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AAMES FINANCIAL CORPORATION
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INFORMATION STATEMENT
APRIL 28, 2000
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
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INTRODUCTION
This Information Statement is furnished in connection with the prior action
taken by the holders of a majority of shares of Series B Convertible Preferred
Stock, par value $0.001 (the "SERIES B PREFERRED STOCK") and the Series C
Convertible Preferred Stock, par value $0.001 (the "SERIES C PREFERRED STOCK"
and, together with the Series B Preferred Stock, the "PREFERRED STOCK"),
together as a single class, entitled to vote on certain corporate matters
relating to Aames Financial Corporation, a Delaware corporation (the "COMPANY").
This information statement is furnished in compliance with Section 14(c) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
On March 3, 2000, the Company's stockholders approved a one-for-five reverse
split of the outstanding shares of the Company's Common Stock and a one-for-five
reverse split of the outstanding shares of the Company's Series C Preferred
Stock (collectively, the "REVERSE STOCK SPLIT"). The Reverse Stock Split became
effective on April 14, 2000. All numerical references in this Information
Statement to any number of shares of Common Stock, par value $0.001 per share
(the "COMMON STOCK") or to the Series C Preferred Stock have been adjusted to
reflect the Reverse Stock Split even if such numerical references relate to
events that occurred on, or are as of, dates which preceded April 14, 2000.
As of March 20, 2000, there were 29,704,000 authorized shares of Series B
Preferred Stock of which 26,704,000 shares were issued and outstanding and there
were 107,122,664 authorized shares of Series C Preferred Stock of which
20,166,600 shares were issued and outstanding.
The Company has approximately 87.0 million shares of Series C Preferred
Stock which have been authorized, but have not yet been issued. The Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation")
requires the Company to obtain the consent of the holders of the Series C
Preferred Stock and Series B Preferred Stock, together as a single class to
issue those authorized but unissued shares of Series C Preferred Stock, or
securities convertible into those shares of Series C Preferred Stock. The
Company has entered into, or will enter into, agreements which commit the
Company to issue shares of Series C Preferred Stock, contingent upon the
effectiveness of consent of the holders of the Series B Preferred Stock and the
holders of the Series C Preferred Stock, together as a single class. The Board
of Directors has proposed that the holders of the Series B Preferred Stock and
the Series C Preferred Stock, together as a single class, consent to the future
issuance of up to 1 million shares of Series C Convertible Preferred Stock which
will enable the Company to issue the shares the Company has already committed to
issue and to issue additional shares in the future without incurring the cost
and delay associated with obtaining stockholder consent for each particular
issuance of Series C Preferred Stock (the "Proposal"). A more detailed
description of the Proposal is included in this Information Statement beginning
on Page 7.
On March 20, 2000, the holders of 26,704,000 shares (which represents
5,340,800 votes) of Series B Preferred Stock and 18,827,346 shares of Series C
Preferred Stock (the "VOTING STOCKHOLDERS"), or approximately 94.74% of the
voting power of the total outstanding shares of the Preferred Stock, together as
a single class, consented in writing to the Proposal and such vote was therefore
sufficient for approval of the Proposal.
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The Board of Directors of the Company (the "BOARD OF DIRECTORS") is not
soliciting any proxies or consents from any other stockholders in connection
with the Proposal. This Information Statement is being mailed on or about
April 28, 2000 to all holders of record as of April 14, 2000 of the Company's
Series C Preferred Stock who did not consent to the Proposal.
The principal executive offices of the Company are located at 350 S. Grand
Avenue, 52(nd) Floor, Los Angeles, California 90071 and its telephone number is
(323) 210-5000.
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DISSENTERS' RIGHTS OF APPRAISAL
No action was taken in connection with the Proposal by the Board of
Directors or the Voting Stockholders for which the DGCL, the Certificate of
Incorporation or the Bylaws provide a right of a stockholder to dissent and
obtain appraisal of or payment for such stockholder's shares.
INTEREST OF OFFICERS AND DIRECTORS IN MATTERS TO BE ACTED UPON
The Company entered into a Management Investment Agreement, effective
October 25, 1999, with A. Jay Meyerson, the Company's Chief Executive Officer
pursuant to which Mr. Meyerson agreed to purchase on a mutually agreed upon
date, 100,000 shares of Series C Preferred Stock for $5.00 per share (the
"MEYERSON SHARES"), of which 50% will be financed by the Company pursuant to a
secured note.
On October 22, 1999 David Sklar, the Company's former Executive Vice
President--Finance and Chief Financial Officer entered into a Retention
Agreement with the Company (the "RETENTION AGREEMENT") pursuant to which
Mr. Sklar agreed to purchase shares of Series C Preferred Stock worth a minimum
of $100,000 (the "SKLAR SHARES") on a mutually agreed upon date. Mr. Sklar
resigned on February 29, 2000 and the Company is currently in discussions with
Mr. Sklar regarding the terms and conditions of his departure.
The Company could not issue the Meyerson Shares or the Sklar Shares without
the consent of a majority of the outstanding shares of the Preferred Stock,
together as a single class. No other officers or directors of the Company have
any substantial interest in the Proposal, except insofar as such officers or
directors may be stockholders, or holders of derivative securities, of the
Company, in which case the implementation of the Proposal will affect them in
the same manner as it affects all other stockholders, or holders of derivative
securities, of the Company. However, as a result of the Proposal the Board of
Directors will have the discretion to issue shares of, or securities convertible
into shares of, Series C Preferred Stock including to officers and/or directors
of the Company.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 20, 2000, certain information
relating to the ownership of the Common Stock which includes shares of Common
Stock issuable upon the exercise of stock options and warrants and conversion of
Preferred Stock by (i) each person known by the Company to be the beneficial
owner of more than 5% of the outstanding shares of the Common Stock, (ii) each
of the Company's directors, (iii) each of the Company's Directors and certain of
its executive officers and (iv) all of the Company's executive officers and
directors as a group. Except as may be indicated in the footnotes to the table
and subject to applicable community property laws, each of such persons has sole
voting and investment power with respect to the shares beneficially owned.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the
Exchange Act. Under Rule 13d-3, certain shares may be deemed to be beneficially
owned by more than one person (such as where persons share voting power or
investment power). In addition, shares are deemed to be beneficially owned by a
person if the person has the right to acquire the shares (for example, upon
exercise of an option) within 60 days of the date as of which the information is
provided; in computing the percentage ownership of any person, the amount of
shares outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition rights. As
a result, the percentage of outstanding shares of any person as shown in the
following table does not necessarily reflect the person's actual voting power at
any particular date. On March 20, 2000 there were 6,212,764 shares of Common
Stock issued and outstanding.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
TITLE OF CLASS NAME AND ADDRESS SHARES OF CLASS
- -------------- ------------------------------------------------ ----------- --------
<S> <C> <C> <C>
Common Stock Specialty Finance Partners ..................... 24,418,146(1) 79.72%
54 Thompson Street
New York, New York 10012
Common Stock David H. Elliott(2)............................. 1,000 *
Common Stock Steven M. Gluckstern(3) (4)..................... 36,830(5) *
Common Stock Neil B. Kornswiet(6)............................ 481,572(7) 7.61%
Common Stock A. Jay Meyerson(2).............................. 22,500(8) *
Common Stock Adam M. Mizel(3)................................ 18,415(5) *
Common Stock Eric C. Rahe(3)................................. 3,735(5) *
Common Stock Mani A. Sadeghi(3).............................. 625(5) *
Common Stock David A. Spuria(3).............................. 2,490(5) *
Common Stock Georges C. St. Laurent, Jr.(2).................. 321,320(9) 4.93%
Common Stock Cary H. Thompson(2)............................. 384,184(10) 5.83%
Common Stock Joe Tomei(2).................................... 125(5) *
Common Stock All executive officers and directors as a group 791,099(11) 11.32%
(10 persons)..................................
Series B Specialty Finance Partners ..................... 26,704,000(14) 100.00%
Preferred 54 Thompson Street
Stock(12)(13) New York, New York 10012
Series C Specialty Finance Partners ..................... 18,827,346(15) 93.06%
Preferred Stock(12) 54 Thompson Street
New York, New York 10012
Series C Georges C. St. Laurent, Jr.(2).................. 310,000(16) 1.53%
Preferred Stock(12)
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF PERCENT
TITLE OF CLASS NAME AND ADDRESS SHARES OF CLASS
- -------------- ------------------------------------------------ ----------- --------
<S> <C> <C> <C>
Series C Cary H. Thompson(2)............................. 50,000(17) *
Preferred Stock(12)
Series C All executive officers, directors and nominees
Preferred Stock(12) as a group (10 persons)(18)................... 360,000(19) 1.78%
</TABLE>
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* Less than one percent.
(1) Includes shares of Common Stock issuable upon conversion of 26,704,000
shares of Series B Preferred Stock and 18,827,346 shares of Series C
Preferred Stock. In addition, Specialty Finance Partners, as a result of
the receipt of warrants to purchase 250,000 shares of Common Stock of the
Company by Capital Z Management, Inc., may be deemed to be the beneficial
owner of 250,000 shares of Common Stock of the Company. Specialty Finance
Partners is a Bermuda general partnership, 99.6% of which is owned by
Capital Z and 0.4% of which is owned by Equifin Capital.
(2) The address of each individual is in care of the Company at 350 S. Grand
Avenue, 52nd Floor, Los Angeles, California 90071.
(3) The address of each individual is in care of Capital Z Partners, 54
Thompson Street, New York, New York 10012.
(4) Mr. Gluckstern is a member of the Investment Committees of Capital Z
Partners, Ltd. and Capital Z Management, Inc. and, in such capacities has
the authority to approve the disposition of investments of Capital Z
Financial Services Fund II, L.P. and Capital Z Financial Services Private
Fund II, L.P. which are both general partners of Specialty Finance
Partners.
(5) Represents shares of Common Stock underlying warrants which are currently
exercisable. Each of Messrs. Gluckstern, Mizel, Rahe, Sadeghi, and Spuria
has disclaimed beneficial ownership of the Series B and Series C Preferred
Stock held by Capital Z or Specialty Finance.
(6) Mr. Kornswiet's address is care of Belin Rawlings & Badal, 11601 Wilshire
Boluvard, Suite 2200, Los Angeles, California 90025-1758, ATTN: Douglas
Rawlings.
(7) Includes 119,000 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days of
March 20, 2000. Mr. Kornswiet's employment with the Company ended during
the first quarter of fiscal 2000. The Company is in discussions with
Mr. Kornswiet regarding terms and conditions of his departure which may
affect the number of exercisable options and the expiration date of such
options.
(8) Represents shares of Common Stock underlying options which are currently
exercisable or which will become exercisable within 60 days of March 20,
2000. If the Fair Market Value of the Common Stock (as defined in the
Company's 1999 Stock Option Plan) reaches certain price targets, an
additional 67,500 options could vest within the next 60 days. Mr. Meyerson
was appointed as the Company's Chief Executive Officer on October 25, 1999
and as a member of the Board of Directors on November 1, 1999.
(9) Includes 1,320 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days of
March 20, 2000, and includes 310,000 shares of Common Stock issuable upon
conversion of Series C Preferred Stock.
(10) Includes 329,804 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days of
March 20, 2000 and includes 50,000 shares of Common Stock issuable upon
conversion of Series C Preferred Stock. If the Fair Market Value of the
Common Stock (as defined in the Company's 1999 Stock Option Plan) reaches
certain price targets, an additional 17,416 options could vest within the
next 60 days.
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(11) Includes 775,719 shares of Common Stock underlying options or warrants
which are currently exercisable or which will become exercisable within
60 days of March 20, 2000 and includes 360,000 shares of Common Stock
issuable upon conversion of Series C Preferred Stock.
(12) As the shares of Series B Preferred Stock and Series C Preferred Stock
were, on March 20, 2000, convertible into shares of Common Stock, they are
included in the Common Stock shares and percent of class numbers above.
(13) Specialty Finance Partners holds 100% of the issued and outstanding
Series B Preferred Stock. None of the Directors, nominees and Named
Executive Officers beneficially hold any shares of Series B Preferred
Stock.
(14) Convertible into 5,340,800 shares of Common Stock.
(15) Convertible into 18,827,346 shares of Common Stock.
(16) Convertible into 310,000 shares of Common Stock.
(17) Convertible into 50,000 shares of Common Stock.
(18) Other than in the case of Messrs. St. Laurent and Thompson, none of the
Directors or executive officers beneficially hold any shares of Series C
Preferred Stock.
(19) Convertible into 360,000 shares of Common Stock.
EXECUTIVE COMPENSATION
Information with respect to the executive compensation of the Company is
incorporated herein by this reference to the Company's definitive Proxy
Statement for the Company's 1999 Annual Meeting of Stockholders which was filed
with the Securities and Exchange Commission (the "SEC") on February 4, 2000 and
mailed to all of the holders of the Common Stock, Series B Preferred Stock and
Series C Preferred Stock.
FINANCIAL AND OTHER INFORMATION
The Company's financial statements are incorporated herein by this reference
to the Company's Annual Report of Form 10-K for the fiscal year ending June 30,
1999 (filed with the SEC on September 3, 1999, the Company's Form 10-K/A filed
with the SEC on August 6, 1999 and the Company's Quarterly Report of Form 10-Q
for the quarter ending September 30, 1999 (filed with the SEC on November 15,
1999) and the quarter ending December 31, 2000 (filed with the SEC on
February 14, 2000).
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THE PROPOSAL TO ISSUE SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK
GENERAL
The Company has approximately 88.2 million shares of Series C Preferred
Stock which have been authorized, but have not yet been issued. The Company's
Certificate of Incorporation requires the Company to obtain the consent of the
holders of the Series C Preferred Stock and Series B Preferred Stock, together
as a single class to issue those authorized but unissued shares of Series C
Preferred Stock, or securities convertible into shares of Series C Preferred
Stock. The Company has entered into, or will enter into, agreements which commit
the Company to issue shares of Series C Preferred Stock, contingent upon the
consent of the holders of the Series B Preferred Stock and the holders of the
Series C Preferred Stock, together as a single class. The Board of Directors has
proposed that the holders of the Series B Preferred Stock and the Series C
Preferred Stock, together as a single class, consent to the future issuance of
up to 1 million shares of Series C Convertible Preferred Stock, to enable the
Company to issue the shares the Company has already committed to issue, and to
issue additional shares in the future without incurring the cost and delay
associated with obtaining stockholder consent for each particular issuance of
Series C Preferred Stock.
EFFECT OF APPROVAL OF THE PROPOSAL
The Company intends to issue shares of, or securities convertible into
shares of, Series C Preferred Stock to certain management investors, lenders,
consultants or other third parties that the Company does business with from time
to time. As of the date 20 days after the date this Information Statement is
mailed to stockholders (the "NOTICE EFFECTIVE DATE"), the Board of Directors
will have the authority to issue up to 1 million shares of, or securities
convertible into shares of, Series C Preferred Stock in accordance with the
Company's Certificate of Incorporation, the Company's Bylaws and the General
Corporation Law of the State of Delaware.
The Board of Directors has, from time to time, made the determination that
it would be in the best interests of the Company to issue some of the authorized
but unissued shares of Series C Preferred Stock. The Board of Directors made a
determination to issue shares of the Series C Preferred Stock, for appropriate
consideration, to the following parties in the following amounts:
<TABLE>
<CAPTION>
NUMBER PRICE
PURCHASER OF SHARES PER SHARE
- --------- --------- ---------
<S> <C> <C>
A. Jay Meyerson.......................................... 100,000 $5.00
David A. Sklar........................................... 20,000 $5.00
OWC Capital SPV II, LP................................... 168,400 $5.00
</TABLE>
The price per share for each of the commitments to issue shares of Series C
Preferred Stock listed above is the same price per share as all of the
previously issued shares of Series C Preferred Stock. The Board of Directors
reserves the right to accept different legally valid consideration for any
future issuances of shares of Series C Preferred Stock pursuant this Proposal.
Current holders of the Company's Series C Preferred Stock would be affected
by the proposal in that the total number of shares of Series C Preferred Stock
outstanding will increase by up to 1 million shares.
TERMS OF THE SERIES C CONVERTIBLE PREFERRED STOCK.
The following is a summary of the material terms of the Series C Preferred
Stock:
- RANK. For dividends or distribution of assets upon liquidation,
dissolution or winding up of the Company, the Series C Preferred Stock and
the Series B Preferred Stock rank senior to each other class or series of
preferred stock and prior to the Common Stock and all subsequently issued
classes and series of capital stock. The Series C Preferred Stock ranks in
parity with the Series B Preferred Stock.
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- LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Company, the holders of the Series C Preferred Stock will receive
$5.00 per share plus all accrued but unpaid dividends.
- DIVIDENDS. The holders of Series C Preferred Stock will receive cash
dividends at an annual rate of 6.5%, payable quarterly in cash. The
Company has the option to accrue and not pay dividends for the first two
years after issuance of the shares.
- RESTRICTIONS ON DIVIDENDS. So long as any shares of Series C Preferred
Stock and Series B Preferred Stock are outstanding, the Company may not
pay any dividends on or repurchase, redeem or retire any junior
securities.
- VOTING RIGHTS. Each share of Series C Convertible Preferred Stock will be
entitled to one vote. The holders of the Series C Preferred Stock are
entitled to vote with the holders of the Common Stock and the holders of
the Series B Preferred Stock, as a single class, on all matters presented
to the holders of the Common Stock except that the holders of the
Series C Convertible Stock may not vote for the election of directors.
- RESTRICTIONS. Without the consent of the holders of the Series C Preferred
Stock and the Series B Preferred Stock, voting as a single class, the
Company may not take any of the following actions:
- authorize, create or issue, or increase the authorized amount of any
senior securities, parity securities or any security convertible into a
class or series of capital stock prior to the mandatory redemption date
of the Series B Preferred Stock;
- reorganize or reclassify outstanding shares of common stock, enter into
any consolidation or merger, or sell or convey all or substantially all
of its property;
- amend, alter or repeal any provisions of its Certificate of
Incorporation or Bylaws to the extent that such action would have a
material adverse effect on the rights of the Series C Preferred Stock
or Series B Preferred Stock;
- REDEMPTION. On February 10, 2009, the Company may redeem all outstanding
shares of Series C Preferred Stock by paying the stated value per share
($5.00 per share) plus all accrued but unpaid dividends in cash out of
funds legally available for such purpose.
- CONVERSION. Each share of Series C Convertible Preferred Stock will be
convertible into one share of common stock.
VOTE REQUIRED TO APPROVE THE PROPOSAL
The affirmative vote of the holders of a majority of the votes entitled to
be cast by holders of all outstanding shares of the Preferred Stock, voting
together as a single class.
STOCKHOLDER PROPOSALS AND SUBMISSIONS
No security holder entitled to consent has submitted to the Company a
proposal which is accompanied by notice of such security holders' intention to
present the proposal for action at a future meeting of the stockholders of the
Company.
AAMES FINANCIAL CORPORATION
[SIGNATURE]
John F. Madden, Jr.
SECRETARY
April 28, 2000
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