UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)*
Aames Financial Corporation
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(Name of Issuer)
Common Stock, par value $.001 per share
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(Title of Class of Securities)
00253A 10 1
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(CUSIP Number)
Barbara S. Polsky
General Counsel
Aames Financial Corporation
350 South Grand Avenue
Los Angeles, California 90071
(323) 210-5000
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
December 23, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13D to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [].
Check the following box if a fee is being paid with this statement []. (A fee is
not required only if the filing person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see Notes).
Page 1 of 10
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SCHEDULE 13D
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CSUIP NO. 00253A 10 1 Page 2 of 10 Pages
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1 NAME OR REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Neil B. Kornswiet ###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) []
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS* N/A
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
[]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
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8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,570,519 (See Response to Item 5.)
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9 SOLE DISPOSITIVE POWER
EACH
REPORTING -0-
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10 SHARED DISPOSITIVE POWER
PERSON
WITH 4,570,519 (See Response to Item 5.)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,570,519 (See Response to Item 5.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.7% (See Response to Item 5.)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
Page 2 of 10
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SCHEDULE 13D
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CSUIP NO. 00253A 10 1 PAGE 3 OF 10 PAGES
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1 NAME OR REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Debra K. Kornswiet ###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) []
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS* N/A
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
[]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
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8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,570,519 (See Response to Item 5.)
--------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
EACH
REPORTING -0-
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON
WITH 4,570,519 (See Response to Item 5.)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,570,519 (See Response to Item 5.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.7% (See Response to Item 5.)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
Page 3 of 10
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This Amendment No. 3 to the Schedule 13D dated September 9, 1996 (date
of event requiring filing August 28, 1996), as amended by Amendment No. 1, dated
November 22, 1996 (date of event requiring filing November 22, 1996) ("Amendment
No. 1") and Amendment No. 2, dated December 18, 1996 (date of event requiring
filing December 5, 1996) ("Amendment No. 2") (collectively, the "Schedule 13D"),
which was filed with the Securities and Exchange Commission by Neil B. Kornswiet
and Debra K. Kornswiet (the "Reporting Persons") relates to the shares of common
stock, par value $.001 per share (the "Common Stock"), of Aames Financial
Corporation, a Delaware corporation (the "Company"). This amendment is being
filed: (a) to amend Item 4 to report that certain Management Voting Agreement by
and among Mr. Kornswiet, Capital Z Financial Services Fund II, L.P., a Bermuda
limited partnership ("Capital Z"), and Cary H. Thompson, dated December 23, 1998
(the "Voting Agreement"), pursuant to which Mr. Kornswiet and Mr. Thompson have
agreed to vote their shares pursuant to the Voting Agreement with respect to
specified matters set forth therein, and to report that certain Management
Investment Agreement by and between Mr. Kornswiet and the Company, dated
December 23, 1998 (the "Investment Agreement"), pursuant to which Mr. Kornswiet
is obligated to purchase certain shares of the Company's capital stock, as more
fully described in Item 6 below; (b) to amend Item 5 of Amendment No. 2; (c) to
amend Item 6 of Amendment No. 2 to report the Voting Agreement and the
Investment Agreement; and (d) to amend Item 7 of Amendment No. 2 to reflect the
Exhibits to this Schedule 13D. Unless otherwise indicated, all capitalized terms
used but not defined herein shall have the same meaning as set forth in the
Schedule 13D.
ITEM 4 IS AMENDED TO READ AS FOLLOWS:
Mr. Kornswiet entered into the Voting Agreement for the purpose of
inducing Capital Z to enter into that certain Preferred Stock Purchase
Agreement by and between the Company and Capital Z dated December 23, 1998 (the
"Agreement"). Pursuant to the Agreement Capital Z will make an equity investment
in the Company of up to $100 million at a price equal to $ 1.00 per share. The
Agreement provides, among other things, for (i) the investment of $75 million
through the purchase by Capital Z of Series B Convertible Preferred Stock of the
Company (the "Series B Stock") and Series C Convertible Preferred Stock of the
Company (the "Series C Stock" and together with the Series B Stock, the
"Preferred Stock") in a private placement transaction (the "Initial Closing");
and (ii) after the Initial Closing and completion of a recapitalization
described below, an offering (the "Rights Offering") to the Company's
stockholders of non-transferable rights to purchase up to $25 million of Series
C Stock for which Capital Z would act as a standby underwriter (the "Standby
Commitment").
Under the Agreement, Capital Z will, on the Initial Closing, purchase
shares of Preferred Stock for an aggregate purchase price of $75 million.
Following the completion of the initial investment and subject to the receipt of
stockholder approval of a recapitalization to increase the Company's authorized
common and preferred stock (together with a split to be effected with respect to
the Preferred Stock, the "Recapitalization"), the stockholders of the Company
will have the opportunity to purchase shares of Series C Stock for an aggregate
purchase price of $25 million. Capital Z will act as standby underwriter with
respect to the Rights Offering and will purchase all shares of Series C Stock
that are not purchased by the Company's stockholders at the
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same per share purchase price offered to the stockholders. On January 4, 1998,
Capital Z Management, Inc., a Bermuda corporation ("Cap Z Management") received,
as a standby commitment fee, a warrant (the "Cap Z Warrant") to purchase 1.25
million shares of the Company's Common Stock at an exercise price of $1.00 per
share. At the Initial Closing, the Company will pay Capital Z (or its designee)
a $1 million transaction fee in connection with the transactions under the
Agreement and Capital Z (or its designee) will receive an additional warrant to
purchase up to 3,000,000 shares of Common Stock at an exercise price of $ 1.00
per share, which will be exercisable if the Recapitalization is not completed by
June 30, 1999.
The Series B Stock will vote in all matters on which the common
stockholders vote, and the Series C Stock will vote in all such matters except
the election of directors. The Series B Stock will be convertible at the
direction of the holders of a majority of the outstanding shares of Series B
Stock. The Series C Stock will be convertible at the direction of the holder or
the holders of a majority of the outstanding shares of Series C Stock. All other
terms of the Series B Stock and the Series C Stock will be identical. Following
the Recapitalization, each share of Preferred Stock will be convertible into one
share of Common Stock based on a stated value of $1.00 per share and will have
an annual dividend rate of 6.5%, which the Company has the option of accruing
for the first two years. The Preferred Stock will be redeemable by the Company
at its option on the tenth anniversary of its issuance. If the Company does not
complete the Recapitalization prior to June 30, 1999 then (i) the dividend rate
on the Preferred Stock will increase to 15% per annum; and (ii) the Preferred
Stock will become mandatorily redeemable on the sixth anniversary of its
issuance. Prior to the Recapitalization, in addition to its regular dividend
rights and rights in liquidation based on its stated value per share, the
Preferred Stock will participate in dividends and rights in liquidation with
holders of the common stock in any remaining assets of the Company.
The Initial Closing is subject to conditions including the receipt by
the Company of all consents necessary to consummate the transactions
contemplated by the Agreement, including waivers from certain bondholders of the
Company, the expiration or termination of the waiting period under the
Hart-Scott-Rodino Act, certain regulatory approvals, the absence of any material
adverse change in the business or operations of the Company, the receipt of a
waiver from the New York Stock Exchange of the stockholder approval requirements
with respect to the issuance and sale of the Preferred Stock, the issuance of a
legal opinion by the Company's legal counsel, commitments from lenders for
warehouse facilities in the total amount of at least $600 million with terms of
at least 6-12 months, the reconstitution of the Board of Directors of the
Company as set forth in the Agreement and other customary closing conditions
including the truth and accuracy of all representations and warranties, full
compliance with the terms of the Agreement, delivery of certain officers'
certificates and other supporting documents, compliance with all of the
provisions of the ancillary documents to the Agreement, the absence of any rule
or order in effect which prohibits the consummation of the transactions
contemplated by the Agreement, and the absence of certain litigation challenging
the transactions contemplated by the Agreement or seeking material damages
relating thereto.
The Company also has agreed to pay Capital Z certain fees in connection
with the transaction, including fees payable if an alternative strategic
transaction is consummated or, in
Page 5 of 10
<PAGE>
certain circumstances, agreed to by the Company. In the event a superior
alternative transaction is proposed, Capital Z also will have certain matching
rights.
Following the completion of the transactions contemplated by the
Agreement, Capital Z would hold Preferred Stock representing 57.2% of the
combined voting power of the Company if all shares offered in the Rights
Offering are purchased by common stockholders and 76.3% of the combined voting
power of the Company if none of the shares offered in the Rights Offering are
purchased by the common stockholders. At the Initial Closing and subject to
completion of the Recapitalization and receipt of stockholder approval, the
Company will adopt a new stock option plan covering approximately 14,000,000
shares of Common Stock.
In addition to the execution of the Agreement, on December 23, 1998,
the Company and ChaseMellon Shareholder Services, LLC, as successor Rights Agent
to Wells Fargo Bank (the "Rights Agent"), entered into an Amendment to Rights
Agreement (the "Amendment") which serves to amend the Company's Rights Agreement
dated June 21, 1996, as amended on April 27, 1998 (the "Rights Agreement"). The
Amendment provides that Capital Z and each Designated Purchaser, as defined in
the Agreement (and their respective affiliates, associates and transferees), is
an Exempt Person, as defined in the Rights Agreement. The Amendment also
provides that in no event shall the Rights Agent be liable for special,
punitive, indirect, consequential or incidental loss or damage and that any
liability of the Rights Agent under the Rights Agreement will be limited to the
amount of fees paid by the Company to the Rights Agent. Except as specifically
amended by the Amendment, the Rights Agreement remains in full force and effect
in accordance with its terms.
Mr. Kornswiet is a party to the Voting Agreement and the Investment
Agreement, each as more fully described in Item 6 below, which govern certain
voting and purchase obligations and transfer restrictions of Mr. Kornswiet as
the same relate to the Company's securities and the transactions described in
this Item 4.
ITEM 5 IS AMENDED TO READ AS FOLLOWS:
(a) As of January 11, 1999 the Reporting Persons are the beneficial
owners of 2,397,860 shares of the Common Stock, or approximately 7.7% of the
Common Stock based on a total of 31,015,893 shares of the Common Stock
outstanding as of November 4, 1998 (as reported in the Company's Form 10-Q for
the period ended September 30, 1998) (the "Outstanding Shares"). Such ownership
includes the right to acquire up to 575,000 shares of Common Stock pursuant to
outstanding options. To the best knowledge of the Reporting Persons, Mr. Cary H.
Thompson and Ms. Karen L. Heilman beneficially own 922,659 shares of Common
Stock, or approximately 3.0% of the Outstanding Shares. To the best knowledge of
the Reporting Persons, Cap Z Management, an affiliate of Cap Z, is the
beneficial owner of 1,250,000 shares of Common Stock pursuant to the Cap Z
Warrant, or approximately 4.0% of the Outstanding Shares.
By virtue of the Voting Agreement, the Reporting Persons, Mr. Cary H.
Thompson and Cap Z may be deemed to constitute a "group" (within the meaning of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If so, the
Reporting Persons, Mr. Thompson and Cap Z
Page 6 of 10
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would be deemed part of a group beneficially owning 4,570,519 shares of the
Common Stock, or approximately 14.7% of the Outstanding Shares. The Reporting
Persons, for the purposes of Section 13(d) of the Exchange Act, expressly
disclaim any beneficial ownership of all shares of Common Stock which may be
deemed to be beneficially owned by them as a result of membership in a group
with Mr. Thompson and/or Cap Z.
(b) The Reporting Persons have shared power to vote or direct the vote
and dispose or direct the disposition of 2,397,860 shares of the Common Stock.
By virtue of the Voting Agreement, the Reporting Persons may be deemed to have
shared voting power over (i) an additional 922,659 shares of Common Stock, which
shares are, to the best knowledge of the Reporting Persons, beneficially owned
by Mr. Thompson and Ms. Heilman, and (ii) an additional 1,250,000 shares of
Common Stock, which shares are, to the best knowledge of the Reporting Persons,
beneficially owned by Cap Z Management, an affiliate of Cap Z. The Reporting
Persons, for purposes of Section 13(d) of the Exchange Act, expressly disclaim
any shared voting power over such additional shares.
(c) Neither of the Reporting Persons has engaged in any transactions in
the Common Stock during the past 60 days. Except as set forth herein, to the
best knowledge of the Reporting Persons, neither Cap Z, Cap Z Management, Mr.
Thompson nor Ms. Heilman have engaged in any transactions in the Common Stock
during the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6 IS AMENDED TO READ AS FOLLOWS:
Pursuant to the Voting Agreement, Mr. Kornswiet agrees that (a) under
any circumstances upon which a vote, consent or other approval will be held or
solicited with respect to the Recapitalization, Mr. Kornswiet shall vote (or
cause to be voted) or shall consent, execute a consent or cause to be executed a
consent with respect to his shares of Common Stock (the "Shares") in favor of
the Recapitalization; (b) at any meeting of shareholders of the Company or at
any adjournment thereof or in any other circumstances upon which their vote,
consent or other approval is sought while the Purchase Agreement remains in
effect, Mr. Kornswiet shall vote (or cause to be voted) the Shares against (i)
any action which is a component of any inquiry or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any acquisition or
purchase of all or a significant portion of the assets or business of the
Company or its subsidiaries (determined on a consolidated basis), or an equity
interest in the Company or any of its subsidiaries, or any merger,
consolidation, business combination or similar transaction involving the Company
or any of its subsidiaries or any other similar transaction (each, an
"Alternative Transaction") or would be a component of an Alternative Transaction
if it were contained in a proposal, or (ii) any other matter submitted to the
shareholders of the Company, including, without limitation, any amendment of the
Company's Certificate of Incorporation or By-Laws, which matter would in any
manner partially or wholly prevent or materially impede, interfere with or delay
any of the transactions contemplated by the Purchase Agreement, as determined in
good faith by Capital Z and with respect to which Capital Z provides written
notice to Mr. Kornswiet; and (c) in the event that the Recapitalization is not
Page 7 of 10
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consummated prior to June 30, 1999, Mr. Kornswiet agrees to vote the Shares, or
grant a consent for approval in respect of the Shares in any manner permitted by
the Delaware General Corporations Law, as Mr. Kornswiet is directed by the board
of directors of the Company, on any matters submitted to the shareholders of the
Company, other than the election of directors. Furthermore, Mr. Kornswiet agreed
not to transfer any Shares which he owned prior to the consummation of the
transactions contemplated by the Agreement.
In connection with the Agreement, Mr. Kornswiet also has entered into
the Investment Agreement. Pursuant to the Investment Agreement, Mr. Kornswiet
has agreed to purchase shares of Series C Stock from the Company for an
aggregate purchase price of $1,667,000. Mr. Kornswiet's obligation to purchase
such shares is conditioned on the consummation of the Initial Closing under the
Agreement. The per share purchase price will be equal to the per share purchase
price for Series C Stock in the Rights Offering. Mr. Kornswiet will pay the
purchase price for such stock concurrently with the closing of the Rights
Offering by delivering to the Company a 6.5% promissory note. Mr. Kornswiet's
obligations under the note will be secured by a security interest in such stock
and certain other collateral. The proposed rights, preferences and privileges of
the Series C Stock are set forth in Exhibit B to the Purchase Agreement.
ITEM 7 IS AMENDED TO READ AS FOLLOWS:
99.1 Preferred Stock Purchase Agreement, dated December 23, 1998, by and
between Aames Financial Corporation and Capital Z Financial Services
Fund II, L.P. Incorporated herein by reference to the Company's Current
Report on Form 8-K filed December 31, 1998.
99.2 Management Voting Agreement, dated December 23, 1998, by and among
Capital Z Financial Services Fund II, L.P., Cary Thompson and Neil
Kornswiet.
99.3 Management Investment Agreement, dated December 23, 1998, by and
between Neil Kornswiet and Aames Financial Corporation.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: January 12, 1999
/s/ NEIL B. KORNSWIET
---------------------------
Neil B. Kornswiet
/s/ DEBRA K. KORNSWIET
---------------------------
Debra K. Kornswiet
The original statement shall be signed by each person on whose behalf
the statement is filed or his authorized representative. If the statement is
signed on behalf of a person by his authorized representative (other than an
executive officer or general partner of this filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statements, provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name any title of each person who signs the statement shall be typed or
printed beneath his signature.
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE
FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
Page 9 of 10
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EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT NO. TITLE
99.1 Preferred Stock Purchase Agreement, dated December 23, 1998, by and
between Aames Financial Corporation and Capital Z Financial Services
Fund II, L.P. Incorporated herein by reference to the Company's Current
Report on Form 8-K filed December 31, 1998.
99.2 Management Voting Agreement, dated December 23, 1998, by and among
Capital Z Financial Services Fund II, L.P., Cary Thompson and Neil
Kornswiet.
99.3 Management Investment Agreement, dated December 23, 1998, by and
between Neil Kornswiet and Aames Financial Corporation.
Page 10 of 10
Exhibit 99.2
MANAGEMENT VOTING AGREEMENT
MANAGEMENT VOTING AGREEMENT dated as of December 23, 1998,
among Capital Z Financial Services Fund II, L.P., a Bermuda limited partnership
("CAPITAL Z"), and Cary Thompson and Neil Kornswiet (collectively, the
"SHAREHOLDERS").
WHEREAS, the Shareholders desire that the Aames Financial
Corporation, a Delaware corporation (the "COMPANY"), and Capital Z enter into a
Preferred Stock Purchase Agreement dated as of the date hereof (as the same may
be amended from time to time, the "PURCHASE AGREEMENT"), which provides, among
other things, that Capital Z, together with certain Capital Z affiliates and
co-investors as provided therein, will purchase shares of the Company's Series B
Convertible Preferred Stock, par value $0.001 per share ("SERIES B PREFERRED
STOCK") and Series C Convertible Preferred Stock, par value $0.001 per share
("SERIES C PREFERRED STOCK," and, together with the Series B Preferred Stock,
"SENIOR PREFERRED STOCK"), in the amounts and subject to the conditions set
forth in the Purchase Agreement; and
WHEREAS, the Shareholders are executing this Agreement as an
inducement to the Company and Capital Z to execute and deliver the Purchase
Agreement.
NOW THEREFORE, in consideration of the execution and delivery
by the Company and Capital Z of the Purchase Agreement and the mutual covenants,
conditions and agreements contained therein and herein, the parties hereto agree
as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. Each of the Share- holders
severally and not jointly represents and warrants to the Company and Capital Z
as to himself (and not as to any other Shareholder) as follows:
(a) Such Shareholder is the record and beneficial owner
of the number of shares of the Company's common stock, par value $0.001 per
share ("COMMON STOCK") (together with any shares of Common Stock or other voting
securities of the Company, including, without limitation, Senior Preferred
Stock, with respect to which the Shareholder obtains voting power after the date
hereof, the "Shares"), as set forth on Exhibit A hereto (which Exhibit shall be
amended after the date hereof to include any voting securities of the Company
with respect to which the Shareholder obtains voting power after the date
hereof). Except for such number of Shares and except for Shares, if any, (i)
issuable in connection with options outstanding as of the date hereof or (ii)
which such Shareholder has agreed to purchase in connection with the
transactions contemplated by the Purchase Agreement, such Shareholder is not the
record or beneficial owner of any shares of Common Stock.
(b) Such Shareholder has the authority to execute,
deliver and perform this Agreement without the necessity of obtaining any third
party consent, approval, authorization or waiver, or giving of any notice or
otherwise, except for such consents as have been obtained, are unconditional and
are in full force and effect.
(c) This Agreement has been duly executed and delivered
by such Shareholder and, assuming due execution and delivery thereof by the
Company and Capital Z, constitutes the legal, valid, and binding obligation of
such Shareholder enforceable against the Shareholder in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
(d) The execution, delivery, and performance of this
Agreement by such Shareholder will not (i) result in the breach of or constitute
a default under any contract to which such Shareholder is subject, (ii)
constitute a violation of any Law applicable or relating to such Shareholder or
(iii) result in the creation of any Lien.
(e) Except for this Agreement, there are no voting
trusts or other agreements or understandings, including, without limitation, any
proxies, in effect governing the voting of the Shares.
(f) Such Shareholder does not hold, and has not issued,
any proxies, or securities convertible into or exchangeable for or any options,
warrants, or other rights to purchase or subscribe for any shares of Common
Stock.
(g) The Shares and the certificates representing such
Shares are now and until the earlier to occur of June 30, 1999 and consummation
of the Recapitalization will be held by such Shareholder, or by a nominee or
custodian for the benefit of such Shareholder, free and clear of all Liens,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever other than as created by this Agreement.
(h) Such Shareholder understands and acknowledges that
the Company and Capital Z are entering into the Purchase Agreement in reliance
upon such Shareholder's execution and delivery of this Agreement.
(i) There are no undertakings, agreements, arrangements
or understandings of the type required to be disclosed by the Company pursuant
to Item 404 of Regulation S-K under the Securities Act in filings by the Company
with the Securities and Exchange Commission in effect between such Shareholder,
or any of his or her affiliates, on the one hand, and the Company or any of its
subsidiaries, on the other hand, which have not been fully and completely
disclosed, in writing, to Capital Z.
SECTION 2. VOTING AGREEMENT. Each Shareholder agrees with, and covenants
to, Capital Z as follows:
(a) At the Shareholders' Meeting or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval will be held or solicited with respect to the increase of the
authorized capital stock of the Company as contemplated by the Purchase
Agreement (the "CHARTER AMENDMENT"), such Shareholder shall vote (or cause to be
voted) or shall consent, execute a consent or cause to be executed a consent in
respect of the Shares in favor of the Charter Amendment and the Stock Split.
(b) At any meeting of shareholders of the Company or at
any adjournment thereof or in any other circumstances upon which their vote,
consent or other approval is sought while the Purchase Agreement remains in
effect, such Shareholder shall vote (or cause to be voted) the Shares against
(i) any Alternative Transaction or any action which is a component of any
Alternative Transaction or would be a component of an Alternative Transaction if
it were contained in a proposal, or (ii) any other matter submitted to the
shareholders of the Company, including, without limitation, any amendment of the
Company's Certificate of Incorporation or By-Laws, which matter would in any
manner partially or wholly prevent or materially impede, interfere with or delay
any of the transactions contemplated by the Purchase Agreement, as determined in
good faith by Purchaser and with respect to which Purchaser provides written
notice to the Shareholder.
(c) In the event that the Recapitalization (as defined
in the Purchase Agreement) is not consummated prior to June 30, 1999, each
Shareholder agrees to vote all Shares for which he has or shares the power to
vote, or grant a consent for approval in respect of such Shares in any manner
permitted by the DGCL, as such Shareholder is directed by the board of directors
of the Company, on any matters submitted to the shareholders of the Company,
other than the election of directors. The foregoing agreement shall terminate
automatically upon the termination of this Agreement with respect to any Shares
owned by such person upon transfer of such Shares pursuant to Section 7. The
Company shall be a third party beneficiary of this Agreement for the purposes of
this Section 2(c).
(d) Each Shareholder represents and warrants to the
Company and Capital Z that any proxies heretofore given in respect of the Shares
are not irrevocable, and that any such proxies are hereby revoked, to the extent
in conflict with Section 2(c) hereof.
(e) Each Shareholder hereby affirms that the
irrevocable proxy set forth in this Section 2 is given in connection with the
execution of the Purchase Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of such Shareholder under this Agreement.
Each Shareholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. Each Shareholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 212(e)
of the DGCL.
SECTION 3. COVENANTS OF THE SHAREHOLDER. Each Shareholder agrees with, and
covenants to, Capital Z that such Shareholder shall not on or prior to the
earlier to occur of June 30, 1999 or the consummation of the Recapitalization,
(i) transfer (which term shall include, without limitation, for the purposes of
this Agreement, any sale, gift, pledge, encumbrance (other than an unforeclosed
pledge or encumbrance for financing purposes where the Shareholder retains sole
voting power with respect to all pledged securities), or other disposition), or
consent to any transfer of, any or all the Shares or any interest therein,
unless the transferee(s) of such Shares agrees in writing to be bound by the
provisions of this Agreement applicable to such Shareholder, (ii) grant any
proxy, power-of-attorney or other authorization in or with respect to such
Shares, except under or in accordance or not in conflict with this Agreement, or
(iii) deposit such Shares into a voting trust, enter into a voting agreement or
arrangement with respect to such Shares or otherwise limit such Shareholder's
power to vote his or her Shares in a manner that conflicts with this Agreement.
SECTION 4. CERTAIN EVENTS. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of the Company affecting the Common Stock, or the acquisition of
additional shares of Common Stock or other voting securities of the Company by
such Shareholder, the number of Shares set forth in Section 1(a) hereof shall be
adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of Common Stock or other voting securities of
the Company issued to or acquired by such Shareholder.
SECTION 5. SHAREHOLDER CAPACITY. No person executing this Agreement who is
or becomes a director of the Company makes any agreement or understanding herein
in his or her capacity as such director. Each Shareholder signs solely in such
Shareholder's capacity as the record and beneficial owner of the Shares.
SECTION 6. FURTHER ASSURANCES. Each Shareholder shall, upon request of
Capital Z, execute and deliver any additional documents and take such further
actions as may reasonably be deemed by Capital Z to be necessary or desirable to
carry out the provisions hereof.
SECTION 7. TERMINATION. This Agreement, and all rights and obligations of
the parties hereunder, shall terminate upon the date upon which the
Recapitalization has been consummated and the Shareholder Approval has been
obtained or the Purchase Agreement is earlier terminated in accordance with its
terms, except that no Shareholder shall be relieved of any liability for breach
of this Agreement by such Shareholder prior to such termination. Further, this
Agreement shall terminate with respect to any Shares which are transferred as
permitted by Section 3 hereof.
SECTION 8. DEFINED TERMS. Capitalized terms used and not otherwise defined
in this Agreement shall have the respective meanings assigned to them in the
Purchase Agreement.
SECTION 9. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be sufficiently given if sent by
registered or certified mail, postage prepaid, or overnight air courier service,
or telecopy or facsimile transmission (with hard copy to follow) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice): (i) if to Capital Z, to the address set forth in
Section 7.3 of the Purchase Agreement; and (ii) if to any Shareholder, to the
address set forth opposite such Shareholder's name on Exhibit A hereto.
SECTION 10. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective as to any Shareholder when one or more
counterparts have been signed by Capital Z and such Shareholder and delivered to
Capital Z and such Shareholder.
SECTION 12. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to any applicable conflicts of law principles of such State.
SECTION 14. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the parties
without the prior written consent of the other parties, except as expressly
contemplated by Section 3(a), and except that Capital Z may assign its rights
under this Agreement to any transferee of any of the Company's securities
acquired by it under the Purchase Agreement (and any such transferee may
similarly assign its rights in connection with any further transfer of such
securities, in whole or in part). Any assignment in violation of the foregoing
shall be void.
SECTION 15. ENFORCEMENT. Each party agrees that irreparable damage would
occur and that the other party hereto would not have any adequate remedy at law
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that each party shall be entitled to an injunction or
injunctions to prevent breaches by the other party hereto of this Agreement and
to enforce specifically the terms and provisions of this Agreement in any court
of the United States located in the State of Delaware or in Delaware State
court, this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (i) consents to submit
such party to the personal jurisdiction of any Federal court located in the
State of Delaware or any Delaware State court in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (iii)
agrees that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court sitting in the State of Delaware or a Delaware State court.
SECTION 16. SEVERABILITY. If any term or provision hereof, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid or unenforceable with respect to
such jurisdiction, and only to such extent, and the remainder of the terms and
provisions hereof, and the application thereof to any other circumstance, shall
remain in full force and effect, shall not in any way be affected, impaired or
invalidated, and shall be enforced to the fullest extent permitted by law, and
the parties hereto shall reasonably negotiate in good faith a substitute term or
provision that comes as close as possible to the invalidated or unenforceable
term or provision, and that puts each party in a position as nearly comparable
as possible to the position each such party would have been in but for the
finding of invalidity or unenforceability, while remaining valid and
enforceable.
SECTION 17. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or
waiver in respect of this Agreement shall be effective against any party unless
it shall be in writing and signed by such party.
<PAGE>
IN WITNESS WHEREOF, Capital Z and the Shareholders have caused
this Agreement to be duly executed and delivered as of the date first written
above.
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.,
By its General Partner
CAPITAL Z PARTNERS, L.P.,
By its General
Partner CAPITAL Z
PARTNERS, LTD.
By: /s/ ADAM M. MIZEL
-------------------
Name: Adam M. Mizel
Title: Partner
SHAREHOLDERS:
/S/ CARY H. THOMPSON
---------------------
Cary Thompson
/S/ NEIL B. KORNSWIET
----------------------
Neil Kornswiet
Exhibit 99.3
MANAGEMENT INVESTMENT AGREEMENT
(NEIL KORNSWIET)
MANAGEMENT INVESTMENT AGREEMENT (this "AGREEMENT") dated as of
December 23, 1998, between Aames Financial Corporation, a Delaware corporation
(the "COMPANY"), and Neil Kornswiet, an individual residing at 16105 Whitecap
Lane, Huntington Beach, California, 96249 (the "MANAGEMENT INVESTOR").
WHEREAS, on the date hereof, the Company and Capital Z
Financial Services Fund II, L.P., a Bermuda limited partnership ("CAPITAL Z"),
are entering into a Preferred Stock Purchase Agreement (the "PURCHASE
AGREEMENT"), pursuant to which Capital Z has agreed to purchase, together with
Capital Z Affiliates and co-investors as designated by Capital Z, shares of the
Company's Series B Convertible Preferred Stock, par value $0.001 per share
("SERIES B PREFERRED STOCK") and Series C Convertible Preferred Stock, par value
$0.001 per share ("SERIES C PREFERRED STOCK," and, together with the Series B
Preferred Stock, "SENIOR PREFERRED STOCK"), in the amounts and subject to the
conditions set forth in the Purchase Agreement; and
WHEREAS, the Management Investor is a senior management
employee of the Company and, as a condition precedent to the closing of the
transactions contemplated by the Purchase Agreement, certain senior management
employees of the Company, including the Management Investor, are required to
purchase Series C Preferred Stock from the Company; and
WHEREAS, the Management Investor desires to purchase from the
Company, and the Company desires to sell to the Management Investor, Series C
Preferred Stock under the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms used and not otherwise defined
in this Agreement shall have the respective meanings assigned to them in the
Purchase Agreement.
SECTION 2. SALE AND DELIVERY.
(a) Upon the terms and subject to the conditions set forth
herein, and conditioned upon the consummation of the Initial Closing,
in reliance upon the representations and warranties of the Management
Investor hereinafter set forth, and for the purchase price described
in Section 2(b), the Company
2
<PAGE>
shall issue, sell and deliver to the Management Investor pursuant to
the Rights Offering, and the Management Investor shall purchase from
the Company pursuant to the Rights Offer, an aggregate of $1,667,000
in stated value (at $1.00 per share) of Series C Preferred Stock (such
shares of Series C Preferred Stock are referred to collectively herein
as the "SHARES") at the price per share at which Series C Preferred
Stock is offered in the Rights Offer, subject to the terms and
conditions of the Rights Offering.
(b) The purchase price for the Shares purchased by the Management
Investor shall be paid by delivery by the Management Investor to the
Company of a 6.5% promissory note having an original principal amount
equal to such amount (the "NOTE"), the form of which Note is attached
hereto as EXHIBIT A.
(c) The purchase and sale of Shares by the Management Investor
shall occur at the time and place provided for in the Rights Offer,
and at the closing of such purchase and sale of Shares by the
Management Investor:
(i) the Company shall deliver to the Management Investor
certificates representing the Shares, duly endorsed for transfer,
transferring to the Management Investor good and marketable title
to such Shares, free and clear of all liens and encumbrances; and
(ii) the Management Investor shall deliver to the Company:
(A) any documents required to be submitted by a Company
shareholder desiring to participate in the Rights Offer;
(B) the Note; and
(C) a pledge agreement (the "PLEDGE AGREEMENT")
substantially in the form attached hereto as EXHIBIT B,
pursuant to which Pledge Agreement, among other things, the
Management Investor's obligations under the Note shall be
secured by a pledge of (i) the Shares, (ii) the shares of
Common Stock that may be acquired upon conversion of the
Shares (the "UNDERLYING COMMON SHARES"), and (iii) certain
other collateral described therein.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT INVESTOR. The
Management Investor hereby represents and warrants to the Company as follows:
(a) The Shares (and the Underlying Common Shares) to be purchased
by such Management Investor will be acquired for investment for the
Management Investor's own account and not with a view to the resale or
distribution of any part thereof, except
3
<PAGE>
in compliance with the provisions of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or an exemption therefrom, and in
compliance with the terms of this Agreement. The Management Investor
is a senior management employee of the Company and is fully familiar
with the business of the Company and with the risks associated with
the purchase of the Shares pursuant to this Agreement. The Management
Investor is an accredited investor as defined under Rule 501(a) under
the Securities Act.
(b) The Management Investor understands that the Shares and the
Underlying Common Shares are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired
from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such Shares (and the
Underlying Common Shares) may be resold without registration under the
Securities Act only in certain limited circumstances.
(c) The Management Investor further agrees that each certificate
representing the Shares (and the Underlying Common Shares) shall be
stamped or otherwise imprinted with a legend substantially in the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SUCH SECURITIES HAVE
BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND TO THE OTHER TERMS SET FORTH IN THAT
CERTAIN MANAGEMENT INVESTMENT AGREEMENT, DATED AS OF DECEMBER 23,
1998, AND BY A CERTAIN RELATED PLEDGE AGREEMENT, BETWEEN THE
COMPANY AND NEIL KORNSWIET, A COPY OF WHICH AGREEMENTS HAVE BEEN
FILED WITH THE SECRETARY OF THE COMPANY AND ARE AVAILABLE UPON
REQUEST."
SECTION 4. RESTRICTIONS ON TRANSFER OF SHARES. For a period commencing on
the Initial Closing Date and ending on the fifth anniversary of the Initial
Closing Date, the Management Investor may not sell, transfer, assign, pledge,
hypothecate or otherwise dispose of (each, a "TRANSFER") any of the Shares (or
the Underlying Common Shares), without the prior express written consent of the
Company, PROVIDED, HOWEVER, that the foregoing restriction on transfer shall not
apply (i) if Capital Z Beneficially Owns less than (A) fifty percent (50%) of
the number of shares of Senior Preferred Stock purchased by Capital Z on the
Initial Closing Date (the "ORIGINAL PREFERRED SHARES") or (B) if any Original
Preferred Shares shall thereafter have been converted into Common Stock, fifty
percent (50%) of the sum of (x) the aggregate number of shares Common Stock
owned by Capital Z as a result of such conversion(s) plus (y) the aggregate
number of shares Common Stock into which any remaining Original
<PAGE>
Preferred Shares owned by Capital Z may be converted (determined without regard
to any limitations on conversion of such shares prior to the Recapitalization),
in each case subject to adjustment for splits, combinations, reclassifications
and similar events; (ii) if the Management Employee dies, retires, is terminated
by the Company, or terminates his employment with the Company, subject to the
provisions of Section 5 hereof; or (iii) a Change of Control (as defined in the
New Option Plan) has occurred, but only if a Capital Z Realization Event (as
defined in the New Option Plan) has also occurred on or prior to such Change of
Control, and PROVIDED, FURTHER, that notwithstanding the foregoing restriction
on transfer, the Management Investor may transfer, during the twelve-month
period ending on the first anniversary of the Initial Closing Date and during
each succeeding twelve-month period, up to 25% of the total number of Underlying
Common Shares (whether structured as a transfer of Shares, Underlying Shares or
a combination thereof) acquired hereunder (subject to adjustment for splits,
combinations, reclassifications and similar events), it being further agreed
that the Management Investor may request the Company's Board of Directors to
allow the Management Investor to transfer Shares (or Underlying Common Shares)
in excess of the 25% limitation described in this proviso if extraordinary
liquidity needs have arisen with respect to the Management Investor, and, in
such event, the Company (through its Board of Directors) will consider such
request in good faith and will not unreasonably withhold its consent to a waiver
of such limitation.
SECTION 5. COMPANY'S OPTION TO PURCHASE SHARES.
(a) In the event of the death or retirement from, or termination
of employment for any reason with, the Company of the Management
Investor (a "Termination Date"), the Company shall have the option,
but not the obligation, to purchase all, or any portion, of the Shares
(and any Underlying Common Shares that may have been acquired upon
conversion of the Shares) then owned by the Management Investor at the
Fair Market Value (as hereinafter defined) per Share and/or Underlying
Common Share on the Business Day immediately prior to the date on
which the Company exercises its option to purchase in accordance with
the this Section 5. The Company may exercise the foregoing option at
any time within 30 days after the Termination Date, by written notice
to the Management Investor, or his legal representative in the case of
death, stating a date and time for consummation of the purchase no
less than 10 nor more than 30 days after giving of such notice. "Fair
Market Value" per Share or per Underlying Common Share, as of any
particular date, shall mean (a) in the case of a Share, the product
obtained by multiplying (I) the Formula Number (as defined in the
Certificate of Designations for the Senior Preferred Stock) in effect
as of such date by (II) the Current Market Price (as defined in the
Certificate of Designations for the Senior Preferred Stock) for the
period of 15 consecutive Trading Days (as defined in the Certificate
of Designations for the Senior Preferred Stock) prior to such date, or
(b) in the
5
<PAGE>
case of an Underlying Share, the Current Market Price for the period
of 15 consecutive Trading Days prior to such date.
(b) At the closing of the purchase of Shares (and any Underlying
Common Shares) by the Company pursuant to Section 4(a), the Management
Investor will deliver the Shares (and any Underlying Common Shares) to
the Company against payment by the Company to the Management Investor
of the purchase price for such Shares (and any Underlying Common
Shares). Such purchase price shall be paid in cash, PROVIDED that if
any principal or accrued but unpaid interest is then outstanding under
the Note, the cash portion of the purchase price shall be reduced by
the amount of such outstanding principal and accrued interest on the
Note (with such reduction being applied first to any accrued interest
and then to principal), and, if no principal or accrued interest is
then remaining on the Note, the Note shall be canceled.
SECTION 6. TERMINATION. All rights and obligations of the parties hereunder
shall terminate upon the date upon which the Purchase Agreement is terminated in
accordance with its terms, provided, that any such termination that results from
the breach by a party of his or its obligations hereunder shall not relieve such
party from any liability for breach of this Agreement.
SECTION 7. FURTHER ASSURANCES. The Management Investor shall,
upon request of the Company, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by the Company to be
necessary or desirable to carry out the provisions hereof.
SECTION 8. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be sufficiently given if sent by
registered or certified mail, postage prepaid, or overnight air courier service,
or telecopy or facsimile transmission (with hard copy to follow) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice): (i) if to the Company, to the address set forth in
Section 7.3 of the Purchase Agreement; and (ii) if to the Management Investor,
to the address set forth for the Management Investor in the preamble to this
Agreement or by telecopy to (323) 210-4537.
SECTION 9. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the Company and the Management Investor and delivered to the
Company and the Management Investor.
<PAGE>
SECTION 11. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
SECTION 12. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to any applicable conflicts of law principles of such State.
SECTION 13. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the parties
without the prior written consent of the other parties. Any assignment in
violation of the foregoing shall be void.
SECTION 14. ENFORCEMENT. Each party agrees that irreparable damage would
occur and that the other party hereto would not have any adequate remedy at law
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that each party shall be entitled to an injunction or
injunctions to prevent breaches by the other party hereto of this Agreement and
to enforce specifically the terms and provisions of this Agreement in any court
of the United States located in the State of Delaware or in Delaware State
court, this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (i) consents to submit
such party to the personal jurisdiction of any Federal court located in the
State of Delaware or any Delaware State court in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (iii)
agrees that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court sitting in the State of Delaware of in Delaware State court.
SECTION 15. SEVERABILITY. If any term or provision hereof, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid or unenforceable with respect to
such jurisdiction, and only to such extent, and the remainder of the terms and
provisions hereof, and the application thereof to any other circumstance, shall
remain in full force and effect, shall not in any way be affected, impaired or
invalidated, and shall be enforced to the fullest extent permitted by law, and
the parties hereto shall reasonably negotiate in good faith a substitute term or
provision that comes as close as possible to the invalidated or unenforceable
term or provision, and that puts each party in a
<PAGE>
position as nearly comparable as possible to the position each such party would
have been in but for the finding of invalidity or unenforceability, while
remaining valid and enforceable.
SECTION 16. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or
waiver in respect of this Agreement shall be effective against any party unless
it shall be in writing and signed by such party.
SECTION 17. EXPENSES. The Company and the Management Investor shall each
bear their own legal fees and other costs and expenses with respect to the
negotiation, execution and delivery of this Agreement and consummation of the
transactions contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the Company and the Management Investor
have caused this Agreement to be duly executed and delivered as of the date
first written above.
AAMES FINANCIAL CORPORATION
By: /S/ BARBARA S. POLSKY
-----------------------
Name: Barbara Polsky
Title: Executive Vice President
MANAGEMENT INVESTOR:
/S/ NEIL B. KORNSWIET
------------------------
Neil Kornswiet
<PAGE>
EXHIBIT A TO
MANAGEMENT INVESTMENT AGREEMENT
(NEIL KORNSWIET)
FORM OF
SECURED PROMISSORY NOTE
$ ________, 1999
----------
FOR VALUE RECEIVED, Neil Kornswiet (the "Maker"), hereby promises to
pay to the order of Aames Financial Corporation, a Delaware corporation
("Aames"), 2 California Plaza, 350 South Grand Avenue, Los Angeles, CA 90071 or
such address as Aames shall have given to the Maker, the principal sum of
_________________________ DOLLARS and 00/100 ($_______), plus interest, which
shall accrue from the date hereof, on the unpaid principal balance of this Note
at such address, at the rate of 6.5% per annum (computed on the basis of a
360-day year) until the principal amount hereof has been repaid in full, on
________, 2004.
The Maker shall have the option to prepay the principal amount and
accrued interest on this Note, in whole or in part, at any time, without payment
of premium or penalty. During the period in which this Note is outstanding, the
Maker shall make an annual mandatory prepayment against the outstanding
principal balance of, and accrued interest on, this Note an amount equal to 25%
of the aggregate cash bonuses (if any) paid to Maker in respect of the fiscal
year ended immediately prior to such payment date, net of income taxes payable
thereon, such payments to be made within two business days after receipt of the
cash bonus paid at the end of such fiscal year and to be applied FIRST, against
any accrued and unpaid interest on this Note and THEN, to the outstanding
principal balance of this Note. In addition, upon receipt by the Maker of any
proceeds from the transfer of the securities pledged under the Pledge Agreement
(as defined below) or dividends, interest payments or other distributions of
cash in respect of such pledged securities, the Maker shall make an immediate
prepayment in respect of the Note in an amount equal to the after tax amount of
such proceeds, dividends, payments or distributions, with such prepayments to be
applied first to the payment of all interest accrued on, and then to the payment
of unpaid principal of, this Note.
Payments of principal and interest shall be made in such currency of
the United States as at the time of payment shall be legal tender for the
payment of public and private debts.
Aames and the Maker have entered into a pledge agreement dated the date
hereof (the "PLEDGE AGREEMENT") providing, among
<PAGE>
other things, for the securing of this Note by a pledge of the Pledged
Collateral (as defined in the Pledge Agreement).
If any of the following events (each, an "EVENT OF DEFAULT") shall occur:
(a) the Maker shall default in the payment of any part of the principal or
interest on this Note when the same shall become due and payable, whether at
maturity, by acceleration or otherwise and such default continues for more than
10 days after receipt of notice from Aames;
(b) the Maker's employment with Aames shall have ceased for any reason
whatsoever or for no reason, whether such cessation is voluntary or involuntary,
and regardless of whether the Maker may claim such cessation of employment
constitutes a wrongful termination of employment;
(c) the Maker shall (i) become insolvent or be unable, or admit in writing
his inability, to pay his debts as they mature; (ii) make a general assignment
for the benefit of creditors; (iii) be adjudicated as bankrupt or insolvent or
file a voluntary petition in bankruptcy; (iv) file a petition or an answer
seeking an arrangement with creditors to take advantage of any insolvency law;
or (v) file an answer admitting to the material obligations or consent to, or
default in answering, or fail to have dismissed within 60 days after the filing
thereof, a petition filed against him in any bankruptcy or insolvency
proceeding; or
(d) any breach of the Maker's obligations under the Pledge Agreement shall
have occurred and be continuing or any representation or warranty made
thereunder shall be false in any material respect, then, the holder of this Note
may at any time by written notice to the Maker, declare the entire unpaid
principal of and the interest accrued on this Note through the date of such
Event of Default to be forthwith due and payable, without other notices or
demands of any kind, all of which are hereby waived by the Maker.
Subject to the terms and conditions herein, if Maker is employed by
Aames for the full period from the date hereof through the first anniversary of
the Effective Date, as such term is defined in Maker's current Employment
Agreement with Aames (the "Employment Agreement"), or through the date of any
earlier termination of Maker's employment by Aames pursuant to Paragraphs 5A, B,
or F of the Employment Agreement or by the Maker pursuant to Paragraph 5D of the
Employment Agreement, the indebtedness evidenced by this Note shall be
nonrecourse (i.e., Aames shall not have recourse to any assets of Maker for any
liability under or in connection with the Pledge Agreement other than the
Pledged Collateral and, Aames shall not be liable for any deficiency
<PAGE>
owing in respect of such liabilities in the event the proceeds derived from the
sale of such Pledged Collateral are insufficient to pay such liabilities.
The Maker agrees to pay to the holder hereof all expenses incurred by
such holder, including reasonable attorneys' fees, in enforcing and collecting
this Note.
The Maker hereby forever waives presentment, demand, presentment for
payment, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note shall be paid without deduction by reason of any set-off,
defense or counterclaim of the Maker.
This Note shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to conflicts of law
principles thereof, shall be binding upon the heirs or legal representatives of
the Maker and shall inure to the benefits of the successors and assigns of
Aames.
---------------------------------
Neil Kornswiet
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EXHIBIT B TO MANAGEMENT INVESTMENT AGREEMENT
(NEIL KORNSWIET)
FORM OF PLEDGE AGREEMENT
PLEDGE AGREEMENT ("AGREEMENT"), dated as of _____, 1999, made
by Neil Kornswiet, an individual residing at 16105 Whitecap Lane, Huntington
Beach, CA, 92649 (the "PLEDGOR"), to Aames Financial Corporation, a Delaware
corporation ("AAMES").
WHEREAS, on the date hereof, the Pledgor is purchasing shares
of Aames' Series C Convertible Preferred Stock, par value $0.001 per share
("SERIES C PREFERRED STOCK"), pursuant to a Management Investment Agreement,
dated the date hereof, between Pledgor and Aames (the "MANAGEMENT INVESTMENT
AGREEMENT"); and
WHEREAS, as part of the transactions contemplated by the
Management Investment Agreement, the Pledgor is executing and delivering to
Aames a Secured Promissory Note dated as of the date hereof in favor of Aames
(the "AAMES NOTE") as part of the purchase price for the Series C Preferred
Stock, and (ii) in accordance with the terms and conditions set forth herein,
pledge the Series C Preferred Stock, together with any shares of Aames' common
stock, par value $0.001 per share that may be acquired upon conversion of the
Series C Preferred Stock (the "UNDERLYING COMMON SHARES, and, together with the
shares of Series C Preferred Stock, the "PLEDGED SHARES").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, and in order to induce Aames to
accept the Aames Note, the Pledgor hereby agrees as follows:
SECTION 1. PLEDGE. The Pledgor hereby pledges to Aames, and
grants to Aames a security interest in, the following (the "PLEDGED
COLLATERAL"):
(i) the Pledged Shares and the certificates
representing the Pledged Shares, and all dividends, cash,
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instruments and other
property of any character whatsoever (including, without limitation, shares of
Common Stock) from time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of the Pledged Shares;
and
(ii) all proceeds of any and all of the foregoing
collateral (including, without limitation, proceeds that constitute property of
the types described above).
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures
the payment of all obligations, whether for principal, interest, fees, expenses
or otherwise, now or hereafter existing, of the Pledgor under the Aames Note and
under this Agreement (all such obligations of the Pledgor being the
"OBLIGATIONS"). Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Obligations and
would be owed by the Pledgor to Aames under the Aames Note or this Agreement but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving the Pledgor.
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Aames pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Aames. Aames shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to have registered in the
name of Aames or any of its nominees any or all of the Pledged Collateral,
subject only to the revocable rights specified in Section 6(a). For the better
perfection of Aames's rights in and to the Pledged Collateral, the Pledgor shall
forthwith, upon the pledge of any Pledged Collateral hereunder, cause such
Pledged Collateral to be registered in the name of Aames or such nominee or
nominees of Aames as Aames shall direct, subject only to the revocable rights
specified in Section 6(a). In addition, Aames shall have the right at any time
to exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor
represents and warrants as follows:
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(a) Neither the execution nor the delivery by the
Pledgor of this Agreement nor the consummation by the Pledgor of the
transactions contemplated hereby, nor compliance with nor fulfillment
by the Pledgor of the terms and provisions hereof, will conflict with
or result in a breach of the terms, conditions or provisions of or
constitute a default under any lease, contract, instrument, mortgage,
deed of trust, trust deed or deed to secure debt evidencing or securing
indebtedness for borrowed money, financing lease, law, rule,
regulation, judgment, order, award, decree or other restriction of any
kind to which the Pledgor is a party or by which he is bound.
(b) This Agreement has been duly executed and delivered
by the Pledgor and is the legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms.
(c) There is no action, lawsuit, claim, counterclaim,
proceeding, or investigation (or group of related actions, lawsuits,
claims, proceedings or investigations) pending or, to the knowledge of
the Pledgor, threatened, relating to or challenging the Pledgor's
obligations under this Agreement or the pledge of the Pledged
Collateral hereunder.
(d) The Pledgor is the legal and beneficial owner of
the Pledged Collateral free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest
created by this Agreement.
(e) The pledge of the Pledged Shares pursuant to this
Agreement creates a valid and perfected first priority security
interest in the Pledged Collateral, securing the payment of the
Obligations.
(f) No consent of any other person or entity and no
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required (i) for
the pledge by the Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this
Agreement by the Pledgor, (ii) for the perfection or maintenance of the
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security interest created hereby (including the first priority nature
of such security interest) or (iii) for the exercise by Aames of the
voting or other rights provided for in this Agreement or the remedies
in respect of the Pledged Collateral pursuant to this Agreement (except
as may be required in connection with any disposition of any portion of
the Pledged Collateral by laws affecting the offering and sale of
securities generally).
(g) There are no conditions precedent to the
effectiveness of the Pledgor's obligations under this Agreement that
have not been satisfied or waived.
SECTION 5. FURTHER ASSURANCES. (a) The Pledgor agrees that at
any time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that Aames may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Aames to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral.
(b) The Pledgor hereby authorizes Aames to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Pledged Collateral without the signature of the Pledgor
where permitted by law. A photocopy or other reproduction of this Agreement or
any financing statement covering the Pledged Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
SECTION 6. VOTING RIGHTS; DIVIDENDS, ETC. (a) so long as no
Event of Default (as defined in the Aames Note) or event which, with the giving
of notice or the lapse of time, or both, would become such an Event of Default
shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise or
refrain from exercising any and all voting and other consensual rights
pertaining to the Pledged Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the Aames
Note; PROVIDED, HOWEVER, that the Pledgor shall not exercise or refrain
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exercising any such right if, in Aames's judgment, such action would
have a material adverse effect on the value of the Pledged Collateral
or any part thereof.
(ii) The Pledgor shall be entitled to any and all
dividends paid in respect of the Pledged Collateral; PROVIDED, HOWEVER,
that any and all dividends paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of or in exchange for, any Pledged
Collateral, shall be, and shall be forthwith delivered to Aames to hold
as, Pledged Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of Aames, be segregated from the
other property or funds of the Pledgor, and be forthwith delivered to
Aames as Pledged Collateral in the same form as so received (with any
necessary endorsement or assignment); and PROVIDED, FURTHER, that the
after tax amount of any cash dividends, proceeds, or other
distributions paid in respect of the Pledged Collateral shall be
applied as an immediate prepayment in respect of the Aames Note, with
such prepayments to be applied first to the payment of all interest
accrued on, and then to the payment of unpaid principal of, the Aames
Note.
(iii) Aames shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights which it
is entitled to exercise pursuant to paragraph (i) above and to receive
the dividends which it is authorized to receive and retain pursuant to
paragraph (ii) above.
(b) Upon the occurrence and during the continuance of
an Event of Default or an event which, with the giving of notice or the lapse of
time, or both, would become an Event of Default:
(i) All rights of the Pledgor (x) to exercise or refrain from
exercising the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 6(a)(i) shall,
upon notice to the Pledgor by Aames, cease and (y) to receive the
dividends payments which it would otherwise be authorized to receive
and retain pursuant to Section 6(a)(ii) shall automatically cease, and
all such rights shall thereupon become vested in Aames (or its
designee), who shall thereupon have the sole
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right to exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as Pledged Collateral such
dividends.
(ii) All dividends which are received by the Pledgor contrary
to the provisions of paragraph (i) of this Section 6(b) shall be
received in trust for the benefit of Aames, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over to Aames as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
SECTION 7. TRANSFERS AND OTHER LIENS. The Pledgor agrees that
it will not (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral
or (ii) create or permit to exist any lien, security interest, option or other
charge or encumbrance upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement and except for any such
sale the proceeds from which are used to repay all unpaid principal of, and
accrued interest on, the Aames Note (with such proceeds first being applied to
accrued interest and then to principal).
SECTION 8. APPOINTMENT OF ATTORNEY-IN-FACT. The Pledgor hereby
appoints [_______] the Pledgor's attorney-in-fact, with full authority in the
place and stead of the Pledgor and in the name of the Pledgor or otherwise, from
time to time in Aames's discretion to take any action and to execute any
instrument that Aames may deem necessary or advisable to accomplish the purposes
of this Agreement (subject to the rights of the Pledgor under Section 6),
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any dividend or other distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same.
SECTION 9. AAMES MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein and does not cure such failure within 10 days
after its receipt of written notice from Aames, Aames may itself perform, or
cause performance of, such agreement, and the expenses of Aames incurred in
connection therewith shall be payable by the Pledgor under Section 12.
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SECTION 10. AAMES' DUTIES. The powers conferred on Aames
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the safe
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Aames shall have no duty as to any
Pledged Collateral as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not Aames has or is deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged Collateral.
Aames shall be deemed to have exercised reasonable care in the custody and
preservation of any Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Aames accords
its own property.
SECTION 11. REMEDIES UPON DEFAULT. If any Event of Default
shall have occurred and be continuing:
(a) Aames may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code in effect in
the State of Delaware at that time (the "Code") (whether or not the
Code applies to the affected Collateral), and may also, without notice
except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any
exchange or broker's board or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as Aames may deem
commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. Aames shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Aames may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(b) Any cash held by Aames as Pledged Collateral and
all cash proceeds received by Aames in respect of any sale of,
collection from or other realization upon all or any part of the
Pledged Collateral may, in the discretion of
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Aames, be held by Aames as collateral for, and/or then or at any time
thereafter be applied (after payment of any amounts payable to Aames
pursuant to Section 12) in whole or in part by Aames against, all or
any part of the Obligations in such order as Aames shall elect. Any
surplus of such cash or cash proceeds held by Aames and remaining after
payment in full of all the Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
SECTION 12. EXPENSES. The Pledgor will upon demand pay to
Aames the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which Aames may
incur in connection with (i) the exercise or enforcement of any of the rights of
Aames hereunder or (ii) the failure by the Pledgor to perform or observe any of
the provisions hereof.
SECTION 13. SECURITY INTEREST ABSOLUTE. The obligations of the
Pledgor under this Agreement are independent of the Obligations, and a separate
action or actions may be brought and prosecuted against the Pledgor to enforce
this Agreement. All rights of Aames and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(i) any lack of validity or enforceability of the Aames
Note any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the obligations, or any
other amendment or waiver of or any consent to any departure from the
Aames Note;
(iii) any taking, exchange, release or nonperfection of
any other collateral, or any taking, release or amendment or waiver of
or consent to departure from any guaranty, for all or any of the
Obligations;
(iv) any manner of application of collateral, or
proceeds thereof, to all or any of the Obligations, or any
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manner of sale or other disposition of any collateral for
all or any of the Obligations or any other assets of the Pledgor;
(v) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Pledgor.
SECTION 14. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed by the parties hereto, and no consent to any
departure by one party herefrom, shall in any event be effective unless the same
shall be in writing and signed by the other party, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 15. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and sent by express courier, telecopied, telegraphed,
telexed or hand-delivered, if to the Pledgor, at his address first set forth
above; and, if to Aames, at its address at 2 California Plaza, 350 South Grand
Avenue, Los Angeles, CA 90071, Attention: Cary Thompson; or, as to each party,
at such other address as shall be designated by such party in a written notice
to the other party. All such notices and communications shall, when sent by
express courier, be effective three days after being sent, when telecopied,
telegraphed, telexed or hand-delivered, be effective when telecopied, delivered
to the telegraph company, confirmed by telex answerback or delivered,
respectively.
SECTION 16. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER
AAMES NOTE. This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
payment in full of the Obligations and all other amounts payable under this
Agreement, (ii) be binding upon the Pledgor, its successors and assigns and
(iii) inure to the benefit of, and be enforceable by, Aames and its successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), Aames may assign or otherwise transfer all or any portion of its rights
and obligations under the Aames Note to any other person or entity, and such
other person or entity shall thereupon become vested with all the benefits in
respect thereof granted to Aames herein or otherwise. Upon the payment in full
of the Obligations and
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all other amounts payable under this Agreement, the security interest granted
hereby shall terminate and all rights to the Pledged Collateral shall revert to
the Pledgor. Upon any such termination, Aames will, at the Pledgor's expense,
return to the Pledgor such of the Pledged Collateral as shall not have been sold
or otherwise applied pursuant to the terms hereof and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 17. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
DELAWARE. Unless otherwise defined herein or in the Aames Note, terms defined in
Article 9 of the Code are used herein as therein defined.
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IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
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Neil Kornswiet
ACKNOWLEDGED AND AGREED:
AAMES FINANCIAL CORPORATION
By:_________________________
Name:
Title:
