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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 27, 1998
AAMES FINANCIAL CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Delaware 0-19604 95-4340340
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
350 South Grand Avenue, 52nd Floor
Los Angeles, California 90071
(Address of Principal Executive Offices)
(213) 210-5000
(Registrant's Telephone Number, Including Area Code)
NA
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
1
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ITEM 5. OTHER EVENTS
On April 27, 1998 (the "Closing Date"), Aames Financial
Corporation (the "Company") issued 2,225,865 shares of its common stock, par
value $.001 per share (the "Common Stock") to Thirty-Five East Investments LLC
("Purchaser #1") and 556,466 shares of the Common Stock (collectively, the
"Shares") to Turtle Creek Revocable Trust ("Purchaser #2," and together with
Purchaser #1, the "Purchasers") pursuant to Stock Purchase Agreements, dated as
of March 19, 1998, between the Company and each of the Purchasers. On the
Closing Date, the Company also issued a warrant to purchase 2,225,865 shares of
the Common Stock to Purchaser #1 and a warrant to purchase 556,466 shares of the
Common Stock to Purchaser #2 pursuant to Warrant Agreements, dated as of March
19, 1998, between the Company and each of the Purchasers. The Company entered
into Registration Rights Agreements, dated as of March 19, 1998, with each of
the Purchasers providing them with certain registration rights with respect to
the Shares, the Common Stock issuable upon exercise of the Warrants and, under
certain circumstances, the Warrants.
The Stock Purchase Agreements, Warrant Agreements and
Registration Rights Agreements referred to above are attached as exhibits to
this Current Report on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
AAMES FINANCIAL CORPORATION
Dated: April 27, 1998 By: /s/ BARBARA S. POLSKY
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Barbara S. Polsky
Executive Vice President,
General Counsel and Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
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<S> <C>
4.1 Warrant Agreement, dated as of March 19, 1998, between the
Company and Thirty-Five East Investments LLC
4.2 Warrant Agreement, dated as of March 19, 1998, between the
Company and Turtle Creek Revocable Trust
10.1 Stock Purchase Agreement, dated as of March 19, 1998, between
the Company and Thirty-Five East Investments LLC
10.2 Stock Purchase Agreement, dated as of March 19, 1998, between
the Company and Turtle Creek Revocable Trust
10.3 Registration Rights Agreement, dated as of March 19, 1998,
between the Company and Thirty-Five East Investments LLC
10.4 Registration Rights Agreement, dated as of March 19, 1998,
between the Company and Turtle Creek Revocable Trust
</TABLE>
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EXHIBIT 4.1
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WARRANT AGREEMENT
Dated as of March 19, 1998
-By and Between-
AAMES FINANCIAL CORPORATION
and
THIRTY-FIVE EAST INVESTMENTS LLC
- --------------------------------------------------------------------------------
The securities represented by the Warrants referred to herein have not been
registered under the Securities Act of 1933, as amended. The transferability of
such securities and of any securities which may be issued upon the exercise of
such securities is subject to the provisions of this Warrant Agreement.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. Issuance of Warrants; Exercise Price...................................1
Section 2. Form of Warrant Certificates...........................................2
Section 3. Execution of Warrant Certificates......................................2
Section 4. Registration; Transfers and Exchanges..................................3
Section 5. Mutilated or Missing Warrant Certificates..............................3
Section 6. Duration and Exercise of Warrants......................................3
Section 7. Payment of Taxes; Transfer and Exchange Fees...........................7
Section 8. Adjustments; Notices...................................................8
Section 9. Fractional Warrants and Fractional Shares.............................16
Section 10. No Rights as Stockholders.............................................17
Section 11. Representations, Warranties and Covenants of
the Company...........................................................17
Section 12. Inspection of Warrant Agreement.......................................20
Section 13. Issuance of New Warrant Certificates..................................20
Section 14. Notices...............................................................20
Section 15. Supplements and Amendments............................................21
Section 16. Successors............................................................22
Section 17. Governing Law.........................................................22
Section 18. Jurisdiction and Venue................................................22
Section 19. Benefits of this Agreement............................................23
Section 20. Severability..........................................................23
Section 21. Specific Performance..................................................23
Section 22. Integration...........................................................24
Section 23. Further Assurances....................................................24
Section 24. Headings and Table of Contents........................................24
Section 25. Counterparts..........................................................24
Section 26. Legends...............................................................24
Section 27. Opinion on Transfer of Warrant Shares After
Exercise..............................................................25
</TABLE>
EXHIBIT A. FORM OF WARRANT CERTIFICATE
EXHIBIT B. FORM OF ASSIGNMENT
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WARRANT AGREEMENT (this "Agreement"), dated as of March 19, 1998,
by and among Aames Financial Corporation, a Delaware corporation (the "Company")
and Thirty-Five East Investments LLC, a Delaware limited liability company (the
"Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Stock
Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"); and
WHEREAS, pursuant to the Stock Purchase Agreement, as
consideration for the purchase of 2,225,865 shares of Common Stock ("Common
Stock"), par value $.001 per share, of the Company (the "Purchase Shares"), the
Company will issue to the Purchaser at the Closing (as defined in the Stock
Purchase Agreement) 2,225,865 warrants to purchase 2,225,865 shares of Common
Stock (each a "Warrant" and collectively, "Warrants"), at an exercise price of
$17.2031 per share, subject to adjustment as provided herein; and
WHEREAS, the Company and the Purchaser have entered into a
Registration Rights Agreement, dated as of the date hereof, providing for
certain matters relating to the registration of the Purchase Shares and the
Common Stock issuable upon exercise of the Warrants under the Securities Act of
1933, as amended (the "Securities Act");
WHEREAS, the Company and Turtle Creek Revocable Trust (the "Other
Purchaser") have entered into a stock purchase agreement, dated the date hereof
(the "Other Stock Purchase Agreement"), providing for, among other things, the
sale by the Company and the purchase by the Other Purchaser of an aggregate of
556,466 shares of Common Stock and warrants to purchase 556,466 shares of Common
Stock at an initial exercise price of $17.2031 per share, a warrant agreement,
dated the date hereof, relating to such warrants (the "Other Warrant
Agreement");
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Issuance of Warrants; Exercise Price.
Pursuant to the Stock Purchase Agreement, the Company shall
issue and deliver to the Purchaser one or more warrant
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certificates (each a "Warrant Certificate") representing an aggregate of
2,225,865 Warrants. Each Warrant shall initially provide the Purchaser, or such
other registered holder of such Warrant to whom transfer is authorized in
accordance with the terms of this Agreement (the Purchaser and such other
registered holder(s) are hereinafter referred to individually as the "Registered
Holder" and collectively as the "Registered Holders"), with the right to
purchase initially one fully paid and nonassessable share of Common Stock (a
"Share" and, collectively, the "Shares") in consideration of the payment by the
Registered Holder of the exercise price (the "Exercise Price") at the time in
effect hereunder. The Exercise Price shall initially be $17.2031 per Warrant.
The Exercise Price and the number of Shares issuable upon exercise of a Warrant
(the "Warrant Exercise Rate") shall be subject to adjustment as provided in
Section 8.
Section 2. Form of Warrant Certificates. The Warrant Certificates
representing the Warrants and the Forms of Exercise and Assignment attached
thereto shall be substantially in the forms set forth in Exhibits A and B
attached hereto. The Warrant Certificates shall be typewritten, printed,
lithographed or engraved and may have such letters, numbers or other marks of
identification and such legends or endorsements as may be required to comply
with any applicable law, rule or regulation or with the rules of any securities
exchange or as may, consistent with the provisions of this Agreement, be
determined by the officers executing any such Warrant Certificate, as evidenced
by their execution of the Warrant Certificate. Each Warrant Certificate shall
contain a legend substantially as set forth in the Form of Warrant Certificate
attached hereto as Exhibit A.
Section 3. Execution of Warrant Certificates. The President or
any Vice President of the Company shall execute the Warrant Certificates on
behalf of the Company, and the official seal of the Company (which may be in
facsimile form) shall be reproduced on the Warrant Certificates and attested by
the Secretary or any Assistant Secretary of the Company. The signatures of the
President or any Vice President and of the Secretary or any Assistant Secretary
on any Warrant Certificate may be manual or facsimile. Warrant Certificates may
bear the manual or facsimile signatures of individuals who were at the time of
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execution of such Warrant Certificates the proper officers of the Company
notwithstanding that such individuals, or any of them, ceased to be such
officers prior to the delivery of such Warrant Certificate or were not such
officers at the date of this Agreement.
Section 4. Registration; Transfers and Exchanges. The Company
shall maintain at its executive offices a register reflecting the ownership of
the Warrant Certificates and any transfers thereof from time to time (the
"Warrant Register").
The Company may deem and treat the Registered Holder of each
Warrant Certificate as indicated in the Warrant Register as the absolute owner
thereof (notwith standing any notation of ownership or other writing thereon
made by anyone) for the purpose of any exercise thereof, any distribution to the
Registered Holder thereof and for all other purposes, and the Company shall not
be affected in any way by any notice to the contrary.
Upon execution and delivery of a written notice in the form of
Exhibit B to the Company by the Registered Holder and its transferee of a
transfer of any Warrant Certificate, the Company shall reflect such transfer in
the Warrant Register.
Section 5. Mutilated or Missing Warrant Certificates. If any
Warrant Certificate at any time becomes mutilated, lost, stolen or destroyed,
the Company will issue in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and in substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant Certificate and indemnity reasonably satisfactory to the Company.
Section 6. Duration and Exercise of Warrants.
(a) The Warrants shall expire on April 19, 2001 (the "Expiration
Date"), notwithstanding any change in the capitalization of the Company
as a result of any stock split, stock dividend, stock combination or
otherwise. Each Warrant may be exercised by the
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Registered Holder thereof only upon the occurrence of a Purchase Event
(as defined below) of the Company. Thereafter, Warrants may be exercised
on any business day beginning on the date of the Purchase Event and
prior to the close of business on the Expiration Date. Each Warrant not
exercised at or before the close of business on the Expiration Date
shall become void and of no value, and all rights of the Registered
Holder under the Warrant Certificate and under this Agreement shall
cease.
(b) For purposes of this Section 6, the following terms shall
have the meanings ascribed to them:
"Purchase Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) The Company or any of its subsidiaries shall have
entered into an agreement to engage in an Acquisition Transaction
(as defined below) with any Person (the term "Person" for
purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934 (the "Exchange Act"), and the rules and regulations
thereunder) other than Ronald O. Perelman, Gerald J. Ford or any
of their respective affiliates which is not a Person with equity
securities listed on a national securities exchange or quoted on
the Nasdaq National Market (each, a "Non-Public Purchaser
Affiliate") or the Board of Directors of the Company shall have
recommended that the shareholders of the Company approve or
accept any Acquisition Transaction with any Person other than a
Non-Public Purchaser Affiliate. For purposes of this Section 6,
"Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving the Company
or any of its significant subsidiaries, (y) a purchase, lease or
other acquisition of all or substantially all of the assets of
the Company or any significant subsidiary or (z) a purchase or
other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 50% or
more of the voting power of the Company or any of its significant
subsidiaries, provided that
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the term "Acquisition Transaction" does not include any internal
merger, consolidation, or similar transaction involving solely
the Company and one or more of its subsidiaries or a merger,
consolidation or similar transaction as to which the holders of
the Company's common stock immediately prior thereto own in the
aggregate at least 50% of the common stock of the publicly held
surviving or successor corporation or any publicly held ultimate
parent company thereof immediately after giving effect thereto.
(ii) Any Person (other than a Non-Public Purchaser
Affiliate or any subsidiary of the Company acting in a fiduciary
capacity in the ordinary course of business) shall have acquired
Beneficial Ownership of shares of Common Stock (the term
"Beneficial Ownership" for purposes of this Section 6, having the
meaning assigned thereto in Section 13(d) of the Exchange Act,
and the rules and regulations thereunder) such that, upon the
consummation of such acquisition, such Person would have
Beneficial Ownership, in the aggregate, of 50% or more of the
then outstanding shares of Common Stock;
(iii) Any Person other than any Non-Public Purchaser
Affiliate shall have made a bona fide proposal to the Company or
its shareholders, by public announcement or written communication
that is or becomes the subject of public disclosure, to engage in
an Acquisition Transaction (including, without limitation, any
situation in which any Person other than a Non-Public Purchaser
Affiliate shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securi ties Act, with respect to, a tender
offer or exchange offer to purchase any shares of Common Stock
such that, upon consummation of such offer, such Person would own
or control 50% or more of the then outstanding shares of Common
Stock; and
(iv) The first day on which a majority of the members of
the Board of Directors of the Company are not "Continuing
Directors" (defined as
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members of the Board of Directors of the Company who (A) were
members of such Board on the date hereof or (B) were nominated
for election or elected to such Board pursuant to the Stock
Purchase Agreement, the Other Stock Purchase Agreement, or with
the approval of a majority of the Continuing Directors who where
members of such Board at the time of such nomination or
election).
"Business day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in Los
Angeles, California are authorized or obligated by law or executive
order to close.
(c) The Company shall notify the Purchaser promptly in writing of
the occurrence of any Purchase Event (other than by a Non-Public
Purchaser Affiliate).
(d) Subject to the provisions of this Agreement, the Registered
Holder of a Warrant Certificate shall have the right to exercise the
Warrant or Warrants evidenced by such Warrant Certificate by delivering
the Warrant Certificate, along with the Form of Exercise attached
thereto duly filled in and executed by the Registered Holder or his duly
authorized agent, and, upon such exercise, to purchase from the Company
at a purchase price equal to the Exercise Price then in effect
multiplied by the number of Warrants so exercised (such product, the
"Aggregate Exercise Price") the number of Shares at the time purchasable
upon exercise of such Warrant or Warrants, including any shares of any
class or series of stock into which such Shares may hereafter be changed
upon surrender to the Company of the Warrant Certificate evidencing such
Warrant or Warrants, upon payment of the Aggregate Exercise Price in
lawful money of the United States of America in cash, by cashier's check
payable to the order of the Company or by wire transfer to the Company's
account of immediately available funds. The number of Shares, and the
amount and type of securities or other property, purchasable upon
exercise of a Warrant shall be subject to adjustment as provided in
Section 8.
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(e) Subject to Section 7, (i) upon such surrender of a Warrant
Certificate and payment of the Aggregate Exercise Price with respect to
the Warrant or Warrants being exercised on or prior to the Expiration
Date, the Company shall deliver or cause to be delivered to the
Registered Holder surrendering such Warrant Certificate certificates for
the Shares, certificates or other appropriate instruments for any other
securities, and such other property issuable upon the exercise of such
Warrant or Warrants evidenced by such Warrant Certificate being
exercised, in such name or names as the Registered Holder of such
Warrant Certificate shall designate on the Form of Exercise attached
thereto and bearing such restrictive legends concerning transferability
as the Company deems necessary; and (ii) such Shares, securities and
other property shall be deemed to have been issued, and any person so
designated therein shall be deemed to have become the holder of record
of such Shares, securities or property as of the date of the surrender
of such Warrant Certificate and payment of the Aggregate Exercise Price.
(f) All or fewer than all of the Warrants evidenced by a Warrant
Certificate may be exercised on any occasion. In the event that fewer
than all of the Warrants represented by a Warrant Certificate are
exercised, upon such exercise the Company shall execute and deliver to
the Registered Holder thereof or, subject to Section 4 hereof, such
person or entity as shall be designated in the Form of Exercise attached
to such Warrant Certificate a new Warrant Certificate representing the
Warrants not so exercised.
Section 7. Payment of Taxes; Transfer and Exchange Fees. The
Company shall not be required to pay any transfer, documentary, stamp or other
taxes imposed under any federal, state or local laws on Warrant Certificates
issued pursuant to transfers or exchanges or under other circumstances covered
in Sections 4, 5 or 9 hereof.
The Company shall pay any tax or taxes or government charges of
any kind that may be payable in respect of any issuance of any stock
certificates for the Shares, any certificates or other instruments for any other
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securities, or any other property purchased upon exercise of a Warrant.
Section 8. Adjustments; Notices. The Exercise Price and the
number of Shares purchasable upon the exercise of each Warrant are subject to
adjustment from time to time as provided in this Section.
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common
Stock, the Exercise Price in effect at the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced
by multiplying such Exercise Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the denominator
shall be the sum of such number of shares plus the total number of
shares constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on the day
following the date fixed for such determination; and in the event that
such dividend or other distribution is not so made, or is made in part,
the Exercise Price shall again be adjusted to the Exercise Price which
would then be in effect (i) if such record date has not been fixed or
(ii) based on the actual number of shares actually issued, as the case
may be.
(b) In case the Company shall issue shares of Common Stock at a
price, or securities convertible into, exchangeable for or exercisable
for shares of Common Stock ("Convertible Securities") having a
Conversion Price (as defined below), per share less than the current
fair market value per share (determined as provided in paragraph (f) of
this Section 8) of the Common Stock on the date such shares or
Convertible Securities are issued, the Exercise Price in effect at the
opening of business on the day following the date on which such shares
or Convertible Securities are issued shall be reduced by multiplying
such Exercise Price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on
the date on
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which such shares or Convertible Securities are issued plus the number
of shares of Common Stock which the aggregate of the offering price of
the total number of shares of Common Stock so issued, or the number of
shares of Common Stock which the aggregate of the Conversion Price of
such Convertible Securities so issued, would purchase at such current
fair market value and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date on which
such shares or Convertible Securities are issued plus the number of
shares of Common Stock so issued or the number of shares of Common Stock
issuable upon conversion, exchange or exercise of such Convertible
Securities so issued, such reduction to become effective immediately
after the opening of business on the day following the date on which
such shares are issued.
For purposes of this Section 8(b), the total offering price of
any securities is the offering price to the public before deduction of
underwriting discounts and commissions, and "Conversion Price" of any
Convertible Securities is the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible
Securities (before deduction of underwriting discounts and commissions)
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion, exchange or exercise
thereof.
Notwithstanding the foregoing, no adjustment to the Exercise
Price shall be made (i) on the account of the issuance of any Purchase
Shares or shares of Common Stock pursuant to the Other Stock Purchase
Agreement, (ii) on the account of the grant or issuance of any option or
securities either prior to or after the date hereof pursuant to any
employee benefit plans of the Company, (iii) on the account of the grant
of any Warrants or issuance of any Shares or other securities pursuant
to this Agreement, the Stock Purchase Agreement, the Other Stock
Purchase Agreement or the Other Warrant Agreement; or (iv) on the
account of the issuance of any securities upon the conversion of the
Company's outstanding 5.5% Convertible Subordinated Debentures Due 2006.
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In case part or all of the subscription or purchase price for the
Common Stock shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the vote of a
majority of the Board of Directors of the Company other than any
director who is a Registered Holder, the nominee of a Registered Holder
or any affiliate, director, officer, trustee, beneficiary or employee of
a Registered Holder (the "Non-Interested Directors").
(c) In case the Company shall (i) subdivide its outstanding
shares of Common Stock into a greater number of shares, (ii) combine its
outstanding shares of Common Stock into a smaller number of shares or
(iii) issue by reclassification of its shares of Common Stock (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing corporation) any shares of
capital stock (any such subdivision, combination or reclassification a
"Change of Shares"), the Exercise Price in effect at the effective date
of such Change of Shares shall be proportionally adjusted so that the
holder of any Warrants exercised after such time shall be entitled to
receive the aggregate number and kind of shares which, if such Warrants
had been converted immediately prior to such time, paying the same
aggregate consideration, he would have owned upon such exercise and been
entitled to receive upon such Change of Shares. Such adjustment shall
become effective immediately after the effective date of such Change of
Shares.
(d) In case the Company shall fix a record date for the making of
a distribution, by dividend or otherwise, to all holders of its Common
Stock evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in paragraph (b) of this
Section, any dividend or distribution paid in cash out of the retained
earnings of the Company and any dividend or distribution referred to in
paragraph (a) of this Section), the Exercise Price in effect after the
record date shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior
to the close of business on the record date by a fraction of which the
numerator shall
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be the current fair market value per share (determined as provided in
paragraph (f) of this Section) of the Common Stock on the date fixed for
such determination less the then fair market value (as determined by the
vote of a majority of the Non-Interested Directors of the Company, whose
determination shall be conclusive and described in a resolution of the
Board of Directors of the Company) of the portion of the assets or
evidences of indebtedness so distributed applicable to one share of
Common Stock and the denominator shall be such current fair market value
per share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following the
record date. In the event that such distribution is not so made, the
Exercise Price shall again be adjusted to the Exercise Price which would
then be in effect if such record date has not been fixed.
(e) Upon each adjustment of the Exercise Price pursuant to this
Section, each Warrant outstanding immediately prior to such adjustment
shall thereafter constitute the right to purchase, at the adjusted
Exercise Price per share, an adjusted number of Shares determined (to
the nearest one-hundredth of a Share) by multiplying the number of
Shares purchasable upon exercise of a Warrant immediately prior to such
adjustment by a fraction, the numerator of which shall be the Exercise
Price in effect immediately prior to such adjustment and the denominator
of which shall be the Exercise Price in effect immediately after such
adjustment.
(f) For the purpose of any computation under paragraphs (b) and
(d) of this Section, the current fair market value per share of Common
Stock on any date shall be (a) the arithmetic average of the daily last
sale prices of the Common Stock for the 15 consecutive trading days
commencing 25 trading days prior to such time, as officially reported on
the principal national securities exchange on which the Common Stock is
then listed (or the NASDAQ if the Common Stock is not listed on a
national securities exchange but is designated as a national market
system security by the NASD) or (b) if the Common Stock is not then
listed or quoted on the over-the-counter market, the fair market value
of the
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Common Stock as determined by the Company's Board of Directors.
(g) The Company may make such reductions in the Exercise Price,
in addition to those otherwise required by this Section, as it considers
to be advisable in order that any event treated for Federal income tax
purposes as a dividend of stock or stock rights shall not be taxable to
the recipients.
(h) No adjustment under this Section in the Exercise Price (and,
therefore, no adjustment in the number of Shares purchasable upon the
exercise of Warrants) shall be required unless such adjustment would
require an increase or decrease of at least $0.25 in such price;
provided, however, that any adjustments which by reason of this
paragraph are not required to be made shall be carried forward and taken
into account in determining any subsequent adjustment. All calculations
under this Section shall be made to the nearest one-hundredth of a cent
or to the nearest one-hundredth of a Share, as the case may be.
(i) Whenever the Exercise Price and the number of Shares
purchasable upon the exercise of a Warrant are adjusted as herein
provided, the Company shall as soon as practicable, but in no event
later than 30 calendar days thereafter:
(i) compute the adjusted Exercise Price in accordance with
this Section and shall prepare a certificate signed by the
principal accounting officer of the Company or any other
appropriate officer or official of the Company setting forth the
adjusted Exercise Price and the adjusted number of Shares
purchasable upon the exercise of Warrants and showing in
reasonable detail the facts upon which such adjustments are
based; and
(ii) cause to be given notice to each of the Registered
Holders at such Registered Holder's address appearing in the
Warrant Register. Such notice shall set forth the adjusted
Exercise Price and the adjusted number of such Shares. Where
appropriate, any such notice may be given in advance and included
as part of any other notice
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required to be mailed under the other provisions of this Section.
The failure to give the notice required in this paragraph
or any defect therein shall not affect the legality or validity of the
event causing the adjustment of the Exercise Price and the number of
Shares purchasable upon the exercise of the Warrant or the vote thereon
or any other action taken in connection therewith.
(j) In case:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash
out of its retained earnings; or
(ii) the Company shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class (or securities
convertible into shares of capital stock of any class) or of any
other rights or shall issue shares of Common Stock; or
(iii) any of the following transactions occur -- any
reclassification of the capital stock of the Company (other than
a subdivision or combination of its outstanding shares of Common
Stock), any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company
is required, or any sale or transfer of all or substantially all
of the assets of the Company; or
(iv) the Company shall be (voluntarily or involuntarily)
dissolved, liquidated or wound up;
then the Company, if notice of such event is being mailed to the holders
of the Common Stock, shall cause to be mailed to the Registered Holders,
at or prior to the time notice of such event is mailed to the holders of
the Common Stock, a copy of the notice being mailed to the holders of
the Common Stock. The failure to give the notice required in this
paragraph or any
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<PAGE> 16
defect therein shall not affect the legality or validity of any
dividend, distribution, right, warrant, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up or the vote thereon or
any other action taken in connection therewith.
(k) In any case in which this Section 8 shall require that any
adjustment in the Exercise Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of the event issuing to the Registered Holder of any Warrants
exercised after that record date the Shares or other capital stock of
the Company, if any, issuable upon exercise over and above the Shares or
other capital stock of the Company, if any, issuable upon the exercise
on the basis of the Exercise Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to the holder a due
bill or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event
requiring such adjustment.
(l) In case the Company shall have issued Convertible Securities
and the Exercise Price was adjusted pursuant to Section 8(b), upon the
expiration of such Convertible Securities or upon the expiration of such
securities' conversion privilege, the number of Shares purchasable upon
exercise of a Warrant and the Exercise Price, to the extent such Warrant
has not then been exercised, shall, upon such expiration, be readjusted
and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required,
as the case may be) on the basis of (A) the fact that the only shares of
Common Stock so issued were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Convertible Securities, and (B)
the fact that such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the
Company for the issuance, sale or grant of all such Convertible
Securities whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the Exercise Price by
an amount in excess of the amount of the adjustment initially made in
respect
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<PAGE> 17
to the issuance, sale or grant of such Convertible Securities.
(m) In case of any consolidation of the Company with or merger of
the Company into any other person, any merger of another person into the
Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company) or any sale or transfer of all or
substantially all of the assets of the Company, each Warrant then
outstanding shall thereafter, at the then Exercise Price and upon the
other terms and conditions specified in this Agreement, be exercisable
for the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder
of the number of shares of Common Stock of the Company issuable upon
exercise of such Warrant immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Common Stock of the
Company is not a person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which
such sale or transfer was made, as the case may be (a "Constituent
Person"), or a person directly or indirectly controlling, controlled by,
or under common control with a Constituent Person (an "Affiliate"), and
failed to exercise its rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share
of Common Stock of the Company held immediately prior to such
consolidation, merger, sale or transfer by others than a Constituent
Person or Affiliate thereof or in respect of which such rights of
election shall not have been exercised ("Non-Electing Share"), then for
the purpose of this Section the kind and amount of securities, cash and
other property receivable upon each such consolidation, merger, sale or
transfer by each Non-Electing Share shall be deemed to be the kind and
amount so receivable per share by a plurality of the Non-Electing
Shares). Prior to or simultaneously with effecting any such
consolidation, merger, sale or transfer, the person formed by such
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<PAGE> 18
consolidation or the successor resulting from such merger or which
acquires such assets, as the case may be, shall execute and deliver to
each Registered Holder a supplemental warrant agreement containing
provisions to the effect set forth in the previous sentence and
providing for adjustments which, for events subsequent to the effective
date of such supplemental warrant agreement, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section and containing an agreement to be bound by the provisions of
this Agreement.
(n) Upon the occurrence of any event requiring an adjustment of
the Exercise Price as described above, if the foregoing adjustments do
not result in the kind and number of shares of Common Stock to be issued
upon exercise of the Warrants having substantially equal value after
such event as the kind and number of shares of Common Stock issuable
upon exercise of the Warrants immediately prior to such event, the
Company shall make such other or additional adjustments to the Exercise
Price and the Warrant Exercise Rate as may be required to carry out the
intention of the parties that no such event shall result in any increase
or decrease in the value of such Warrants.
(o) The above adjustments shall be made, to the extent
applicable, successively whenever any event described above shall occur.
(p) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants,
Warrant Certificates theretofore or thereafter issued may continue to
express the same Exercise Price per Share and number and kind of Shares
as are stated on the Warrant Certificates initially issuable pursuant to
this Agreement.
Section 9. Fractional Warrants and Fractional Shares. The Company
shall not be required to exchange or transfer Warrants for fractions of
Warrants. The Company will not be required to issue any fractional Warrants
representing fractional shares of Common Stock or other distributed securities
upon exercise of the Warrants or distribute stock certificates or other
instruments that
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<PAGE> 19
evidence fractional shares of Common Stock or other distributed securities and
the Company will not pay any cash adjustment in respect of any fractional shares
of Common Stock or other distributed securities otherwise issuable upon the
exercise of any Warrant.
Section 10. No Rights as Stockholders. Nothing contained in this
Agreement or in any of the Warrant Certificates shall be construed as conferring
upon the Registered Holder thereof the right to vote, receive dividends or to be
deemed for any purpose the holder of Common Stock or of any other securities of
the Company that may at any time be issuable on the exercise of the Warrant
Certificates, nor shall anything contained herein or in the Warrant Certificates
be construed to confer upon the Registered Holders thereof, as such, any of the
rights of a stockholder of the Company or any right to vote on matters submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or, without limitation, otherwise) or to receive notice of meetings,
or to receive subscription rights or otherwise, until the Warrants evidenced by
the Warrant Certificates shall have been exercised as provided herein.
Section 11. Representations, Warranties and Covenants of the
Company. The Company represents, warrants and agrees with each Registered Holder
that:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to carry out and perform
its obligations under this Agreement.
(b) The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. At
March 17, 1998, there was outstanding 27,823,317 shares of Common Stock and 0
shares of preferred stock. At February 28, 1998, the Company had outstanding
5,037,121 options to purchase shares of Common Stock, which options were duly
granted pursuant to the 1991 Stock Incentive Plan, 1995 Stock Incentive Plan,
1996 Stock Incentive Plan, 1997 Non-Qualified Stock Option Plan, 1997 Stock
Option Plan and outside of any such plans. Each such
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<PAGE> 20
plan has been duly approved by the Board of Directors and, except for the 1997
Non-Qualified Stock Option Plan, stockholders of the Company. 5,315,505 shares
of Common Stock are reserved for issuance upon exercise of such options,
6,106,617 shares of Common Stock are reserved for issuance upon conversion of
the Company's 5.5% Subordinated Convertible Debentures due 2006. 500,000 Shares
of preferred stock are reserved for issuance upon exercise of the Rights
distributed to holders of Common Stock pursuant to the Rights Agreement,
1,124,184 shares of Common Stock are reserved for issuance under the Company's
Dividend Reinvestment and Stock Purchase Plan and 562,500 shares of Common Stock
are reserved for issuance under the Company's Stock Purchase Plan.
(c) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company enforceable in accordance with its terms except as such enforceability
may be subject to any applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, equitable subordination or other laws relating to or
affecting creditor's rights and general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing; and neither the issuance of the Warrants nor the issuance of the shares
of Common Stock issuable upon exercise of the Warrants will result in a breach
or violation of any terms or provisions of, or constitute a default under, any
contract, indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company is currently a party or by which the Company
is currently bound, the Certificate of Incorporation or Bylaws of the Company,
or any law, order, rule, regulation or decree of any government, governmental
agency or court, domestic or foreign, currently applicable to the Company, or
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company, except for such breaches, violations or
defaults as, individually and in the aggregate, do not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, assuming that all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") have expired or been terminated and all applicable
filings pursuant to state securities laws, the HSR Act, the Securities Act, the
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<PAGE> 21
Exchange Act and the rules and regulations of the New York Stock Exchange have
been made.
(d) No consent, approval, authorization or order of any court or
governmental agency or body or any third party is required to be obtained by the
Company for the sale and issuance of the Warrants or the issuance of the shares
of Common Stock issuable upon exercise of the Warrants except such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities laws, the HSR Act, the Securities Act, the Exchange Act
and the rules and regulations of the New York Stock Exchange. Upon the valid
exercise of the Warrants by a Registered Holder thereof, the shares of Common
Stock with respect to which the Warrants are exercised shall be fully paid and
nonassessable.
(e) The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Agreement or of the Warrants.
(f) The Company shall not consolidate with or merge into any
other corporation or sell, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any entity, unless the entity formed
by such consolidation or into which the Company is merged or the entity which
acquires by sale or transfer, or which leases, the properties and assets of the
Company as an entirety or substantially as an entirety shall be a corporation,
company, partnership or trust, shall be organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by supplemental agreement, the due and
punctual performance and observance of each and every obligation, covenant and
condition of this Agreement to be performed or observed by the Company. Upon any
such consolidation, merger, sale, transfer or lease in accordance with the
preceding sentence, such entity shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Agreement with the
same effect as if such successor entity had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor entity shall be
relieved of all
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<PAGE> 22
obligations and covenants under this Agreement and the Warrants.
(g) The Company covenants to at all times keep reserved and
available, for the purpose of effecting the exercise of the Warrants, free from
preemptive rights, out of its authorized but unissued Common Stock the full
number of shares of Common Stock sufficient to provide for the exercise of all
rights of purchase represented by all outstanding Warrants.
Section 12. Inspection of Warrant Agreement. The Company shall
keep copies of this Agreement and any notices given or received hereunder
available for inspection by Registered Holders during normal business hours at
its executive offices.
Section 13. Issuance of New Warrant Certificates. Notwithstanding
any of the provisions of this Agreement or of the Warrants to the contrary, the
Company may, at its option, issue new Warrant Certificates evidencing Warrants
in such form as may be approved by its Board of Directors which reflect any
adjustment or change in the number or kind or class of shares of stock or other
securities or property purchasable under the Warrant Certificates made in
accordance with the provisions of this Agreement. The Company may, at its
option, require Registered Holders of Warrants to surrender their old Warrant
Certificates for any such new Warrant Certificates. The Company shall make no
service or other charge in connection with any such exchange or Warrant
Certificates, except for any taxes payable in connection therewith.
Section 14. Notices. All instructions, notices and other
communications to be given to any party hereto shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid
and return receipt requested, and shall be deemed to be given
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<PAGE> 23
for purposes of this Agreement on the day when delivered to the intended party
at its address specified below:
(a) If to the Company:
Aames Financial Corporation
350 South Grand Avenue, 52nd Floor
Los Angeles, California 90071
Attention: Barbara S. Polsky
With copy to:
Manatt, Phelps & Phillips LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attention: William Quicksilver
or such other address as the Company may designate from time to time by written
notice to the Registered Holder.
(b) If to the Registered Holder, then at the address as set forth
in the Warrant Register or such other address as the Registered Holder may
designate from time to time by written notice to the Company.
Section 15. Supplements and Amendments. The Company and the
Registered Holders of a majority of the then outstanding Warrants may from time
to time supplement or amend this Agreement, without the approval of any other
Registered Holders, in order to cure any ambiguity or to correct or supplement
any provision contained herein that may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder that the Company and such Registered Holders may
deem necessary or desirable and that shall not adversely affect the interests of
the Registered Holders. This Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a written instrument
duly executed by the Company and the Registered Holders of a majority of the
then-outstanding Warrants; provided, however, that no such amendment or waiver
shall, without the consent of the Registered Holder of each outstanding Warrant
affected thereby, (a) alter the provisions of this Agreement so as to affect
adversely the Exercise Price, the number of
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<PAGE> 24
shares of Common Stock purchasable upon exercise of a Warrant, or the adjustment
provisions of Section 8, or (b) reduce the number of Warrants outstanding the
consent of whose Registered Holders is required for any such amendment or
waiver. Each Registered Holder shall be bound by any amendment or waiver
effected pursuant to this Section 15, whether or not any notice, writing or
marking indicating such amendment or waiver appears on the certificates for the
Warrants held by such Registered Holder or is delivered to such Registered
Holder.
Section 16. Successors. This Agreement shall be binding upon and
inure to the benefit of the respective successors and permitted assigns
hereunder of the Company or any Registered Holder. In the event that any
transferee of a Registered Holder shall acquire Warrants, in any manner, whether
by gift, bequest, purchase, operation of law or otherwise, such transferee
shall, upon the execution and delivery to the Company of an assignement in the
form of Exhibit B hereto, be deemed a party hereto for all purposes and such
Warrants shall be held subject to all of the terms of this Agreement, and by
taking and holding such Warrants, such transferee shall be entitled to receive
the benefits of and be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement. In addition, in
connection with a bona fide pledge of any Warrants to secure indebtedness or
other obligations, a Registered Holder may assign its rights, interests and
obligations hereunder to the beneficiary of such pledge; provided that if the
beneficiary of such pledge becomes, or through the exercise of remedies under
such pledge causes another person to become, a Registered Holder of Warrants,
such Registered Holder agrees to be bound by the terms of this Agreement by
execution and delivery to the Company of written notice in the form of Exhibit B
pursuant to Section 4 or otherwise; and provided further that unless and until
the immediately preceding proviso is applicable, the pledgor shall remain bound
by the terms of this Agreement. The Company shall not have either the right or
the power to assign or delegate any right or obligation hereunder (except by
merger or other operation of law) without the written consent of Registered
Holders holding a majority of the then outstanding Warrants.
SECTION 17. GOVERNING LAW. THIS AGREEMENT, EACH WARRANT
CERTIFICATE AND EACH WARRANT ISSUED HEREUNDER SHALL
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<PAGE> 25
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PROVISIONS THEREOF.
Section 18. Jurisdiction and Venue. Each of the parties hereto
hereby irrevocably submits in any legal action or proceeding relating to or
arising out of this Agreement or any other document relating hereto or delivered
in connection with the transactions contemplated hereby, or for recognition and
enforcement of any judgment in respect thereof, to the exclusive jurisdiction of
the United States District Court for the District of Delaware (or if such court
does not have jurisdiction, the courts of the State of Delaware, Newcastle
County, and appellate courts thereof. Each of the parties hereto further (a)
consents that any such action or proceeding may be brought in such court and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the same; (b) agrees
that service of process in any such action or proceeding may be effected by
personal delivery thereof to such party's registered office in the jurisdiction
in which it is incorporated, with a copy to such party at its address as
provided in Section 14; and (c) agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by law.
Section 19. Benefits of this Agreement. Except as otherwise
provided for in Section 16, nothing in this Agreement shall be construed to give
to any person or corporation other than the Company and the Registered Holders
of the Warrant Certificates any legal or equitable right, remedy or claim under
this Agreement, and this Agreement shall be for the sole and exclusive benefit
of the Company and the Registered Holders of the Warrant Certificates.
Section 20. Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held or
rendered invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
affected or
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<PAGE> 26
impaired thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
Section 21. Specific Performance. The Company acknowledges that
it would be impossible to determine the amount of damages that would result from
any breach by it of any of the provisions of this Agreement and that the remedy
at law for any breach, or threatened breach, of any of such provisions would
likely be inadequate and, accordingly, agrees that each Holder shall, in
addition to any other rights or remedies which it may have, be entitled to seek
such equitable and injunctive relief as may be available from any court of
competent jurisdiction to compel specific performance of, or restrain the
Company from violating any of, such provisions. In connection with any action or
proceeding for injunctive relief, the Company hereby waives the claim or defense
that a remedy at law alone is adequate and agrees, to the maximum extent
permitted by law, to have each provision of this Agreement specifically enforced
against it, without the necessity of posting bond or other security against it,
and consents to the entry of injunctive relief against it enjoining or
restraining any breach or threatened breach of this Agreement.
Section 22. Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto, including the exhibits hereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and thereof. There are no agreements, representations, warranties,
covenants or undertakings with respect to the subject matter hereof and thereof
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to this subject matter.
Section 23. Further Assurances. Each of the parties hereto shall
execute and deliver such further instruments and documents and take such further
actions as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby.
Section 24. Headings and Table of Contents. The section and
subsection headings herein and the table of
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<PAGE> 27
contents are for convenience only and shall not affect the construction hereof.
Section 25. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
one and the same instrument.
Section 26. Legends. The certificates evidencing the Warrants and
the shares of Common Stock issuable upon exercise of the Warrants shall bear a
legend to the effect that such security may not be sold or transferred unless
registered under the Securities Act or if an exemption thereunder is available.
Such legend shall be removed upon registration under the Securities Act or if
the Purchaser or any transferee delivers an opinion of counsel reasonably
acceptable to the Company to the effect that such legend is no longer required
under the Securities Act. In addition, certificates evidencing the Warrants
shall bear a legend which states that such Warrants are subject to the terms of
this Agreement.
Section 27. Opinion on Transfer of Warrant Shares After Exercise.
Notwithstanding anything to the contrary stated herein, neither the Company nor
the Company's transfer agent and registrar shall be required to reflect the
transfer of the Shares or other securities issued upon exercise of the Warrants
unless such Shares or other securities have been transferred pursuant to a
registration statement which is effective under the Securities Act of the
Company or the Company's transfer agent and registrar has received an opinion of
counsel, who is reasonably acceptable to the Company, that the transfer is
exempt from registration under the Securities Act.
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<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
AAMES FINANCIAL CORPORATION
By: /s/ Cary H. Thompson
-----------------------------------
Name: Cary H. Thompson
Title: Chief Executive Officer
THIRTY-FIVE EAST INVESTMENTS LLC
By: /s/ Howard Gittis
-----------------------------------
Name: Howard Gittis
Title: Vice Chairman
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<PAGE> 29
EXHIBIT A
FORM OF WARRANT CERTIFICATE
---------------------------
---------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES
WHICH MAY BE ISSUED UPON EXERCISE OF THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ARE SUBJECT TO THE TERMS OF THE
WARRANT AGREEMENT, DATED AS OF MARCH 19, 1998 BY AND BETWEEN AAMES FINANCIAL
CORPORATION AND _____________ (THE "WARRANT AGREEMENT"). THESE SECURITIES AND
ANY SECURITIES WHICH MAY BE ISSUED UPON EXERCISE OF THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SAID ACT OR OTHERWISE THAN IN ACCORDANCE WITH THE WARRANT
AGREEMENT. A COPY OF THE WARRANT AGREEMENT MAY BE OBTAINED FROM AAMES FINANCIAL
CORPORATION.
---------------------------
This Warrant Certificate certifies that
_____________________________ , or any registered and permitted assigns, is the
Registered Holder (as hereinafter defined) of __________ warrants (the
"Warrants"). Each Warrant entitles the Registered Holder hereof to purchase,
upon the terms and conditions set forth herein, one fully paid and nonassessable
share (the "Share") of Common Stock, par value $.001 per share (the "Common
Stock"), of Aames Financial Corporation, a Delaware corporation (the "Company"),
in consideration of the payment by the Registered Holder of the exercise price
(the "Exercise Price") at the time in effect under the Warrant Agreement (as
hereinafter defined). The Exercise Price shall initially be $17.2031 per
Warrant. The Exercise Price and the number of shares purchasable upon exercise
of a Warrant shall be subject to adjustment as provided in Section 8 of the
Warrant Agreement. Any or all of the Warrants shall expire on April 19, 2001
(the "Expiration Date"). After the Expiration Date, unexercised Warrants will be
wholly void and of no value. The Warrants represented hereby may be exercised by
the Registered Holder on any business day, as defined in the Warrant Agreement,
beginning on the date of a
<PAGE> 30
Purchase Event (as defined in the Warrant Agreement) and on or prior to the
close of business on the Expiration Date upon payment of the Exercise Price
multiplied by the number of such Warrants being exercised (the "Aggregate
Exercise Price") in cash, by cashier's check payable to the order of the Company
or by wire transfer to the Company's account of immediately available funds, and
upon proper execution of the Form of Exercise attached hereto and surrender of
this Warrant Certificate at the corporate executive offices of the Company at
350 South Grand Avenue, 52nd Floor, Los Angeles, California 90071. The Exercise
Price and the number of shares of Common Stock and the type and amount of other
securities or other property purchasable upon exercise of each Warrant may as of
the date of this Warrant Certificate have been, or may after such date be,
adjusted as a result of the occurrence of certain events, as more fully provided
in the Warrant Agreement.
The Warrant or Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants issued pursuant to the Stock
Purchase Agreement, dated March 19, 1998, by and among the Company and the
Purchaser and whose terms and provisions are governed by the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for the description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the Purchaser or such other registered holder of the Warrants to
whom transfer is authorized in accordance with the terms of the Warrant
Agreement (the Purchaser and such other registered holder are referred to herein
individually as the "Registered Holder" and, collectively, as the "Registered
Holders") to all of which the Registered Holder of the Warrants represented by
this Warrant Certificate, by acceptance hereof, consents. Copies of the Warrant
Agreement are on file and available for inspection and can be obtained from or
at the corporate executive offices of the Company.
Subject to the provisions of the Warrant Agreement, (i) upon such
surrender of this Warrant Certificate and payment of the Aggregate Exercise
Price with respect to the Warrant or Warrants being exercised on or prior to the
close of business on the Expiration Date, the Company shall deliver or cause to
be delivered to the Registered Holder
A-2
<PAGE> 31
surrendering this Warrant Certificate certificates for the shares of Common
Stock, certificates or other appropriate instruments for any other securities,
and such other property issuable upon the exercise of the Warrant or Warrants
evidenced by this Warrant Certificate, in such name or names as the Registered
Holder of this Warrant Certificate that are being exercised shall designate on
the Form of Exercise attached hereto; and (ii) such shares of Common Stock,
securities and other property shall be deemed to have been issued, and any
person so designated therein shall be deemed to have become, the holder of
record of such shares of Common Stock, securities or property as of the date of
the surrender of this Warrant Certificate and payment of the Aggregate Exercise
Price.
All or fewer than all of the Warrants evidenced by this Warrant
Certificate may be exercised on any occasion. In the event that fewer than all
of the Warrants represented by this Warrant Certificate are exercised, upon such
exercise the Company shall execute and deliver to the Registered Holder thereof
or, subject to Section 4 of the Warrant Agreement, such person or entity as
shall be designated in the Form of Exercise attached hereto a new Warrant
Certificate representing the Warrants not so exercised.
Transfers of the Warrant shall only be made in accordance with
the Warrant Agreement.
The Company may deem and treat the Registered Holder hereof as
the absolute owner of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof, any distribution to the Registered Holder hereof and for all
other purposes, and the Company shall not be affected in any way by any notice
to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
Signatures on exercises and assignments of the Warrant
represented by this Warrant Certificate must, unless waived by the Company, be
guaranteed by a bank or trust company having an office or correspondent in the
United States or by a broker or dealer that is a member of a
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<PAGE> 32
registered national securities exchange or the National Association of
Securities Dealers, Inc.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its official seal by its President or any
Vice President and attested to by its Secretary or any Assistant Secretary.
Dated: ____________, 1998
AAMES FINANCIAL CORPORATION
By:
----------------------------------
Attest:
- -------------------------
[SEAL]
A-4
<PAGE> 33
FORM OF EXERCISE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise _______
Warrants represented by this Warrant Certificate, entitling the undersigned to
purchase ________ shares of Common Stock, par value $.001 per share (the "Common
Stock"), of Aames Financial Corporation, a Delaware corporation (the "Company"),
and such other securities or property issuable upon exercise of such Warrants in
accordance with the terms of the Warrant Agreement, dated as of March 19, 1998,
between the Company and ___________, and herewith tenders payment for such
Warrants in the amount of $_________ payable in cash, by cashier's check payable
to the order of the Company or by wire transfer to the Company's account of
immediately available funds.
The undersigned requests that certificates for shares of Common
Stock and certificates or other instruments for other securities, and other
property issuable upon exercise of the Warrant be registered in the name of
_______________________ whose address is _____________________________________
and that such certificates and other instruments and property be delivered to
_________________________________ whose address is
_____________________________________. If said number of Warrants is less than
all of the Warrants represented by this Warrant Certificate, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
the Warrants be registered in the name of _______________________ whose address
is _____________________________________ and that such Warrant Certificate be
delivered to __________________________ whose address is
___________________________________.
<PAGE> 34
[The undersigned hereby certifies that it is acquiring the shares
of Common Stock issuable upon the exercise of the Warrants for its own account
and is an "accredited investor" as defined in Rule 501 to the Securities Act of
1933, as amended (the "Securities Act"), and has no intention of distributing
the shares of Common Stock issuable upon the exercise of the Warrants in
violation of the Securities Act or applicable state securities or "blue sky"
laws.]*
Dated:
Signature:
-----------------------------------
(Signature must conform in all respects to
the name of the Registered Holder as
specified on the face of the Warrant
Certificate.)
- --------------------------
(Social Security or Other
Taxpayer Identification
Number of Registered Holder)
* Required if the shares of Common Stock issuable upon exercise of the Warrants
are not registered under the Securities Act for issuance and sale by the Company
<PAGE> 35
EXHIBIT B
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto
--------------------------------
--------------------------------
--------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________,
attorney to transfer this Warrant Certificate on the books of
____________________, with full power of substitution.
[The undersigned hereby certifies that the acquisition by the
transferee of the Warrants evidenced by this Warrant Certificate was effected in
a transaction exempt from the registration provisions in Section 5 of the
Securities Act of 1933, as amended (the "Securities Act") and was effected in a
transaction that was not a distribution, without the use of general advertising
or general solicitation, to a person or entity that the undersigned, in his best
knowledge, believes to be an "accredited investor" (as defined in Rule 501 to
the Securities Act) and not an underwriter (as defined in Section 2(11) of the
Securities Act).]*
Dated:
Signature:
-------------------------
(Signature must conform in all
respects to the name of the
Registered Holder as specified
on the face of the Warrant
Certificate.)
<PAGE> 36
- ------------------------------
(Insert Social Security or
Other Identifying Number of
Assignee)
[The aforesaid assignee hereby certifies that such assignee is an
"accredited investor" as defined in Rule 501 to the Securities Act, is acquiring
the Warrants for its own account and has no intention of distributing the
Warrants or shares of Common Stock issuable upon the exercise of the Warrants in
violation of the Securities Act or applicable state securities or "blue sky"
laws.]
By accepting this assignment, the aforesaid assignee shall be
entitled to the benefits of and hereby agrees to be bound by all of the terms
and conditions of the Warrant Agreement.
Agreed and Accepted as of __________________:
- ------------------------------
* Required if the Warrants are not registered under the Securities Act for
resale by registered holders.
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
Dated as of March 19, 1998
-By and Between-
AAMES FINANCIAL CORPORATION
and
TURTLE CREEK REVOCABLE TRUST
- --------------------------------------------------------------------------------
The securities represented by the Warrants referred to herein have not been
registered under the Securities Act of 1933, as amended. The transferability of
such securities and of any securities which may be issued upon the exercise
<PAGE> 2
of such securities is subject to the provisions of this Warrant Agreement.
<PAGE> 3
TABLE OF CONTENTS
Page
Section 1. Issuance of Warrants; Exercise Price..............................1
Section 2. Form of Warrant Certificates......................................2
Section 3. Execution of Warrant Certificates.................................2
Section 4. Registration; Transfers and Exchanges.............................3
Section 5. Mutilated or Missing Warrant Certificates.........................3
Section 6. Duration and Exercise of Warrants.................................3
Section 7. Payment of Taxes; Transfer and Exchange Fees......................7
Section 8. Adjustments; Notices..............................................8
Section 9. Fractional Warrants and Fractional Shares........................16
Section 10. No Rights as Stockholders........................................17
Section 11. Representations, Warranties and Covenants of the Company.........17
Section 12. Inspection of Warrant Agreement..................................20
Section 13. Issuance of New Warrant Certificates.............................20
Section 14. Notices..........................................................20
Section 15. Supplements and Amendments.......................................21
Section 16. Successors.......................................................22
Section 17. Governing Law....................................................22
Section 18. Jurisdiction and Venue...........................................23
Section 19. Benefits of this Agreement.......................................23
Section 20. Severability.....................................................23
Section 21. Specific Performance.............................................24
Section 22. Integration......................................................24
Section 23. Further Assurances...............................................24
Section 24. Headings and Table of Contents...................................24
Section 25. Counterparts.....................................................25
Section 26. Legends..........................................................25
Section 27. Opinion on Transfer of Warrant Shares After Exercise.............25
EXHIBIT A. FORM OF WARRANT CERTIFICATE
EXHIBIT B. FORM OF ASSIGNMENT
-i-
<PAGE> 4
WARRANT AGREEMENT (this "Agreement"), dated as of March 19, 1998, by
and among Aames Financial Corporation, a Delaware corporation (the "Company")
and Turtle Creek Revocable Trust, a trust formed under the laws of the State of
Texas (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Stock
Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"); and
WHEREAS, pursuant to the Stock Purchase Agreement, as consideration
for the purchase of 556,466 shares of Common Stock ("Common Stock"), par value
$.001 per share, of the Company (the "Purchase Shares"), the Company will issue
to the Purchaser at the Closing (as defined in the Stock Purchase Agreement)
556,466 warrants to purchase 556,466 shares of Common Stock (each a "Warrant"
and collectively, "Warrants"), at an exercise price of $17.2031 per share,
subject to adjustment as provided herein; and
WHEREAS, the Company and the Purchaser have entered into a
Registration Rights Agreement, dated as of the date hereof, providing for
certain matters relating to the registration of the Purchase Shares and the
Common Stock issuable upon exercise of the Warrants under the Securities Act of
1933, as amended (the "Securities Act");
WHEREAS, the Company and Thirty-Five East Investments LLC (the
"Other Purchaser") have entered into a stock purchase agreement, dated the date
hereof (the "Other Stock Purchase Agreement"), providing for, among other
things, the sale by the Company and the purchase by the Other Purchaser of an
aggregate of 2,225,865 shares of Common Stock and warrants to purchase 2,225,865
shares of Common Stock at an initial exercise price of $17.2031 per share, a
warrant agreement, dated the date hereof, relating to such warrants (the "Other
Warrant Agreement");
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Issuance of Warrants; Exercise Price. Pursuant to the
Stock Purchase Agreement, the Company shall issue and deliver to the Purchaser
one or more warrant
<PAGE> 5
certificates (each a "Warrant Certificate") representing an aggregate of 556,466
Warrants. Each Warrant shall initially provide the Purchaser, or such other
registered holder of such Warrant to whom transfer is authorized in accordance
with the terms of this Agreement (the Purchaser and such other registered
holder(s) are hereinafter referred to individually as the "Registered Holder"
and collectively as the "Registered Holders"), with the right to purchase
initially one fully paid and nonassessable share of Common Stock (a "Share" and,
collectively, the "Shares") in consideration of the payment by the Registered
Holder of the exercise price (the "Exercise Price") at the time in effect
hereunder. The Exercise Price shall initially be $17.2031 per Warrant. The
Exercise Price and the number of Shares issuable upon exercise of a Warrant (the
"Warrant Exercise Rate") shall be subject to adjustment as provided in Section
8.
Section 2. Form of Warrant Certificates. The Warrant Certificates
representing the Warrants and the Forms of Exercise and Assignment attached
thereto shall be substantially in the forms set forth in Exhibits A and B
attached hereto. The Warrant Certificates shall be typewritten, printed,
lithographed or engraved and may have such letters, numbers or other marks of
identification and such legends or endorsements as may be required to comply
with any applicable law, rule or regulation or with the rules of any securities
exchange or as may, consistent with the provisions of this Agreement, be
determined by the officers executing any such Warrant Certificate, as evidenced
by their execution of the Warrant Certificate. Each Warrant Certificate shall
contain a legend substantially as set forth in the Form of Warrant Certificate
attached hereto as Exhibit A.
Section 3. Execution of Warrant Certificates. The President or any
Vice President of the Company shall execute the Warrant Certificates on behalf
of the Company, and the official seal of the Company (which may be in facsimile
form) shall be reproduced on the Warrant Certificates and attested by the
Secretary or any Assistant Secretary of the Company. The signatures of the
President or any Vice President and of the Secretary or any Assistant Secretary
on any Warrant Certificate may be manual or facsimile. Warrant Certificates may
bear the manual or facsimile signatures of individuals who were at the time of
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<PAGE> 6
execution of such Warrant Certificates the proper officers of the Company
notwithstanding that such individuals, or any of them, ceased to be such
officers prior to the delivery of such Warrant Certificate or were not such
officers at the date of this Agreement.
Section 4. Registration; Transfers and Exchanges. The Company shall
maintain at its executive offices a register reflecting the ownership of the
Warrant Certificates and any transfers thereof from time to time (the "Warrant
Register").
The Company may deem and treat the Registered Holder of each Warrant
Certificate as indicated in the Warrant Register as the absolute owner thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for the purpose of any exercise thereof, any distribution to the
Registered Holder thereof and for all other purposes, and the Company shall not
be affected in any way by any notice to the contrary.
Upon execution and delivery of a written notice in the form of
Exhibit B to the Company by the Registered Holder and its transferee of a
transfer of any Warrant Certificate, the Company shall reflect such transfer in
the Warrant Register.
Section 5. Mutilated or Missing Warrant Certificates. If any Warrant
Certificate at any time becomes mutilated, lost, stolen or destroyed, the
Company will issue in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant Certificate and indemnity reasonably satisfactory to the Company.
Section 6. Duration and Exercise of Warrants.
(a) The Warrants shall expire on April 19, 2001 (the "Expiration
Date"), notwithstanding any change in the capitalization of the Company as
a result of any stock split, stock dividend, stock combination or
otherwise. Each Warrant may be exercised by the
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<PAGE> 7
Registered Holder thereof only upon the occurrence of a Purchase Event (as
defined below) of the Company. Thereafter, Warrants may be exercised on
any business day beginning on the date of the Purchase Event and prior to
the close of business on the Expiration Date. Each Warrant not exercised
at or before the close of business on the Expiration Date shall become
void and of no value, and all rights of the Registered Holder under the
Warrant Certificate and under this Agreement shall cease.
(b) For purposes of this Section 6, the following terms shall have
the meanings ascribed to them:
"Purchase Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) The Company or any of its subsidiaries shall have
entered into an agreement to engage in an Acquisition Transaction
(as defined below) with any Person (the term "Person" for purposes
of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act"), and the rules and regulations thereunder) other
than Ronald O. Perelman, Gerald J. Ford or any of their respective
affiliates which is not a Person with equity securities listed on a
national securities exchange or quoted on the Nasdaq National Market
(each, a "Non-Public Purchaser Affiliate") or the Board of Directors
of the Company shall have recommended that the shareholders of the
Company approve or accept any Acquisition Transaction with any
Person other than a Non-Public Purchaser Affiliate. For purposes of
this Section 6, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving the Company or
any of its significant subsidiaries, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of the Company
or any significant subsidiary or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 50% or more of the voting
power of the Company or any of its significant subsidiaries,
provided that
-4-
<PAGE> 8
the term "Acquisition Transaction" does not include any internal
merger, consolidation, or similar transaction involving solely the
Company and one or more of its subsidiaries or a merger,
consolidation or similar transaction as to which the holders of the
Company?s common stock immediately prior thereto own in the
aggregate at least 50% of the common stock of the publicly held
surviving or successor corporation or any publicly held ultimate
parent company thereof immediately after giving effect thereto.
(ii) Any Person (other than a Non-Public Purchaser Affiliate
or any subsidiary of the Company acting in a fiduciary capacity in
the ordinary course of business) shall have acquired Beneficial
Ownership of shares of Common Stock (the term "Beneficial Ownership"
for purposes of this Section 6, having the meaning assigned thereto
in Section 13(d) of the Exchange Act, and the rules and regulations
thereunder) such that, upon the consummation of such acquisition,
such Person would have Beneficial Ownership, in the aggregate, of
50% or more of the then outstanding shares of Common Stock;
(iii) Any Person other than any Non-Public Purchaser Affiliate
shall have made a bona fide proposal to the Company or its
shareholders, by public announcement or written communication that
is or becomes the subject of public disclosure, to engage in an
Acquisition Transaction (including, without limitation, any
situation in which any Person other than a Non-Public Purchaser
Affiliate shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act, with respect to, a tender offer
or exchange offer to purchase any shares of Common Stock such that,
upon consummation of such offer, such Person would own or control
50% or more of the then outstanding shares of Common Stock; and
(iv) The first day on which a majority of the members of the
Board of Directors of the Company are not "Continuing Directors"
(defined as
-5-
<PAGE> 9
members of the Board of Directors of the Company who (A) were
members of such Board on the date hereof or (B) were nominated for
election or elected to such Board pursuant to the Stock Purchase
Agreement, the Other Stock Purchase Agreement, or with the approval
of a majority of the Continuing Directors who where members of such
Board at the time of such nomination or election).
"Business day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Los Angeles,
California are authorized or obligated by law or executive order to close.
(c) The Company shall notify the Purchaser promptly in writing of
the occurrence of any Purchase Event (other than by a Non-Public Purchaser
Affiliate).
(d) Subject to the provisions of this Agreement, the Registered
Holder of a Warrant Certificate shall have the right to exercise the
Warrant or Warrants evidenced by such Warrant Certificate by delivering
the Warrant Certificate, along with the Form of Exercise attached thereto
duly filled in and executed by the Registered Holder or his duly
authorized agent, and, upon such exercise, to purchase from the Company at
a purchase price equal to the Exercise Price then in effect multiplied by
the number of Warrants so exercised (such product, the "Aggregate Exercise
Price") the number of Shares at the time purchasable upon exercise of such
Warrant or Warrants, including any shares of any class or series of stock
into which such Shares may hereafter be changed upon surrender to the
Company of the Warrant Certificate evidencing such Warrant or Warrants,
upon payment of the Aggregate Exercise Price in lawful money of the United
States of America in cash, by cashier's check payable to the order of the
Company or by wire transfer to the Company's account of immediately
available funds. The number of Shares, and the amount and type of
securities or other property, purchasable upon exercise of a Warrant shall
be subject to adjustment as provided in Section 8.
-6-
<PAGE> 10
(e) Subject to Section 7, (i) upon such surrender of a Warrant
Certificate and payment of the Aggregate Exercise Price with respect to
the Warrant or Warrants being exercised on or prior to the Expiration
Date, the Company shall deliver or cause to be delivered to the Registered
Holder surrendering such Warrant Certificate certificates for the Shares,
certificates or other appropriate instruments for any other securities,
and such other property issuable upon the exercise of such Warrant or
Warrants evidenced by such Warrant Certificate being exercised, in such
name or names as the Registered Holder of such Warrant Certificate shall
designate on the Form of Exercise attached thereto and bearing such
restrictive legends concerning transferability as the Company deems
necessary; and (ii) such Shares, securities and other property shall be
deemed to have been issued, and any person so designated therein shall be
deemed to have become the holder of record of such Shares, securities or
property as of the date of the surrender of such Warrant Certificate and
payment of the Aggregate Exercise Price.
(f) All or fewer than all of the Warrants evidenced by a Warrant
Certificate may be exercised on any occasion. In the event that fewer than
all of the Warrants represented by a Warrant Certificate are exercised,
upon such exercise the Company shall execute and deliver to the Registered
Holder thereof or, subject to Section 4 hereof, such person or entity as
shall be designated in the Form of Exercise attached to such Warrant
Certificate a new Warrant Certificate representing the Warrants not so
exercised.
Section 7. Payment of Taxes; Transfer and Exchange Fees. The Company
shall not be required to pay any transfer, documentary, stamp or other taxes
imposed under any federal, state or local laws on Warrant Certificates issued
pursuant to transfers or exchanges or under other circumstances covered in
Sections 4, 5 or 9 hereof.
The Company shall pay any tax or taxes or government charges of any
kind that may be payable in respect of any issuance of any stock certificates
for the Shares, any certificates or other instruments for any other
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<PAGE> 11
securities, or any other property purchased upon exercise of a Warrant.
Section 8. Adjustments; Notices. The Exercise Price and the number
of Shares purchasable upon the exercise of each Warrant are subject to
adjustment from time to time as provided in this Section.
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock,
the Exercise Price in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by
multiplying such Exercise Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and the denominator
shall be the sum of such number of shares plus the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following
the date fixed for such determination; and in the event that such dividend
or other distribution is not so made, or is made in part, the Exercise
Price shall again be adjusted to the Exercise Price which would then be in
effect (i) if such record date has not been fixed or (ii) based on the
actual number of shares actually issued, as the case may be.
(b) In case the Company shall issue shares of Common Stock at a
price, or securities convertible into, exchangeable for or exercisable for
shares of Common Stock ("Convertible Securities") having a Conversion
Price (as defined below), per share less than the current fair market
value per share (determined as provided in paragraph (f) of this Section
8) of the Common Stock on the date such shares or Convertible Securities
are issued, the Exercise Price in effect at the opening of business on the
day following the date on
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<PAGE> 12
which such shares or Convertible Securities are issued shall be reduced by
multiplying such Exercise Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the date on which such shares or Convertible Securities are
issued plus the number of shares of Common Stock which the aggregate of
the offering price of the total number of shares of Common Stock so
issued, or the number of shares of Common Stock which the aggregate of the
Conversion Price of such Convertible Securities so issued, would purchase
at such current fair market value and the denominator shall be the number
of shares of Common Stock outstanding at the close of business on the date
on which such shares or Convertible Securities are issued plus the number
of shares of Common Stock so issued or the number of shares of Common
Stock issuable upon conversion, exchange or exercise of such Convertible
Securities so issued, such reduction to become effective immediately after
the opening of business on the day following the date on which such shares
are issued.
For purposes of this Section 8(b), the total offering price of any
securities is the offering price to the public before deduction of
underwriting discounts and commissions, and "Conversion Price" of any
Convertible Securities is the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible
Securities (before deduction of underwriting discounts and commissions)
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion, exchange or exercise thereof.
Notwithstanding the foregoing, no adjustment to the Exercise Price
shall be made (i) on the account of the issuance of any Purchase Shares or
shares of Common Stock pursuant to the Other Stock Purchase Agreement,
(ii) on the account of the grant or issuance of any option or securities
either prior to or after the date hereof pursuant to any employee benefit
plans of the Company, (iii) on the account of the grant of any Warrants or
issuance of any Shares or other securities pursuant to this Agreement, the
Stock Purchase Agreement, the Other Stock Purchase Agreement or the Other
Warrant Agreement; or (iv) on the account of the issuance of any
securities upon the conversion of the Company?s outstanding 5.5%
Convertible Subordinated Debentures Due 2006.
-9-
<PAGE> 13
In case part or all of the subscription or purchase price for the
Common Stock shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the vote of a
majority of the Board of Directors of the Company other than any director
who is a Registered Holder, the nominee of a Registered Holder or any
affiliate, director, officer, trustee, beneficiary or employee of a
Registered Holder (the "Non-Interested Directors").
(c) In case the Company shall (i) subdivide its outstanding shares
of Common Stock into a greater number of shares, (ii) combine its
outstanding shares of Common Stock into a smaller number of shares or
(iii) issue by reclassification of its shares of Common Stock (including
any such reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation) any shares of capital
stock (any such subdivision, combination or reclassification a "Change of
Shares"), the Exercise Price in effect at the effective date of such
Change of Shares shall be proportionally adjusted so that the holder of
any Warrants exercised after such time shall be entitled to receive the
aggregate number and kind of shares which, if such Warrants had been
converted immediately prior to such time, paying the same aggregate
consideration, he would have owned upon such exercise and been entitled to
receive upon such Change of Shares. Such adjustment shall become effective
immediately after the effective date of such Change of Shares.
(d) In case the Company shall fix a record date for the making of
a distribution, by dividend or otherwise, to all holders of its Common
Stock evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in paragraph (b) of this
Section, any dividend or distribution paid in cash out of the retained
earnings of the Company and any dividend or distribution referred to in
paragraph (a) of this Section), the Exercise Price in effect after the
record date shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior
to the close of business on the record date by a fraction of which the
numerator shall
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<PAGE> 14
be the current fair market value per share (determined as provided in
paragraph (f) of this Section) of the Common Stock on the date fixed for
such determination less the then fair market value (as determined by the
vote of a majority of the Non-Interested Directors of the Company, whose
determination shall be conclusive and described in a resolution of the
Board of Directors of the Company) of the portion of the assets or
evidences of indebtedness so distributed applicable to one share of Common
Stock and the denominator shall be such current fair market value per
share of the Common Stock, such adjustment to become effective immediately
prior to the opening of business on the day following the record date. In
the event that such distribution is not so made, the Exercise Price shall
again be adjusted to the Exercise Price which would then be in effect if
such record date has not been fixed.
(e) Upon each adjustment of the Exercise Price pursuant to this
Section, each Warrant outstanding immediately prior to such adjustment
shall thereafter constitute the right to purchase, at the adjusted
Exercise Price per share, an adjusted number of Shares determined (to the
nearest one-hundredth of a Share) by multiplying the number of Shares
purchasable upon exercise of a Warrant immediately prior to such
adjustment by a fraction, the numerator of which shall be the Exercise
Price in effect immediately prior to such adjustment and the denominator
of which shall be the Exercise Price in effect immediately after such
adjustment.
(f) For the purpose of any computation under paragraphs (b) and
(d) of this Section, the current fair market value per share of Common
Stock on any date shall be (a) the arithmetic average of the daily last
sale prices of the Common Stock for the 15 consecutive trading days
commencing 25 trading days prior to such time, as officially reported on
the principal national securities exchange on which the Common Stock is
then listed (or the NASDAQ if the Common Stock is not listed on a national
securities exchange but is designated as a national market system security
by the NASD) or (b) if the Common Stock is not then listed or quoted on
the over-the-counter market, the fair market value of the
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<PAGE> 15
Common Stock as determined by the Company?s Board of Directors.
(g) The Company may make such reductions in the Exercise Price, in
addition to those otherwise required by this Section, as it considers to
be advisable in order that any event treated for Federal income tax
purposes as a dividend of stock or stock rights shall not be taxable to
the recipients.
(h) No adjustment under this Section in the Exercise Price (and,
therefore, no adjustment in the number of Shares purchasable upon the
exercise of Warrants) shall be required unless such adjustment would
require an increase or decrease of at least $0.25 in such price; provided,
however, that any adjustments which by reason of this paragraph are not
required to be made shall be carried forward and taken into account in
determining any subsequent adjustment. All calculations under this Section
shall be made to the nearest one-hundredth of a cent or to the nearest
one-hundredth of a Share, as the case may be.
(i) Whenever the Exercise Price and the number of Shares
purchasable upon the exercise of a Warrant are adjusted as herein
provided, the Company shall as soon as practicable, but in no event later
than 30 calendar days thereafter:
(i) compute the adjusted Exercise Price in accordance with
this Section and shall prepare a certificate signed by the principal
accounting officer of the Company or any other appropriate officer
or official of the Company setting forth the adjusted Exercise Price
and the adjusted number of Shares purchasable upon the exercise of
Warrants and showing in reasonable detail the facts upon which such
adjustments are based; and
(ii) cause to be given notice to each of the Registered
Holders at such Registered Holder's address appearing in the Warrant
Register. Such notice shall set forth the adjusted Exercise Price
and the adjusted number of such Shares. Where appropriate, any such
notice may be given in advance and included as part of any other
notice
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<PAGE> 16
required to be mailed under the other provisions of this Section.
The failure to give the notice required in this paragraph or
any defect therein shall not affect the legality or validity of the event
causing the adjustment of the Exercise Price and the number of Shares
purchasable upon the exercise of the Warrant or the vote thereon or any
other action taken in connection therewith.
(j) In case:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out
of its retained earnings; or
(ii) the Company shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class (or securities
convertible into shares of capital stock of any class) or of any
other rights or shall issue shares of Common Stock; or
(iii) any of the following transactions occur -- any
reclassification of the capital stock of the Company (other than a
subdivision or combination of its outstanding shares of Common
Stock), any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is
required, or any sale or transfer of all or substantially all of the
assets of the Company; or
(iv) the Company shall be (voluntarily or involuntarily)
dissolved, liquidated or wound up;
then the Company, if notice of such event is being mailed to the holders
of the Common Stock, shall cause to be mailed to the Registered Holders,
at or prior to the time notice of such event is mailed to the holders of
the Common Stock, a copy of the notice being mailed to the holders of the
Common Stock. The failure to give the notice required in this paragraph or
any
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<PAGE> 17
defect therein shall not affect the legality or validity of any dividend,
distribution, right, warrant, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up or the vote thereon or any other
action taken in connection therewith.
(k) In any case in which this Section 8 shall require that any
adjustment in the Exercise Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
the event issuing to the Registered Holder of any Warrants exercised after
that record date the Shares or other capital stock of the Company, if any,
issuable upon exercise over and above the Shares or other capital stock of
the Company, if any, issuable upon the exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to the holder a due bill or other appropriate
instrument evidencing such holder?s right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(l) In case the Company shall have issued Convertible Securities
and the Exercise Price was adjusted pursuant to Section 8(b), upon the
expiration of such Convertible Securities or upon the expiration of such
securities? conversion privilege, the number of Shares purchasable upon
exercise of a Warrant and the Exercise Price, to the extent such Warrant
has not then been exercised, shall, upon such expiration, be readjusted
and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as
the case may be) on the basis of (A) the fact that the only shares of
Common Stock so issued were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Convertible Securities, and (B)
the fact that such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such exercise plus
the consideration, if any, actually received by the Company for the
issuance, sale or grant of all such Convertible Securities whether or not
exercised; provided, however, that no such readjustment shall have the
effect of increasing the Exercise Price by an amount in excess of
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<PAGE> 18
the amount of the adjustment initially made in respect to the issuance,
sale or grant of such Convertible Securities.
(m) In case of any consolidation of the Company with or merger of
the Company into any other person, any merger of another person into the
Company (other than a merger that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
of the Company) or any sale or transfer of all or substantially all of the
assets of the Company, each Warrant then outstanding shall thereafter, at
the then Exercise Price and upon the other terms and conditions specified
in this Agreement, be exercisable for the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, sale
or transfer by a holder of the number of shares of Common Stock of the
Company issuable upon exercise of such Warrant immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Common
Stock of the Company is not a person with which the Company consolidated
or into which the Company merged or which merged into the Company or to
which such sale or transfer was made, as the case may be (a "Constituent
Person"), or a person directly or indirectly controlling, controlled by,
or under common control with a Constituent Person (an "Affiliate"), and
failed to exercise its rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of
Common Stock of the Company held immediately prior to such consolidation,
merger, sale or transfer by others than a Constituent Person or Affiliate
thereof or in respect of which such rights of election shall not have been
exercised ("Non-Electing Share"), then for the purpose of this Section the
kind and amount of securities, cash and other property receivable upon
each such consolidation, merger, sale or transfer by each Non-Electing
Share shall be deemed to be the kind and amount so receivable per share by
a plurality of the Non-Electing Shares). Prior to or simultaneously with
effecting any such consolidation,
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<PAGE> 19
merger, sale or transfer, the person formed by such consolidation or the
successor resulting from such merger or which acquires such assets, as the
case may be, shall execute and deliver to each Registered Holder a
supplemental warrant agreement containing provisions to the effect set
forth in the previous sentence and providing for adjustments which, for
events subsequent to the effective date of such supplemental warrant
agreement, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section and containing an agreement to be
bound by the provisions of this Agreement.
(n) Upon the occurrence of any event requiring an adjustment of
the Exercise Price as described above, if the foregoing adjustments do not
result in the kind and number of shares of Common Stock to be issued upon
exercise of the Warrants having substantially equal value after such event
as the kind and number of shares of Common Stock issuable upon exercise of
the Warrants immediately prior to such event, the Company shall make such
other or additional adjustments to the Exercise Price and the Warrant
Exercise Rate as may be required to carry out the intention of the parties
that no such event shall result in any increase or decrease in the value
of such Warrants.
(o) The above adjustments shall be made, to the extent applicable,
successively whenever any event described above shall occur.
(p) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants,
Warrant Certificates theretofore or thereafter issued may continue to
express the same Exercise Price per Share and number and kind of Shares as
are stated on the Warrant Certificates initially issuable pursuant to this
Agreement.
Section 9. Fractional Warrants and Fractional Shares. The Company
shall not be required to exchange or transfer Warrants for fractions of
Warrants. The Company will not be required to issue any fractional Warrants
representing fractional shares of Common Stock or other distributed securities
upon exercise of the Warrants or
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distribute stock certificates or other instruments that evidence fractional
shares of Common Stock or other distributed securities and the Company will not
pay any cash adjustment in respect of any fractional shares of Common Stock or
other distributed securities otherwise issuable upon the exercise of any
Warrant.
Section 10. No Rights as Stockholders. Nothing contained in this
Agreement or in any of the Warrant Certificates shall be construed as conferring
upon the Registered Holder thereof the right to vote, receive dividends or to be
deemed for any purpose the holder of Common Stock or of any other securities of
the Company that may at any time be issuable on the exercise of the Warrant
Certificates, nor shall anything contained herein or in the Warrant Certificates
be construed to confer upon the Registered Holders thereof, as such, any of the
rights of a stockholder of the Company or any right to vote on matters submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or, without limitation, otherwise) or to receive notice of meetings,
or to receive subscription rights or otherwise, until the Warrants evidenced by
the Warrant Certificates shall have been exercised as provided herein.
Section 11. Representations, Warranties and Covenants of the
Company. The Company represents, warrants and agrees with each Registered Holder
that:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to carry out and
perform its obligations under this Agreement.
(b) The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock.
At March 17, 1998, there was outstanding 27,823,317 shares of Common Stock
and 0 shares of preferred stock. At February 28, 1998, the Company had
outstanding 5,037,121 options to purchase shares of Common Stock, which
options were duly granted pursuant to the 1991 Stock Incentive Plan, 1995
Stock Incentive Plan, 1996 Stock Incentive Plan, 1997 NonQualified Stock
Option Plan, 1997
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<PAGE> 21
Stock Option Plan and outside of any such plans. Each such plan has been
duly approved by the Board of Directors and, except for the 1997
Non-Qualified Stock Option Plan, stockholders of the Company. 5,315,505
shares of Common Stock are reserved for issuance upon exercise of such
options, 6,106,617 shares of Common Stock are reserved for issuance upon
conversion of the Company?s 5.5% Subordinated Convertible Debentures due
2006. 500,000 Shares of preferred stock are reserved for issuance upon
exercise of the Rights distributed to holders of Common Stock pursuant to
the Rights Agreement, 1,124,184 shares of Common Stock are reserved for
issuance under the Company's Dividend Reinvestment and Stock Purchase Plan
and 562,500 shares of Common Stock are reserved for issuance under the
Company?s Stock Purchase Plan.
(c) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding obligation
of the Company enforceable in accordance with its terms except as such
enforceability may be subject to any applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, equitable subordination or other laws
relating to or affecting creditor's rights and general principles of
equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing; and neither the issuance of
the Warrants nor the issuance of the shares of Common Stock issuable upon
exercise of the Warrants will result in a breach or violation of any terms
or provisions of, or constitute a default under, any contract, indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
to which the Company is currently a party or by which the Company is
currently bound, the Certificate of Incorporation or Bylaws of the
Company, or any law, order, rule, regulation or decree of any government,
governmental agency or court, domestic or foreign, currently applicable to
the Company, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company, except for such
breaches, violations or defaults as, individually and in the aggregate, do
not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole, assuming that all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") have
expired or been terminated and all applicable filings pursuant to state
securities laws, the HSR Act, the Securities Act, the
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<PAGE> 22
Exchange Act and the rules and regulations of the New York Stock Exchange
have been made.
(d) No consent, approval, authorization or order of any court or
governmental agency or body or any third party is required to be obtained
by the Company for the sale and issuance of the Warrants or the issuance
of the shares of Common Stock issuable upon exercise of the Warrants
except such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities laws, the HSR
Act, the Securities Act, the Exchange Act and the rules and regulations of
the New York Stock Exchange. Upon the valid exercise of the Warrants by a
Registered Holder thereof, the shares of Common Stock with respect to
which the Warrants are exercised shall be fully paid and nonassessable.
(e) The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Agreement or of the Warrants.
(f) The Company shall not consolidate with or merge into any other
corporation or sell, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any entity, unless the entity
formed by such consolidation or into which the Company is merged or the
entity which acquires by sale or transfer, or which leases, the properties
and assets of the Company as an entirety or substantially as an entirety
shall be a corporation, company, partnership or trust, shall be organized
and validly existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume, by
supplemental agreement, the due and punctual performance and observance of
each and every obligation, covenant and condition of this Agreement to be
performed or observed by the Company. Upon any such consolidation, merger,
sale, transfer or lease in accordance with the preceding sentence, such
entity shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Agreement with the same effect
as if such successor entity had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor entity shall be
relieved of all
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<PAGE> 23
obligations and covenants under this Agreement and the Warrants.
(g) The Company covenants to at all times keep reserved and
available, for the purpose of effecting the exercise of the Warrants, free
from preemptive rights, out of its authorized but unissued Common Stock
the full number of shares of Common Stock sufficient to provide for the
exercise of all rights of purchase represented by all outstanding
Warrants.
Section 12. Inspection of Warrant Agreement. The Company shall keep
copies of this Agreement and any notices given or received hereunder available
for inspection by Registered Holders during normal business hours at its
executive offices.
Section 13. Issuance of New Warrant Certificates. Notwithstanding
any of the provisions of this Agreement or of the Warrants to the contrary, the
Company may, at its option, issue new Warrant Certificates evidencing Warrants
in such form as may be approved by its Board of Directors which reflect any
adjustment or change in the number or kind or class of shares of stock or other
securities or property purchasable under the Warrant Certificates made in
accordance with the provisions of this Agreement. The Company may, at its
option, require Registered Holders of Warrants to surrender their old Warrant
Certificates for any such new Warrant Certificates. The Company shall make no
service or other charge in connection with any such exchange or Warrant
Certificates, except for any taxes payable in connection therewith.
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<PAGE> 24
Section 14. Notices. All instructions, notices and other
communications to be given to any party hereto shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid
and return receipt requested, and shall be deemed to be given for purposes of
this Agreement on the day when delivered to the intended party at its address
specified below:
(a) If to the Company:
Aames Financial Corporation
350 South Grand Avenue, 52nd Floor
Los Angeles, California 90071
Attention: Barbara S. Polsky
With copy to:
Manatt, Phelps & Phillips LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attention: William Quicksilver
or such other address as the Company may designate from time to time by written
notice to the Registered Holder.
(b) If to the Registered Holder, then at the address as set forth
in the Warrant Register or such other address as the Registered Holder may
designate from time to time by written notice to the Company.
Section 15. Supplements and Amendments. The Company and the
Registered Holders of a majority of the then outstanding Warrants may from time
to time supplement or amend this Agreement, without the approval of any other
Registered Holders, in order to cure any ambiguity or to correct or supplement
any provision contained herein that may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder that the Company and such Registered Holders may
deem necessary or desirable and that shall not adversely affect the interests of
the Registered Holders. This Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a written instrument
duly executed by the Company and the Registered Holders of a
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<PAGE> 25
majority of the then-outstanding Warrants; provided, however, that no such
amendment or waiver shall, without the consent of the Registered Holder of each
outstanding Warrant affected thereby, (a) alter the provisions of this Agreement
so as to affect adversely the Exercise Price, the number of shares of Common
Stock purchasable upon exercise of a Warrant, or the adjustment provisions of
Section 8, or (b) reduce the number of Warrants outstanding the consent of whose
Registered Holders is required for any such amendment or waiver. Each Registered
Holder shall be bound by any amendment or waiver effected pursuant to this
Section 15, whether or not any notice, writing or marking indicating such
amendment or waiver appears on the certificates for the Warrants held by such
Registered Holder or is delivered to such Registered Holder.
Section 16. Successors. This Agreement shall be binding upon and
inure to the benefit of the respective successors and permitted assigns
hereunder of the Company or any Registered Holder. In the event that any
transferee of a Registered Holder shall acquire Warrants, in any manner, whether
by gift, bequest, purchase, operation of law or otherwise, such transferee
shall, upon the execution and delivery to the Company of an assignment in the
form of Exhibit B hereto, be deemed a party hereto for all purposes and such
Warrants shall be held subject to all of the terms of this Agreement, and by
taking and holding such Warrants, such transferee shall be entitled to receive
the benefits of and be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement. In addition, in
connection with a bona fide pledge of any Warrants to secure indebtedness or
other obligations, a Registered Holder may assign its rights, interests and
obligations hereunder to the beneficiary of such pledge; provided that if the
beneficiary of such pledge becomes, or through the exercise of remedies under
such pledge causes another person to become, a Registered Holder of Warrants,
such Registered Holder agrees to be bound by the terms of this Agreement by
execution and delivery to the Company of written notice in the form of Exhibit B
pursuant to Section 4 or otherwise; and provided further that unless and until
the immediately preceding proviso is applicable, the pledgor shall remain bound
by the terms of this Agreement. The Company shall not have either the right or
the power to assign or delegate any right or obligation hereunder (except by
merger or other operation of law)
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<PAGE> 26
without the written consent of Registered Holders holding a majority of the then
outstanding Warrants.
SECTION 17. GOVERNING LAW. THIS AGREEMENT, EACH WARRANT CERTIFICATE
AND EACH WARRANT ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO
CONFLICT OF LAWS PROVISIONS THEREOF.
Section 18. Jurisdiction and Venue. Each of the parties hereto
hereby irrevocably submits in any legal action or proceeding relating to or
arising out of this Agreement or any other document relating hereto or delivered
in connection with the transactions contemplated hereby, or for recognition and
enforcement of any judgment in respect thereof, to the exclusive jurisdiction of
the United States District Court for the District of Delaware (or if such court
does not have jurisdiction, the courts of the State of Delaware, Newcastle
County, and appellate courts thereof. Each of the parties hereto further (a)
consents that any such action or proceeding may be brought in such court and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the same; (b) agrees
that service of process in any such action or proceeding may be effected by
personal delivery thereof to such party?s registered office in the jurisdiction
in which it is incorporated, with a copy to such party at its address as
provided in Section 14; and (c) agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by law.
Section 19. Benefits of this Agreement. Except as otherwise provided
for in Section 16, nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and the Registered Holders of the
Warrant Certificates any legal or equitable right, remedy or claim under this
Agreement, and this Agreement shall be for the sole and exclusive benefit of the
Company and the Registered Holders of the Warrant Certificates.
Section 20. Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held or
rendered invalid, illegal
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<PAGE> 27
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way affected or impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
Section 21. Specific Performance. The Company acknowledges that it
would be impossible to determine the amount of damages that would result from
any breach by it of any of the provisions of this Agreement and that the remedy
at law for any breach, or threatened breach, of any of such provisions would
likely be inadequate and, accordingly, agrees that each Holder shall, in
addition to any other rights or remedies which it may have, be entitled to seek
such equitable and injunctive relief as may be available from any court of
competent jurisdiction to compel specific performance of, or restrain the
Company from violating any of, such provisions. In connection with any action or
proceeding for injunctive relief, the Company hereby waives the claim or defense
that a remedy at law alone is adequate and agrees, to the maximum extent
permitted by law, to have each provision of this Agreement specifically enforced
against it, without the necessity of posting bond or other security against it,
and consents to the entry of injunctive relief against it enjoining or
restraining any breach or threatened breach of this Agreement.
Section 22. Integration. This Agreement and the documents referred
to herein or delivered pursuant hereto, including the exhibits hereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and thereof. There are no agreements, representations, warranties,
covenants or undertakings with respect to the subject matter hereof and thereof
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to this subject matter.
Section 23. Further Assurances. Each of the parties hereto shall
execute and deliver such further instruments and documents and take such further
actions as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby.
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Section 24. Headings and Table of Contents. The section and
subsection headings herein and the table of contents are for convenience only
and shall not affect the construction hereof.
Section 25. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
one and the same instrument.
Section 26. Legends. The certificates evidencing the Warrants and
the shares of Common Stock issuable upon exercise of the Warrants shall bear a
legend to the effect that such security may not be sold or transferred unless
registered under the Securities Act or if an exemption thereunder is available.
Such legend shall be removed upon registration under the Securities Act or if
the Purchaser or any transferee delivers an opinion of counsel reasonably
acceptable to the Company to the effect that such legend is no longer required
under the Securities Act. In addition, certificates evidencing the Warrants
shall bear a legend which states that such Warrants are subject to the terms of
this Agreement.
Section 27. Opinion on Transfer of Warrant Shares After Exercise.
Notwithstanding anything to the contrary stated herein, neither the Company nor
the Company?s transfer agent and registrar shall be required to reflect the
transfer of the Shares or other securities issued upon exercise of the Warrants
unless such Shares or other securities have been transferred pursuant to a
registration statement which is effective under the Securities Act of the
Company or the Company?s transfer agent and registrar has received an opinion of
counsel, who is reasonably acceptable to the Company, that the transfer is
exempt from registration under the Securities Act.
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<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
AAMES FINANCIAL CORPORATION
By: /s/ Cary H. Thompson
---------------------------------------
Name: Cary H. Thompson
Title: Chief Executive Officer
TURTLE CREEK REVOCABLE TRUST
By: /s/ Gerald J. Ford
---------------------------------------
Name: Gerald J. Ford
Title: Trustee
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<PAGE> 30
EXHIBIT A
FORM OF WARRANT CERTIFICATE
---------------------------
---------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES
WHICH MAY BE ISSUED UPON EXERCISE OF THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ARE SUBJECT TO THE TERMS OF THE
WARRANT AGREEMENT, DATED AS OF MARCH 19, 1998 BY AND BETWEEN AAMES FINANCIAL
CORPORATION AND _____________ (THE "WARRANT AGREEMENT"). THESE SECURITIES AND
ANY SECURITIES WHICH MAY BE ISSUED UPON EXERCISE OF THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SAID ACT OR OTHERWISE THAN IN ACCORDANCE WITH THE WARRANT
AGREEMENT. A COPY OF THE WARRANT AGREEMENT MAY BE OBTAINED FROM AAMES FINANCIAL
CORPORATION.
---------------------------
This Warrant Certificate certifies that
_____________________________ , or any registered and permitted assigns, is the
Registered Holder (as hereinafter defined) of __________ warrants (the
"Warrants"). Each Warrant entitles the Registered Holder hereof to purchase,
upon the terms and conditions set forth herein, one fully paid and nonassessable
share (the "Share") of Common Stock, par value $.001 per share (the "Common
Stock"), of Aames Financial Corporation, a Delaware corporation (the "Company"),
in consideration of the payment by the Registered Holder of the exercise price
(the "Exercise Price") at the time in effect under the Warrant Agreement (as
hereinafter defined). The Exercise Price shall initially be $17.2031 per
Warrant. The Exercise Price and the number of shares purchasable upon exercise
of a Warrant shall be subject to adjustment as provided in Section 8 of the
Warrant Agreement. Any or all of the Warrants shall expire on April 19, 2001
(the "Expiration Date"). After the Expiration Date, unexercised Warrants will be
wholly void and of no value. The Warrants represented hereby may be exercised by
the Registered Holder on any business day, as
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<PAGE> 31
defined in the Warrant Agreement, beginning on the date of a Purchase Event (as
defined in the Warrant Agreement) and on or prior to the close of business on
the Expiration Date upon payment of the Exercise Price multiplied by the number
of such Warrants being exercised (the "Aggregate Exercise Price") in cash, by
cashier's check payable to the order of the Company or by wire transfer to the
Company's account of immediately available funds, and upon proper execution of
the Form of Exercise attached hereto and surrender of this Warrant Certificate
at the corporate executive offices of the Company at 350 South Grand Avenue,
52nd Floor, Los Angeles, California 90071. The Exercise Price and the number of
shares of Common Stock and the type and amount of other securities or other
property purchasable upon exercise of each Warrant may as of the date of this
Warrant Certificate have been, or may after such date be, adjusted as a result
of the occurrence of certain events, as more fully provided in the Warrant
Agreement.
The Warrant or Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants issued pursuant to the Stock
Purchase Agreement, dated March 19, 1998, by and among the Company and the
Purchaser and whose terms and provisions are governed by the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for the description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the Purchaser or such other registered holder of the Warrants to
whom transfer is authorized in accordance with the terms of the Warrant
Agreement (the Purchaser and such other registered holder are referred to herein
individually as the "Registered Holder" and, collectively, as the "Registered
Holders") to all of which the Registered Holder of the Warrants represented by
this Warrant Certificate, by acceptance hereof, consents. Copies of the Warrant
Agreement are on file and available for inspection and can be obtained from or
at the corporate executive offices of the Company.
Subject to the provisions of the Warrant Agreement, (i) upon such
surrender of this Warrant Certificate and payment of the Aggregate Exercise
Price with respect to the Warrant or Warrants being exercised on or prior to the
close of business on the Expiration Date, the Company shall deliver or cause to
be delivered to the Registered Holder
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<PAGE> 32
surrendering this Warrant Certificate certificates for the shares of Common
Stock, certificates or other appropriate instruments for any other securities,
and such other property issuable upon the exercise of the Warrant or Warrants
evidenced by this Warrant Certificate, in such name or names as the Registered
Holder of this Warrant Certificate that are being exercised shall designate on
the Form of Exercise attached hereto; and (ii) such shares of Common Stock,
securities and other property shall be deemed to have been issued, and any
person so designated therein shall be deemed to have become, the holder of
record of such shares of Common Stock, securities or property as of the date of
the surrender of this Warrant Certificate and payment of the Aggregate Exercise
Price.
All or fewer than all of the Warrants evidenced by this Warrant
Certificate may be exercised on any occasion. In the event that fewer than all
of the Warrants represented by this Warrant Certificate are exercised, upon such
exercise the Company shall execute and deliver to the Registered Holder thereof
or, subject to Section 4 of the Warrant Agreement, such person or entity as
shall be designated in the Form of Exercise attached hereto a new Warrant
Certificate representing the Warrants not so exercised.
Transfers of the Warrant shall only be made in accordance with the
Warrant Agreement.
The Company may deem and treat the Registered Holder hereof as the
absolute owner of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof, any distribution to the Registered Holder hereof and for all
other purposes, and the Company shall not be affected in any way by any notice
to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
Signatures on exercises and assignments of the Warrant represented
by this Warrant Certificate must, unless waived by the Company, be guaranteed by
a bank or trust company having an office or correspondent in the United States
or by a broker or dealer that is a member of a
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<PAGE> 33
registered national securities exchange or the National Association of
Securities Dealers, Inc.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its official seal by its President or any Vice
President and attested to by its Secretary or any Assistant Secretary.
Dated: ____________, 1998
AAMES FINANCIAL CORPORATION
By: __________________________
Attest:
- -------------------------
[SEAL]
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<PAGE> 34
FORM OF EXERCISE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise _______
Warrants represented by this Warrant Certificate, entitling the undersigned to
purchase ________ shares of Common Stock, par value $.001 per share (the "Common
Stock"), of Aames Financial Corporation, a Delaware corporation (the "Company"),
and such other securities or property issuable upon exercise of such Warrants in
accordance with the terms of the Warrant Agreement, dated as of March 19, 1998,
between the Company and ___________, and herewith tenders payment for such
Warrants in the amount of $_________ payable in cash, by cashier's check payable
to the order of the Company or by wire transfer to the Company's account of
immediately available funds.
The undersigned requests that certificates for shares of Common
Stock and certificates or other instruments for other securities, and other
property issuable upon exercise of the Warrant be registered in the name of
_______________________ whose address is _____________________________________
and that such certificates and other instruments and property be delivered to
_________________________________ whose address is
_____________________________________. If said number of Warrants is less than
all of the Warrants represented by this Warrant Certificate, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
the Warrants be registered in the name of _______________________ whose address
is _____________________________________ and that such Warrant Certificate be
delivered to __________________________ whose address is
___________________________________.
<PAGE> 35
[The undersigned hereby certifies that it is acquiring the shares of
Common Stock issuable upon the exercise of the Warrants for its own account and
is an "accredited investor" as defined in Rule 501 to the Securities Act of
1933, as amended (the "Securities Act"), and has no intention of distributing
the shares of Common Stock issuable upon the exercise of the Warrants in
violation of the Securities Act or applicable state securities or "blue sky"
laws.].
Dated:
Signature: ________________________
(Signature must conform in all respects
to the name of the Registered Holder as
specified on the face of the Warrant
Certificate.)
- ----------------------------------
(Social Security or Other
Taxpayer Identification
Number of Registered Holder)
- ----------
* Required if the shares of Common Stock issuable upon exercise of the
Warrants are not registered under the Securities Act for issuance and sale by
the Company.
<PAGE> 36
EXHIBIT B
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
--------------------------------
--------------------------------
--------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________,
attorney to transfer this Warrant Certificate on the books of
____________________, with full power of substitution.
[The undersigned hereby certifies that the acquisition by the
transferee of the Warrants evidenced by this Warrant Certificate was effected in
a transaction exempt from the registration provisions in Section 5 of the
Securities Act of 1933 (as amended (the "Securities Act") and was effected in a
transaction that was not a distribution, without the use of general advertising
or general solicitation, to a person or entity that the undersigned, in his best
a person or entity that the undersigned, in his best knowledge, believes to be
an "accredited investor" (as defined in Rule 501 to the Securities Act and not
an underwriter (as defined in Section 2(II) of the Securities Act.]*
Dated:
Signature: ___________________ (Signature
must conform in all respects to the name
of the Registered Holder as specified on
the face of the Warrant Certificate.)
<PAGE> 37
- ------------------------------
(Insert Social Security or
Other Identifying Number of
Assignee)
[The aforesaid assignee hereby certifies that such assignee is an
"accredited investor" as defined in Rule 501 to the Securities Act, is acquiring
the Warrants for its own account and has no intention of distributing the
Warrants or shares of Common Stock issuable upon the exercise of the Warrants in
violation of the Securities Act or applicable state securities or "blue sky"
laws.]*
By accepting this assignment, the aforesaid assignee shall be
entitled to the benefits of and hereby agrees to be bound by all of the terms
and conditions of the Warrant Agreement.
Agreed and Accepted as of __________________:
- ------------------------------
* Required if the Warrants are not registered under the Securities Act for
resale by registered holders.
<PAGE> 1
EXHIBIT 10.1
================================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 19, 1998
By and Between
AAMES FINANCIAL CORPORATION
and
THIRTY-FIVE EAST INVESTMENTS LLC
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
SECTION 1
Definitions
<S> <C>
1.1 Certain Definitions......................................................1
1.2 Other Definitions........................................................3
SECTION 2
Purchase and Sale of the Shares and Warrants
2.1 Purchase and Sale........................................................4
2.2 The Closing..............................................................4
2.3 Delivery.................................................................4
SECTION 3
Representations and Warranties of the Company
3.1 Organization, etc.......................................................5
3.2 Qualification to do Business............................................5
3.3 Capitalization..........................................................5
3.4 Authorization; No Breach................................................6
3.5 Material Contracts; Defaults............................................7
3.6 Regulatory Matters......................................................7
3.7 Compliance with Laws....................................................8
3.8 Authorization of Shares and Warrants....................................9
3.9 Ownership of Shares and Warrants........................................9
3.10 Financial Reports and Regulatory Documents..............................9
3.11 Litigation.............................................................11
3.12 Tax Matters............................................................11
3.13 Anti-takeover Provisions...............................................11
3.14 Brokers or Finders.....................................................11
3.15 Disclosure.............................................................11
3.16 Risk Management Instruments............................................12
3.17 Books and Records......................................................12
3.18 Insurance..............................................................12
3.19 Environmental Matters..................................................12
3.20 Employee Benefit Plans.................................................14
3.21 Labor Matters..........................................................15
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
SECTION 4
Representations, Warranties and
Acknowledgments of the Purchaser
<S> <C>
4.1 Execution, Delivery and Performance.....................................16
4.2 Investment..............................................................16
4.3 Organization............................................................16
4.4 No Breach...............................................................16
4.5 Financing...............................................................17
SECTION 5
Conditions to the Purchaser's Obligations for the Closing
5.1 Representations and Warranties..........................................17
5.2 Registration Rights Agreement...........................................17
5.3 Warrant Agreement.......................................................18
5.4 Opinion of the Company's Counsel........................................18
5.5 HSR Act.................................................................20
5.6 Amendment of the Rights Agreement.......................................20
5.7 Proceedings.............................................................20
5.8 Closing Documents.......................................................21
5.9 Waiver..................................................................21
SECTION 6
Conditions to the Company's Obligations for the Closing
6.1 Representations and Warranties..........................................21
6.2 Legal Matters...........................................................21
6.3 Closing Documents.......................................................22
6.4 HSR Act.................................................................22
6.5 Waiver..................................................................22
6.6 Concurrent Purchase Agreement...........................................22
SECTION 7
Covenants
7.1 Financial Statements and Other Information..............................22
7.2 Directors...............................................................23
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
7.3 HSR Act Filing..........................................................23
7.4 Conditions to Closing...................................................23
7.5 Use of Proceeds.........................................................23
7.6 Pledge of Shares........................................................23
7.7 No-Action Letter........................................................24
SECTION 8
Miscellaneous
8.1 Expenses...............................................................24
8.2 Additional Purchases of Common Stock...................................25
8.3 Amendments and Waivers.................................................25
8.4 Termination............................................................25
8.5 Survival of Representations and Warranties.............................25
8.6 Successors and Assigns.................................................25
8.7 Severability...........................................................26
8.8 Entire Agreement.......................................................26
8.9 Descriptive Headings; Language Interpretation..........................26
8.10 Governing Law..........................................................26
8.11 Waiver of Jury Trial...................................................27
8.12 Notices................................................................27
8.13 Remedies...............................................................28
8.14 Counterparts...........................................................28
8.15 Publicity..............................................................28
8.16 Legend.................................................................28
8.17 Transfer Opinion.......................................................29
</TABLE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
--------------
<S> <C>
Registration Rights Agreement A
Warrant Agreement B
</TABLE>
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March
19, 1998, by and between Aames Financial Corporation, a Delaware corporation
(the "Company") and Thirty-Five East Investments LLC, a Delaware limited
liability company (the "Purchaser").
WHEREAS, the Company desires to sell 2,225,865 shares (the
"Shares") of Common Stock and warrants to purchase an additional 2,225,865
shares of Common Stock, on the terms and conditions set forth herein; and
WHEREAS, the Purchaser desires to purchase the Shares and the
Warrants on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
SECTION 1
Definitions
1.1 Certain Definitions. The terms specified in this Section 1.1
shall, for all purposes of this Agreement, have the meanings herein specified,
unless the context expressly otherwise requires.
"Affiliate" means a person that directly, or indirectly through
one of more intermediaries, controls or is controlled by, or is under common
control with, the person specified.
"Closing" shall have the meaning assigned to such term in Section
2.2.
"Common Stock" shall mean the Company's common stock, par value
$.001 per share.
"Concurrent Purchase Agreement" shall mean the Stock Purchase
Agreement, dated the date hereof, by and between the Company and the Concurrent
Purchaser.
<PAGE> 6
"Concurrent Purchaser" shall mean Turtle Creek Revocable Trust.
"Documents" shall mean, collectively, this Agreement, the Warrant
Agreement and the Registration Rights Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or
any federal statute from time to time in effect which has replaced such statute.
"Governmental Authority" means any court, administrative agency
or commission or other federal, state or local governmental authority or
instrumentality.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
"Material Adverse Effect" means any effect that (i) is material
and adverse to the financial position, results of operations, business or
prospects of the Company and its Subsidiaries taken as a whole, or (ii) would
materially impair the ability of either the Purchaser or the Company to perform
its obligations under any of the Documents or otherwise, provided, however, that
in determining whether a Material Adverse Effect has occurred there shall be
excluded any effect on the referenced party the cause of which is (i) any change
in consumer finance or similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental authorities
and (ii) any change in generally accepted accounting principles or regulatory
accounting principles applicable to finance companies generally.
"Officer's Certificate" shall mean a certificate signed by the
chief executive officer and the chief financial officer of the Company, stating
that (i) the person signing such certificate has made or has caused to be made
such investigations as are necessary in order to permit him to verify the
accuracy of the information set forth in such certificate, and (ii) to the best
of such person's knowledge, such certificate does not misstate any material fact
or omit to state any material fact necessary to make the certificate not
misleading.
"Registration Rights Agreement" shall have the meaning set forth
in Section 5.2 hereof.
-2-
<PAGE> 7
"Regulatory Documents" shall have the meaning set forth in
Section 3.10.
"Rights" shall mean securities or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, or any options, calls or commitments relating to, or any stock
appreciation right or other instrument the value of which is determined in whole
or in part by reference to the market price or value of, shares of Common Stock.
"Rights Agreement" shall mean the Rights Agreement dated as of
June 21, 1996, between the Company and Wells Fargo Bank.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, or any
federal statute from time to time in effect which has replaced such statute.
"Subsidiary" shall mean any corporation of which shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Company either directly or through its Subsidiaries, any partnership in which
the Company or any Subsidiary is a general partner and any joint venture in
which the Company or any Subsidiary is a joint venturer.
"Warrant Agreement" shall have the meaning set forth in Section
5.3 hereof.
"Warrant Shares" shall mean the shares of Common Stock issuable
upon exercise of the Warrants.
"Warrants" shall mean the warrants to purchase an aggregate of up
to 2,225,865 shares of Common Stock at a price of $17.2031 per share upon the
occurrence of a Purchase Event (as defined in the Warrant Agreement), subject to
adjustment as provided herein and in the Warrant Agreement.
1.2 Other Definitions. In addition to the terms defined in
Section 1.1 hereof, certain other terms are defined elsewhere in this Agreement,
and, whenever such
-3-
<PAGE> 8
terms are used in this Agreement, they shall have their respective defined
meanings, unless the context expressly otherwise requires.
SECTION 2
Purchase and Sale of the Shares and Warrants
2.1 Purchase and Sale. On the terms and subject to the conditions
set forth herein, the Company will issue to the Purchaser and the Purchaser will
purchase from the Company the Shares at a purchase price of $13.7625 per share,
for an aggregate purchase price of $30,633,467.06 (the "Purchase Price"). In
addition, on the terms and subject to the conditions set forth herein, in
consideration for the purchase of the Shares, the Company will issue to the
Purchaser the Warrants. If the Company shall adjust, split, combine or
reclassify its shares of Common Stock between the date hereof and the date of
Closing, the purchase price per share, the number of shares of Common Stock
purchased hereby, the number of Warrants issued and the exercise price of such
Warrants shall be adjusted so that the Purchaser's interest shall not be
diluted.
2.2 The Closing. The delivery of and payment for the Shares and
Warrants will take place at the offices of Sullivan & Cromwell, 444 South Flower
Street, Los Angeles, California 90071, no later than five business days after
all waiting periods applicable to the transactions contemplated by this
Agreement and the Concurrent Purchase Agreement under the HSR Act have expired
or been terminated, and on the same day as the closing of the Concurrent
Purchase Agreement or such other time and date or such other place, as the
parties shall mutually agree in writing (the "Closing").
2.3 Delivery. At the Closing, the Company will deliver to the
Purchaser the Shares and the Warrants, registered in the Purchaser's or its
nominee's name, against payment therefor by the Purchaser of the Purchase Price
in immediately available funds by wire transfer to such account as the Company
may designate in writing.
-4-
<PAGE> 9
SECTION 3
Representations and Warranties of the Company
The Company hereby represents and warrants to the Purchaser that:
3.1 Organization, etc. Each of the Company and its Subsidiaries
is a corporation duly incorporated, validly existing and in good standing under
the laws of the state of its incorporation. Each of the Company and its
Subsidiaries has all requisite corporate power and authority to own and operate
its properties, to carry on its businesses as now conducted and to carry out and
perform its obligations under the terms of this Agreement, the Warrant Agreement
and the Registration Rights Agreement.
3.2 Qualification to do Business. The Company is duly licensed or
qualified and is in good standing as a foreign corporation in the State of
California and each other jurisdiction wherein the nature of the business
transacted by the Company or the nature of the property owned or leased by it
requires such licensing or qualification. Each of the Subsidiaries is duly
licensed or otherwise qualified in each state where in the nature of the
business transacted by such Subsidiary or the nature of the property owned or
leased by it requires such licensing or qualification and where failure to be so
licensed or qualified would reasonably be expected to, singly or in the
aggregate, have a Material Adverse Effect on the Company.
3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. At
March 17, 1998, there was outstanding 27,823,317 shares of Common Stock and 0
shares of preferred stock. At February 28, 1998, the Company had outstanding
5,037,121 options to purchase shares of Common Stock, which options were duly
granted pursuant to the 1991 Stock Incentive Plan, 1995 Stock Incentive Plan,
1996 Stock Incentive Plan, 1997 Non-Qualified Stock Option Plan, 1997 Stock
Option Plan and outside of any such plans. Each such plan has been duly approved
by the Board of Directors and, except for the 1997 Non-Qualified Stock Option
Plan, stockholders of the Company. 5,315,505 shares of Common
-5-
<PAGE> 10
Stock are reserved for issuance upon exercise of such options, 6,106,617 shares
of Common Stock are reserved for issuance upon conversion of the Company's 5.5%
Subordinated Convertible Debentures due 2006. 500,000 Shares of preferred stock
are reserved for issuance upon exercise of the Rights distributed to holders of
Common Stock pursuant to the Rights Agreement, 1,124,184 shares of Common Stock
are reserved for issuance under the Company's Dividend Reinvestment and Stock
Purchase Plan and 562,500 shares of Common Stock are reserved for issuance under
the Company's Stock Purchase Plan.
(b) Except as described in Section 3.3(a), the Company has no
outstanding Rights, except for Warrants which will be issued pursuant to this
Agreement and the Concurrent Purchase Agreement.
(c) All of the outstanding shares of the capital stock of the
Company are validly issued, fully paid and nonassessable and, upon the issuance
and sale of the Shares, the Shares will be validly issued, fully paid and
nonassessable, and upon the valid exercise (including payment of the exercise
price) of the Warrants, the Warrant Shares will be validly issued, fully paid
and nonassessable.
3.4 Authorization; No Breach. The execution, delivery and
performance of each of the Documents and all other agreements and instruments
contemplated thereby and the consummation of all transactions contemplated
thereby have been duly authorized by all requisite corporate action of the
Company. Assuming due execution by the Purchaser, each of the Documents and all
other agreements and instruments contemplated thereby constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, equitable subordination,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing. The execution and delivery by the Company of each of the Documents and
all other agreements and other instruments contemplated and the consummation of
the transactions contemplated thereby do not and will not (with or without the
giving of notice, the lapse of time or both) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's or any Subsidiary's
-6-
<PAGE> 11
capital stock or assets or (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) give any
third party the right to accelerate any obligation under or (iv) result in a
violation of, the Certificate of Incorporation or Bylaws of the Company, or, any
law, statute, rule, regulation, instrument, order, judgment or decree to which
the Company or any of its properties is subject, or any contract to which the
Company is a party or by which it is bound or to which any of its properties is
subject, assuming that all applicable waiting periods under the HSR Act have
expired or been terminated and all applicable filings pursuant to state
securities laws, the HSR Act, the Securities Act, the Exchange Act and the rules
and regulations of the New York Stock Exchange have been made.
3.5 Material Contracts; Defaults. Except for those agreements and
other documents filed as exhibits to its Regulatory Documents or as set forth in
Schedule 3.5, neither the Company nor any of its subsidiaries is a party to,
bound by or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (i) that is a "material contract" within
the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii) that
materially restricts the conduct of business by it or any of its Subsidiaries.
Except as disclosed in the Regulatory Documents, neither the Company nor any of
its Subsidiaries is in default in any material respect under any material
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective assets,
business, or operations receives benefits, or under any other contract if such
default could reasonably be expected to have a Material Adverse Effect on the
Company, and in either case there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
3.6 Regulatory Matters. (a) No consent, approval, authorization,
registration or qualification of any Governmental Authority or any third party
is required to be obtained by the Company or any of its Subsidiaries in
connection with the execution, delivery or performance by the Company of each of
the Documents, except such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities laws, the HSR Act,
-7-
<PAGE> 12
the Securities Act, the Exchange Act and the rules and regulations of the New
York Stock Exchange.
(b) Neither the Company nor any of its Subsidiaries or any of
their properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, or extraordinary supervisory letter from, any federal
or state governmental agency or authority charged with the supervision or
regulation of companies which originate, process, underwrite, sell, securitize
or service loans (collectively, the "Regulatory Authorities").
(c) Neither the Company nor any of its Subsidiaries has been
advised by any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar submission.
3.7 Compliance with Laws. The Company and each of its
Subsidiaries:
(a) Is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Federal
Truth-in-Lending Act and Regulation Z, the Home Mortgage Disclosure Act and all
other applicable fair lending laws and other laws relating to discriminatory
business practices except where such noncompliance would not, individually or in
the aggregate, have or reasonably be expected to have a Material Adverse Effect
on the Company.
(b) Has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted,
except where the failure to obtain such permits, licenses, authorizations,
orders and approvals or to make such filings, applications and registrations
could not reasonably be expected to, singularly or in the aggregate, to have a
Material Adverse Effect; all such
-8-
<PAGE> 13
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to Company's knowledge, no suspension or cancellation of
any of them is threatened.
(c) Except as disclosed in Schedule 3.7, has received, since June
30, 1997, no notification or communication from any Governmental Authority (i)
asserting that the Company or any of its Subsidiaries is not in compliance with
any of the statutes, regulations or ordinances which such Governmental Authority
enforces, except where such notification or communication would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect on the Company or (ii) threatening to revoke any
material license, franchise, permit or governmental authorization (nor, to the
Company's knowledge, do any grounds for any of the foregoing exist).
3.8 Authorization of Shares and Warrants. The Company has
authorized the issuance and sale to the Purchaser of the Shares and Warrants.
Each share of Common Stock issued and sold to the Purchaser hereunder has the
rights set forth in the Company's Certificate of Incorporation and each Warrant
has the terms and rights set forth in the Warrant Agreement.
3.9 Ownership of Shares and Warrants. Upon delivery of the Shares
and Warrants to the Purchaser and payment therefor pursuant hereto, good and
valid title to such Shares and Warrants, free and clear of all liens,
encumbrances, equities or claims, will pass to the Purchaser. The issuance and
sale of the Shares and Warrants pursuant hereto will not give rise to any
preemptive rights and will not violate any law, statute, rule, regulation,
instrument, order, judgment or decree to which the Company or any of its assets
are subject.
3.10 Financial Reports and Regulatory Documents.
(a) The Company's Annual Reports on Form 10-K for the fiscal
years ended June 30, 1995, 1996 and 1997, and all other reports, registration
statements, definitive proxy statements or information statements filed or to be
filed by it or any of its Subsidiaries subsequent to December 31, 1995 under the
Securities Act, under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in
the form filed or to be filed (collectively, "Regulatory Documents") with the
SEC,
-9-
<PAGE> 14
as applicable, as of the date filed, (i) complied or will comply in all material
respects as to form with the applicable requirements under the Securities Act
and the Exchange Act, as the case may be, and (ii) did not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
each of the consolidated balance sheets contained in or incorporated by
reference into any such Regulatory Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the consolidated
financial position of the Company and its Subsidiaries as of its date, and each
of the consolidated statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such Regulatory Documents (including any
related notes and schedules thereto) fairly presents, or will fairly present,
the consolidated results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the Company and its Subsidiaries
for the periods to which they relate, in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal year-end audit
adjustments and the lack of complete footnote disclosure in the case of
unaudited statements.
(b) Except as disclosed in Schedule 3.10, since June 30, 1997,
the Company and its Subsidiaries have not incurred any material liability other
than in the ordinary course of business consistent with past practice (other
than liabilities with respect to expenses related to this Agreement and the
transactions contemplated hereby).
(c) Except as disclosed in Schedule 3.10 or disclosed in the
Regulatory Documents filed on or before the date hereof, since June 30, 1997,
(i) the Company and its Subsidiaries have conducted their respective businesses
in the ordinary and usual course consistent with past practice (excluding the
incurrence of expenses related to this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or circumstance arisen that,
individually or taken together with all other facts, circumstances and events
(described in any paragraph of Section 3 or otherwise), is reasonably likely to
have a Material Adverse Effect.
-10-
<PAGE> 15
3.11 Litigation. Except as disclosed in Schedule 3.11, no
material litigation, claim or other proceeding before any court or governmental
agency is pending against the Company or any of its Subsidiaries and, to the
Company's knowledge, no such litigation, claim or other proceeding has been
threatened.
3.12 Tax Matters. The Company has duly filed or caused to be
filed all material tax returns (Federal, state, local and foreign) required to
be filed and paid all amounts of taxes shown or required to be shown thereon to
be due, including interest and penalties, except to the extent of any taxes
being contested by or on behalf of the Company in good faith and by proper
proceedings, for which adequate reserves have been provided. The Company does
not possess any knowledge of any actual or proposed additional tax assessments
against it which, singly or in the aggregate, could have a Material Adverse
Effect on the Company. No issues raised in connection with the examination of
any of the tax returns referred to above are currently pending which is likely
to result in a Material Adverse Effect on the Company, and no waivers of
statutes of limitation have been given or requested by or with respect to any
taxes of the Company.
3.13 Anti-takeover Provisions. Subject to amendment of the Rights
Agreement prior to Closing, the acquisition of the Shares and the Warrants and
the exercise of the Warrants by the Purchaser will not cause the Purchaser or
any of its Affiliates to become (i) an "Acquiring Person" for purposes of the
Rights Agreement or (ii) subject to the restrictions against business
combinations contained in Section 203 of the Delaware General Corporation Law.
3.14 Brokers or Finders. The Company has not incurred, nor will
it incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement and the transactions
contemplated hereby, other than to Donaldson, Lufkin & Jenrette Securities
Corporation.
3.15 Disclosure. Neither this Agreement nor any of the schedules
or other attachments hereto nor any document delivered by the Company to the
Purchaser pursuant hereto or in connection herewith contains any untrue
-11-
<PAGE> 16
statement of a material fact or omits a material fact necessary to make the
statements contained therein not misleading.
3.16 Risk Management Instruments. All interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for the Company's own account, or
for the account of one or more of the Company's Subsidiaries or their customers,
if any, were entered into in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of the Company or one
of its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect. Neither the Company nor its
Subsidiaries, nor to the Company's knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
3.17 Books and Records. The books and records of the Company and
its Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies of
any kind contained or reflected therein, and they fairly present the financial
position of the Company and its Subsidiaries.
3.18 Insurance. The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management of
the Company reasonably has determined to be prudent in accordance with industry
practices. All the insurance policies, binders, or bonds maintained by the
Company or its Subsidiaries are in full force and effect; the Company and its
Subsidiaries are not in material default thereunder; and all claims thereunder
have been filed in due and timely fashion.
3.19 Environmental Matters. To the best knowledge of the Company,
neither the conduct nor operation of the Company or its Subsidiaries nor any
condition of any property presently or previously owned, leased or operated
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by any of them (including, without limitation, in a fiduciary or agency
capacity), violates or violated Environmental Laws and no condition has existed
or event has occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely to result in
liability under Environmental Laws which violation or liability would have or
would reasonably be expected to have a Material Adverse Effect on the Company.
To the knowledge of the Company's executive officers, no property on which the
Company or any of its Subsidiaries holds a Lien, violates or violated
Environmental Laws and no condition has existed or event has occurred with
respect to any such property that, with notice or the passage of time, or both,
is reasonably likely to result in liability under Environmental Laws, which
violation or liability would have or would reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries has received any notice from any person or entity that the Company
or its Subsidiaries or the operation or condition of any property ever owned,
leased, operated, or held as collateral or in a fiduciary capacity by any of
them are or were in violation of or otherwise are alleged to have liability
under any Environmental Law, including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or materials
at, on, beneath, or originating from, any such property, which violation or
liability would have or would reasonably be expected to have a Material Adverse
Effect on the Company.
As used herein, the term "Environmental Law" means any federal,
state or local law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the protection or restoration
of the environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, indoor air, pollution, contamination or any injury or
threat of injury to persons or property in connection with any Hazardous
Substance and the term "Hazardous Substance" means any substance in any
concentration that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is or
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may be the subject of regulatory action by any Governmental Authority in
connection with any Environmental Law.
3.20 Employee Benefit Plans.
(a) All employee benefit plans (within the meaning of Section
3(3) of ERISA), other than "multiemployer plans" within the meaning of Section
3(37) of ERISA (the "Plans"), covering current employees or former employees of
the Company and its subsidiaries (the "Employees"), to the extent subject to
ERISA, are in material compliance with ERISA. Except as set forth in Schedule
3.20, the Company is not a party to any "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to
be qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). There is no material pending or threatened litigation
relating to the Plans. Neither the Company nor any of its Subsidiaries has
engaged in a transaction with respect to any Plan that, assuming the taxable
period of such transaction expired as of the date hereof, could subject the
Company or any Subsidiary to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA in an amount which would be material.
(b) No material liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate"). Neither the Company, any of its
Subsidiaries nor an ERISA Affiliate has contributed to a "multiemployer plan",
within the meaning of Section 3(37) of ERISA, at any time on or after September
26, 1980. No notice of a "reportable event", within the meaning of Section 4043
of ERISA for which the 30-day reporting requirement has not been waived, has
been required to be filed for any Pension Plan or by any ERISA Affiliate within
the 12-month period ending on the date hereof or will be required to be filed in
connection with the transactions contemplated by this Plan.
(c) All contributions required to be made under the terms of any
Plan have been timely made or have been
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reflected on the consolidated financial statements of the Company included in
the Regulatory Documents. Neither any Pension Plan nor any single-employer plan
of an ERISA Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA
and no ERISA Affiliate has an outstanding funding waiver. Neither the Company
nor any of its Subsidiaries has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Code.
(d) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any employees of the Company or any of its
Subsidiaries to severance pay, (y) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the Plans
or deferred compensation, stock option, stock purchase, stock appreciation
rights, stock based, incentive and bonus plans (collectively, the "Benefit
Plans") or (z) result in any breach or violation of, or a default under, any of
the Benefit Plans. Without limiting the foregoing, as a result of the
consummation of the transactions contemplated by this Agreement, none of the
Purchaser, the Company or any of its Subsidiaries will be obligated to make a
payment to an individual that would be a "parachute payment" to a disqualified
individual" as those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future.
3.21 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or is bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is the Company or any of its Subsidiaries the subject of a
proceeding asserting that it or any such Subsidiary has committed an unfair
labor practice (within the meaning of the National Labor Relations Act) or
seeking to compel the Company or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any strike or
other labor dispute involving it or any of its Subsidiaries pending or, to the
Company's knowledge, threatened, nor is the Company aware of any activity
involving its or any of its Subsidiaries' employees seeking
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to certify a collective bargaining unit or engaging in other organizational
activity.
SECTION 4
Representations, Warranties and
Acknowledgments of the Purchaser
The Purchaser hereby represents and warrants to the Company with
respect to the purchase of the Shares and Warrants hereunder as follows:
4.1 Execution, Delivery and Performance. The Purchaser has full
power and authority to execute and deliver this Agreement and each of the
agreements contemplated hereby to which the Purchaser is a party and to perform
the Purchaser's obligations hereunder and thereunder. This Agreement and each of
the agreements contemplated hereby to which the Purchaser is a party has been
duly authorized, executed and delivered by the Purchaser and is a valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights. No consent, approval, authorization,
order, filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by the Purchaser in
connection with the execution and delivery of this Agreement or any of the
agreements contemplated hereby to which the Purchaser is a party or the
performance of the Purchaser's obligations hereunder or thereunder.
4.2 Investment. The Purchaser is acquiring the Shares and
Warrants for its own account and has no intention of distributing such
securities or the Warrant Shares in violation of the Securities Act or
applicable state securities or "blue sky" laws.
4.3 Organization. Purchaser is duly organized, validly existing
and in good standing under the laws of the state of its organization.
4.4 No Breach. The execution and delivery by the
Purchaser of each of the Documents and all other agreements
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and other instruments contemplated and the consummation of the transactions
contemplated thereby do not and will not (with or without the giving of notice,
the lapse of time or both) (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any lien, security interest, charge or encumbrance upon the
Purchaser's or any Subsidiary's equity interests or assets, (iv) give any third
party the right to accelerate any obligation under, or (v) result in a violation
of, the Purchaser's certificate of formation and limited liability company
agreement, if the Purchaser is a limited liability company, or trust agreement,
if the Purchaser is a trust, or any law, statute, rule, regulation, instrument,
order, judgment or decree to which the Purchaser or any of its properties is
subject, or any contract to which the Purchaser is a party or by which it is
bound or to which any of its properties is subject, assuming that all applicable
waiting periods have expired under the HSR Act.
4.5 Financing. The Purchaser has or will have at the Closing
funds available to it to consummate the purchase of the Shares pursuant to the
terms of this Agreement.
SECTION 5
Conditions to the Purchaser's Obligations for the Closing
The obligation of the Purchaser to purchase and pay for the
Shares and Warrants to be purchased by the Purchaser at the Closing is subject
to the satisfaction on or before the date of the Closing of the following
conditions:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 hereof shall be true in all
material respects at and as of the Closing as though then made, except as
expressly contemplated thereby.
5.2 Registration Rights Agreement. A Registration Rights
Agreement substantially in the form of Exhibit A shall have been executed and
delivered by the Company and the Purchaser and shall be in full force and effect
as of the Closing.
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5.3 Warrant Agreement. A Warrant Agreement substantially in the
form of Exhibit B shall have been executed and delivered by the Company and the
Purchaser and shall be in full force and effect as of the Closing.
5.4 Opinion of the Company's Counsel. The Purchaser shall have
received from Barbara S. Polsky, General Counsel for the Company, her opinion,
dated the date of the Closing, in form and substance reasonably satisfactory to
the Purchaser, to the effect that, subject to customary exceptions:
(a) each of the Company and its Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws
of the state of its incorporation, and each of the Company and its
Subsidiaries has all requisite corporate power and authority to own and
operate its properties, to carry on its businesses as now conducted and
to carry out and perform its obligations under the terms of this
Agreement, the Warrant Agreement and the Registration Rights Agreement;
(b) the Company is duly licensed or qualified and is in good
standing as a foreign corporation in the State of California and each
other jurisdiction wherein the nature of the business transacted by the
Company or the nature of the property owned or leased by it requires
such licensing or qualification. Each of the Subsidiaries is duly
licensed or otherwise qualified in each state wherein the nature of the
business transacted by such Subsidiary or the nature of the property
owned or leased by it requires such licensing or qualification and where
failure to be so licensed or qualified would reasonably be expected to,
singly or in the aggregate, have a Material Adverse Effect on the
Company;
(c) the authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 1,000,000 shares of preferred
stock, and all of the outstanding shares of the capital stock of the
Company are validly issued, fully paid and nonassessable; upon the
issuance and sale of the Shares, the Shares will be validly issued,
fully paid and nonassessable; and upon the valid exercise (including
payment of the exercise
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price) of the Warrants, the Warrant Shares will be validly issued, fully
paid and nonassessable;
(d) the execution, delivery and performance of each of the
Documents and all other agreements and instruments contemplated thereby
and the consummation of all transactions contemplated thereby have been
duly authorized by all requisite corporate action of the Company; each
of the Documents and all other agreements and instruments contemplated
thereby constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, equitable subordination,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing; and to the best knowledge
of such counsel (except as provided below), the execution and delivery
by the Company of each of the Documents and all other agreements and
other instruments contemplated and the consummation of the transactions
contemplated thereby do not and will not (with or without the giving of
notice, the lapse of time or both) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's or any
Subsidiary's capital stock or assets or (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) give any third party the right to accelerate any
obligation under or (iv) result in a violation of, the Certificate of
Incorporation or Bylaws of the Company (where such opinion shall not be
qualified as to such counsel's best knowledge), or any law, statute,
rule, regulation, instrument, order, judgment or decree to which the
Company or any of its properties is subject, or any contract to which
the Company is a party or by which it is bound or to which any of its
properties is subject;
(e) no consent, approval, authorization, registration or
qualification of any Governmental Authority or any third party is
required to be obtained by the Company or any of its Subsidiaries in
connection with the execution, delivery or performance by the Company of
each of the Documents, except such consents, approvals, authorizations,
registration or
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<PAGE> 24
qualifications as may be required under the HSR Act, which shall have
been received prior to the Closing, and state securities laws, the
Securities Act, the Exchange Act and the rules and regulations of the
New York Stock Exchange;
(f) the Company has authorized the issuance and sale to the
Purchaser of the Shares and Warrants; each share of Common Stock issued
and sold to the Purchaser hereunder has, and each Warrant Share issued
upon the valid exercise of Warrants will have, the rights set forth in
the Company's Certificate of Incorporation, and each Warrant has the
terms and rights set forth in the Warrant Agreement; and
(g) the acquisition of the Shares and the Warrants and the
exercise of the Warrants by the Purchaser will not cause the Purchaser
or any of its Affiliates to become (i) an "Acquiring Person" for
purposes of the Rights Agreement or (ii) subject to the restrictions
against business combinations contained in Section 203 of the Delaware
General Corporation Law.
5.5 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement or the Concurrent Purchase
Agreement under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or the Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated hereby, which action shall have not been withdrawn or terminated.
5.6 Amendment of the Rights Agreement. The Company shall have
caused the Rights Agreement to be amended to provide that the Purchaser and its
Affiliates, so long as the Purchaser and its Affiliates beneficially owns shares
of Common Stock equal to at least 50% of the number of Shares purchased
hereunder shall be an "Exempt Person" under the Rights Agreement.
5.7 Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing shall have been taken and all
documents incident thereto shall be satisfactory in form and substance to the
Purchaser.
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5.8 Closing Documents. The Company shall have delivered to the
Purchaser on the date of such Closing:
(a) An Officer's Certificate dated the date of such Closing,
stating that the conditions set forth in Section 5.1 have been satisfied;
(b) Copies of the Certificate of Incorporation and the Bylaws of
the Company, each certified by an officer of the Company;
(c) Copies of the resolutions adopted by the Company's Board of
Directors, authorizing the transactions contemplated hereby; and
(d) Such other documents relating to the transactions
contemplated by this Agreement as the Purchaser or their counsel may reasonably
request.
5.9 Waiver. Any condition specified in this Section 5 may be
waived in writing by the Purchaser.
SECTION 6
Conditions to the Company's Obligations for the Closing
The obligation of the Company to the Purchaser to issue and
deliver the Shares and Warrants to the Purchaser at the Closing is subject to
the satisfaction on or before the date of the Closing of the following
conditions:
6.1 Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects on and as of the date of the Closing as if made
on and as of such date; and the Purchaser shall have performed and complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by the Purchaser prior to or at the
Closing.
6.2 Legal Matters. The Purchaser's purchase of and payment for
the Shares and Warrants shall not be prohibited by any applicable law, court
order or governmental regulation.
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6.3 Closing Documents. The Purchaser shall have delivered to the
Company on the date of such Closing:
(a) Copies of the certificate of formation and limited liability
company agreement, if the Purchaser is a limited liability company, or trust
agreement, if the Purchaser is a trust, each certified by an officer, if the
Purchaser is a limited liability company, or the trustee, if the Purchaser is a
trust; and
(b) Such other documents relating to the transactions
contemplated by this Agreement as the Company or its counsel may reasonably
request.
6.4 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement or the Concurrent Purchase
Agreement under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or the Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated hereby, which action shall have not been withdrawn or terminated.
6.5 Waiver. Any condition specified in this Section 6 may be
waived in writing by the Company.
6.6 Concurrent Purchase Agreement. The Concurrent Purchase
Agreement shall be consummated simultaneously with the Closing.
SECTION 7
Covenants
7.1 Financial Statements and Other Information.
(a) Prior to the Closing, the Company shall furnish to the
Purchaser copies of all filings made by the Company with the SEC, promptly
following such filing.
(b) Prior to the Closing, the Company shall furnish to the
Purchaser the same information that it provides its directors, except for
discussions, analyses and other information pertaining to this Agreement and the
Documents. In addition, the Company shall, prior to the
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Closing, furnish to the Purchaser prompt notice of (a) any material change in
its business, operations or prospects, (b) the institution or threat of material
litigation, (c) any material change in the number of outstanding shares of
Common Stock or preferred stock, and (d) any event or condition that constitutes
a breach of this Agreement, or that might be reasonably expected to cause its
representations and warranties set forth herein not to be true and correct in
all material respects as of the Closing.
7.2 Directors. At the Closing, or as soon as practicable
thereafter, the Company shall cause Howard Gittis to be elected to the Company's
Board of Directors and shall continue to recommend that such person or any other
person designated by the Purchaser be elected a member of the Board of Directors
so long as the Purchaser, the Concurrent Purchaser and their respective
Affiliates beneficially own in the aggregate shares of Common Stock equal to at
least 50% of the total number of Shares purchased hereunder and under the
Concurrent Purchase Agreement.
7.3 HSR Act Filing. If and when necessary, as promptly as
practicable, the Company and the Purchaser shall make all filings and
submissions under the HSR Act as may be reasonably required to be made in
connection with this Agreement and the transactions contemplated hereby. The
Company shall furnish to the Purchaser, and the Purchaser shall furnish to the
Company, such information and assistance as the other may reasonably request in
connection with the preparation of any such filings or submissions.
7.4 Conditions to Closing. The Company and the Purchaser shall
each use their best efforts to cause the conditions to the Closing, as described
herein in Sections 5 and 6, to be satisfied, and to cause the Closing to occur
promptly after satisfaction of the conditions thereto.
7.5 Use of Proceeds. Any consideration received by the Company
for the sale of the Shares and Warrants to the Purchaser shall be used solely
for working capital purposes, capital expenditures, repayment of indebtedness or
the payment of business expenses.
7.6 Pledge of Shares. If the Purchaser, pursuant to Section 8.6,
pledges any Shares, Warrants or Warrant Shares to secure indebtedness or other
obligations, the
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Company agrees that such pledgee shall be entitled to rely on the Opinion of the
Company's Counsel delivered pursuant to Section 5.4 and each of the closing
documents delivered pursuant to Section 5.8 as if such opinion or certificate
was addressed to such pledgee, and the Company, if reasonably requested by such
pledgee, shall provide opinions of counsel, reliance letters, certificates or
other documents which provide that the representations and warranties contained
in Sections 3.1, 3.3(c), 3.4 (first two sentences only) and 3.8 are correct in
all material respects as if made on such later date and which state that such
pledgee shall be entitled to rely on the documents delivered pursuant to
Sections 5.4, 5.8(a), (b) and (c) and this Section 7.6 (each, a "bring-down
document") none of which will the Company be obligated to reconfirm or in any
way certify as of any date subsequent to the Closing; provided, that the Company
shall be obligated to provide such bring-down documents on no more than two
occasions without charge to the Purchaser, and thereafter, the Purchaser shall
be required to reimburse the Company for all reasonable expenses relating
thereto; provided, further, the Company's obligations under this Section 7.6
shall expire two years after the Closing.
7.7 No-Action Letter. At the request of the Purchaser, the
Company agrees to file with the Commission as soon as practicable after the
Closing, but in no event later than the 120th day after the Closing, a request
for a no-action letter to the effect that the Company may file a shelf
registration statement under the Securities Act to register the offer and sale
by the Company of the Warrant Shares and Other Warrant Shares after the
occurrence of a Purchase Event (as defined in the Warrant Agreement and Other
Warrant Agreement, as the case may be) and such filing would not result in the
loss of the exemption from the registration requirements under the Securities
Act which was relied on by the Company for the offer and sale of any of the
Shares, Other Shares, Warrants or Other Warrants. The Purchaser agrees to
reimburse the Company for reasonable fees, disbursements and expenses of one
counsel retained in connection with such no-action letter.
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SECTION 8
Miscellaneous
8.1 Expenses. Each party hereto shall bear all expenses incurred
by it in connection with this Agreement or the transactions contemplated hereby.
8.2 Additional Purchases of Common Stock. Nothing in this
Agreement or any of the Documents shall restrict the Purchaser from acquiring
additional shares of Common Stock whether through open market purchases or
otherwise.
8.3 Amendments and Waivers. Except as otherwise provided herein,
any provision hereof may be amended or waived generally and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, if, but only if, the Company has obtained the written consent
of the Purchaser. No course of dealing between the Company or any of its
Subsidiaries, on the one hand, and the Purchaser on the other hand, or any delay
on the part of the Purchaser in exercising any rights hereunder or under any
agreement contemplated hereby, will operate as a waiver of any rights of any
such holder.
8.4 Termination. If the Closing does not occur by June 30, 1998,
this Agreement shall automatically terminate, and no party to this Agreement
shall have any liability or further obligation to any other party except that
termination will not relieve a breaching party from liability for any willful
breach of this Agreement giving rise to such termination.
8.5 Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive for a period of one year from the date of
the execution and delivery of this Agreement, regardless of any investigation
made by or on behalf of any party.
8.6 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement and all of the provisions hereto shall bind and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns whether so expressed or not, but, except as expressly
contemplated herein, neither this Agreement nor
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any of the rights, interests or obligations hereunder shall be assigned,
directly or indirectly, by the Purchaser or the Company without the prior
written consent of the other; provided, that in connection with a bona fide
pledge of any Shares, Warrants or shares of common stock issuable upon exercise
of the Warrants to secure indebtedness or other obligations, the Purchaser may
assign its rights, interests and obligations hereunder to the beneficiary of
such pledge without the consent of the Company; and provided, further, that the
Purchaser may assign this Agreement to any Affiliate of the Purchaser or to
Concurrent Purchaser or any of its Affiliates without the consent of the
Company, so long as such assignment to any savings and loan institution, savings
and loan holding company, bank or similar regulated entity or any subsidiary of
the foregoing will not subject the Company or any of its Subsidiaries to
examination or supervision by any federal or state banking supervisory
authority.
8.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability in such jurisdiction, without
invalidating the remainder of this Agreement in such jurisdiction or any
provision hereof in any other jurisdiction.
8.8 Entire Agreement. This Agreement, together with the Documents
and that certain Confidentiality Agreement by and between the Company and Ronald
O. Perelman, dated March 9, 1998, is the entire agreement among the parties and,
when executed by the parties hereto, supersedes all prior agreements and
communications, either verbal or in writing, with respect to the subject matter
contained herein.
8.9 Descriptive Headings; Language Interpretation. The
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders,
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(c) references to persons shall include corporations or other bodies and vice
versa, and (d) references to parties, sections, schedules, paragraphs and
exhibits shall mean the parties, sections, schedules, paragraphs and exhibits of
and to this Agreement.
8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PROVISIONS THEREOF.
8.11 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
8.12 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally or
three days after being mailed by certified or registered mail, return receipt
requested and postage prepaid, to the recipient. Such notices, demands and other
communications will be sent to the Company and the Purchaser at the addresses
indicated below:
If to the Company:
Aames Financial Corporation
350 S. Grand Ave., 52nd Floor
Los Angeles, California 90071
Attn: Barbara S. Polsky
With a copy to:
Manatt, Phelps & Phillips LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attn: William Quicksilver
If to the Purchaser:
MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
New York, New York 10021
Attn: General Counsel
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<PAGE> 32
With a copy to:
Sullivan & Cromwell
444 South Flower Street, Suite 1200
Los Angeles, California 90071
Attn: Stanley F. Farrar
8.13 Remedies. The Company acknowledges that it would be
impossible to determine the amount of damages that would result from any breach
by it of any of the provisions of this Agreement and that the remedy at law for
any breach, or threatened breach, of any of such provisions would likely be
inadequate and, accordingly, agrees that the Purchaser shall, in addition to any
other rights or remedies which it may have, including recission of this
Agreement, be entitled to seek such equitable and injunctive relief as may be
available from any court of competent jurisdiction to compel specific
performance of, or restrain the Company from violating any of, such provisions.
In connection with any action or proceeding for injunctive relief, the Company
hereby waives the claim or defense that a remedy at law alone is adequate and
agrees, to the maximum extent permitted by law, to have each provision of this
Agreement specifically enforced against it, without the necessity of posting
bond or other security against it, and consents to the entry of injunctive
relief against it enjoining or restraining any breach or threatened breach of
this Agreement.
8.14 Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.15 Publicity. Purchaser and the Company shall consult with each
other before issuing any press release with respect to this Agreement and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which shall not be reasonably withheld;
provided, however, that a party may, without the prior consent of the other
party (but after prior consultation, to the extent practicable in the
circumstances) issue such press release or make such public statement as may
upon the advice of counsel be required by
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<PAGE> 33
law or the rules and regulations of the New York Stock Exchange.
8.16 Legend. The certificates evidencing the Shares and the
shares of Common Stock issuable upon exercise of the Warrant shall bear the
following legend until such time as such shares are registered under the
Securities Act or the Purchaser or any transferee thereof delivers an opinion of
counsel reasonably acceptable to the Company to the effect that such legend is
no longer required under the Securities Act:
THESE SECURITIES WERE SOLD IN A PRIVATE PLACEMENT, WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND MAY BE OFFERED
OR SOLD ONLY IF REGISTERED UNDER THE SECURITIES ACT OF 1933 OR IF
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
8.17 Transfer Opinion. Notwithstanding anything to the contrary
stated herein, the Company's transfer agent and registrar shall not be required
to reflect the transfer of the Shares on the Company's stock ledger unless such
Shares have been transferred pursuant to a registration statement which is
effective under Section 5 of the Securities Act or the Company's transfer agent
and registrar has received an opinion of counsel, who is reasonably acceptable
to the Company, that the transfer is exempt from registration under the
Securities Act.
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
AAMES FINANCIAL CORPORATION
By: /s/ Cary H. Thompson
---------------------------------------
Name: Cary H. Thompson
Title: Chief Executive Officer
THIRTY-FIVE EAST INVESTMENTS LLC
By: /s/ Howard Gittis
--------------------------------------
Name: Howard Gittis
Title: Vice Chairman
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<PAGE> 1
EXHIBIT 10.2
================================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 19, 1998
By and Between
AAMES FINANCIAL CORPORATION
and
TURTLE CREEK REVOCABLE TRUST
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 Definitions
1.1 Certain Definitions................................................... 1
1.2 Other Definitions..................................................... 3
SECTION 2 Purchase and Sale of the Shares and Warrants
2.1 Purchase and Sale..................................................... 4
2.2 The Closing........................................................... 4
2.3 Delivery.............................................................. 4
SECTION 3 Representations and Warranties of the Company
3.1 Organization, etc..................................................... 5
3.2 Qualification to do Business.......................................... 5
3.3 Capitalization........................................................ 5
3.4 Authorization; No Breach.............................................. 6
3.5 Material Contracts; Defaults.......................................... 7
3.6 Regulatory Matters.................................................... 7
3.7 Compliance with Laws.................................................. 8
3.8 Authorization of Shares and Warrants.................................. 9
3.9 Ownership of Shares and Warrants...................................... 9
3.10 Financial Reports and Regulatory Documents............................ 9
3.11 Litigation............................................................11
3.12 Tax Matters...........................................................11
3.13 Anti-takeover Provisions..............................................11
3.14 Brokers or Finders....................................................11
3.15 Disclosure............................................................11
3.16 Risk Management Instruments...........................................12
3.17 Books and Records.....................................................12
3.18 Insurance.............................................................12
3.19 Environmental Matters.................................................12
3.20 Employee Benefit Plans................................................14
3.21 Labor Matters.........................................................15
SECTION 4 Representations, Warranties andAcknowledgments of the Purchaser
4.1 Execution, Delivery and Performance...................................16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
4.2 Investment.............................................................16
4.3 Organization...........................................................16
4.4 No Breach..............................................................16
4.5 Financing..............................................................17
SECTION 5 Conditions to the Purchaser=s Obligations for the Closing
5.1 Representations and Warranties.........................................17
5.2 Registration Rights Agreement..........................................17
5.3 Warrant Agreement......................................................18
5.4 Opinion of the Company's Counsel.......................................18
5.5 HSR Act................................................................20
5.6 Amendment of the Rights Agreement......................................20
5.7 Proceedings............................................................20
5.8 Closing Documents......................................................21
5.9 Waiver.................................................................21
SECTION 6 Conditions to the Company's Obligations for the Closing
6.1 Representations and Warranties.........................................21
6.2 Legal Matters..........................................................21
6.3 Closing Documents......................................................22
6.4 HSR Act................................................................22
6.5 Waiver.................................................................22
6.6 Concurrent Purchase Agreement..........................................22
SECTION 7 Covenants
7.1 Financial Statements and Other Information.............................22
7.2 Directors..............................................................23
7.3 HSR Act Filing.........................................................23
7.4 Conditions to Closing..................................................23
7.5 Use of Proceeds........................................................23
7.6 Pledge of Shares.......................................................23
7.7 No-Action Letter.......................................................24
SECTION 8 Miscellaneous
8.1 Expenses...............................................................25
8.2 Additional Purchases of Common Stock...................................25
8.3 Amendments and Waivers.................................................25
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
8.4 Termination............................................................25
8.5 Survival of Representations and Warranties.............................25
8.6 Successors and Assigns.................................................25
8.7 Severability...........................................................26
8.8 Entire Agreement.......................................................26
8.9 Descriptive Headings; Language Interpretation..........................26
8.10 Governing Law..........................................................27
8.11 Waiver of Jury Trial...................................................27
8.12 Notices................................................................27
8.13 Remedies...............................................................28
8.14 Counterparts...........................................................28
8.15 Publicity..............................................................28
8.16 Legend.................................................................29
8.17 Transfer Opinion.......................................................29
</TABLE>
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<PAGE> 5
INDEX TO EXHIBITS
Exhibit Number
--------------
Registration Rights Agreement A
Warrant Agreement B
-v-
<PAGE> 6
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March 19,
1998, by and between Aames Financial Corporation, a Delaware corporation (the
"Company") and Turtle Creek Revocable Trust, a trust formed under the laws of
the state of Texas (the "Purchaser").
WHEREAS, the Company desires to sell 556,466 shares (the "Shares")
of Common Stock and warrants to purchase an additional 556,466 shares of Common
Stock, on the terms and conditions set forth herein; and
WHEREAS, the Purchaser desires to purchase the Shares and the
Warrants on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
SECTION 1
Definitions
1.1 Certain Definitions. The terms specified in this Section 1.1
shall, for all purposes of this Agreement, have the meanings herein specified,
unless the context expressly otherwise requires.
"Affiliate" means a person that directly, or indirectly through one
of more intermediaries, controls or is controlled by, or is under common control
with, the person specified.
"Closing" shall have the meaning assigned to such term in Section
2.2.
"Common Stock" shall mean the Company's common stock, par value
$.001 per share.
<PAGE> 7
"Concurrent Purchase Agreement" shall mean the Stock Purchase
Agreement, dated the date hereof, by and between the Company and the Concurrent
Purchaser.
"Concurrent Purchaser" shall mean Thirty-Five East Investments LLC.
"Documents" shall mean, collectively, this Agreement, the Warrant
Agreement and the Registration Rights Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
federal statute from time to time in effect which has replaced such statute.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
"Material Adverse Effect" means any effect that (i) is material and
adverse to the financial position, results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole, or (ii) would materially
impair the ability of either the Purchaser or the Company to perform its
obligations under any of the Documents or otherwise, provided, however, that in
determining whether a Material Adverse Effect has occurred there shall be
excluded any effect on the referenced party the cause of which is (i) any change
in consumer finance or similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental authorities
and (ii) any change in generally accepted accounting principles or regulatory
accounting principles applicable to finance companies generally.
"Officer's Certificate" shall mean a certificate signed by the chief
executive officer and the chief financial officer of the Company, stating that
(i) the person signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit
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<PAGE> 8
him to verify the accuracy of the information set forth in such certificate, and
(ii) to the best of such person's knowledge, such certificate does not misstate
any material fact or omit to state any material fact necessary to make the
certificate not misleading.
"Registration Rights Agreement" shall have the meaning set forth in
Section 5.2 hereof.
"Regulatory Documents" shall have the meaning set forth in Section
3.10.
"Rights" shall mean securities or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, or any options, calls or commitments relating to, or any stock
appreciation right or other instrument the value of which is determined in whole
or in part by reference to the market price or value of, shares of Common Stock.
"Rights Agreement" shall mean the Rights Agreement dated as of June
21, 1996, between the Company and Wells Fargo Bank.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, or any
federal statute from time to time in effect which has replaced such statute.
"Subsidiary" shall mean any corporation of which shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Company either directly or through its Subsidiaries, any partnership in which
the Company or any Subsidiary is a general partner and any joint venture in
which the Company or any Subsidiary is a joint venturer.
"Warrant Agreement" shall have the meaning set forth in Section 5.3
hereof.
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<PAGE> 9
"Warrant Shares" shall mean the shares of Common Stock issuable upon
exercise of the Warrants.
"Warrants" shall mean the warrants to purchase an aggregate of up to
556,466 shares of Common Stock at a price of $17.2031 per share upon the
occurrence of a Purchase Event (as defined in the Warrant Agreement), subject to
adjustment as provided herein and in the Warrant Agreement.
1.2 Other Definitions. In addition to the terms defined in Section
1.1 hereof, certain other terms are defined elsewhere in this Agreement, and,
whenever such terms are used in this Agreement, they shall have their respective
defined meanings, unless the context expressly otherwise requires.
SECTION 2
Purchase and Sale of the Shares and Warrants
2.1 Purchase and Sale. On the terms and subject to the conditions
set forth herein, the Company will issue to the Purchaser and the Purchaser will
purchase from the Company the Shares at a purchase price of $13.7625 per share,
for an aggregate purchase price of $7,658,363.32 (the "Purchase Price"). In
addition, on the terms and subject to the conditions set forth herein, in
consideration for the purchase of the Shares, the Company will issue to the
Purchaser the Warrants. If the Company shall adjust, split, combine or
reclassify its shares of Common Stock between the date hereof and the date of
Closing, the purchase price per share, the number of shares of Common Stock
purchased hereby, the number of Warrants issued and the exercise price of such
Warrants shall be adjusted so that the Purchaser's interest shall not be
diluted.
2.2 The Closing. The delivery of and payment for the Shares and
Warrants will take place at the offices of Sullivan & Cromwell, 444 South Flower
Street, Los Angeles, California 90071, no later than five business days after
all waiting periods applicable to the transactions contemplated by this
Agreement and the Concurrent Purchase Agreement
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<PAGE> 10
under the HSR Act have expired or been terminated, and on the same day as the
closing of the Concurrent Purchase Agreement or such other time and date or such
other place, as the parties shall mutually agree in writing (the "Closing").
2.3 Delivery. At the Closing, the Company will deliver to the
Purchaser the Shares and the Warrants, registered in the Purchaser's or its
nominee's name, against payment therefor by the Purchaser of the Purchase Price
in immediately available funds by wire transfer to such account as the Company
may designate in writing.
SECTION 3
Representations and Warranties of the Company
The Company hereby represents and warrants to the Purchaser that:
3.1 Organization, etc. Each of the Company and its Subsidiaries is
a corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation. Each of the Company and its Subsidiaries
has all requisite corporate power and authority to own and operate its
properties, to carry on its businesses as now conducted and to carry out and
perform its obligations under the terms of this Agreement, the Warrant Agreement
and the Registration Rights Agreement.
3.2 Qualification to do Business. The Company is duly licensed or
qualified and is in good standing as a foreign corporation in the State of
California and each other jurisdiction wherein the nature of the business
transacted by the Company or the nature of the property owned or leased by it
requires such licensing or qualification. Each of the Subsidiaries is duly
licensed or otherwise qualified in each state where in the nature of the
business transacted by such Subsidiary or the nature of the property owned or
leased by it requires such licensing or qualification and where failure to be so
licensed or
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<PAGE> 11
qualified would reasonably be expected to, singly or in the aggregate, have a
Material Adverse Effect on the Company.
3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. At
March 17, 1998, there was outstanding 27,823,317 shares of Common Stock and 0
shares of preferred stock. At February 28, 1998, the Company had outstanding
5,037,121 options to purchase shares of Common Stock, which options were duly
granted pursuant to the 1991 Stock Incentive Plan, 1995 Stock Incentive Plan,
1996 Stock Incentive Plan, 1997 NonQualified Stock Option Plan, 1997 Stock
Option Plan and outside of any such plans. Each such plan has been duly approved
by the Board of Directors and, except for the 1997 Non-Qualified Stock Option
Plan, stockholders of the Company. 5,315,505 shares of Common Stock are reserved
for issuance upon exercise of such options, 6,106,617 shares of Common Stock are
reserved for issuance upon conversion of the Company's 5.5% Subordinated
Convertible Debentures due 2006. 500,000 Shares of preferred stock are reserved
for issuance upon exercise of the Rights distributed to holders of Common Stock
pursuant to the Rights Agreement, 1,124,184 shares of Common Stock are reserved
for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan
and 562,500 shares of Common Stock are reserved for issuance under the Company's
Stock Purchase Plan.
(b) Except as described in Section 3.3(a), the Company has no
outstanding Rights, except for Warrants which will be issued pursuant to this
Agreement and the Concurrent Purchase Agreement.
(c) All of the outstanding shares of the capital stock of the
Company are validly issued, fully paid and nonassessable and, upon the issuance
and sale of the Shares, the Shares will be validly issued, fully paid and
nonassessable, and upon the valid exercise (including payment of the exercise
price) of the Warrants, the Warrant Shares will be validly issued, fully paid
and nonassessable.
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<PAGE> 12
3.4 Authorization; No Breach. The execution, delivery and
performance of each of the Documents and all other agreements and instruments
contemplated thereby and the consummation of all transactions contemplated
thereby have been duly authorized by all requisite corporate action of the
Company. Assuming due execution by the Purchaser, each of the Documents and all
other agreements and instruments contemplated thereby constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, equitable subordination,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing. The execution and delivery by the Company of each of the Documents and
all other agreements and other instruments contemplated and the consummation of
the transactions contemplated thereby do not and will not (with or without the
giving of notice, the lapse of time or both) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's or any Subsidiary's
capital stock or assets or (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) give any
third party the right to accelerate any obligation under or (iv) result in a
violation of, the Certificate of Incorporation or Bylaws of the Company, or, any
law, statute, rule, regulation, instrument, order, judgment or decree to which
the Company or any of its properties is subject, or any contract to which the
Company is a party or by which it is bound or to which any of its properties is
subject, assuming that all applicable waiting periods under the HSR Act have
expired or been terminated and all applicable filings pursuant to state
securities laws, the HSR Act, the Securities Act, the Exchange Act and the rules
and regulations of the New York Stock Exchange have been made.
3.5 Material Contracts; Defaults. Except for those agreements and
other documents filed as exhibits to its Regulatory Documents or as set forth in
Schedule 3.5, neither the Company nor any of its subsidiaries is a party to,
bound by or subject to any agreement, contract,
-7-
<PAGE> 13
arrangement, commitment or understanding (whether written or oral) (i) that is a
"material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K or (ii) that materially restricts the conduct of business by it
or any of its Subsidiaries. Except as disclosed in the Regulatory Documents,
neither the Company nor any of its Subsidiaries is in default in any material
respect under any material contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party, by which its
respective assets, business, or operations may be bound or affected, or under
which it or its respective assets, business, or operations receives benefits, or
under any other contract if such default could reasonably be expected to have a
Material Adverse Effect on the Company, and in either case there has not
occurred any event that, with the lapse of time or the giving of notice or both,
would constitute such a default.
3.6 Regulatory Matters. (a) No consent, approval, authorization,
registration or qualification of any Governmental Authority or any third party
is required to be obtained by the Company or any of its Subsidiaries in
connection with the execution, delivery or performance by the Company of each of
the Documents, except such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities laws, the HSR Act, the
Securities Act, the Exchange Act and the rules and regulations of the New York
Stock Exchange.
(b) Neither the Company nor any of its Subsidiaries or any of
their properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, or extraordinary supervisory letter from, any federal
or state governmental agency or authority charged with the supervision or
regulation of companies which originate, process, underwrite, sell, securitize
or service loans (collectively, the "Regulatory Authorities").
(c) Neither the Company nor any of its Subsidiaries has been
advised by any Regulatory Authority that such Regulatory Authority is
contemplating issuing or
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<PAGE> 14
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter,
supervisory letter or similar submission.
3.7 Compliance with Laws. The Company and each of its
Subsidiaries:
(a) Is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Federal
Truth-in-Lending Act and Regulation Z, the Home Mortgage Disclosure Act and all
other applicable fair lending laws and other laws relating to discriminatory
business practices except where such noncompliance would not, individually or in
the aggregate, have or reasonably be expected to have a Material Adverse Effect
on the Company.
(b) Has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted,
except where the failure to obtain such permits, licenses, authorizations,
orders and approvals or to make such filings, applications and registrations
could not reasonably be expected to, singularly or in the aggregate, to have a
Material Adverse Effect; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to Company's knowledge,
no suspension or cancellation of any of them is threatened.
(c) Except as disclosed in Schedule 3.7, has received, since June
30, 1997, no notification or communication from any Governmental Authority (i)
asserting that the Company or any of its Subsidiaries is not in compliance with
any of the statutes, regulations or ordinances which such Governmental Authority
enforces, except where such notification or communication would not,
individually or in the aggregate, have or reasonably be
-9-
<PAGE> 15
expected to have a Material Adverse Effect on the Company or (ii) threatening to
revoke any material license, franchise, permit or governmental authorization
(nor, to the Company's knowledge, do any grounds for any of the foregoing
exist).
3.8 Authorization of Shares and Warrants. The Company has
authorized the issuance and sale to the Purchaser of the Shares and Warrants.
Each share of Common Stock issued and sold to the Purchaser hereunder has the
rights set forth in the Company's Certificate of Incorporation and each Warrant
has the terms and rights set forth in the Warrant Agreement.
3.9 Ownership of Shares and Warrants. Upon delivery of the Shares
and Warrants to the Purchaser and payment therefor pursuant hereto, good and
valid title to such Shares and Warrants, free and clear of all liens,
encumbrances, equities or claims, will pass to the Purchaser. The issuance and
sale of the Shares and Warrants pursuant hereto will not give rise to any
preemptive rights and will not violate any law, statute, rule, regulation,
instrument, order, judgment or decree to which the Company or any of its assets
are subject.
3.10 Financial Reports and Regulatory Documents.
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<PAGE> 16
(a) The Company's Annual Reports on Form 10-K for the fiscal years
ended June 30, 1995, 1996 and 1997, and all other reports, registration
statements, definitive proxy statements or information statements filed or to be
filed by it or any of its Subsidiaries subsequent to December 31, 1995 under the
Securities Act, under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in
the form filed or to be filed (collectively, "Regulatory Documents") with the
SEC, as applicable, as of the date filed, (i) complied or will comply in all
material respects as to form with the applicable requirements under the
Securities Act and the Exchange Act, as the case may be, and (ii) did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and each of the consolidated balance sheets contained in or
incorporated by reference into any such Regulatory Document (including the
related notes and schedules thereto) fairly presents, or will fairly present,
the consolidated financial position of the Company and its Subsidiaries as of
its date, and each of the consolidated statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such Regulatory
Documents (including any related notes and schedules thereto) fairly presents,
or will fairly present, the consolidated results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the
Company and its Subsidiaries for the periods to which they relate, in each case
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except in each case as may be noted therein,
subject to normal year-end audit adjustments and the lack of complete footnote
disclosure in the case of unaudited statements.
(b) Except as disclosed in Schedule 3.10, since June 30, 1997, the
Company and its Subsidiaries have not incurred any material liability other than
in the ordinary course of business consistent with past practice (other than
liabilities with respect to expenses related to this Agreement and the
transactions contemplated hereby).
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<PAGE> 17
(c) Except as disclosed in Schedule 3.10 or disclosed in the
Regulatory Documents filed on or before the date hereof, since June 30, 1997,
(i) the Company and its Subsidiaries have conducted their respective businesses
in the ordinary and usual course consistent with past practice (excluding the
incurrence of expenses related to this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or circumstance arisen that,
individually or taken together with all other facts, circumstances and events
(described in any paragraph of Section 3 or otherwise), is reasonably likely to
have a Material Adverse Effect.
3.11 Litigation. Except as disclosed in Schedule 3.11, no material
litigation, claim or other proceeding before any court or governmental agency is
pending against the Company or any of its Subsidiaries and, to the Company's
knowledge, no such litigation, claim or other proceeding has been threatened.
3.12 Tax Matters. The Company has duly filed or caused to be filed
all material tax returns (Federal, state, local and foreign) required to be
filed and paid all amounts of taxes shown or required to be shown thereon to be
due, including interest and penalties, except to the extent of any taxes being
contested by or on behalf of the Company in good faith and by proper
proceedings, for which adequate reserves have been provided. The Company does
not possess any knowledge of any actual or proposed additional tax assessments
against it which, singly or in the aggregate, could have a Material Adverse
Effect on the Company. No issues raised in connection with the examination of
any of the tax returns referred to above are currently pending which is likely
to result in a Material Adverse Effect on the Company, and no waivers of
statutes of limitation have been given or requested by or with respect to any
taxes of the Company.
3.13 Anti-takeover Provisions. Subject to amendment of the Rights
Agreement prior to Closing, the acquisition of the Shares and the Warrants and
the exercise of the Warrants by the Purchaser will not cause the Purchaser or
any of its Affiliates to become (i) an "Acquiring Person" for purposes of the
Rights Agreement or
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<PAGE> 18
(ii) subject to the restrictions against business combinations contained in
Section 203 of the Delaware General Corporation Law.
3.14 Brokers or Finders. The Company has not incurred, nor will it
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement and the transactions
contemplated hereby, other than to Donaldson, Lufkin & Jenrette Securities
Corporation.
3.15 Disclosure. Neither this Agreement nor any of the schedules or
other attachments hereto nor any document delivered by the Company to the
Purchaser pursuant hereto or in connection herewith contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein not misleading.
3.16 Risk Management Instruments. All interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for the Company's own account, or
for the account of one or more of the Company's Subsidiaries or their customers,
if any, were entered into in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of the Company or one
of its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect. Neither the Company nor its
Subsidiaries, nor to the Company's knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
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3.17 Books and Records. The books and records of the Company and
its Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies of
any kind contained or reflected therein, and they fairly present the financial
position of the Company and its Subsidiaries.
3.18 Insurance. The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management of
the Company reasonably has determined to be prudent in accordance with industry
practices. All the insurance policies, binders, or bonds maintained by the
Company or its Subsidiaries are in full force and effect; the Company and its
Subsidiaries are not in material default thereunder; and all claims thereunder
have been filed in due and timely fashion.
3.19 Environmental Matters. To the best knowledge of the Company,
neither the conduct nor operation of the Company or its Subsidiaries nor any
condition of any property presently or previously owned, leased or operated by
any of them (including, without limitation, in a fiduciary or agency capacity),
violates or violated Environmental Laws and no condition has existed or event
has occurred with respect to any of them or any such property that, with notice
or the passage of time, or both, is reasonably likely to result in liability
under Environmental Laws which violation or liability would have or would
reasonably be expected to have a Material Adverse Effect on the Company. To the
knowledge of the Company's executive officers, no property on which the Company
or any of its Subsidiaries holds a Lien, violates or violated Environmental Laws
and no condition has existed or event has occurred with respect to any such
property that, with notice or the passage of time, or both, is reasonably likely
to result in liability under Environmental Laws, which violation or liability
would have or would reasonably be expected to have a Material Adverse Effect on
the Company. Neither the Company nor any of its Subsidiaries has received any
notice from any person or entity that the Company or its Subsidiaries or the
operation or condition of any property ever owned, leased, operated, or held as
collateral or in a fiduciary capacity by any of them are or were in violation
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of or otherwise are alleged to have liability under any Environmental Law,
including, but not limited to, responsibility (or potential responsibility) for
the cleanup or other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or originating from,
any such property, which violation or liability would have or would reasonably
be expected to have a Material Adverse Effect on the Company.
As used herein, the term "Environmental Law" means any federal,
state or local law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the protection or restoration
of the environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, indoor air, pollution, contamination or any injury or
threat of injury to persons or property in connection with any Hazardous
Substance and the term "Hazardous Substance" means any substance in any
concentration that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is or may be
the subject of regulatory action by any Governmental Authority in connection
with any Environmental Law.
3.20 Employee Benefit Plans.
(a) All employee benefit plans (within the meaning of Section 3(3)
of ERISA), other than "multiemployer plans" within the meaning of Section 3(37)
of ERISA (the "Plans"), covering current employees or former employees of the
Company and its subsidiaries (the "Employees"), to the extent subject to ERISA,
are in material compliance with ERISA. Except as set forth in Schedule 3.20, the
Company is not a party to any "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). There is no material pending or threatened litigation relating to the
Plans. Neither the Company nor any of its
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Subsidiaries has engaged in a transaction with respect to any Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
could subject the Company or any Subsidiary to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an amount which
would be material.
(b) No material liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate "). Neither the Company, any of its
Subsidiaries nor an ERISA Affiliate has contributed to a "multiemployer plan",
within the meaning of Section 3(37) of ERISA, at any time on or after September
26, 1980. No notice of a "reportable event", within the meaning of Section 4043
of ERISA for which the 30-day reporting requirement has not been waived, has
been required to be filed for any Pension Plan or by any ERISA Affiliate within
the 12-month period ending on the date hereof or will be required to be filed in
connection with the transactions contemplated by this Plan.
(c) All contributions required to be made under the terms of any
Plan have been timely made or have been reflected on the consolidated financial
statements of the Company included in the Regulatory Documents. Neither any
Pension Plan nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate has an
outstanding funding waiver. Neither the Company nor any of its Subsidiaries has
provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code.
(d) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any
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employees of the Company or any of its Subsidiaries to severance pay, (y)
accelerate the time of payment or vesting or trigger any payment of compensation
or benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Plans or deferred compensation, stock option,
stock purchase, stock appreciation rights, stock based, incentive and bonus
plans (collectively, the "Benefit Plans") or (z) result in any breach or
violation of, or a default under, any of the Benefit Plans. Without limiting the
foregoing, as a result of the consummation of the transactions contemplated by
this Agreement, none of the Purchaser, the Company or any of its Subsidiaries
will be obligated to make a payment to an individual that would be a "parachute
payment" to a disqualified individual" as those terms are defined in Section
280G of the Code, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
3.21 Labor Matters. Neither the Company nor any of its Subsidiaries
is a party to or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor
is the Company or any of its Subsidiaries the subject of a proceeding asserting
that it or any such Subsidiary has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel the
Company or any such Subsidiary to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other labor
dispute involving it or any of its Subsidiaries pending or, to the Company's
knowledge, threatened, nor is the Company aware of any activity involving its or
any of its Subsidiaries' employees seeking to certify a collective bargaining
unit or engaging in other organizational activity.
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SECTION 4
Representations, Warranties and
Acknowledgments of the Purchaser
The Purchaser hereby represents and warrants to the Company with
respect to the purchase of the Shares and Warrants hereunder as follows:
4.1 Execution, Delivery and Performance. The Purchaser has full
power and authority to execute and deliver this Agreement and each of the
agreements contemplated hereby to which the Purchaser is a party and to perform
the Purchaser's obligations hereunder and thereunder. This Agreement and each of
the agreements contemplated hereby to which the Purchaser is a party has been
duly authorized, executed and delivered by the Purchaser and is a valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights. No consent, approval, authorization,
order, filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by the Purchaser in
connection with the execution and delivery of this Agreement or any of the
agreements contemplated hereby to which the Purchaser is a party or the
performance of the Purchaser's obligations hereunder or thereunder.
4.2 Investment. The Purchaser is acquiring the Shares and Warrants
for its own account and has no intention of distributing such securities or the
Warrant Shares in violation of the Securities Act or applicable state securities
or "blue sky" laws.
4.3 Organization. Purchaser is duly organized, validly existing
and in good standing under the laws of the state of its organization.
4.4 No Breach. The execution and delivery by the Purchaser of each
of the Documents and all other agreements
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and other instruments contemplated and the consummation of the transactions
contemplated thereby do not and will not (with or without the giving of notice,
the lapse of time or both) (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any lien, security interest, charge or encumbrance upon the
Purchaser's or any Subsidiary's equity interests or assets, (iv) give any third
party the right to accelerate any obligation under, or (v) result in a violation
of, the Purchaser's certificate of formation and limited liability company
agreement, if the Purchaser is a limited liability company, or trust agreement,
if the Purchaser is a trust, or any law, statute, rule, regulation, instrument,
order, judgment or decree to which the Purchaser or any of its properties is
subject, or any contract to which the Purchaser is a party or by which it is
bound or to which any of its properties is subject, assuming that all applicable
waiting periods have expired under the HSR Act.
4.5 Financing. The Purchaser has or will have at the Closing funds
available to it to consummate the purchase of the Shares pursuant to the terms
of this Agreement.
SECTION 5
Conditions to the Purchaser's Obligations for the Closing
The obligation of the Purchaser to purchase and pay for the Shares
and Warrants to be purchased by the Purchaser at the Closing is subject to the
satisfaction on or before the date of the Closing of the following conditions:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 hereof shall be true in all
material respects at and as of the Closing as though then made, except as
expressly contemplated thereby.
5.2 Registration Rights Agreement. A Registration Rights Agreement
substantially in the form of
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Exhibit A shall have been executed and delivered by the Company and the
Purchaser and shall be in full force and effect as of the Closing.
5.3 Warrant Agreement. A Warrant Agreement substantially in the
form of Exhibit B shall have been executed and delivered by the Company and the
Purchaser and shall be in full force and effect as of the Closing.
5.4 Opinion of the Company's Counsel. The Purchaser shall have
received from Barbara S. Polsky, General Counsel for the Company, her opinion,
dated the date of the Closing, in form and substance reasonably satisfactory to
the Purchaser, to the effect that, subject to customary exceptions:
(a) each of the Company and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
state of its incorporation, and each of the Company and its Subsidiaries
has all requisite corporate power and authority to own and operate its
properties, to carry on its businesses as now conducted and to carry out
and perform its obligations under the terms of this Agreement, the Warrant
Agreement and the Registration Rights Agreement;
(b) the Company is duly licensed or qualified and is in good
standing as a foreign corporation in the State of California and each
other jurisdiction wherein the nature of the business transacted by the
Company or the nature of the property owned or leased by it requires such
licensing or qualification. Each of the Subsidiaries is duly licensed or
otherwise qualified in each state wherein the nature of the business
transacted by such Subsidiary or the nature of the property owned or
leased by it requires such licensing or qualification and where failure to
be so licensed or qualified would reasonably be expected to, singly or in
the aggregate, have a Material Adverse Effect on the Company;
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(c) the authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock,
and all of the outstanding shares of the capital stock of the Company are
validly issued, fully paid and nonassessable; upon the issuance and sale
of the Shares, the Shares will be validly issued, fully paid and
nonassessable; and upon the valid exercise (including payment of the
exercise price) of the Warrants, the Warrant Shares will be validly
issued, fully paid and nonassessable;
(d) the execution, delivery and performance of each of the
Documents and all other agreements and instruments contemplated thereby
and the consummation of all transactions contemplated thereby have been
duly authorized by all requisite corporate action of the Company; each of
the Documents and all other agreements and instruments contemplated
thereby constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, equitable subordination, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith
and fair dealing; and to the best knowledge of such counsel (except as
provided below), the execution and delivery by the Company of each of the
Documents and all other agreements and other instruments contemplated and
the consummation of the transactions contemplated thereby do not and will
not (with or without the giving of notice, the lapse of time or both)
result in the creation of any lien, security interest, charge or
encumbrance upon the Company's or any Subsidiary's capital stock or assets
or (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) give any third party
the right to accelerate any obligation under or (iv) result in a violation
of, the Certificate of Incorporation or Bylaws of the Company (where such
opinion shall not be qualified as to such counsel's best knowledge), or
any law, statute, rule, regulation, instrument, order,
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judgment or decree to which the Company or any of its properties is
subject, or any contract to which the Company is a party or by which it is
bound or to which any of its properties is subject;
(e) no consent, approval, authorization, registration or
qualification of any Governmental Authority or any third party is required
to be obtained by the Company or any of its Subsidiaries in connection
with the execution, delivery or performance by the Company of each of the
Documents, except such consents, approvals, authorizations, registration
or qualifications as may be required under the HSR Act, which shall have
been received prior to the Closing, and state securities laws, the
Securities Act, the Exchange Act and the rules and regulations of the New
York Stock Exchange;
(f) the Company has authorized the issuance and sale to the
Purchaser of the Shares and Warrants; each share of Common Stock issued
and sold to the Purchaser hereunder has, and each Warrant Share issued
upon the valid exercise of Warrants will have, the rights set forth in the
Company's Certificate of Incorporation, and each Warrant has the terms and
rights set forth in the Warrant Agreement; and
(g) the acquisition of the Shares and the Warrants and the
exercise of the Warrants by the Purchaser will not cause the Purchaser or
any of its Affiliates to become (i) an "Acquiring Person" for purposes of
the Rights Agreement or (ii) subject to the restrictions against business
combinations contained in Section 203 of the Delaware General Corporation
Law.
5.5 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement or the Concurrent Purchase
Agreement under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or the Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated
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hereby, which action shall have not been withdrawn or terminated.
5.6 Amendment of the Rights Agreement. The Company shall have
caused the Rights Agreement to be amended to provide that the Purchaser and its
Affiliates, so long as the Purchaser and its Affiliates beneficially owns shares
of Common Stock equal to at least 50% of the number of Shares purchased
hereunder shall be an "Exempt Person" under the Rights Agreement.
5.7 Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing shall have been taken and all
documents incident thereto shall be satisfactory in form and substance to the
Purchaser.
5.8 Closing Documents. The Company shall have delivered to the
Purchaser on the date of such Closing:
(a) An Officer's Certificate dated the date of such Closing,
stating that the conditions set forth in Section 5.1 have been satisfied;
(b) Copies of the Certificate of Incorporation and the Bylaws of
the Company, each certified by an officer of the Company;
(c) Copies of the resolutions adopted by the Company's Board of
Directors, authorizing the transactions contemplated hereby; and
(d) Such other documents relating to the transactions contemplated
by this Agreement as the Purchaser or their counsel may reasonably request.
5.9 Waiver. Any condition specified in this Section 5 may be
waived in writing by the Purchaser.
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SECTION 6
Conditions to the Company's Obligations for the Closing
The obligation of the Company to the Purchaser to issue and deliver
the Shares and Warrants to the Purchaser at the Closing is subject to the
satisfaction on or before the date of the Closing of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects on and as of the date of the Closing as if made
on and as of such date; and the Purchaser shall have performed and complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by the Purchaser prior to or at the
Closing.
6.2 Legal Matters. The Purchaser's purchase of and payment for the
Shares and Warrants shall not be prohibited by any applicable law, court order
or governmental regulation.
6.3 Closing Documents. The Purchaser shall have delivered to the
Company on the date of such Closing:
(a) Copies of the certificate of formation and limited liability
company agreement, if the Purchaser is a limited liability company, or trust
agreement, if the Purchaser is a trust, each certified by an officer, if the
Purchaser is a limited liability company, or the trustee, if the Purchaser is a
trust; and
(b) Such other documents relating to the transactions contemplated
by this Agreement as the Company or its counsel may reasonably request.
6.4 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement or the Concurrent Purchase
Agreement under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or the Federal Trade
Commission challenging or seeking to
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enjoin the consummation of the transactions contemplated hereby, which action
shall have not been withdrawn or terminated.
6.5 Waiver. Any condition specified in this Section 6 may be
waived in writing by the Company.
6.6 Concurrent Purchase Agreement. The Concurrent Purchase
Agreement shall be consummated simultaneously with the Closing.
SECTION 7
Covenants
7.1 Financial Statements and Other Information.
(a) Prior to the Closing, the Company shall furnish to the
Purchaser copies of all filings made by the Company with the SEC, promptly
following such filing.
(b) Prior to the Closing, the Company shall furnish to the
Purchaser the same information that it provides its directors, except for
discussions, analyses and other information pertaining to this Agreement and the
Documents. In addition, the Company shall, prior to the Closing, furnish to the
Purchaser prompt notice of (a) any material change in its business, operations
or prospects, (b) the institution or threat of material litigation, (c) any
material change in the number of outstanding shares of Common Stock or preferred
stock, and (d) any event or condition that constitutes a breach of this
Agreement, or that might be reasonably expected to cause its representations and
warranties set forth herein not to be true and correct in all material respects
as of the Closing.
7.2 Directors. At the Closing, or as soon as practicable
thereafter, the Company shall cause Gerald J. Ford to be elected to the
Company's Board of Directors and shall continue to recommend that such person or
any other person designated by the Purchaser be elected a member of the Board of
Directors so long as the Purchaser, the
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Concurrent Purchaser and their respective Affiliates beneficially own in the
aggregate shares of Common Stock equal to at least 50% of the total number of
Shares purchased hereunder and under the Concurrent Purchase Agreement.
7.3 HSR Act Filing. If and when necessary, as promptly as
practicable, the Company and the Purchaser shall make all filings and
submissions under the HSR Act as may be reasonably required to be made in
connection with this Agreement and the transactions contemplated hereby. The
Company shall furnish to the Purchaser, and the Purchaser shall furnish to the
Company, such information and assistance as the other may reasonably request in
connection with the preparation of any such filings or submissions.
7.4 Conditions to Closing. The Company and the Purchaser shall
each use their best efforts to cause the conditions to the Closing, as described
herein in Sections 5 and 6, to be satisfied, and to cause the Closing to occur
promptly after satisfaction of the conditions thereto.
7.5 Use of Proceeds. Any consideration received by the Company for
the sale of the Shares and Warrants to the Purchaser shall be used solely for
working capital purposes, capital expenditures, repayment of indebtedness or the
payment of business expenses.
7.6 Pledge of Shares. If the Purchaser, pursuant to Section 8.6,
pledges any Shares, Warrants or Warrant Shares to secure indebtedness or other
obligations, the Company agrees that such pledgee shall be entitled to rely on
the Opinion of the Company's Counsel delivered pursuant to Section 5.4 and each
of the closing documents delivered pursuant to Section 5.8 as if such opinion or
certificate was addressed to such pledgee, and the Company, if reasonably
requested by such pledgee, shall provide opinions of counsel, reliance letters,
certificates or other documents which provide that the representations and
warranties contained in Sections 3.1, 3.3(c), 3.4 (first two sentences only) and
3.8 are correct in all material respects as if made on such later date and which
state that such
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pledgee shall be entitled to rely on the documents delivered pursuant to
Sections 5.4, 5.8(a), (b) and (c) and this Section 7.6 (each, a "bring-down
document") none of which will the Company be obligated to reconfirm or in any
way certify as of any date subsequent to the Closing; provided, that the Company
shall be obligated to provide such bring-down documents on no more than two
occasions without charge to the Purchaser, and thereafter, the Purchaser shall
be required to reimburse the Company for all reasonable expenses relating
thereto; provided, further, the Company's obligations under this Section 7.6
shall expire two years after the Closing.
7.7 No-Action Letter. At the request of the Purchaser, the Company
agrees to file with the Commission as soon as practicable after the Closing, but
in no event later than the 120th day after the Closing, a request for a
no-action letter to the effect that the Company may file a shelf registration
statement under the Securities Act to register the offer and sale by the Company
of the Warrant Shares and Other Warrant Shares after the occurrence of a
Purchase Event (as defined in the Warrant Agreement and Other Warrant Agreement,
as the case may be) and such filing would not result in the loss of the
exemption from the registration requirements under the Securities Act which was
relied on by the Company for the offer and sale of any of the Shares, Other
Shares, Warrants or Other Warrants. The Purchaser agrees to reimburse the
Company for reasonable fees, disbursements and expenses of one counsel retained
in connection with such no-action letter.
SECTION 8
Miscellaneous
8.1 Expenses. Each party hereto shall bear all expenses incurred
by it in connection with this Agreement or the transactions contemplated hereby.
8.2 Additional Purchases of Common Stock. Nothing in this
Agreement or any of the Documents shall
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restrict the Purchaser from acquiring additional shares of Common Stock whether
through open market purchases or otherwise.
8.3 Amendments and Waivers. Except as otherwise provided herein,
any provision hereof may be amended or waived generally and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, if, but only if, the Company has obtained the written consent
of the Purchaser. No course of dealing between the Company or any of its
Subsidiaries, on the one hand, and the Purchaser on the other hand, or any delay
on the part of the Purchaser in exercising any rights hereunder or under any
agreement contemplated hereby, will operate as a waiver of any rights of any
such holder.
8.4 Termination. If the Closing does not occur by June 30, 1998,
this Agreement shall automatically terminate, and no party to this Agreement
shall have any liability or further obligation to any other party except that
termination will not relieve a breaching party from liability for any willful
breach of this Agreement giving rise to such termination.
8.5 Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive for a period of one year from the date of
the execution and delivery of this Agreement, regardless of any investigation
made by or on behalf of any party.
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8.6 Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement and all of the provisions hereto shall bind and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns whether so expressed or not, but, except as expressly contemplated
herein, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, by the Purchaser or the
Company without the prior written consent of the other; provided, that in
connection with a bona fide pledge of any Shares, Warrants or shares of common
stock issuable upon exercise of the Warrants to secure indebtedness or other
obligations, the Purchaser may assign its rights, interests and obligations
hereunder to the beneficiary of such pledge without the consent of the Company;
and provided, further, that the Purchaser may assign this Agreement to any
Affiliate of the Purchaser or to Concurrent Purchaser or any of its Affiliates
without the consent of the Company, so long as such assignment to any savings
and loan institution, savings and loan holding company, bank or similar
regulated entity or any subsidiary of the foregoing will not subject the Company
or any of its Subsidiaries to examination or supervision by any federal or state
banking supervisory authority.
8.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability in such jurisdiction, without
invalidating the remainder of this Agreement in such jurisdiction or any
provision hereof in any other jurisdiction.
8.8 Entire Agreement. This Agreement, together with the Documents
and that certain Confidentiality Agreement by and between the Company and Gerald
J. Ford, dated March 9, 1998, is the entire agreement among the parties and,
when executed by the parties hereto, supersedes all prior agreements and
communications, either verbal or in
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writing, with respect to the subject matter contained herein.
8.9 Descriptive Headings; Language Interpretation. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. In the interpretation of this Agreement,
unless the context otherwise requires, (a) words importing the singular shall be
deemed to import the plural and vice versa, (b) words denoting gender shall
include all genders, (c) references to persons shall include corporations or
other bodies and vice versa, and (d) references to parties, sections, schedules,
paragraphs and exhibits shall mean the parties, sections, schedules, paragraphs
and exhibits of and to this Agreement.
8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PROVISIONS THEREOF.
8.11 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
8.12 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally or
three days after being mailed by certified or registered mail, return receipt
requested and postage prepaid, to the recipient. Such notices, demands and other
communications will be sent to the Company and the Purchaser at the addresses
indicated below:
If to the Company:
Aames Financial Corporation
350 S. Grand Ave., 52nd Floor
Los Angeles, California 90071
Attn: Barbara S. Polsky
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<PAGE> 36
With a copy to:
Manatt, Phelps & Phillips LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attn: William Quicksilver
If to the Purchaser:
c/o California Federal Bank, FSB
200 Crescent Court, Suite 1350
Dallas, Texas 75201
Attn: Christie S. Flanagan
With a copy to:
Sullivan & Cromwell
444 South Flower Street, Suite 1200
Los Angeles, California 90071
Attn: Stanley F. Farrar
8.13 Remedies. The Company acknowledges that it would be impossible
to determine the amount of damages that would result from any breach by it of
any of the provisions of this Agreement and that the remedy at law for any
breach, or threatened breach, of any of such provisions would likely be
inadequate and, accordingly, agrees that the Purchaser shall, in addition to any
other rights or remedies which it may have, including recission of this
Agreement, be entitled to seek such equitable and injunctive relief as may be
available from any court of competent jurisdiction to compel specific
performance of, or restrain the Company from violating any of, such provisions.
In connection with any action or proceeding for injunctive relief, the Company
hereby waives the claim or defense that a remedy at law alone is adequate and
agrees, to the maximum extent permitted by law, to have each provision of this
Agreement specifically enforced against it, without the necessity of posting
bond or other security against it, and consents to the entry of injunctive
relief against it enjoining or
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<PAGE> 37
restraining any breach or threatened breach of this Agreement.
8.14 Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.15 Publicity. Purchaser and the Company shall consult with each
other before issuing any press release with respect to this Agreement and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which shall not be reasonably withheld;
provided, however, that a party may, without the prior consent of the other
party (but after prior consultation, to the extent practicable in the
circumstances) issue such press release or make such public statement as may
upon the advice of counsel be required by law or the rules and regulations of
the New York Stock Exchange.
8.16 Legend. The certificates evidencing the Shares and the shares
of Common Stock issuable upon exercise of the Warrant shall bear the following
legend until such time as such shares are registered under the Securities Act or
the Purchaser or any transferee thereof delivers an opinion of counsel
reasonably acceptable to the Company to the effect that such legend is no longer
required under the Securities Act:
THESE SECURITIES WERE SOLD IN A PRIVATE PLACEMENT, WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND MAY BE OFFERED OR
SOLD ONLY IF REGISTERED UNDER THE SECURITIES ACT OF 1933 OR IF AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
8.17 Transfer Opinion. Notwithstanding anything to the contrary
stated herein, the Company's transfer agent and registrar shall not be required
to reflect the transfer of the Shares on the Company's stock ledger unless such
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<PAGE> 38
Shares have been transferred pursuant to a registration statement which is
effective under Section 5 of the Securities Act or the Company's transfer agent
and registrar has received an opinion of counsel, who is reasonably acceptable
to the Company, that the transfer is exempt from registration under the
Securities Act.
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<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first written above.
AAMES FINANCIAL CORPORATION
By: /s/ Cary H. Thompson
----------------------------------------
Name: Cary H. Thompson
Title: Chief Executive Officer
TURTLE CREEK REVOCABLE TRUST
By: /s/ Gerald J. Ford
----------------------------------------
Name: Gerald J. Ford
Title: Trustee
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<PAGE> 1
EXHIBIT 10.3
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of March 19, 1998
By and Between
AAMES FINANCIAL CORPORATION
and
THIRTY-FIVE EAST INVESTMENTS LLC
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Certain Definitions...............................................1
Section 2. Registration Under the Securities Act.............................5
Section 3. Registration Procedures...........................................8
Section 4. Registration Expenses............................................18
Section 5. Representations and Warranties...................................19
Section 6. Indemnification..................................................22
Section 7. Underwritten Offerings...........................................27
Section 8. Rule 144.........................................................27
Section 9. Miscellaneous....................................................28
</TABLE>
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<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
March 19, 1998, by and among Aames Financial Corporation, a Delaware corporation
(the "Company"), and Thirty-Five East Investments LLC, a Delaware limited
liability company (the "Purchaser").
RECITALS
WHEREAS, the Company and the Purchaser have entered into a Stock
Purchase Agreement, dated the date hereof (the "Stock Purchase Agreement"),
providing for, among other things, the sale by the Company and the purchase by
the Purchaser of an aggregate of 2,225,865 shares (the "Shares") of Common Stock
of the Company, par value $.001 per share (the "Common Stock") and warrants
(each a "Warrant" and collectively, the "Warrants") to purchase 2,225,865 shares
of Common Stock at an initial exercise price of $17.2031 per share (the "Warrant
Shares");
WHEREAS, the Company and Turtle Creek Revocable Trust (the "Other
Purchaser") have entered into a Stock Purchase Agreement, dated the date hereof
(the "Other Stock Purchase Agreement"), providing for, among other things, the
sale by the Company and the purchase by the Other Purchaser of an aggregate of
556,446 shares (the "Other Shares") of Common Stock and warrants (the "Other
Warrants") to purchase 556,466 shares of Common Stock at an initial exercise
price of $17.2031 per share (the "Other Warrant Shares");
WHEREAS, the Company and the Purchaser have entered into a
Warrant Agreement, dated as of the date hereof (the "Warrant Agreement"),
providing for, among other things, the terms and conditions of the Warrants; and
NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto agree as follows:
Section 1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following respective meanings:
<PAGE> 4
"Affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified.
"Closing Date" shall be the same date as the closing of the Stock
Purchase Agreement and the Other Stock Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission,
or any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
"Common Stock" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Holder" shall mean the Purchaser, the Other Purchaser and each
of their successive successors and assigns who acquire Registrable Securities,
directly or indirectly, from either such persons or from any successive
successor or assign of either such persons.
"Other Purchaser" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Other Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated the date hereof, between the Company and the Other
Purchaser, with terms and provisions substantially similar to this Agreement.
"Other Shares" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Other Stock Purchase Agreement" shall have the meaning assigned
to such term in the preamble to this Agreement.
"Other Warrants" shall have the meaning assigned to such term in
the preamble to this Agreement.
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<PAGE> 5
"Other Warrant Shares" shall have the meaning assigned to such
term in the preamble to this Agreement.
"Registrable Securities" shall mean the Shares, Other Shares,
Warrant Shares and Other Warrant Shares, and any securities of the Company
issued successively in exchange for or in respect of any of the foregoing,
whether as a result of any successive stock split or reclassification of, or
stock dividend on, any of the foregoing or otherwise; provided, however, that
such shares of Common Stock or securities shall cease to be Registrable
Securities when (i) a registration statement registering such shares of Common
Stock or securities, as the case may be, under the Securities Act has been
declared effective and such shares of Common Stock or securities, as the case
may be, have been sold or otherwise transferred by the Holder thereof pursuant
to such effective registration statement, (ii) such shares of Common Stock or
securities, as the case may be, are sold pursuant to Rule 144 (or any successor
provision) promulgated under the Securities Act under circumstances in which
any legend borne by such shares of Common Stock or securities relating to
restrictions on transferability thereof, under the Securities Act or otherwise,
is removed by the Company or (iii) such shares of Common Stock or securities
shall have been transferred, new securities evidencing such shares of Common
Stock or securities without legends restricting further transfer shall have been
delivered by the Company and subsequent public distribution of such shares of
Common Stock or securities shall not require registration under the Securities
Act.
"Registration Expenses" shall have the meaning assigned thereto
in Section 4 of this Agreement.
"Rights" shall mean any options, warrants, securities, rights or
other instruments convertible into or exchangeable or exercisable for, or
otherwise giving the holder thereof the right to acquire, directly or
indirectly, any Common Stock or any other such options, warrants, securities,
rights or instruments, including without limitation, the Warrants, Other
Warrants and any instrument the value of which is measured by reference to the
value of the Common Stock.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
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<PAGE> 6
"Shares" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Share Shelf Registration Statement" shall mean any registration
statement of the Company that covers the resale of any of the Shares and the
Other Shares pursuant to the provisions of this Agreement and the Other
Registration Rights Agreement, including any prospectus, amendments and
supplements to such registration statement or prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference, if any, in such
registration statement.
"Shelf Registration Statements" shall mean the
Share Shelf Registration Statement and the Warrant Shelf
Registration Statement.
"Subsidiary" shall mean any corporation of which shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Company either directly or through its Subsidiaries, any partnership in which
the Company or any Subsidiary is a general partner and any joint venture in
which the Company or any Subsidiary is a joint venturer.
"Warrants" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Warrant Shelf Registration Statement" shall mean any
registration statement of the Company that covers the resale of any of the
Warrant Shares and the Other Warrant Shares, including any prospectus,
amendments and supplements to such registration statement or prospectus,
including pre-and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference, if
any, in such registration statement.
"Warrant Shares" shall have the meaning assigned to such term in
the preamble to this Agreement.
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<PAGE> 7
Section 2. Registration Under the Securities Act.
(a) The Company agrees to file with the Commission as soon as
practicable after the Closing Date, but in no event later than the 120th day
after the Closing Date, the Share Shelf Registration Statement. The Share Shelf
Registration Statement shall be on Form S-3 under the Securities Act or another
appropriate form permitting registration of the Shares and the Other Shares for
resale by the Holders from time to time in open market transactions (with or
without the use of one or more brokers) or through an underwritten offering. The
Company shall not permit any securities other than the Shares and the Other
Shares to be included in the Share Shelf Registration Statement. The Company
shall use its reasonable best efforts to cause the Share Shelf Registration
Statement to be declared effective pursuant to the Securities Act as promptly as
practicable following the filing thereof, but in no event later than 60 days
following such filing date, and to keep the Share Shelf Registration Statement
continuously effective under the Securities Act thereafter for a period ending
the earlier of (i) three years from the Closing Date (subject to extension
pursuant to Section 2(e) below), or (ii) when there ceases to be any outstanding
Shares or Other Shares which are Registrable Securities (the "Purchase Shelf
Effectiveness Period").
(b) After the occurrence of a Purchase Event (as defined in the
Warrant Agreement or the Other Warrant Agreement, as the case may be), the
Company agrees to file with the Commission at the request of any registered
holder of Warrants, Warrant Shares, Other Warrants or Other Warrant Shares, but
in no event later than the 90th day after any such registered holder makes such
request, the Warrant Shelf Registration Statement. The right of the Purchaser to
request registration of the Warrant Shares shall expire on the Expiration Date
of the Warrants (as defined in the Warrant Agreement). The Warrant Shelf
Registration Statement shall be on Form S-3 under the Securities Act or another
appropriate form permitting registration of such Warrant Shares and Other
Warrant Shares for resale by the Holders from time to time in open market
transactions (with or without the use of one or more brokers) or through an
underwritten offering. The Company shall not permit any securities other than
the Warrant Shares and the Other Warrant Shares to be included in the Warrant
Shelf Registration Statement. The Company shall use its
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<PAGE> 8
reasonable best efforts to cause the Warrant Shelf Registration Statement to be
declared effective pursuant to the Securities Act as promptly as practicable
following the filing thereof, but in no event later than 60 days following such
filing date, and to keep such Warrant Shelf Registration Statement continuously
effective under the Securities Act thereafter for a period ending on the earlier
of (i) twelve months from the date the Warrant Shelf Registration Statement
becomes effective (subject to extension pursuant to Section 2(e) below), or (ii)
when there ceases to be any outstanding Warrant Shares and Other Warrant Shares
which are Registrable Securities (the "Warrant Shelf Effectiveness Period," and
each of the Purchase Shelf Effectiveness Period and Warrant Shelf Effectiveness
Period, an "Effectiveness Period").
(c) In the event that either (i) the no action relief
contemplated by Section 7.7 of the Stock Purchase Agreement and Other Stock
Purchase Agreement is obtained or (ii) the Company determines in its sole and
absolute discretion that there has been a change in law or change in
administrative interpretation by the Commission that would permit the Company to
file a shelf registration statement (the "Exercise Shelf Registration
Statement") under the Securities Act to register the offer and sale by the
Company of the Common Stock issuable upon exercise of the Warrants and Other
Warrants after the occurrence of a Purchase Event (as defined in the Warrant
Agreement and Other Warrant Agreement, as the case may be) and such filing will
not result in the loss of the exemption from the registration requirements under
the Securities Act which was relied on by the Company for the offer and sale of
any of the Shares, Other Shares, Warrants or Other Warrants, at the request of
any registered holder of Warrants, Warrant Shares, Other Warrants or Other
Warrant Shares, the Company shall file with the Commission the Exercise Shelf
Registration Statement. The Company shall use its reasonable best efforts to
cause such Exercise Shelf Registration Statement to be declared effective as
promptly as practicable after the filing thereof and to keep such Exercise Shelf
Registration Statement continuously effective under the Securities Act
thereafter for a period ending on the earlier of (i) three years from the
Closing Date (subject to extension pursuant to Section 2(e) below) or (ii) when
there ceases to be any outstanding Warrants and Other Warrants which have not
expired or been exercised. As soon as practicable after (a) the Exercise Shelf
Registration
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<PAGE> 9
Statement is declared effective under the Securities Act and (b) the Warrant
Agreement, Other Warrant Agreement, Warrants and Other Warrants shall have been
amended by the Company and each of the registered holders of Warrants and Other
Warrants in a manner acceptable to the Company to provide for a suspension of
the right of any registered holder of Warrants or Other Warrants to exercise
such Warrants or Other Warrants in the event the Exercise Shelf Registration
Statement shall not continue to remain effective with the Commission, the
Company will amend this Agreement in a manner consistent with the other terms
hereof to provide for the filing of a shelf registration statement under the
Securities Act covering the resale of the Warrants and Other Warrants.
(d) If, for any reason, any of the Shelf Registration Statements
loses its effectiveness during its applicable Effectiveness Period, the Company
shall file with the Commission as soon as practicable, but in no event later
than 60 days after the date such shelf registration statement loses its
effectiveness, another registration statement covering all of the Registrable
Securities which were covered by the Shelf Registration Statement which so lost
its effectiveness; provided, that if the Company has notice that any Shelf
Registration Statement will lose its effectiveness, the Company shall use its
reasonable best efforts to file another registration statement covering the
Registrable Securities which are covered by such Shelf Registration Statement
for the applicable Effectiveness Period as soon as practicable after the Company
receives such notice.
(e) The Company shall use its reasonable best efforts to keep the
shelf registration statements continuously effective by supplementing and
amending them as required by the rules, regulations or instructions applicable
to the registration form used for such shelf registration statement if required
by the Securities Act or reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Securities covered by such shelf
registration statement; provided that the applicable Effectiveness Period shall
be extended to the extent necessary to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 and as otherwise
provided herein.
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<PAGE> 10
Section 3. Registration Procedures.
(a) In connection with the Company's obligations with respect to
any registration of Registrable Securities pursuant to Section 2 hereof, the
Company shall use its reasonable best efforts to effect or cause such
registration to permit the sale of the Registrable Securities by the Holders
thereof in open market transactions or in one underwritten offering pursuant to
Section 7 hereof. In connection therewith, the Company shall, as soon as
reasonably possible:
(i) comply with the provisions of the Securities Act
applicable to issuers with respect to the disposition of all of the
Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the Holders
thereof set forth in such registration statement;
(ii) provide (A) each Holder of the Shares and the Other
Shares, in the case of the Share Shelf Registration Statement, and the
Warrant Shares and the Other Warrant Shares, in the case of the Warrant
Shelf Registration Statement, and counsel for such Holders the
opportunity to participate in the preparation of such Shelf Registration
Statement and (B) (1) each such Holder and counsel, (2) the underwriters
(which term, for purposes of this Agreement, shall include a person
deemed to be an underwriter within the meaning of Section 2(11) of the
Securities Act), if any, in connection with the one underwritten
offering pursuant to Section 7 hereof and (3) counsel for such
underwriters, if any, the opportunity to participate in the preparation
of each prospectus included in the applicable Shelf Registration
Statement or filed with the Commission, and each amendment or supplement
thereto (and, in the case of the parties referred to in Sections
3(a)(ii)(B)(2) and 3(a)(ii)(B)(3), only with respect to each prospectus,
amendment or supplement relating to the one underwritten offering
pursuant to Section 7 hereof);
(iii) throughout the Effectiveness Period and after
receiving notice under Section 3(c) hereof until such offer and sale is
completed, make available for inspection during normal business hours by
the parties referred to in Section 3(a)(ii) above (and, in
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<PAGE> 11
the case of the party referred to in Sections 3(a)(ii)(B)(2) and
3(a)(ii)(B)(3), only with respect to an offer and sale pursuant to
Section 7 hereof) such financial and other information and books and
records of the Company, and cause the officers, directors, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries, as shall be reasonably necessary, in the
judgment of the respective counsel referred to in such Section, to
conduct a reasonable investigation within the meaning of Section 11 of
the Securities Act if the recipient thereof has executed a
confidentiality agreement in a form reasonably acceptable to the Company
protecting against the misappropriation or disclosure of the Company's
confidential information;
(iv) promptly notify the Holders of the Shares and the
Other Shares, in the case of the Share Shelf Registration Statement, and
the Holders of the Warrant Shares and the Other Warrant Shares, in the
case of the Warrant Shelf Registration Statement and confirm such advice
in writing, (A) when such registration statement or the prospectus
included therein or any prospectus amendment or supplement or
post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same
has become effective, (B) of any comments by the Commission and by the
Blue Sky or securities commissioner or regulator of any state with
respect thereto or any request by the Commission for amendments or
supplements to such registration statement or prospectus or for
additional information, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement
or the initiation or threatening of any proceedings for that purpose,
(D) if at any time during the applicable Effectiveness Period the
representations and warranties of the Company contemplated by Section
3(a)(xiii) or Section 5 hereof cease to be true and correct in all
material respects, (E) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose, or (F) in addition to such Holders,
the managing underwriter or underwriters, if any, in connection with the
one underwritten offering pursuant
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<PAGE> 12
to Section 7 hereof, at any time a prospectus (in the case of such
underwriter or underwriters, only when a prospectus relating to such
underwritten offering) is required to be delivered under the Securities
Act, that such registration statement, prospectus, prospectus amendment
or supplement or post-effective amendment, or any document incorporated
by reference in any of the foregoing, may contain an untrue statement of
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(v) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of either of the
Shelf Registration Statements or any post-effective amendment thereto at
the earliest practicable date;
(vi) if requested by any managing underwriter or
underwriters in connection with the one underwritten offering pursuant
to Section 7 hereof, or any Holder, promptly incorporate in a prospectus
supplement or post-effective amendment such information as is required
by the applicable rules and regulations of the Commission and as such
managing underwriter, underwriters or Holder specifies should be
included therein relating to the terms of the sale of such Registrable
Securities, including, without limitation, information with respect to
the number of Registrable Securities being sold by the Holders or to any
underwriters, the name and description of the Holders and underwriter,
the offering price of such Registrable Securities and any discount,
commission or other compensation payable in respect thereof, the
purchase price being paid therefor by such underwriters and with respect
to any other terms of the offering of the Registrable Securities to be
sold by the Holders or to such underwriters; and make all required
filings of such prospectus supplement or post-effective amendment
promptly after notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(vii) furnish (A) to each Holder of the Shares and the Other
Shares, in the case of the Share Shelf Registration Statement, and the
Warrant Shares and the
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<PAGE> 13
Other Warrant Shares, in the case of the Warrant Shelf Registration
Statement, an executed copy of such registration statement, each such
amendment and supplement thereto (in each case including all exhibits
thereto and documents incorporated by reference therein), and (B) to any
Holder of Registrable Securities such number of copies of such
registration statement (excluding exhibits thereto and documents
incorporated by reference therein unless specifically so requested by
any Holder or underwriter, if any, in connection with the one
underwritten offering pursuant to Section 7 hereof) and of the
prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with
the requirements of the Securities Act, and such other documents, as any
such Holder and underwriter, if any, may reasonably request in order to
facilitate the offering and disposition of the Registrable Securities
owned by any such Holder or underwritten by such underwriter and to
permit each Holder and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to
the use of such prospectus (including such preliminary and summary
prospectus) and any amendment or supplement thereto by each Holder and
by any such underwriter, in each case in the form most recently provided
to such party by the Company, in connection with the offering and sale
of the Registrable Securities covered by the prospectus (including such
preliminary and summary prospectus) or any supplement or amendment
thereto;
(viii) use its reasonable best efforts to (A) register or
qualify the Registrable Securities to be included in the applicable
Shelf Registration Statement under such securities laws or Blue Sky laws
of such jurisdictions in the United States as any Holder and
underwriter, if any, in connection with the one underwritten offering
pursuant to Section 7 hereof, thereof shall reasonably request, (B) keep
such registrations or qualifications in effect and comply with such laws
so as to permit the continuance of offers, sales and dealings therein in
such jurisdictions for so long as may be necessary to enable the Holders
or underwriters to complete its distribution of Registrable Securities
pursuant to such offering and (C) take any and all other actions as may
be reasonably necessary or advisable to enable the
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<PAGE> 14
Holders and underwriters, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
the Company shall not be required for any such purpose to (I) qualify as
a foreign corporation in any jurisdiction wherein it would not otherwise
be required to qualify but for the requirements of this Section
3(a)(viii) or (II) consent to general service of process in any such
jurisdiction;
(ix) use its reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether federal,
state or local, which may be required to effect such registration or the
offering or sale in connection therewith or to enable the Holders to
offer, or to consummate the disposition of, the Registrable Securities;
(x) cooperate with the Holders and the managing
underwriters, if any, in connection with the one underwritten offering
pursuant to Section 7 hereof to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or
produced by any combination of such methods, on steel engraved borders
if required or appropriate and which shall not bear any restrictive
legends; and, in the case of an underwritten offering, enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriters may request at least two
business days prior to any sale of the Registrable Securities;
(xi) (reserved);
(xii) in the event of the one underwritten offering
pursuant to Section 7 hereof, enter into one or more underwriting
agreements, engagement letters, agency agreements, "best efforts"
underwriting agreements or similar agreements, as appropriate, and take
such other actions in connection therewith as the Holders shall
reasonably request in order to expedite or facilitate the disposition of
the Registrable Securities registered;
(xiii) in the event of the one underwritten offering
pursuant to Section 7 hereof, (A) make such representations and
warranties to the Holders and the
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<PAGE> 15
underwriters, in form, substance and scope as are customarily made in
connection with an offering of common stock or other equity securities
pursuant to any appropriate agreement and/or to a registration statement
filed on the form applicable to such registration; (B) to use reasonable
best efforts to obtain an opinion of counsel to the Company in customary
form and covering such matters, of the type customarily covered by such
an opinion, as the managing underwriters, and as the Holders may
reasonably request, addressed to the Holders and the underwriters, dated
the date of the closing under the underwriting agreement relating
thereto, it being agreed that the matters to be covered by such opinion
shall include, without limitation, subject to such customary
assumptions, qualifications and limitations as such counsel reasonably
deems appropriate, the due incorporation and good standing of the
Company and its significant Subsidiaries (as defined in Regulation S-X
under the Exchange Act); the qualification of the Company and its
significant Subsidiaries to transact business as foreign corporations;
the due authorization, execution and delivery of this Agreement and of
any agreement of the type referred to in Section (3)(a)(xii) hereof; the
due authorization and valid issuance of, full payment for, and
nonassessability of, the Registrable Securities and all other
outstanding Common Stock; the absence of material legal or governmental
proceedings involving the Company; the absence of a breach by the
Company or its significant Subsidiaries of, or a default under, material
agreements binding the Company or any Subsidiary as a result of (I) the
execution and delivery by the Company of any agreement of the type
referred to in Section 3(a)(xii) hereof, (II) the consummation of the
transactions contemplated by any such agreement or (III) the performance
by the Company of its obligations hereunder with respect to such
Registrable Securities; the absence of governmental approvals required
to be obtained in connection with such registration, the offering and
sale of the Registrable Securities, this Agreement or any agreement of
the type referred to in Section (3)(a)(xii) hereof; the compliance as to
form of such registration statement and any documents incorporated by
reference therein with the requirements of the Securities Act; the
effectiveness of such registration statement under
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the Securities Act; and, as of the date of the opinion, the lack of
knowledge of such counsel of the inclusion in such registration
statement or the prospectus included therein, as then amended or
supplemented, or from the documents incorporated by reference therein of
an untrue statement of a material fact or the omission to state therein
a material fact necessary to make the statements therein not misleading
(in the case of such documents, in the light of the circumstances
existing at the time that such documents were filed with the Commission
under the Exchange Act); (C) to use its reasonable best efforts to
obtain a "cold comfort" letter or letters from the independent certified
public accountants of the Company addressed to the Holders and the
underwriters, if any, thereof, dated (I) the effective date of any
prospectus supplement, if any, to the prospectus included in such
registration statement or post-effective amendment to such registration
statement which includes unaudited or audited financial statements as of
a date or for a period subsequent to that of the latest such statements
included in such prospectus and (II) dated the date of the closing under
the underwriting agreement relating thereto, such letter or letters to
be in customary form and covering such matters of the type customarily
covered by letters of such type; (D) deliver such documents and
certificates, including officers' certificates, as may be reasonably
requested by the Holders and the managing underwriters, if any, thereof
to evidence the accuracy of the representations and warranties made
pursuant to clause (A) above or those contained in Section 5(a) hereof
and the compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered into
by the Company; and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in
Section 6 hereof;
(xiv) in the event of one underwritten offering pursuant
to Section 7 hereof, that (i) any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate
as a member of an underwriting syndicate or selling group or "assist in
the distribution" (within the meaning of the Conduct Rules and the
By-Laws of the National Association of Securities Dealers, Inc.
("NASD")) thereof, whether as a Holder of Registrable Securities
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<PAGE> 17
or as an underwriter, or a broker or dealer in respect thereof, or
otherwise, or (ii) more than 10% of the net offering proceeds, not
including underwriting compensation, of such distribution is intended to
be paid to any such broker-dealer or "associated or affiliated persons"
of such broker-dealer or "members of the immediate family of such
persons" (each within the meaning of such Rules), the Company shall take
reasonable steps to assist such broker-dealer in complying with the
requirements of such Rules and By-Laws, including, without limitation,
by (A) if such Rules or By-Laws, including Rule 2720 thereto, shall so
require, engaging a "qualified independent underwriter" (as defined in
such Schedule) to participate in the preparation of the registration
statement relating to such Registrable Securities, to exercise usual
standards of due diligence in respect thereto and, if any portion of the
offering contemplated by such registration statement is an underwritten
offering, to recommend the price of such Registrable Securities, (B)
indemnifying any such qualified independent underwriter to the extent of
the indemnification of underwriters provided in Section 6 hereof, and
(C) providing such information to such broker-dealer as may be required
in order for such broker-dealer to comply with the requirements of the
Conduct Rules of the NASD;
(xv) comply with all applicable rules and regulations of
the Commission, and make generally available to its securityholders, as
soon as practicable after the date of filing of the last report of the
Company incorporated by reference into the prospectus next preceding the
relevant sale, an earning statement of the Company and its Subsidiaries
complying with Section 11(a) of the Securities Act (including, at the
option of the Company, Rule 158 thereunder); and
(xvi) use its reasonable best efforts to list prior to the
effective date of the Share Shelf Registration Statement, subject to
notice of issuance, the Shares and the Other Shares and prior to the
effective date of the Warrant Shelf Registration Statement, subject to
the notice of issuance, the Warrant Shares and the Other Warrant Shares
covered by such registration statement on any securities exchange on
which the Common Stock is then listed.
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(b) In the event that the Company would be required, pursuant to
Section 3(a)(iv)(F) above, to notify the Holders and the managing underwriters,
if any, thereof in connection with the one underwritten offering pursuant to
Section 7 hereof, the Company shall without delay prepare and furnish to the
Holders, and to each underwriter, if any, a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to an
offeree of Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. The Holders agree that upon receipt of
any notice from the Company pursuant to Section 3(a)(iv)(F) hereof, they shall
forthwith discontinue the disposition of Registrable Securities pursuant to the
registration statement applicable to such Registrable Securities until they
shall have received copies of such amended or supplemented prospectus, and if so
directed by the Company, the Holders shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in their
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(c) If any Holder proposes to sell any of its Registrable
Securities pursuant to the applicable Shelf Registration Statement, such Holder
shall notify the Company of its intent to do so (including the proposed manner
and timing of such sales) at least two (2) but no more than five (5) full
trading days prior to such sale, and the provision of such notice to the Company
shall conclusively be deemed to reestablish and reconfirm an agreement by such
Holder to comply with the registration provisions in this Agreement. Unless
otherwise specified in such notice, such notice shall be deemed to constitute a
representation that any information previously supplied by such Holder expressly
for inclusion in the Share Shelf Registration Statement or the Warrant Shelf
Registration Statement, as appropriate (as the same may have been superseded by
subsequent information), is accurate as of the date of such notice. At any time
within such two (2) to five (5) trading day period, the Company may refuse to
permit any Holder to resell any Registrable Securities pursuant to the
appropriate Shelf Registration Statement, provided, that in order to exercise
this right, the Company or its counsel must deliver a certificate in writing to
the Holder to the effect that a delay in such
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<PAGE> 19
sale is necessary because a sale pursuant to the Shelf Registration Statement in
its then-current form without the addition of material, nonpublic information
about the Company could constitute a violation of the federal securities laws.
In addition, in connection with any sale of the Registrable Securities, the
Company may require the Holders to: (i) furnish to the Company such information
regarding the distribution of such Registrable Securities as is required by law
to be disclosed in the registration statement and (ii) provide to the Company a
signed writing accepting and acknowledging its rights and obligations hereunder.
(d) The registration rights of Holders pursuant to this Agreement
and the ability to offer and sell Registrable Securities pursuant to any Shelf
Registration Statement are subject to the conditions and limitations contained
in Sections 3(b) and 3(c), and Holders will be deemed to have agreed with the
Company that if the Board of Directors of the Company determines in its good
faith judgment that the use of any prospectus would require the disclosure of
material information that the Company has a bona fide business purpose for
preserving as confidential, and that the Company is not otherwise required by
applicable securities laws or regulations to disclose, or that the offer and
sale of the Registrable Securities would interfere with any financing,
acquisition or other material transaction contemplated by the Company, upon
written notice of such determination by the Company, the rights of the Holders
to offer, sell or distribute any Registrable Securities pursuant to a Shelf
Registration Statement or to require the Company to take action with respect to
the registration or sale of any Registrable Securities pursuant to a Shelf
Registration Statement shall be suspended until the date upon which the Company
notifies the Holders in writing (the "Suspension Termination Notice") that
suspension of such rights for the grounds set forth in this paragraph is no
longer necessary, and the Company agrees to give such notice as promptly as
practicable following the date that such suspension of rights is no longer
necessary. Further, if during the applicable Effectiveness Period, the Holder or
a person who is a nominee, Affiliate, director, officer, trustee, beneficiary or
employee of such Holder, is an officer, director or employee of the Company, the
rights of the Holder to offer, sell or otherwise effect any distribution of
Registrable Securities pursuant to the Shelf Registration Statement or to
require the Company to take
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<PAGE> 20
action with respect to the registration or sale of any Registrable Securities
pursuant to the applicable Shelf Registration Statement shall be suspended
during any period in which directors, officers or employees of the Company are
not permitted to offer or sell securities in accordance with the Company's
policies.
(e) From the time that the Company receives any notice pursuant
to Section 3(c) from a Holder or Holders in connection with a sale of an
aggregate of $10.0 million of more of Registrable Securities in connection with
the one underwritten offering pursuant to Section 7, and the Company does not
give notice to Holders pursuant to Sections 3(b), 3(c) or 3(d) to suspend sales
of Registrable Securities, until the date 90 days after the sale relating
thereto or such shorter period as may be required by the managing underwriter or
underwriters of such offering, if any, or the selling Holders, the Company will
not offer, issue, sell, agree or commit to issue or sell, file with the
Commission a registration statement relating to any offering of or solicit any
offer to buy any Common Stock or any Rights, other than (A) in connection with
the Registrable Securities, (B) pursuant to a bona fide employee stock option,
bonus or other benefit plan as then in existence, (C) in connection with the
5.5% Convertible Subordinated Debentures due 2006 and (D) any other Rights which
may be issued by the Company, the terms of such issue requires a filing by the
Company of a shelf registration statement covering such Rights.
Section 4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid
promptly upon request being made therefor all customary expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, (a) all Commission and any NASD registration and filing fees and
expenses, (b) all fees and expenses in connection with the qualification of the
Registrable Securities for offering and sale under the State securities and Blue
Sky laws, including reasonable fees and disbursements of one counsel for the
underwriters in connection with such qualifications, (c) all expenses relating
to the preparation, printing, distribution and reproduction of each registration
statement required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or
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supplement to the foregoing, the certificates representing the Common Stock or
other equity securities to be sold and all other documents relating hereto, (d)
messenger and delivery expenses, (e) fees and expenses of any escrow agent or
custodian, (f) internal expenses of the Company (including, without limitation,
all salaries and expenses of the Company's officers and employees performing
legal or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (h) fees, disbursements and expenses (including
fees and expenses of one counsel) of any "qualified independent underwriter"
engaged pursuant to Section 3(a)(xiv) hereof but excluding underwriting
commissions and discounts, (i) reasonable fees, disbursements and expenses of
one counsel for all of the Holders retained in connection with one underwritten
offering pursuant to Section 7 hereof, and fees, expenses and disbursements of
any other persons, including special experts, retained by the Company in
connection with such registration, and (j) all fees and expenses (including,
without limitation, listing fees) in connection with the listing or quotation of
trading of the Registrable Securities as required by Section 3(a)(xvi) hereof
(collectively, the "Registration Expenses"). Under no circumstances will the
Company be obligated to bear and pay underwriting discounts, commissions and
brokerage fees. To the extent that any Registration Expenses are incurred,
assumed or paid by the Holder or any underwriter thereof in connection with the
one underwritten offering pursuant to Section 7 hereof, the Company shall
reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor.
Section 5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each
Holder from time to time of Registrable Securities that:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to carry out and perform
its obligations under this Agreement.
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<PAGE> 22
(b) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company enforceable in accordance with its terms except as such enforceability
may be subject to any applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, equitable subordination or other laws relating to or
affecting creditor's rights and general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing; and the registration of the Registrable Securities will not result in a
breach or violation of any terms or provisions of, or constitute a default
under, any contract, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is currently a party or by which
the Company is currently bound, the Certificate of Incorporation or Bylaws of
the Company, or any law, order, rule, regulation or decree of any government,
governmental agency or court, domestic or foreign, currently applicable to the
Company, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company, except for such
breaches, violations or defaults as, individually and in the aggregate, do not
have a material adverse effect on the Company.
(c) Each registration statement covering Registrable Securities
and each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(a)(vii) hereof and any further
amendments or supplements to any such registration statement or prospectus, when
it becomes effective or is filed with the Commission, as the case may be, and,
in the case of an underwritten offering of Registrable Securities, at the time
of the closing under the underwriting agreement relating thereto will conform in
all material respects to the requirements of the Securities Act and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and at all times subsequent to the effective date of registration
statement when a prospectus would be required to be delivered under the
Securities Act, other than from (i) such time as a notice has been given to
Holders of Registrable Securities pursuant to Section 3(a)(iv)(F) hereof until
(ii) such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(b) hereof, each such registration statement, and each
prospectus (including any
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summary prospectus) contained therein or furnished pursuant to Section 3(a)(vii)
hereof, as then amended or supplemented, will conform in all material respects
to the requirements of the Securities Act and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by a Holder of Registrable Securities or any of the parties referred to
in Section 3(a)(ii) expressly for use therein.
(d) Any documents incorporated by reference in any prospectus
referred to in Section 5(c) hereof, when they become or became effective or are
or were filed with the Commission, as the case may be, as then amended or
supplemented, will conform or conformed in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and none
of such documents will contain or contained an untrue statement of a material
fact or will omit or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with information furnished
in writing to the Company by a Holder of Registrable Securities or any of the
parties referred to in Section 3(a)(ii) expressly for use therein.
(e) The compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any
significant Subsidiary is or hereafter becomes a party or by which the Company
or any significant Subsidiary is or hereafter becomes bound or to which any of
the property or assets of the Company or any significant Subsidiary is or
hereafter becomes subject, except for such conflicts, breaches and defaults as,
individually and in the aggregate, do not have a material adverse effect on the
financial condition, results of
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<PAGE> 24
operations, business or prospects of the Company and its significant
Subsidiaries, taken as a whole, and do not materially hinder or delay the rights
of the Holders hereunder, nor will such action result in any violation of the
provisions of the Restated Certificate of Incorporation, as amended, or the
By-Laws of the Company or any statute or any order specifically applicable to
the Company, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any significant Subsidiary or any of
their properties; and no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions contemplated by
this Agreement, except the registration under the Securities Act of the
Registrable Securities and such consents, approvals, authorizations,
registrations or qualifications as may be required under State securities or
Blue Sky laws in connection with the offering and distribution of the
Registrable Securities.
Section 6. Indemnification.
(a) Indemnification by the Company. Upon the registration of any
Registrable Securities pursuant to Section 2 hereof, and in consideration of the
agreements of the Holders contained herein and of the Purchaser, in the Stock
Purchase Agreement, and as an inducement to the Purchaser, to enter into such
Agreement, the Company shall, and it hereby agrees to, indemnify and hold
harmless each Holder, and each person who participates as an underwriter in any
offering or sale of such Registrable Securities, against any losses, claims,
damages or liabilities, joint or several, to which any such Holder or
underwriter may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, or any
preliminary, final or summary prospectus contained therein or furnished by the
Company to any such Holder or underwriter, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company shall, and it hereby
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agrees to, reimburse any such Holder and underwriter for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such action or claim; provided, however, that the Company shall
not be liable to any such Holder or underwriter in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Holder or underwriter
expressly for use therein or (ii) any untrue statement or alleged untrue
statement of material fact contained in, or any omission or alleged omission of
a material fact from, a prospectus if (x) a later prospectus corrects the untrue
statement or alleged untrue statement, or omission or alleged omission, which is
the basis for the claim, action, demand, loss, damage, liability, cost or
expense for which indemnification is sought, (y) a copy of the later prospectus
has been made available to the Holders in a timely fashion in accordance with
the Securities Act and had not been sent or given to such purchaser at or prior
to confirmation of sale to such purchaser and the Holder seeking indemnification
was under an obligation to deliver such later prospectus to the purchaser and
(z) there would have been no such liability but for such failure to deliver such
later prospectus by such Holder.
(b) Indemnification by the Holder and any Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2 hereof and to entering
into any underwriting agreement with respect thereto in connection with the one
underwritten offering pursuant to Section 7 hereof, that the Company shall have
received an undertaking from the Holder thereof and from each underwriter named
in any such underwriting agreement, severally and not jointly, to (i) indemnify
and hold harmless the Company against any losses, claims, damages or liabilities
to which the Company may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in such registration statement, or any
preliminary, final or summary prospectus contained therein or furnished to the
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Company by the Holders or underwriter, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Holder or underwriter expressly for
use therein, and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim; provided, however, that no Holder shall be required to
undertake liability under this Section 6(b) for any amounts in excess of the
dollar amount of the proceeds to be received by such Holder from the sale of its
Registrable Securities pursuant to such registration, as reduced by any damages
or other amounts that such Holder was otherwise required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party under subsection (a) or (b) above of written notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of or contemplated by this Section 6, notify such
indemnifying party in writing of the commencement of such action; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party other than under the
indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who may be counsel to the indemnifying party unless representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them) provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that
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there may be legal defenses available to it and/or other indemnified parties
that are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel (in which case the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties). After
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, such indemnifying party shall not be liable to
such indemnified party for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of investigation
unless (i) the indemnified party shall have employed separate counsel in
connection with the assertion of legal defenses in accordance with the proviso
to the next preceding sentence, (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time, or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. No indemnifying party shall be liable for
settlement of any proceeding effected without its written consent, which consent
shall not be unreasonably withheld.
(d) Contribution. Each party hereto agrees that, if for any
reason the indemnification provisions contemplated by Section 6(a) or Section
6(b) hereof are unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or by such indemnified party, and
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the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section 6(d)
were determined by pro rata allocation (even if the Holders or underwriters or
all of them were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in this Section 6(d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, or liabilities (or actions in
respect thereof) referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no Holder shall be required to contribute any
amount in excess of the amount of the proceeds received by such Holder from the
sale of any Registrable Securities, and no underwriter shall be required to
contribute any amount in excess of the amount of compensation received. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders' and any
underwriter's obligations in this Section 6(d) to contribute shall be several in
proportion to the number or amount of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of any Holder or underwriter and each person, if any, who controls any
Holder or underwriter within the meaning of the Securities Act; and the
obligations of the Holders and any underwriters contemplated by this Section 6
shall be in addition to any liability which the Holders or underwriter may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in any registration statement as about to become a director of the
Company) and to each person, if any, who controls the Company within the meaning
of the Securities Act.
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Section 7. Underwritten Offerings.
(a) In addition to selling Registrable Securities from time to
time in open market transactions under the Shelf Registration Statements,
Holders of Registrable Securities shall be permitted to sell such Registrable
Securities in one underwritten offering, provided that the aggregate market
value of all Registrable Securities to be sold in such underwritten offering
exceeds $10 million, and provided further that, if an underwritten offering is
elected pursuant to the Other Registration Rights Agreement, then such right to
elect an underwritten offering pursuant to this Agreement shall terminate.
(b) Upon a receipt of a notice under Section 3(c) which includes
a request to sell Registrable Securities pursuant to an underwritten offering,
the Company shall provide all Holders of Registrable Securities then covered by
the appropriate Shelf Registration Statement a written notice of and opportunity
to participate in the offering. The managing underwriter or underwriters thereof
shall be designated by the Holders of a majority of the Registrable Securities
so to be offered, provided that such designated managing underwriter or
underwriters is or are reasonably acceptable to the Company.
(c) Each Holder hereby agrees that it may not participate in any
underwritten offering hereunder unless it (i) agrees to sell its Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
Section 8. Rule 144.
The Company covenants to and with each Holder of Registrable
Securities that to the extent it shall be required to do so under the Exchange
Act, the Company shall timely file the reports required to be filed by it under
the Exchange Act or the Securities Act (including, but not limited to, the
reports under Section 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities
Act) and the rules and regulations adopted by the Commission thereunder,
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and shall take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable the Holders to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 9. Miscellaneous.
(a) Purchaser Lock-Up. If, at any time, the Company undertakes to
register any of its Common Stock or Rights or any other equity securities under
the Securities Act on a registration statement on Form S-1, Form S-2 or Form S-3
(or an equivalent general registration form then in effect), from the time that
the Company files such registration statement or, in the case of a Form S-3, a
prospectus or prospectus supplement thereunder relating to an offering pursuant
thereto with the Commission until the earlier of (i) the date 90 days after the
effectiveness of the registration statement or, in the case of a Form S-3, the
filing of a prospectus or prospectus supplement thereunder relating to an
offering pursuant thereto or such shorter period as may be required by the
managing underwriter or underwriters of such offering and (ii) the date an
election is made to withdraw such registration statement with the Commission, no
Holder will offer, sell, agree or commit or sell, grant any option for the
purchase of or solicit any offer to buy any Common Stock or any Rights. If
requested by the Company or the managing underwriter or underwriters, if any,
the Holders will execute and deliver all such documents as are necessary and
appropriate to reflect the foregoing.
(b) No Inconsistent Agreements. The Company covenants and agrees
that it shall not grant registration rights with respect to any class of Common
Stock or any other securities which would adversely affect the rights of the
Holders as set forth in this Agreement; provided, the Holders acknowledge that
the Company has heretofore granted registration rights in connection with its
5.5% Subordinated Convertible Debentures due 2006.
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(c) Specific Performance. The Company acknowledges that it would
be impossible to determine the amount of damages that would result from any
breach by it of any of the provisions of this Agreement and that the remedy at
law for any breach, or threatened breach, of any of such provisions would likely
be inadequate and, accordingly, agrees that each Holder shall, in addition to
any other rights or remedies which it may have, be entitled to seek such
equitable and injunctive relief as may be available from any court of competent
jurisdiction to compel specific performance of, or restrain the Company from
violating any of, such provisions. In connection with any action or proceeding
for injunctive relief, the Company hereby waives the claim or defense that a
remedy at law alone is adequate and agrees, to the maximum extent permitted by
law, to have each provision of this Agreement specifically enforced against it,
without the necessity of posting bond or other security against it, and consents
to the entry of injunctive relief against it enjoining or restraining any breach
or threatened breach of this Agreement.
(d) Illegality. If any term or provision of this Agreement or any
application thereof shall be declared or held invalid, illegal or unenforceable,
in whole or in part, whether generally or in any particular jurisdiction, such
provision shall be deemed amended to the extent, but only to the extent,
necessary to cure such invalidity, illegality or unenforceability, and the
validity, legality and enforceability of the remaining provisions, both
generally and in every other jurisdiction, shall not in any way be affected or
impaired thereby.
(e) Recovery of Litigation Costs. Except as otherwise expressly
provided herein to the contrary, in the event any dispute between the parties to
this Agreement shall result in litigation, arbitration or other proceeding, the
prevailing party shall be entitled to recover from the losing party all
reasonable costs and expenses, including without limitation reasonable
attorneys' fees and disbursements, incurred by the prevailing party in
connection with such litigation or other proceeding and any appeal thereof. Such
costs, expenses, fees and disbursements shall be included in and made a part of
the judgment recovered by the prevailing party, if any.
(f) Notices. All notices, requests, claims, demands, waivers and
other communications hereunder shall be
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in writing and shall be deemed to have been duly given when delivered by hand,
when delivered personally or by courier, three days after being deposited in the
mail (registered or certified mail, postage prepaid, return receipt requested),
or when received by facsimile transmission if promptly confirmed by one of the
foregoing means, as follows: If to the Company, to it at 350 South Grand Avenue,
52nd Floor, Los Angeles, California 90071, Attention: Barbara S. Polsky,
facsimile transmission no. (213) 640-5000, and if to a Holder, to the address or
facsimile transmission number of such Holder set forth in the security register
or other records of the Company, or to such other address or facsimile
transmission number as any party may have furnished to the others in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
(g) Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and assigns,
but, except as set forth in this Section 9(g), no such term or provision is for
the benefit of, or intended to create any obligations to, any other persons. In
the event that any transferee of a Purchaser or other Holder shall acquire
Registrable Securities, in any manner, whether by gift, bequest, purchase,
operation of law or otherwise, such transferee shall, by the execution and
delivery of an agreement to be bound to the terms of this Agreement, be deemed a
party hereto for all purposes and such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by delivering such agreement,
such transferee shall be entitled to receive all the benefits of and be bound by
all of the terms and provisions of this Agreement. Until the execution and
delivery of such agreement, the transferee shall have no rights under this
Agreement. In addition, in connection with a bona fide pledge of any Registrable
Securities to secure indebtedness or other obligations, a Purchaser or other
Holder may assign its rights, interests and obligations hereunder to the
beneficiary of such pledge; provided that neither the beneficiary of such
pledge, nor any other person who through the exercise of remedies under such
pledge becomes a Holder of Registrable Securities, shall be entitled to exercise
any rights under this Agreement unless and until the person who wishes to
exercise such rights agrees in writing to be bound by the terms of this
Agreement. The Company shall not have
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either the right or the power to assign or delegate any right or obligation
hereunder (except by merger or other operation of law) without the written
consent of Holders who own a majority of the aggregate of the then outstanding
Registrable Securities and Warrants.
(h) Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this Agreement
or made pursuant hereto shall remain in full force and effect regardless of any
investigation (or statement as to the results thereof) made by or on behalf of
any Holder, any director, officer, partner or employee of any Holder, any
underwriter or any director, officer, partner or employee thereof, or any
controlling person of any of the foregoing, and shall survive delivery of and
payment for the Warrants pursuant to the Warrant Agreement and the transfer and
registration of Registrable Securities by any Holder.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO CONFLICT OF LAW PROVISIONS THEREOF.
(j) Jurisdiction and Venue. Each of the parties hereto hereby
irrevocably submits in any legal action or proceeding relating to or arising out
of this Agreement or any other document relating hereto or delivered in
connection with the transactions contemplated hereby, or for recognition and
enforcement of any judgment in respect thereof, to the exclusive jurisdiction of
the United States District Court for the District of Delaware (or if such court
does not have jurisdiction, the courts of the State of Delaware, Newcastle
County), and appellate courts thereof. Each of the parties hereto further (a)
consents that any such action or proceeding may be brought in such court and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the same; (b) agrees
that service of process in any such action or proceeding may be effected by
personal delivery thereof to such party's registered office in the jurisdiction
in which it is incorporated, with a copy to such party at its address as
provided in Section 9(f); and (c) agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by law.
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<PAGE> 34
(k) Headings. The descriptive headings of the several Sections
and paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
(l) Entire Agreement; Amendments. This Agreement and the other
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter. This
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
Holders of at least a majority of the Warrants and of the Registrable Securities
at the time outstanding. Each Holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any amendment or waiver effected
pursuant to this Section 9(l), whether or not any notice, writing or marking
indicating such amendment or waiver appears on such Registrable Securities or is
delivered to such Holder.
(m) Inspection. For so long as this Agreement shall be in effect,
this Agreement and a complete list of the names and addresses of all the Holders
of Registrable Securities and Warrants shall be made available for inspection
and copying on any business day by any Holder of Registrable Securities at the
offices of the Company at the address thereof set forth in Section 9(f) above.
(n) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first written above.
AAMES FINANCIAL CORPORATION
By: /s/ Cary H. Thompson
---------------------------------------
Name: Cary H. Thompson
Title: Chief Executive Officer
THIRTY-FIVE EAST INVESTMENTS LLC
By: /s/ Howard Gittis
---------------------------------------
Name: Howard Gittis
Title: Vice Chairman
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<PAGE> 1
EXHIBIT 10.4
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of March 19, 1998
By and Between
AAMES FINANCIAL CORPORATION
and
TURTLE CREEK REVOCABLE TRUST
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Section 1. Certain Definitions...............................................2
Section 2. Registration Under the Securities Act.............................5
Section 3. Registration Procedures...........................................8
Section 4. Registration Expenses............................................19
Section 5. Representations and Warranties...................................20
Section 6. Indemnification..................................................23
Section 7. Underwritten Offerings...........................................28
Section 8. Rule 144.........................................................28
Section 9. Miscellaneous....................................................29
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<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March
19, 1998, by and among Aames Financial Corporation, a Delaware corporation (the
"Company"), and Turtle Creek Revocable Trust, a trust formed under the laws of
the state of Texas (the "Purchaser").
RECITALS
WHEREAS, the Company and the Purchaser have entered into a Stock
Purchase Agreement, dated the date hereof (the "Stock Purchase Agreement"),
providing for, among other things, the sale by the Company and the purchase by
the Purchaser of an aggregate of 556,466 shares (the "Shares") of Common Stock
of the Company, par value $.001 per share (the "Common Stock") and warrants
(each a "Warrant" and collectively, the "Warrants") to purchase 556,466 shares
of Common Stock at an initial exercise price of $17.2031 per share (the "Warrant
Shares");
WHEREAS, the Company and Thirty-Five East Investments LLC (the
"Other Purchaser") have entered into a Stock Purchase Agreement, dated the date
hereof (the "Other Stock Purchase Agreement"), providing for, among other
things, the sale by the Company and the purchase by the Other Purchaser of an
aggregate of 2,225,865 shares (the "Other Shares") of Common Stock and warrants
(the "Other Warrants") to purchase 2,225,865 shares of Common Stock at an
initial exercise price of $17.2031 per share (the "Other Warrant Shares");
WHEREAS, the Company and the Purchaser have entered into a Warrant
Agreement, dated as of the date hereof (the "Warrant Agreement"), providing for,
among other things, the terms and conditions of the Warrants; and
NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto agree as follows:
<PAGE> 4
Section 1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following respective meanings:
"Affiliate" means a person that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common control
with, the person specified.
"Closing Date" shall be the same date as the closing of the Stock
Purchase Agreement and the Other Stock Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
"Common Stock" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Holder" shall mean the Purchaser, the Other Purchaser and each of
their successive successors and assigns who acquire Registrable Securities,
directly or indirectly, from either such persons or from any successive
successor or assign of either such persons.
"Other Purchaser" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Other Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated the date hereof, between the Company and the Other
Purchaser, with terms and provisions substantially similar to this Agreement.
"Other Shares" shall have the meaning assigned to such term in the
preamble to this Agreement.
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<PAGE> 5
"Other Stock Purchase Agreement" shall have the meaning assigned to
such term in the preamble to this Agreement.
"Other Warrants" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Other Warrant Shares" shall have the meaning assigned to such term
in the preamble to this Agreement.
"Registrable Securities" shall mean the Shares, Other Shares,
Warrant Shares and Other Warrant Shares, and any securities of the Company
issued successively in exchange for or in respect of any of the foregoing,
whether as a result of any successive stock split or reclassification of, or
stock dividend on, any of the foregoing or otherwise; provided, however, that
such shares of Common Stock or securities shall cease to be Registrable
Securities when (i) a registration statement registering such shares of Common
Stock or securities, as the case may be, under the Securities Act has been
declared effective and such shares of Common Stock or securities, as the case
may be, have been sold or otherwise transferred by the Holder thereof pursuant
to such effective registration statement, (ii) such shares of Common Stock or
securities, as the case may be, are sold pursuant to Rule 144 (or any successor
provision) promulgated under the Securities Act under circumstances in which any
legend borne by such shares of Common Stock or securities relating to
restrictions on transferability thereof, under the Securities Act or otherwise,
is removed by the Company or (iii) such shares of Common Stock or securities
shall have been transferred, new securities evidencing such shares of Common
Stock or securities without legends restricting further transfer shall have been
delivered by the Company and subsequent public distribution of such shares of
Common Stock or securities shall not require registration under the Securities
Act.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 of this Agreement.
"Rights" shall mean any options, warrants, securities, rights or
other instruments convertible into or exchangeable or exercisable for, or
otherwise giving the holder thereof the right to acquire, directly or
indirectly, any Common Stock or any other such options, warrants,
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<PAGE> 6
securities, rights or instruments, including without limitation, the Warrants,
Other Warrants and any instrument the value of which is measured by reference to
the value of the Common Stock.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time. "Shares"
shall have the meaning assigned to such term in the preamble to this Agreement.
"Share Shelf Registration Statement" shall mean any registration
statement of the Company that covers the resale of any of the Shares and the
Other Shares pursuant to the provisions of this Agreement and the Other
Registration Rights Agreement, including any prospectus, amendments and
supplements to such registration statement or prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference, if any, in such
registration statement.
"Shelf Registration Statements" shall mean the Share Shelf
Registration Statement and the Warrant Shelf Registration Statement.
"Subsidiary" shall mean any corporation of which shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Company either directly or through its Subsidiaries, any partnership in which
the Company or any Subsidiary is a general partner and any joint venture in
which the Company or any Subsidiary is a joint venturer.
"Warrants" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Warrant Shelf Registration Statement" shall mean any registration
statement of the Company that covers the resale of any of the Warrant Shares and
the Other Warrant Shares, including any prospectus, amendments and supplements
to such registration statement or prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be
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<PAGE> 7
incorporated by reference, if any, in such registration statement.
"Warrant Shares" shall have the meaning assigned to such term in the
preamble to this Agreement.
Section 2. Registration Under the Securities Act.
(a) The Company agrees to file with the Commission as soon as
practicable after the Closing Date, but in no event later than the 120th day
after the Closing Date, the Share Shelf Registration Statement. The Share Shelf
Registration Statement shall be on Form S-3 under the Securities Act or another
appropriate form permitting registration of the Shares and the Other Shares for
resale by the Holders from time to time in open market transactions (with or
without the use of one or more brokers) or through an underwritten offering. The
Company shall not permit any securities other than the Shares and the Other
Shares to be included in the Share Shelf Registration Statement. The Company
shall use its reasonable best efforts to cause the Share Shelf Registration
Statement to be declared effective pursuant to the Securities Act as promptly as
practicable following the filing thereof, but in no event later than 60 days
following such filing date, and to keep the Share Shelf Registration Statement
continuously effective under the Securities Act thereafter for a period ending
the earlier of (i) three years from the Closing Date (subject to extension
pursuant to Section 2(e) below), or (ii) when there ceases to be any outstanding
Shares or Other Shares which are Registrable Securities (the "Purchase Shelf
Effectiveness Period").
(b) After the occurrence of a Purchase Event (as defined in the
Warrant Agreement or the Other Warrant Agreement, as the case may be), the
Company agrees to file with the Commission at the request of any registered
holder of Warrants, Warrant Shares, Other Warrants or other Warrant Shares, but
in no event later than the 90th day after any such registered holder makes such
request, the Warrant Shelf Registration Statement. The right of the Purchaser to
request registration of the Warrant Shares shall expire on the Expiration Date
of the Warrants (as defined in the Warrant Agreement). The Warrant Shelf
Registration Statement shall be on Form S-3 under the Securities Act or another
appropriate form permitting registration of such
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<PAGE> 8
Warrant Shares and Other Warrant Shares for resale by the Holders from time to
time in open market transactions (with or without the use of one or more
brokers) or through an underwritten offering. The Company shall not permit any
securities other than the Warrant Shares and the Other Warrant Shares to be
included in the Warrant Shelf Registration Statement. The Company shall use its
reasonable best efforts to cause the Warrant Shelf Registration Statement to be
declared effective pursuant to the Securities Act as promptly as practicable
following the filing thereof, but in no event later than 60 days following such
filing date, and to keep such Warrant Shelf Registration Statement continuously
effective under the Securities Act thereafter for a period ending on the earlier
of (i) twelve months from the date the Warrant Shelf Registration Statement
becomes effective (subject to extension pursuant to Section 2(e) below), or (ii)
when there ceases to be any outstanding Warrant Shares and Other Warrant Shares
which are Registrable Securities (the "Warrant Shelf Effectiveness Period," and
each of the Purchase Shelf Effectiveness Period and Warrant Shelf Effectiveness
Period, an "Effectiveness Period").
(c) In the event that either (i) the no action relief contemplated
by Section 7.7 of the Stock Purchase Agreement and Other Stock Purchase
Agreement is obtained or (ii) the Company determines in its sole and absolute
discretion that there has been a change in law or change in administrative
interpretation by the Commission that would permit the Company to file a shelf
registration statement (the "Exercise Shelf Registration Statement") under the
Securities Act to register the offer and sale by the Company of the Common Stock
issuable upon exercise of the Warrants and Other Warrants after the occurrence
of a Purchase Event (as defined in the Warrant Agreement and Other Warrant
Agreement, as the case may be) and such filing will not result in the loss of
the exemption from the registration requirements under the Securities Act which
was relied on by the Company for the offer and sale of any of the Shares, Other
Shares, Warrants or Other Warrants, at the request of any registered holder of
Warrants, Warrant Shares, Other Warrants or Other Warrant Shares, the Company
shall file with the Commission the Exercise Shelf Registration Statement. The
Company shall use its reasonable best efforts to cause such Exercise Shelf
Registration Statement to be declared effective as promptly as practicable after
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<PAGE> 9
the filing thereof and to keep such Exercise Shelf Registration Statement
continuously effective under the Securities Act thereafter for a period ending
on the earlier of (i) three years from the Closing Date (subject to extension
pursuant to Section 2(e) below) or (ii) when there ceases to be any outstanding
Warrants and Other Warrants which have not expired or been exercised. As soon as
practicable after (a) the Exercise Shelf Registration Statement is declared
effective under the Securities Act and (b) the Warrant Agreement, Other Warrant
Agreement, Warrants and Other Warrants shall have been amended by the Company
and each of the registered holders of Warrants and Other Warrants in a manner
acceptable to the Company to provide for a suspension of the right of any
registered holder of Warrants or Other Warrants to exercise such Warrants or
Other Warrants in the event the Exercise Shelf Registration Statement shall not
continue to remain effective with the Commission, the Company will amend this
Agreement in a manner consistent with the other terms hereof to provide for the
filing of a shelf registration statement under the Securities Act covering the
resale of the Warrants and Other Warrants.
(d) If, for any reason, any of the Shelf Registration Statements
loses its effectiveness during its applicable Effectiveness Period, the Company
shall file with the Commission as soon as practicable, but in no event later
than 60 days after the date such shelf registration statement loses its
effectiveness, another registration statement covering all of the Registrable
Securities which were covered by the Shelf Registration Statement which so lost
its effectiveness; provided, that if the Company has notice that any Shelf
Registration Statement will lose its effectiveness, the Company shall use its
reasonable best efforts to file another registration statement covering the
Registrable Securities which are covered by such Shelf Registration Statement
for the applicable Effectiveness Period as soon as practicable after the Company
receives such notice.
(e) The Company shall use its reasonable best efforts to keep the
shelf registration statements continuously effective by supplementing and
amending them as required by the rules, regulations or instructions applicable
to the registration form used for such shelf registration statement if required
by the Securities Act or
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<PAGE> 10
reasonably requested by the Holders of a majority in aggregate principal amount
of the Registrable Securities covered by such shelf registration statement;
provided that the applicable Effectiveness Period shall be extended to the
extent necessary to permit dealers to comply with the applicable prospectus
delivery requirements of Rule 174 and as otherwise provided herein.
Section 3. Registration Procedures.
(a) In connection with the Company's obligations with respect to
any registration of Registrable Securities pursuant to Section 2 hereof, the
Company shall use its reasonable best efforts to effect or cause such
registration to permit the sale of the Registrable Securities by the Holders
thereof in open market transactions or in one underwritten offering pursuant to
Section 7 hereof. In connection therewith, the Company shall, as soon as
reasonably possible:
(i) comply with the provisions of the Securities Act
applicable to issuers with respect to the disposition of all of the
Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the Holders thereof
set forth in such registration statement;
(ii) provide (A) each Holder of the Shares and the Other
Shares, in the case of the Share Shelf Registration Statement, and the
Warrant Shares and the Other Warrant Shares, in the case of the Warrant
Shelf Registration Statement, and counsel for such Holders the opportunity
to participate in the preparation of such Shelf Registration Statement and
(B) (1) each such Holder and counsel, (2) the underwriters (which term,
for purposes of this Agreement, shall include a person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act), if
any, in connection with the one underwritten offering pursuant to Section
7 hereof and (3) counsel for such underwriters, if any, the opportunity to
participate in the preparation of each prospectus included in the
applicable Shelf Registration Statement or filed with the Commission, and
each amendment or supplement thereto (and, in the case of the parties
referred to in
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<PAGE> 11
Sections 3(a)(ii)(B)(2) and 3(a)(ii)(B)(3), only with respect to each
prospectus, amendment or supplement relating to the one underwritten
offering pursuant to Section 7 hereof);
(iii) throughout the Effectiveness Period and after receiving
notice under Section 3(c) hereof until such offer and sale is completed,
make available for inspection during normal business hours by the parties
referred to in Section 3(a)(ii) above (and, in the case of the party
referred to in Sections 3(a)(ii)(B)(2) and 3(a)(ii)(B)(3), only with
respect to an offer and sale pursuant to Section 7 hereof) such financial
and other information and books and records of the Company, and cause the
officers, directors, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be
reasonably necessary, in the judgment of the respective counsel referred
to in such Section, to conduct a reasonable investigation within the
meaning of Section 11 of the Securities Act if the recipient thereof has
executed a confidentiality agreement in a form reasonably acceptable to
the Company protecting against the misappropriation or disclosure of the
Company's confidential information;
(iv) promptly notify the Holders of the Shares and the Other
Shares, in the case of the Share Shelf Registration Statement, and the
Holders of the Warrant Shares and the Other Warrant Shares, in the case of
the Warrant Shelf Registration Statement and confirm such advice in
writing, (A) when such registration statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such registration statement
or any post-effective amendment, when the same has become effective, (B)
of any comments by the Commission and by the Blue Sky or securities
commissioner or regulator of any state with respect thereto or any request
by the Commission for amendments or supplements to such registration
statement or prospectus or for additional information, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of such
registration statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time
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<PAGE> 12
during the applicable Effectiveness Period the representations and
warranties of the Company contemplated by Section 3(a)(xiii) or Section 5
hereof cease to be true and correct in all material respects, (E) of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, or (F) in addition to such Holders, the managing underwriter or
underwriters, if any, in connection with the one underwritten offering
pursuant to Section 7 hereof, at any time a prospectus (in the case of
such underwriter or underwriters, only when a prospectus relating to such
underwritten offering) is required to be delivered under the Securities
Act, that such registration statement, prospectus, prospectus amendment or
supplement or post-effective amendment, or any document incorporated by
reference in any of the foregoing, may contain an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(v) use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of either of the Shelf
Registration Statements or any post-effective amendment thereto at the
earliest practicable date;
(vi) if requested by any managing underwriter or underwriters
in connection with the one underwritten offering pursuant to Section 7
hereof, or any Holder, promptly incorporate in a prospectus supplement or
post-effective amendment such information as is required by the applicable
rules and regulations of the Commission and as such managing underwriter,
underwriters or Holder specifies should be included therein relating to
the terms of the sale of such Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being sold by the Holders or to any underwriters, the name and
description of the Holders and underwriter, the offering price of such
Registrable Securities and any discount, commission or other compensation
payable in respect thereof, the purchase
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<PAGE> 13
price being paid therefor by such underwriters and with respect to any
other terms of the offering of the Registrable Securities to be sold by
the Holders or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(vii) furnish (A) to each Holder of the Shares and the Other
Shares, in the case of the Share Shelf Registration Statement, and the
Warrant Shares and the Other Warrant Shares, in the case of the Warrant
Shelf Registration Statement, an executed copy of such registration
statement, each such amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein), and (B) to any Holder of Registrable Securities such number of
copies of such registration statement (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by any Holder or underwriter, if any, in connection with the one
underwritten offering pursuant to Section 7 hereof) and of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as any such
Holder and underwriter, if any, may reasonably request in order to
facilitate the offering and disposition of the Registrable Securities
owned by any such Holder or underwritten by such underwriter and to permit
each Holder and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to the
use of such prospectus (including such preliminary and summary prospectus)
and any amendment or supplement thereto by each Holder and by any such
underwriter, in each case in the form most recently provided to such party
by the Company, in connection with the offering and sale of the
Registrable Securities covered by the prospectus (including such
preliminary and summary prospectus) or any supplement or amendment
thereto;
(viii) use its reasonable best efforts to (A) register or
qualify the Registrable Securities to be included in the applicable
Shelf Registration
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<PAGE> 14
Statement under such securities laws or Blue Sky laws of such
jurisdictions in the United States as any Holder and underwriter, if any,
in connection with the one underwritten offering pursuant to Section 7
hereof, thereof shall reasonably request, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such jurisdictions
for so long as may be necessary to enable the Holders or underwriters to
complete its distribution of Registrable Securities pursuant to such
offering and (C) take any and all other actions as may be reasonably
necessary or advisable to enable the Holders and underwriters, if any, to
consummate the disposition in such jurisdictions of such Registrable
Securities; provided, however, that the Company shall not be required for
any such purpose to (I) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 3(a)(viii) or (II) consent to general
service of process in any such jurisdiction;
(ix) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required to effect such registration or the
offering or sale in connection therewith or to enable the Holders to
offer, or to consummate the disposition of, the Registrable Securities;
(x) cooperate with the Holders and the managing
underwriters, if any, in connection with the one underwritten offering
pursuant to Section 7 hereof to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, on steel engraved borders if required
or appropriate and which shall not bear any restrictive legends; and, in
the case of an underwritten offering, enable such Registrable Securities
to be in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
the Registrable Securities;
(xi) (reserved);
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<PAGE> 15
(xii) in the event of the one underwritten offering pursuant
to Section 7 hereof, enter into one or more underwriting agreements,
engagement letters, agency agreements, "best efforts" underwriting
agreements or similar agreements, as appropriate, and take such other
actions in connection therewith as the Holders shall reasonably request in
order to expedite or facilitate the disposition of the Registrable
Securities registered;
(xiii) in the event of the one underwritten offering pursuant
to Section 7 hereof, (A) make such representations and warranties to the
Holders and the underwriters, in form, substance and scope as are
customarily made in connection with an offering of common stock or other
equity securities pursuant to any appropriate agreement and/or to a
registration statement filed on the form applicable to such registration;
(B) to use reasonable best efforts to obtain an opinion of counsel to the
Company in customary form and covering such matters, of the type
customarily covered by such an opinion, as the managing underwriters, and
as the Holders may reasonably request, addressed to the Holders and the
underwriters, dated the date of the closing under the underwriting
agreement relating thereto, it being agreed that the matters to be covered
by such opinion shall include, without limitation, subject to such
customary assumptions, qualifications and limitations as such counsel
reasonably deems appropriate, the due incorporation and good standing of
the Company and its significant Subsidiaries (as defined in Regulation S-X
under the Exchange Act); the qualification of the Company and its
significant Subsidiaries to transact business as foreign corporations; the
due authorization, execution and delivery of this Agreement and of any
agreement of the type referred to in Section (3)(a)(xii) hereof; the due
authorization and valid issuance of, full payment for, and
nonassessability of, the Registrable Securities and all other outstanding
Common Stock; the absence of material legal or governmental proceedings
involving the Company; the absence of a breach by the Company or its
significant Subsidiaries of, or a default under,
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<PAGE> 16
material agreements binding the Company or any Subsidiary as a result of
(I) the execution and delivery by the Company of any agreement of the type
referred to in Section 3(a)(xii) hereof, (II) the consummation of the
transactions contemplated by any such agreement or (III) the performance
by the Company of its obligations hereunder with respect to such
Registrable Securities; the absence of governmental approvals required to
be obtained in connection with such registration, the offering and sale of
the Registrable Securities, this Agreement or any agreement of the type
referred to in Section (3)(a)(xii) hereof; the compliance as to form of
such registration statement and any documents incorporated by reference
therein with the requirements of the Securities Act; the effectiveness of
such registration statement under the Securities Act; and, as of the date
of the opinion, the lack of knowledge of such counsel of the inclusion in
such registration statement or the prospectus included therein, as then
amended or supplemented, or from the documents incorporated by reference
therein of an untrue statement of a material fact or the omission to state
therein a material fact necessary to make the statements therein not
misleading (in the case of such documents, in the light of the
circumstances existing at the time that such documents were filed with the
Commission under the Exchange Act); (C) to use its reasonable best efforts
to obtain a "cold comfort" letter or letters from the independent
certified public accountants of the Company addressed to the Holders and
the underwriters, if any, thereof, dated (I) the effective date of any
prospectus supplement, if any, to the prospectus included in such
registration statement or post-effective amendment to such registration
statement which includes unaudited or audited financial statements as of a
date or for a period subsequent to that of the latest such statements
included in such prospectus and (II) dated the date of the closing under
the underwriting agreement relating thereto, such letter or letters to be
in customary form and covering such matters of the type customarily
covered by letters of such type; (D) deliver such documents and
certificates, including officers' certificates, as may be reasonably
requested by the Holders and the managing underwriters, if any, thereof to
evidence the accuracy of the representations and warranties made pursuant
to
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<PAGE> 17
clause (A) above or those contained in Section 5(a) hereof and the
compliance with or satisfaction of any agreements or conditions contained
in the underwriting agreement or other agreement entered into by the
Company; and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in Section
6 hereof;
(xiv) in the event of one underwritten offering pursuant to
Section 7 hereof, that (i) any broker-dealer registered under the Exchange
Act shall underwrite any Registrable Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules and the By-Laws of
the National Association of Securities Dealers, Inc. ("NASD")) thereof,
whether as a Holder of Registrable Securities or as an underwriter, or a
broker or dealer in respect thereof, or otherwise, or (ii) more than 10%
of the net offering proceeds, not including underwriting compensation, of
such distribution is intended to be paid to any such broker-dealer or
"associated or affiliated persons" of such broker-dealer or "members of
the immediate family of such persons" (each within the meaning of such
Rules), the Company shall take reasonable steps to assist such
broker-dealer in complying with the requirements of such Rules and
By-Laws, including, without limitation, by (A) if such Rules or By-Laws,
including Rule 2720 thereto, shall so require, engaging a "qualified
independent underwriter" (as defined in such Schedule) to participate in
the preparation of the registration statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
registration statement is an underwritten offering, to recommend the price
of such Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof, and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Conduct Rules of the
NASD;
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<PAGE> 18
(xv) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders, as soon
as practicable after the date of filing of the last report of the Company
incorporated by reference into the prospectus next preceding the relevant
sale, an earning statement of the Company and its Subsidiaries complying
with Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder); and
(xvi) use its reasonable best efforts to list prior to the
effective date of the Share Shelf Registration Statement, subject to
notice of issuance, the Shares and the Other Shares and prior to the
effective date of the Warrant Shelf Registration Statement, subject to the
notice of issuance, the Warrant Shares and the Other Warrant Shares
covered by such registration statement on any securities exchange on which
the Common Stock is then listed.
(b) In the event that the Company would be required, pursuant to
Section 3(a)(iv)(F) above, to notify the Holders and the managing underwriters,
if any, thereof in connection with the one underwritten offering pursuant to
Section 7 hereof, the Company shall without delay prepare and furnish to the
Holders, and to each underwriter, if any, a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to an
offeree of Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. The Holders agree that upon receipt of
any notice from the Company pursuant to Section 3(a)(iv)(F) hereof, they shall
forthwith discontinue the disposition of Registrable Securities pursuant to the
registration statement applicable to such Registrable Securities until they
shall have received copies of such amended or supplemented prospectus, and if so
directed by the Company, the Holders shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in their
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(c) If any Holder proposes to sell any of its Registrable
Securities pursuant to the applicable Shelf
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<PAGE> 19
Registration Statement, such Holder shall notify the Company of its intent to do
so (including the proposed manner and timing of such sales) at least two (2) but
no more than five (5) full trading days prior to such sale, and the provision of
such notice to the Company shall conclusively be deemed to reestablish and
reconfirm an agreement by such Holder to comply with the registration provisions
in this Agreement. Unless otherwise specified in such notice, such notice shall
be deemed to constitute a representation that any information previously
supplied by such Holder expressly for inclusion in the Share Shelf Registration
Statement or the Warrant Shelf Registration Statement, as appropriate (as the
same may have been superseded by subsequent information), is accurate as of the
date of such notice. At any time within such two (2) to five (5) trading day
period, the Company may refuse to permit any Holder to resell any Registrable
Securities pursuant to the appropriate Shelf Registration Statement, provided,
that in order to exercise this right, the Company or its counsel must deliver a
certificate in writing to the Holder to the effect that a delay in such sale is
necessary because a sale pursuant to the Shelf Registration Statement in its
then-current form without the addition of material, nonpublic information about
the Company could constitute a violation of the federal securities laws. In
addition, in connection with any sale of the Registrable Securities, the Company
may require the Holders to: (i) furnish to the Company such information
regarding the distribution of such Registrable Securities as is required by law
to be disclosed in the registration statement and (ii) provide to the Company a
signed writing accepting and acknowledging its rights and obligations hereunder.
(d) The registration rights of Holders pursuant to this Agreement
and the ability to offer and sell Registrable Securities pursuant to any Shelf
Registration Statement are subject to the conditions and limitations contained
in Sections 3(b) and 3(c), and Holders will be deemed to have agreed with the
Company that if the Board of Directors of the Company determines in its good
faith judgment that the use of any prospectus would require the disclosure of
material information that the Company has a bona fide business purpose for
preserving as confidential, and that the Company is not otherwise required by
applicable securities laws or regulations to disclose, or that the offer and
sale of the Registrable Securities would interfere
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<PAGE> 20
with any financing, acquisition or other material transaction contemplated by
the Company, upon written notice of such determination by the Company, the
rights of the Holders to offer, sell or distribute any Registrable Securities
pursuant to a Shelf Registration Statement or to require the Company to take
action with respect to the registration or sale of any Registrable Securities
pursuant to a Shelf Registration Statement shall be suspended until the date
upon which the Company notifies the Holders in writing (the "Suspension
Termination Notice") that suspension of such rights for the grounds set forth in
this paragraph is no longer necessary, and the Company agrees to give such
notice as promptly as practicable following the date that such suspension of
rights is no longer necessary. Further, if during the applicable Effectiveness
Period, the Holder, or a person who is a nominee, Affiliate, director, officer,
trustee, beneficiary or employee of such Holder, is an officer, director or
employee of the Company, the rights of the Holder to offer, sell or otherwise
effect any distribution of Registrable Securities pursuant to the Shelf
Registration Statement or to require the Company to take action with respect to
the registration or sale of any Registrable Securities pursuant to the
applicable Shelf Registration Statement shall be suspended during any period in
which directors, officers or employees of the Company are not permitted to offer
or sell securities in accordance with the Company's policies.
(e) From the time that the Company receives any notice pursuant to
Section 3(c) from a Holder or Holders in connection with a sale of an aggregate
of $10.0 million of more of Registrable Securities in connection with the one
underwritten offering pursuant to Section 7, and the Company does not give
notice to Holders pursuant to Sections 3(b), 3(c) or 3(d) to suspend sales of
Registrable Securities, until the date 90 days after the sale relating thereto
or such shorter period as may be required by the managing underwriter or
underwriters of such offering, if any, or the selling Holders, the Company will
not offer, issue, sell, agree or commit to issue or sell, file with the
Commission a registration statement relating to any offering of or solicit any
offer to buy any Common Stock or any Rights, other than (A) in connection with
the Registrable Securities, (B) pursuant to a bona fide employee stock option,
bonus or other benefit plan as then in existence, (C) in connection with the
5.5% Convertible Subordinated
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<PAGE> 21
Debentures due 2006 and (D) any other Rights which may be issued by the Company,
the terms of such issue requires a filing by the Company of a shelf registration
statement covering such Rights.
Section 4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly
upon request being made therefor all customary expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, (a) all Commission and any NASD registration and filing fees and
expenses, (b) all fees and expenses in connection with the qualification of the
Registrable Securities for offering and sale under the State securities and Blue
Sky laws, including reasonable fees and disbursements of one counsel for the
underwriters in connection with such qualifications, (c) all expenses relating
to the preparation, printing, distribution and reproduction of each registration
statement required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or supplement to the
foregoing, the certificates representing the Common Stock or other equity
securities to be sold and all other documents relating hereto, (d) messenger and
delivery expenses, (e) fees and expenses of any escrow agent or custodian, (f)
internal expenses of the Company (including, without limitation, all salaries
and expenses of the Company's officers and employees performing legal or
accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (h) fees, disbursements and expenses (including
fees and expenses of one counsel) of any "qualified independent underwriter"
engaged pursuant to Section 3(a)(xiv) hereof but excluding underwriting
commissions and discounts, (i) reasonable fees, disbursements and expenses of
one counsel for all of the Holders retained in connection with one underwritten
offering pursuant to Section 7 hereof, and fees, expenses and disbursements of
any other persons, including special experts, retained by the Company in
connection with such registration, and (j) all fees and expenses (including,
without limitation, listing fees) in connection with the listing or quotation of
trading of the Registrable
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<PAGE> 22
Securities as required by Section 3(a)(xvi) hereof (collectively, the
"Registration Expenses"). Under no circumstances will the Company be obligated
to bear and pay underwriting discounts, commissions and brokerage fees. To the
extent that any Registration Expenses are incurred, assumed or paid by the
Holder or any underwriter thereof in connection with the one underwritten
offering pursuant to Section 7 hereof, the Company shall reimburse such person
for the full amount of the Registration Expenses so incurred, assumed or paid
promptly after receipt of a request therefor.
Section 5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Holder
from time to time of Registrable Securities that:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to carry out and perform
its obligations under this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company enforceable in accordance with its terms except as such enforceability
may be subject to any applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, equitable subordination or other laws relating to or
affecting creditor's rights and general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing; and the registration of the Registrable Securities will not result in a
breach or violation of any terms or provisions of, or constitute a default
under, any contract, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is currently a party or by which
the Company is currently bound, the Certificate of Incorporation or Bylaws of
the Company, or any law, order, rule, regulation or decree of any government,
governmental agency or court, domestic or foreign, currently applicable to the
Company, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company, except for such
breaches, violations or defaults as,
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<PAGE> 23
individually and in the aggregate, do not have a material adverse effect on the
Company.
(c) Each registration statement covering Registrable Securities
and each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(a)(vii) hereof and any further
amendments or supplements to any such registration statement or prospectus, when
it becomes effective or is filed with the Commission, as the case may be, and,
in the case of an underwritten offering of Registrable Securities, at the time
of the closing under the underwriting agreement relating thereto will conform in
all material respects to the requirements of the Securities Act and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and at all times subsequent to the effective date of registration
statement when a prospectus would be required to be delivered under the
Securities Act, other than from (i) such time as a notice has been given to
Holders of Registrable Securities pursuant to Section 3(a)(iv)(F) hereof until
(ii) such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(b) hereof, each such registration statement, and each
prospectus (including any summary prospectus) contained therein or furnished
pursuant to Section 3(a)(vii) hereof, as then amended or supplemented, will
conform in all material respects to the requirements of the Securities Act and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by a Holder of Registrable Securities or any
of the parties referred to in Section 3(a)(ii) expressly for use therein.
(d) Any documents incorporated by reference in any prospectus
referred to in Section 5(c) hereof, when they become or became effective or are
or were filed with the Commission, as the case may be, as then amended or
supplemented, will conform or conformed in all material respects to the
requirements of the Securities Act or the
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<PAGE> 24
Exchange Act, as applicable, and none of such documents will contain or
contained an untrue statement of a material fact or will omit or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company by a
Holder of Registrable Securities or any of the parties referred to in Section
3(a)(ii) expressly for use therein.
(e) The compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any
significant Subsidiary is or hereafter becomes a party or by which the Company
or any significant Subsidiary is or hereafter becomes bound or to which any of
the property or assets of the Company or any significant Subsidiary is or
hereafter becomes subject, except for such conflicts, breaches and defaults as,
individually and in the aggregate, do not have a material adverse effect on the
financial condition, results of operations, business or prospects of the Company
and its significant Subsidiaries, taken as a whole, and do not materially hinder
or delay the rights of the Holders hereunder, nor will such action result in any
violation of the provisions of the Restated Certificate of Incorporation, as
amended, or the By-Laws of the Company or any statute or any order specifically
applicable to the Company, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any significant
Subsidiary or any of their properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under the
Securities Act of the Registrable Securities and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
securities or Blue Sky laws in connection with the offering and distribution of
the Registrable Securities.
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<PAGE> 25
Section 6. Indemnification.
(a) Indemnification by the Company. Upon the registration of any
Registrable Securities pursuant to Section 2 hereof, and in consideration of the
agreements of the Holders contained herein and of the Purchaser, in the Stock
Purchase Agreement, and as an inducement to the Purchaser, to enter into such
Agreement, the Company shall, and it hereby agrees to, indemnify and hold
harmless each Holder, and each person who participates as an underwriter in any
offering or sale of such Registrable Securities, against any losses, claims,
damages or liabilities, joint or several, to which any such Holder or
underwriter may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, or any
preliminary, final or summary prospectus contained therein or furnished by the
Company to any such Holder or underwriter, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company shall, and it hereby
agrees to, reimburse any such Holder and underwriter for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such action or claim; provided, however, that the Company shall
not be liable to any such Holder or underwriter in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Holder or underwriter
expressly for use therein or (ii) any untrue statement or alleged untrue
statement of material fact contained in, or any omission or alleged omission of
a material fact from, a prospectus if (x) a later prospectus corrects the untrue
statement or alleged untrue statement, or omission or alleged omission, which is
the basis for the claim, action, demand, loss, damage, liability, cost or
expense for which
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<PAGE> 26
indemnification is sought, (y) a copy of the later prospectus has been made
available to the Holders in a timely fashion in accordance with the Securities
Act and had not been sent or given to such purchaser at or prior to confirmation
of sale to such purchaser and the Holder seeking indemnification was under an
obligation to deliver such later prospectus to the purchaser and (z) there would
have been no such liability but for such failure to deliver such later
prospectus by such Holder.
(b) Indemnification by the Holder and any Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2 hereof and to entering
into any underwriting agreement with respect thereto in connection with the one
underwritten offering pursuant to Section 7 hereof, that the Company shall have
received an undertaking from the Holder thereof and from each underwriter named
in any such underwriting agreement, severally and not jointly, to (i) indemnify
and hold harmless the Company against any losses, claims, damages or liabilities
to which the Company may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in such registration statement, or any
preliminary, final or summary prospectus contained therein or furnished to the
Company by the Holders or underwriter, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Holder or underwriter expressly for
use therein, and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim; provided, however, that no Holder shall be required to
undertake liability under this Section 6(b) for any amounts in excess of the
dollar amount of the proceeds to be received by such Holder from the sale of its
Registrable Securities pursuant to such registration, as reduced by any damages
or other amounts
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<PAGE> 27
that such Holder was otherwise required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party under subsection (a) or (b) above of written notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of or contemplated by this Section 6, notify such
indemnifying party in writing of the commencement of such action; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party other than under the
indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who may be counsel to the indemnifying party unless representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them) provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties). After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, such indemnifying party
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shall not be liable to such indemnified party for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation unless (i) the indemnified party shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence, (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time, or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. No
indemnifying party shall be liable for settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld.
(d) Contribution. Each party hereto agrees that, if for any reason
the indemnification provisions contemplated by Section 6(a) or Section 6(b)
hereof are unavailable to or insufficient to hold harmless an indemnified party
in respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and the indemnified party in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such indemnifying party or by
such indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation (even if
the Holders or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no
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Holder shall be required to contribute any amount in excess of the amount of the
proceeds received by such Holder from the sale of any Registrable Securities,
and no underwriter shall be required to contribute any amount in excess of the
amount of compensation received. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' and any underwriter's obligations in
this Section 6(d) to contribute shall be several in proportion to the number or
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Company under this Section 6 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of any Holder or underwriter and each person, if any, who controls any
Holder or underwriter within the meaning of the Securities Act; and the
obligations of the Holders and any underwriters contemplated by this Section 6
shall be in addition to any liability which the Holders or underwriter may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in any registration statement as about to become a director of the
Company) and to each person, if any, who controls the Company within the meaning
of the Securities Act.
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Section 7. Underwritten Offerings.
(a) In addition to selling Registrable Securities from time to
time in open market transactions under the Shelf Registration Statements,
Holders of Registrable Securities shall be permitted to sell such Registrable
Securities in one underwritten offering, provided that the aggregate market
value of all Registrable Securities to be sold in such underwritten offering
exceeds $10 million, and provided further that, if an underwritten offering is
elected pursuant to the Other Registration Rights Agreement, then such right to
elect an underwritten offering pursuant to this Agreement shall terminate.
(b) Upon a receipt of a notice under Section 3(c) which includes a
request to sell Registrable Securities pursuant to an underwritten offering, the
Company shall provide all Holders of Registrable Securities then covered by the
appropriate Shelf Registration Statement a written notice of and opportunity to
participate in the offering. The managing underwriter or underwriters thereof
shall be designated by the Holders of a majority of the Registrable Securities
so to be offered, provided that such designated managing underwriter or
underwriters is or are reasonably acceptable to the Company.
(c) Each Holder hereby agrees that it may not participate in any
underwritten offering hereunder unless it (i) agrees to sell its Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
Section 8. Rule 144.
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The Company covenants to and with each Holder of Registrable
Securities that to the extent it shall be required to do so under the Exchange
Act, the Company shall timely file the reports required to be filed by it under
the Exchange Act or the Securities Act (including, but not limited to, the
reports under Section 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities
Act) and the rules and regulations adopted by the Commission thereunder, and
shall take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable the Holders to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 9. Miscellaneous.
(a) Purchaser Lock-Up. If, at any time, the Company undertakes to
register any of its Common Stock or Rights or any other equity securities under
the Securities Act on a registration statement on Form S-1, Form S-2 or Form S-3
(or an equivalent general registration form then in effect), from the time that
the Company files such registration statement or, in the case of a Form S-3, a
prospectus or prospectus supplement thereunder relating to an offering pursuant
thereto with the Commission until the earlier of (i) the date 90 days after the
effectiveness of the registration statement or, in the case of a Form S-3, the
filing of a prospectus or prospectus supplement thereunder relating to an
offering pursuant thereto or such shorter period as may be required by the
managing underwriter or underwriters of such offering and (ii) the date an
election is made to withdraw such registration statement with the Commission, no
Holder will offer, sell, agree or commit or sell, grant any option for the
purchase of or solicit any offer to buy any Common Stock or any Rights. If
requested by the Company or the managing underwriter or underwriters, if any,
the Holders will execute and deliver all such documents as are necessary and
appropriate to reflect the foregoing.
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(b) No Inconsistent Agreements. The Company covenants and agrees
that it shall not grant registration rights with respect to any class of Common
Stock or any other securities which would adversely affect the rights of the
Holders as set forth in this Agreement; provided, the Holders acknowledge that
the Company has heretofore granted registration rights in connection with its
5.5% Subordinated Convertible Debentures due 2006.
(c) Specific Performance. The Company acknowledges that it would
be impossible to determine the amount of damages that would result from any
breach by it of any of the provisions of this Agreement and that the remedy at
law for any breach, or threatened breach, of any of such provisions would likely
be inadequate and, accordingly, agrees that each Holder shall, in addition to
any other rights or remedies which it may have, be entitled to seek such
equitable and injunctive relief as may be available from any court of competent
jurisdiction to compel specific performance of, or restrain the Company from
violating any of, such provisions. In connection with any action or proceeding
for injunctive relief, the Company hereby waives the claim or defense that a
remedy at law alone is adequate and agrees, to the maximum extent permitted by
law, to have each provision of this Agreement specifically enforced against it,
without the necessity of posting bond or other security against it, and consents
to the entry of injunctive relief against it enjoining or restraining any breach
or threatened breach of this Agreement.
(d) Illegality. If any term or provision of this Agreement or any
application thereof shall be declared or held invalid, illegal or unenforceable,
in whole or in part, whether generally or in any particular jurisdiction, such
provision shall be deemed amended to the extent, but only to the extent,
necessary to cure such invalidity, illegality or unenforceability, and the
validity, legality and enforceability of the remaining provisions, both
generally and in every other jurisdiction, shall not in any way be affected or
impaired thereby.
(e) Recovery of Litigation Costs. Except as otherwise expressly
provided herein to the contrary, in the event any dispute between the parties to
this Agreement shall result in litigation, arbitration or other proceeding,
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the prevailing party shall be entitled to recover from the losing party all
reasonable costs and expenses, including without limitation reasonable
attorneys' fees and disbursements, incurred by the prevailing party in
connection with such litigation or other proceeding and any appeal thereof. Such
costs, expenses, fees and disbursements shall be included in and made a part of
the judgment recovered by the prevailing party, if any.
(f) Notices. All notices, requests, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, when delivered personally or by courier,
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested), or when received by facsimile
transmission if promptly confirmed by one of the foregoing means, as follows: If
to the Company, to it at 350 South Grand Avenue, 52nd Floor, Los Angeles,
California 90071, Attention: Barbara S. Polsky, facsimile transmission no. (213)
640-5000, and if to a Holder, to the address or facsimile transmission number of
such Holder set forth in the security register or other records of the Company,
or to such other address or facsimile transmission number as any party may have
furnished to the others in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
(g) Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and assigns,
but, except as set forth in this Section 9(g), no such term or provision is for
the benefit of, or intended to create any obligations to, any other persons. In
the event that any transferee of a Purchaser or other Holder shall acquire
Registrable Securities, in any manner, whether by gift, bequest, purchase,
operation of law or otherwise, such transferee shall, by the execution and
delivery of an agreement to be bound to the terms of this Agreement, be deemed a
party hereto for all purposes and such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by delivering such agreement,
such transferee shall be entitled to receive all the benefits of and be bound by
all of the terms and provisions of this Agreement. Until the execution and
delivery of such agreement, the
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transferee shall have no rights under this Agreement. In addition, in connection
with a bona fide pledge of any Registrable Securities to secure indebtedness or
other obligations, a Purchaser or other Holder may assign its rights, interests
and obligations hereunder to the beneficiary of such pledge; provided that
neither the beneficiary of such pledge, nor any other person who through the
exercise of remedies under such pledge becomes a Holder of Registrable
Securities, shall be entitled to exercise any rights under this Agreement unless
and until the person who wishes to exercise such rights agrees in writing to be
bound by the terms of this Agreement. The Company shall not have either the
right or the power to assign or delegate any right or obligation hereunder
(except by merger or other operation of law) without the written consent of
Holders who own a majority of the aggregate of the then outstanding Registrable
Securities and Warrants.
(h) Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this Agreement
or made pursuant hereto shall remain in full force and effect regardless of any
investigation (or statement as to the results thereof) made by or on behalf of
any Holder, any director, officer, partner or employee of any Holder, any
underwriter or any director, officer, partner or employee thereof, or any
controlling person of any of the foregoing, and shall survive delivery of and
payment for the Warrants pursuant to the Warrant Agreement and the transfer and
registration of Registrable Securities by any Holder.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO CONFLICT OF LAW PROVISIONS THEREOF.
(j) Jurisdiction and Venue. Each of the parties hereto hereby
irrevocably submits in any legal action or proceeding relating to or arising out
of this Agreement or any other document relating hereto or delivered in
connection with the transactions contemplated hereby, or for recognition and
enforcement of any judgment in respect thereof, to the exclusive jurisdiction of
the United States District Court for the District of Delaware (or if such court
does not have jurisdiction, the courts of the State of Delaware, Newcastle
County), and appellate courts thereof.
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Each of the parties hereto further (a) consents that any such action or
proceeding may be brought in such court and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding in such court or
that such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same; (b) agrees that service of process in any such
action or proceeding may be effected by personal delivery thereof to such
party's registered office in the jurisdiction in which it is incorporated, with
a copy to such party at its address as provided in Section 9(f); and (c) agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law. (k) Headings. The descriptive headings of the
several Sections and paragraphs of this Agreement are inserted for convenience
only, do not constitute a part of this Agreement and shall not affect in any way
the meaning or interpretation of this Agreement.
(l) Entire Agreement; Amendments. This Agreement and the other
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter. This
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
Holders of at least a majority of the Warrants and of the Registrable Securities
at the time outstanding. Each Holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any amendment or waiver effected
pursuant to this Section 9(l), whether or not any notice, writing or marking
indicating such amendment or waiver appears on such Registrable Securities or is
delivered to such Holder.
(m) Inspection. For so long as this Agreement shall be in effect,
this Agreement and a complete list of the names and addresses of all the Holders
of Registrable Securities and Warrants shall be made available for inspection
and copying on any business day by any Holder of Registrable Securities at the
offices of the Company at the address thereof set forth in Section 9(f) above.
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(n) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
AAMES FINANCIAL CORPORATION
By: /s/ Cary H. Thompson
----------------------------------------
Name: Cary H. Thompson
Title: Chief Executive Officer
TURTLE CREEK REVOCABLE TRUST
By: /s/ Gerald J. Ford
----------------------------------------
Name: Gerald J. Ford
Title: Trustee
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