shall be governed by applicable
law.

      3.    No Distributions Pending Allowance.

            Notwithstanding any other provisions of this Plan, no payments or
distributions will be made on account of a Disputed Claim or a Disputed Interest
until such Claim or Interest becomes an Allowed Claim or Allowed Interest.

      4.    Distributions on Account of Disputed Claims and Interests Once They
            are Allowed.

            Within 30 days after the end of each calendar quarter following the
Effective Date, the applicable Disbursing Agent will make all distributions on
account of any Disputed Claim or Disputed Interest that has become an Allowed
Claim or Allowed Interest during the preceding calendar quarter. Such
distributions will be made pursuant to the provisions of the Plan governing the
applicable Class. Holders of Disputed Claims or Disputed Interests that are
ultimately allowed will also be entitled to receive, on the basis of the amount
ultimately allowed: (i) matured and payable interest, if any, at the rate
provided for the Class to which such Claim belongs; and (ii) any dividends or
other payments made on account of New Common Stock, if any, provided to the
Class to which such Claim or Interest belongs, but held pending distribution.


                                      A-30
<PAGE>   106

I.    Setoffs.

            Except with respect to Claims allowed pursuant to the Plan or claims
of the Debtors, Reorganized Cityscape or Reorganized CSC released pursuant to
the Plan or any contract, instrument, release, indenture or other agreement or
document created in connection with the Plan, the Debtors, Reorganized Cityscape
or Reorganized CSC, as the case may be, may, pursuant to Section 553 of the
Bankruptcy Code or applicable nonbankruptcy law, set off against any Allowed
Claim and the distributions to be made pursuant to the Plan on account of such
Claim (before any distribution is made on account of such Claim), the claims,
rights and causes of action of any nature that the Debtors, Reorganized
Cityscape or Reorganized CSC may hold against the Holder of such Allowed Claim;
provided, however, that neither the failure to effect such a setoff nor the
allowance of any Claim hereunder shall constitute a waiver or release by the
Debtors, Reorganized Cityscape or Reorganized CSC of any such claims, rights and
causes of action that the Debtors, Reorganized Cityscape or Reorganized CSC may
possess against such Holder.

J.    Termination of Subordination.

            The classification and manner of satisfying all Claims and Interests
under the Plan and the distributions hereunder take into consideration all
contractual, legal and equitable subordination rights, whether arising under any
agreement, general principles of equitable subordination, Section 510 of the
Bankruptcy Code or otherwise, that a Holder of a Claim or Interest may have
against other Claim or Interest Holders with respect to any distribution made
pursuant to this Plan. On the Effective Date, all contractual, legal or
equitable subordination rights that such Holder may have with respect to any
distribution to be made pursuant to this Plan shall be deemed to be waived,
discharged and terminated, and all actions related to the enforcement of such
subordination rights will be permanently enjoined. Accordingly, distributions
pursuant to the Plan to Holders of Allowed Claims and Allowed Interests shall
not be subject to payment to a beneficiary of such terminated subordination
rights, or to levy, garnishment, attachment or other legal process by any
beneficiary of such terminated subordination rights.

                                      VII.

              TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

A.    Assumptions.

            To the extent that any of the contracts listed on a schedule to be
Filed and served on the parties thereto prior to the Confirmation Hearing is an
executory contract, the Debtors will assume each such contract pursuant to
Section 365 of the Bankruptcy Code on the Effective Date. Listing a contract or
lease on such schedule does not constitute an admission by the Debtors,
Reorganized Cityscape or Reorganized CSC that such contract or lease is an
executory contract or unexpired lease or that the Debtors, Reorganized Cityscape
or Reorganized CSC has any liability thereunder. The Confirmation Order will
constitute an Order of the Bankruptcy


                                      A-31
<PAGE>   107

Court approving the assumptions described in this Section VII.A. pursuant to
Section 365 of the Bankruptcy Code, as of the Effective Date.

B.    Cure of Defaults in Connection with Assumption.

            Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default will be satisfied,
pursuant to Section 365(b)(l) of the Bankruptcy Code, at the option of the
Debtors, Reorganized Cityscape or Reorganized CSC, as the case may be: (a) by
payment of the default amount in Cash on the Effective Date or as soon as
practicable thereafter; or (b) on such other terms as are agreed to by the
parties to such executory contract or unexpired lease.

            If there is a dispute regarding: (i) the amount of any cure
payments; (ii) the ability of Reorganized Cityscape or Reorganized CSC to
provide "adequate assurance of future performance" (within the meaning of
Section 365 of the Bankruptcy Code) under the contract or lease to be assumed;
or (iii) any other matter pertaining to assumption, the cure payments required
by Section 365(b)(l) of the Bankruptcy Code will be made following the entry of
a Final Order resolving the dispute and approving the assumption.

C.    Rejections.

            Except as otherwise provided in (i) Section VII.A. above, (ii) any
previous Orders authorizing the assumption or rejection of any of the Debtors'
executory contracts on unexpired leases, or (iii) any contract, instrument,
release or other agreement or document entered into in connection with the Plan,
on the Effective Date, pursuant to Section 365 of the Bankruptcy Code, the
Debtors will reject each of the executory contracts and unexpired leases to
which either of them is a party. The Confirmation Order shall constitute an
Order of the Bankruptcy Court approving such rejections, pursuant to Section 365
of the Bankruptcy Code, as of the Effective Date.

D.    Bar Date for Rejection Damages.

            If the rejection of an executory contract or unexpired lease
pursuant to the preceding Section VII.C gives rise to a Claim by the other party
or parties to such contract or lease, such Claim shall be forever barred and
shall not be enforceable against the Debtors, Reorganized Cityscape, Reorganized
CSC, their successors or properties unless (a) a stipulation with respect to the
amount and nature of such Claim has been entered into by either of the Debtors,
Reorganized Cityscape or Reorganized CSC, as applicable, and the Holder of such
Claim in connection with the rejection of such executory contract or unexpired
lease, or (b) a proof of Claim is Filed and served on Reorganized Cityscape or
Reorganized CSC, as the case may be, and counsel for Reorganized Cityscape or
Reorganized CSC, as the case may be, within 30 days after the Effective Date or
such earlier date as established by the Bankruptcy Court. Unless otherwise
ordered by the Bankruptcy Court, all Allowed Claims arising from the rejection
of executory contracts and unexpired leases shall be treated as Claims in Class
5, 5a or 13, as applicable.


                                      A-32
<PAGE>   108

                                      VIII.

                      ACCEPTANCE OR REJECTION OF THIS PLAN

A.    Voting Classes.

            The Holders of Allowed Claims and Interests in Classes 4, 4a, 5, 5a,
6 and 6a are Impaired and shall receive distributions under the Plan, and shall
be entitled to vote to accept or reject the Plan.

B.    Presumed Acceptances of Plan.

            The Holders of Allowed Claims in Classes 1, 2a et. seq. and 3 are
not Impaired under the Plan and, therefore, are conclusively presumed to accept
the Plan.

C.    Presumed Rejections of Plan.

            Classes 7, 8, 9, 10, 11, 12, 13 and 14 will not be entitled to
receive or retain any property under this Plan, and pursuant to Section 1126(g)
of the Bankruptcy Code, are deemed not to have accepted this Plan.

D.    Voting Instructions.

            Each Holder of an Allowed Claim entitled to vote on the Plan will
receive a Ballot. The Voting Record Date for purposes of Classes 4, 4a, 6 and 6a
is _____. The Ballot will contain two boxes for each Class entitled to vote on
the Plan, one box indicating acceptance of the Plan and the other box indicating
rejection of the Plan. Holders of Allowed Claims who elect to vote on the Plan
must mark one or the other box pursuant to the instructions contained on the
Ballot. Any executed Ballot that does not indicate acceptance or rejection of
the Plan will be counted as an acceptance of the Plan.

E.    Voting Deadline and Extensions.

            THE VOTING DEADLINE IS _________________________. Ballots must be
received by the "VOTING AGENT" designated in the Ballots at the address set
forth on the applicable Ballot. To be counted for purposes of voting on the
Plan, all of the information requested on the applicable Ballot must be
provided.

F.    Confirmability of Plan and Cramdown.

            In the event at least one Impaired Class of Claims votes to accept
the Plan (and at least one Impaired Class either votes to reject the Plan or is
deemed to have rejected the Plan), the Debtors reserve the right to request that
the Bankruptcy Court confirm the Plan under the "cramdown" provisions of Section
1129(b) of the Bankruptcy Code. At a minimum, the Debtors will request
confirmation of the Plan over the deemed rejection of Classes 7, 8, 9, 10, 11,
12, 13 and 14 under the Plan.


                                      A-33
<PAGE>   109

                                      IX.

               MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN

A.    Corporate Structure.

            On the Effective Date, Cityscape will become Reorganized Cityscape,
CSC will become Reorganized CSC, and Reorganized CSC will be a wholly-owned
subsidiary of Reorganized Cityscape.

B.    Corporate Action.

      1.    Cancellation of Old Securities and Related Agreements.

            On the Effective Date, all securities, instruments and agreements
governing any Claims or Interests Impaired hereby, including, without
limitation, (i) the Old Securities, (ii) the indentures governing the Old Debt,
(iii) the agreements governing the Old Warrants and (iv) any security,
instrument or agreement entered into in connection with any of the foregoing, in
each case shall be deemed terminated, cancelled and extinguished, and except as
otherwise provided herein, the Debtors, on the one hand, and the Indenture
Trustees, on the other hand, shall be released from any and all obligations
under the applicable indenture except with respect to the payments required to
be made to each such Indenture Trustee as provided herein or with respect to
such other rights of such Indenture Trustee that, pursuant to the terms of such
indenture, survive the termination of such indenture. Termination of the
indentures shall not impair the rights of the Holders of Old Debt to receive
distributions on account of Old Debt pursuant to this Plan.

      2.    Certificate of Incorporation and Bylaws for Reorganized Cityscape.

            On the Effective Date, Reorganized Cityscape shall be deemed to have
adopted the Reorganized Cityscape Certificate of Incorporation and the
Reorganized Cityscape Bylaws pursuant to applicable non-bankruptcy law and
Section 11 23(a)(5)(I) of the Bankruptcy Code. The Reorganized Cityscape
Certificate of Incorporation will, among other provisions: (i) authorize the
issuance of the New Common Stock; and (ii) prohibit the issuance of nonvoting
equity securities to the extent required by Section 11 23(a)(6) of the
Bankruptcy Code. The Reorganized Cityscape Certificate of Incorporation and the
Reorganized Cityscape Bylaws (forms of which are attached hereto as Exhibits "A"
and "B," respectively) will become effective upon the last to occur of the
following: (1) Confirmation of the Plan; (2) the occurrence of the Effective
Date; and (3) the filing with the Delaware Secretary of State of the Reorganized
Cityscape Certificate of Incorporation.

      3.    Certificate of Incorporation and Bylaws for Reorganized CSC.

            On the Effective Date, Reorganized CSC shall be deemed to have
adopted the Reorganized CSC Certificate of Incorporation and the Reorganized CSC
Bylaws pursuant to applicable non-bankruptcy law and Section 1 123(a)(5)(I) of
the Bankruptcy Code. The


                                      A-34
<PAGE>   110

Reorganized CSC Certificate of Incorporation will, among other provisions,
prohibit the issuance of nonvoting equity securities to the extent required by
Section 1123(a)(6) of the Bankruptcy Code. The Reorganized CSC Certificate of
Incorporation and the Reorganized CSC Bylaws (forms of which are attached hereto
as Exhibits "C" and "D," respectively) will become effective upon the last to
occur of the following: (1) Confirmation of the Plan; (2) the occurrence of the
Effective Date; and (3) the filing with the New York Secretary of State of the
Reorganized CSC Certificate of Incorporation.

      4.    Directors and Management of Reorganized Cityscape.

            As of the Effective Date, the Persons identified in the Disclosure
Statement will serve as the initial members of the Board of Directors of
Reorganized Cityscape. Such Persons shall be deemed elected to the Board of
Directors, and such elections shall be deemed effective as of the Effective
Date, without any requirement of further action by stockholders of the Debtors
or Reorganized Cityscape. The initial officers of Reorganized Cityscape shall be
selected by the Board of Directors of Reorganized Cityscape and, to the extent
such officers have been selected, their names have been disclosed in the
Disclosure Statement or shall be disclosed in a schedule to be Filed with the
Bankruptcy Court on or prior to the Confirmation Date. Subject to any
requirement of Bankruptcy Court approval under Section 11 29(a)(5) of the
Bankruptcy Code, those persons identified or designated as directors and
officers of Reorganized Cityscape in the Disclosure Statement or on any schedule
to be Filed with the Bankruptcy Court on or prior to the Confirmation Date shall
assume their offices as of the Effective Date and shall continue to serve in
such capacities thereafter, pending further action of the Board of Directors or
stockholders of Reorganized Cityscape in accordance with the Reorganized
Cityscape Bylaws, Reorganized Cityscape Certificate of Incorporation and
applicable state law.

      5.    Directors and Management of Reorganized CSC.

            As of the Effective Date, the Persons identified have been disclosed
in the Disclosure Statement will serve as the initial members of the Board of
Directors of Reorganized CSC. Such Persons shall be deemed elected to the Board
of Directors, and such elections shall be deemed effective as of the Effective
Date, without any requirement of further action by stockholders of the Debtors
or Reorganized CSC. The initial officers of Reorganized CSC shall be selected by
the Board of Directors of Reorganized CSC and, to the extent such officers have
been selected, their names have been disclosed in the Disclosure Statement or
shall be disclosed in a schedule to be Filed with the Bankruptcy Court on or
prior to the Confirmation Date. Subject to any requirement of Bankruptcy Court
approval under Section 1129(a)(5) of the Bankruptcy Code, those persons
identified or designated as directors and officers of Reorganized CSC in the
Disclosure Statement or on any schedule to be Filed with the Bankruptcy Court on
or prior to the Confirmation Date shall assume their offices as of the Effective
Date and shall continue to serve in such capacities thereafter, pending further
action of the Board of Directors or the stockholder of Reorganized CSC in
accordance with the Reorganized CSC Bylaws, Reorganized CSC Certificate of
Incorporation and applicable state law.


                                      A-35
<PAGE>   111

C.    Implementation.

            The Debtors, Reorganized Cityscape and Reorganized CSC are hereby
authorized and directed to take all necessary steps, and perform all necessary
acts, to consummate the terms and conditions of the Plan on the Effective Date.
On or before the Effective Date, the Debtors may file with the Bankruptcy Court
such agreements and other documents as may be necessary or appropriate to
effectuate or further evidence the terms and conditions of this Plan and the
other agreements referred to herein.

D.    Other Documents and Actions.

            The Debtors, Reorganized Cityscape and Reorganized CSC may, and
shall, execute such documents and take such other actions as are necessary to
effectuate the transactions provided for in the Plan.

E.    Payment of Statutory Fees.

            All fees payable pursuant to 28 U.S.C. ss. 1930(a)(6) (U.S. Trustee
Fees) as determined by the Bankruptcy Court at the Confirmation Hearing shall be
paid by the Debtors on or before the Effective Date.

F.    Payment of Fees and Expenses of Unofficial Committees' Counsel.

            Subject to the approval of the Bankruptcy Court, unpaid fees and
expenses of counsel to each of the Unofficial Committees incurred through and
including the Effective Date will be paid on or as soon as practicable after the
Effective Date.

G.    Term of Injunctions or Stays.

            Unless provided in the Confirmation Order or otherwise, all
injunctions or stays imposed in the Reorganization Cases pursuant to Sections
105 and 362 of the Bankruptcy Code or otherwise in effect on the Confirmation
Date shall remain in full force and effect until the Effective Date.

H.    No Interest.

            Except as expressly provided herein, no Holder of an Allowed Claim
or Allowed Interest shall receive interest on the distribution to which such
Holder is entitled hereunder, regardless of whether such distribution is made on
the Effective Date or thereafter.

I.    Retiree Benefits.

            On and after the Effective Date, to the extent required by Section
1129(a)(13) of the Bankruptcy Code, Reorganized Cityscape or Reorganized CSC, as
the case may be, shall continue to pay all retiree benefits (if any), as the
term "retiree benefits" is defined in Section 1114(a) of the Bankruptcy Code,
maintained or established by the Debtors prior to the Confirmation Date.


                                      A-36
<PAGE>   112

J.    Issuance of New Common Stock

            On the Effective Date or as soon as practicable thereafter,
Reorganized Cityscape shall, in accordance with the Plan, issue the New Common
Stock to the Holders of the Allowed Class 4, 5 and 6 Claims. On the Effective
Date, all securities, instruments and agreements entered into pursuant to the
Plan, including, without limitation, the New Common Stock and any security,
instrument or agreement entered into in connection therewith, shall become
effective and binding in accordance with their respective terms and conditions
upon the parties thereto without further act or action under applicable law,
regulation, order or rule, and shall be deemed to become effective
simultaneously.

                                       X.

                   CONFIRMATION AND EFFECTIVE DATE CONDITIONS

A.    Conditions to Confirmation.

            Confirmation of this Plan cannot occur until all of the substantive
confirmation requirements under the Bankruptcy Code have been satisfied pursuant
to Section 1129 of the Bankruptcy Code. In addition, the Bankruptcy Court will
not enter the Confirmation Order unless the Confirmation Order is acceptable in
form and substance to the Debtors, and the Confirmation Order expressly
authorizes and directs the Debtors, Reorganized Cityscape and Reorganized CSC to
perform those actions specified herein. Finally, it shall be a condition to
Confirmation that each of the events and actions required by the Plan to occur
or to be taken prior to Confirmation shall have occurred or been taken, or the
Debtors, or the party whose obligations are conditioned upon such occurrences or
actions, as applicable, shall have waived such occurrences or actions and the
Bankruptcy Court shall confirm the Plan without such occurrence or action.

B.    Conditions to Effective Date.

            The Effective Date will not occur and the Plan will not be
consummated unless and until each of the following conditions has been satisfied
or waived by the Debtors:

      1. The Confirmation Order shall authorize and direct that the Debtors,
      Reorganized Cityscape and Reorganized CSC take all actions necessary or
      appropriate to enter into, implement and consummate the contracts,
      instruments, releases, leases and other agreements or documents created in
      connection with the Plan, including those actions contemplated by the
      provisions of this Plan set forth in Section XI hereof.

      2. The statutory fees owing the U.S. Trustee shall have been paid in full.

      3. All other actions and documents necessary to implement the provisions
      of the Plan shall have been effected or executed or, if waivable, waived
      by the Person or Persons entitled to the benefit thereof.


                                      A-37
<PAGE>   113

C.    Waiver of Conditions to Confirmation and Effective Date.

            Each of the conditions to Confirmation and the Effective Date, other
than the condition set forth in Section X.B.2 of the Plan, may be waived in
whole or in part by the Debtors at any time, without notice or an Order of the
Bankruptcy Court. The failure to satisfy or to waive any condition may be
asserted by the Debtors regardless of the circumstances giving rise to failure
of such condition to be satisfied (including any action or inaction by the
Debtors). The failure of the Debtors to exercise any of the foregoing rights
will not be deemed a waiver of any other rights and each such right will be
deemed an ongoing right that may be asserted at any time.

                                       XI.

                          EFFECTS OF PLAN CONFIRMATION

A.    Discharge of Debtors and Injunction.

            Except as otherwise provided in the Plan or the Confirmation Order:
(i) on the Effective Date, the Debtors shall be deemed discharged and released
to the fullest extent permitted by Section 1141 of the Bankruptcy Code from all
Claims and Interests, including, but not limited to, demands, liabilities,
Claims and Interests that arose before the Effective Date and all debts of the
kind specified in Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code,
whether or not (A) a proof of Claim or proof of Interest based on such debt or
Interest is Filed or deemed Filed pursuant to Section 501 of the Bankruptcy
Code, (B) a Claim or Interest based on such debt or Interest is allowed pursuant
to Section 502 of the Bankruptcy Code, or (C) the Holder of a Claim or Interest
based on such debt or Interest has accepted the Plan; and (ii) all Persons shall
be precluded from asserting against Reorganized Cityscape, Reorganized CSC,
their respective successors, or their respective assets or properties any other
or further Claims or Interests based upon any act or omission, transaction, or
other activity of any kind or nature that occurred prior to the Effective Date.
Except as otherwise provided in the Plan or the Confirmation Order, the
Confirmation Order shall act as a discharge of any and all Claims against and
all debts and liabilities of the Debtors, as provided in Sections 524 and 1141
of the Bankruptcy Code, and such discharge shall void any judgment against the
Debtors at any time obtained to the extent that it relates to a Claim
discharged.

            Except as otherwise provided in the Plan or the Confirmation Order,
on and after the Effective Date, all Persons who have held, currently hold or
may hold a debt, Claim or Interest discharged pursuant to the terms of the Plan
are permanently enjoined from taking any of the following actions on account of
any such discharged debt, Claim or Interest: (i) commencing or continuing in any
manner any action or other proceeding against the Debtors, Reorganized Cityscape
or Reorganized CSC, or their respective successors or their respective
properties; (ii) enforcing, attaching, collecting or recovering in any manner
any judgment, award, decree or order against the Debtors, Reorganized Cityscape
or Reorganized CSC, or their respective successors or their respective
properties; (iii) creating, perfecting or enforcing any lien or encumbrance
against the Debtors, Reorganized Cityscape or Reorganized CSC, or their


                                      A-38
<PAGE>   114

respective successors or their respective properties; and (iv) commencing or
continuing any action, in any manner, in any place that does not comply with or
is inconsistent with the provisions of the Plan or the Confirmation Order. Any
Person injured by any willful violation of such injunction shall recover actual
damages, including costs and attorneys' fees, and, in appropriate circumstances,
may recover punitive damages, from the willful violator.

B.    Limitation of Liability.

            None of the Debtors, Reorganized Cityscape, Reorganized CSC, the
members of the Unofficial Senior Noteholders' Committee, the members of the
Unofficial Subordinated Debentureholders' Committee, the members of the
Creditors' Committee, the Indenture Trustees or any of their respective
employees, officers, directors, agents, or representatives, or any professional
persons employed by any of them (including, without limitation, their respective
Designated Professionals), shall have any responsibility, or have or incur any
liability, to any Person whatsoever (i) for any matter expressly approved or
directed by the Confirmation Order or (ii) under any theory of liability (except
for any claim based upon willful misconduct or gross negligence) for any act
taken or omission made in good faith directly related to formulating,
implementing, confirming, or consummating the Plan, the Disclosure Statement, or
any contract, instrument, release, or other agreement or document created in
connection with the Plan; provided, that nothing in this Section XI.B shall
limit the liability of any Person for breach of any express obligation it has
under the terms of this Plan or under any agreement or other document entered
into by such Person either post-Petition Date or in accordance with the terms of
this Plan (except to the extent expressly provided in the Confirmation Order) or
for any breach of a duty of care owed to any other Person occurring after the
Effective Date.

C.    Releases.

            On the Effective Date, each of the Debtors shall release
unconditionally, and hereby is deemed to release unconditionally (i) each of the
Debtors' then-current and former officers, directors, shareholders, employees,
consultants, attorneys, accountants, financial advisors and other
representatives (solely in their capacities as such) (collectively, the "DEBTOR
RELEASEES"), (ii) the Creditors' Committee and, solely in their capacity as
members or representatives of the Creditors' Committee, each member, consultant,
attorney, accountant or other representative of the Creditors' Committee
(including, without limitation, their respective Designated Professionals),
(iii) the Unofficial Senior Noteholders' Committee and, solely in their capacity
as members or representatives of the Unofficial Senior Noteholders' Committee,
each member, consultant, attorney, accountant or other representative of the
Unofficial Senior Noteholders' Committee (including, without limitation, their
respective Designated Professionals), (iv) the Unofficial Subordinated
Debentureholders' Committee and, solely in their respective capacity as members
or representatives of the Unofficial Subordinated Debentureholders' Committee,
each member, consultant, attorney, accountant or other representative of the
Unofficial Subordinated Debentureholders' Committee (including, without
limitation, their respective Designated Professionals), (v) the Indenture
Trustees, in their respective capacities as Indenture Trustee, and each of their
then-current and former officers, directors, shareholders, employees,
consultants, attorneys, accountants, financial advisors and


                                      A-39
<PAGE>   115

other representatives (solely in their capacities as such) from any and all
claims, obligations, suits, judgments, damages. rights, causes of action and
liabilities whatsoever, whether known or unknown, foreseen or unforeseen,
existing or hereafter arising, in law, equity or otherwise, based in whole or in
part upon any act or omission, transaction, event or other occurrence taking
place on or prior to the Effective Date in any way relating to Cityscape, CSC,
the Company's trust indentures, the CIT Facility, the Greenwich Facility, the
DIP Facilities, the Debtors, the Reorganization Cases, the Plan or the
Disclosure Statement.

            On the Effective Date, (i) provided that Class 4 and Class 4a vote
to accept the Plan, each Holder of a Class 4 or Class 4a Claim, and (ii)
provided that Class 6 and Class 6a vote to accept the Plan, each Holder of a
Class 6 or Class 6a Claim shall be deemed to have unconditionally released the
Debtor Releasees from any and all claims, obligations, suits, judgments,
damages, rights, causes of action and liabilities whatsoever which any such
Holder may be entitled to assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or otherwise, based in
whole or in part upon any act or omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way relating to
Cityscape, CSC, the Company's trust indentures, the Debtors, the Reorganization
Cases, the Plan or the Disclosure Statement.

D.    Indemnification.

            The Debtors shall fully indemnify and Reorganized Cityscape or
Reorganized CSC, as the case may be, shall assume the Debtors' obligations to
indemnify any person by reason of the fact that he or she is or was a director,
officer, employee, agent, Designated Professional, member, or other authorized
representative (in each case, as applicable) of either of the Debtors, the
Creditors' Committee, the Unofficial Senior Noteholders' Committee, the
Unofficial Subordinated Debentureholders' Committee or the Indenture Trustees
(collectively, the "INDEMNITEES") against any claims, liabilities, actions,
suits, damages, fines, judgments or expenses (including reasonable attorney's
fees and expenses), arising during the course of, or otherwise in connection
with or in any way related to, the negotiation, preparation, formulation,
solicitation, dissemination, implementation, confirmation and consummation of
the Plan and the transactions contemplated thereby and the Disclosure Statement
in support thereof; provided, however, that the foregoing indemnification shall
not apply to any liabilities arising from the gross negligence or willful
misconduct of any Indemnitee. If any claim, action or proceeding is brought or
asserted against an Indemnitee in respect of which indemnity may be sought from
Reorganized Cityscape or Reorganized CSC, the Indemnitee shall promptly notify
Reorganized Cityscape or Reorganized CSC, as the case may be, in writing and
Reorganized Cityscape or Reorganized CSC, as the case may be, shall assume the
defense thereof including the employment of counsel reasonably satisfactory to
the Indemnitee, and the payment of all expenses of such Indemnitee. The
Indemnitee shall have the right to employ separate counsel in any such claim,
action or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Indemnitee unless (a)
Reorganized Cityscape or Reorganized CSC, as the case may be, has agreed to pay
the fees and expenses of such counsel, or (b) Reorganized Cityscape or
Reorganized CSC, as the case may be, shall have failed to assume promptly the
defense of such claim, action or proceeding or to employ counsel


                                      A-40
<PAGE>   116

reasonably satisfactory to the Indemnitee in any such claim, action or
proceeding, or (c) the named parties in any such claim, action or proceeding
(including any impleaded parties) include both the Indemnitee and Reorganized
Cityscape or Reorganized CSC, as the case may be, and the Indemnitee believes,
in the exercise of its business judgment and in the opinion of its legal
counsel, reasonably satisfactory to Reorganized Cityscape or Reorganized CSC, as
the case may be, that the joint representation of Reorganized Cityscape or
Reorganized CSC, as the case may be, and the Indemnitee will likely result in a
conflict of interest (in which case, if the Indemnitee notifies Reorganized
Cityscape or Reorganized CSC, as the case may be, in writing that it elects to
employ separate counsel at the expense of Reorganized Cityscape or Reorganized
CSC, Reorganized Cityscape or Reorganized CSC, as the case may be, shall not
have the right to assume the defense of such action or proceeding on behalf of
the Indemnitee). In addition, neither Reorganized Cityscape nor Reorganized CSC
shall effect any settlement or release from liability in connection with any
matter for which the Indemnitee would have the right to indemnification from
Reorganized Cityscape or Reorganized CSC unless such settlement contains a full
and unconditional release of the Indemnitee, or a release of the Indemnitee
reasonably satisfactory in form and substance to the Indemnitee.

E.    Vesting of Assets.

            Except as otherwise provided in the Plan or the Confirmation Order,
including Article III hereof, on the Effective Date, all property of Cityscape's
Estate shall vest in Reorganized Cityscape and all property of CSC's Estate
shall vest in Reorganized CSC, all free and clear of all Claims, liens,
encumbrances and Interests of Holders of Claims and Holders of Old Securities
and Old Stock Rights. From and after the Effective Date, Reorganized Cityscape
and Reorganized CSC may operate their business and use, acquire, and dispose of
property and settle and compromise claims or interests arising on or after the
Effective Date without supervision by the Bankruptcy Court and free of any
restrictions of the Bankruptcy Code, the Bankruptcy Rules or the Local
Bankruptcy Rules, other than those restrictions expressly imposed by the Plan or
the Confirmation Order.

F.    Preservation of Causes of Action.

            Except as otherwise provided herein, or in any contract, instrument,
release, or other agreement entered into in connection with the Plan, in
accordance with Section 1123(b) of the Bankruptcy Code, Reorganized Cityscape
and Reorganized CSC shall retain (and may enforce) any claims, rights and causes
of action that the Debtors or the Estates may hold against any Person,
including, among other things, (i) any claims, rights or causes of action under
Sections 544 through 550 of the Bankruptcy Code or any similar provisions of
state law, or any other statute or legal theory, and (ii) any claims for
recovery against present or former Holders of Trade Claims who received payments
from the Debtors during the pendency of the Debtors' chapter 11 cases on account
of Trade Claims to the extent that such payments resulted in such Holders'
receiving greater distributions on account of their Trade Claims than that to
which they are entitled under Section V.B.5 of this Plan; provided, however,
that (i) in the event that Class 4 and Class 4a vote to accept the Plan, any
such claims, rights or causes of action against Holders of Allowed Claims in
such Classes (solely in their capacities as such) shall be released,


                                      A-41
<PAGE>   117

discharged and extinguished on the Effective Date, whether or not then pending,
and (ii) in the event that Class 6 and Class 6a vote to accept the Plan, any
such claims, rights or causes of action against Holders of Allowed Claims in
such Class (solely in their capacities as such) shall be released, discharged
and extinguished on the Effective Date, whether or not then pending.

G.    Retention of Bankruptcy Court Jurisdiction.

            To the maximum extent permitted by the Bankruptcy Code or other
applicable law, the Bankruptcy Court shall have jurisdiction of all mailers
arising out of, and related to, the Reorganization Cases and the Plan pursuant
to, and for the purpose of, Sections 105(a) and 1142 of the Bankruptcy Code,
including, without limitation, jurisdiction to:

            1. Allow, disallow, determine, liquidate, classify, estimate or
      establish the priority or secured or unsecured status of any Claim or
      Interest, including the resolution of any request for payment of any
      Administrative Claim, the resolution of any objections to the allowance or
      priority of Claims or Interests and the resolution of any dispute as to
      the treatment necessary to Reinstate a Claim pursuant to the Plan;

            2. Grant or deny any applications for allowance of compensation or
      reimbursement of expenses authorized pursuant to the Bankruptcy Code or
      the Plan, for periods ending before the Effective Date;

            3. Resolve any matters related to the assumption or rejection of any
      executory contract or unexpired lease to which the either of the Debtors
      is a party or with respect to which either of the Debtors may be liable,
      and to hear, determine and, if necessary, liquidate any Claims arising
      therefrom;

            4. Ensure that distributions to Holders of Allowed Claims or Allowed
      Interests are accomplished pursuant to the provisions of the Plan;

            5. Decide or resolve any motions, adversary proceedings, contested
      or litigated matters and any other matters and grant or deny any
      applications involving the Debtors, Reorganized Cityscape or Reorganized
      CSC that may be pending on the Effective Date;

            6. Enter such Orders as may be necessary or appropriate to implement
      or consummate the provisions of the Plan and all contracts, instruments,
      releases, indentures and other agreements or documents created in
      connection with the Plan, the Disclosure Statement or the Confirmation
      Order, except as otherwise provided herein;

            7. Resolve any cases, controversies, suits or disputes that may
      arise in connection with the consummation, interpretation or enforcement
      of the Plan or the Confirmation Order, including the release and
      injunction provisions set forth in and contemplated by the Plan and the
      Confirmation Order, or any entity's rights arising under or obligations
      incurred in connection with this Plan or the Confirmation Order;


                                      A-42
<PAGE>   118

            8. Subject to any restrictions on modifications provided herein or
      in any contract, instrument, release, indenture or other agreement or
      document created in connection with the Plan, modify this Plan before or
      after the Effective Date pursuant to Section 1127 of the Bankruptcy Code
      or modify the Disclosure Statement, the Confirmation Order or any
      contract, instrument, release, indenture or other agreement or document
      created in connection with the Plan, the Disclosure Statement or the
      Confirmation Order, or remedy any defect or omission or reconcile any
      inconsistency in any Bankruptcy Court Order, this Plan, the Disclosure
      Statement, the Confirmation Order or any contract, instrument, release,
      indenture or other agreement or document created in connection with the
      Plan, the Disclosure Statement or the Confirmation Order, in such manner
      as may be necessary or appropriate to consummate this Plan, to the extent
      authorized by the Bankruptcy Code;

            9. Issue injunctions, enter and implement other Orders or take such
      other actions as may be necessary or appropriate to restrain interference
      by any entity with consummation, implementation or enforcement of the Plan
      or the Confirmation Order;

            10. Enter and implement such Orders as are necessary or appropriate
      if the Confirmation Order is for any reason modified, stayed, reversed,
      revoked or vacated;

            11. Except as otherwise provided in this Plan, or with respect to
      specific matters, in the Confirmation Order or any other Order entered in
      connection with the Reorganization Cases, determine any other matters that
      may arise in connection with or relating to the Plan, the Disclosure
      Statement, the Confirmation Order or any contract, instrument, release,
      indenture or other agreement or document created in connection with this
      Plan, the Disclosure Statement or the Confirmation Order;

            12. Hear and dispose of any claims assigned to, and asserted by,
      Reorganized Cityscape or Reorganized CSC pursuant to Section XI.F of this
      Plan;

            13. Resolve any disputes relating to the Indenture Trustees'
      requests for payment of their fees and expenses, as provided in Section
      V.A.3.c of the Plan;

            14. Resolve any disputes over invoices submitted by professionals to
      the Reorganized Company for compensation for services rendered or
      reimbursement of expenses incurred after the Effective Date, as provided
      in Section V.A.3.b of the Plan; and

            15. Enter an Order or Orders closing the Reorganization Cases.

H.    Failure of Bankruptcy Court to Exercise Jurisdiction.

            If the Bankruptcy Court abstains from exercising or declines to
exercise jurisdiction, or is otherwise without jurisdiction over any matter
arising out of the Reorganization Cases, including the matters set forth in
Section XI.G above, Section XI.G shall not prohibit or


                                      A-43
<PAGE>   119

limit the exercise of jurisdiction by any other court having competent
jurisdiction with respect to such matter.

I.    Committees.

            On the Effective Date, all Committees, if any, shall be dissolved
and the members of such Committees and their professionals shall be released and
discharged from all further rights and duties arising from or related to the
Reorganization Cases. The professionals retained by such Committees and the
members thereof shall not be entitled to compensation or reimbursement of
expenses incurred for services rendered after the Effective Date other than for
services rendered pursuant to the Plan, to enforce the terms of the Plan or in
connection with other activities reserved to such Committees or such
professionals under the Plan or the Confirmation Order or in connection with any
application for allowance of compensation and reimbursement of expenses pending
as of, or Filed after, the Effective Date.

                                      XII.

                            MISCELLANEOUS PROVISIONS

A.    Final Order.

            Any requirement in this Plan that an Order be a Final Order may be
waived by the Debtors; provided, that nothing contained herein or elsewhere in
this Plan shall prejudice the right of any party in interest to seek a stay
pending appeal with respect to such order.

B.    Modification of the Plan.

            The Debtors reserve the right to modify the Plan at any time prior
to the Confirmation Date in the manner provided for by Section 1127 of the
Bankruptcy Code or as otherwise permitted by law without additional disclosure
pursuant to Section 1125 of the Bankruptcy Code, except as the Bankruptcy Court
may otherwise order.

            The Debtors reserve the right after the Confirmation Date and before
the Effective Date to modify the terms of the Plan or waive any conditions to
the effectiveness thereof if and to the extent the Debtors determine that such
modifications or waivers are necessary or desirable to consummate the Plan. The
Debtors will give such Holders of Claims and Interests notice of such
modifications or waivers as may be required by applicable law and the Bankruptcy
Court, and any such modifications shall be subject to the approval of the
Bankruptcy Court to the extent required by, and in accordance with, Section 1127
of the Bankruptcy Code.

            The Debtors shall give notice to any Committee, each of the
Unofficial Committees and each of the DIP Lenders of any modification of the
Plan.


                                      A-44
<PAGE>   120

C.    Revocation of the Plan.

            The Debtors reserve the right to revoke or withdraw the Plan prior
to the Confirmation Date. If the Debtors revoke or withdraw the Plan, or if
Confirmation does not occur, then the Plan shall be null and void, and all of
the Debtors' respective obligations with respect to the Claims and Interests
shall remain unchanged and nothing contained herein or in the Disclosure
Statement shall be deemed an admission or statement against interest or to
constitute a waiver or release of any claims by or against either Debtor or any
other Person or to prejudice in any manner the rights of either Debtor or any
Person in any further proceedings involving either Debtor or any Person.

D.    Severability of Plan Provisions.

            If, prior to Confirmation, any term or provision of the Plan is held
by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy
Court will have the power, upon the request of the Debtors, to alter and
interpret such term or provision to make it valid or enforceable to the maximum
extent practicable, consistent with the original purpose of the term or
provision held to be invalid, void or unenforceable, and such term or provision
shall then be applicable as altered or interpreted. Notwithstanding any such
holding, alteration or interpretation, the remainder of the terms and provisions
of this Plan shall remain in full force and effect and shall in no way be
affected, impaired or invalidated by such holding, alteration or interpretation.
The Confirmation Order shall constitute a judicial determination and shall
provide that each term and provision of this Plan, as it may have been altered
or interpreted in accordance with the foregoing, is valid and enforceable
pursuant to its terms.

E.    Successors and Assigns.

            The rights, benefits and obligations of any Person named or referred
to in the Plan shall be binding on, and shall inure to the benefit of, any heir,
executor, trustee, administrator, successor or assign of such Person.

F.    Saturday, Sunday or Legal Holiday.

            If any payment or act under the Plan is required to be made or
performed on a date that is not a Business Day, then the making of such payment
or the performance of such act may be completed on the next succeeding Business
Day, but shall be deemed to have been completed as of the required date.

G.    Post-Effective Date Effect of Evidences of Claims or Interests.

            Except as otherwise specified herein, notes, bonds, stock
certificates and other evidences of Claims against or Interests in the Debtors,
and all Instruments of the Debtors (in either case, other than those executed
and delivered as contemplated hereby in connection with the consummation of the
Plan), shall, effective upon the Effective Date, represent only the right to
participate in the distributions contemplated by the Plan.


                                      A-45
<PAGE>   121

H.    Governing Law.

            Unless a rule of law or procedure is supplied by (i) federal law
(including the Bankruptcy Code, the Bankruptcy Rules or the Local Bankruptcy
Rules). (ii) an express choice of law provision in any agreement, contract,
instrument, or document provided for, or executed in connection with, the Plan,
or (iii) applicable non-bankruptcy law, the rights and obligations arising under
the Plan and any agreements, contracts, documents, and instruments executed in
connection with the Plan shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without giving effect to the
principles of conflict of laws thereof.

I.    No Liability for Solicitation or Participation.

            As specified in Section 1125(e) of the Bankruptcy Code, Persons that
solicit acceptances or rejections of the Plan and/or that participate in the
offer, issuance, sale, or purchase of securities offered or sold under the Plan,
in good faith and in compliance with the applicable provisions of the Bankruptcy
Code, shall not be liable, on account of such solicitation or participation, for
violation of any applicable law, rule, or regulation governing the solicitation
of acceptances or rejections of the Plan or the offer, issuance, sale, or
purchase of securities.

J.    No Admissions or Waiver of Objections.

            Notwithstanding anything herein to the contrary, if the Effective
Date does not occur, nothing contained in the Plan shall be deemed as an
admission by the Debtors or any other party with respect to any matter set forth
herein, including, without limitation, liability on any Claim or the propriety
of any Claims classification. The Debtors are not bound by any statements herein
or in the Disclosure Statement as judicial admissions.


                                      A-46
<PAGE>   122

DATED:  March 26, 1999

                                   CITYSCAPE FINANCIAL CORP.,

                                   By: /s/ Steven M. Miller
                                       ----------------------------------------
                                       Name:  Steven M. Miller
                                       Title: President and Chief  Executive
                                              Officer


                                   CITYSCAPE CORP.,
                                       a New York corporation

                                   By: /s/ Steven M. Miller
                                        ----------------------------------------
                                       Name:  Steven M. Miller
                                       Title: Senior Vice President

Presented by:

Robert J. Rosenberg
A. Brent Truitt
Rachael Fink
LATHAM & WATKINS
885 Third Avenue, Suite 1000
New York, New York 10022
(212) 906-1200

COUNSEL FOR CITYSCAPE FINANCIAL
CORP. AND CITYSCAPE CORP.

By: /s/ Robert J. Rosenberg
    -----------------------------
        Robert J. Rosenberg
<PAGE>   123

                                INDEX OF EXHIBITS

Exhibit A   Reorganized Cityscape Certificate of Incorporation
Exhibit B   Reorganized Cityscape Bylaws
Exhibit C   Reorganized CSC Certificate of Incorporation
Exhibit D   Reorganized CSC Bylaws
<PAGE>   124

                                    EXHIBIT A

               REORGANIZED CITYSCAPE CERTIFICATE OF INCORPORATION
<PAGE>   125

                              AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                            CITYSCAPE FINANCIAL CORP.

            I, the undersigned Chief Executive Officer of Cityscape Financial
Corp., a corporation existing under the laws of the State of Delaware
(hereinafter referred to as the "Corporation"), do hereby certify as follows:

            FIRST: That the Certificate of Incorporation of the Corporation was
      filed with the Secretary of State of the State of Delaware on December 16,
      1988, under the name Mandi of Essex, LTD. An amendment to the certificate
      for Renewal and Revival of Charter of Mandi of Essex, Inc. was filed on
      April 21, 1994 and was further amended by Amendment to Certificate of
      Change of Registered Agent and Registered Office on June 23, 1994. An
      Amendment to the Certificate of Incorporation amending the authorized
      number of shares was filed by the Secretary of State of Delaware on July
      22, 1994.

            SECOND: This Restated Certificate of Incorporation restates and
      integrates and amends the Certificate of Incorporation of the Corporation
      by restating the Certificate of Incorporation in its entirety. The text of
      the Certificate of Incorporation is in its entirety as follows:

            FIRST:      The name of the Company is:
                        CITYSCAPE FINANCIAL CORP.

            SECOND:     The address of the Company's registered office in the
                        State of Delaware is 1209 Orange Street, Wilmington,
                        County of New Castle, Delaware, 19801, and the name of
                        its registered agent at such address is The Corporation
                        Trust Company.

            THIRD:      The purpose of the Company is to engage in any lawful
                        act or activity for which corporations may be
                        organized under the General Corporation Law of
                        Delaware as it now exists or may hereafter be amended
                        and supplemented.

            FOURTH:     The total number of shares of stock which the Company
                        shall have authority to issue is __________ having a
                        par value of $0.01 per share. All such shares are
                        Common Stock.

                        The issuance of nonvoting equity securities is
                        prohibited.

            FIFTH:      The personal liability of the directors of the
                        Company is hereby eliminated to the fullest extent
                        permitted by paragraph (7) of
<PAGE>   126

                        subsection (b) of Section 102 of the General Corporation
                        Law of the State of Delaware, as the same may be amended
                        and supplemented. Any repeal or modification of this
                        Article Fifth shall not adversely affect any right or
                        protection of a director of the Company existing
                        immediately prior to such repeal or modification.

            SIXTH:      The Company shall, to the fullest extent permitted or
                        required by Section 145 of the General Corporation Law
                        of the State of Delaware, as the same may be amended and
                        supplemented, indemnify any and all persons to whom it
                        shall have power to indemnify under said section from
                        and against any and all of the expenses, liabilities or
                        other matters referred to in or covered by said section,
                        and the indemnification provided for herein shall not be
                        deemed exclusive of any other rights to which those
                        indemnified may be entitled under any By-Law, agreement,
                        vote of stockholders or disinterested directors or
                        otherwise, both as to action in his or her official
                        capacity and as to action in another capacity while
                        holding such office, and shall continue as to a person
                        who has ceased to be a director, officer, employee or
                        agent and shall inure to the benefit of the heirs,
                        executors and administrators of such person. Any repeal
                        or modification of this Article Sixth shall not
                        adversely affect any right or protection existing
                        hereunder immediately prior to such repeal or
                        modification.

            SEVENTH:    From time to time any of the provisions of this
                        certificate of incorporation may be amended, altered or
                        repealed, and other provisions authorized by the laws of
                        the State of Delaware at the time in force may be added
                        or inserted in the manner and at the time prescribed by
                        said laws, and all rights at any time conferred upon the
                        stockholders of the Company by this certificate of
                        incorporation are granted subject to the provisions of
                        this Article Seventh.

            EIGHTH:     In furtherance and not in limitation of the rights,
                        powers, privileges and discretionary authority granted
                        or conferred by the General Corporation Law of the State
                        of Delaware or other statutes or laws of the state of
                        Delaware, the Board of Directors is expressly authorized
                        to make, alter, amend or repeal the By-Laws of the
                        Company, without any action on the part of the
                        Stockholders, but the Stockholders may make additional
                        By-Laws and may alter, amend or repeal any By-Law
                        whether adopted by them or otherwise. The Company may in
                        its By-Laws confer powers upon its Board of Directors in
                        addition to the foregoing and in addition


                                       2
<PAGE>   127

                        to the powers and authorities expressly conferred
                        upon the Board of Directors by applicable law.

            THIRD: This Restated Certificate of Incorporation was duly adopted
      pursuant to the Corporation's Plan of Reorganization as filed with the
      United States Bankruptcy Court for the Southern District of New York and
      confirmed by such Court as of ___________, 1999 (the "Plan of
      Reorganization"), pursuant to Chapter 11 of Title 11 of the United States
      Code and otherwise in accordance with applicable provisions of the General
      Corporation Law of the State of Delaware.

            IN WITNESS WHEREOF, I have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by me and are true and correct.

Date: _____________, 1999

                                    CITYSCAPE FINANCIAL CORP.


                                    -----------------------------------
                                    Name:
                                    Title:


                                       3
<PAGE>   128

                                    EXHIBIT B

                          REORGANIZED CITYSCAPE BYLAWS
<PAGE>   129

                               AMENDED & RESTATED

                                     BY-LAWS

                                       OF

                            CITYSCAPE FINANCIAL CORP.
<PAGE>   130

                                TABLE OF CONTENTS
                                                                         Page
                                                                         ----

ARTICLE I. OFFICES .........................................................1
  Section 1 ................................................................1
  Section 2 ................................................................1
ARTICLE II. MEETINGS OF STOCKHOLDERS .......................................1
  Section 1 ................................................................1
  Section 2 ................................................................1
  Section 3 ................................................................1
  Section 4 ................................................................2
  Section 5 ................................................................2
  Section 6 ................................................................2
  Section 7 ................................................................2
  Section 8 ................................................................3
  Section 9 ................................................................3
ARTICLE III. DIRECTORS .....................................................3
  Section 1 ................................................................3
  Section 2 ................................................................3
  Section 3 ................................................................4
  Section 4 ................................................................4
  Section 5 ................................................................4
  Section 6 ................................................................4
  Section 7 ................................................................4
  Section 8 ................................................................5
  Section 9 ................................................................5
  Section 10 ...............................................................5
  Section 11 ...............................................................6
  Section 12 ...............................................................6
  Section 13 ...............................................................6
ARTICLE IV OFFICERS ........................................................8
  Section 1 ................................................................8
  Section 2 ................................................................8
  Section 3 ................................................................9
  Section 4 ................................................................9
  Section 5 ................................................................9
  Section 6 ................................................................9
  Section 7 ................................................................9
  Section 8 ...............................................................10
  Section 9 ...............................................................10
  Section 10 ..............................................................10
  Section 11 ..............................................................1O
ARTICLE V. CERTIFICATES OF STOCK ..........................................11
  Section 1 ...............................................................11
  Section 2 ...............................................................11
  Section 3 ...............................................................12
  Section 4 ...............................................................12
  Section 5 ...............................................................12
  Section 6 ...............................................................13
  Section 7 ...............................................................13
ARTICLE VI GENERAL PROVISIONS .............................................13
  Section 1 ...............................................................13


                                       i
<PAGE>   131

                                                                         Page
                                                                         ----

  Section 2 ...............................................................13
  Section 3 ...............................................................14
  Section 4 ...............................................................14
  Section 5 ...............................................................14
  Section 6 ...............................................................14
  Section 7 ...............................................................14
  Section 8 ...............................................................14
ARTICLE VII. AMENDMENTS ...................................................15
  Section 1 ...............................................................15


                                       ii
<PAGE>   132

                               AMENDED & RESTATED
                                     BY-LAWS
                                       OF
                            CITYSCAPE FINANCIAL CORP.
                         As Amended As Of ________, 1999

                                   ARTICLE I.

                                     OFFICES

            Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.

            Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.

                                   ARTICLE II.

                            MEETINGS OF STOCKHOLDERS

            Section 1. Meetings of stockholders shall be held at any place
within or outside the State of Delaware designated by the Board of Directors. In
the absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.

            Section 2. The annual meeting of stockholders shall be held each
year on a date and a time designated by the Board of Directors. At each annual
meeting directors shall be elected and any other proper business may be
transacted.

            Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
<PAGE>   133

            Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.

            Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.

            Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.

            Section 7. Whenever stockholders are required or permitted to take
any action at a meeting, a written notice of the meeting shall be given which
notice shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation.

            Section 8. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.


                                       2
<PAGE>   134

            Section 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.

                                  ARTICLE III.

                                    DIRECTORS

            Section 1. The number of directors which shall constitute the whole
Board shall be not less than one (1) nor more than ten (10). The first Board
shall consist of ______ directors. The directors need not be stockholders. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified; provided, however, that
unless otherwise restricted by the Certificate of Incorporation or by law, any
director or the entire Board of Directors may be removed, either with or without
cause, from the Board of Directors at any meeting of stockholders by a majority
of the stock represented and entitled to vote thereat.

            Section 2. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.

            Section 3. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.


                                       3
<PAGE>   135

MEETINGS OF THE BOARD OF DIRECTORS

            Section 4. The directors may hold their meetings and have one or
more offices, and keep the books of the corporation outside of the State of
Delaware.

            Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.

            Section 6. Special meetings of the Board of Directors may be called
by the President on forty-eight hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
President or the Secretary in like manner and on like notice on the written
request of two directors unless the Board consists of only one director; in
which case special meetings shall be called by the President or Secretary in
like manner or on like notice on the written request of the sole director.

            Section 7. At all meetings of the Board of Directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum.

            Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.

            Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.

COMMITTEES OF DIRECTORS

            Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or


                                       4
<PAGE>   136

not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.

            Section 11. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.

COMPENSATION OF DIRECTORS

            Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.

INDEMNIFICATION

            Section 13. (a) The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.


                                       5
<PAGE>   137

            (b) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.

            (c) To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

            (d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.

            (e) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors in
the manner provided in paragraph (d) upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Section 13.

            (f) The indemnification provided by this Section 13 shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.


                                       6
<PAGE>   138

            (g) The Board of Directors may authorize, by a vote of a majority of
a quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Section 13.

            (h) For the purposes of this Section 13, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.

            (i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.

                                   ARTICLE IV.

                                    OFFICERS

           Section 1. The officers of this corporation shall be chosen by the 
Board of Directors and shall include a President, a Secretary, and a Treasurer. 
The corporation may also have at the discretion of the Board of Directors such 
other officers as are desired, including a Chairman of the Board, one or more 
Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of 
Section 3 hereof. In the event there are two or more Vice Presidents, then one 
or more may be designated as Executive Vice President, Senior Vice President, or
other similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.


                                       7
<PAGE>   139

            Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers of the corporation.

            Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.

            Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.

            Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.

CHAIRMAN OF THE BOARD

            Section 6. The Chairman of the Board, if such an officer be elected,
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by these By-Laws. If
there is no President, the Chairman of the Board shall in addition be the Chief
Executive Officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article IV.

PRESIDENT

            Section 7. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these By-Laws.

SECRETARY AND ASSISTANT SECRETARY

            Section 8. The Secretary shall attend all sessions of the Board of
Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. He shall keep
in safe custody the seal of


                                       8
<PAGE>   140

the corporation, and when authorized by the Board, affix the same to any
instrument requiring it, and when so affixed it shall be attested by his
signature or by the signature of an Assistant Secretary. The Board of Directors
may give general authority to any other officer to affix the seal of the
corporation and to attest the affixing by his signature.

            Section 9. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors, or
if there be no such determination, the Assistant Secretary designated by the
Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.

TREASURER AND ASSISTANT TREASURER

            Section 10. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.

            Section 11. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors,
or if there be no such determination, the Assistant Treasurer designated by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.

                                   ARTICLE V.

                              CERTIFICATES OF STOCK

            Section 1. Every holder of stock of the corporation shall be
entitled to have a certificate signed by, or in the name of the corporation by,
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.


                                       9
<PAGE>   141

            Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.

            Section 3. If the corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.

LOST. STOLEN OR DESTROYED CERTIFICATES

            Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.

TRANSFERS OF STOCK

            Section 5. Upon surrender to the corporation, or the transfer agent
of the corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.

FIXING RECORD DATE

            Section 6. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise


                                       10
<PAGE>   142

any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record date
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

REGISTERED STOCKHOLDERS

            Section 7. The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.

                                   ARTICLE VI.

                               GENERAL PROVISIONS

DIVIDENDS

            Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.

            Section 2. Before payment of any dividend there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve.

CHECKS

            Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.

FISCAL YEAR

            Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.

SEAL

            Section 5. The corporate seal shall have inscribed thereon the name
of the


                                       11
<PAGE>   143

corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.

NOTICES

            Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.

            Section 7. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
to be equivalent.

ANNUAL STATEMENT

            Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.

                                  ARTICLE VII.

                                   AMENDMENTS

            Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.


                                       12
<PAGE>   144

                                    EXHIBIT C

                  REORGANIZED CSC CERTIFICATE OF INCORPORATION
<PAGE>   145

                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                                 CITYSCAPE CORP.

                  --------------------------------------------

      I, the undersigned Chief Executive Officer of Cityscape Corp., a
corporation existing under the laws of the State of New York (hereinafter
referred to as the "Corporation"), do hereby certify as follows:

            FIRST: That the Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of New York on March 4, 1985,
under the name of RSSG Corp. An Amendment changing the corporation's name to
Cityscape Corp. was filed on November 7, 1985, and was further amended by
Amendment to Certificate of Incorporation filed by the Department of State on
February 16, 1990.

            SECOND: This Restated Certificate of Incorporation restates and
integrates and amends the Certificate of Incorporation of the Corporation by
restating the Certificate of Incorporation in its entirety. The text of the
Certificate of Incorporation is in its entirety as follows:

            FIRST:      The name of the corporation is CITYSCAPE CORP.

            SECOND:     The corporation is formed for the following purpose or
                        purposes:

                        To engage in any lawful act or activity for which
                        corporations may be organized under the Business
                        Corporation Law, provided that the corporation is not
                        formed to engage in any act or activity requiring the
                        consent or approval of any state official, department,
                        board, agency or other body without such consent or
                        approval first being obtained.

            THIRD:      The office of the corporation is to be located in the
                        County of Westchester, State of New York.

            FOURTH:     The aggregate number of shares which the corporation
                        shall have authority to issue is 400 all of which are
                        of a par value of $0.01 each, and all of which are of
                        the same class.

                        The issuance of nonvoting equity securities is
                        prohibited.
<PAGE>   146

            FIFTH:      The Secretary of State is designated as the agent of the
                        corporation upon whom process against the corporation
                        may be served. The post office address within the State
                        of New York to which the Secretary of State shall mail a
                        copy of any process against the corporation served upon
                        him is:

                        Cityscape Corp.
                        565 Taxter Road
                        Elmsford, New York 10523

            SIXTH:      The duration of the corporation is to be perpetual.

            SEVENTH:    The corporation shall, to the fullest extent permitted
                        by Article 7 of the Business Corporation Law of the
                        State of New York, as the same may be amended and
                        supplemented, indemnify any and all persons whom it
                        shall have power to indemnify under said Article from
                        and against any and all of the expenses, liabilities, or
                        other matters referred to in or covered by said Article,
                        and the indemnification provided for herein shall not be
                        deemed exclusive of any other rights to which any person
                        may be entitled under any By-Law, resolution of
                        shareholders, resolution of directors, agreement, or
                        otherwise, as permitted by said Article, as to action in
                        any capacity in which he served at the request of the
                        corporation.

            EIGHTH:     The personal liability of the directors of the
                        corporation is eliminated to the fullest extent
                        permitted by the provisions of paragraph (b) of Section
                        402 of the Business Corporation Law of the State of New
                        York, as the same may be amended and supplemented.

            THIRD: This Amended and Restated Certificate of Incorporation was
duly adopted pursuant to the Corporation's Plan of Reorganization as filed with
the United States Bankruptcy Court for the Southern District of New York and
confirmed by such Court as of 1999 (the "Plan of Reorganization"), pursuant to
Chapter 11 of Title 11 of the United States Code and otherwise in accordance
with applicable provisions of the Business Corporation Law of the State of New
York.


                                       2
<PAGE>   147

      IN WITNESS WHEREOF, I have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained therein have been examined by me and are true and correct.

Date: _____________, 1999

                                         CITYSCAPE CORP.


                                         -----------------------------
                                         Name:
                                         Title:


                                       3
<PAGE>   148

                                    EXHIBIT D

                             REORGANIZED CSC BYLAWS
<PAGE>   149

                               AMENDED & RESTATED

                                     BY-LAWS

                                       OF

                                 CITYSCAPE CORP.

                            (a New York corporation)
                        As Amended As Of__________, 1999

                                  ARTICLE VIII.

                                  SHAREHOLDERS

            1. Certificates Representing Shares. Certificates representing
shares shall set forth thereon the statements prescribed by Section 508, and,
where applicable, by Sections 505, 616, 620, 709, and 1002, of the Business
Corporation Law and by any other applicable provision of law and shall be signed
by the Chairman or a Vice-Chairman of the Board of Directors, if any, or by the
President or a Vice-President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer and may be sealed with the corporate
seal or a facsimile thereof. The signatures of the officers upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or its employee, or
if the shares are listed on a registered national security exchange. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.

            A certificate representing shares shall not be issued until the full
amount of consideration therefor has been paid except as Section 504 of the
Business Corporation Law may otherwise permit.

            The corporation may issue a new certificate for shares in place of
any certificate theretofore issued by it, alleged to have been lost or
destroyed, and the Board of Directors may require the owner of any lost or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such certificate
or the issuance of any such new certificate.

            2. Fractional Share Interests. The corporation may issue
certificates for fractions of a share where necessary to effect transactions
authorized by the Business Corporation Law which shall entitle the holder, in
proportion to his fractional holdings, to exercise voting rights, receive
dividends and participate in liquidating distributions; or it may pay, in cash
the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined; or it may issue scrip in registered or
bearer form over the manual
<PAGE>   150

or facsimile signature of an officer of the corporation or of its agent,
exchangeable as therein provided for full shares, but such scrip shall not
entitle the holder to any rights of a shareholder except as therein provided.

            3. Share Transfers. Upon compliance with provisions restricting the
transferability of shares, if any, transfers of shares of the corporation shall
be made only on the share record of the corporation by the registered holder
thereof or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes due
thereon.

            4. Record Date for Shareholders. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the directors may fix, in advance, a date as the
record date for any such determination of shareholders. Such date shall not be
more than fifty days nor less than ten days before the date of such meeting, nor
more than fifty days prior to any other action. If no record date is fixed, the
record date for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of the business on the
day next preceding the day on which notice is given, or, if no notice is given,
the day on which the meeting is held; the record date for determining
shareholders for any purpose other than that specified in the preceding clause
shall be at the close of business on the day on which the resolution of the
directors relating thereto is adopted. When a determination of shareholders of
record entitled to notice of or to vote at any meeting of shareholders has been
made as provided in this paragraph, such determination shall apply to any
adjournment thereof, unless directors fix a new record date under this paragraph
for the adjourned meeting.

            5. Meaning of Certain Terms. As used herein in respect of the right
to notice of a meeting of shareholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "shareholder" or "shareholders"
refers to an outstanding share or shares and to a holder or holders of record of
outstanding shares when the corporation is authorized to issue only one class of
shares, and said reference is also intended to include any outstanding share or
shares and any holder or holders of record of outstanding shares of any class
upon which or upon whom the Certificate of Incorporation confers such rights
where there are two or more classes or series of shares or upon which or upon
whom the Business Corporation Law confers such rights notwithstanding that the
Certificate of Incorporation may provide for more than one class or series of
shares, one or more of which are limited or denied such rights thereunder.

            6. Shareholder Meetings.

      - TIME. The annual meeting shall be held on the date fixed, from time to
time, by the directors, provided, that the first annual meeting shall be held on
a date within thirteen months after the formation of the corporation, and each
successive annual meeting shall be held on a date
<PAGE>   151

within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date fixed by the directors except when the
Business Corporation Law confers the right to fix the date upon shareholders.

      - PLACE. Annual meetings and special meetings shall be held at such place,
within or without the State of New York, as the directors may, from time to
time, fix. Whenever the directors shall fail to fix such place, or, whenever
shareholders entitled to call a special meeting shall call the same, the meeting
shall be held at the office of the corporation in the State of New York.

      - CALL. Annual meetings may be called by the directors or by any officer
instructed by the directors to call the meeting. Special meetings may be called
in like manner except when the directors are required by the Business
Corporation Law to call a meeting, or except when the shareholders are entitled
by said Law to demand the call of a meeting.

      - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written notice of all
meetings shall be given, stating the place, date, and hour of the meeting, and,
unless it is an annual meeting, indicating that it is being issued by or at the
direction of the person or persons calling the meeting. The notice of an annual
meeting shall state that the meeting is called for the election of directors and
for the transaction of other business which may properly come before the
meeting, and shall, (if any other action which could be taken at a special
meeting is to be taken at such annual meeting) state the purpose or purposes.
The notice of a special meeting shall in all instances state the purpose or
purposes for which the meeting is called; and, at any such meeting, only such
business may be transacted which is related to the purpose or purposes set forth
in the notice. If the directors shall adopt, amend, or repeal a bylaw regulating
an impending election of directors, the notice of the next meeting for election
of directors shall contain the statements prescribed by Section 601(b) of the
Business Corporation Law. If any action is proposed to be taken which would, if
taken, entitle shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect and shall be
accompanied by a copy of Section 623 of the Business Corporation Law or an
outline of its material terms. A copy of the notice of any meeting shall be
given, personally or by first class mail, not less than ten days nor more than
fifty days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, to each shareholder at his record address
or at such other address which he may have furnished by request in writing to
the Secretary of the corporation. In lieu of giving a copy of such notice
personally or by first class mail as aforesaid, a copy of such notice may be
given by third class mail not fewer than twenty-four nor more than fifty days
before the date of the meeting. Notice by mail shall be deemed to be given when
deposited, with postage thereon prepaid, in a post office or official depository
under the exclusive care and custody of the United States post office
department. If a meeting is adjourned to another time or place, and, if any
announcement of the adjourned time or place is made at the meeting, it shall not
be necessary to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice of a
meeting need not be given to any shareholder who submits a signed waiver of
notice before or after the meeting. The attendance of a shareholder at a meeting
without protesting prior to the
<PAGE>   152

conclusion of the meeting the lack of notice of such meeting shall constitute a
waiver of notice by him.

      - SHAREHOLDER LIST AND CHALLENGE. A list of shareholders as of the record
date, certified by the Secretary or other officer responsible for its
preparation or by the transfer agent, if any, shall be produced at any meeting
of shareholders upon the request thereat or prior thereto of any shareholder. If
the right to vote at any meeting is challenged, the inspectors of election, if
any, or the person presiding thereat, shall require such list of shareholders to
be produced as evidence of the right of the persons challenged to vote at such
meeting, and all persons who appear from such list to be shareholders entitled
to vote thereat may vote at such meeting.

      - CONDUCT OF MEETING. Meetings of the shareholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting--the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by the Chairman to be chosen by the shareholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.

      - PROXY REPRESENTATION. Every shareholder may authorize another person or
persons to act for him by proxy in all matters in which a shareholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by the
Business Corporation Law.

      - INSPECTORS - APPOINTMENT. The directors, in advance of any meeting, may,
but need not, appoint one or more inspectors to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or any
shareholder, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.
<PAGE>   153

      - QUORUM. Except for a special election of directors pursuant to Section
603(b) of the Business Corporation Law, and except as herein otherwise provided,
the holders of a majority of the outstanding shares shall constitute a quorum at
a meeting of shareholders for the transaction of any business. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any shareholders. The shareholders present may adjourn the meeting
despite the absence of a quorum.

      - VOTING. Each share shall entitle the holder thereof to one vote. In the
election of directors, a plurality of the votes cast shall elect. Any other
action shall be authorized by a majority of the votes cast except where the
Business Corporation Law prescribes a different proportion of votes.

            7.Shareholder Action Without Meetings. Whenever shareholders are
required or permitted to take any action by vote, such action may be taken
without a meeting on written consent, setting forth the action so taken, signed
by the holders of all shares.

                                   ARTICLE IX.

                                 GOVERNING BOARD

            1. Functions and Definitions. The business of the corporation shall
be managed under the direction of a governing board, which is herein referred to
as the "Board of Directors" or "directors" notwithstanding that the members
thereof may otherwise bear the titles of trustees, managers, or governors or any
other designated title, and notwithstanding that only one director legally
constitutes the Board. The word "director" or "directors" likewise herein refers
to a member or to members of the governing board notwithstanding the designation
of a different official title or titles. The use of the phrase "entire board"
herein refers to the total number of directors which the corporation would have
if there were no vacancies.

            2. Qualifications and Number. Each director shall be at least
eighteen years of age. A director need not be a shareholder, a citizen of the
United States, or a resident of the State of New York. The number of directors
which shall constitute the whole Board shall be not less than one (1). The first
Board shall consist of _________ directors. The number of directors constituting
the board may be fixed from time to time by the by-laws, or by action of the
shareholders or of the board under the specific provisions of a by-law adopted
by the shareholders. If not otherwise fixed under this paragraph, the number
shall be one (1). The number of directors may be increased or decreased by
action of shareholders or of the directors, provided that any action of the
directors to effect such increase or decrease shall require the vote of a
majority of the entire Board. No decrease shall shorten the term of any
incumbent director.

            3. Election and Term. The first Board of Directors shall be elected
by the incorporator or incorporators and shall hold office until the first
annual meeting of shareholders and until their successors have been elected and
qualified. Thereafter, directors who are elected at an annual meeting of
shareholders, and directors who are elected in the interim by the shareholders
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of shareholders and until their successors have been elected
and qualified; and
<PAGE>   154

directors who are elected in the interim by the directors to fill vacancies and
newly created directorships shall hold office until the next meeting of
shareholders at which the election of directors is in the regular order of
business and until their successors have been elected and qualified. In the
interim between annual meetings of shareholders or of special meetings of
shareholders called for the election of directors, newly created directorships
and any vacancies in the Board of Directors, including vacancies resulting from
the removal of directors for cause or without cause, may be filled by the vote
of the remaining directors then in office, although less than a quorum exists.

            4. Meetings.

      - TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.

      - PLACE. Meetings shall be held at such place within or without the State
of New York as shall be fixed by the Board.

      - CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, of the President, or of a majority of the
directors in office.

      - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. The notice of any meeting need not specify the purpose of the meeting.
Any requirement of furnishing a notice shall be waived by any director who signs
a waiver of notice before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
him.

      - QUORUM AND ACTION. A majority of the entire Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided such
majority shall constitute at least one-third of the entire Board. A majority of
the directors present, whether or not a quorum is present, may adjourn a meeting
to another time and place. Except as herein otherwise provided, the act of the
Board shall be the act, at a meeting duly assembled, by vote of a majority of
the directors present at the time of the vote, a quorum being present at such
time. Any one or more members of the Board of Directors or of any committee
thereof may participate in a meeting of said Board or of any such committee by
means of a conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time, and
participation by such means shall constitute presence in person at the meeting.

      - CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the President, if
present and acting, or any other director chosen by the Board, shall preside.
<PAGE>   155

            5. Removal of Directors. Any or all of the directors may be removed
for cause or without cause by the shareholders. One or more of the directors may
be removed for cause by the Board of Directors.

            6. Committees. Whenever the Board of Directors shall consist of more
than three members, the Board of Directors, by resolution adopted by a majority
of the entire Board of Directors, may designate from their number three or more
directors to constitute an Executive Committee and other committees, each of
which, to the extent provided in the resolution designating it, shall have the
authority of the Board of Directors with the exception of any authority the
delegation of which is prohibited by Section 712 of the Business Corporation
Law.

            7. Written Action. Any action required (or permitted to be taken by
the Board of Directors or by any committee thereof may be taken without a
meeting if all of the members of the Board of Directors or of any committee
thereof consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
Board of Directors or of any such committee shall be filed with the minutes of
the proceeding of the Board of Directors or of any such committee.

                                   ARTICLE X.

                                    OFFICERS

            The directors may elect or appoint a Chairman of the Board of
Directors, a President, one or more Vice-Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such
other officers as they may determine. The President may but need not be a
director. Any two or more offices may be held by the same person except the
offices of President and Secretary; or, when all of the issued and outstanding
shares of the corporation are owned by one person, such person may hold all or
any combination of offices.

            Unless otherwise provided in the resolution of election or
appointment, each officer shall hold office until the meeting of the Board of
Directors following the next annual meeting of shareholders and until his
successor has been elected and qualified.

            Officers shall have the powers and duties defined in the resolutions
appointing them.

            The Board of Directors may remove any officer for cause or without
cause.

                                   ARTICLE XI.

                        STATUTORY NOTICES TO SHAREHOLDERS

            The directors may appoint the Treasurer or other fiscal officer
and/or the Secretary or any other officer to cause to be prepared and furnished
to shareholders entitled thereto any special financial notice and/or any
financial statement, as the case may be, which
<PAGE>   156

may be required by any provision of law, and which, more specifically, may be
required by Sections 510, 511, 515, 516, 517, 519, and 520 of the Business
Corporation Law.

                                  ARTICLE XII.

                                BOOKS AND RECORDS

            The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of the shareholders, of the
Board of Directors, and/or any committee which the directors may appoint, and
shall keep at the office of the corporation in the State of New York or at the
office of the transfer agent or registrar, if any, in said state, a record
containing the names and addresses of all shareholders, the number and class of
shares held by each, and the dates when they respectively became the owners of
record thereof Any of the foregoing books, minutes, or records may be in written
form or in any other form capable of being converted into written form within a
reasonable time.

                                  ARTICLE XIII.

                                 CORPORATE SEAL

            The corporate seal, if any, shall be in such form as the Board of
Directors shall prescribe.

                                  ARTICLE XIV.

                                   FISCAL YEAR

            The fiscal year of the corporation shall be fixed, and shall be
subject to change from time to time, by the Board of Directors.

                                   ARTICLE XV.

                              CONTROL OVER BY-LAWS

            The shareholders entitled to vote in the election of directors or
the directors upon compliance with any statutory requisite may amend or repeal
the By-Laws and may adopt new By-Laws, except that the directors may not amend
or repeal any By-Law or adopt any new By-Law, the statutory control over which
is vested exclusively in the said shareholders or in the incorporators. By-Laws
adopted by the incorporators or directors may be amended or repealed by the said
shareholders.
<PAGE>   157

         Exhibit B to Debtors' First Amended Joint Disclosure Statement
                 Pursuant to Section 1125 of the Bankruptcy Code

              Examiner Report Pursuant to Order of October 20, 1998
<PAGE>   158

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------x
In re:                          :      Chapter 11
                                :
CITYSCAPE FINANCIAL CORP.,      :      Case Nos. 98-B-22569 (ASH)
and CITYSCAPE CORP.,            :      and 98-B-22570 (ASH)
                                :      Jointly Administered
                   Debtors.     :
--------------------------------x

                            EXAMINER REPORT PURSUANT
                           TO ORDER OF OCTOBER 20,1998

To:  The Honorable Adlai S. Hardin, Jr.
      United States Bankruptcy Judge

      Examiner Harrison J. Goldin respectfully submits this Report in accordance
with this Court's order dated October 20, 1998 (the "Examiner Order").

                                  INTRODUCTION

A.    PROCEDURAL BACKGROUND

      On October 6, 1998 Cityscape Financial Corp. and Cityscape Corp. (together
the "Debtor")(1) separately filed in this Court voluntary petitions under
Chapter 11 of the Bankruptcy Code. On October 7, 1998 an order was entered
granting the Debtors application that the cases be jointly administered. Along
with the petitions, the Debtor filed a "prepackaged" joint disclosure statement
and plan of reorganization (the "Plan"). The Plan enjoys the support of the
Unofficial Committee of Subordinated Debentures (holders of 6% Convertible
Subordinated Debentures, due 2006), and the Unofficial Committee of Senior
Noteholders

----------
(1) Unless otherwise indicated, the two Debtors, Cityscape Financial Corp. and
its wholly owned subsidiary Cityscape Corp., are referred to collectively below
as the "Debtor"


                                      B-1
<PAGE>   159

(holders of 12 3/4% Senior Notes, due September 1, 2004). Opposed are the equity
classes, including Elliott Associates, L.P. and Westgate International, L.P.
(together "Elliott"). (Elliott is a holder of Series B Convertible Preferred
Stock.) Hearings on approval of the disclosure statement and confirmation are
scheduled for November 13, 1998.

      On October 7, 1998 Elliott moved, pursuant to Bankruptcy Code Section
1104(c), for entry of an order appointing an examiner. A hearing was held and on
October 20, 1998, over the opposition of the Indenture Trustee for Subordinated
Indenture (Chase Manhattan Bank), the Trustee for Senior Indenture (Norwest),
the Unofficial Committee of Subordinated Debentures and the Unofficial Committee
of Senior Noteholders, the Court entered the Examiner Order; it defined and
limited the scope of the Examiners investigation and report. On October 22, 1998
the Court approved my appointment as Examiner.

B.    DESCRIPTION OF THE DEBTOR

      Cityscape Financial Corp. is a consumer finance company that, through its
wholly-owned subsidiary, Cityscape Corp., is in the business of originating,
purchasing, selling and servicing mortgage loans secured primarily by one-to
four-family residences. The majority of the Debtors loans are made to owners of
single family residences, who typically use the loan proceeds for such purposes
as debt consolidation, financing of home improvements and payment of educational
expenses, among others. Typically, the Debtor from time to time would sell its
loans in securitized packages, retaining a residual interest, in order to
finance its growing lending business. The Debtor is licensed to do business in


                                      B-2
<PAGE>   160

46 states and the District of Columbia. In May 1995 the Debtor commenced
operations in the United Kingdom ("UK") with the formation of City Mortgage
Company, Ltd., an English corporation in which the Debtor originally held a 50%
interest and later acquired a 100% interest, that originated, sold and serviced
loans in England, Scotland and Wales. In March, 1998 the Debtors board of
directors adopted a plan to sell the Debtors entire UK operation; a sale to a
third party closed in the spring of 1998.

      Total revenues for the Debtors fiscal year ended December 31, 1996 were
$107.8 million. Revenues declined some $74 million in 1997, to $34 million. Net
income in 1996 was $50.7 million; the net loss in 1997 was $418.9 million. The
Debtors financial collapse in 1997 is discussed in more detail below.

                              SCOPE OF EXAMINATION

      The Examiner Order directed the Examiner to review and investigate the
following matters (the "Scope"):

            (a) Whether the facts relating to the Debtors' restatements of their
financial statements and write-downs of assets for the period beginning with the
quarter ended June 30, 1996 may give rise to potential claims of the Debtors'
Estates against any of the Individual Defendants (or any other of the Debtors'
current and former officers and directors) and/or the Debtors' financial
advisors and other professionals (a "Potential Claim").

            (b) The results of any investigations with regard to the
restatements of the Debtors' financial statements and write-downs of assets
performed by the


                                      B-3
<PAGE>   161

Debtors, any special committee of the Debtors' boards of directors or any
independent third-party.

         (c) The extent to which, if at all, any person who may be liable on a
Potential Claim and who is being released under the Plan is contributing to the
Plan.

         (d) The facts and circumstances with respect to alleged short sales of
the Debtors' common stock during 1997 and 1998 by the Individual Defendants (or
any other of the Debtors' current and former officers and directors) and/or the
Debtors' financial advisors and other professionals.

         (e) The extent to which the proceeds of insurance policies of the
Debtors that might cover a Potential Claim are being used to fund payments under
the Plan.

         (f) The extent to which the proceeds of insurance policies of the
Debtors might be available to satisfy Potential Claims. Examiner Order at 3.

      This Court directed the Examiner to complete and file his report not
later than 5:00 p.m. New York City time on November 9, 1998. Id.

      Thus, the Examiner was allotted 18 calendar days from the time of his
appointment on October 22 to complete his examination and report. Mindful of the
exigencies discussed in the Examiner Order and the need to facilitate the plan
process in these cases, beginning on October 23, 1998 the Examiner and his
counsel commenced a program of expedited interviews with the parties in
interest, their legal counsel, senior management of the Debtor and personnel of
the Debtors accounting and financial advisory firms. Given the time constraints


                                      B-4
<PAGE>   162

imposed by the Examiner Order, the Examiner concluded that it would not be
practicable to depose formally or conduct Rule 2004 examinations of people with
material information concerning the matters under investigation. The Examiner
determined that gathering information by informal interviews would speed up the
investigation process; in any event, witnesses and their legal counsel might be
more forthcoming and less defensive in an interview format.

      The following individuals were interviewed by the Examiner and his legal
counsel. These witnesses submitted voluntarily to interviews without the need of
a Rule 2004 order, thereby streamlining the process and resulting in a cost
saving to the Estate. As directed by the Court, the Debtor, its counsel and all
other parties cooperated fully with the Examiner.

            1.    John Verdonck, KPMG Peat Marwick

            2.    James Goldsmith, KPMG Peat Marwick

            3.    Michael Walters, KPMG Peat Marwick

            4.    Daniel Dooley, Pricewaterhouse Coopers

            5.    David Friedman, Esq., counsel to the senior bondholders

            6.    Robert Rosenberg, Esq., bankruptcy counsel to the Debtor

            7.    James Brandt, Esq., bankruptcy counsel to the Debtor

            8.    Sean Griffiths, Esq., corporate counsel to the Debtor

            9.    Robert Serio Esq. and Peter Beshar, Esq., litigation counsel
                  to the Debtor

            10.   Kenneth Eckstein, Esq., counsel to the subordinated
                  bondholders


                                      B-5
<PAGE>   163

            11.   Mark Brodsky, Esq., Elliott

            12.   Brian Rosen, Esq., counsel to Elliott

            13.   Tim Ledwick, Chief Financial Officer of the Debtor

            14.   Robert Grosser, Chairman and former CEO of the Debtor

            15.   Steven Miller, current CEO of the Debtor

            16.   Jonah Goldstein, Esq., director and general counsel of the
                  Debtor

            17.   Andrew Heyer, CIBC Oppenheimer Corp. ("CIBC")

            18.   Robert Kramer, Bear, Steams & Co. Inc. ("Bear, Stearns")

      In addition, the Examiner and his counsel reviewed and analyzed voluminous
documents and analyses produced voluntarily by the Debtor and others. Such
evidence helped the Examiner assess witnesses' statements concerning the
chronology of events and the timing of the Debtor's discovery of many of the
circumstances which adversely affected the Debtor and its business prospects.

                     EVALUATION OF POTENTIAL CLAIMS ARISING
                        FROM RESTATEMENTS AND WRITE-DOWNS

      This section of the Examiner's Report addresses Scope paragraph (a),
relating to the Debtor's restatements of financial statements and write-downs of
assets commencing the second quarter of 1996 and potential claims by the
Debtor's Estate arising therefrom.


                                      B-6
<PAGE>   164

A.    RESTATEMENT OF FINANCIAL RESULTS
      FOR QUARTER ENDED JUNE 30, 1996

      During the second quarter of 1996 the Debtor's wholly-owned British
subsidiary, City Mortgage Company, Ltd. ("CMC"), acquired all the outstanding
stock of J&J Securities Ltd. ("J&J"), a London-based mortgage banker, and
Heritable Group Ltd. ("Heritable"), a UK-based mortgage finance company. Both of
these acquisitions were accounted for as purchase transactions.

      On August 14, 1996 the Debtor filed its Form 10-Q for the three months
ended June 30,1996, reporting earnings of $34.8 million for that quarter. It
also disclosed that the Debtor was recognizing a total of $60.4 million of
goodwill in connection with the two acquisitions. Also during the second quarter
of 1996, CMC sold the loan portfolios acquired in the J&J and Heritable
acquisitions. As reported in the Form 10-Q, the results for that quarter
included gains of $51.0 million on the sale of these loan portfolios.

      According to The Debtor, prior to the filing of this Form 10-Q KPMG Peat
Marwick LLP ("KPMG"), the Debtor's outside auditor, approved the appropriateness
of the accounting treatment in the Form 10-Q of the two acquisitions and the
subsequent portfolio sales. Representatives of KPMG denied to the Examiner that
any such approval had been given.

      After the Form 10-Q was filed, representatives of KPMG questioned whether
the accounting for the acquisitions accorded with generally accepted accounting
principles governing purchase accounting for financial transactions. The issue
that concerned KPMG related to the general accounting principle that assets
acquired in a transaction subject to purchase accounting should be


                                      B-7
<PAGE>   165

booked by the acquiree at fair value. As initially reflected in the consolidated
financial results for the three months ended June 30, 1996, the Debtor recorded
the acquired portfolios at par; shortly after their acquisition the Debtor
realized a substantial gain when the portfolios were sold above par. KMPG took
the position that, given these subsequent sales which had occurred in such
proximity to their purchase, carrying the portfolios at par on their acquisition
did not give recognition to their fair value, i.e., that the value of the
portfolios at purchase had to have been understated on the Debtors financial
statements and, therefore, a gain on the sale was incorrectly recognized.

      The Debtor was convinced that the treatment set forth in the Form 10-Q
was correct, that such treatment had been blessed by KPMG's engagement partner
and that, because others at KPMG now disagreed with that partner, the Debtor was
needlessly being placed in the embarrassing and awkward position of having to
restate previously announced results. Nonetheless, the Debtor acquiesced in
KPMG's insistence that such a restatement take place. Prior to issuing the
restatement, the Debtor took the initiative and contacted the Securities and
Exchange Commission ("S.E.C.") to advise it that a restatement would be
forthcoming. By letter dated September 26, 1996, the S.E.C. advised the Debtor
that a prompt restatement was necessary.

      On September 27, 1996, approximately six weeks after the original Form
10-Q was filed, the Debtor filed an amended Form 10-Q for the quarter ended
June 30, 1996 which contained a restatement of results for that quarter. The
value of the assets acquired in the acquisitions was increased by approximately


                                      B-8
<PAGE>   166

$51 million and goodwill recognized on the acquisitions was reduced from $60.5
million to $10.6 million. The gain on the sale of the loan portfolios was
thereby reduced from $80.1 million to $29.2 million. As a result, earnings
before minority interests and income taxes were reduced from $59.6 million to
$14.1 million; and net earnings were reduced from $34.8 million to $8.3 million.
The reduction in goodwill benefited the Debtor by relieving the negative impact
on future earnings that results from the amortization of goodwill.

      The stock market did not react adversely to the restatement. The stock
closed at 26-1/2 on both Friday, September 27, 1996 and Monday, September 30,
1996, as compared to a closing price of 25-5/8 on Thursday, September 26, 1996.

      On November 19, 1996 the Debtor filed another amended Form 10-Q,
containing a further restatement of the results for the quarter ended June 30,
1996. The effect of This restatement was to increase net earnings from $8.3
million to $11.1 million and to increase goodwill recorded in connection with
the acquisitions from $10.6 million to $30.6 million. This restatement corrected
the accounting treatment of $5.0 million of restructuring charges and $17.3
million of deferred taxes recorded as a result of the acquisitions. The stock
market also did not react adversely to this second restatement. The stock closed
at 19-5/8 on November 19, 1996 and 21-5/8 on November 20, 1996, as compared to a
closing price of 19-1/4 on November 18, 1996.

      By letter dated October 23, 1996 the S.E.C. advised the Debtor that it was
conducting an informal inquiry relating to the restatement. The Debtor was


                                      B-9
<PAGE>   167

notified on October 17, 1997 That the S.E.C. had commenced a formal
investigation. In connection with this investigation the S.E.C. has taken
testimony from representatives of the Debtor and others. Some of this
testimony was taken as recently as the week of October 26, 1998. The S.E.C.
has taken no action to date arising from the investigation.

      The purchase accounting issues that relate to The two U.K acquisitions are
complex, and professionals can reasonably differ on their treatment. In
connection with the S.E.C. investigation, the Debtor's counsel retained
PriceWaterhouse (now Pricewaterhouse Coopers LLP) ("PwC"). A representative of
PwC advised the Examiner of his view that the initial accounting treatment was
acceptable and that the Debtor should not have been required to undertake a
restatement; the accounting literature can be read to support the position
originally taken by the Debtor, as well as that taken in the restatement. A
summary of the documentation that supports each of the two positions, which was
prepared by PwC at the request of the Examiner, is set forth in Appendix A
hereto.

      The Examiner uncovered no evidence that any representative of the Debtor,
or any professional, acted in bad faith, recklessly or unreasonably respecting
the accounting issues that relate to the Debtor's results for the second quarter
of 1996. The Examiner also concludes that it is not in the Debtor's interest to
pursue a claim against anyone relating to these circumstances. Under Section
141(e) of the Delaware General Corporation Law, the directors of the Debtor were
entitled to rely on the opinions and statements of professionals


                                      B-10
<PAGE>   168

and experts. The only potentially colorable claim would be against KPMG for
allegedly having wrongfully approved the Debtor's initial treatment and then
changing its position and requiring a restatement, to the Debtor's injury.
However, the only concrete injury to the Debtor appears to have been the legal
and other professional fees, and management time, that relate to the restatement
and subsequent S.E.C. investigation. This, however, does not, in the Examiner's
view, justify the expense and effort of an accountant's malpractice action.

B.    WRITE-DOWN TAKEN FOR 
      QUARTER ENDED JUNE 30, 1997

      In a Form 8-K filed on August 4, 1997 the Debtor disclosed that it had
taken a pre-tax reserve of $15.0 million to increase reserves relating to UK
mortgage servicing receivables. This reserve was in recognition of regulatory
developments relating to the UK's Office of Fair Trading ("OFT"), as follows:

      On March 13, 1997 CMC, which contributed 50% of the Debtor's
profitability, received a letter from the OFT, the regulatory agency responsible
for overseeing and licensing mortgage lenders in the UK. The letter referred to
specified business practices which the Director General of the OFT considered
"deceitful or oppressive, or otherwise unfair or improper, whether unlawful or
not." These practices included two which were significant components of CMC's
modus operandi, namely, a "dual rate" structure and use of the so-called "Rule
of 78." Under the dual rate structure borrowers were charged a "standard"
interest rate; but in the event they made payments on schedule, they were
charged a much lower "concessionary" interest rate, which might be as much as
half the standard rate. The Rule of 78 refers to a method for calculating the
amount


                                      B-11
<PAGE>   169

owed by a borrower who wishes to pre-pay a mortgage loan prior to maturity; it
is less favorable to the borrower than other methods often applied. (A detailed
explanation of the Rule of 78, and sample calculations applying the Rule, are
set forth in Appendix B hereto.) The OFT letter said that the Rule of 78
produces "an excessively high settlement figure relative to the amount borrowed
and repayments already made." The letter also stated that the Director General
"will take appropriate action against those that appear to carry on the
practices highlighted by this letter."

      In its 1996 Form 10-K, filed on March 31, 1997, the Debtor referred to the
letter from the OFT, noting that it was reviewing and evaluating its practices
respecting the issues raised in the letter and had not yet discussed the letter
with the OFT. The Form 10-K referred to the Debtor's belief that the regulatory
concerns reflected in the letter would not have a material adverse effect on any
of its existing mortgage loans, "although no assurances to that effect can be
given at this time." The Form 10-K also noted the possible material adverse
effect in future periods that would result from elimination of use of the dual
rate structure and the Rule of 78.

      Based on its consultations with Clifford Chance, CMC's UK counsel, the
Debtor believed that under British law the OFT lacked the power to change
existing contractual arrangements between CMC and its borrowers and, thus, that
any regulatory changes could have only prospective effect. In addition, by
statute, the Rule of 78 is mandatory for so-called "regulated loans," i.e.,
loans with a principal balance of (pound)15,000 or less. The Debtor questioned
how the OFT


                                      B-12
<PAGE>   170

logically could nullify, for "unregulated loans" in excess of (pound)15,000, a
practice that is required for regulated loans.

      Pursuant to negotiations with the OFT held after March 31, 1997, the
Debtor agreed to discontinue use of the Rule of 78 on new loans originated after
August 1,1997. In a Form 10-Q filed on May 12, 1997 the Debtor disclosed this
development and repeated its belief that the OFT regulatory initiative would not
have a material adverse effect on any existing mortgage loans, "although no
assurances to that effect can be given at this time." This cautionary language,
as well as that in the Form 10-K, may have reflected some uncertainty respecting
the opinion of UK counsel that existing loans were beyond the purview of the
OFT. The Form 10-Q noted that elimination of the Rule of 78 could have a
material adverse effect in future periods on the Debtors operations and
financial condition. The Form 10-Q also referred to the possible future
modification of the standard/concessionary rate structure as a result of OFT
regulatory initiatives, which could similarly have a material adverse effect on
the Debtor.

      On July 18, 1997 the OFT issued "Non-Status Lending Guidelines for Lenders
and Brokers." These Guidelines made clear that the "unfair and oppressive" dual
rate structure should be discontinued, since in the OFT's view the imposition of
a "standard" rate, as opposed to a "concessionary" rate, constituted an
unjustified penalty for late payments. The Guidlines also concluded "that the
use of the Rule of 78 is inappropriate in the non-status lending market and
amounts to a penalty on early redemption that is not justified by the costs
involved. Lenders should discontinue its use at the earliest possible


                                      B-13
<PAGE>   171

opportunity, and should not apply it rigidly to existing loan agreements without
some form of cap to ensure that payments on early redemption are not excessive."

      The Debtor was caught by surprise by this challenge of the OFT to
continued use of The Rule of 78 in existing agreements. Robert Grosser, the
Debtor's CEO at that time, who had visited the OFT on June 20,1997, told the
Examiner that he received no indication at that time that this retroactive
position would be taken. Prior to this meeting, CMC's UK counsel had received a
letter from the OFT dated June 17, 1997 referring to the willingness of certain
lenders not to "take up their full entitlement to apply the rule of 78." The
letter then stated: "We should be interested to know if your client sees any
scope for adopting such a practice retrospectively, so that even where there is
a contractual entitlement for them to be reimbursed on the basis of the rule of
78, they do not exercise this." Following the June 20 meeting, an OFT
representative wrote a letter on June 23, 1997 (the next business day), stating
that he "found our meeting to be useful and constructive, and will reflect
further on the points which you and your colleagues raised."

      On July 23, 1997 the Debtor filed a Form 8-K discussing the OFT Guidelines
and their potential impact on the Debtors business. The Debtor noted that the
dual rate system would be eliminated on future loans and that in the future the
Debtor would calculate prepayments using methods other than the Rule of 78. The
Debtor commented that these developments "could have a material adverse effect
in future periods." The Form 8-K also stated that use of


                                      B-14
<PAGE>   172

the Rule of 78 respecting existing loan agreements might be restricted by the
OFT, which, in turn, could have a material adverse effect on the Debtor.

      As noted, on August 4, 1997 the Debtor announced that it was taking a $15
million reserve relating to its UK operations. The Debtor consulted with and was
advised by KPMG respecting this reserve. It was based on a review of the UK loan
portfolio and the assumption that the Debtor would no longer apply the Rule of
78 to existing unregulated loans (i.e., loans in excess of (pound)15,000) which
were prepaid after the seventh or eighth year of their existence.

      Representatives of the Debtor advised the Examiner that, at that time,
they were reasonably confident that they could work out a settlement of this
nature with the OFT as to the Rule of 78 and existing loans. Tending to
substantiate this confidence is a letter dated July 25, 1997 from the OFT to
CMC's UK counsel, referring to CMC's recent offer "to cease applying the Rule of
78 to all existing loans from the tenth year of the loan." The letter expressed
reservations about the proposal because "[o]ur knowledge of the operation of the
Rule of 78 is That its most onerous impact occurs about one third of the way
through the loan, which means around the eighth year of a 25 year loan." The
Debtor's presumption that a settlement with the OFT could be reached on the
basis assumed in calculating the $15 million reserve (i.e., non-enforcement of
the Rule of 78 after the seventh or eighth year) does not appear to be
unreasonable.

      Since the Debtor believed that the UK operation would still be
sufficiently profitable, notwithstanding the foregoing regulatory developments,
no write-down


                                      B-15
<PAGE>   173

of goodwill was taken in the second quarter of 1997. KPMG was consulted
respecting this determination.

      In its Form 10-Q for the quarter ended June 30, 1997, filed on August 14,
1997, the Debtor referred to the $15 million reserve and cautioned that "there
can be no assurance that such additional reserve will be sufficient to offset
any negative impact that changes resulting from the new Non-Status Guidelines
may have on the carrying value of the Company's recorded mortgage servicing
receivables."

      On August 13, 1997, the day before the Form 10-Q was filed and shortly
after the Form 8-K was filed, Mr. Grosser purchased (on margin) 100,000 shares
of the Debtor's stock in the open market for approximately $1,000,000. At the
time this purchase was made Mr. Grosser already directly owned nearly 3.9
million shares of the Debtor's stock. Mr. Grosser advised the Examiner that, in
making this purchase, he was motivated by the view that the stock had been hurt
by bad press, that an agreement ultimately would be reached with the OFT that
would remove the cloud of uncertainty and that part of the $15 million reserve,
which he thought was conservative, could be reversed.

      It is difficult to identify a cause of action that the Debtor has against
anyone respecting the $15 million reserve taken in the second quarter of 1997.
Starting in March, 1997 the Debtor was confronted by a significant change in the
UK regulatory climate. The Examiner has not found any material misstatements,
omissions or delays in the Debtor's public disclosure concerning developments in
the UK during the period from March, 1997 through August, 1997. All


                                      B-16
<PAGE>   174

disclosures were reviewed by both UK and U.S. counsel. While further reserves
were later required as a result of increasingly aggressive positions asserted by
the OFT after August, 1997, the Examiner found no evidence that the Debtor had
deliberately or negligently understated the reserve taken for the quarter ended
June 30, 1997. Indeed, as late as October 1997, internal documents indicate that
management thought the $15 million reserve could prove excessive. Nor does the
Debtor appear to have inaccurately reported its then apparently reasonably held
belief respecting the UK regulatory situation. The Examiner notes that
securities class actions are pending against the Debtor and others in the United
States District Court for the Eastern District of New York, based on alleged
deficiencies in disclosure as to developments in the UK. While the Examiner is
not called on to evaluate such third party claims, nothing in the pleadings in
these class actions suggests a basis for a claim by the Debtor itself (in
contrast to its shareholders) that it sustained injury from such challenged
disclosure.

C.    WRITE-DOWNS TAKEN FOR
      QUARTER ENDED SEPTEMBER 30, 1997

      In the Form 10-Q for the quarter ended September 30, 1997, which was filed
on November 14, 1997, the Debtor reported a $95.1 million loss adjustment, which
was described in its income statement as "Net unrealized loss on valuation of
residuals." This item and other factors produced a $115.1 million pre-tax loss
for the third quarter. The Form 10-Q described the reason for the $95.1 million
write-down as follows:


                                      B-17
<PAGE>   175

            As a result of the Company's initiatives to enhance liquidity, the
            Company anticipates selling its interest-only and residual
            certificates on its US home equity securitizations. In anticipation
            of such sale, the Company has valued such residuals at the expected
            net realizable value based on a liquidation sale and has recorded a
            $95.1 million loss adjustment. Previously, the Company determined
            the fair value of these assets based on a discounted cash flow
            analysis.

      On October 21, 1997, three weeks before the filing of the Form 10-Q, the
Debtor announced that it had retained Bear, Stearns to explore strategic
alternatives. The Debtor also said that Third quarter results would be
materially below analysts' estimates. While no public disclosure of the Bear,
Steams retention was made until October 21, 1997, the Bear, Stearns interviewee
stated that the firm had actually commenced performing services for the Debtor
at some undefined point between the time the OFT Guidelines were issued on July
18, 1997 and the time the $15 million reserve was taken on August 4, 1997, but
before Mr Grosser's $1 million stock purchase on August 13, 1997. Bear, Stearns'
assignment was to explore options, including a possible disposition of the
Debtor's UK operations in view of the change in the regulatory climate there.

      The Debtor's decision to liquidate its interest-only and residual
certificates on its U.S. home equity securitizations was prompted by the
liquidity crisis in which it found itself during October and November, 1997. As
a result of a calamitous decline in the price of the Debtor's common stock, from
a high of 10-1/16 on October 10, 1997 to a low of 1-1/2 on October 28, 1997, the
Debtor was no longer able to access the capital markets. While explanations vary
as to the


                                      B-18
<PAGE>   176

cause of this collapse in the Debtor's stock, people interviewed by the Examiner
referred to the following factors:

            1.    Ratings downgrades of the Debtor's debt instruments by Moody's
                  on October 10, 1997 and by Standard and Poor's on October 22,
                  1997.

            2.    Unfavorable press comments on the Debtor.

            3.    A large and longstanding short position in the Debtor's stock.

            4.    Margin calls that resulted in forced sales of the Debtor's
                  stock, which accelerated when the price of the stock dropped
                  below $5 a share, at which point the stock was no longer
                  eligible for margin.

            5.    Developments relating to the Debtor's 6% Convertible Preferred
                  Stock, Series A ("Series A Preferred"), which the Debtor
                  issued in April, 1997, and its 6% Convertible Preferred Stock,
                  Series B ("Series B Preferred"), which the Debtor issued in
                  September, 1997. Both of these series were convertible into
                  common stock at the market price of the stock at the time a
                  conversion was sought, with no floor of any kind applicable to
                  the conversion. Hence, as the price of the common declined,
                  more shares were required to satisfy the potential exercise of
                  the preferred's conversion privilege -- a phenomenon that led
                  several of those interviewed to describe the instrument as a
                  "death spiral preferred." On September 26 and October 14,


                                      B-19
<PAGE>   177

                  1997 the Debtor filed registration statements with the S.E.C.
                  respecting the shares of common stock into which the Series A
                  and Series B Preferred were potentially convertible; these
                  registration statements covered a total of 16.5 million shares
                  of common stock. As of June 30, 1997, The Debtor had 31.7
                  million common shares outstanding. The market may have begun
                  to perceive a mass dilution from the potential conversion of
                  the preferred into common, contributing to the disintegration
                  of the stock price.

      In any event, with the precipitous decline in the common stock price,
funding sources previously available to the Debtor dried up. The Debtor was
forced to address its liquidity needs by such steps as whole loan sales, which,
while immediately cash positive, resulted in lower margins and a negative impact
on future earnings. Moreover, under generally accepted accounting principles the
Debtor's intention to sell these assets required it to reduce the recorded
amount of the residuals in question to their expected net realizable value based
on a liquidation sale. Guided by portfolio sales by other companies at or about
this time period, the Debtor determined to take a 35% write-down on the value of
its U.S. residuals, which produced the $95.1 million number referred to above.

      In addition, the Form 10-Q filed on November 14, 1997 showed a $16.0
million provision for loan losses as a 1997 third quarter expense. This
provision resulted from portfolio performance in the U.S. and the UK, the latter
unrelated to the OFT situation.


                                      B-20
<PAGE>   178

      While the third-quarter write-downs were obviously large, the Examiner's
investigation establishes that they were, in material part, directly
attributable to the sudden and extreme deterioration in the Debtor's common
stock price and the consequent impact on its ability to access capital sources.
From mid-August until mid-October of 1997 the stock price was relatively stable,
in the $10-11 range. Confronted subsequently by the need to change its method of
doing business and to sell whole loans to solve its liquidity problems, the
Debtor had no choice but to mark down its portfolio, which led to the quarter's
horrendous results.

D.    WRITE-DOWNS TAKEN FOR
      QUARTER ENDED DECEMBER 31, 1997

      The Debtor's problems intensified after the third quarter of 1997. As a
result of escalating pressure from the OFT, which was threatening injunctive
action against CMC, the Debtor agreed that it would not use the Rule of 78 to
calculate prepayments on existing unregulated loans. It also agreed that for
such loans the standard rate of interest would be no more than 2.5% higher than
the concessionary rate. These revisions respecting its existing UK loan
portfolio led the Debtor, for the fourth quarter of 1997, to take a write-down
of $106.2 million in the value of its UK mortgage servicing receivables and to
write off unamortized goodwill of $52.7 million recorded in connection with its
UK acquisitions. The Debtor also wrote off an unamortized commitment fee of
$32.4 million related to its UK operations.

      The Debtor sold its UK business on May 1,1998 pursuant to an agreement
dated March 31, 1998. The Debtor received net proceeds of


                                      B-21
<PAGE>   179

approximately $102 million, less costs of approximately $16 million related to
the disposal of its discontinued UK operations.

      As a consequence of continued deterioration in its U.S. operations, the
Debtor took further write-downs in the fourth quarter, resulting in a total 1997
recognition of a net unrealized loss of $148 million on the valuation of its
domestic residuals.

                          RESULTS OF INVESTIGATIONS OF
                          RESTATEMENTS AND WRITE-DOWNS

      As to Scope paragraph (b), the Examiner has determined that, with the
exception of the ongoing S.E.C. investigation referred to above, there were no
investigations regarding the restatements of the Debtor's financial statements
and write-downs of assets performed by the Debtor or anyone else.

                             ALLEGED SHORT SALES OF
                              DEBTOR'S COMMON STOCK

      As to Scope paragraph (d), alleged short sales of the Debtor's common
stock, the Examiner has adduced no evidence that the Debtor's current or former
officers or directors engaged in any short sales of any kind during 1997 and
1998 (or at any other time). All witnesses denied categorically any such short
selling activities. Their denials are corroborated by the Form 4 disclosures
filed with the S.E.C., which were provided to the Examiner. Additionally, as
discussed below, officers and directors of the Debtor owned substantial
quantities of the Debtor's common stock which they have retained to this day and
are now worthless, or which were the subject of forced sales through margin
calls.


                                      B-22
<PAGE>   180

      Examinations of personnel employed by the Debtor's financial advisors
(CIBC and Bear, Stearns) were inconclusive. Those interviewed had no knowledge
of any short selling activity; their involvements were with the investment
advisory and/or underwriting functions of their respective firms. CIBC advised
that it acquired $15 million of the Debtor's Series B Preferred in September,
1997, which it continued to hold as the value declined to zero. Bear, Steams
advised that it acquired the Debtor's Series A Preferred in April, 1997; the
disposition, if any, of such shares was not known to the person interviewed.
Those interviewed could not say definitively whether the proprietary trading
desks of their firms held short positions in the Debtor's common stock. They
said their institutions maintain a "Chinese wall" of confidentiality between
their underwriting and proprietary trading functions. Time limitations precluded
the Examiner from pursuing these matters further.

      One of the parties in the case suggested that the Examiner conduct Rule
2004 examinations of major securities broker/dealers in New York to try and
determine which institutions held short positions in the Debtor's common stock
and whether those short positions were illegal. Of course, There is nothing
illegal about short selling per se. Only when, for example, the seller has not
actually borrowed the shares to be sold short does the transaction violate
S.E.C. rules and regulations. Moreover, the Examiner considers a wholesale
fishing expedition into the short sales positions of a large number of
broker/dealers which did not serve in any professional or fiduciary capacity to
the Debtor beyond the scope of the Examiner Order. It would take many months and
consume


                                      B-23
<PAGE>   181

Estate resources not contemplated in the Examiner Order budget to review short
sale trades by broker/dealers. And, even assuming that illegality could be
established, the successful assertion by the Debtor of a private right of action
against third party broker/dealers for illegal short selling under the
Securities Exchange Act of 1934 (the "Act") would raise difficult factual issues
of causation and injury, as well as novel legal issues.(2) In any event, on
November 2, 1998 this Court ruled that the scope of the Examiner's investigation
does not include an inquiry into the short sales trading positions of people or
entities that had not served as underwriters, placement agents or financial
advisors to the Debtor. This Court ruled further that the Examiner should limit
his investigation of this issue solely to two interviews with a single
individual each at CIBC and Bear Stearns. Hence, this Report does not contain
any further analysis or discussion of alleged short sales of the Debtor's common
stock

                          ISSUES RELATING TO INSURANCE
                          COVERAGE AND AVAILABILITY TO
                          DEBTOR OF INSURANCE PROCEEDS

      This section of the Report addresses insurance matters referred to in
Scope paragraphs (e) and (f).

----------
(2) See, e.g., Advanced Magnetics, Inc. v. Bayfront Partners, Inc., No. 92 Civ.
6879 (CSH), 1996 WL 14440, at *8-9 (S.D.N.Y. Jan. 16. 1990) ("Advanced Magnetics
1") (holding that corporation could assert a claim under ss. 10(b) of the Act
and related rules based on alleged illicit short sales that reduced share prices
in a public offering), acq., 106 F.3d 11 (2d Cir. 1997); Advanced Magnetics 1,
1996 WL 14440, at *5-8 (holding that no private right of action exists under ss.
10(a) of the Act relating to short sales of securities); Advanced Magnetics 1,
106 F.3d at 22 (observing, after district court had dismissed the ss.10(a)
claim, that corporation's assertion of that claim was a "novel proposition");
Advanced Magnetics, inc. v. Bayfront Partners, Inc., No. 92 Civ. 6879(CSH), 1997
WL. 299430. at *6 (S.D.N.Y. June 4,1997) (reaffirming the holding of Advanced
Magnetics 1 that "no private right of action exists under ss. 10(a) and the
rules issued pursuant thereto," after court considered additional arguments from
the parties on ss. 10(a)'s language and legislative history).


                                      B-24
<PAGE>   182

      The Debtor indicated that it has Directors and Officers and Company
Reimbursement insurance policies on a "claims made" basis for the policy period
January 1,1998 to January 1, 2001 which afford $35 million in coverage; $25
million in coverage was maintained for the policy period November 2,1996 to
January 1, 1998. The Debtor's counsel has stated that the insurers were notified
of the securities class actions commenced in or about October, 1997, as well as
the action commenced by Elliott in the United States District Court for the
Southern District of New York in September, 1998. Insurance proceeds are not
being used to fund payments under the Debtor's Plan.

      The policies contain the so-called "insured versus insured" exclusion
pursuant to which there is no coverage for claims "by, or on behalf of or at the
direction of any of the Assureds..." (There is coverage for an independently
brought shareholder derivative action.) The term "Assureds" is defined to
include "the Company," i.e., Cityscape Financial Corp. and any subsidiary.

      Assuming the Debtor, or a litigation trust established under a plan of
reorganization, were to bring an action against present or former officers and
directors of the Company, it is unclear whether the aforesaid exclusion would
bar coverage. Compare Reliance Inc. Co. of Illinois v. Weis, 148 B.R. 575, 578
(Bankr. E.D. Mo. 1992), aff'd, 5 F.3d 532 (6th Cir. 1993), cert. denied, 510
U.S. 1117 (1994) with In re Pintlar, 205 B.R. 945 (Bankr. D. Idaho 1997); see
also In re The Leslie Fey Companies Inc., 207 B.R. 764, 784-85 (Bankr. S.D.N.Y.
1997). Third party claims against the Company's directors and officers, such as
those


                                      B-25
<PAGE>   183

already pending referred to above, would not be precluded under the "insured
versus insured" exclusion.

      In any event, nothing that has come to the Examiner's attention leads him
to recommend that claims be asserted against any of the Debtor's present or
former directors or officers. While the collapse of the Debtor was massive and
sudden, causing huge losses to its creditors and equity holders, the Examiner
has not uncovered evidence of bad faith, lack of integrity, self-dealing,
falsification or manipulation of corporate records or other impropriety.
Clearly, the Debtor's management believed in its favorable prospects throughout
the 1996 - 1997 period, notwithstanding the difficulties being experienced. For
example, from 1996 on Mr Grosser never sold a share of the Debtor's stock (with
the exception of a 200,000 share forced sale pursuant to a margin call on
October 22, 1997, at an average share price of $2.93). As a result, his holding
of nearly 3.9 million shares, which in January, 1997 was worth over $115 million
(on the basis of a $30 a share market price), was ridden down to zero. Robert
Parent, the Debtor's Executive Vice President, also experienced losses of
comparable magnitude, having maintained his full position of over 3.8 million
shares as of January, 1997.(3)

----------
(3) As shown by S.E.C. filings, pursuant to the terms of credit facilities which
David A. Steene and Gerald Epstein entered into with Merrill Lynch International
Bank United on March 20, 1997, Merrill Lynch sold 250,000 shares owned by each
of them on August 19, 1997 and applied the proceeds to outstanding loans. Mr.
Steene was a director of Cityscape Financial Corp. and CMC and Mr. Epstein a
director of CMC; they were both very active in the Debtors UK operation. The
average sales price was approximately $9.50. Following such sales, Mr. Steene
continued to own 950,000 shares and Mr. Epstein 952,200 shares. Virtually all of
such shares were sold by Merrill Lynch from October 14 through October 24, 1997
at prices ranging from $2.50 to $9.00 a share.

      Another director of Cityscape Financial Corp., Asher Fensterheim, Mr.
Grosser's father-in-law, entered into credit facilities with several financial
institutions between December, 1996 and April, 1997. The lenders sold more than
3.4 million pledged shares between October 21 and October


                                      B-26
<PAGE>   184

      To be sure, this evaporation of personal wealth does not insulate the
Debtor's executives from liability to the Debtor. Yet the demise of the Debtor
appears to have resulted from a precipitous combination of cyclonic forces, such
as the unexpected aggressiveness of UK regulators and the crushing 85% decline
in the price of the Debtor's stock over a two-week period in October, 1997. An
effort to establish director and officer liability to the Debtor under these
circumstances -- especially absent evidence of fraud or other misconduct -- is
not, in the Examiner's view, a sensible undertaking.(4)

      In this connection, note that the Certificate of Incorporation of the
Debtor Cityscape Financial Corp. contains a provision precluding, to the fullest
extent permitted by the Delaware General Corporation Law, the personal liability
of a director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. Section 102(b)(7) of the Delaware law
expressly authorizes a provision of this nature in a certificate of
incorporation, except that liability may not be eliminated or limited for (a)
breach of the director's duty of loyalty to the corporation or its stockholders,
(b) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) unlawful payment of dividends or unlawful
stock purchases or redemptions or (d)

----------
31, 1997 and applied the proceeds to outstanding loans. The sales occurred at
prices ranging from $1.44 to $5.94 a share. 

Steven Weiss, an officer and director of Cityscape Corp., entered into credit
facilities with two financial institutions between January, 1997 and April,
1997. The lenders sold 200,000 pledged shares between October 21 and October 27,
1997 and applied the proceeds to outstanding loans. The sales occurred at prices
ranging from $2.56 to $3.97 a share.

(4) The Debtor paid annual bonuses to certain of its executives on the basis of
a percentage of a defined portion of pre-tax profits, "as determined by the
Company's outside auditors in accordance with GAAP." No audited year-end figures
have been restated and, accordingly, no claim can be made that bonuses were
inflated by erroneous results that were corrected later.


                                      B-27
<PAGE>   185

any transaction from which a director derived an improper personal benefit.
Hence, mismanagement by a director of the Debtor Cityscape Financial Corp.
(assuming that it occurred) would not, by itself, be actionable in a suit by
that Debtor against its present or former directors. See, e.g., Zirn v. VLI
Corp., 681 A.2d 1050, 1061-62 (Del. 1996) (ss. 102(b)(7) and a corresponding
provision in the certificate of incorporation protect directors from monetary
liability for breach of duty of care); Frank v. Arnelle, 1998 WL 668649, *10
(Del. Ch.) (same).

      Debtor Cityscape Corp., a wholly owned subsidiary of Debtor Cityscape
Financial Corp., is a New York corporation; its directors do not have protection
comparable to that afforded by ss. 102(b)(7) of the Delaware General
Corporation Law. Thus, an action by that Debtor against its directors (who
include inside directors of the parent) could be based on a breach of the duty
of care owed by a director under Section 717 of the New York Business
Corporation Law. However, for the reasons noted above, the Examiner does not
recommend actions by either Debtor against its directors or officers.

                             THE NON-DEBTOR RELEASES
                              IN THE PROPOSED PLAN

      This section of the Report addresses issues arising under Scope paragraph
(c) concerning releases under the Plan and contributions by releasees to the
Plan.

      The proposed Plan contains two kinds of releases. The first is a release
of all claims of the Debtor and the Estate against the Debtor's current or
former officers and directors, accountants, financial advisors and legal counsel
(the "Derivative Release"). Plan at Section XI(C)(i). The second type of release


                                      B-28
<PAGE>   186

covers claims held by third parties, such as individual preferred shareholders
like Elliott, against those same current and former officers and directors,
accountants, financial advisors and legal counsel (the "Third Party Release").
Plan at Section XI(C). The classes of senior and subordinated debt have
overwhelmingly approved the Derivative Release and the Third Party Release,
while the preferred shareholder classes under the Plan have failed to approve
either such release. The Derivative and Third Party Releases are discussed
separately because the Derivative Release is within the Court's express power to
grant under section 524(e) of the Bankruptcy Code; The Third Party release
involves consideration of the Court's inherent powers under section 105(a) of
the Code.

A.    THE DERIVATIVE RELEASE

      It is well settled law that a debtor may release claims of the estate
against third parties pursuant to a confirmed plan of reorganization. The
leading case in this Circuit is In re Texaco, Inc., 84 B.R. 893 (Bankr. S.D.N.Y.
1988). The plan there proposed to release all derivative claims against Texaco's
officers and directors brought by certain Texaco shareholders after the entry of
the Pennzoil judgment against Texaco arising out of the Getty Oil purchase
transaction. The Court held that the release of the derivative actions was a
proper exercise of the debtor's discretion in the context of a full and complete
settlement of the Pennzoil judgment against Texaco.

      The Texaco court analyzed whether the estate was relinquishing a valuable
property right in granting the releases. In doing so, it first evaluated the
merits of the underlying claims against the directors and officers. 84 B.R. at
903.


                                      B-29
<PAGE>   187

Following the guidance of Texaco, we turn first to the merits of the underlying
claims covered by the Derivative Release.

      As noted already, the Examiner has found no evidence of fraud or bad faith
in connection with the two restatements of the Debtor's financial statements
during 1996. The earnings and goodwill write-downs and asset write-ups
represented issues as to which reasonably prudent accountants could (and do)
differ. The Debtor followed the advice of its outside auditors, KPMG, in issuing
the first and second restatements and informed the SEC prior to issuing the
first restatement. The common stock price reacted favorably to the announcement
that unamortized goodwill from the J&J and Heritable acquisitions would be
reduced. These events all occurred long before the issuance of The Series B
Preferred in September, 1997 and were or should have been well known to the
preferred holders.

      Similarly, the Examiner has found no evidence of fraud or bad faith in
connection with the write-down of the Debtor's UK mortgage receivables in the
second quarter of 1997. The Debtor disclosed promptly in its financial reports
all material developments respecting its dealings with the OFT, an independent
body whose proposed rules the Debtor could not reasonably be expected to have
predicted. The initial OFT letter was received on March 13, 1997 and was
promptly reported in the Debtors 1996 Form 10K, filed on March 31, 1997.
Officers of The Debtor stated in their interviews that they had no expectation
the OFT would seek to affect the existing portfolio of mortgages until they
received the OFT Guidelines on July 18, 1997. Their statements are buttressed by
the


                                      B-30
<PAGE>   188

fact that smaller, regulated home loans in the UK were permitted to be governed
by the Rule of 78 and a dual rate structure. The Debtor promptly reported on the
OFT Guidelines in a Form 8K filed on July 23, 1997.

      The Debtor's explanation as to why it wrote down second quarter UK
mortgage assets by $15 million, instead of some larger number, is credible and
consistent with its then state of negotiations with the OFT. Its legal advisors
in the UK told it that the OFT did not have jurisdiction over pre-existing
unregulated mortgage loans. The Debtor's officers and directors were justified
in relying on this advice. Indeed, on August 13, 1997, during the unfolding OFT
developments, Mr Grosser purchased an additional 100,000 shares of the Debtor's
common stock for $1 million.

      Since the Debtor's basis for asserting fraud, bad faith or other
actionable conduct against its officers and directors and professionals is
tenuous, given the findings of the Examiner's investigation, such a claim can
reasonably be released under the proposed Plan. The derivative causes of action
that the Examiner investigated are of little value to the Estate and satisfy the
Texaco criteria.

      Another factor cited in the applicable case law is whether the officers
and directors are entitled to indemnification for liabilities incurred while
acting on behalf of the Debtor. Texaco, 84 B.R. at 904-05; In re Leslie Fay
Companies, Inc., 207 B.R. 764, 783 (Bankr. S.D.N.Y. 1997). The Texaco court
stated that any derivative recoveries against officers and directors would be
offset by their indemnification claims over against the debtor. 84 B.R. at
904-05. However, this statement does not appear to be correct Under Section
145(b) of the Delaware


                                      B-31
<PAGE>   189

General Corporation Law, applicable to both Texaco and the Debtor Cityscape
Financial Corp., a Delaware corporation has no obligation and no authority to
indemnify a director or officer against a judgment rendered or a settlement made
in an action or suit by or in the right of a corporation. Indemnification is
permissible for defense expenses. The by-laws of Cityscape Financial Corp.
(Article Eighth) are consistent with the Delaware law.(5)

      The Leslie Fay court noted that the "insured versus insured" exclusion to
Leslie Fay's D&O policies did not cover derivative actions not initiated or
instigated by the debtor. Such a third party derivative action was pending at
the date of confirmation; the court excluded it from the release to preserve the
possibility of a D&O insurance recovery on behalf of the estate. 207 BR. at 783.
The Leslie Fay court did, however, approve a release that covered claims by the
debtor against its officers or directors. Id.(6)

      While the Debtor's D&O policies provide coverage for an independently
brought shareholder derivative action, no such action is pending in this case.
The "insured versus insured" exclusion bars coverage only for claims by or on
behalf of, or at the direction of, the "Assureds," i.e, Cityscape Financial
Corp. and Cityscape Corp. Moreover, as discussed above, even if mismanagement by

----------
(5) for Debtor Cityscape Corp., a New York corporation, the situation is
different Under New York Business Corporation Law ss. 722(c) a corporation may
under certain circumstances indemnify a director or officer for a settlement of
an action brought by or in the right of the corporation. The by-laws of
Cityscape Corp. (Article 8.2) purport to make such indemnification mandatory if
a court approves it as fair and reasonable in a particular case.

(6) The Leslie Fay court also noted that it is appropriate as a policy mailer to
grant officers and directors releases covering their post-bankruptcy activities
in order to encourage their continued presence at the company during the
reorganization process and their participation in that process.
207 B.R. at 782.


                                      B-32
<PAGE>   190

directors of Cityscape Financial Corp. could be proven, that, standing alone,
would not appear to be actionable under Delaware law.

      Therefore, the Derivative Release provided in the Plan falls squarely
within the kind of release approved in Leslie Fey. There is no third party
derivative action extant and the Debtor cannot be said to have a valid direct
cause of action or insurance claim against its own directors and officers that
could be realized by suing in its own name.

      A final, and most significant, factor respecting the Derivative Release is
the overwhelming acceptance of the Debtor's prepackaged Plan by the two creditor
classes. These classes claim that the Debtor is hopelessly insolvent and that
under no circumstances can an enterprise value for the Debtor be conceived that
is sufficient to place the non-consenting preferred stockholders in the money.
These senior parties, which would be entitled to receive any derivative or
direct action recoveries in any event, have voted to approve the Derivative
Release. Should this Court find at confirmation that the Debtor is, indeed,
hopelessly insolvent, with the preferred stock classes far out of the money,
then this Court can overrule any objection by those classes to the Derivative
Release. It has long been established law that objectors to a plan of
reorganization may not raise the putative objections of third parties. In re
Drexel Burnham Lambert Group, 138 B.R. 717, 721 (Bankr. S.D.N.Y. 1992) (holding
that a party whose equity interest is worthless lacks standing to object to the
confirmation of a plan, because it has no stake in the controversy); In re
Orlando Investors, L.P., 103 B.R. 593, 597 (Bankr. E.D. Pa. 1989) (holding that
it does not follow "that the


                                      B-33
<PAGE>   191

statutory right to be heard on an issue includes the right to assert interests
possessed solely by others" and finding that parties lacked standing to object
to a plan because their property rights were not impaired under the plan,
whereas, in contrast, parties whose rights were impaired did not object to the
plan confirmation). See also Kane v. Johns Manville Corporation, 843 F.2d 636,
641 (2d Cir. 1988) ("A party who seeks to appeal an order confirming a plan must
be 'directly and adversely affected pecuniarily' by it").

B.    THE THIRD PARTY RELEASE

      It is beyond the scope of the Examiner's authority in this case to
investigate the bone fides of the third party securities class action claims or
the Elliott claims against the Debtor and others. The Examiner assumes for
purposes of this discussion that there may be some validity to these claims.

      The Third Party Release is more problematic than the Derivative Release.
Section 524(e) of the Bankruptcy Code expressly prohibits a court from using its
all writs powers under section 105(a) to release or discharge third parties from
claims against them by a debtor's creditors. In a number of circuits, this
prohibition is held to be absolute. See, e.g., ln re Lowenschuss, 67 F.3d 1394,
1401-02 (9th Cir. 1995)("This court has repeatedly held, without exception,
that section 524(e) precludes bankruptcy courts from discharging the liabilities
of non-debtors."); First Fidelity Bank v. McAteer, 985 F.2d 114, 118-19 (3d Cir.
1989) (the Bankruptcy Code alters the debtor's contractual obligations, but not
the contractual obligations and liabilities of third parties).


                                      B-34
<PAGE>   192

      The Second Circuit, however, has taken a somewhat more flexible approach
to the discharge of third party claims. See, e.g., In re Drexel Burnham Lambert
Group, Inc., 960 F.2d 285, 293 (2d Cir. 1992) (finding that settlement with past
officers and directors was a crucial part of the plan of liquidation, sufficient
to warrant imposition of an injunction preventing creditors from suing past
officers and directors); ln re Johns-Manville Corporation, 837 F.2d 89, 93-94
(2d Cir. 1988) (court has power to protect non-debtors where a settlement is
necessary to permit a channeling of all settlement funds into a single pot to
permit equitable distribution to all creditors). The Johns-Manville rationale
for a "channeling" injunction is not present here, since the Examiner's
investigation has developed no evidence that the Debtor's officers, directors,
financial advisors or accountants are making a monetary or pecuniary
contribution to creditors under the proposed Plan. Additionally, the Drexel
Burnham reasoning would not seem to apply here either. The Third Party Release
can easily be carved out from the Derivative Release and the other Plan
provisions without changing the economics of the transactions contemplated in
the Plan. Most importantly, the officers and directors are not remaining in
their present roles with the reorganized Debtor. A new management team and board
of directors will be brought in to run the Debtor if the proposed Plan is
confirmed.

      Courts outside the Second Circuit have identified five criteria or factors
that are helpful here in evaluating the appropriateness and necessity of a Third
Party Release. ln re Monarch Capital Corp., 65 F.3d 973, 979-80 (1st Cir. 1995);


                                      B-35
<PAGE>   193

In re Master Mortgage Investment Fund, Inc., 168 B.R. 930, 935 (Bankr. W.D. Mo.
1994). Those factors are discussed below.

            1.    A Third Party Release may be proper where there is an identify
                  of interest between the debtor and the third party, such as an
                  indemnity relationship, so that suit against the non-debtor
                  is, in essence, a suit against the debtor or will deplete
                  assets of the estate.

                  This factor might at first appear to weigh in favor of
                  granting the Third Party Release to the Debtor's officers and
                  directors who have indemnification rights (at least as to
                  defense costs) under Delaware law. However, to the best of the
                  Examiner's knowledge, The officers and directors have not paid
                  anything of value to the third party claimants or otherwise
                  incurred any present pecuniary liability for which their
                  indemnity could be invoked against the Debtor, except perhaps
                  for payment of legal defense fees. Under these circumstances,
                  should the Court determine to confirm the proposed Plan,
                  section 502(e)(1 )(B) of the Bankruptcy Code will cause a
                  disallowance of any claim for contribution or indemnity that
                  the officers and directors might file to the extent that they
                  have not themselves already incurred loss. In re Wedtech
                  Corp., 85 B.R. 285, 290 (Bankr. S.D.N.Y. 1988) (disallowing
                  pursuant to section 502(e)(1 )(B) of the Code contingent
                  claims for indemnity that


                                      B-36
<PAGE>   194

                  were filed by a debtor's former officers and directors). See
                  also In re Drexel Burnham Lambert Group, Inc., 148 B.R. 982,
                  987 (Bankr. S.D.N.Y. 1992) (disallowing under Code section
                  502(e)(1 )(B) an underwriter's claim against an issuer-debtor
                  because the claim was a "contingent claim for reimbursement on
                  which the debtor and the Claimants are co-liable").

            2.    The non-debtor has contributed substantial assets to the
                  reorganization.

                  This factor militates against granting the Third Party
                  Release. The officers and directors and other proposed
                  releasees are contributing nothing of pecuniary value to the
                  reorganization pot. Thus, one of the principal reasons for
                  overriding the prohibitions of section 524(e) of the Code does
                  not exist here.(7)

            3.    The injunction is essential to reorganization. Without it,
                  there is little likelihood of success.

                  As noted, the Third Party Release can easily be carved out of
                  the Plan without impacting on the Plan's economics. The senior
                  and subordinated creditors will still receive the controlling
                  common stock and new warrants in the reorganized Debtor,
                  whether or not there is a release. The old officers and
                  directors will not continue in their present positions with
                  the

----------
(7) Following the Leslie Fay reasoning, this Court could nonetheless grant
complete releases to the officers and directors for their post-petition
activities on public policy grounds, although such releases may be of little
moment, given the short duration of these cases under the aegis of the court.


                                      B-37
<PAGE>   195

                  reorganized Debtor. Accordingly, any ensuing litigation will
                  not cause substantial disruption to the reorganized Debtor's
                  ongoing business.

            4.    A substantial majority of the creditors agree to such
                  injunction; specifically, the impacted class (or classes) has
                  "overwhelmingly voted to accept the proposed plan treatment."
                  While the creditor classes have voted overwhelmingly to accept
                  the Plan, the holders of the Series B Preferred have rejected
                  the Plan. The largest holder in this preferred class, Elliott,
                  will lose Rule 10b-5 and common law claims against the
                  officers and directors if The Third Party Release is approved.
                  Additionally, the common shareholders will lose their Rule
                  10b-5 claims that are the subject of the several class actions
                  pending in the Eastern District of New York. Thus, this factor
                  cannot be said to militate in favor of granting the Third
                  Party Release.

            5.    The plan provides a mechanism for the payment of all or
                  substantially all of the claims of the class or classes
                  affected by the injunction.

                  This factor weighs decidedly against granting the Third Party
                  Release. First, under The Plan the preferred stockholder
                  classes will not receive even a fraction of their initial
                  investment. They are to receive warrants whose strike price


                                      B-38
<PAGE>   196

                  will be set at a level (approximately $400 million in
                  enterprise value) which requires that the creditor classes be
                  paid in full before such warrants have any value. Second, as
                  concluded earlier in this Report, the Estate's claims against
                  the officers and directors are of doubtful worth. Were those
                  claims stronger, one could conclude that any recoveries
                  thereon, which would be paid into the general pot of creditor
                  recoveries under the Plan, should take precedence over the
                  third party claims. This would be especially so because of the
                  D&O insurance, the proceeds of which (if available
                  notwithstanding the "insured versus insured" exclusion) should
                  properly go to the Estate to be distributed to creditors in
                  their strict order of priority. Here, however, because the
                  Estate's claims are not strong, and because of "insured versus
                  insured" coverage issues, the third party claims, if valid,
                  will likely have the only call on the D&O policy proceeds. To
                  cut off the third party claims by means of the Third Party
                  Release would deprive these classes of preferred shareholders
                  (as well as common shareholders on whose behalf the pending
                  class actions have been brought) of virtually the only avenue
                  available to them to recover meaningful value in these cases.

      For all the foregoing reasons, the Examiner recommends that this Court
deny confirmation of any plan that contains the Third Party Release as presently


                                      B-39
<PAGE>   197

drafted. It may be that upon further negotiation the parties can arrive at a
third party release that is satisfactory to all the impaired constituencies. For
example, the parties might agree on a release that is limited to a claim in
excess of any D&O insurance coverage that is applicable under the policies.
However, such resolution should be left to the parties themselves to negotiate.


                                      B-40
<PAGE>   198

Dated:  New York, New York
        November 9, 1998

                                   Respectfully submitted,

                                   /s/ Harrison J. Goldin


                                   -------------------------------------
                                   Harrison J. Goldin
                                   Goldin Associates, L.L.C.
                                   767 Fifth Avenue
                                   New York, New York 10153
                                   (212) 593-2255

WINTHROP, STIMSON, PUTNAM
& ROBERTS

By: /s/ Richard L. Epling
    ----------------------------------
    Richard L. Epling (RE-9302)
    Stephen A. Weiner (SW-7829)
    One Battery Park Plaza
    New York, New York 10004
    (212) 858-1000

    Counsel to the Examiner


                                      B-41
<PAGE>   199

                      ACCOUNTING FOR PURCHASE TRANSACTIONS

Relevant Accounting Literature with respect to Purchase Transactions

The accounting principles applied to this dispute by Cityscape Corp.
("Cityscape" or the "Company.") and KPMG Pear Marwick LLP) ("KPMG") arc as
follows:

o     Accounting Principles Board ("APB") No. 16, "Business Combinations"

o     Emerging Issues Task Force ("EITF") Issue No. 87-11, "Allocation of
      Purchase Price to Assets to Be Sold"

o     EITF Issue No. 86.24, "Third Party Establishment of Collateralized
      Mortgage Obligations" ("CMO")

o     Auditing and Accounting Guide ("AAG") -- "Bank, and Savings Institutions",
      Chapter 8, "Mortgage Banking Activities and Loan Sales"

o     Financial Accounting Standards Board ("FASB") Statement of Financial
      Accounting Standard ("SFAS") No. 122, "Accounting for Mortgage Servicing
      Rights"

o     EITF Issue No. 84-21, "Sale of a Loan with a Partial Participation
      Retained"

o     SFAS No. 65, "Accounting for Certain Mortgage Banking Activities"

o     EITF Issue No. 88-11, "Allocation of Recorded Investment When a Loan or
      Part of a Loan is Sold"

o     Mortgage - Backed Securities Products, Analyses, Trading by William W.
      Bartlett (NYIF Corp., Simon & Schuster, Inc., and Prentice Hall. New
      Jersey, 1989).

o     Financial Reporting Standard ("FRS") 7 [United Kingdom {"UK"}] --"Fair
      Values in Acquisition Accounting"

Cast for Recognition of Gains

Cityscape believes that its financial statements, as restated, comport with
GAAP. As set forth below, the accounting originally applied equally comported
with GAAP; and Cityscape believes that either accounting treatment has support
as to its reasonableness. Eased on his review of the relevant accounting
literature and the documents provided to him and his staff Daniel V. Dooley,:
partner of PricewaterhouseCoopers LLP ("PwC"), concurs with this conclusion.


                                      B-42

                                    EXHIBIT A
<PAGE>   200

The relevant accounting literature supporting the recognition of gains are as
follows:

APB No. 16, "Business Considerations", paragraph 88 allows for post acquisition
recognition of a reasonable profit" on sale of businesses stock in trade, in
this instance, mortgage loan products. The gain is calculated by valuing the
interest only ("I/O") product created and retained, both to compute the
reciprocal basis in the creation of the mortgage pass through security ("MPTS")
sold and to comport with EITF 86-24, 84-21, SFAS No. 122 and EITF 88-11.
Specifically, in respect of inventory; which is the nature of the whole mortgage
loans acquired in the Heritable and J&J business combinations to be sold as
mortgage products by Cityscape, APB 16, paragraph 88(c) provides the applicable
guidance. Cityscape's whole mortgage loans are "raw materials", as defined by
APB 16, paragraph 88 (c)(3), to be used by the Company in the production of
mortgage products, and as such should be valued at, "...current replacement
costs." Such costs would be par, which is the value of similar new loans
originated or purchased in the UK market. Even if such loans were deemed to be
"work in process", according to APB 16, paragraph 88 (c) (2), their value would
be:" ...estimated selling price of the finished goods less the sum of (a) costs
to complete, (b) costs of disposal, and (c) a reasonable profit allowance for
the completing and selling effort of the acquiring corporation based on profits
for similar finished goods." In the mortgage banking business, given the nature
of the transactions, interest rate and market differentials, the creation of
value in the residual tranche, and the value of creating and securitizing the
mortgage products, the "reasonable profit allowance" as defined by APB No. 16
would be the gain achieved by Cityscape.

EITF Issue No. 86-24, "Third-Party Establishment of Collateralized Mortgage
Obligations" is applicable to the Cityscape transaction. It addresses this
issue: "A financial institution sells mortgage loans to an unrelated third party
that then uses the mortgages as collateral to issue...CMOs...Other than the
responsibility to replace any mortgages that are deemed to have any eligibility
defects, the financial institution is not at risk with respect to the
mortgages...As part of the transaction, the financial institution acquires the
right to receive a defined portion of


                                      B-43
<PAGE>   201

the total payments received from the mortgages in excess of the amount required
to service the CMOs (hereafter referred to as the residual interest). The issue
is whether the transaction represents a sale of mortgages from the viewpoint of
the financial institution, and if it does represent a sale whether the present
value of the expected residual cash flows...can be included in the computation
of gain or loss on the sale." EITF 86-24 further provides: "...the sale of
mortgages to an unrelated third party under [this] condition. ..should be
accounted for as a sale by the financial institution. Any gain or loss from the
sale, including the present value of the residual interest if it can be reliably
estimated, should be recognized in the period in which the transaction occurs."

AAG -- Banks and Savings Institutions at Chapter 8 first addresses at 3.12 what
"market value" should be used for the whole mortgage loans at acquisition date.
At such time the whole loans were held for investment but planned to be sold in
part. In this context, AAG 8.12 states: "...Uncommitted loans should be valued
based on the market in which the institution normally operates." Even if treated
as committed to sale (as whole loans), AAG 8.12 requires: "Committed loans
should be valued based on actual commitment price." Either way, the accounting
evidence of J&J, Heritable and Cityscape is that the mortgage loans, acquired as
whole loans, were priced and valued in the appropriate market at only par (net
book value), hence fair value.

AAG 8.18 specifically prescribes when a transaction can be recorded to account
for a sale of loans or mortgage products, as follows: "...gains however, should
not be recognized before the closing of the sale, that is, when title has passed
and, ... there are no significant unresolved contingencies." In the case of
Cityscape, this occurred after the acquisitions were completed at the time of
the sale of the loan, into the Greenwich facility,

SFAS No. 122, "Accounting for Mortgage Servicing Rights", specifically describes
the "economic events" that can create gains from sales of mortgage loans at
paragraph 31, as follows: "...A mortgage banking enterprise can create
additional value by purchasing or originating mortgage loans in one market and
packaging them for sale in another market, comparable to buying at wholesale and
selling retail. For example, a mortgage banking


                                      B-44
<PAGE>   202

enterprise may originate mortgage loans with contractual interest of 10 percent,
pool those mortgage loan, and sell the pool at par to yield 9 percent. An
investor would be willing to receive 9 percent on its investment because... it
has acquired a passive investment in a pool of mortgage loans." This is just a
simple example of how increased value, post acquisition, can be created by a
mortgage banking business. In the subject Cityscape transactions, the gains
were created by: (1) pooling of the loans; (2) creation of the MPTS; (3) credit
enhancement of the MPTS by subordination of the I/O cash flow strip; and the (4)
creation of a residual interest in the form of a mortgage servicing receivable.
In the rating agency's judgment, Cityscape's servicing capability uniquely
enabled it to produce the transactions that created the gain.

EITF Issue No. 84-21, "Sale of a Loan with a Partial Participation Retained"
provides guidance for the concept of gain recognition when new mortgage products
are created as follows: "An enterprise sells a loan to pay a yield below the
face rate of the loan, thereby retaining a share in the interest income over the
period that the loan remains outstanding. The enterprise also retains the
servicing rights as well as the excess interest. The issue is whether the
present value of the estimated future interest income stream should be
recognized immediately in calculating gain or loss on the sale...Several Task
Force members stated that immediate gain recognition is the redomninant practice
[and]...gain recognition is required by existing literature (SFAS No. 65 and the
Audit and Accounting Guide for Savings and Loans)..."

EITF Issue No. 88-11, "Allocation of Recorded investment When a Loan is Part of
a Loan is Sold" then specifically addresses how to allocate cost basis between
the MPTS (principal and interest) and the I/O products, stating: "...an
enterprise that sells, the right to receive...a portion of either or both [of
the interest payments and principal payments]...should allocate the recorded
investment in that loan between the portion of the loan sold and the portion
retained based on the relative fair values of those portions on the date the
loan was acquired." Mr. Dooley's interpretation of the facts of the case support
Cityscape's actions. The Company accounted for cost basis in this matter and
conformed with the separate guidance provided in EITF 86-24, since the residual
interest (I/O) value is the gain, when the MPTS is sold for essentially the same
amount as the original purchase price of the whole loans.


                                      B-45
<PAGE>   203

The text "Mortgage-Backed Securities" by William Bartlet recognizes the creation
of new value in relationship to the present value of the cash flow streams
generated by the new securities in Chapter 6: "The price of any mortgage backed
security ("MBS") is the present value of the future stream of cash flows
generated by the security" and lists some of these mortgage products created out
of the original whole loans as principal only ("P/O") and I/O strips, CMOs and
Residuals. Bartlet defines the earnings process for the mortgage banker trading
in such mortgage products in Chapter 2 at p. 78: "The sale of mortgage loans
[and mortgage products] produces a net gain or loss equal to the sum of (1) the
difference between the principal amount of the loans and the net price at which
the loans are sold (the cash gain or loss on sale) and (2) the present value of
the difference between the gross mortgage interest rate collected by the
mortgage banker from the borrowers and the pass-through interest rate collected
by the mortgage banker from the borrower and the pass-through interest rate
remitted to the purchaser of the loans, net of a normal servicing spread."

Cityscape also conformed to UK GAAP. FRS 7 requires: "Changes in the assets and
liabilities resulting from the acquirer's intention or from events after the
acquisition should be dealt with as post-acquisition items."

Case for Restatement

Citing EITF Issue No. 87-11, "Allocation of Purchase Price to Assets to Be Sold"
or an inability to support the estimates of the future I/O cash flow stream,
KMPG compelled Cityscape to restate its acquisition accounting and previously
issued 10-Q. The effect of this restatement was to reverse the gain on sale and
allocate this excess of proceeds over carrying value of the sold MPTS (or
conversely, the present value of the residual I/O) as a credit (reduction) to
recorded goodwill.

The accounting issue at the heart of the restatement is embodied in a general
principle stated in APB No. 16, "Business Combinations", paragraph 87, ...An
acquiring corporation should allocate the cost of acquired company to assets
acquired...normally equal to their fair values at date of acquisition...
Independent appraisal may be used as an aid in determining the fair values


                                      B-46
<PAGE>   204

of some assets and liabilities. Subsequent sales of assets may also provide
evidence of value." More specifically, KPMG cites EITF 87-11, consensus point
no. 5; "...Issue. An enterprise (Company A) acquires another enterprise...in a
business combination accounted for as a purchase...Company A's intent is to
keep the majority of Company B's operations and sell within one year Subsidiary
S, an operating unit that represents the remainder of Company B. Company A will
use the proceeds from the sale to reduce the debt incurred to finance the
acquisition of Company B...[Should] the difference between the selling price and
carrying amount of Subsidiary S retroactively adjust the purchase price
allocation of Company B or be reflected as income at the date of sale?..." The
answer in EITF 87-11 relied on by KPMG is: "...The difference between the
carrying amount of Subsidiary S at the date of sale and the proceeds from the
sale usually should result in a reallocation of the purchase price of Company B
based on those sales proceeds..."

EITF 87-11 is inapplicable to Cityscape's accounting issue. EITF 87-11
specifically limits its guidance to: "...net assets held for sale that
constitute a line of business or a portion of a line of business as defined by
APB Opinion 30 "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business"...Those net assets may be in the form of a
subsidiary, a division, or a department provided that its assets, results of
operations, and activities can be clearly distinguished, both physically and
operationally, and also for financial reporting purposes from the other assets,
results of operations, and activities of the purchased entity..." The loans used
by Cityscape to create and subsequently sell the MPTS and create the residual
interest in the form of a mortgage servicing receivable clearly are not a
subsidiary, division, department or any form of identifiable operation. EITF
87.11 does not apply.


                                      B-47
<PAGE>   205

      The rule of 78s is an accelerated method of calculating interest. Under
this rule (which gets its name from the fact that the sum of the values from 1
through 12 is 78), you'll pay more interest during the early years of the loan
than you would with an equivalent simple-interest loan. Since more of each
payment is going toward interest, less is going toward principal. As a result,
the payoff during the early periods of a rule of 78s loan will be higher than it
would be if Interest were calculated in the traditional way.

To calculate the payoff for a rule of 78s loan, begin by calculating the total
interest you'll pay over the life of the loan. To do this, multiply the number
of payments by the term, then subtract the principal from the result. For
example if you borrowed $2500 and are paying $77.41 a month for 48 months,
you'll pay a total of (77.4lx48)-2500=$3715.88-2500=$$1215.88 in interest.

Next, calculate the sum of the digits in the life of the loan. For example, if
the term of the loan is 48 months, you'd add 1,2,3,4, and so forth, all the way
to 48. (Fortunately, there's an easy way to do this: Add 1 to the final value,
and multiply by 1/2 of the final value. For example, to sum the values from 1 to
48, you'd multiply 48+1=49 by 48/2=24. The result--49x24=1176--is the sum of the
digits).

Once you've calculated these two values, calculate the total amount of interest
you'll have paid by the time of the payoff. To do this, subtract 1 from the
payoff period and divide by 2. Then subtract that result from the term of the
loan. Multiply the result of the subtraction by the payoff period. Divide the
result of the multiplication by the sum of the digits. Then, multiply the result
of the division by the total interest. For example, to calculate the rule of 78s
payoff of our example loan after the 10th payment, you'd proceed as follows:

1.  (10-1)/2=4.5

2.  48-4.5=43.5

3.  43.5x10=435

4.  435/1176-.369898

5.  .369898x1215.88=$449.75

After you've calculated the total amount of the interest you'll have paid by the
time of payoff (In this case, $449.75), calculate the total amount of the
payments you'll have made up to that point. To do that, simply multiply the
payoff period by the periodic payment. In this case, the result if
10x$77.41=$774.10. Then subtract the result of the interest calculation. The
result of that subtraction---in this case, $774.10-$449.75=$324.39--is the
amount of principal you'll you'll have paid. Finally, subtract the result of
that subtraction from the amount borrowed. The result--in this case,
$2500-$324.39=$2175.61--is the payoff amount. The payoff on an identical
simple-interest loan would be $2135.57--over $40 less than the payoff for the
rule of 78s loan.


                                      B-48
<PAGE>   206

                                    EXHIBIT B
<PAGE>   207

----------------------------------------------------------------
Loan Amount in British pounds                   (pound)15,000.00
@ exchange rate of 1.661                        @ 2:30pm 11/4/98
----------------------------------------------------------------

----------------------------------------------------------------
Loan Amount in US dollars                             $24,915.00
Annual Rate                                               9.000%
Term in Years                                                 20
----------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                        Variance                Variance as 
----------            Simple interest                               Rule of 78s    simple interest vs.         a percent of
$24,915.00                 payoff             Years                    payoff       Rule of 78s Payoff          O/S balance
---------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                   <C>                  <C>                        <C>                   <C>  
                          24,448.41             1                    25,035.60                  587.18                2.40%
                          23,938.06             2                    25,012.36                1,074.30                4.49%
                          23,379.53             3                    24,845.31                1,465.48                6.27%
                          22,769.23             4                    24,534.43                1,765.19                7.75%
                          22,101.36             5                    24,079.72                1,978.36                8.95%
                          21,370.84             6                    23,481.18                2,110.35                9.87%
                          20,571,78             7                    22,738.82                2,167.04               10.53%
                          19,697.77             8                    21,852.64                2,154.86               10.94%
                          18,741.78             9                    20,822.63                2,080.85               11.10%
                          17,696.10            10                    19,648.79                1,952,69               11.03%
                          16,552.33            11                    18,331.13                1.778,79               10.75%
                          15,301.27            12                    16,869.64                1,568.37               10.25%
                          13,932.85            13                    15,264.32                1,331.47                9.56%
                          12,438.06            14                    13,515.18                1.079,12                8.68%
                          10,798.87            15                    11,622.22                  823.35                7.62%
                           9,008.09            16                     9,585.43                  577.33                6.41%
                           7,049.33            17                     7,404.81                  355.48                5.04%
                           4,906.82            18                     5,080.38                  173,55                3.54%
                           2,563.33            19                     2,612.10                   48.77                1.90%
                               0.00            20                         0.00                   (0.00)

----------------------------------------------------------------
Loan Amount in British pounds                   (pound)15,000.00
@ exchange rate of 1.661                        @ 2:30pm 11/4/98
----------------------------------------------------------------

----------------------------------------------------------------
Loan Amount in US dollars                             $24,915.00
Annual Rate                                              18.000%
Term in Years                                                  4
----------------------------------------------------------------

<CAPTION>
                                                                                        Variance                Variance as 
                      Simple interest                               Rule of 78s    simple interest vs.         a percent of
$24,915.00                 payoff             Years                    payoff       Rule of 78s Payoff          O/S balance
                      -----------------------------------------------------------------------------------------------------
<S>                       <C>                   <C>                  <C>                        <C>                   <C>  
                          20,244.25             1                    20,562.50                  318.25                1.57%
                          14,659.82             2                    14,959.17                  299.35                2.04%
                           7,982.96             3                     8,105,00                  122.04                1.53%
                              (0.00)            4                        (0.00)                  (0.00)
</TABLE>


                                      B-49
<PAGE>   208

----------------------------------------------------------------
Loan Amount in British pounds                   (pound)15,000.00
@ exchange rate of 1.661                        @ 2:30pm 11/4/98
----------------------------------------------------------------

----------------------------------------------------------------
Loan Amount in US dollars                             $24,915.00
Annual Rate                                               9.000%
Term in Years                                                 30
Monthly Payment                                          $200.47
----------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                        Variance                Variance as 
----------            Simple interest                               Rule of 78s    simple interest vs.         a percent of
$24,915.00                 payoff             Years                    payoff       Rule of 78s Payoff          O/S balance
---------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                   <C>                  <C>                        <C>                   <C>  
                          24,744.78             1                    25,602.94                  858.16                3.47%
                          24,558.60             2                    26,186.16                1,627.56                6.63%
                          24,354.94             3                    26,664.65                2,309.71                9.48%
                          24,132.19             4                    27,038.43                2,906.24               12.04%
                          23,888.54             5                    27,307.49                3,418.95               14.31%
                          23,622.03             6                    27,471.83                3,849.80               16.30%
                          23,330.52             7                    27,531.45                4,200.93               18.01%
                          23,011.67             8                    27,486.34                4,474.68               19.45%
                          22,662.90             9                    27,336.52                4,673.62               20.62%
                          22,281.42            10                    27,081.98                4,800.56               21.55%
                          21,864.15            11                    26,722.72                4~858.57               22.22%
                          21,407.75            12                    26,258.74                4,851.00               22.66%
                          20,908.52            13                    25,690.04                4,781.52               22.87%
                          20,362.47            14                    25,016.62                4,654.15               22.86%
                          19,765.19            15                    24,238.48                4,473.29               22.63%
                          19,111.88            16                    23,355.62                4,243.74               22.20%
                          18,397.29            17                    22,368.04                3,970.75               21.58%
                          17,615.67            18                    21,275.74                3,660.07               20.78%
                          16,760.72            19                    20,078.72                3,318.00               19.80%
                          15,825.58            20                    18,776.98                2,951.41               18.65%
                          14,802.71            21                    17,370.52                2,567.82               17.35%
                          13,683.89            22                    15,859.34                2,175.46               15.90%
                          12,460.11            23                    14,243.45                1,783.33               14.31%
                          11,121.54            24                    12,522.83                1,401.29               12.60%
                           9,657.40            25                    10,697.49                1,040.09               10.77%
                           8,055.91            26                     8,767.43                  711.52                8.83%
                           6,304.20            27                     6,732.65                  428.46                6.80%
                           4,388.15            28                     4,593.16                  205.00                4.67%
                           2,292.38            29                     2,348.94                   56.56                2.47%
                               0.00            30                         0.00                  (0.00)
</TABLE>


                                      B-50
<PAGE>   209

         Exhibit C to Debtors' First Amended Joint Disclosure Statement
                 Pursuant to Section 1125 of the Bankruptcy Code

                  Unaudited Proforma Consolidated Balance Sheet
                       and Projected Financial Information
<PAGE>   210

                 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

The Unaudited Pro Forma Consolidated Balance Sheet presented below is based upon
the historical consolidated financial position of the Debtors as of November 30,
1998. The pro forma adjustments made to the historical consolidated balance
sheet (based on the assumptions set forth below) give effect to the
Reorganization as if that entire series of transactions, including the issuance
of the New Common Stock to the holders of the Old Senior Notes, the Old
Subordinated Debentures, and the Trade Creditors had occurred on November 30,
1998. In addition, since the Reorganization is to be effectuated through a plan
of reorganization under chapter II of the Bankruptcy Code, the provisions of the
American Institute of Certified Public Accountants Statement of Position ("SOP")
90-7. (Financial Reporting by Entities in Reorganization under the Bankruptcy
Code), which require the application of fresh start reporting, have been
reflected in the pro forma consolidated balance sheet as of November 30, 1998.
The pro forma consolidated balance sheet is unaudited and was derived by
adjusting the historical balance sheet of the Debtors for certain transactions
as described in the respective notes thereto. THIS PRO FORMA BALANCE SHEET IS
PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE
INDICATIVE OF THE FINANCIAL CONDITION OF THE DEBTORS HAD THE TRANSACTIONS
DESCRIBED THEREIN BEEN CONSUMMATED ON THE DATE INDICATED AND ARE NOT INTENDED TO
BE PREDICTIVE OF THE FINANCIAL CONDITION OF THE DEBTORS AT ANY FUTURE DATE.

The pro forma adjustments are based on available information and certain
assumptions that the Debtors believe are reasonable under the circumstances. The
Unaudited Pro Forma Consolidated Balance Sheet and accompanying notes should be
read in conjunction with the historical consolidated financial statements of the
Debtors, including the notes thereto, and the other information pertaining to
the Debtors appearing elsewhere in this Disclosure Statement. In addition, the
independent auditors of Cityscape and CSC have neither examined nor compiled the
Unaudited Pro Forma Consolidated Balance Sheet and accordingly assume no
responsibility for it. The Projections (defined below) were prepared based upon
the Debtors' unaudited financial information as of November 30, 1998; the 1998
year-end audit had not been completed as of the time the Projections were
prepared. Consequently. the actual audited operating results and financial
information for the Debtors may materially differ from the unaudited financial
information upon which the Projections are based because of, among other things,
adjustments. if any, resulting from completion of a 1998 year-end audit of the
Debtors.


                                      C-1
<PAGE>   211

<TABLE>
<CAPTION>
                                                                                               Adjustments For         After      
                                                  Cityscape          Adjs         Historical   Reorganization      Reorganization 
                                                  ---------          ----         ----------   --------------      -------------- 
<S>                                              <C>             <C>             <C>              <C>                <C>          
Assets                                                                                                             
   Cash And Cash Equivalents                      21,097,725                      21,097,725      (5,000,000)   1     16,097,725  
   Cash Held In Escrow                            20,912,690                      20,912,690                          20,912,690  
   Mortgage Servicing Receivables                  7,617,021      (7,617,021)             --              --                  --  
   Trading Securities                             76,217,559     (42,556,629)     33,660,930                          33,660,930  
   Mortgages Held For Sale, Net                  131,243,357         805,700     132,049,057                         132,049,057  
   Mortgages Held For Investment, Net              4,805,700      (4,805,700)             --              --                      
   Equipment And Leasehold Improvements, Net       1,455,558      (1,417,558)         38,000                              38,000  
   Investment In Discontinued Operations, Net     13,289,902                      13,289,902                          13,289,902  
   Income Tax Receivable                           2,165,698                       2,165,698                           2,165,698  
   Reorganization Value                                                                                                           
   Other Assets                                   14,615,720      (3,420,619)     11,195,101              --          11,195,101  
                                                ------------     -----------    ------------    ------------         -----------
   Total Assets                                  293,420,930     (59,011,827)    234,409,103      (5,000,000)        229,409,103  
                                                ------------     -----------    ------------    ------------         -----------
Liabilities                                                                                                        
   Warehouse Financing Facilities                112,636,623                     112,636,623                         112,636,623  
   Accounts Payable And Other Liabilities         83,605,057       4,730,334      88,335,391     (46,411,517)   2     41,923,874  
   Allowance For Loan Losses                       7,617,021      (7,617,021)             --                                  --  
   Income Taxes Payable                              284,218                         284,218                             284,218  
   Old Senior Notes                              300,000,000                     300,000,000    (300,000,000)   3                 
   Old Subordinated Debentures                   129,620,000              --     129,620,000    (129,620,000)                 --  
                                                ------------     -----------    ------------    ------------         -----------
   Total Liabilities                             633,762,919      (2,886,687)    630,876,232    (476,031,517)        154,844,715  
                                                                                                                   
Equity (Deficit)                                                                                                   
   Old Cityscape Common Stock                        649,489                         649,489        (649,489)   5             --  
   Old Cityscape Preferred Stock                          52                              52             (52)   5             --  
   Treasury Stock                                   (175,000)                       (175,000)        175,000    5             --  
   New Common Stock                                                                       --         128,000    5        128,000  
   Additional Paid-In Capital                    175,304,103                     175,304,103         346,541    5    175,650,644  
   Retained Earnings (Accumulated Deficit)      (516,120,633)    (56,125,140)   (572,245,773)    471,031,517    6             --
                                                ------------     -----------    ------------    ------------         -----------
   Total Stockholders Equity (Deficit)          (340,341,989)    (56,125,140)   (396,467,129)    471,031,517          74,564,388  
                                                ------------     -----------    ------------    ------------         -----------
   Total Liabilities and Equity (Deficit)        293,420,930     (59,011,827)    234,409,103      (5,000,000)        229,409,103  
                                                ------------     -----------    ------------    ------------         -----------

<CAPTION>
                                                Adjustments For
                                                  Fresh Start
                                                   Reporting            Pro Forma   
                                                   ---------            ---------
<S>                                               <C>                  <C>        
Assets                                                                
   Cash And Cash Equivalents                                            16,097,725
   Cash Held In Escrow                                                  20,912,690
   Mortgage Servicing Receivables                                               --
   Trading Securities                                                   33,660,930
   Mortgages Held For Sale, Net                                        132,049,057
   Mortgages Held For Investment, Net                                             
   Equipment And Leasehold Improvements, Net                                38,000
   Investment In Discontinued Operations, Net                           13,289,902
   Income Tax Receivable                                                 2,165,698
   Reorganization Value                           (11,359,790)         (11,359,790)
   Other Assets                                            --           11,195,101
                                                 ------------          -----------
   Total Assets                                   (11,359,790)         218,049,313
                                                 ------------          -----------
                                                                      
Liabilities                                                           
   Warehouse Financing Facilities                                      112,636,623
   Accounts Payable And Other Liabilities                               41,923,874
   Allowance For Loan Losses                                                    --
   Income Taxes Payable                                    --              284,218
   Old Senior Notes                                                             --
   Old Subordinated Debentures                             --                   --
                                                 ------------          -----------
   Total Liabilities                                       --          154,844,715
                                                                      
Equity (Deficit)                                                      
   Old Cityscape Common Stock                                                   --
   Old Cityscape Preferred Stock                                                --
   Treasury Stock                                                               --
   New Common Stock                                                        128,000
   Additional Paid-In Capital                    (112,574,046)   7      63,076,598
   Retained Earnings (Accumulated Deficit)       (101,214,256)   7     101,214,256
                                                 ------------          -----------
   Total Stockholders Equity (Deficit)            (11,359,790)          63,204,598
                                                 ------------          -----------
   Total Liabilities and Equity (Deficit)         (11,359,790)         218,049,313
                                                 ------------          -----------
</TABLE>                                                         


                                                    C-2
<PAGE>   212

(1)   To record estimated fees and expenses consisting of estimated financing
      costs, severance, and professional fees.

(2)   To record the elimination of interest accrued on the Old Senior Notes and
      Old Subordinated Debentures and the extinguishment of other liabilities
      subject to compromise.

(3)   To record the extinguishment of Old Senior Notes.

(4)   To record the extinguishment of Old Subordinated Debentures.

(5)   To reflect the issuance of New Common Stock and the cancellation of Old
      Cityscape Common Stock. Old Cityscape Preferred Stock and treasury stock.

(6)   To record the net gain on forgiveness of debt and additional
      reorganization expenses, as detailed below:

      <TABLE>
      <CAPTION>
          <S>                                                          <C>      
          Gain on Forgiveness of Debt:
            Extinguishment of Old Senior Notes........................ $300,000 
            Extinguishment of Old Subordinated Debentures.............  129,620 
            Elimination of accrued interest and
               liabilities subject to compromise......................   46,411 
                                                                       --------
            Net gain on forgiveness of debt...........................  476,031 
            Reorganization expenses...................................   (5,000)
                                                                       --------
            Total change in retained earnings......................... $471,031
                                                                       ========
</TABLE>

(7)   To eliminate historical deficit and reflect fresh start adjustments
      (pursuant to SOP 90-7) related to the reorganization value of the
      Reorganized Company.

The Debtors propose to account for the reorganization and the related
transactions using the principles of fresh start reporting as required by SOP
90-7. The Debtors have estimated a range of reorganization values between
approximately $80 million and $90 million. For purposes of determining
reorganization value, the Debtors have used $84 million. Reorganization value,
as defined in SOP 90-7, generally approximates the fair value of the entity
before considering liabilities and approximates the amount a willing buyer would
pay' for the assets immediately after the restructuring. Asset valuations were
assessed with respect to the following criteria: (i) the Debtors' historical
cost basis in the underlying assets; (ii) underlying liquidity and cash flow
characteristics of the assets; and (iii) the mark-to-market value of the assets
as determined under various sale and liquidation scenarios. These criteria
contain significant subjective components, which the Debtors did not
independently verify. The foregoing criteria then were applied to the Debtors'
financial forecast included elsewhere in this Disclosure Statement. See
"Projected Financial Information." The valuation takes into account the
following factors, not listed in order of importance:

      (i)   The Debtors' emergence from chapter 11 proceedings pursuant to the
            Plan as described herein is assumed to occur on or about May 31,
            1999.

      (ii)  That all transactions contemplated by the Plan will be consummated
            by the Effective Date.

      (iii) That general financial and market conditions as of the assumed
            Effective Date of the Plan will not differ materially from those
            prevailing as of the date of this Disclosure Statement.

The Debtors estimate that the Reorganized Company will have net assets with an
approximate carrying value of $68 million consisting of unencumbered assets of
approximately $84 million less liabilities (excluding funds held in escrow) of
approximately $16 million at the Effective Date.

The amount of stockholders' equity in the fresh start balance sheet is not an
estimate of the trading value of the New Common Stock after confirmation of the
Plan, which value is subject to many uncertainties and cannot be reasonably
estimated at this time. Neither the Debtors nor their financial advisors make
any representation as to the trading value of the shares to be issued under the
Plan.


                                      C-3
<PAGE>   213

                         PROJECTED FINANCIAL INFORMATION

The following Projections (as defined below) were prepared by Cityscape and CSC.
based upon, among other things, the anticipated future financial condition and
results of operations of the Reorganized Company.

Cityscape and CSC do not generally publish their business plans and strategies
or make external projections of their anticipated financial position or results
of operations. Accordingly, after the Effective Date, the Reorganized Company
does not intend to update or otherwise revise the Projections to reflect
circumstances existing since their preparation in March 1999 or to reflect the
occurrence of unanticipated events, even in the event that any or all of the
underlying assumptions are shown to be in error. Furthermore, the Reorganized
Company' does not intend to update or revise the Projections to reflect changes
in general economic or industry conditions. However, Reorganized Cityscape's
regular quarterly and annual financial statements, and the accompanying
discussion and analysis, contained in Reorganized Cityscape's Quarterly Reports
on Form 10-Q and Annual Reports on Form 10-K, will contain disclosure concerning
Reorganized Cityscape's actual financial condition and results of operations
during the period covered by' the Projections.

The Projections were not prepared with a view toward general use, but rather for
the limited purpose of providing information in conjunction with the Plan.
Accordingly, the Projections were not intended to be presented in accordance
with the published guidelines of the American Institute of Certified Public
Accountants regarding financial projections, nor have they been presented in
lieu of pro forma historical financial information, and accordingly, are not
intended to comply with Rule 11-02 of Regulation S-X of the Commission. In
addition, the independent auditors of Cityscape and CSC have neither examined
nor compiled the Projections and accordingly assume no responsibility for them.

Projected unaudited consolidated statements of operations, balance sheets, and
statements of cash flows for the Debtors are included for the six-month period
prior to an assumed Effective Date of May 31, 1999. Projected unaudited
consolidated financial statements for the Reorganized Company are included for
the seven months ending December 31, 1999, and for each twelve month period
ending December 31, 2000, 2001, 2002, and 2003.

Additional information relating to the principal assumptions used in preparing
the Projections is set forth below. See "Certain Risk Factors" for a discussion
of various other factors that could materially affect Reorganized Cityscape's
and Reorganized CSC's financial condition, results of operations, businesses,
prospects and securities.

For the purpose of providing projected financial information, the Debtors have
defined its business as mortgage banking and related operating and investment
activities, including but not limited to the origination, ownership, sale, and
servicing of mortgage loans.

The Debtors estimate that the Reorganized Company will have net assets with an
approximate carrying value of $68 million, consisting primarily of mortgage
residual certificates, receivables related to such certificates and cash.

It is assumed that the Reorganized Company will invest such cash and operate its
business in such a manner that it will not be required to register as an
investment company under the Investment Company Act of 1940, and the rules and
regulations thereunder. While a plan as to the use of the Reorganized Company's
cash and other assets has not been formed, such assets will be available for
general corporate purposes as determined by the Board of Directors of the
Reorganized Company, including investments, acquisitions, joint ventures and
dividends and other distributions on equity securities, all as determined by the
Board of Directors to be in the best interests of the Reorganized Company.

The projected financial statements assume that the Reorganized Company's cash
will be invested at an assumed yield of 5% per annum. There are no present plans
for the Reorganized Company to pay' dividends on its New Common Stock. Any such
dividends will be determined by the Board of Directors of the Reorganized
Company' in light of the financial condition, cash flow, results of operations,
and legal dividend capacity of the Reorganized Company, and other factors. The
Projections assume no payment of dividends throughout the Projection Period.
Following the Effective Date, it is expected that the Reorganized Company will
invest its available cash and manage


                                      C-4
<PAGE>   214

its business with a view to maximizing values to holders of its equity
securities. It is expected that the Reorganized Company should be able to
invest such available cash in a manner which will create higher returns than the
5% rate assumed in the Projections. However, there is no assurance that this
will be the case or that such investments, if made, will create returns
sufficient to allow the Reorganized Company to pay dividends at any time in the
future.

It is expected that the Reorganized Company will reenter the mortgage loan
origination business at some time in the future, based on prevailing industry
conditions and the general business climate. Because the Reorganized Company
will be relatively liquid, it is expected that management of the Reorganized
Company will examine various acquisition prospects in the subprime and high-LTV
organization and servicing markets. Because of a deterioration of the capital
markets supporting the subprime and high-LTV origination businesses, a number of
potential acquisition or merger candidates may be available. However, there can
be no assurance that the Reorganized Company will identify suitable acquisition
or merger candidates, or that if such candidates are identified, acceptable
business transactions will be structured and concluded.

Specifically, Aegis Mortgage Corporation ("Aegis") may be a potential
acquisition or merger candidate. Aegis is owned solely by D. Richard Thompson,
the prospective Chairman and CEO of the Reorganized Company. Aegis is involved
principally in the origination and servicing of single-family mortgage loans,
concentrating primarily on the conforming marketplace for FHA, VA, and
conventional mortgages. In the year concluding December 31, 1998, Aegis
originated approximately $875 million of single-family mortgage loans. At
December 31, 1998, Aegis serviced approximately $150 million in mortgage loans
from its Oklahoma City location. Aegis is headquartered in Houston, Texas, and
maintains wholesale and retail production offices in seven states. In 1998,
Aegis originated mortgage loans in a total of 28 states.

Aegis may be an attractive acquisition or merger candidate because of its
efficient loan production operation and management synergies. The Reorganized
Company could expand Aegis's loan production operations through application of
capital to support additional branch facilities and warehouse lines.

A number of obstacles could impede the acquisition or merger of Aegis with the
Reorganized Company. First, an acquisition or merger with Aegis represents a
conflict of interest for Thompson. and if such an acquisition or merger is
considered. Thompson would be required not to participate in any discussions or
from representing the Reorganized Company with respect to any resulting
transaction with Aegis. Accordingly, the Reorganized Company may be at a
disadvantage in discussing, structuring or concluding any such transaction.
Second, pricing and terms are integral to any acquisition or merger transaction,
and there can be no assurance that Aegis and the Reorganized Company can reach
agreement on mutually agreeable pricing and terms of any proposed acquisition or
merger transaction. Third, the disinterested management and directors of the
Reorganized Company may feel that companies with subprime and/or high-LTV
origination and servicing operations represent more attractive acquisition or
merger candidates than does Aegis.

Within this context the following points represent the major assumptions
underlying the attached financial data (the "Projections").

      1.    Effective Date and Plan Terms. The Projections assume that the Plan
            will be confirmed in accordance with its terms, and that all
            transactions contemplated by the Plan will be consummated by the
            assumed Effective Date. Any significant delay in the assumed
            Effective Date of the Plan may have a significant negative impact on
            the operations and financial performance of the Reorganized Company
            including, but not limited to, higher overhead and operating
            expenses, and higher reorganization expenses.

      2.    General Operating Assumptions. The Reorganized Company is assumed
            throughout the Projection Period to have no loan production. The
            loan servicing portfolio is assumed to run-off at a rate of
            approximately 35% CPR for home equity loans and 20% CPR for
            Sav-A-Loans.

            The Projections were prepared assuming that the current general
            economic conditions prevailing today will not change materially
            during the Projection Period.


                                     C-5
<PAGE>   215

      3.    Revenue. The following revenue assumptions employed in the
            Projections are based on the recent historical results of Cityscape
            and CFC and current conditions in the mortgage lending industry.

            Accretion Income. For the Projection period June 1, 1999 and beyond,
            the Projections assume that the Home Equity and Say-A-Loan residuals
            will accrete value as each residual comes closer to generating cash
            flow.

            Interest Income. Represents interest earned on loans and cash held
            at the following rates (the Home Equity' Loans and the Sav-A-Loans
            are for periods prior to and including May 31, 1999, the assumed
            Effective Date:

                  <TABLE>
                  <CAPTION>
                  <S>                                 <C> 
                  Home Equity Loans                    9.5%
                  Sav-A-Loans                         13.5%
                  Cash on Hand                           5%
                  </TABLE>

            Servicing Income. Represents the revenue attributable to the
            Reorganized Company's servicing operations on a cash basis and
            unadjusted for SFAS No. 122.

      4.    Expenses--Salaries and Employee Benefits. The Projections assume
            that the Reorganized Company will reduce its workforce to be in line
            with current and projected levels of business activity. The
            Projections assume that the Debtors will have approximately 40
            employees by the Effective Date. In general, salaries and related
            expenses have been reduced to be in line with the reduced level of
            business activity.

      5.    Other Operating Expenses. Primarily includes expenses for rent,
            travel and entertainment, telephone and utilities, ordinary course
            professional fees, supplies, and general insurance. All expense
            levels are estimated to correspond to the recently reduced levels of
            business activity.

      6.    Income Taxes. Projected income taxes are based on an assumed
            combined state and federal tax at 40%, applied to income from
            operations plus cash-flow received from residual interests, adjusted
            pursuant to specific tax guidelines governing REMIC and owner trust
            structures. While taxes will accrue and be paid on a quarterly
            basis, the Projections assume that the Reorganized Company will not
            have the benefit of net operating loss carry forwards for income tax
            purposes as all net operating losses will be used to offset gain on
            forgiveness of debt.

      7.    Gain on Forgiveness of Debt. The gain results from the
            extinguishment of debt in exchange for the issuance of the New
            Common Stock. The gain is calculated based on a carrying value of
            the Old Senior Notes and Old Subordinated Debentures on November 30,
            1998 (including principal and accrued interest) and the carrying
            value of other liabilities subject to compromise, principally
            consisting of future lease obligations with respect to realty and
            equipment leases.

      8.    Fresh Start Accounting. The Projections have been prepared using
            basic principles of the "fresh start" accounting for the periods
            after the Effective Date. These principles are contained in SOP
            90-7. The fair values of the assets and liabilities of the
            Reorganized Company (and thus the amount allocable to reorganization
            expenses in excess of amounts allocated to identifiable tangible and
            intangible assets, if any) are subject to revision following the
            results of appraisals and other studies which will be performed
            after consummation of the Reorganization and the related
            transactions. The Projections assume that the reorganization value
            in excess of amounts allocable to identifiable assets, if any, will
            be amortized over ten years. The amount of stockholders' equity in
            the Fresh Start balance sheet is not an estimate of the trading
            value of the New Common Stock after the confirmation of the Plan,
            which value is subject to many uncertainties and cannot be
            reasonably estimated at this time. Neither the Debtors nor their
            financial advisors make any representations as to the trading value
            of the shares to be issued under the Plan. 


                                      C-6
<PAGE>   216

            Financial Projections. Each of the following tables summarizes the
            Debtor (projections for several distinct periods including:

            a.    The six months ending May 31, 1999;

            b.    The seven months ending December 31, 1999; and

            c.    Each of the twelve months ending December 31, 2000, 2001,
                  2002, and 2003.

            The projections include Projected Consolidated Statements of
            Operations, Projected Consolidated Balance Sheets (including
            estimates of the effects of Fresh Start accounting) and Projected
            Consolidated Statements of Cash Flows.


                                      C-7
<PAGE>   217

            CITYSCAPE CORPORATION AND CITYSCAPE FINANCIAL CORPORATION
                 PROJECTED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                   The Company                                   
                                                       ---------------------------------------------------------------------
                                                                 Historical
                                                       -------------------------------        Projected         Projected
                                                                            Eleven           Period From       Seven Months
                                                       Year Ended        Months Ended        December 1,          Ending
                                                       December 31,      November 30,          through          December 31,       
                                                           1997              1998            May 31, 1999           1999
                                                       ------------      -------------       ------------      -------------
<S>                                                       <C>               <C>                 <C>               <C>  
Revenues:
Gain (Loss) On Sale                                          83,366              1,453                 --                 -- 
Net Unrealized Loss On Valuation Of Residuals              (148,004)           (68,861)                --                 -- 
Mortgage Origination Income                                   4,849              2,202                 --                 -- 
Net Interest Income (Expense)                                 2,830            (34,346)             1,739                823
Accretion On Residual Balances                                                   1,800                 --              5,065
Servicing Income                                                745                389              1,383              1,909
Other                                                        20,302                636                 --                 -- 
                                                       ------------      -------------       ------------      -------------

Total Revenues                                              (36,657)           (96,371)             2,128              7,271

Expenses:
Salaries And Employee Benefits                               41,089             28,276              3,602              2,435
Selling Expenses                                              4,137              4,031              1,800                300
Other Operating Expenses                                     42,085             39,660              3,000              1,100
Provision For Loan Losses                                    12,614              8,728                 --                 -- 
Restructuring Charge / Non-Recurring Expense                     --             44,422              5,000                 -- 
                                                       ------------      -------------       ------------      -------------

Total Expenses                                               99,925            125,117             13,402              3,835
                                                       ------------      -------------       ------------      -------------

Earnings (Loss) From Continuing Operations Before
   Income Taxes And Extraordinary Items                    (136,582)          (221,487)           (11,274)             3,436
Income Tax (Benefit) Provision                              (18,077)            (1,845)                --              1,043
                                                       ------------      -------------       ------------      -------------

Earnings (Loss) From Continuing Operations Before
   Extraordinary Items                                     (118,505)          (219,642)           (11,274)             2,393
Earnings (Loss) From Discontinued Operations               (295,846)                --                 --                 -- 
Gain On Forgiveness Of Debt                                      --                 --            476,032                 -- 
                                                       ------------      -------------       ------------      -------------

Net Earnings (Loss)                                        (414,351)          (219,642)           464,757              2,393
Old Cityscape Preferred Stock Dividends                         905             20,327                 --                 -- 
Old Cityscape Preferred - Beneficial Discount                 2,725                 --                 --                 -- 
Old Cityscape Preferred - Increase In Liquidation
  Preference                                                    918                 --                 --                 -- 
Old Cityscape Preferred - Default Payments                       --                 --                 --                 -- 
Net Earnings (Loss) Applicable To Common Stock             (418,899)          (239,969)           464,757              2,393
                                                       ------------      -------------       ------------      -------------

Net Interest Income (Expense) Detail:
Interest Income                                              73,520             11,143              3,657                823
Interest Expense And Fees On Warehouse Credit
  Facilities                                                (70,690)           (45,489)            (1,917)                -- 
                                                       ------------      -------------       ------------      -------------
Net Interest Income (Expense)                                 2,830            (34,346)             1,739                823
                                                       ------------      -------------       ------------      -------------

<CAPTION>
                                                                          The Reorganized Company
                                                    ---------------------------------------------------------------------
                                                                     Projected Year Ending December 31,
                                                    ---------------------------------------------------------------------
                                                          2000              2001              2002              2003
                                                    ---------------   ---------------   ---------------   ---------------
<S>                                                          <C>               <C>               <C>               <C>  
Revenues:
Gain (Loss) On Sale                                              --                --                --                --
Net Unrealized Loss On Valuation Of Residuals                    --                --
Mortgage Origination Income                                      --                --                --                --
Net Interest Income (Expense)                                 1,719             1,378             1,299             1,434
Accretion On Residual Balances                                9,269            10,901            12,881            13,999
Servicing Income                                              1,431             1,076               813
Other                                                            --                --                --                --
                                                    ---------------   ---------------   ---------------   ---------------

Total Revenues                                               12,897            13,711            15,256            16,246

Expenses:
Salaries And Employee Benefits                                2,424             2,424             2,424             2,424
Selling Expenses                                                 --                --                --                --
Other Operating Expenses                                      1,200             1,200             1,200             1,200
Provision For Loan Losses                                        --                --                --                --
Restructuring charge / Non-Recurring Expense                     --                --                --                --
                                                    ---------------   ---------------   ---------------   ---------------

Total Expenses                                                3,624             3,624             3,624             3,624
                                                    ---------------   ---------------   ---------------   ---------------

Earnings (Loss) From Continuing Operations Before
   Income Taxes And Extraordinary Items                       9,273            10,087            11,632            12,622
Income Tax (Benefit) Provision                                3,551             3,760             4,455             4,943
                                                    ---------------   ---------------   ---------------   ---------------

Earnings (Loss) From Continuing Operations Before
   Extraordinary Items                                        5,723             6,327             7,177             7,680
Earnings (Loss) From Discontinued Operations                     --                --                --                --
Gain On Forgiveness Of Debt                                      --                --                --                --
                                                    ---------------   ---------------   ---------------   ---------------

Net Earnings (Loss)                                           5,723             6,327             7,177             7,680
Old Cityscape Preferred Stock Dividends                          --                --                --                --
Old Cityscape Preferred - Beneficial Discount                    --                --                --                --
Old Cityscape Preferred - Increase In Liquidation
  Preference                                                     --                --                --                --
Old Cityscape Preferred - Default Payments                       --                --                --                --
                                                    ---------------   ---------------   ---------------   ---------------
Net Earnings (Loss) Applicable To Common Stock                5,723             6,327             7,177             7,680
                                                    ---------------   ---------------   ---------------   ---------------

Net Interest Income (Expense) Detail:
Interest Income                                               1,719             1,378             1,299             1,434
Interest Expense And Fees On Warehouse Credit
  Facilities                                                     --                --                --                --
                                                    ---------------   ---------------   ---------------   ---------------

Net Interest Income (Expense)                                 1,719             1,378             1,299             1,434
                                                    ---------------   ---------------   ---------------   ---------------
</TABLE>


                                      C-8
<PAGE>   218

            CITYSCAPE CORPORATION AND CITYSCAPE FINANCIAL CORPORATION
                      PROJECTED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        The Company                                           
                                                   ----------------------------------------------------
                                                               Historical
                                                   ----------------------------------
                                                                                           Projected                          
                                                                                          Pre-Confirm                         
                                                     December 31,       November 30,         May 31,         Reorganization   
                                                         1997               1998              1999            Adjustments
                                                   ---------------    ---------------    ---------------    ---------------
<S>                                                <C>                <C>                <C>                <C>
Assets
      Cash And Cash Equivalents                              2,594             21,098             20,137                 --
      Cash Held In Escrow                                   24,207             20,913              7,000                 -- 
      Mortgage Servicing Receivables                         9,525                 --                 --                 -- 
      Trading Securities                                   126,475             33,661             33,061                 -- 
      Mortgages Held For Sale, Net                          93,290            132,049              5,000                 -- 
      Mortgages Held For Investment, Net                     6,531                 --                 --                 -- 
      Equipment And Leasehold Improvements, Net              6,058                 38                 38                 -- 
      Investment In Discontinued Operations, Net            84,232             13,290              6,990                 -- 
      Income Tax Receivable                                 18,376              2,166              2,166                 -- 
      Other Assets                                          27,268             11,195             17,195             17,195
                                                   ---------------    ---------------    ---------------    ---------------
      Total Assets                                         398,556            234,409             91,586                 -- 
                                                   ---------------    ---------------    ---------------    ---------------

Liabilities
      Warehouse Financing Facilities                        77,479            112,637                 --                 -- 
      Accounts Payable And Other Liabilities                63,428             88,335             69,423            (46,412)
      Allowance For Loan Losses                              4,555                 --                 --                 -- 
      Income Taxes Payable                                     300                284                284                 -- 
      Old Senior Notes                                     300,000            300,000            300,000           (300,000)
      Old Subordinated Debentures                          129,620            129,620            129,620           (129,620)
                                                   ---------------    ---------------    ---------------    ---------------

      Total Liabilities                                    575,382            630,876            499,327           (476,032)

Equity (Deficit)
      Old Cityscape Common Stock                               476                649                649               (649)
      Old Cityscape Preferred Stock                             --                  0                  0                 (0)
      Treasury Stock                                          (175)              (175)              (175)               175
      New Common Stock                                          --                 --                 --                128
      Additional Paid-In Capital                           175,477            175,304            175,304           (107,142)
      Retained Earnings (Accumulated Deficit)             (352,604)          (572,246)          (583,520)           583,520
                                                   ---------------    ---------------    ---------------    ---------------
      Total Stockholders Equity (Deficit)                 (176,826)          (396,467)          (407,741)           476,032
                                                   ---------------    ---------------    ---------------    ---------------
      Total Liabilities and Equity (Deficit)               398,556            234,409             91,586                 -- 
                                                   ---------------    ---------------    ---------------    ---------------

<CAPTION>
                                                                         The Reorganized Company
                                                   ---------------------------------------------------------------------
                                                      Projected
                                                     Post-Confirm                       December 31,
                                                        May 31,      ---------------------------------------------------
                                                         1999              1999              2000              2001 
                                                   ---------------   ---------------   ---------------   ---------------
<S>                                                <C>               <C>               <C>               <C>   
Assets
      Cash And Cash Equivalents                             20,137            34,387            27,568            25,976
      Cash Held In Escrow                                    7,000             7,000             7,000             7,000
      Mortgage Servicing Receivables                            --                --                --                -- 
      Trading Securities                                    33,061            37,075            43,605            51,524
      Mortgages Held For Sale, Net                           5,000                --                --                -- 
      Mortgages Held For Investment, Net                        --                --                --                -- 
      Equipment And Leasehold Improvements, Net                 38                38                38                38
      Investment In Discontinued Operations, Net             6,990                --                --                -- 
      Income Tax Receivable                                  2,166                --                --                -- 
      Other Assets                                           8,195             8,195             8,195             8,195
                                                   ---------------   ---------------   ---------------   ---------------
      Total Assets                                          91,586            86,695            86,406            92,733
                                                   ---------------   ---------------   ---------------   ---------------

Liabilities
      Warehouse Financing Facilities                            --                --                --                -- 
      Accounts Payable And Other Liabilities                23,011            16,011            10,000            10,000
      Allowance For Loan Losses                                 --                --                --                -- 
      Income Taxes Payable                                     284                --                --                -- 
      Old Senior Notes                                          --                --                --                -- 
      Old Subordinated Debentures                               --                --                --                -- 
                                                   ---------------   ---------------   ---------------   ---------------

      Total Liabilities                                     23,295            16,011            10,000            10,000

Equity (Deficit)
      Old Cityscape Common Stock                                --                --                --                -- 
      Old Cityscape Preferred Stock                             --                --                --                -- 
      Treasury Stock                                            --                --                --                -- 
      New Common Stock                                         128               128               128               128
      Additional Paid-In Capital                            68,162            68,162            68,162            68,162
      Retained Earnings (Accumulated Deficit)                   --             2,393             8,116            14,443
                                                   ---------------   ---------------   ---------------   ---------------
      Total Stockholders Equity (Deficit)                   68,290            70,684            76,406            82,733
                                                   ---------------   ---------------   ---------------   ---------------
      Total Liabilities and Equity (Deficit)                91,586            86,695            86,406            92,733
                                                   ---------------   ---------------   ---------------   ---------------

<CAPTION>
                                                        The Reorganized Company
                                                   ---------------------------------
                                                             December 31,
                                                   ---------------------------------
                                                         2002              2003        
                                                   ---------------   ---------------  
<S>                                                <C>               <C>              
Assets
      Cash And Cash Equivalents                             28,680            33,740
      Cash Held In Escrow                                    7,000             7,000
      Mortgage Servicing Receivables                            --                --
      Trading Securities                                    55,998            58,617
      Mortgages Held For Sale, Net                              --                --
      Mortgages Held For Investment, Net                        --                --
      Equipment And Leasehold Improvements, Net                 38                38
      Investment In Discontinued Operations, Net                --                --
      Income Tax Receivable                                     --                --
      Other Assets                                           8,195             8,195
                                                   ---------------   ---------------
      Total Assets                                          99,911           107,590
                                                   ---------------   ---------------

Liabilities
      Warehouse Financing Facilities                            --                --
      Accounts Payable And Other Liabilities                10,000            10,000
      Allowance For Loan Losses                                 --                --
      Income Taxes Payable                                      --                --
      Old Senior Notes                                          --                --
      Old Subordinated Debentures                               --                -- 
                                                   ---------------   ---------------
      Total Liabilities                                     10,000            10,000

Equity (Deficit)
      Old Cityscape Common Stock                                --                --
      Old Cityscape Preferred Stock                             --
      Treasury Stock                                            --                --
      New Common Stock                                         128               128
      Additional Paid-In Capital                            68,162            68,162
      Retained Earnings (Accumulated Deficit)               21,620            29,300
                                                   ---------------   ---------------
      Total Stockholders Equity (Deficit)                   89,911            97,590
                                                   ---------------   ---------------
      Total Liabilities and Equity (Deficit)                99,911           107,590
                                                   ---------------   ---------------
</TABLE>


                                      C-9
<PAGE>   219

            CITYSCAPE CORPORATION AND CITYSCAPE FINANCIAL CORPORATION
                 PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                   The Company
                                                                     ---------------------------------------------------------------
                                                                                Historical
                                                                     -------------------------------    Projected       Projected
                                                                                        Eleven         Period From     Seven Months
                                                                      Year Ended     Months Ended      December 1,        Ending
                                                                     December 31,    November 30,        through        December 31,
                                                                         1997           1998           May 31, 1999         1999
                                                                     ------------    -------------     ------------    -------------
<S>                                                                  <C>               <C>                 <C>               <C>  
Cash Flow From Operating Activities
Earnings (Loss) From Continuing Operations                              (118,505)       (219,642)        (11,274)          2,393
  Adjustments To Reconcile Net (Loss) Earnings From
    Continuing Operations To Net Cash Used In
    Continuing Operating Activities:
    Depreciation And Amortization                                          2,846           3,168              --
    Income Taxes Payable                                                 (27,528)            (16)             --            (284)
    Gain On Forgiveness Of Debt                                         (476,032)
    Net Unrealized Gain On Securities
    Decrease (Increase) in Mortgage Servicing Receivables                 40,606           9,525              --              -- 
    Decrease (Increase) in Trading Securities                            (23,276)         92,814             600          (4,015)
    Provision For Losses                                                  12,614           8,728              --              -- 
    Net Purchases (Sales) Of Securities Under Agreements
      To Resell                                                          154,177  
    (Repayment Of) Proceeds From Securities Sold But
      Not Yet Purchased                                                 (152,862) 
    Proceeds From Sale Of Mortgages                                    1,637,387         407,138         127,049           5,000
    Mortgage Origination Funds Disbursed                              (1,655,191)       (454,625)
  Other, Net                                                               5,062          55,930         465,031           4,166
                                                                   -------------   -------------   -------------    ------------ 
Net Cash Provided By (Used In) Continuing Operating Activities          (124,670)        (96,980)        105,375           7,260
Net Cash (Used In) Discontinued Operating Activities                    (177,260)             --              --              -- 
Net Cash Provided By (Used In) Operating Activities                     (301,930)        (96,980)        105,375           7,260
                                                                   -------------   -------------   -------------    ------------ 

Cash Flows From Investing Activities
  (Purchases) Sales Of Equipment                                          (5,134)          2,852              --              -- 
  Sale From Discontinued Operations, Net                                                  70,942           6,300           6,990
  Proceeds From Equipment Sale And Leaseback Financing                     1,776    
  Proceeds From Sale Of Available-For-Sale Securities                     18,289    
  Proceeds From The Sale Of Mortgage Loans Held For  
    Investment                                                            15,248           6,531              --              -- 

Net Cash Provided By (Used In) Investing Activities                       30,179          80,325           6,300           6,990

Cash Flows From Financing Activities
  Increase (Decrease) In Warehouse Credit Facilities                      (2,749)         35,158        (112,637)             -- 
  Proceeds From Notes And Loans Payable                                   49,000  
  Repayment Of Notes And Loans Payable                                  (161,406) 
  Proceeds From Issuance Of Old Cityscape Preferred Stock                 98,250  
  Net Proceeds From Issuance Of Old Cityscape Common
    Stock                                                                    221
  Purchase Of Treasury Stock                                                (175) 
  Net Proceeds From Issuance Of Old Senior Notes                         290,759              --              --              -- 
                                                                   -------------   -------------   -------------    ------------ 
Net Cash Provided By (used In) Financing Activities                      273,900          35,158        (112,637)             -- 

Net Increase (Decrease) In Cash And Cash Equivalents                       2,149          18,503            (962)         14,250
Cash And Cash Equivalents At The Beginning Of Period                         445           2,594          21,098          20,137
                                                                   -------------   -------------   -------------    ------------ 
Cash And Cash Equivalents At The End Of The Period                         2,594          21,097          20,136          34,387
                                                                   -------------   -------------   -------------    ------------ 

<CAPTION>
                                                                                     The Reorganized Company                        
                                                                   ------------------------------------------------------------- 
                                                                                 Projected Year Ending December 31,                 
                                                                   ------------------------------------------------------------- 
                                                                        2000            2001           2002             2003      
                                                                   -------------   -------------   -------------    ------------ 
<S>                                                                 <C>             <C>             <C>             <C>   
Cash Flow From Operating Activities
Earnings (Loss) From Continuing Operations                                 5,723           6,327           7,177           7,680
  Adjustments To Reconcile Net (Loss) Earnings From
    Continuing Operations To Net Cash Used In
    Continuing Operating Activities:
    Depreciation And Amortization
    Income Taxes Payable         
    Gain On Forgiveness Of Debt                                      
    Net Unrealized Gain On Securities
    Decrease (Increase) In Mortgage Servicing Receivables                     --              --              --              --
    Decrease (Increase) In Trading Securities                             (6,530)         (7,919)         (4,474)         (2,619)
    Provision For Losses                                                      --              --              --              --
    Net Purchases (Sales) Of Securities Under Agreements
      To Resell                                                           
    (Repayment Of) Proceeds From Securities Sold But
      Not Yet Purchased                                                   
    Proceeds From Sale Of Mortgages                                       
    Mortgage Origination Funds Disbursed
  Other, Net                                                              (6,011)             --              --              --
                                                                   -------------   -------------   -------------    ------------ 
Net Cash Provided By (Used In) Continuing Operating Activities            (6,818)         (1,592)          2,704           5,061
Net Cash (Used In) Discontinued Operating Activities                          --              --              --              --
                                                                   -------------   -------------   -------------    ------------ 
Net Cash Provided By (Used In) Operating Activities                       (6,818)         (1,592)          2,704           5,061
                                                                   -------------   -------------   -------------    ------------ 

Cash Flows From Investing Activities
  (Purchases) Sales Of Equipment                                       
  Sale From Discontinued Operations, Net                               
  Proceeds From Equipment Sale And Leaseback Financing                 
  Proceeds From Sale Of Available-For-Sale Securities                  
  Proceeds From The Sale Of Mortgage Loans Held For
    Investment                                                                --              --              --              --
                                                                   -------------   -------------   -------------    ------------ 

Net Cash Provided By (Used In) Investing Activities                           --              --              --              --
                                                                   -------------   -------------   -------------    ------------ 

Cash Flows From Financing Activities
  Increase (Decrease) In Warehouse Credit Facilities                      
  Proceeds From Notes And Loans Payable                                   
  Repayment Of Notes And Loans Payable                                    
  Proceeds From Issuance Of Old Cityscape Preferred Stock                 
  Nat Proceeds From Issuance Of Old Cityscape Common
    Stock 
Purchase Of Treasury Stock
  Net Proceeds From Issuance Of Old Senior Notes                              --              --              --              --
                                                                   -------------   -------------   -------------    ------------ 

Net Cash Provided By (used In) Financing Activities                           --              --              --              --
                                                                   -------------   -------------   -------------    ------------ 

Net Increase (Decrease) In Cash And Cash Equivalents                      (6,818)         (1,592)          2,704           5,061
Cash And Cash Equivalents At The Beginning Of Period                      34,387          27,568          25,976          28,680
                                                                   -------------   -------------   -------------    ------------ 
Cash And Cash Equivalents At The End Of The Period                        27,568          25,976          28,680          33,740
                                                                   -------------   -------------   -------------    ------------ 
</TABLE>


                                      C-10
<PAGE>   220

         Exhibit D to Debtors' First Amended Joint Disclosure Statement
                 Pursuant to Section 1125 of the Bankruptcy Code

                              Liquidation Analysis


                                      C-11
<PAGE>   221

Chapter 7 Liquidation Analysis

            The "Best Interest Test" under Section 1129 of the Bankruptcy Code
requires that each holder of impaired claims or impaired interests receive
property with a value not less than the amount such holder would receive in a
Chapter 7 liquidation. As indicated above, Cityscape and CSC believe that under
the Plan, Holders of Impaired Claims or Impaired Interests will receive property
with a value equal to or in excess of the value such Holders would receive in a
liquidation of Cityscape and CSC under Chapter 7 of the Bankruptcy Code. The
Chapter 7 Liquidation Analysis set forth herein demonstrates that the Plan
satisfies the requirements of the "Best Interest Test."

            To estimate potential returns to Holders of Claims and Interests in
a Chapter 7 liquidation, Cityscape and CSC determined, as might a Bankruptcy
Court conducting such an analysis, the amount of liquidation proceeds that might
be available for distribution and the allocation of such proceeds among the
Classes of Claims and Interests based on their relative priority. Cityscape and
CSC considered many factors and data, including actual sales and market data
from Cityscape's and CSC's most recent sales of whole loans and residual
interests, which are their two significant types of assets. Cityscape and CSC
have assumed that the liquidation of all assets would be conducted in an orderly
manner and, as such, the bids received for Cityscape's and CSC's significant
assets would be, at most, materially no different from the bids Cityscape and
CSC have received from sales and inquiries in recent months. The liquidation
proceeds available to Cityscape and CSC for distribution to Holders of Claims
against and Interests in Cityscape and CSC would consist of the net proceeds
from the disposition of the assets of Cityscape and CSC, augmented by any other
cash held and generated during the assumed holding period stated herein by
Cityscape and CSC and after deducting the incremental expenses of operating the
business pending disposition.

            In general, as to each entity, liquidation proceeds would be
allocated in the following priority: (i) first, to the Claims of secured
creditors to the extent of the value of their collateral; (ii) second, to the
costs, fees and expenses of the liquidation, as well as other administrative
expenses of Cityscape's and CSC's Chapter 7 cases, including tax liabilities;
(iii) third, to the unpaid Administrative Claims of the Reorganization Cases;
(iv) fourth, to Priority Tax Claims and other Claims entitled to priority in
payment under the Bankruptcy Code; (v) fifth, to Unsecured Claims; (vi) sixth,
to Holders of Old Cityscape Preferred Stock; and (vii) seventh, to Holders of
Old Cityscape Common Stock. Cityscape's and CSC's liquidation costs in a Chapter
7 case would include the compensation of a bankruptcy trustee, as well as
compensation of counsel and other professionals retained by such trustee, asset
disposition expenses, applicable taxes, litigation costs, Claims arising from
the operation of Cityscape and CSC during the pendency of the Chapter 7 cases
and all unpaid Administrative Claims incurred by Cityscape and CSC during the
Reorganization Cases that are allowed in the Chapter 7 case. The liquidation
itself might trigger certain Priority Claims, such as Claims for severance pay,
and would likely accelerate or, in the case of taxes, make it likely that the
Internal Revenue Service would assert all of its claims as Priority Tax Claims
rather than asserting them in due course as is expected to occur under the
Reorganization Cases. These Priority Claims would be paid in full out of the net
liquidation proceeds, after payment of secured Claims, Chapter 7 costs of


                                      D-1
<PAGE>   222

administration and other Administrative Claims, and before the balance would be
made available to pay Unsecured Claims or to make any distribution in respect of
Interests.

            The following Chapter 7 liquidation analysis is provided solely to
discuss the effects of a hypothetical Chapter 7 liquidation of Cityscape and CSC
and is subject to the assumptions set forth herein. There can be no assurance
that such assumptions would be accepted by a Bankruptcy Court. The Chapter 7
liquidation analysis has not been independently audited or verified.

Liquidation Value of Cityscape and CSC

            The table below details the computation of Cityscape's and CSC's
liquidation value and the estimated distributions to Holders of Impaired Claims
and Impaired Interests in a Chapter 7 liquidation of Cityscape and CSC. This
analysis is based upon a number of estimates and assumptions that are inherently
subject to significant uncertainties and contingencies, many of which would be
beyond the control of Cityscape and CSC. Accordingly, while the analyses that
follow are necessarily presented with numerical specificity, there can be no
assurance that the values assumed would be realized if Cityscape and CSC were in
fact liquidated, nor can there be any assurance that a Bankruptcy Court would
accept this analysis or concur with such assumptions in making its
determinations under Section 1129(a) of the Bankruptcy Code. Actual liquidation
proceeds could be materially lower or higher than the amounts set forth below;
no representation or warranty can or is being made with respect to the actual
proceeds that could be received in a Chapter 7 liquidation of Cityscape and CSC.
The liquidation valuations have been prepared solely for purposes of estimating
proceeds available in a Chapter 7 liquidation of the Estates and do not
represent values that may be appropriate for any other purpose. Nothing
contained in these valuations is intended or may constitute a concession or
admission of Cityscape and CSC for any other purpose.

Estimated Liquidation Proceeds

            Cityscape and CSC assume that under an orderly Chapter 7 liquidation
scenario, zero value would be assigned to the mortgage servicing platform and
that the loan servicing operation would cease. As such, Cityscape and CSC assume
that the majority of the proceeds from liquidation will result from sales of
their interest-only and residual mortgage securities (the "Residuals") as of the
commencement of the liquidation. In determining the estimated proceeds from the
sale of these, as well as other insignificant assets, Cityscape and CSC
performed the following:

            (i) Estimated the value of all assets and related liabilities as of
      May 31, 1999, based on the most recent balance sheet information and by
      forecasting the effect of maintaining their current operations and recent
      performance through May 31, 1999; and

            (ii) Estimated the recovery on each individual class of assets based
      on current market data without taking into account the impact of Chapter 7
      on the potential buyers' pricing strategies.


                                      D-2
<PAGE>   223

Nature and Timing of the Liquidation Process

            Under Section 704 of the Bankruptcy Code, a Chapter 7 trustee must,
among other duties, collect and convert the property of the debtor's estate to
cash and close the estate as expeditiously as is compatible with the best
interests of the parties in interest. Solely for the purposes of this
liquidation analysis, it is assumed that Cityscape's and CSC's Reorganization
Cases would be converted to a Chapter 7 liquidation on May 31, 1999. Cityscape
and CSC assumed dispositions of their assets in multiple transactions, rather
than as an entirety or a piecemeal liquidation of Cityscape's and CSC's
operating assets, during a five-month period ending October 31, 1999.

Additional Liabilities and Reserves

            Cityscape and CSC believe that there would be certain actual and
contingent liabilities and expenses for which provision would be required in a
Chapter 7 liquidation before distributions could be made to creditors in
addition to the expenses that would be incurred in a Chapter 11 reorganization,
including: (a) certain liabilities that are not dischargeable pursuant to the
Bankruptcy Code; (b) Administrative Claims including the fees of a trustee and
of counsel and other professionals (including financial advisors and
accountants) and other liabilities; and (c) certain administrative costs
including the incremental expenses of marketing the assets and performing the
procedures necessary to divest the remaining Residuals. Management believes that
there is significant uncertainty as to the reliability of Cityscape's and CSC's
estimates of the amounts related to the foregoing that have been assumed in the
liquidation analysis.

Conclusion

            In summary, Cityscape and CSC believe that a Chapter 7 liquidation
of Cityscape and CSC would result in a diminution in the value to be realized by
the Holders of Claims and Interests. As set forth in the table below,
Cityscape's and CSC's management estimates that the total liquidation proceeds
available for distribution, net of Chapter 7 expenses, would aggregate
approximately $40,297 million. Cityscape and CSC believe that the Claims against
and Interests in the Company other than Claims for Chapter 7 trustees' fees,
professionals' fees and related expenses, Claims based upon the Old Senior Notes
and Claims of general unsecured creditors would receive no value in a
liquidation of Cityscape and CSC under Chapter 7 of the Bankruptcy Code. The
Holders of the Old Senior Notes and general unsecured creditors are expected to
receive recoveries under the Plan in excess of that shown in a Chapter 7
liquidation. The recovery for Cityscape's and CSC's creditors and equity
security holders, in aggregate, would be less than the proposed distribution
under the Plan. Consequently, Cityscape and CSC believe that the Plan will
provide a substantially greater ultimate return to the Holders of Claims and
Interests than would a Chapter 7 liquidation.

            The following table estimates Cityscape's and CSC's assets as of May
31, 1999, and the amount of recovery on each asset.


                                      D-3
<PAGE>   224

                              LIQUIDATION ANALYSIS
                          ESTIMATED AS OF MAY 31, 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                Estimated       Estimated
                                                     Book      Percentage      Liquidation
                                                    Balance     Recovery          Value
                                                    -------    ----------      -----------
<S>                      <C>                        <C>            <C>           <C>    
Assets available to creditors                                               
Cash and Cash Equivalents(1) ................       $20,137        100.0%        $20,137
Trading Securities ..........................        33,061         50.0%         16,531
Mortgages Held for Sale .....................         5,000         80.0%           4.01
Equipment and Leasehold Improvements, Net ...            38          0.0%             --
Investment in Discontinued Operations, Net ..         6,990         70.0%          4,893
Income Tax Receivable .......................         2,166        100.0%          2,166
Other Assets (2) ............................        17,195          0.0%             --
                                                    -------         ----         -------
Total Assets Available to Creditors .........       $84,587         56.4%        $47,727
                                                    =======         ====         =======
</TABLE>

----------                                                                  
Notes:                                                           
                                                             
(1)   Does not include cash held in escrow. Assumes that cash held in escrow is
      netted against escrows payable.

(2)   Primarily includes prepaid expenses, prepaid insurance and foreclosure and
      interest advances in connection with mortgage loan securitizations.


                                      D-4
<PAGE>   225

                 APPLICATION OF PROCEEDS TO CLAIMS AND INTERESTS
                          ESTIMATED AS OF MAY 31, 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                         Estimated      Proceeds
                                           Amount     Available to   Percentage
                                         of Claims   Satisfy Claims   Recovery
                                         ---------   --------------   --------
<S>                                        <C>          <C>            <C>    
Total estimated liquidation proceeds 
 available for distribution ...........               $   47,727

 Chapter 7 expenses
   Trustee's fees .....................                    1,400
   Operating costs ....................                    4,800
   Professional fees...................                    1,230
                                                         -------
Available to pay unsecured creditors ..                  $40,297
                                                         =======

Unsecured Creditors
Priority and Chapter 11 Administrative      10,000        10,000       100.00%
 Claims (3)
Old Senior Notes (4)                       332,513        29,789         8.96%
General Unsecured Claims(S)                  8,000           508         6.35%
Old Subordinated Debentures (6)            136,659            --         0.0%

Interests
                                                                         
Old Cityscape Preferred Stock                   --            --         0.0%
Old Cityscape Common Stock                      --            --         0.0%
Total Claims                             $ 487,172
                                         =========
</TABLE>

Notes:

(3)   The Debtors are not currently in a position to determine the amount of
      chapter 11 Administrative Claims, Priority Tax Claims and other Priority
      Claims for which they will be liable as of the assumed date of
      liquidation. However, for the purpose of preparing this analysis, they
      have assumed that the aggregate amount of such Claims will not exceed
      $10,000,000.

(4)   Includes $300,000,000 of principal on Old Senior Notes and $32,512,500 of
      accrued interest.

(5)   Includes other unsecured claims including, but not limited to, lease
      rejection claims of approximately $5.8 million (assuming no leases are
      sold), all of which claims are assumed, for purposes of this analysis
      only, not to constitute "Senior Indebtedness" under the indenture goveming
      the Old Subordinated Debentures.

(6)   Includes $129,620,000 of principal on Old Subordinated Debentures and
      $7,038,720 of accrued interest.


                                      D-5
<PAGE>   226

                 File a Plan: 98-22569 Cityscape Financial Corp.
                              U.S. Bankruptcy Court
                          Southern District of New York
                           Notice of Electronic Filing

The following transaction was received from Truitt, A. Brent on 3/26/1999 at
11:01 AM

Case Name:          Cityscape Financial Corp.
Case Number:        98-22569-ash
Document Number:    289

Docket Text:

First Amended Disclosure Statement (Joint) Pursuant to Section 1125 of the
Bankruptcy Code filed by A. Brent Truitt of Latham & Watkins on behalf of
Cityscape Financial Corp.. (Attachments: # (1) Exhibit A - First Amended Joint
Plan, # (2) Exhibit A-D to Exhibit A - First Amended Joint Plan, # (3) Exhibit B
- Examiners Report, # (4) Exhibit C - Balance Sheet and Projected Financial
Information, # (5) Exhibit D - Liquidation Analysis)(Truitt, A.)

The following document(s) are associated with this transaction:

Document description: Main Document 

Original filename: N:/USER/SZWICK/DATA/PDF/ZWICK/CityScape/Amendedp&ds/discstat.
pdf 
Electronic document Stamp: 
[STAMP NYSBStamp_ID=842906028 [Date=3/26/1999][FileNumber=29025-0][4562441df2f48
a4672d8a3041c4f4016d4553934c59216f21e649e76902f08afc8cfff8lef6bb7193b164e7a7fc42
e7a4bf1ab239ca6aa65cf98c37996362d9e]]

Document description: Exhibit A - First Amended Joint Plan 
Original filename: N:/USER/SZWICK/DATA/PDF/ZWICK/CityScape/Amendedp&ds/exhibit
A-Plan.pdf 
Electronic document Stamp: 
[STAMP NYSBStamp_ID=842906028[Date=3/26/999][FileNumber=29O2S-1][a5ccff67c384f37
9dac0e257813b1eabe9548c888c76ab008d0a62e971cfa6a5ac51960e847158a31b010edd454dce5
cf475b14a79592fd41ed6a109b2e85eea]]

Document description: Exhibit A-D to Exhibit A - First Amended Joint Plan
Original filename: N:/USER/SZWICK/DATA/PDF/ZWICK/CityScape/Amendedp&d5/planexha-
d.pdf 
Electronic document Stamp: 
[STAMP NYSB Stamp_ID=842906028[Date=3/26/1999][FileNumber=29025-2][037883fdcd4ba
d4f13d2ef6fa44c0f5813811912d5f4742f435300c418c6ef9425ddb55ead48ebd729ad2a4f49ea0
959011c1ca26e859c5929964be1027961c5]

Document description: Exhibit B - Examiners Report
Original filename:N:/USER/SZWICK/DATA/PDF/ZWICK/CityScape/AmendedP7ds/examrpt.
PDF
Electronic document Stamp:
[STAMP NYSBStamp_ID=842906028[Date=3/26/1999][FileNumber=29025-3][7c6a69676b487c
7f272ab09fd25d0ec456a1dafd99fe4b205f7349f1fd353a5571a26925e5288833d09417c7a84790
078cb02f1f4e96de470093ad718783b0ce]]

Document description: Exhibit C - Balance Sheet and Projected Financial
Information
Original filename: N:/USER/SZWICK/DATA/PDF/ZWICK/CityScape/AmendedP&ds/Balance
Sheet.PDF
Electronic document Stamp: 
[STAMP NYSBStamp_ID=842906028[Date=3/26/1 999][FileNumber29O25-4][b4d7e5a4d6892e
7d1d8a26e905a3b8d17abdd9e6cce784129148bd9c1lOf13fa5361led45c19ab2c2b0773e4b82482
be9f1435edffb7eb9ef9fa6a706da358c5]]

Document description: Exhibit D Liquidation Analysis 
Original filename: N:/USER/SZWICK/DATA/PDF/ZWICK/CityScape/Amendedp&ds/ExhibitD.
PDF
Electronic document Stamp:

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<PAGE>   227

[STAMP NYSBStamp_ID=842906028[Date=3/26/1999][FileNumber=29O25-5][ae8c94cl06c0O3
2ddOac5a3d891f4f4d4a7d2f3dac37d3a776e786bOff8b65l3c433dO7dc57264bb1276baaff95d89
3a891045bcbf8l8c963c91029O6dO82325]]

98-22569-ash Notice will be electronically mailed to:

Kevin W. Barrett kbarrett@gdclaw.com;jricciardi@gdclaw.com

Saul Eliot Burian scipolla@kramer-levin.com

Alan Morris Feld AMFELD@PHJW.COM;AGYEBI@PHJW.COM;SLHARRIS@PHJW.COM

Joy F. Forster
jforster@brobeck.com;ekhachigian@brobeck.com;oridges@brobeck.com;

djbrown@brobeck.com

David M. Friedman khbtf!khbt!ffigueroa@attmail.com

Michael N. Gottfried MGOTTFRI@Milbank.com

Mark R. Somerstein msomerstein@kelleydrye.com

Michael Scott Stainer mstamer@akingump.com;idizengoff@akingump.com

Richard L. Wynne

rlwynne@wsilaw.com;skopman@wsilaw.com;cburch@wsilaw.com;tdiconti@wsilaw.com;
pnaegeley@wsilaw.com

98-22569-ash Notice will not be electronically mailed to:

Nancy L. Bertolino
919 Third Avenue
New York, NY 10022
NBertolino@Kramer-Levin.com

Ronald L. Cohen
One Battery Park Plaza
New York, NY 10004
cohenr@sewkis.com

Carla E. Craig
Steiner, LLP
120 W. 45th Street
New York, NY 10036
ccraig@brownraysman.com

Richard L. Epling
1 Battery Park Plaza
New York, NY 10004
eplingr@winstim.com

Rachael Fink
885 Third Avenue
New York, NY 10022
rachael.fink@lw.com

Nathan M. Fuchs
7 World Trade Center                                                       
New York, NY 10048


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Andrew C. Gold
2 Park Avenue
New York, NY 10016
AGOLD@HERRICK.COM

Bruce H. Kaplan
225 Broadhollow Road
Suite 404W
Melville, NY 11530

David Michael Pollack
81 Main Street
White Plains, NY 10601
sz@cloud9.net

Janine L. Pollack
One Pennsylvania Plaza
New York, NY 101 19-0165

Jeffrey N. Rich
919 Third Avenue
New York, NY 10022
jeffr@cosmoweb.net

Brian S. Rosen
767 Fifth Avenue
New York, NY 10153
brian.rosen@weil.com

Robert J. Rosenberg
885 Third Avenue
New York, NY 10022
robert.rosenberg@lw.com

David A. Schrader
185 Madison Avenue
New York, NY 10016

Barry N. Seidel
1221 Avenue of the Americas
New York, NY 10020
bns@sonnenschein.com

Doria G. Stetch
33 Whitehall Street
22nd Floor
New York, NY 10004

Arturo D. Tavarez
300 Quarropas Street
White Plains, NY 10601

David L. Tillem & Dicker
925 Westchester Avenue
White Plains, NY 10604


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<PAGE>   229

tillemd@wemed.com

A. Brent Truitt
885 Third Avenue
New York, NY 10022
brent.truitt@lw.com

Roland Sanford Young
885 Third Avenue
Suite 1000
New York, NY 10022
ROLAND.YOUNG@LW.COM


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