<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 19, 2000
AAMES FINANCIAL CORPORATION
(Exact name of Registrant as Specified in Its Charter)
DELAWARE 0-19604 95-340340
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
350 South Grand Avenue, 52nd Floor
Los Angeles, California 90071
(Address of Principal Executive Offices)
(323) 210-5000
--------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
NA
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. ANNUAL SHAREHOLDERS MEETING
Reference is made to the Preferred Stock Purchase Agreement of
Registrant, dated as of May 19, 2000, by and between the Registrant and
Specialty Finance Partners (the "STOCK PURCHASE AGREEMENT"), which contains
information meeting the requirements of this Item 5 and is incorporated
herein by this reference. A copy of the Preferred Stock Purchase Agreement is
attached to this Form 8-K as Exhibit 10.38.
Reference is made to the two press releases of Registrant issued on May
19, 2000 which contains information meeting the requirements of this Item 5 and
is incorporated herein by this reference. A copy of the press releases are
attached to this Form 8-K as Exhibits 99.1 and 99.2.
ITEM 6. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
(c) EXHIBITS
<C> <S>
10.38 Preferred Stock Purchase Agreement, dated as of May
19, 2000, by and between the Registrant and Specialty
Finance Partners
99.1 Press release issued May 19, 2000.
99.2 Press release issued May 19, 2000.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
AAMES FINANCIAL CORPORATION
Dated: May 23, 2000 By: /s/ Ralph W. Flick
--------------------------
Ralph W. Flick
Assistant Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
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<C> <S>
10.38 Preferred Stock Purchase Agreement, dated as of May
19, 2000, by and between the Registrant and Specialty
Finance Partners
99.1 Press release issued May 19, 2000.
99.2 Press release issued May 19, 2000.
</TABLE>
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EXHIBIT 10.38
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of
May 19, 2000, between Aames Financial Corporation, a Delaware corporation (the
"COMPANY") and Specialty Finance Partners, a Bermuda general partnership (the
"PURCHASER").
WHEREAS, each of the Company and the Purchaser has determined
to enter into this Agreement, pursuant to which the Purchaser has agreed to
purchase from the Company, and the Company has agreed to issue and sell to the
Purchaser on the Initial Closing Date and the Additional Closing Date (each as
hereinafter defined), shares of the Company's Series C Convertible Preferred
Stock, par value $0.001 per share (the "SERIES C PREFERRED STOCK"), having the
rights, preferences, privileges and restrictions set forth in the Company's
Certificate of Incorporation, as attached hereto as EXHIBIT A (the "CERTIFICATE
OF INCORPORATION"), the aggregate number of which shares to be sold and
purchased pursuant to this Agreement is to be determined in accordance with
Section 1 of this Agreement;
WHEREAS, on the Initial Closing (as hereinafter defined) the
Company will issue to Purchaser a warrant (the "WARRANT") to purchase five
million (5,000,000) shares of Series C Preferred Stock at an exercise price
equal to the Purchase Price (as defined below), such Warrant to be in the form
attached hereto as EXHIBIT B.
WHEREAS, the Company and the Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
SECTION 1. INITIAL ISSUANCE, SALE AND DELIVERY.
(a) Upon the terms and subject to the conditions set forth
herein, and in reliance upon the representations and warranties
hereinafter set forth, the Company shall issue, sell and deliver to the
Purchaser, the number of shares of Series C Preferred Stock (such
shares of Series C Preferred Stock are referred to collectively herein
as the "SHARES")equal to the quotient obtained by dividing (i)
50,000,000 by (ii) the lower of (x) $0.90 per share or (y) the average
closing price of the Company's Common Stock, par value $0.001 per share
(the "COMMON STOCK") on the New York Stock Exchange (the "NYSE") for
the five (5) days prior to the Initial Closing Date (as defined below)
(the "PURCHASE PRICE").
(b) The total aggregate purchase price for the Shares to be
issued at the Initial Closing and the Additional Closing (as
hereinafter defined) and the Warrant shall be Fifty Million Dollars
($50,000,000).
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(c) The purchase and sale of 40 million of the Shares (the
"INITIAL Shares")shall occur at a time and place mutually agreed upon
by the parties for such closing, which shall be the first date on which
the closing conditions described in Sections 7 and 8 have been
satisfied (the "INITIAL CLOSING DATE"), and at the closing of such
purchase and sale of Shares (the "INITIAL CLOSING"):
(i) the Company shall deliver to the Purchaser
certificates representing the Initial Shares (the "INITIAL
CERTIFICATES"), duly endorsed for transfer, transferring to
the Purchaser good and marketable title to such Initial
Shares, free and clear of all liens and encumbrances; and
(ii) the Initial Certificates shall be stamped or
otherwise imprinted with the legend as set forth in Section
3(c); and
(iii) the Company will issue to the Purchaser the
Warrant; and
(iv) each of the Company and Purchaser shall deliver
such other documents as necessary to comply with the
provisions of Sections 7 and 8 of this Agreement.
SECTION 1.1. ADDITIONAL ISSUANCES, SALE AND DELIVERY
(a) Upon the terms and subject to the conditions set forth
herein, and in reliance upon the representations and warranties
hereinafter set forth, on the Additional Closing Date (as defined
below) the Company shall issue, sell and deliver to the Purchaser the
number of shares of Series C Preferred Stock equal to (i) the total
number of Shares as determined in Section 1(a) above, minus (ii) the
Initial Shares (the "ADDITIONAL SHARES").
(b) Such sales and purchases shall occur at a time and place
mutually agreed upon by the parties for such closing, if the following
conditions have been met (the "ADDITIONAL CLOSING DATE"):
(i) The Initial Closing Date shall have occurred;
and
(ii) The closing conditions in Sections 7 and 8 shall
have been satisfied with respect to the Additional Shares; and
(iii) the Company shall deliver to the Purchaser
certificates representing the Additional Shares (the
"ADDITIONAL CERTIFICATES"), duly endorsed for transfer,
transferring to the Purchaser good and marketable title to
such Additional Shares, free and clear of all liens and
encumbrances; and
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(iv) the Additional Certificates shall be stamped or
otherwise imprinted with the legend as set forth in Section
3(c); and
(v) each of the Company and Purchaser shall deliver
such other documents as necessary to comply with the
provisions of Sections 7 and 8 of this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Purchaser as follows:
(a) The Company is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Delaware and
is in good standing under such laws. The Company has requisite
corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted. The
Company is duly qualified to do business as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a
material adverse affect on the Company's business.
(b) The Company has all requisite legal and corporate power
and authority to execute and deliver this Agreement, to sell and issue
the Shares and to issue the Warrant, the shares of Series C Preferred
Stock issuable upon the exercise of the Warrant (the "WARRANT SHARES")
and to issue the Company's Common Stock, par value $0.001 per share
(the "COMMON STOCK") which underlies the conversion of the Shares and
the Warrant Shares (the "CONVERSION STOCK"), and to carry out and
perform its obligations under the terms of this Agreement and the
Warrant.
(c) As of May 18, 2000, there were 400,000,000 shares of
Common Stock authorized of which 6,212,713 shares were issued and
outstanding and 29,840,133 are reserved for issuance (i) upon
conversion of currently outstanding Series B Convertible Preferred
Stock, par value $0.001 per share (the "SERIES B PREFERRED STOCK") and
Series C Preferred Stock, and (ii) under existing stock option plans,
warrants and convertible debt.
(d) As of May 18, 2000, there were 200,000,000 shares of
preferred stock authorized, of which (i) 500,000 have been designated
as Series A Preferred Stock, par value $0.001 per share (of which there
are no shares currently issued or outstanding); (ii) 29,704,000 have
been designated as Series B Preferred Stock (26,704,000 of which are
issued and outstanding; none of which have been otherwise reserved for
issuance); (iii) 107,122,664 have been designated as Series C Preferred
Stock (20,166,600 of which are issued and outstanding; none of which
have been otherwise reserved for issuance). None of shares of any of
the classes of preferred stock described in this Section 2(d)are, as of
the date hereof, listed on any trading exchange.
(e) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement, the
authorization, sale, issuance and delivery of
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the Shares, the Warrant, the Warrant Shares and the Conversion Stock,
and the performance of all of the Company's obligations under this
Agreement and the Warrant has been taken or will be taken prior to the
Initial Closing or the Additional Closing, as applicable. This
Agreement and the Warrant, when executed and delivered by the Company,
shall constitute valid and binding obligations of the Company,
enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies. The Shares, when issued in
compliance with the provisions of this Agreement will be validly
issued, fully paid and nonassessable, and will have the rights,
preferences and privileges described in the Certificate of
Incorporation. The Conversion Stock has been duly and validly reserved
and, when issued in compliance with the provisions of this Agreement,
the Warrant and the Certificate of Incorporation, will be validly
issued, fully paid and nonassessable. The Warrant Shares shall be duly
and validly reserved as of the Additional Closing Date and, when issued
shall be in compliance with the provisions of this Agreement, the
Warrant and the Certificate of Incorporation, and will be validly
issued, fully paid and nonassessable. The Shares, the Warrant Shares
and the Conversion Stock will be free of any liens or encumbrances,
assuming the Purchaser takes the shares with no notice thereof, other
than any liens or encumbrances created by or imposed upon the holders;
PROVIDED, HOWEVER, that the Shares, the Warrant Shares and the
Conversion Stock are subject to restrictions on transfer under state
and/or federal securities laws.
(f) The Company is not in violation or default of any term or
provision of the Certificate of Incorporation or the Company's Bylaws,
as amended (the "BYLAWS"), or in any material respect of any term or
provision of any indebtedness, indenture, material agreement, material
instrument, judgment, order or decree by which it is bound, and to its
knowledge is not in violation of any statute, rule or regulation
applicable to the Company where such violation would materially and
adversely affect the Company. The execution and performance of the
transactions contemplated by this Agreement and the Warrant and
compliance with their provisions by the Company, and the issuance of
the Shares, the Warrant Shares and the Conversion Stock, will not
violate any applicable federal or state law, rule or regulation where
such violation would materially and adversely affect the Company, and
will not, in any material respect, conflict with, result in any breach
of any of the terms or provisions of, or constitute a default under or
require a consent or waiver under the Certificate of Incorporation or
Bylaws or any indebtedness, indenture, material agreement, material
instrument, judgment, order or decree by which the Company is bound.
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<PAGE>
(g) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of
the Company is required in connection with the valid execution and
delivery of this Agreement, the Warrant, or the offer, sale or issuance
of the Shares, the Warrant Shares and the Conversion Stock, or the
consummation of any other transaction contemplated hereby, except: (i)
the filing of a definitive Information Statement with the Securities
and Exchange Commission (the "SEC") and subsequent mailing of such
Information Statement at least twenty (20) calendar days prior to the
Initial Closing Date pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (the "EXCHANGE ACT"), (ii) the approval of the
NYSE prior to the Initial Closing Date, or (iii) the filing of a
definitive Information Statement with the SEC and subsequent mailing of
such Information Statement at least twenty (20) calendar days prior to
the Additional Closing Date pursuant to Section 14(c) of the Exchange
Act.
(h) Subject to the accuracy of the Purchaser's representations
in Section 3 hereof, the offer, sale and issuance of the Shares, the
Warrant Shares and the Conversion Stock to be issued in conformity with
the terms of this Agreement or the Warrant constitute transactions
exempt from the registration requirements of Section 5 of the
Securities Act of 1933 (the "SECURITIES ACT") and is in compliance with
applicable state securities laws.
(i) Neither this Agreement nor the Warrant nor any information
in any Exhibit attached hereto or otherwise furnished to Purchaser,
when taken as a whole, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the
statement contained herein and therein not misleading in light of the
circumstance under which they were made. The Company has provided
Purchaser with all the information such Purchaser has requested.
(j) As of the respective dates all documents filed by the
Company pursuant to the Exchange Act or Securities Act prior to the
date hereof and including the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000 to be filed on or before May 22,
2000 (the "SEC DOCUMENTS"), or, in the case of registration statements
as of their respective effective dates, complied in all material
respects with the requirements of the Exchange Act or the Securities
Act, as applicable. None of the SEC Documents, as of their respective
dates, contained any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(k) The transactions contemplated by this Agreement have been
approved by at least a majority of those members of the Board of
Directors who are not affiliated with the Purchaser.
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(l) The Conversion Stock, when issued, shall have rights
issued pursuant to the Rights Agreement (as defined below) on a Common
Stock equivalent basis.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company as follows:
(a) The Shares, the Warrant Shares and the Conversion Stock to
be purchased by such Purchaser will be acquired for investment for the
Purchaser's own account and not with a view to the resale or
distribution of any part thereof, except in compliance with the
provisions of the Securities Act, or an exemption therefrom, and in
compliance with the terms of this Agreement. The Purchaser is an
Accredited Investor as defined under Rule 501(a) under the Securities
Act.
(b) The Purchaser understands that the Shares, the Warrant
Shares and the Conversion Stock 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, Warrant Shares and the Conversion Stock may be resold without
registration under the Securities Act only in certain limited
circumstances.
(c) The Purchaser further agrees that each certificate
representing the Shares, Warrant Shares and the Conversion Stock 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 (THE "ACT") AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SUCH SECURITIES HAVE BEEN REGISTERED
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
(d) The Purchaser is a general partnership duly organized and
validly existing under, and by virtue of, the laws of Bermuda and is in
good standing under such laws. The Purchaser has requisite corporate
power and authority to own and operate its properties and assets, and
to carry on its business as presently conducted.
(e) The Purchaser has all requisite legal and other power and
authority to execute and deliver this Agreement and receive issuance of
the Warrant, to purchase the Shares and the Warrant Shares and to carry
out and perform its obligations under the terms of this Agreement and
the Warrant.
(f) All action on the part of the Purchaser, its officers,
managers and members necessary for the authorization, execution,
delivery and performance of this
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Agreement and the Warrant, purchase and receipt of the Shares, the
Warrant Shares and the Conversion Stock, and the performance of all of
the Purchaser's obligations under this Agreement and the Warrant have
been taken or will be taken prior to the Initial Closing Date or the
Additional Closing Date. This Agreement and the Warrant, when executed
and delivered by the Company, shall constitute valid and binding
obligations of the Purchaser, enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
(g) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of
the Purchaser is required in connection with the valid execution and
delivery of this Agreement or the Warrant, or the purchase of the
Shares, the Warrant Shares or the Conversion Stock, or the consummation
of any other transaction contemplated hereby.
SECTION 4. [Reserved]
SECTION 5. PUBLIC FILINGS. The Purchaser hereby acknowledges
receipt of the Company's filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 and the Securities Exchange Act.
SECTION 6. FURTHER ASSURANCES. The Purchaser 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 7. CONDITIONS TO CLOSING OBLIGATION OF PURCHASER.
Purchaser's obligation to purchase the Shares and the Warrant on the Initial
Closing Date or the Additional Closing Date, as applicable is, at the option of
Purchaser, subject to the fulfillment of the following conditions:
(a) The representations and warranties made by the Company in
Section 2 hereof shall be true and correct when made, and shall be true
and correct as of the Initial Closing Date or the Additional Closing
Date, as applicable.
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Initial
Closing Date or the Additional Closing Date, as applicable, shall have
been performed or complied with in all material respects.
(c) The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares
and the issuance of the Warrant.
(d) All necessary filings specifying the rights and privileges
of the Shares and the Warrant Shares shall have been filed with the
Delaware Secretary of State and other relevant government entitled.
(e) Since the date of this Agreement, there shall not have
occurred (i) a Material Adverse Change or (ii) any change or event
which is reasonably likely to have a
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Material Adverse Change, PROVIDED, however, that in determining whether
a Material Adverse Change has occurred, there shall be excluded any
matters disclosed by the Company in any SEC Document filed prior to the
date hereof. For the purpose of this Agreement, a "Material Adverse
Change" shall mean (i) a material adverse change in or effect with
respect to the business, operations, assets, properties, financial
condition, results of operations, regulatory condition or prospects of
the Company and any wholly-owned subsidiary of the Company taken as a
whole; or (ii) any impairment in any material respect of the Company's
ability to perform any of its obligations or agreements hereunder to
which it is a party or consummate the transactions contemplated hereby.
(f) All necessary approvals or waivers have been received by
the Company from the NYSE.
(g) The Company has complied with Section 14(c) of the
Exchange Act as described in Section 2(g) of this Agreement and all
applicable waiting periods have elapsed prior to the Initial Closing
Date or Additional Closing Date, as applicable.
(h) The Company shall have taken all necessary action to amend
the Rights Agreement, dated as of June 21, 1996, between the Company
and Wells Fargo Bank (the "RIGHTS AGREEMENT"), pursuant to which
agreement the Company issued preferred stock purchase rights to its
stockholders on July 12, 1996 ("EXISTING RIGHTS"), each of which
Existing Rights, when exercisable, entitles the holder to purchase from
the Company one one-hundredth of a share of Series A Preferred Stock at
a price of $100.00 (subject to anti-dilution adjustment) so as to
prevent the Existing Rights from becoming exercisable upon the
consummation of the transactions contemplated hereby.
(i) The Company shall have delivered to the Purchaser any
required consent, amendment, waiver or extension, in a form acceptable
to Purchaser, from any material provision in any material debt or
securitization document to which the Company (or any of its
subsidiaries) is a party and which material provision the Company has
breached, or that the Company would breach, on or before the Initial
Closing.
(j) The Company shall have received an opinion from a
nationally recognized investment banking firm that the transactions
contemplated in this Agreement are fair, from a financial standpoint,
to the Company and its subsidiaries.
SECTION 8. CONDITIONS TO CLOSING OBLIGATION OF THE COMPANY.
The Company's obligation to sell the Shares and issue the Warrant to the
Purchaser on the Initial Closing Date or the Additional Closing Date, as
applicable is, at the option of the Company, subject to the fulfillment of the
following conditions:
(a) The representations and warranties made by the Purchaser
in Section 3 hereof shall be true and correct when made, and shall be
true and correct as of the Initial Closing Date or the Additional
Closing Date, as applicable.
(b) All covenants, agreements and conditions contained in this
Agreement and the Warrant to be performed by the
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Purchaser on or prior to the Initial Closing Date or the Additional
Closing Date shall have been performed or complied with in all material
respects.
SECTION 9. NOTICES. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and
sufficiently given if delivered personally or 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 Aames Financial Corporation, 2
California Plaza, 350 South Grand Avenue, Los Angeles, California 90071,
Attention: General Counsel, telecopy number (323) 210-5026; and (ii) if to the
Purchaser, care of Capital Z Partners, 54 Thompson Street, New York, New York
10012 or by telecopy to (212) 965-2301 with a copy to Thomas Cerabino, Esq.,
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
telecopy number (212) 728-8111.
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 when one or more counterparts
have been signed by each of the Company and the Purchaser and delivered to the
Company and the Purchaser.
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. Except as otherwise
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, permitted assigns and administrators of the
parties hereto, 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 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
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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 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 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.
SECTION 18. EXPENSES. The Company hereby agrees to pay or
reimburse the Purchaser and its affiliates for all reasonable out-of-pocket
expenses (including the reasonable fees and disbursements of legal counsel and
investment and other advisors and consultants and expenses) incurred in
connection with the transactions contemplated by this Agreement, whether
incurred before or after the date hereof and whether or not such transactions
contemplated hereby are made or effected. Any such amounts shall be paid or
reimbursed promptly after invoicing thereof by the Purchaser which invoicing
shall be accompanied by supporting detail evidencing such expenses.
SECTION 19. SURVIVAL. The representations, warranties,
covenants and agreements made herein by all parties hereto shall survive the
closing of the transactions contemplated hereby.
SECTION 20. WAIVERS. No delay or omission to exercise any
right, power or remedy accruing to any party hereto upon any breach or default
of the other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach or default
or acquiescense therein; nor shall any waiver of any such breach or default be
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deemed a waiver of any other breach or default theretofore or thereunder
ocurring. Any waiver, permit, consent or approval of any kind or character on
the part of either party of any breach or default under this Agreement, or any
waiver of any part or any provision or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the Company, the Purchaser have caused
this Agreement to be duly executed and delivered as of the date first written
above.
AAMES FINANCIAL CORPORATION
By:___________________________________
Name: A. Jay Meyerson
Title: Chief Executive Officer
SPECIALTY FINANCE PARTNERS
By its General Partner
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:____________________
Name:
Title:
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EXHIBIT A
CERTIFICATE OF INCORPORATION
CERTIFICATE OF INCORPORATION
OF
AAMES FINANCIAL CORPORATION
FIRST: The name of this corporation is Aames Financial
Corporation (the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may now or hereafter be organized
under the General Corporation Law of the State of Delaware as set forth in Title
8 to the Delaware Code (the "GCL").
FOURTH: The total number of shares which the Corporation shall
have authority to issue is 8,000,000 consisting of 7,000,000 shares of common
stock, par value $0.001 per share (the "Common Stock"), and 1,000,000 shares of
preferred stock, par value $0.001 per share (the "Preferred Stock").
Shares of the Preferred Stock of the Corporation may be issued
from time to time in one or more classes or series, each of which class or
series shall have such distinctive designation or title as shall be fixed by the
Board of Directors of the Corporation (the "Board of Directors") prior to the
issuance of any shares thereof. Each such class or series of Preferred Stock
shall have such voting powers, full or limited, or no voting powers, and such
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated in
such resolution or resolutions providing for the issue of such class or series
of Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof pursuant to the authority hereby
expressly vested in it, all in accordance with the laws of the State of
Delaware.
FIFTH: All rights to vote and all voting power shall be
vested in the Common Stock and the holders thereof shall be entitled at all
elections of directors to one (1) vote per share. Special meetings of the
stockholders for any purpose or purposes may be called at any time only by the
Board of Directors, the Chairman of the Board or by the Chief Executive Officer
or President of the Corporation.
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SIXTH: The directors of the Corporation shall be divided
into three classes, designated Class I, Class II and Class III. The term of
the initial Class I directors shall terminate on the date of the 1994 annual
meeting of stockholders; the term of the initial Class II directors shall
terminate on the date of the 1993 annual meeting of stockholders and the term
of the initial Class III directors shall terminate on the date of the 1992
annual meeting of stockholders. At each annual meeting of stockholders
beginning in 1992, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly
equal as reasonably possible, and any additional directors of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class,
but in no case will a decrease in the number of directors shorten the term of
any incumbent directors. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor shall
be elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the Board
of Directors, howsoever resulting, shall be filled only by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director and not by the stockholders. Any director elected to fill a vacancy
shall hold office for a term that shall coincide with the terms of the class
to which such director shall have been elected.
Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the Corporation
may be removed from office at any time, for cause only, by the affirmative vote
of the holders of a majority of the outstanding shares of the Corporation then
entitled to vote generally in the election of directors, considered for purposes
of this Article SIXTH as one class.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation or the resolution or resolutions
adopted by the Board of Directors pursuant to the second paragraph of Article
FOURTH applicable thereto, and such directors so elected shall not be divided
into classes pursuant to this Article SIXTH unless expressly provided by such
terms.
SEVENTH: Elections of directors at an annual or
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special meeting of stockholders need not be by written ballot unless the
Bylaws of the Corporation shall otherwise provide.
Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting duly noticed and called, as
provided in the Bylaws of the Corporation, and may not be taken by written
consent of the stockholders pursuant to the GCL.
EIGHTH: The officers of the Corporation shall be chosen in
such a manner, shall hold their offices for such terms and shall carry out
such duties as are determined solely by the Board of Directors, subject to
the right of the Board of Directors to remove any officer or officers at any
time with or without cause.
NINTH: (A) The Corporation shall indemnify to the full
extent authorized or permitted by law (as now or hereafter in effect) any
person made, or threatened to be made, a defendant or witness to any action,
suit or proceeding (whether civil or criminal or otherwise) by reason of the
fact that he, his testator or intestate, is or was a director or officer of
the Corporation or by reason of the fact that such director or officer, at
the request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or enterprise, in
any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment or repeal of this Section A of Article NINTH
shall apply to or have any effect on any right to indemnification provided
hereunder with respect to any acts or omissions occurring prior to such
amendment or repeal.
(B) No director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such a director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to the extent
provided by applicable law (i) for any breach of the Director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
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law, (iii) pursuant to Section 174 of the GCL, or (iv) for any transaction
from which such director derived an improper personal benefit. No amendment
to or repeal of this Section B of Article NINTH shall apply to or have any
effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
(C) In furtherance and not in limitation
of the powers conferred by statute:
(i) the Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify against such liability under the provisions of
law; and
(ii) the Corporation may create a
trust fund, grant a security interest and/or use other means (including, without
limitation, letters of credit, surety bonds and/or other similar arrangements),
as well as enter into contracts providing indemnification to the full extent
authorized or permitted by law and including as part thereof provisions with
respect to any or all of the foregoing to ensure the payment of such amounts as
may become necessary to effect indemnification as provided therein, or
elsewhere.
TENTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to adopt,
repeal, alter, amend or rescind the Bylaws of the Corporation.
ELEVENTH: The Corporation reserves the right to repeal, alter,
amend or rescind any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
on stockholders herein are granted subject to this reservation.
TWELFTH: The name and mailing address for the
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Incorporator of the Corporation is as follows: Barbara J. Gillen, 10940
Wilshire Boulevard, Suite 600, Los Angeles, California 90024-3902.
IN WITNESS WHEREOF, the undersigned has executed the
Certificate of Incorporation this 2nd day of October, 1991.
/s/ Barbara J. Gillen
---------------------
Barbara J. Gillen
Incorporator
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
AAMES FINANCIAL CORPORATION, a corporation organized and existing under
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of Aames Financial
Corporation (the "Corporation"), resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of the Corporation,
declaring the amendment to be advisable and calling a meeting of the
stockholders of the Corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation
be amended by changing Article FOURTH to provide that the authorized
number of shares shall be 11,000,000, consisting of 10,000,000
shares of common stock, par value $0.001 per shares, and 1,000,000
shares of preferred stock, par value $0.001 per share.
SECOND: That thereafter, pursuant to resolution of its Board
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of Directors, the annual meeting of the stockholders of the Corporation was
duly called and held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendment.
THIRD: That the amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporate law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Gary K. Judis, its Chief Executive Officer, and Bobbie J. Burroughs,
its Secretary, this 25 day of April, 1994.
By:/s/ Gary K. Judis
----------------------------
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Chief Executive Officer
ATTEST: /s/ Bobbie J. Burroughs
------------------------
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Secretary
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AAMES FINANCIAL CORPORATION
(A DELAWARE CORPORATION)
The undersigned GARY JUDIS and BOBBIE BURROUGHS, the President and
Secretary, respectively, of Aames Financial Corporation (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "DGCL"), do hereby certify
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pursuant to Section 103 of the DGCL:
The text of Article FOURTH of the Certificate of Incorporation of the
Corporation is hereby amended and restated to read in full as follows:
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 51,000,000, consisting of 50,000,000 shares
of common stock, par value $0.001 per share (the "Common Stock")
and 1,000,000 shares of preferred stock, par value $0.001 per share
(the "Preferred Stock").
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to the Certificate of Incorporation of the Corporation as of this 17th
day of January, 1996.
By: /s/ Gary K. Judis
--------------------------------
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Gary K. Judis, President
Secretary Attest: /s/ Bobbie J. Burroughs, Secretary
-----------------------------------
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Bobbie J. Burroughs, Secretary
Secretary
CERTIFICATE OF DESIGNATION OF
RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES A PREFERRED STOCK
OF
AAMES FINANCIAL CORPORATION
Pursuant to Section 151 of the Delaware General Corporation law:
The undersigned hereby certifies that the following resolution has been
adopted by the Board of Directors of Aames Financial Corporation, a Delaware
corporation (the "Corporation") as required by Section 151 of the Delaware
General Corporation Law by unanimous written consent on June 21, 1996;
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RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (hereinafter
called the "Board of Directors") in accordance with the
provisions of the Certificate of Incorporation of the
Corporation, the Board of Directors hereby creates a new series
of the previously authorized Preferred Stock, par value $0.001
per share (the "Preferred Stock") of the Corporation, and
hereby states the designation and number of shares, and fixes
the, relative rights, preferences and limitations thereof (in
addition to any provision set forth in the Certificate of
Incorporation of the Corporation which are applicable to the
Preferred Stock of all classes and series) as follows:
Series A Preferred Stock:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting the Series A Preferred Stock
shall be 500,000 shares of Series A Preferred Stock, having a par value of
$0.001 per share. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions
(a) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the holders
of Common Stock, par value $0.001 per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, (i) cash dividends in an amount per whole share
(rounded to the nearest cent) equal to the Formula Number (as defined below)
then in effect, times the aggregate per share amount of all cash dividends
declared or paid on the Common Stock, and (ii) a preferential cash dividend
(a "Preferential Dividend"), if any, on the first day of July, October,
January and April in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to $1.00 per share of Series A Preferred Stock less the
per share amount of all cash dividends declared on the Series A Preferred
Stock pursuant to clause (i) of this sentence since the immediately preceding
Quarterly Dividend Payment Date
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or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred
Stock. In addition, if the Corporation shall pay any dividend or make any
distribution on the Common Stock payable in assets, securities or other forms
of noncash consideration (other than dividends or distributions solely in
shares of Common Stock), then, in each such case, the Corporation shall
simultaneously pay or make on each whole outstanding share of Series A
Preferred Stock, a dividend or distribution in like kind equal to the Formula
Number then in effect times such dividend or distribution on each share of
the Common Stock. The dividends and distributions on the Series A Preferred
Stock to which holders thereof are entitled pursuant to clause (i) of the
first sentence of this paragraph and the second sentence of this paragraph
are hereinafter referred to as "Participating Dividends." As used herein, the
"Formula Number" shall be 100; provided, however, that if at any time after
June 21, 1996, the Corporation shall (i) declare or pay any dividend or make
any distribution on the Common Stock, payable in shares of Common Stock, (ii)
subdivide (by a stock split or otherwise), the outstanding shares of Common
Stock into a larger number of shares of Common Stock, or (iii) combine (by a
reverse stock split or otherwise) the outstanding shares of Common Stock into
a smaller number of shares of Common Stock, then in each such case the
Formula Number in effect immediately prior to such event shall be adjusted to
a number determined by multiplying the Formula Number then in effect by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event (and rounding the result to the nearest whole number); and
provided further, that, if at any time after June 21, 1996, the Corporation
shall issue any shares of its capital stock in a merger, reclassification, or
change of the outstanding shares of Common Stock, then in each such event the
Formula Number shall be appropriately adjusted to reflect such merger,
reclassification, or change so that each share of Series A Preferred Stock
continues to be the economic equivalent of a Formula Number of shares of
Common Stock prior to such merger, reclassification or change.
(b) The Corporation shall declare each Participating
Dividend immediately prior to or at the same time it declares any cash or
non-cash dividend or distribution on the Common Stock in respect of which a
Participating Dividend is required to be paid. No cash or non-cash dividend
or distribution on the Common Stock in respect of which a Participating
Dividend is required shall be paid or set aside for payment on the Common
Stock unless a
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Participating Dividend in respect of such dividend shall have been paid.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be
entitled to a number of votes equal to the Formula Number then in effect, for
each share of Series A Preferred Stock held of record on each matter on which
holders of the Common Stock or stockholders generally are entitled to vote,
multiplied by the maximum number of votes per share which any holder of the
Common Stock or stockholders generally then have with respect to such matter
(assuming any holding period or other requirement to vote a greater number of
shares is satisfied).
(b) Except as otherwise provided herein, in any other
Certificate of Amendment creating a series of Preferred Stock or any similar
stock, or by law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall have no special
voting rights and their consent shall not be required (except
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to the extent they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever Preferential Dividends or Participating
Dividends are in arrears or the Corporation shall be in default in payment
thereof, thereafter and until all accrued and unpaid Participating Dividends
and Preferential Dividends, whether or not declared, on shares of Series A
Preferred Stock outstanding shall have been paid or set aside for payment in
full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions on or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on the shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior or on a parity (either as to
dividends or upon liquidation, dissolution or winding up) to or with the Series
A Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior or parity stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration shares of Series A Preferred Stock, or any shares of stock ranking
on a parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
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Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock subject to the conditions and restrictions on
issuance set forth herein, in the Certificate of Incorporation, or in any
other Certificate of Amendment or Certificate of Designation creating a
series of Preferred Stock or any similar stock or as otherwise required by
law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (a) to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock unless, prior thereto, the
holders of shares of Series A Preferred Stock shall have received an amount
equal to the accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, plus an amount equal to the
greater of (i) $0.01 per whole share, or (ii) an aggregate amount per share
equal to the Formula Number then in effect times the aggregate amount to be
distributed per share to holders of Common Stock, or (b) to the holders of
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
unless simultaneously therewith distributions are made ratably on the Series
A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of Series A Preferred Stock shares are entitled
under clause (a)(i) of this sentence and to which the holders of such parity
shares are entitled in each case upon such liquidation, dissolution or
winding up.
Section 7. Consolidation, Merger, etc. If the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which
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the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share equal to the Formula Number then in effect
times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event that both this
Section 7 and Section 2 appear to apply to a transaction, this Section 7
shall control.
Section 8. Effective Time of Adjustments.
(a) Adjustments to the Series A Preferred Stock
required by the provisions hereof shall be effective as of the time at which
the event requiring such adjustments occurs.
(b) The Corporation shall give prompt written notice to
each holder of a share of Series A Preferred Stock of the effect on any such
shares of any adjustment to the dividend rights or rights upon liquidation,
dissolution or winding up of the Corporation required by the provisions
hereof. Notwithstanding the foregoing sentence, the failure of the
Corporation to give such notice shall not affect the validity of or the force
or effect of or the requirement for such adjustment.
Section 9. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
Section 10. Rank. Unless otherwise provided in the Certificate of
Incorporation or a Certificate of Designation relating to a subsequent series of
Preferred Stock of the Corporation, the Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets, junior
to all series of any other class of the Corporation's Preferred Stock.
Section 11. Fractional Shares. The Series A Preferred Stock
shall be issuable upon exercise of the Rights issued pursuant to the Rights
Agreement in whole shares or in any fraction of a share that is one
one-hundredth (1/100th) of a share or any integral multiple of such fraction
which shall entitle the holder, in proportion to such holder's fractional
shares, to receive dividends, exercise voting rights, participate in
distributions and to have the benefit of all other rights of holders of
Series A Preferred Stock. In lieu of fractional shares, the Corporation,
prior to the
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first issuance of a share or a fraction of a share of Series A Preferred
Stock, may elect (1) to make a cash payment as provided in the Rights
Agreement for fractions of a share other than one one-hundredth (1/100th) of
a share or any integral multiple thereof, or (2) to issue depository receipts
evidencing such authorized fraction of a share of Series A Preferred Stock
pursuant to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided that such agreement shall provide that
the holders of such depository receipts shall have the rights, privileges and
preferences to which they are entitled as holders of the Series A Preferred
Stock.
Section 12. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, AAMES FINANCIAL CORPORATION has caused this
Certificate to be signed and attested this 21st day of June, 1996.
/s/ Gary K. Judis
--------------------------------
Gary K. Judis,
Chief Executive Officer
Attest:
/s/ Audry Patterson
- - --------------------------------
Audry Patterson, Secretary
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR IN THE
CERTIFICATE OF AMENDMENT OF
AAMES FINANCIAL CORPORATION
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Aames Financial Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, does
hereby certify:
1. The name of the corporation is Aames Financial Corporation.
2. That a Certificate of Amendment was filed by the Secretary
of State of Delaware on January 19, 1996 and that said Certificate requires
correction as permitted by Section 103 of the General Corporation Law of the
State of Delaware.
3. The inaccuracy or defect of said Certificate to be corrected
is as follows: the second paragraph of Article FOURTH was inadvertently
deleted.
4. Article FOURTH of said Certificate is corrected to read in its
entirety as follows:
FOURTH: The total number of shares which the Corporation shall
have authority to issue is 51,000,000, consisting of 50,000,000
shares of common stock, par value $0.001 per share (the "Common
Stock") and 1,000,000 shares of preferred stock, par value
$0.001 per share (the "Preferred Stock").
Shares of the Preferred Stock of the Corporation may be issued
from time to time in one or more classes or series, each of
which class or series shall have such distinctive designation
or title as shall be fixed by the Board of Directors of the
Corporation (the "Board of Directors") prior to the issuance of
any shares thereof. Each such class or series of Preferred
Stock shall have such voting powers, full or limited, or no
voting powers, and such preferences and relative,
participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall
be stated in such resolution or resolutions providing for the
issue of such class or series of Preferred Stock as may be
adopted from time to time by the Board of Directors prior to
the issuance of any shares thereof pursuant to the authority
hereby expressly vested in it, all in accordance with the laws
of the State of Delaware.
Aames Financial Corporation has caused this Certificate of Correction
to be signed by Barbara S. Polsky, its authorized officer, this 26th day of
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August, 1997.
By: /s/ Barbara S. Polsky
----------------------------------
Barbara S. Polsky
Executive Vice President,
General Counsel and Secretary
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CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS, AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
AAMES FINANCIAL CORPORATION
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AAMES FINANCIAL CORPORATION, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolutions were adopted by the Board of
Directors of the Corporation (the "Board of Directors") pursuant to authority of
the Board of Directors as required by Section 151 of the Delaware General
Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors in accordance with the provisions of the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of the
Corporation's previously authorized preferred stock, par value $0.001 per share
(the "Preferred Stock"), and hereby states the designation and number thereof,
and fixes the voting powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions
thereof, as follows:
SERIES B CONVERTIBLE PREFERRED STOCK:
I. DESIGNATION AND AMOUNT
The designation of this series of shares shall be "Series B
Convertible Preferred Stock" (the "Series B Preferred Stock") par value $0.001
per share; the initial stated value per share shall be $1,000.00 (the "Initial
Stated Value"); and the number of shares constituting such series shall be
100,000. The number of shares of the Series B Preferred Stock may be decreased
from time to time by a resolution or resolutions of the Board of Directors;
provided, however, that such number shall not be decreased below the aggregate
number of shares of the Series B Preferred Stock then outstanding.
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II. RANK
A. With respect to dividends, the Series B Preferred Stock
shall rank (i) senior to each other class or series of Preferred Stock,
except for the Series C Convertible Preferred Stock, par value $0.001 per
share, of the Corporation (the "Series C Preferred Stock"); (ii) on a parity
with the Series C Preferred Stock; and (iii) senior to the Corporation's
Common Stock, par value $.001 per share (the "Common Stock"), and, except as
specified above, all other classes and series of capital stock of the
Corporation hereafter issued by the Corporation. With respect to dividends,
all equity securities of the Corporation to which the Series B Preferred
Stock ranks senior, including the Common Stock, are collectively referred to
herein as the "Junior Dividend Securities"; all equity securities of the
Corporation with which the Series B Preferred Stock ranks on a parity,
including the Series C Preferred Stock, are collectively referred to herein
as the "Parity Dividend Securities"; and all equity securities of the
Corporation (other than convertible debt securities) to which the Series B
Preferred Stock ranks junior, with respect to dividends, are collectively
referred to herein as the "Senior Dividend Securities."
B. With respect to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series B Preferred Stock shall rank (i) senior to each other class or series
of Preferred Stock of the Corporation, except for the Series C Preferred Stock;
(ii) on a parity with the Series C Preferred Stock; and (iii) senior to the
Common Stock, and, except as specified above, all other classes and series of
capital stock of the Corporation hereafter issued by the Corporation. With
respect to the distribution of assets upon liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, all equity securities
of the Corporation to which the Series B Preferred Stock ranks senior, including
the Common Stock, are collectively referred to herein as "Junior Liquidation
Securities"; all equity securities of the Corporation (other than convertible
debt securities) to which the Series B Preferred Stock ranks on parity,
including the Series C Preferred Stock, are collectively referred to herein as
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"Parity Liquidation Securities"; and all equity securities of the Corporation
to which the Series B Preferred Stock ranks junior are collectively referred
to herein as "Senior Liquidation Securities."
C. The Series B Preferred Stock shall be subject to the creation
of Junior Dividend Securities and Junior Liquidation Securities (collectively,
"Junior Securities"), but no Parity Dividend Securities or Parity Liquidation
Securities (collectively, "Parity Securities") (other than the Series C
Preferred Stock) or Senior Dividend Securities or Senior Liquidation Securities
(collectively, "Senior Securities") shall be created except in accordance with
the terms hereof.
III. DIVIDENDS
A. DIVIDENDS. Subject to the terms of paragraph D below, shares
of Series B Preferred Stock shall accumulate dividends at a rate of 6.5% per
annum (the "Dividend Rate"), which dividends shall be paid quarterly in cash, in
four equal quarterly installments on the last day of March, June, September and
December of each year, or if any such date is not a Business Day, the Business
Day next preceding such day (each such date, regardless of whether any dividends
have been paid or declared and set aside for payment on such date, a "Dividend
Payment Date"), to holders of record (the "Registered Holders") as they appear
on the stock record books of the Corporation on the fifteenth day prior to the
relevant Dividend Payment Date; provided, however, that during the Accrual
Period (as defined in Article IX hereof) the Corporation shall have the option
to accrue such dividends, which dividends, to the extent so accrued, shall
compound quarterly. Prior to the consummation of the Recapitalization, dividends
shall accrue and accumulate on the Initial Stated Value of each share of Series
B Preferred Stock. Following the consummation of the Recapitalization, dividends
shall accrue and accumulate on the Post-Recapitalization Stated Value of each
share of Series B Preferred Stock. Dividends shall be paid only when, as and if
declared by the Board of Directors out of funds at the time
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legally available for the payment of dividends. Dividends shall begin to
accumulate on outstanding shares of Series B Preferred Stock from the date of
issuance and shall be deemed to accumulate from day to day whether or not earned
or declared until paid. Dividends shall accumulate on the basis of a 360-day
year consisting of twelve 30-day months (four 90-day quarters) and the actual
number of days elapsed in the period for which payable.
B. ACCUMULATION. Dividends on the Series B Preferred Stock shall
be cumulative, and from and after (i) any Dividend Payment Date on which any
dividend that has accumulated or been deemed to have accumulated through such
date has not been paid in full (other than by reason of the election of the
Corporation to accrue dividends during the Accrual Period); or (ii) any payment
date set for a redemption on which such redemption payment has not been paid in
full, additional dividends shall accumulate in respect of the amount of such
unpaid dividends or unpaid redemption payment (the "Arrearage") at 125% of the
stated dividend rate (or such lesser rate as may be the maximum rate that is
then permitted by applicable law). Such additional dividends in respect of any
Arrearage shall be deemed to accumulate from day to day whether or not earned or
declared until the Arrearage is paid, shall be calculated as of such successive
Dividend Payment Date, and shall constitute an additional Arrearage from and
after any Dividend Payment Date to the extent not paid on such Dividend Payment
Date. References in any Article herein to dividends that have accumulated or
that have been deemed to have accumulated with respect to the Series B Preferred
Stock shall include the amount, if any, of any Arrearage together with any
dividends accumulated or deemed to have accumulated on such Arrearage pursuant
to the immediately preceding two sentences. Additional dividends in respect of
any Arrearage may be declared and paid at any time, in whole or in part, without
reference to any regular Dividend Payment Date, to Registered Holders as they
appear on the stock record books of the Corporation on such record date as may
be fixed by the Board of Directors (which record date shall be no less than 10
days prior to the corresponding payment date). Dividends in respect of any
Arrearage shall be paid in cash.
C. METHOD OF PAYMENT. Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series B Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. After the Second Anniversary Date, dividends that are
declared and paid in an amount less than the full amount of dividends
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accumulated on the Series B Preferred Stock (and on any Arrearage) shall be
applied first to the earliest dividend which has not theretofore been paid. All
cash payments of dividends on the shares of Series B Preferred Stock shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
D. SPECIAL DIVIDEND RIGHTS.
1. In addition to the dividend rights set forth in paragraph A
above, prior to the consummation of the Recapitalization, the holders of
shares of Series B Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for such
purpose, cash dividends in an amount per whole share (rounded to the nearest
cent) equal to the Formula Number then in effect times the aggregate per
share amount of all cash dividends declared or paid on the Common Stock. If,
prior to the consummation of the Recapitalization, the Corporation shall pay
any dividend or make any distribution on the Common Stock payable in assets,
securities or other forms of non-cash consideration, then, in each such case,
the Corporation shall simultaneously pay or make on each whole outstanding
share of the Series B Preferred Stock a dividend or distribution in like kind
equal to the Formula Number then in effect times such dividend or
distribution on each share of the Common Stock. The dividends and
distributions on the Series B Preferred Stock pursuant to this paragraph are
hereinafter referred to as "Participating Dividends." The Corporation shall
declare each Participating Dividend immediately prior to or at the same time
it declares any cash or non-cash dividend or distribution on the Common Stock
in respect of which a Participating Dividend is required to be paid. No cash
or non-cash dividend or distribution on the Common Stock in respect of which
a Participating Dividend is required shall be paid or set aside for payment
on the Common Stock unless a Participation Dividend in respect of such
dividend shall be have been paid. Nothing contained in this paragraph D shall
obligate the Company to declare or pay any dividend or other distribution on
the Common Stock or (except pursuant to paragraph A of this Article III or in
connection with a dividend or distribution on the Common Stock as provided in
this paragraph D) the Series B Preferred Stock.
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2. If the Recapitalization is not consummated prior to June 30,
1999, the Dividend Rate shall be deemed to be 15% per annum during the period
commencing on such date and ending on the date the Recapitalization is
consummated.
IV. LIQUIDATION PREFERENCE
A. PRIOR TO THE RECAPITALIZATION. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
occurring prior to the consummation of the Recapitalization, the holders of
then-outstanding shares of Series B Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets are capital or surplus
of any nature, an amount per share equal to the sum of (i) the dividends, if
any, accumulated or deemed to have accumulated thereon, to the date of final
distribution to such holders, whether or not such dividends are declared; and
(ii) the Initial Stated Value thereof, before any payment shall be made or any
assets distributed to the holders of any Junior Liquidation Securities (the
"Initial Preferred Distribution"). After the Initial Preferred Distribution has
been made, the holders of Series B Preferred Stock shall be entitled to share
pro rata with the holders of Common Stock in the distribution of any remaining
assets of the Corporation on the basis of each whole outstanding share of the
Series B Preferred Stock receiving an amount equal to the Formula Number then in
effect times such distribution on each share of the Common Stock. The
distributions on the Series B Preferred Stock pursuant to the immediately
preceding sentence of this paragraph A are hereinafter referred to as
"Participating Liquidation Distributions." No distribution on the Common Stock
in respect of which a Participating Liquidation Distribution is required shall
be paid or set aside for payment on the Common Stock unless a Participating
Liquidation Distribution in respect of such distribution is concurrently paid.
B. AFTER THE RECAPITALIZATION. Subsequent to the consummation of
the Recapitalization, the holders of the outstanding shares of Series B
Preferred Stock shall be entitled to receive out of the assets of the
Corporation, whether such assets are capital or surplus of any nature, an amount
per share equal to the sum of (i) the dividends, if any, accumulated or deemed
to have accumulated thereon to the date of final distribution to such holders,
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whether or not such dividends are declared; and (ii) the Post-Recapitalization
Stated Value thereof, before any payment shall be made or any assets distributed
to the holders of any Junior Liquidation Securities. After any such payment in
full after the consummation of the Recapitalization, the holders of Series B
Preferred Stock shall not, as such, be entitled to any further participation in
any distribution of assets of the Corporation.
C. PARITY SECURITIES. All the assets of the Corporation available
for distribution to stockholders after the liquidation preferences of any Senior
Liquidation Securities shall be distributed ratably (in proportion to the full
distributable amounts to which holders of Series B Preferred Stock and Parity
Liquidation Securities, if any, are respectively entitled upon such dissolution,
liquidation or winding up) among the holders of the then-outstanding shares of
Series B Preferred Stock and Parity Liquidation Securities, if any, when such
assets are not sufficient to pay in full the aggregate amounts payable thereon.
D. MERGER NOT A LIQUIDATION. Neither a consolidation or merger of
the Corporation with or into any other Person or Persons, nor a sale,
conveyance, lease, exchange or transfer of all or part of the Corporation's
assets for cash, securities or other property to a Person or Persons shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Article IV, but the holders of shares of Series B Preferred
Stock shall nevertheless be entitled from and after any such consolidation,
merger or sale, conveyance, lease, exchange or transfer of all or part of the
Corporation's assets to the rights provided by this Article IV following any
such transaction. Notice of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when, and the place or places where, the amounts distributable to each holder of
shares of Series B Preferred Stock in such circumstances shall be payable, shall
be given by first-class mail, postage prepaid, mailed not less than 30 days
prior to any payment date stated therein, to holders of record as they appear on
the stock record books of the Corporation as of the date such notices are first
mailed.
V. REDEMPTION
A. INTENTIONALLY OMITTED
B. OPTIONAL REDEMPTION. Commencing on the earlier to occur of (x)
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the tenth anniversary of the Issue Date and (y) the date on which fewer than 25%
of the shares of Series B Preferred Stock issued on the Issue Date remain
outstanding, and at all times thereafter, the Corporation may, at its option,
redeem all (but not less than all) outstanding shares of Series B Preferred
Stock on a date specified by the Corporation (the "Optional Redemption Date") by
paying the Redemption Price therefor in cash out of funds legally available for
such purpose.
C. NOTICE AND REDEMPTION PROCEDURES. Notice of the redemption
of shares of Series B Preferred Stock pursuant to paragraph B of this Article
V (a "Notice of Redemption") shall be sent to the holders of record of the
shares of Series B Preferred Stock to be redeemed by first class mail,
postage prepaid, at each such holder's address as it appears on the stock
record books of the Corporation not more than 120 nor fewer than 90 days
prior to the Optional Redemption Date, which date shall be set forth in such
notice (the "Redemption Date"); provided that failure to give such Notice of
Redemption to any holder, or any defect in such Notice of Redemption to any
holder shall not affect the validity of the proceedings for the redemption of
any shares of Series B Preferred Stock held by any other holder. In order to
facilitate the redemption of shares of Series B Preferred Stock, the Board of
Directors may fix a record date for the determination of the holders of
shares of Series B Preferred Stock to be redeemed not more than 30 days prior
to the date the Notice of Redemption is mailed. On or after the Optional
Redemption Date, each holder of the shares called for redemption shall
surrender the certificate evidencing such shares to the Corporation at the
place designated in such notice and shall thereupon be entitled to receive
payment of the Redemption Price for such shares. From and after the Optional
Redemption Date, all dividends on shares of Series B Preferred Stock shall
cease to accumulate and all rights of the holders thereof as holders of
Series B Preferred Stock shall cease and terminate, except to the extent the
Corporation shall default in payment thereof on the Optional Redemption Date.
D. DEPOSIT OF FUNDS. The Corporation shall, on or prior to the
Optional Redemption Date, pursuant to paragraph C of this Article V, deposit
with its transfer agent or other redemption agent in the Borough of Manhattan,
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The City of New York having a capital and surplus of at least $500,000,000
selected by the Board of Directors, as a trust fund for the benefit of the
holders of the shares of Series B Preferred Stock to be redeemed, cash that is
sufficient in amount to redeem the shares to be redeemed in accordance with the
Notice of Redemption, with irrevocable instructions and authority to such
transfer agent or other redemption agent to pay to the respective holders of
such shares, as evidenced by a list of such holders certified by an officer of
the Corporation, the Redemption Price for such shares upon surrender of their
respective share certificates. Such deposit shall be deemed to constitute full
payment of the Redemption Price for such shares to the holders, and from and
after the date of such deposit, all rights of the holders of the shares of
Series B Preferred Stock that are to be redeemed as stockholders of the
Corporation with respect to such shares, except the right to receive the
Redemption Price upon the surrender of their respective certificates, shall
cease and terminate. No dividends shall accumulate on any shares of Series B
Preferred Stock after the Optional Redemption Date for such shares (unless the
Corporation shall fail to deposit cash sufficient to redeem all such shares). In
case holders of any shares of Series B Preferred Stock called for redemption
shall not, within two years after such deposit, claim the cash deposited for
redemption thereof, such transfer agent or other redemption agent shall, upon
demand, pay over to the Corporation the balance so deposited. Thereupon, such
transfer agent or other redemption agent shall be relieved of all responsibility
to the holders thereof and the sole right of such holders, with respect to
shares to be redeemed, shall be to receive the Redemption Price as general
creditors of the Corporation. Any interest accrued on any funds so deposited
shall belong to the Corporation, and shall be paid to it from time to time on
demand.
VI. RESTRICTIONS ON DIVIDENDS
So long as any shares of the Series B Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or make
any payment on account of, or set apart for payment money for a sinking or other
similar fund for, the repurchase, redemption or other retirement of, any Junior
Securities or Parity Securities or any warrants, rights or options exercisable
for or convertible into any Junior Securities or Parity Securities (other than
the repurchase, redemption or other retirement of debentures or other debt
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securities that are convertible or exchangeable into any Junior Securities or
Parity Securities), or make any distribution in respect of the Junior
Securities, either directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than distributions or
dividends in Junior Securities to the holders of Junior Securities), and shall
not permit any corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem any Junior Securities or Parity Securities
or any warrants, rights, calls or options exercisable for or convertible into
any Junior Securities or Parity Securities (other than the repurchase,
redemption or other retirement of debentures or other debt securities that are
convertible or exchangeable into any Junior Securities or Parity Securities or
the repurchase, redemption or other retirement of Junior Securities or Parity
Securities in exchange for Junior Securities or Parity Securities) unless prior
to or concurrently with such declaration, payment, setting apart for payment,
repurchase, redemption or other retirement or distribution, as the case may be,
all accumulated and unpaid dividends on shares of the Series B Preferred Stock
not paid on the dates provided for in paragraph A of Article III hereof
(including Arrearages and accumulated dividends thereon) shall have been paid,
except that when dividends are not paid in full as aforesaid upon the shares of
Series B Preferred Stock, all dividends declared on the Series B Preferred Stock
and any series of Parity Dividend Securities shall be declared and paid pro rata
so that the amount of dividends so declared and paid on Series B Preferred Stock
and such series of Parity Dividend Securities shall in all cases bear to each
other the same ratio that accumulated dividends (including interest accrued on
or additional dividends accumulated in respect of such accumulated dividends) on
the shares of Series B Preferred Stock and such Parity Dividend Securities bear
to each other.
VII. VOTING RIGHTS
A. On or prior to the consummation of the Recapitalization, the
holders of Series B Preferred Stock shall be entitled to one thousand (1,000)
votes per share of Series B Preferred Stock at each meeting of stockholders of
the Corporation with respect to any and all matters presented to the
stockholders of the Corporation for their action and consideration. After the
consummation of the Recapitalization, the holders of Series B Preferred Stock
shall be entitled to the number of votes per share of Series B Preferred Stock
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equal to the number of shares of Common Stock for which such share of Series B
Preferred Stock is then convertible pursuant to Article VIII at each meeting of
stockholders of the Corporation with respect to any and all matters presented to
the stockholders of the Corporation for their action and consideration.
B. So long as any shares of the Series B Preferred Stock are
outstanding, (i) each share of Series B Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock; and (ii) the
shares of Series B Preferred Stock shall vote together with shares of Common
Stock (and any shares of Series C Preferred Stock entitled to vote) as a single
class.
C. At each annual meeting of the stockholders of the Corporation,
the holders of Series B Preferred Stock, voting as a separate class, shall have
the right to elect, by the written consent (if action by written consent is
permitted) or affirmative vote of the holders of a majority of the outstanding
shares of Series B Preferred Stock, four members of a separate class of
directors, each of whom shall serve until the next annual meeting of the
stockholders of the Corporation or until his or her successor is elected and
qualified. Such vote or consent shall be taken in accordance with the procedures
specified in paragraph F below. The initial directors shall be Steven M.
Gluckstern, Adam M. Mizel, Mani Sadeghi and David Spuria.
D. Without the written consent (if action by written consent is
permitted) or affirmative vote of the holders of a majority of the outstanding
shares of Series B Preferred Stock and Series C Preferred Stock, voting together
as a single class, the Corporation shall not (i) authorize, create or issue, or
increase the authorized amount of, (x) any Senior Securities or Parity
Securities or (y) any class or series of capital stock or any security
convertible into or exercisable for any class or series of capital stock,
redeemable mandatorily or redeemable at the option of the holder thereof or (ii)
enter into any Transaction (as defined in paragraph H of Article VIII). Such
vote or consent shall be taken in accordance with the procedures specified in
paragraph F below.
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E. Without the written consent (if action by written consent is
permitted) or affirmative vote of the holders of at least a majority of the
outstanding shares of Series B Preferred Stock and Series C Preferred Stock,
voting together as a single class, the Corporation shall not (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the Bylaws, if the
amendment, alteration or repeal alters or changes the powers, preferences or
special rights of the Series B Preferred Stock so as to affect them materially
and adversely or (ii) authorize or take any other action if such action alters
or changes any of the rights of the Series B Preferred Stock in any respect or
otherwise would be inconsistent with the provisions of this Certificate of
Designations and the holders of any class or series of the capital stock of the
Corporation is entitled to vote thereon. Such vote or consent shall be taken in
accordance with the procedures specified in paragraph F below.
F. The foregoing rights of holders of shares of Series B
Preferred Stock to take any actions as provided in this Article VII may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares required to
take such action, if action by written consent of stockholders of the
Corporation is then permitted. The Chairman of the Board of the Corporation
may call, and upon written request of holders of record of 35% of the
outstanding shares of Series B Preferred Stock, if the holders of Series B
Preferred Stock are to vote separately as a single class, or the holders of
record of 35% of the outstanding shares of Series B Preferred Stock and
Series C Preferred Stock, if the holders of shares of Series B Preferred
Stock are to vote as a class with the holders of shares of any Series C
Preferred Stock, addressed to the Secretary of the Corporation at the
principal office of the Corporation shall call, a special meeting of the
holders of shares entitled to vote as provided herein. Such meeting shall be
held within 30 days after delivery of such request to the Secretary, at the
place and upon the notice provided by law and in the By-laws of the
Corporation for the holding of meetings of stockholders.
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At each meeting of stockholders at which the holders of shares of
Series B Preferred Stock shall have the right, voting separately as a single
class or as a class with the holders of shares of any Series C Preferred Stock,
to elect directors of the Corporation as provided in paragraph C above or to
take any action, the presence in person or by proxy of the holders of record of
one-third of the total number of shares of Series B Preferred Stock, if the
holders of shares of Series B Preferred Stock are to vote separately as a single
class, or the holders of record of one-third of the total number of shares of
Series B Preferred Stock and Series C Preferred Stock, if the holder of shares
of Series B Preferred Stock are to vote as a class with the holders of shares of
Series C Preferred Stock, then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum. At any such meeting or
at any adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series B
Preferred Stock, if the holders of Series B Preferred Stock are to vote
separately as a single class, shall not prevent the election of
directors other than those to be elected by the holders of shares of
Series B Preferred Stock, and the absence of a quorum of the holders of
shares of any other class or series of capital stock shall not prevent
the election of directors to be elected by the holders of shares of
Series B Preferred Stock or the taking of any action as provided in this
Article VII; and
(B) in the absence of a quorum of the holders of shares of Series
B Preferred Stock, if the holders of Series B Preferred Stock are to
vote separately as a single class, or the holders of shares of Series B
Preferred Stock and Series C Preferred Stock, if the holders of Series B
Preferred Stock are to vote as a class with the holders of shares of
Series C Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the
meeting as to the actions to be taken by the holders of shares of Series
B Preferred Stock or the holders of Series B Preferred Stock and Series
C Preferred Stock, as the case may be, from time to time and place to
place without notice other than announcement at the meeting until a
quorum shall be present.
For taking of any action as provided in this Article VII by the
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holders of shares of Series B Preferred Stock voting separately as a single
class or together with the holders of shares of Series B Preferred Stock and
Series C Preferred Stock as a single class, as the case may be, each such
holder shall have one vote for each share of such stock standing in his name
on the transfer books of the Corporation as of any record dated fixed for
such purpose or, if no such date be fixed, at the close of business on the
Business Day next preceding the day on which notice is given, or if notice if
waived, at the close of business on the Business Day next preceding the day
on which the meeting is held.
In case any vacancy shall occur among the directors elected by
the holders of shares of Series B Preferred Stock, as provided in paragraph C
above, such vacancy may be filled for the unexpired portion of the term by vote
of the remaining directors theretofore elected by such holders (if there is a
remaining director), or the last remaining director's successor in office. If
any such vacancy is not so filled within 20 days after the creation thereof or
if all directors so elected by the holders of Series B Preferred Stock shall
cease to serve as directors before their terms shall expire, the holders of the
Series B Preferred Stock then outstanding and entitled to vote for such
directors may, by written consent as herein provided (if action by written
consent is permitted), or at a special meeting of such holders called as
provided herein, elect successors to hold office for the unexpired terms of the
directors whose places shall be vacant.
Any director elected by the holders of shares of Series B
Preferred Stock voting separately as a single class may be removed from office
with or without cause by the vote or written consent (if action by written
consent is permitted) of the holders of at least a majority of the outstanding
shares of Series B Preferred Stock. A special meeting of the holders of shares
of Series B Preferred Stock may be called in accordance with the procedures set
forth in this paragraph F.
G. The Corporation shall not enter into any agreement or issue
any security that prohibits, conflicts or is inconsistent with, or would be
breached by, the Corporation's performance of its obligations hereunder.
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VIII. CONVERSION
The holders of the Series B Preferred Stock shall have conversion
rights as follows:
A. Each share of Series B Preferred Stock shall be convertible at
the direction of, and by notice to the Corporation from, the
holders of a majority of the outstanding shares of Series B
Preferred Stock, at any time, at the office of the Corporation or
any transfer agent for such Series, into one thousand (1,000)
fully paid and nonassessable shares of Common Stock subject (x)
to adjustment from time to time as provided below (as so
adjusted, the "conversion ratio") and (y) (prior to the
consummation of the Recapitalization) to limitations resulting
from the available number of shares of Common Stock which may be
reserved for issuance upon such conversion, provided ,that any
conversion pursuant to this paragraph A of less than all of the
outstanding shares of Series B Preferred Stock shall be on a pro
rata basis amongst all holders of Series B Preferred Stock. After
consummation of the Recapitalization, the number "1,000" in this
paragraph shall be "1", subject to adjustment as provided in
paragraph VIII.G.
B. If the holders of a majority of the outstanding shares of Series
B Preferred Stock give notice of conversion under paragraph A
above, the Corporation shall notify all other record holders of
Series B Preferred Stock (a "Conversion Notice"). Following
receipt of a Conversion Notice, the holders of Series B Preferred
Stock shall surrender the certificate or certificates therefor
duly endorsed, at the office of the Corporation or of any
transfer agent for such Series, and shall state therein the name
or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such
holder, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common
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Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to
the close of business on the date of such Conversion Notice and
the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all
purposes as the recordholder or holders of such shares of Common
Stock as of such date. The issuance of certificates or shares of
Common Stock upon conversion of shares of Series B Preferred
Stock shall be made without charge for any issue, stamp or other
similar tax in respect of such issuance.
C. No fractional shares shall be issued upon conversion of any
shares of Series B Preferred Stock and the number of shares of
Common Stock to be issued shall be rounded down to the nearest
whole share, and the holder of Series B Preferred Stock shall be
paid in cash for any fractional share.
D. In case at any time or from time to time the Corporation shall
pay any dividend or make any other distribution to the holders of
its Common Stock or other class of securities, or shall offer for
subscription pro rata to the holders of its Common Stock or other
class of securities any additional shares of stock of any class
or any other right, or there shall be any capital reorganization
or reclassification of the Common Stock of the Corporation or
consolidation or merger of the Corporation with or into another
corporation, or any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially
as an entirety, or there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, then,
in any one or more of said cases the Corporation shall give at
least 20 days' prior written notice (the time of mailing of such
notice shall be deemed to be the time of giving thereof) to the
registered holders of the Series B Preferred Stock at the
addresses of each as shown on the books of the Corporation
maintained by the Transfer Agent thereof of the date on which (i)
the books of the Corporation shall close or a record shall be
taken for such stock dividend,
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distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the
case may be, provided that in the case of any Transaction to
which paragraph H applies the Corporation shall give at least 30
days' prior written notice as aforesaid. Such notice shall also
specify the date as of which the holders of the Common Stock of
record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or
conveyance or participate in such dissolution, liquidation or
winding up, as the case may be. Failure to give such notice shall
not invalidate any action so taken.
E. From and after the Recapitalization, the Corporation shall at all
times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series B Preferred
Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all
outstanding shares of Series B Preferred Stock, and if at any
time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then
outstanding shares of Series B Preferred Stock, then in addition
to such other remedies as shall be available to the holder of
Series B Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for
such purposes.
F. Any notice required by the provisions of paragraph D to be given
the holders of shares of Series B Preferred Stock shall be deemed
given if sent by facsimile transmission, by telex, or if
deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his, her or its address
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appearing on the books of the Corporation.
G. The conversion ratio shall be subject to adjustment from time to
time as follows:
(i) In case the Corporation shall at any time or from time
to time after the Issue Date (A) pay a dividend or make a
distribution, on the outstanding shares of Common Stock in shares
of Common Stock, (B) subdivide the outstanding shares of Common
Stock into a larger number of shares of Common Stock, (C) combine
the outstanding shares of Common Stock into a smaller number of
shares or (D) issue by reclassification of the shares of Common
Stock any shares of capital stock of the Corporation, then, and
in each such case, the conversion ratio in effect immediately
prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any shares of
Series B Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock
or other securities of the Corporation which such holder would
have owned or have been entitled to receive after the happening
of any of the events described above, had such shares of Series B
Preferred Stock been surrendered for conversion immediately prior
to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this clause
(i) shall become effective (x) in the case of any such dividend
or distribution, immediately after the close of business on the
record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y)
in the case of any such subdivision, reclassification or
combination, at the close of business on the day upon which such
corporate action
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becomes effective.
(ii) In the case the Corporation shall, after the Issue
Date, issue shares of Common Stock at a price per share, or
securities convertible into or exchangeable for shares of Common
Stock ("Convertible Securities") having a "Conversion Price" (as
defined below) less than the Current Market Price (for a period
of 15 consecutive trading days prior to such date), then, and in
each such case, the conversion ratio shall be adjusted so that
the holder of each share of Series B Preferred Stock shall be
entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (A) the
applicable conversion ratio on the day immediately prior to such
date by (B) a fraction, the numerator of which shall be the sum
of (1) the number of shares of Common Stock outstanding on the
date on which such shares or Convertible Securities are issued
and (2) the number of additional shares of Common Stock issued,
or into which the Convertible Securities may convert, and the
denominator of which shall be the sum of (x) the number of shares
of Common Stock outstanding on such date and (y) the number of
shares of Common Stock which the aggregate consideration
receivable by the Corporation for the total number of shares of
Common Stock so issued, or the number of shares of Common Stock
which the aggregate of the Conversion Price of such Convertible
Securities so issued, would purchase at such Current Market price
on such date. An adjustment made pursuant to this clause (ii)
shall be made on the next Business Day following the date on
which any such issuance is made and shall be effective
retroactively immediately after the close of business on such
date. For purposes of this clause (ii), the aggregate
consideration receivable by the Corporation in connection with
the issuance of any securities shall be deemed to be the sum of
the aggregate offering price to the public (before deduction of
underwriting discounts or commissions and expenses payable to
third parties), and the "Conversion Price" of any Convertible
Securities is the total amount received or receivable by the
Corporation as consideration for the issue or sale of such
Convertible Securities (before deduction of underwriting
discounts or commissions and expenses payable to third parties)
plus the minimum aggregate amount of additional consideration, if
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any, payable to the Corporation upon the conversion, exchange or
exercise of any such Convertible Securities. Neither (A) the
issuance of any shares of Common Stock (whether treasury shares
or newly issued shares) pursuant to a dividend or distribution
on, or subdivision, combination or reclassification of, the
outstanding shares of Common Stock requiring an adjustment in the
conversion ratio pursuant to clause (i) of this paragraph G, or
pursuant to any employee benefit plan or program of the
Corporation or pursuant to any option, warrant, right, or
Convertible Security outstanding as of the date hereof
(including, but not limited to, the Rights, the Series B
Preferred Stock, the Series C Preferred Stock and the Warrants)
nor (B) the issuance of shares of Common Stock pursuant thereto
shall be deemed to constitute an issuance of Common Stock or
Convertible Securities by the Corporation to which this clause
(ii) applies. Upon expiration of any Convertible Securities which
shall not have been exercised or converted and for which an
adjustment shall have been made pursuant to this clause (ii), the
Conversion Price computed upon the original issue thereof shall
upon expiration be recomputed as if the only additional shares of
Common Stock issued were such shares of Common Stock (if any)
actually issued upon exercise or conversion of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue
of such Convertible Securities (whether or not exercised or
converted) plus the consideration actually received by the
Corporation upon such exercise of conversion.
(iii) In case the Corporation shall at any time or from
time to time after the Issue Date declare, order, pay or make a
dividend or other distribution (including, without limitation,
any distribution of stock or other securities or property or
rights or warrants to subscribe for securities of the Corporation
or any of its Subsidiaries by way of dividend or spin-off), on
its Common Stock, other than (A) regular quarterly dividends
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payable in cash in an aggregate amount not to exceed 15% of net
income from continuing operations before extraordinary items of
the Corporation, determined in accordance with generally accepted
accounting principles, during the period (treated as one
accounting period) commencing on July 1, 1998, and ending on the
date such dividend is paid or (B) dividends or distributions of
shares of Common Stock which are referred to in clause (i) of
this paragraph G, then, and in each such case, the conversion
ratio shall be adjusted so that the holder of each share of
Series B Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (1) the applicable conversion ratio on
the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend
or distribution by (2) a fraction, the numerator of which shall
be the then Current Market Price per share of Common Stock for
the period of 20 Trading Days preceding such record date, and the
denominator of which shall be such Current Market Price per share
of Common Stock for the period of 20 Trading Days preceding such
record date, less the Fair Market Value (as defined in Article
IX) per share of Common Stock (as determined in good faith by the
Board of Directors of the Corporation, a certified resolution
with respect to which shall be mailed to each holder of shares of
Series B Preferred Stock) of such dividend or distribution;
provided, however, that in the event of a distribution of shares
of capital stock of a Subsidiary of the Corporation (a
"Spin-Off") made to holders of shares of Common Stock, the
numerator of such fraction shall be the sum of the Current Market
Price per share of Common Stock for the period of 20 Trading Days
preceding the 35th Trading Day after the effective date of such
Spin-Off and the Current Market Price of the number of shares (or
the fraction of a share) of capital stock of the Subsidiary which
is
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distributed in such Spin-Off in respect of one share of Common
Stock for the period of 20 Trading Days preceding such 35th
Trading Day and the denominator of which shall be the current
market price per share of the Common Stock for the period of 20
Trading Days proceeding such 35th Trading Day. An adjustment made
pursuant to this clause (iii) shall be made upon the opening of
business on the next Business Day following the date on which any
such dividend or distribution is made and shall be effective
retroactively immediately after the close of business on the
record date fixed for the determination of stockholders entitled
to receive such dividend or distribution; provided, however, if
the proviso to the preceding sentence applies, then such
adjustment shall be made and be effective as of such 35th Trading
Day after the effective date of such Spin-Off.
(iv) For purposes of this paragraph G, the number of shares
of Common Stock at any time outstanding shall not include any
shares of Common Stock then owned or held by or for the account
of the Corporation.
(v) The term "dividend", as used in this paragraph G shall
mean a dividend or other distribution upon stock of the
Corporation except pursuant to the Rights Agreement (as defined
in Article IX). Notwithstanding anything in this Article VIII to
the contrary, the conversion ratio shall not be adjusted as a
result of any dividend, distribution or issuance of securities of
the Corporation pursuant to the Rights Agreement.
(vi) Anything in this paragraph G to the contrary
notwithstanding, the Corporation shall not be required to give
effect to any adjustment in the conversion ratio unless and until
the net effect of one or more adjustments (each of which shall be
carried forward), determined as above provided, shall have
resulted in a change of the conversion ratio by at least
one-hundredth of one share of Common Stock, and when the
cumulative net effect of more than one adjustment so determined
shall be to change the conversion ratio by at least one-hundredth
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of one share of Common Stock, such change in conversion ratio
shall thereupon be given effect.
(vii) The certificate of any firm of independent public
accountants of recognized standing selected by the Board of
Directors of the Corporation (which may be the firm of
independent public accountants regularly employed by the
Corporation) shall be presumptively correct for any computation
made under this paragraph G.
(viii) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, and shall thereafter
and before the distribution to stockholders thereof legally
abandon its plan to pay or deliver such dividend or distribution,
then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion
granted by this paragraph G or in the conversion ratio then in
effect shall be required by reason of the taking of such
record.
(ix) There shall be no adjustment of the conversion ratio
in case of the issuance of any stock of the Corporation in a
merger, reorganization, acquisition or other similar transaction
except as set forth in paragraph G(i), G(ii) and H of this
Article VIII.
H. In case of any reorganization or reclassification of outstanding
shares of Common Stock (other than a reclassification covered by
paragraph G(i) of this Article VIII, or in case of any
consolidation or merger of the Corporation with or into another
corporation, or in the case of any sale or conveyance to another
corporation of the property of the Corporation as an entirety or
substantially as an entirety (each of the foregoing being
referred to as a "Transaction"), each share of Series B Preferred
Stock then outstanding shall thereafter be convertible into, in
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lieu of the Common Stock issuable upon such conversion prior to
consummation of such Transaction, the kind and amount of shares
of stock and other securities and property receivable (including
cash) upon the consummation of such Transaction by a holder of
that number of shares of Common Stock into which one share of
Series B Preferred Stock was convertible immediately prior to
such Transaction (including, on a pro rata basis, the cash,
securities or property received by holders of Common Stock in any
tender or exchange offer that is a step in such Transaction). In
case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all
reference in this paragraph H shall be deemed to apply, so far as
appropriate and as nearly as may be, to such other securities or
property.
I. Upon any adjustment of the conversion ratio then in effect and
any increase or decrease in the number of shares of Common Stock
issuable upon the operation of the conversion set forth in
Article VIII, then, and in each such case, the Corporation shall
promptly deliver to the registered holders of the Series B
Preferred and Common Stock, a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment
was calculated and specifying the conversion ratio then in effect
following such adjustment and the increased or decreased number
of shares issuable upon the conversion set forth in this Article
VIII.
IX. ADDITIONAL DEFINITIONS
For the purposes of this Certificate of Designations of Series
B Preferred Stock, the following terms shall have the meanings indicated:
"Accrual Period" means the end of the first quarterly period
following the Second Anniversary Date.
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"Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule
13d-3 under the Exchange Act as in effect on the date hereof, except that a
Person shall be deemed to Beneficially Own all such securities that such
Person has the right to acquire whether such right is exercisable immediately
or after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings.
"Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Bylaws" means the Bylaws of the Corporation, as amended.
"Current Market Price", when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing price
per share of Common Stock or such other securities on such date and, when
used with reference to shares of Common Stock or other securities for any
period shall mean the average of the daily closing prices per share of Common
Stock or such other securities for such period. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Common Stock or such other securities
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Common Stock or such other securities are listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. National Market System or such other securities are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Stock or such other securities selected by the Board of Directors of
the Corporation. If the Common Stock or such other securities are not
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publicly held or so listed or publicly traded, "Current Market Price" shall
mean the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the
Corporation based on an opinion of an independent investment banking firm
with an established national reputation as a valuer of securities, which
opinion may be based on such assumption as such firm shall deem to be
necessary and appropriate.
"Equity Securities" of any Person means any and all common
stock, preferred stock and any other class of capital stock of, and any
partnership or limited liability company interests of such Person or any
other similar interests of any Person that is not a corporation, partnership
or limited liability company.
"Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, from time
to time.
"Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
"Formula Number" shall mean one thousand (1,000) prior to
consummation of the Recapitalization, provided, however, that if at any time
prior to the consummation of the Recapitalization, the Corporation shall (i)
declare or pay any dividend or make any distribution on the Common Stock,
payable in shares of Common Stock; (ii) subdivide (by a stock split or
otherwise) the outstanding shares of Common Stock into a larger number of
shares of Common Stock; or (iii) combine (by a reverse stock split or
otherwise) the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then in each such case the Formula Number in effect
immediately prior to such event shall be adjusted to a number determined by
multiplying the Formula Number then in effect by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event (and rounding the
result to the nearest whole number); and provided further, that, if prior to
the consummation of the Recapitalization the Corporation shall issue any
shares of its capital stock in a merger, reclassification, or change of the
outstanding shares of Common Stock, then in each such event the Formula
Number shall be appropriately
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adjusted to reflect such merger, reclassification, or change so that each
share of Series B Preferred Stock continues to be the economic equivalent of
a Formula Number of shares of Common Stock immediately prior to such merger,
reclassification, or change.
"Group" has the meaning set forth in Rule 13d-5 under the
Exchange Act.
"Issue Date" shall mean the first date on which shares of
Series B Preferred Stock are issued.
"Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
"Post-Recapitalization Stated Value" shall be equal to $1.00.
"Recapitalization" means the amendment of the Corporation's
Certificate of Incorporation to increase the authorized shares of Common
Stock from 50,000,000 to 400,000,000, and the authorized shares of Preferred
Stock from 1,000,000 to 200,000,000, and the subsequent one thousand-for-one
split of Series B Preferred Stock and Series C Preferred Stock.
"Redemption Price" of a share of Class B Preferred Stock shall
mean the sum of (a) the dividends, if any, accumulated or deemed to have
accumulated thereon to the Optional Redemption Date, whether or not such
dividends are declared plus (b) either (i) the Initial Stated Value thereof
(if the Recapitalization has not been consummated prior to June 30, 1999) or
(ii) the Post-Recapitalization Stated Value thereof (if the Recapitalization
has been consummated prior to June 30, 1999), in each case subject to
adjustment for splits, reclassifications, recombinations or other similar
events.
"Rights" shall mean any rights to purchase securities of the
Corporation issued pursuant to any Rights Agreement.
"Rights Agreement" shall mean the Rights Agreement, dated as
of June 21, 1996, between the Company and Wells Fargo Bank as rights agent,
and all amendments, supplements and replacements thereof.
"Second Anniversary Date" means the second anniversary of the
Issue Date.
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"Subsidiary" means, as to any Person, any other Person of
which more than 50% of the shares of the Voting Securities or other voting
interests are owned or controlled, or the ability to select or elect 50% or
more of the directors or similar managers is held, directly or indirectly, by
such first Person and one or more of its Subsidiaries.
"Trading Day" means a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business or, if the Common Stock is
not listed or admitted to trading on any national securities exchange a
Business Day.
"Voting Securities" means, (i) with respect to the Company,
the Equity Securities of the Company entitled to vote generally for the
election of directors of the Company, and (ii) with respect to any other
Person, any securities of or interests in such Person entitled to vote
generally for the election of directors or any similar managing person of
such Person.
X. MISCELLANEOUS
A. NOTICES. Any notice referred to herein shall be in writing
and, unless first-class mail shall be specifically permitted for such notices
under the terms hereof, shall be deemed to have been given upon personal
delivery thereof, upon transmittal of such notice by telecopy (with
confirmation of receipt by telecopy or telex) or five days after transmittal
by registered or certified mail, postage prepaid, addressed as follows:
(i) if to the Corporation, to its office at 2 California
Plaza, 350 South Grand Avenue, Los Angeles, California
90071 (Attention: General Counsel) or to the transfer
agent for the Series B Preferred Stock;
(ii) if to a holder of the Series B Preferred Stock, to such
holder at the address of such holder as listed in the
stock record books of the Corporation (which may
include the records of any transfer agent for the
Series B Preferred Stock); or
(iii) to such other address as the Corporation or such
holder, as the case may be, shall have designated by
notice similarly given.
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B. REACQUIRED SHARES. Any shares of Series B Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation, directly or
indirectly, in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof (and shall not be deemed to be outstanding for
any purpose) and, if necessary to provide for the lawful redemption or
purchase of such shares, the capital represented by such shares shall be
reduced in accordance with the Delaware General Corporation Law. All such
shares of Series B Preferred Stock shall upon their cancellation and upon the
filing of an appropriate certificate with the Secretary of State of the State
of Delaware, become authorized but unissued shares of Preferred Stock, par
value $0.001 per share, of the Corporation and may be reissued as part of
another series of Preferred Stock, par value $0.001 per share, of the
Corporation subject to the conditions or restrictions on issuance set forth
herein.
C. ENFORCEMENT. Any registered holder of shares of Series B
Preferred Stock may proceed to protect and enforce its rights and the rights
of such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of
any provision in this Certificate of Designations or in aid of the exercise
of any power granted herein, or to enforce any other proper remedy.
D. TRANSFER TAXES. Except as otherwise agreed upon pursuant to
the terms of this Certificate of Designations, the Corporation shall pay any
and all documentary, stamp or similar issue or transfer taxes and other
governmental charges that may be imposed under the laws of the United States
of America or any political subdivision or taxing authority thereof or
therein in respect of any issue or delivery of Common Stock on conversion of,
or other securities or property issued on account of, shares of Series B
Preferred Stock pursuant hereto or certificates representing such shares or
securities. The Corporation shall not, however, be required to pay any such
tax or other charge that may be imposed in connection with any transfer
involved in the issue or transfer and delivery of any certificate for Common
Stock or other securities or property in a name other than that in which the
shares of Series B Preferred Stock so exchanged, or on account of which such
securities were issued, were registered and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Corporation the amount of any such tax or has established to the satisfaction
of the Corporation that such tax has been
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paid or is not payable.
E. TRANSFER AGENT. The Corporation may appoint, and from time
to time discharge and change, a transfer agent for the Series B Preferred
Stock. Upon any such appointment or discharge of a transfer agent, the
Corporation shall send notice thereof by first-class mail, postage prepaid,
to each holder of record of shares of Series B Preferred Stock.
F. RECORD DATES. In the event that the Series B Preferred
Stock shall be registered under either the Securities Act of 1933, as
amended, or the Exchange Act, the Corporation shall establish appropriate
record dates with respect to payments and other actions to be made with
respect to the Series B Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Executive vice President,
General Counsel and Secretary and attested by its Assistant Secretary, this
10th day of February , 1999.
AAMES FINANCIAL CORPORATION
By: /s/ Barbara S. Polsky
---------------------------------
Name: Barbara S. Polsky
Title: Executive Vice President, General
Counsel and Secretary
[Corporate Seal]
ATTEST:
/s/ John F. Madden, Jr.
- -----------------------------------
John F. Madden Jr.
Assistant Secretary
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- --------------------------------------------------------------------------------
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS, AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
AAMES FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
AAMES FINANCIAL CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were adopted
by the Board of Directors of the Corporation (the "Board of Directors")
pursuant to authority of the Board of Directors as required by Section 151 of
the Delaware General Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors in accordance with the provisions of the
Certificate of Incorporation of the Corporation, as amended (the "Certificate
of Incorporation"), the Board of Directors hereby creates a series of the
Corporation's previously authorized preferred stock, par value $0.001 per
share (the "Preferred Stock"), and hereby states the designation and number
thereof,
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and fixes the voting powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions
thereof, as follows:
SERIES C CONVERTIBLE PREFERRED STOCK:
I. DESIGNATION AND AMOUNT
The designation of this series of shares shall be "Series C
Convertible Preferred Stock" (the "Series C Preferred Stock") par value $0.001
per share; the initial stated value per share shall be $1,000.00 (the "Initial
Stated Value"); and the number of shares constituting such series shall be
100,000. The number of shares of the Series C Preferred Stock may be decreased
from time to time by a resolution or resolutions of the Board of Directors;
provided, however, that such number shall not be decreased below the aggregate
number of shares of the Series C Preferred Stock then outstanding.
II. RANK
A. With respect to dividends, the Series C Preferred Stock shall
rank (i) senior to each other class or series of Preferred Stock, except for
the Series B Convertible Preferred Stock, par value $0.001 per share, of the
Corporation (the "Series B Preferred Stock"); (ii) on a parity with the
Series B Preferred Stock; and (iii) senior to the Corporation's Common Stock,
par value $.001 per share (the "Common Stock"), and, except as specified
above, all other classes and series of capital stock of the Corporation
hereafter issued by the Corporation. With respect to dividends, all equity
securities of the Corporation to which the Series C Preferred Stock ranks
senior, including the Common Stock, are collectively referred to herein as
the "Junior Dividend Securities"; all equity securities of the Corporation
with which the Series C Preferred Stock ranks on a parity, including the
Series B Preferred Stock, are collectively referred to herein as the "Parity
Dividend Securities"; and all equity securities of the Corporation (other
than convertible debt securities) to which the Series C Preferred Stock ranks
junior, with respect to dividends, are collectively referred to herein as the
"Senior
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Dividend Securities."
B. With respect to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series C Preferred Stock shall rank (i) senior to each other class or series
of Preferred Stock, except for the Series B Preferred Stock; (ii) on a parity
with the Series B Preferred Stock; and (iii) senior to the Common Stock, and,
except as specified above, all other classes and series of capital stock of the
Corporation hereafter issued by the Corporation. With respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, all equity securities of the
Corporation to which the Series C Preferred Stock ranks senior, including the
Common Stock, are collectively referred to herein as "Junior Liquidation
Securities"; all equity securities of the Corporation (other than convertible
debt securities) to which the Series C Preferred Stock ranks on parity,
including the Series B Preferred Stock, are collectively referred to herein as
"Parity Liquidation Securities"; and all equity securities of the Corporation to
which the Series C Preferred Stock ranks junior are collectively referred to
herein as "Senior Liquidation Securities."
C. The Series C Preferred Stock shall be subject to the creation
of Junior Dividend Securities and Junior Liquidation Securities (collectively,
"Junior Securities"), but no Parity Dividend Securities or Parity Liquidation
Securities (collectively, "Parity Securities") (other than the Series B
Preferred Stock) or Senior Dividend Securities or Senior Liquidation Securities
(collectively, "Senior Securities") shall be created except in accordance with
the terms hereof.
III. DIVIDENDS
A. DIVIDENDS. Subject to the terms of paragraph D below, shares
of Series C Preferred Stock shall accumulate dividends at a rate of 6.5% per
annum (the "Dividend Rate"), which dividends shall be paid quarterly in cash, in
four equal quarterly installments on the last day of March, June, September and
December of each year, or if any such date is not a Business Day, the Business
Day next preceding such day (each such date, regardless of whether any dividends
have been paid or declared and set aside for payment on such date, a "Dividend
Payment Date"), to holders of record (the "Registered Holders") as they appear
on the stock record books of the Corporation on the fifteenth day prior to the
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relevant Dividend Payment Date; provided, however, that during the Accrual
Period (as defined in Article IX hereof) the Corporation shall have the
option to accrue such dividends, which dividends, to the extent so accrued,
shall compound quarterly. Prior to the consummation of the Recapitalization,
dividends shall accrue and accumulate on the Initial Stated Value of each
share of Series B Preferred Stock. Following the consummation of the
Recapitalization, dividends shall accrue and accumulate on the
Post-Recapitalization Stated Value of each share of Series B Preferred Stock.
Dividends shall be paid only when, as and if declared by the Board of
Directors out of funds at the time legally available for the payment of
dividends. Dividends shall begin to accumulate on outstanding shares of
Series C Preferred Stock from the date of issuance and shall be deemed to
accumulate from day to day whether or not earned or declared until paid.
Dividends shall accumulate on the basis of a 360-day year consisting of
twelve 30-day months (four 90-day quarters) and the actual number of days
elapsed in the period for which payable.
B. ACCUMULATION. Dividends on the Series C Preferred Stock shall
be cumulative, and from and after (i) any Dividend Payment Date on which any
dividend that has accumulated or been deemed to have accumulated through such
date has not been paid in full (other than by reason of the election of the
Corporation to accrue dividends during the Accrual Period); or (ii) any payment
date set for a redemption on which such redemption payment has not been paid in
full, additional dividends shall accumulate in respect of the amount of such
unpaid dividends or unpaid redemption payment (the "Arrearage") at 125% of the
stated dividend rate (or such lesser rate as may be the maximum rate that is
then permitted by applicable law). Such additional dividends in respect of any
Arrearage shall be deemed to accumulate from day to day whether or not earned or
declared until the Arrearage is paid, shall be calculated as of such successive
Dividend Payment Date, and shall constitute an additional Arrearage from and
after any Dividend Payment Date to the extent not paid on such Dividend Payment
Date. References in any Article herein to dividends that have accumulated or
that have been deemed to have accumulated with respect to the Series C Preferred
Stock shall include the amount, if any, of any Arrearage together with any
dividends accumulated or deemed to have accumulated on such Arrearage pursuant
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to the immediately preceding two sentences. Additional dividends in respect of
any Arrearage may be declared and paid at any time, in whole or in part, without
reference to any regular Dividend Payment Date, to Registered Holders as they
appear on the stock record books of the Corporation on such record date as may
be fixed by the Board of Directors (which record date shall be no less than 10
days prior to the corresponding payment date). Dividends in respect of any
Arrearage shall be paid in cash.
C. METHOD OF PAYMENT. Dividends paid on the shares of Series C
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series C Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. After the Second Anniversary Date, dividends that are
declared and paid in an amount less than the full amount of dividends
accumulated on the Series C Preferred Stock (and on any Arrearage) shall be
applied first to the earliest dividend which has not theretofore been paid. All
cash payments of dividends on the shares of Series C Preferred Stock shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
D. SPECIAL DIVIDEND RIGHTS.
1. In addition to the dividend rights set forth in paragraph A
above, prior to the consummation of the Recapitalization, the holders of
shares of Series C Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for such
purpose, cash dividends in an amount per whole share (rounded to the nearest
cent) equal to the Formula Number then in effect times the aggregate per
share amount of all cash dividends declared or paid on the Common Stock. If,
prior to the consummation of the Recapitalization, the Corporation shall pay
any dividend or make any distribution on the Common Stock payable in assets,
securities or other forms of non-cash consideration, then, in each such case,
the Corporation shall simultaneously pay or make on each whole outstanding
share of the Series C Preferred Stock a dividend or distribution in like kind
equal to the Formula Number then in effect times such dividend or
distribution on each share of the
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Common Stock. The dividends and distributions on the Series C Preferred Stock
pursuant to this paragraph D are hereinafter referred to as "Participating
Dividends." The Corporation shall declare each Participating Dividend
immediately prior to or at the same time it declares any cash or non-cash
dividend or distribution on the Common Stock in respect of which a
Participating Dividend is required to be paid. No cash or non-cash dividend
or distribution on the Common Stock in respect of which a Participating
Dividend is required shall be paid or set aside for payment on the Common
Stock unless a Participation Dividend in respect of such dividend shall be
have been paid. Nothing contained in this paragraph D shall obligate the
Company to declare or pay any dividend or other distribution on the Common
Stock or (except pursuant to paragraph A of this Article III or in connection
with a dividend or distribution on the Common Stock as provided in this
paragraph D) the Series B Preferred Stock.
2. If the Recapitalization is not consummated prior to June 30,
1999, the Dividend Rate shall be deemed to be 15% per annum during the period
commencing on such date and ending on the date the Recapitalization is
consummated.
IV. LIQUIDATION PREFERENCE
A. PRIOR TO THE RECAPITALIZATION. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
occurring prior to the consummation of the Recapitalization, the holders of
then-outstanding shares of Series C Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets are capital or surplus
of any nature, an amount per share equal to the sum of (i) the dividends, if
any, accumulated or deemed to have accumulated thereon, to the date of final
distribution to such holders, whether or not such dividends are declared; and
(ii) the Initial Stated Value thereof, before any payment shall be made or any
assets distributed to the holders of any Junior Liquidation Securities (the
"Initial Preferred Distribution"). After the Initial Preferred Distribution has
been made, the holders of Series C Preferred Stock shall be entitled to share
pro rata with the holders of Common Stock in the distribution of any remaining
assets of the Corporation on the basis of each whole outstanding share of the
Series C Preferred Stock receiving an amount equal to the Formula Number then in
effect times such distribution on each share of the Common Stock. The
distributions on the Series C Preferred Stock pursuant to the immediately
preceding sentence of this paragraph A are hereinafter referred to as
"Participating Liquidation Distributions." No distribution on the Common Stock
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in respect of which a Participating Liquidation Distribution is required shall
be paid or set aside for payment on the Common Stock unless a Participating
Liquidation Distribution in respect of such distribution is concurrently paid.
B. AFTER THE RECAPITALIZATION. Subsequent to the consummation of
the Recapitalization, the holders of the outstanding shares of Series C
Preferred Stock shall be entitled to receive out of the assets of the
Corporation, whether such assets are capital or surplus of any nature, an amount
per share equal to the sum of (i) the dividends, if any, accumulated or deemed
to have accumulated thereon to the date of final distribution to such holders,
whether or not such dividends are declared; and (ii) the Post-Recapitalization
Stated Value thereof, before any payment shall be made or any assets distributed
to the holders of any Junior Liquidation Securities. After any such payment in
full after the consummation of the Recapitalization, the holders of Series C
Preferred Stock shall not, as such, be entitled to any further participation in
any distribution of assets of the Corporation.
C. PARITY SECURITIES. All the assets of the Corporation available
for distribution to stockholders after the liquidation preferences of any Senior
Liquidation Securities shall be distributed ratably (in proportion to the full
distributable amounts to which holders of Series C Preferred Stock and Parity
Liquidation Securities, if any, are respectively entitled upon such dissolution,
liquidation or winding up) among the holders of the then-outstanding shares of
Series C Preferred Stock and Parity Liquidation Securities, if any, when such
assets are not sufficient to pay in full the aggregate amounts payable thereon.
D. MERGER NOT A LIQUIDATION. Neither a consolidation or merger of
the Corporation with or into any other Person or Persons, nor a sale,
conveyance, lease, exchange or transfer of all or part of the Corporation's
assets for cash, securities or other property to a Person or Persons shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Article IV, but the holders of shares of Series C Preferred
Stock shall nevertheless be entitled from and after any such consolidation,
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merger or sale, conveyance, lease, exchange or transfer of all or part of the
Corporation's assets to the rights provided by this Article IV following any
such transaction. Notice of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when, and the place or places where, the amounts distributable to each holder of
shares of Series C Preferred Stock in such circumstances shall be payable, shall
be given by first-class mail, postage prepaid, mailed not less than 30 days
prior to any payment date stated therein, to holders of record as they appear on
the stock record books of the Corporation as of the date such notices are first
mailed.
V. REDEMPTION
A. INTENTIONALLY OMITTED
B. OPTIONAL REDEMPTION. Commencing on the earlier to occur of (x)
the tenth anniversary of the Issue Date and (y) the date on which fewer than 25%
of the shares of Series C Preferred Stock issued on the Issue Date remain
outstanding, and at all times thereafter, the Corporation may, at its option,
redeem all (but not less than all) outstanding shares of Series C Preferred
Stock on a date specified by the Corporation (the "Optional Redemption Date") by
paying the Redemption Price therefor in cash out funds legally available for
such purpose.
C. NOTICE AND REDEMPTION PROCEDURES. Notice of the redemption
of shares of Series C Preferred Stock pursuant to paragraph B of this Article
V (a "Notice of Redemption") shall be sent to the holders of record of the
shares of Series C Preferred Stock to be redeemed by first class mail,
postage prepaid, at each such holder's address as it appears on the stock
record books of the Corporation not more than 120 nor fewer than 90 days
prior to the Optional Redemption Date, which date shall be set forth in such
notice (the "Redemption Date"); provided that failure to give such Notice of
Redemption to any holder, or any defect in such Notice of Redemption to any
holder shall not affect the validity of the proceedings for the redemption of
any shares of Series C Preferred Stock held by any other holder. In order to
facilitate the redemption of shares of Series C Preferred
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Stock, the Board of Directors may fix a record date for the determination of
the holders of shares of Series C Preferred Stock to be redeemed not more
than 30 days prior to the date the Notice of Redemption is mailed. On or
after the Optional Redemption Date, each holder of the shares called for
redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price for such shares. From and
after the Optional Redemption Date, all dividends on shares of Series C
Preferred Stock shall cease to accumulate and all rights of the holders
thereof as holders of Series C Preferred Stock shall cease and terminate,
except to the extent the Corporation shall default in payment thereof on the
Optional Redemption Date.
D. DEPOSIT OF FUNDS. The Corporation shall, on or prior to the
Optional Redemption Date, pursuant to paragraph C of this Article V, deposit
with its transfer agent or other redemption agent in the Borough of Manhattan,
The City of New York having a capital and surplus of at least $500,000,000
selected by the Board of Directors, as a trust fund for the benefit of the
holders of the shares of Series C Preferred Stock to be redeemed, cash that is
sufficient in amount to redeem the shares to be redeemed in accordance with the
Notice of Redemption, with irrevocable instructions and authority to such
transfer agent or other redemption agent to pay to the respective holders of
such shares, as evidenced by a list of such holders certified by an officer of
the Corporation, the Redemption Price upon surrender of their respective share
certificates. Such deposit shall be deemed to constitute full payment of the
Redemption Price for such shares to the holders, and from and after the date of
such deposit, all rights of the holders of the shares of Series C Preferred
Stock that are to be redeemed as stockholders of the Corporation with respect to
such shares, except the right to receive the Redemption Price upon the surrender
of their respective certificates, shall cease and terminate. No dividends shall
accumulate on any shares of Series C Preferred Stock after the Optional
Redemption Date, for such shares (unless the Corporation shall fail to deposit
cash sufficient to redeem all such shares). In case holders of any shares of
Series C Preferred Stock called for redemption shall not, within two years after
such deposit, claim the cash deposited for redemption thereof, such transfer
agent or other redemption agent shall, upon demand, pay over to the Corporation
the balance so deposited. Thereupon, such transfer agent or other redemption
agent shall be relieved of all responsibility to the holders thereof and the
sole right of such holders, with respect to shares to be redeemed, shall be to
receive the Redemption Price as general creditors of the Corporation. Any
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interest accrued on any funds so deposited shall belong to the Corporation, and
shall be paid to it from time to time on demand.
VI. RESTRICTIONS ON DIVIDENDS
So long as any shares of the Series C Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or make
any payment on account of, or set apart for payment money for a sinking or other
similar fund for, the repurchase, redemption or other retirement of, any Junior
Securities or Parity Securities or any warrants, rights or options exercisable
for or convertible into any Junior Securities or Parity Securities (other than
the repurchase, redemption or other retirement of debentures or other debt
securities that are convertible or exchangeable into any Junior Securities or
Parity Securities), or make any distribution in respect of the Junior
Securities, either directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than distributions or
dividends in Junior Securities to the holders of Junior Securities), and shall
not permit any corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem any Junior Securities or Parity Securities
or any warrants, rights, calls or options exercisable for or convertible into
any Junior Securities or Parity Securities (other than the repurchase,
redemption or other retirement of debentures or other debt securities that are
convertible or exchangeable into any Junior Securities or Parity Securities or
the repurchase, redemption or other retirement of Junior Securities or Parity
Securities in exchange for Junior Securities or Parity Securities) unless prior
to or concurrently with such declaration, payment, setting apart for payment,
repurchase, redemption or other retirement or distribution, as the case may be,
all accumulated and unpaid dividends on shares of the Series C Preferred Stock
not paid on the dates provided for in paragraph A of Article III hereof
(including Arrearages and accumulated dividends thereon) shall have been paid,
except that when dividends are not paid in full as aforesaid upon the shares of
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Series C Preferred Stock, all dividends declared on the Series C Preferred Stock
and any series of Parity Dividend Securities shall be declared and paid pro rata
so that the amount of dividends so declared and paid on Series C Preferred Stock
and such series of Parity Dividend Securities shall in all cases bear to each
other the same ratio that accumulated dividends (including interest accrued on
or additional dividends accumulated in respect of such accumulated dividends) on
the shares of Series C Preferred Stock and such Parity Dividend Securities bear
to each other.
VII. VOTING RIGHTS
A. On or prior to the consummation of the Recapitalization, the
holders of Series C Preferred Stock shall be entitled to one thousand (1,000)
votes per share of Series C Preferred Stock at each meeting of stockholders of
the Corporation with respect to any and all matters presented to the
stockholders of the Corporation for their action and consideration, other than
the election of directors. After the consummation of the Recapitalization, the
holders of Series C Preferred Stock shall be entitled to the number of votes per
share of Series C Preferred Stock equal to the number of shares of Common Stock
for which such share of Series C Preferred Stock is then convertible pursuant to
Article VIII at each meeting of stockholders of the Corporation with respect to
any and all matters presented to the stockholders of the Corporation for their
action and consideration, other than the election of directors.
B. So long as any shares of the Series C Preferred Stock are
outstanding, (i) each share of Series C Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock, other than
the election of directors; and (ii) the shares of Series C Preferred Stock shall
vote together with shares of Common Stock and shares of Series B Preferred Stock
as a single class.
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C. Without the written consent (if action by written consent is
permitted) or affirmative vote of the holders of a majority of the outstanding
shares of Series C Preferred Stock and Series B Preferred Stock, voting together
as a single class, the Corporation shall not (i) authorize, create or issue, or
increase the authorized amount of, (x) any Senior Securities or Parity
Securities or (y) any class or series of capital stock or any security
convertible into or exercisable for any class or series of capital stock,
redeemable mandatorily or redeemable at the option of the holder thereof or (ii)
enter into any Transaction (as defined in paragraph H of Article VIII). Such
vote or consent shall be taken in accordance with the procedures specified in
paragraph E below.
D. Without the written consent (if action by written consent is
permitted) or affirmative vote of the holders of at least a majority of the
outstanding shares of Series C Preferred Stock and Series B Preferred Stock,
voting together as a single class, the Corporation shall not (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the Bylaws, if the
amendment, alteration or repeal alters or changes the powers, preferences or
special rights of the Series C Preferred Stock so as to affect them materially
and adversely or (ii) authorize or take any other action if such action alters
or changes any of the rights of the Series C Preferred Stock in any respect or
otherwise would be inconsistent with the provisions of this Certificate of
Designations and the holders of any class or series of the capital stock of the
Corporation is entitled to vote thereon. Such vote or consent shall be taken in
accordance with the procedures specified in paragraph E below.
E. The foregoing rights of holders of shares of Series C
Preferred Stock to take any actions as provided in this Article VII may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action, if action by written consent of stockholders of the Corporation is
then permitted.
The Chairman of the Board of the Corporation may call, and upon
written request of holders of record of 35% of the outstanding shares of Series
C Preferred Stock and Series B Preferred Stock, addressed to the Secretary of
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the Corporation at the principal office of the Corporation shall call, a special
meeting of the holders of shares entitled to vote as provided herein. Such
meeting shall be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the By-laws
of the Corporation for the holding of meetings of stockholders.
At each meeting of stockholders at which the holders of shares
of Series C Preferred Stock shall have the right to take any action, the
presence in person or by proxy of the holders of record of one-third of the
total number of shares of Series C Preferred Stock and Series B Preferred
Stock then outstanding and entitled to vote on the matter shall be necessary
and sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series C
Preferred Stock shall not prevent the election of directors to be
elected by the holders of shares of Series B Preferred Stock or the
taking of any action as provided in this Article VII; and
(B) in the absence of a quorum of the holders of shares of Series
C Preferred Stock and Series B Preferred Stock, a majority of the
holders of such shares present in person or by proxy shall have the
power to adjourn the meeting as to the actions to be taken by the
holders of shares of Series C Preferred Stock and Series B Preferred
Stock, from time to time and place to place without notice other than
announcement at the meeting until a quorum shall be present.
For taking of any action as provided in this Article VII by the
holders of shares of Series C Preferred Stock and Series B Preferred Stock, each
such holder shall have one vote for each share of such stock standing in his
name on the transfer books of the Corporation as of any record dated fixed for
such purpose or, if no such date be fixed, at the close of business on the
Business Day next preceding the day on which notice is given, or if notice if
waived, at the close of business on the Business Day next preceding the day on
which the meeting is held.
F. The Corporation shall not enter into any agreement or issue
any security that prohibits, conflicts or is inconsistent with, or would be
breached by, the Corporation's performance of its obligations hereunder.
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VIII. CONVERSION
The holders of the Series C Preferred Stock shall have conversion
rights as follows:
A. Each share of Series C Preferred Stock shall be convertible at
the direction of, and by notice to the Corporation from, (i) the
holder thereof or (ii) the holders of a majority of the
outstanding shares of Series C Preferred Stock, at any time, at
the office of the Corporation or any transfer agent for such
Series, into one thousand (1,000) fully paid and nonassessable
shares of Common Stock subject (x) to adjustment from time to
time as provided below (as so adjusted, the "conversion ratio")
and (y) (prior to the consummation of the Recapitalization) to
limitations resulting from the available number of shares of
Common Stock which may be reserved for issuance upon such
conversion, provided, that any conversion pursuant to clause (ii)
above of less than all of the outstanding shares of Series C
Preferred Stock shall be on a pro rata basis amongst all holders
of Series C Preferred Stock. After consummation of the
Recapitalization, the number "1,000" in this paragraph shall be
"1", subject to adjustment as provided in paragraph VIII.G.
B. If a holder of Series C Preferred Stock gives notice (an
"Optional Conversion Notice") of conversion under paragraph A
above, such holder shall surrender with such Optional Conversion
Notice the duly endorsed certificate or certificates for the
Series C Preferred Stock being converted, at the office of the
Corporation or of any transfer agent for such Series, and shall
state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. If the
holders of a majority of the outstanding shares of Series C
Preferred Stock give notice of conversion under paragraph A
above, the Corporation shall notify all other record holders of
Series C Preferred Stock (a "Mandatory Conversion Notice").
Following receipt of a Mandatory Conversion Notice, the holders
of Series C Preferred Stock shall surrender the certificate or
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certificates therefor duly endorsed, at the office of the
Corporation or of any transfer agent for such Series, and shall
state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable after the surrender of
a Series C Preferred Stock certificate or certificates pursuant
to an Optional Conversion Notice or Mandatory Conversion Notice,
issue and deliver at such office to such holder, or to the
nominee or nominees of such holder, a certificate or certificates
for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed
to have been made immediately prior to the close of business on
the date of such Optional Conversion Notice or Mandatory
Conversion Notice, as applicable, and the person or persons
entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the recordholder
or holders of such shares of Common Stock as of such date. The
issuance of certificates or shares of Common Stock upon
conversion of shares of Series C Preferred Stock shall be made
without charge for any issue, stamp or other similar tax in
respect of such issuance.
C. No fractional shares shall be issued upon conversion of any
shares of Series C Preferred Stock and the number of shares of
Common Stock to be issued shall be rounded down to the nearest
whole share, and the holder of Series C Preferred Stock shall be
paid in cash for any fractional share.
D. In case at any time or from time to time the Corporation shall
pay any dividend or make any other distribution to the holders of
its Common Stock or other class of securities, or shall offer for
subscription pro rata to the holders of its Common Stock or other
class of securities any additional shares of stock of any class
or any other right, or there shall be any capital reorganization
or reclassification of the Common Stock of the Corporation or
consolidation or merger of the Corporation with or into another
corporation, or any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially
as an entirety, or there shall be a voluntary or involuntary
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dissolution, liquidation or winding up of the Corporation, then,
in any one or more of said cases the Corporation shall give at
least 20 days' prior written notice (the time of mailing of such
notice shall be deemed to be the time of giving thereof) to the
registered holders of the Series C Preferred Stock at the
addresses of each as shown on the books of the Corporation
maintained by the Transfer Agent thereof of the date on which
(i) the books of the Corporation shall close or a record shall
be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be,
provided that in the case of any Transaction to which paragraph H
applies the Corporation shall give at least 30 days' prior
written notice as aforesaid. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall
participate in said dividend, distribution or subscription rights
or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or
conveyance or participate in such dissolution, liquidation or
winding up, as the case may be. Failure to give such notice shall
not invalidate any action so taken.
E. From and after the Recapitalization, the Corporation shall at all
times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series C Preferred
Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all
outstanding shares of Series C Preferred Stock, and if at any
time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then
outstanding shares of Series C Preferred Stock, then in
addition
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to such other remedies as shall be available to the holder of
Series C Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for
such purposes.
F. Any notice required by the provisions of paragraph D to be given
the holders of shares of Series C Preferred Stock shall be deemed
given if sent by facsimile transmission, by telex, or if
deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his, her or its address
appearing on the books of the Corporation.
G. The conversion ratio shall be subject to adjustment from time to
time as follows:
(i) In case the Corporation shall at any time or from time
to time after the Issue Date (A) pay a dividend or make a
distribution, on the outstanding shares of Common Stock in shares
of Common Stock, (B) subdivide the outstanding shares of Common
Stock into a larger number of shares of Common Stock, (C) combine
the outstanding shares of Common Stock into a smaller number of
shares or (D) issue by reclassification of the shares of Common
Stock any shares of capital stock of the Corporation, then, and
in each such case, the conversion ratio in effect immediately
prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any shares of
Series C Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock
or other securities of the Corporation which such holder would
have owned or have been entitled to receive after the happening
of any of the events described above, had such shares of Series C
Preferred Stock been surrendered for conversion immediately prior
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to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this clause
(i) shall become effective (x) in the case of any such dividend
or distribution, immediately after the close of business on the
record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y)
in the case of any such subdivision, reclassification or
combination, at the close of business on the day upon which such
corporate action becomes effective.
(ii) In the case the Corporation shall, after the Issue
Date, issue shares of Common Stock at a price per share, or
securities convertible into or exchangeable for shares of Common
Stock ("Convertible Securities") having a "Conversion Price" (as
defined below) less than the Current Market Price (for a period
of 15 consecutive trading days prior to such date), then, and in
each such case, the conversion ratio shall be adjusted so that
the holder of each share of Series C Preferred Stock shall be
entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (A) the
applicable conversion ratio on the day immediately prior to such
date by (B) a fraction, the numerator of which shall be the sum
of (1) the number of shares of Common Stock outstanding on the
date on which such shares or Convertible Securities are issued
and (2) the number of additional shares of Common Stock issued,
or into which the Convertible Securities may convert, and the
denominator of which shall be the sum of (x) the number of shares
of Common Stock outstanding on such date and (y) the number of
shares of Common Stock which the aggregate consideration
receivable by the Corporation for the total number of shares of
Common Stock so issued, or the number of shares of Common Stock
which the aggregate of the Conversion Price of such Convertible
Securities so issued, would purchase at such Current Market price
on such date. An adjustment made pursuant to this clause (ii)
shall be made on the next Business Day following the date on
which any such issuance is made and shall be effective
retroactively immediately after the close of business on such
date. For purposes of this clause (ii), the aggregate
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consideration receivable by the Corporation in connection with
the issuance of any securities shall be deemed to be the sum of
the aggregate offering price to the public (before deduction of
underwriting discounts or commissions and expenses payable to
third parties), and the "Conversion Price" of any Convertible
Securities is the total amount received or receivable by the
Corporation as consideration for the issue or sale of such
Convertible Securities (before deduction of underwriting
discounts or commissions and expenses payable to third parties)
plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion, exchange or
exercise of any such Convertible Securities. Neither (A)
the issuance of any shares of Common Stock (whether treasury
shares or newly issued shares) pursuant to a dividend or
distribution on, or subdivision, combination or reclassification
of, the outstanding shares of Common Stock requiring an
adjustment in the conversion ratio pursuant to clause (i) of this
paragraph G, or pursuant to any employee benefit plan or program
of the Corporation or pursuant to any option, warrant, right, or
Convertible Security outstanding as of the date hereof
(including, but not limited to, the Rights, the Series B
Preferred Stock, the Series C Preferred Stock and the Warrants)
nor (B) the issuance of shares of Common Stock pursuant thereto
shall be deemed to constitute an issuance of Common Stock or
Convertible Securities by the Corporation to which this clause
(ii) applies. Upon expiration of any Convertible Securities which
shall not have been exercised or converted and for which an
adjustment shall have been made pursuant to this clause (ii), the
Conversion Price computed upon the original issue thereof shall
upon such expiration be recomputed as if the only additional
shares of Common Stock issued were such shares of Common Stock
(if any) actually issued upon exercise of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue
of such Convertible Securities (whether or not exercised or
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converted) plus the consideration actually received by the
Corporation upon such exercise of conversion.
(iii) In case the Corporation shall at any time or from
time to time after the Issue Date declare, order, pay or make a
dividend or other distribution (including, without limitation,
any distribution of stock or other securities or property or
rights or warrants to subscribe for securities of the Corporation
or any of its Subsidiaries by way of dividend or spin-off), on
its Common Stock, other than (A) regular quarterly dividends
payable in cash in an aggregate amount not to exceed 15% of net
income from continuing operations before extraordinary items of
the Corporation, determined in accordance with generally accepted
accounting principles, during the period (treated as one
accounting period) commencing on July 1, 1998, and ending on the
date such dividend is paid or (B) dividends or distributions of
shares of Common Stock which are referred to in clause (i) of
this paragraph G, then, and in each such case, the conversion
ratio shall be adjusted so that the holder of each share of
Series C Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (1) the applicable conversion ratio on
the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend
or distribution by (2) a fraction, the numerator of which shall
be the then Current Market Price per share of Common Stock for
the period of 20 Trading Days preceding such record date, and the
denominator of which shall be such Current Market Price per share
of Common Stock for the period of 20 Trading Days preceding such
record date less the Fair Market Value (as defined in Article IX)
per share of Common Stock (as determined in good faith by the
Board of Directors of the Corporation, a certified resolution
with respect to which shall be mailed to each holder of shares of
Series C Preferred Stock) of such dividend or distribution;
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provided, however, that in the event of a distribution of shares
of capital stock of a Subsidiary of the Corporation (a
"Spin-Off") made to holders of shares of Common Stock, the
numerator of such fraction shall be the sum of the Current Market
Price per share of Common Stock for the period of 20 Trading Days
preceding the 35th Trading Day after the effective date of such
Spin-Off and the Current Market Price of the number of shares (or
the fraction of a share) of capital stock of the Subsidiary which
is distributed in such Spin-Off in respect of one share of Common
Stock for the period of 20 Trading Days preceding such 35th
Trading Day and the denominator of which shall be the current
market price per share of the Common Stock for the period of 20
Trading Days proceeding such 35th Trading Day. An adjustment made
pursuant to this clause (iii) shall be made upon the opening of
business on the next Business Day following the date on which any
such dividend or distribution is made and shall be effective
retroactively immediately after the close of business on the
record date fixed for the determination of stockholders entitled
to receive such dividend or distribution; provided, however, if
the proviso to the preceding sentence applies, then such
adjustment shall be made and be effective as of such 35th Trading
Day after the effective date of such Spin-Off.
(iv) For purposes of this paragraph G, the number of shares
of Common Stock at any time outstanding shall not include any
shares of Common Stock then owned or held by or for the account
of the Corporation.
(v) The term "dividend", as used in this paragraph G shall
mean a dividend or other distribution upon stock of the
Corporation except pursuant to the Rights Agreement (as defined
in Article IX). Notwithstanding anything in this Article VIII to
the contrary, the conversion ratio shall not be adjusted as a
result of any dividend, distribution or issuance of securities of
the Corporation pursuant to the Rights Agreement.
(vi) Anything in this paragraph G to the contrary
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notwithstanding, the Corporation shall not be required to give
effect to any adjustment in the conversion ratio unless and until
the net effect of one or more adjustments (each of which shall be
carried forward), determined as above provided, shall have
resulted in a change of the conversion ratio by at least
one-hundredth of one share of Common Stock, and when the
cumulative net effect of more than one adjustment so determined
shall be to change the conversion ratio by at least one-hundredth
of one share of Common Stock, such change in conversion ratio
shall thereupon be given effect.
(vii) The certificate of any firm of independent public
accountants of recognized standing selected by the Board of
Directors of the Corporation (which may be the firm of
independent public accountants regularly employed by the
Corporation) shall be presumptively correct for any computation
made under this paragraph G.
(viii) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, and shall thereafter
and before the distribution to stockholders thereof legally
abandon its plan to pay or deliver such dividend or distribution,
then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted
by this paragraph G or in the conversion ratio then in effect
shall be required by reason of the taking of such record.
(ix) There shall be no adjustment of the conversion ratio
in case of the issuance of any stock of the Corporation in a
merger, reorganization, acquisition or other similar transaction
except as set forth in paragraph G(i), G(ii) and H of this
Article VIII.
H. In case of any reorganization or reclassification of outstanding
shares of Common Stock (other than a reclassification covered by
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paragraph G(i) of this Article VIII), or in case of any
consolidation or merger of the Corporation with or into another
corporation, or in the case of any sale or conveyance to another
corporation of the property of the Corporation as an entirety or
substantially as an entirety (each of the foregoing being
referred to as a "Transaction"), each share of Series C Preferred
Stock then outstanding shall thereafter be convertible into, in
lieu of the Common Stock issuable upon such conversion prior to
consummation of such Transaction, the kind and amount of shares
of stock and other securities and property receivable (including
cash) upon the consummation of such Transaction by a holder of
that number of shares of Common Stock into which one share of
Series C Preferred Stock was convertible immediately prior to
such Transaction (including, on a pro rata basis, the cash,
securities or property received by holders of Common Stock in any
tender or exchange offer that is a step in such Transaction). In
case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all
reference in this paragraph H shall be deemed to apply, so far as
appropriate and as nearly as may be, to such other securities or
property.
I. Upon any adjustment of the conversion ratio then in effect and
any increase or decrease in the number of shares of Common Stock
issuable upon the operation of the conversion set forth in
Article VIII, then, and in each such case, the Corporation shall
promptly deliver to the registered holders of the Series C
Preferred and Common Stock, a certificate signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment
was calculated and specifying the conversion ratio then in effect
following such adjustment and
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the increased or decreased number of shares issuable upon the
conversion set forth in this Article VIII.
IX. ADDITIONAL DEFINITIONS
For the purposes of this Certificate of Designations of Series C
Preferred Stock, the following terms shall have the meanings indicated:
"Accrual Period" means the end of the first quarterly period
following the Second Anniversary Date.
"Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date hereof, except that a Person
shall be deemed to Beneficially Own all such securities that such Person has the
right to acquire whether such right is exercisable immediately or after the
passage of time). The terms "Beneficial Ownership" and "Beneficial Owner" have
correlative meanings.
"Business Day" means any day, other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Bylaws" means the Bylaws of the Corporation, as amended.
"Current Market Price", when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing price per
share of Common Stock or such other securities on such date and, when used with
reference to shares of Common Stock or other securities for any period shall
mean the average of the daily closing prices per share of Common Stock or such
other securities for such period. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading or, if the Common Stock is
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not listed or admitted to trading on any national securities exchange, the
last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. National Market System or such other
securities are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock or such other securities selected by the
Board of Directors of the Corporation. If the Common Stock or such other
securities are not publicly held or so listed or publicly traded, "Current
Market Price" shall mean the Fair Market Value per share of Common Stock or
of such other securities as determined in good faith by the Board of
Directors of the Corporation based on an opinion of an independent investment
banking firm with an established national reputation as a valuer of
securities, which opinion may be based on such assumption as such firm shall
deem to be necessary and appropriate.
"Equity Securities" of any Person means any and all common stock,
preferred stock and any other class of capital stock of, and any partnership or
limited liability company interests of such Person or any other similar
interests of any Person that is not a corporation, partnership or limited
liability company.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, from time to
time.
"Fair Market Value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's-length transaction.
"Formula Number" shall mean one thousand (1,000) prior to
consummation of the Recapitalization; provided, however, that if at any time
prior to the consummation of the Recapitalization, the Corporation shall (i)
declare or pay any dividend or make any distribution on the Common Stock,
payable in shares of Common Stock; (ii) subdivide (by a stock split or
otherwise) the outstanding shares of Common Stock into a larger number of shares
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of Common Stock; or (iii) combine (by a reverse stock split or otherwise) the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then in each such case the Formula Number in effect immediately prior to
such event shall be adjusted to a number determined by multiplying the Formula
Number then in effect by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event (and rounding the result to the
nearest whole number); and provided further, that, if prior to the consummation
of the Recapitalization the Corporation shall issue any shares of its capital
stock in a merger, reclassification, or change of the outstanding shares of
Common Stock, then in each such event the Formula Number shall be appropriately
adjusted to reflect such merger, reclassification, or change so that each share
of Series C Preferred Stock continues to be the economic equivalent of a Formula
Number of shares of Common Stock immediately prior to such merger,
reclassification, or change.
"Group" has the meaning set forth in Rule 13d-5 under the
Exchange Act.
"Issue Date" shall mean the first date on which shares of Series
C Preferred Stock are issued. "Person" means any individual, corporation,
company, association, partnership, joint venture, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
"Post-Recapitalization Stated Value" shall be equal to $1.00.
"Recapitalization" means the amendment of the Corporation's
Certificate of Incorporation to increase the authorized shares of Common Stock
from 50,000,000 to 400,000,000, and the authorized shares of Preferred Stock
from 1,000,000 to 200,000,000, and the subsequent one thousand-for-one split of
Series C Preferred Stock and Series B Preferred Stock.
"Redemption Price" of a share of Series C Preferred Stock shall
mean the sum of (a) the dividends, if any, accumulated or deemed to have
accumulated thereon to the Optional Redemption Date, whether or not such
dividends are declared plus (b) either (i) the Initial Stated Value thereof (if
the Recapitalization has not been consummated prior to June 30, 1999) or (ii)
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the Post-Recapitalization Stated Value thereof (if the Recapitalization has been
consummated prior to June 30, 1999), in each case subject to adjustment for
splits, reclassifications, recombinations or similar events.
"Rights" shall mean any rights to purchase securities of the
Corporation issued pursuant to any Rights Agreement.
"Rights Agreement" shall mean the Rights Agreement, dated as of
June 21, 1996, between the Company and Wells Fargo Bank as rights agent, and all
amendments, supplements and replacements thereof.
"Second Anniversary Date" means the second anniversary of the
Issue Date.
"Subsidiary" means, as to any Person, any other Person of which
more than 50% of the shares of the Voting Securities or other voting interests
are owned or controlled, or the ability to select or elect 50% or more of the
directors or similar managers is held, directly or indirectly, by such first
Person and one or more of its Subsidiaries.
"Trading Day" means a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange a Business Day.
"Voting Securities" means, (i) with respect to the Company, the
Equity Securities of the Company entitled to vote generally for the election of
directors of the Company, and (ii) with respect to any other Person, any
securities of or interests in such Person entitled to vote generally for the
election of directors or any similar managing person of such Person.
X. MISCELLANEOUS
A. NOTICES. Any notice referred to herein shall be in writing
and, unless first-class mail shall be specifically permitted for such notices
under the terms hereof, shall be deemed to have been given upon personal
delivery thereof, upon transmittal of such notice by telecopy (with confirmation
of receipt by telecopy or telex) or five days after transmittal by registered or
certified mail, postage prepaid, addressed as follows:
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(i) if to the Corporation, to its office at 2 California
Plaza, 350 South Grand Avenue, Los Angeles, California
90071 (Attention: General Counsel)
or to the transfer agent for the Series C
Preferred Stock;
(ii) if to a holder of the Series C Preferred Stock, to such
holder at the address of such holder as listed in the
stock record books of the Corporation (which may
include the records of any transfer agent for the
Series C Preferred Stock); or
(iii) to such other address as the Corporation or such
holder, as the case may be, shall have designated by
notice similarly given.
B. REACQUIRED SHARES. Any shares of Series C Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation, directly or
indirectly, in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Delaware General Corporation Law. All such shares of Series
C Preferred Stock shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State of Delaware,
become authorized but unissued shares of Preferred Stock, par value $0.001 per
share, of the Corporation and may be reissued as part of another series of
Preferred Stock, par value $0.001 per share, of the Corporation subject to the
conditions or restrictions on issuance set forth herein.
C. ENFORCEMENT. Any registered holder of shares of Series C
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of any
provision in this Certificate of Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
D. TRANSFER TAXES. Except as otherwise agreed upon pursuant to
the terms of this Certificate of Designations, the Corporation shall pay any and
all documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
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any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Common Stock on conversion of, or other securities or
property issued on account of, shares of Series C Preferred Stock pursuant
hereto or certificates representing such shares or securities. The Corporation
shall not, however, be required to pay any such tax or other charge that may be
imposed in connection with any transfer involved in the issue or transfer and
delivery of any certificate for Common Stock or other securities or property in
a name other than that in which the shares of Series C Preferred Stock so
exchanged, or on account of which such securities were issued, were registered
and no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Corporation the amount of any such tax or
has established to the satisfaction of the Corporation that such tax has been
paid or is not payable.
E. TRANSFER AGENT. The Corporation may appoint, and from time to
time discharge and change, a transfer agent for the Series C Preferred Stock.
Upon any such appointment or discharge of a transfer agent, the Corporation
shall send notice thereof by first-class mail, postage prepaid, to each holder
of record of shares of Series C Preferred Stock.
F. RECORD DATES. In the event that the Series C Preferred Stock
shall be registered under either the Securities Act of 1933, as amended, or the
Exchange Act, the Corporation shall establish appropriate record dates with
respect to payments and other actions to be made with respect to the Series C
Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designations is executed
on behalf of the Corporation by its Executive Vice President, General Counsel
and Secretary and attested by its Assistant Secretary, this 10th day of February
, 1999.
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AAMES FINANCIAL CORPORATION
By: /s/ Barbara S. Polsky
---------------------------------
Name: Barbara S. Polsky
Title: Executive Vice President, General
Counsel and Secretary
[Corporate Seal]
ATTEST:
/s/ John F. Madden, Jr.
- ----------------------------------
John F. Madden Jr.
Assistant Secretary
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CERTIFICATE OF INCREASE
OF
AUTHORIZED NUMBER OF SHARES
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
AAMES FINANCIAL CORPORATION
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Aames Financial Corporation, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
That a Certificate of the Voting Powers, Designations,
Preferences and Relative, Participating, Optional or Other Special Rights, and
Qualifications, Limitations or Restrictions Thereof, of Series B Convertible
Preferred Stock was filed in the Office of the Secretary of State on February
10,1999.
That the Board of Directors of the Corporation adopted a
resolution authorizing and directing an increase in the authorized number of
shares of Series B Convertible Preferred Stock of the Corporation, from 100,000
shares to 29,704,000 shares, all in accordance with the provisions of Section
151 of The General Corporation Law of the State of Delaware and the Certificate
of Incorporation of the Corporation.
That the effective date and time of this Certificate of
Increase is September 30, 1999 at 11:59 p.m., eastern time.
IN WITNESS WHEREOF, Aames Financial Corporation has caused
this certificate to be signed by Barbara S. Polsky, its Executive Vice
President, General Counsel and Secretary, this 30th day of September, 1999.
AAMES FINANCIAL CORPORATION
By: /s/ Barbara S. Polsky
---------------------------------
Name: Barbara S. Polsky
Title: Executive Vice President,
General Counsel and Secretary
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CERTIFICATE OF INCREASE
OF
AUTHORIZED NUMBER OF SHARES
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
AAMES FINANCIAL CORPORATION
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Aames Financial Corporation, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
That a Certificate of the Voting Powers, Designations,
Preferences and Relative, Participating, Optional or Other Special Rights, and
Qualifications, Limitations or Restrictions Thereof, of Series C Convertible
Preferred Stock was filed in the Office of the Secretary of State on February
10,1999.
That the Board of Directors of the Corporation adopted a
resolution authorizing and directing an increase in the authorized number of
shares of Series C Convertible Preferred Stock of the Corporation, from 100,000
shares to 107,122,664 shares, all in accordance with the provisions of Section
151 of The General Corporation Law of the State of Delaware and the Certificate
of Incorporation of the Corporation.
That the effective date and time of this Certificate of
Increase is September 30, 1999 at 11:59 p.m., eastern time.
IN WITNESS WHEREOF, Aames Financial Corporation has caused
this certificate to be signed by Barbara S. Polsky, its Executive Vice
President, General Counsel and Secretary, this 30th day of September, 1999.
AAMES FINANCIAL CORPORATION
By: /s/ Barbara S. Polsky
--------------------------------
Name: Barbara S. Polsky
Title: Executive Vice President,
General Counsel and Secretary
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CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AAMES FINANCIAL CORPORATION
(A DELAWARE CORPORATION)
The undersigned Barbara S. Polsky the Executive Vice President, General
Counsel and Secretary, respectively, of Aames Financial Corporation (the
"Corporation"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "DGCL"), do hereby certify
that the following amendments were adopted in accordance with the provisions of
Section 242 of the DGCL:
The text of the first paragraph of Article FOURTH of the Certificate of
Incorporation of the Corporation is hereby amended and restated to read in full
as follows:
FOURTH: The total number of shares which the
Corporation shall have the authority to issue is 600,000,000,
consisting of 400,000,000 shares of common stock, par value
$0.001 per share (the "Common Stock") and 200,000,000 shares
of preferred stock, par value $0.001 per share (the "Preferred
Stock").
Simultaneously with the effective date of this
amendment (the "EFFECTIVE DATE"), each share of the
Corporation's Series B Convertible Preferred Stock having a
par value of $0.001 per share issued and outstanding
immediately prior to the Effective Date (the "PRE-SPLIT SERIES
B PREFERRED STOCK") shall automatically and without any action
on the part of the holder thereof be reclassified as and
changed into one thousand (1,000) shares of Series B
Convertible Preferred Stock, par value of $0.001 per share
(the "POST-SPLIT SERIES B STOCK"). Each holder of a
certificate or certificates which immediately prior to the
Effective Date represented outstanding shares of Pre-Split
Series B Convertible Preferred Stock (the "PRE-SPLIT SERIES B
CERTIFICATES," whether one or more) shall be entitled to
receive upon surrender of such Pre-Split Series B Certificates
to the Corporation's Secretary for cancellation, a certificate
or certificates (the "POST-SPLIT SERIES B CERTIFICATES,"
whether one or more) representing the number of whole shares
of Post-Split Series B Convertible Preferred Stock into which
and for which the shares of Pre-Split Series B Convertible
Preferred Stock formerly represented by such Pre-Split Series
B Certificates so surrendered, are reclassified pursuant to
the terms hereof. From and after the Effective Date, Pre-Split
Series B Certificates shall represent only the right to
receive Post-Split Series B Certificates pursuant to the
provisions hereof. If more than one Pre-Split Series B
Certificate shall be surrendered at one time for the account
of the same stockholder, the number of full shares of
Post-Split Series B Convertible Preferred Stock for which the
Post-Split Series B Certificates shall be issued shall be
computed on the basis of the aggregate number of shares
represented by the Pre-Split Series B Certificates so
-79-
<PAGE>
surrendered. If any Post-Split Series B Certificate is to be
issued in a name other than that in which the Pre-Split Series
B Certificate surrendered for exchange are issued, the
Pre-Split Series B Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer,
and the person or persons requesting such exchange shall affix
any requisite stock transfer tax stamps to the Pre-Split
Series B Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the
Corporation's Secretary that such taxes are not payable;
Simultaneously with the Effective Date, each share of
the Corporation's Series C Convertible Preferred Stock having
a par value of $0.001 per share issued and outstanding
immediately prior to the Effective Date (the "PRE-SPLIT SERIES
C PREFERRED STOCK") shall automatically and without any action
on the part of the holder thereof be reclassified as and
changed into one thousand (1,000) shares of Series C
Convertible Preferred Stock, par value of $0.001 per share
(the "POST-SPLIT SERIES C STOCK"). Each holder of a
certificate or certificates which immediately prior to the
Effective Date represented outstanding shares of Pre-Split
Series C Convertible Preferred Stock (the "PRE-SPLIT SERIES C
CERTIFICATES," whether one or more) shall be entitled to
receive upon surrender of such Pre-Split Series C Certificates
to the Corporation's Secretary for cancellation, a certificate
or certificates (the "POST-SPLIT SERIES C CERTIFICATES,"
whether one or more) representing the number of whole shares
of Post-Split Series C Convertible
Preferred Stock into which and for which the shares
of Pre-Split Series C Convertible Preferred Stock formerly
represented by such Pre-Split Series C Certificates so
surrendered, are reclassified pursuant to the terms hereof.
From and after the Effective Date, Pre-Split Series C
Certificates shall represent only the right to receive
Post-Split Series C Certificates pursuant to the provisions
hereof. If more than one Pre-Split Series C Certificate shall
be surrendered at one time for the account of the same
stockholder, the number of full shares of Post-Split Series C
Convertible Preferred Stock for which the Post-Split Series C
Certificates shall be issued shall be computed on the basis of
the aggregate number of shares represented by the Pre-Split
Series C Certificates so surrendered. If any Post-Split Series
C Certificate is to be issued in a name other than that in
which the Pre-Split Series C Certificate surrendered for
exchange are issued, the Pre-Split Series C Certificates so
surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person or persons requesting such
exchange shall affix any requisite stock transfer tax stamps
to the Pre-Split Series C Certificates surrendered, or provide
funds for their purchase, or establish to the satisfaction of
the Corporation's Secretary that such taxes are not payable;
The Corporation's Series A Preferred Stock shall not
be affected by the filing of this Amendment.
-80-
<PAGE>
The text of Article III, Subsection D(2) of the Series B Certificate of
Designations of the Corporation is hereby amended and restated to read in full
as follows:
2. If the Recapitalization is not consummated prior
to the earlier to occur of September 30, 1999 and the date of
a meeting of the stockholders of the Company at which any
proposal necessary to consummate the Recapitalization is
defeated, the Dividend Rate shall be deemed to be 15% per
annum during the period commencing on such date and ending on
the date the Recapitalization is consummated.
The text of Article III, Subsection D(2) of the Series C Certificate of
Designations of the Corporation is hereby amended and restated to read in full
as follows:
2. If the Recapitalization is not consummated prior
to the earlier to occur of September 30, 1999 and the date of
a meeting of the stockholders of the Company at which any
proposal necessary to consummate the Recapitalization is
defeated, the Dividend Rate shall be deemed to be 15% per
annum during the period commencing on such date and ending on
the date the Recapitalization is consummated."
The Effective Date of this Certificate of Amendment is September 30,
1999 at 11:59 p.m., eastern time.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to the Certificate of Incorporation of the Corporation as of this 30th
of September, 1999.
By: /s/ Barbara S. Polsky
--------------------------------
Barbara S. Polsky
Executive Vice President,
General Counsel and Secretary
-81-
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AAMES FINANCIAL CORPORATION
(A DELAWARE CORPORATION)
The undersigned John F. Madden, Jr. the Secretary of Aames Financial
Corporation (the "Corporation"), a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware ("DGCL"), does
hereby certify that the following amendments were adopted in accordance with the
provisions of Section 242 of the DGCL:
The text of the second paragraph of Article SEVENTH of the Certificate
of Incorporation of the Corporation is hereby amended and restated to read in
full as follows:
Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken either upon the
vote of the stockholders at an annual or special meeting duly
noticed and called, as provided in the Bylaws of the
Corporation, or may be taken by written consent of the
stockholders pursuant to the GCL.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to the Certificate of Incorporation of the Corporation as of this 15th
day of March, 2000.
By: /s/ John F. Madden, Jr.
-----------------------------
John F. Madden, Jr.
Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AAMES FINANCIAL CORPORATION
(A DELAWARE CORPORATION)
The undersigned John F. Madden, Jr. the Secretary of Aames Financial
Corporation (the "Corporation"), a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware ("DGCL"), does
hereby certify that the following amendments were adopted in accordance with the
provisions of Section 242 of the DGCL:
The Certificate of the Voting Powers, Designations, Preferences and
Relative, Participating, Optional or Other Special Rights, and Qualifications,
Limitations or Restrictions thereof, of Series C Convertible Preferred Stock of
the Corporation is hereby amended as follows:
(i) the references to Series B Preferred Stock in the
twelfth and fourteenth lines of paragraph A of
Section III, each of which was in error, shall be
amended to instead refer to Series C Preferred Stock;
and
(ii) the definition of "Post-Recapitalization Stated
Value" shall be amended by inserting immediately
after "$1.00" and before the period at the end of the
sentence "; provided, however, that from and after
the effective date of the Reverse Series C Preferred
Stock Split approved by the stockholders of the
Company at the 1999 Annual Meeting of Stockholders
(the "Reverse Series C Preferred Stock Split") the
Post-Recapitalization Stated Value shall be equal to
$5.00, subject to subsequent adjustments for splits,
reclassifications, recombinations or similar events".
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to the Certificate of Incorporation of the Corporation as of this 15th
day of March, 2000.
By: /s/ John F. Madden, Jr.
---------------------------
John F. Madden, Jr.
Secretary
-83-
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AAMES FINANCIAL CORPORATION
(A DELAWARE CORPORATION)
The undersigned John F. Madden, Jr. the Secretary of Aames Financial
Corporation (the "Corporation"), a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware ("DGCL"), do
hereby certify that the following amendments were adopted in accordance with the
provisions of Section 242 of the DGCL:
The first paragraph of Article FOURTH of the Certificate of
Incorporation of the Corporation is amended and restated in its entirety to read
in full as follows:
FOURTH: The total number of shares which the
Corporation shall have the authority to issue is 600,000,000,
consisting of 400,000,000 shares of common stock, par value
$0.001 per share (the "Common Stock") and 200,000,000 shares
of preferred stock, par value $0.001 per share (the "Preferred
Stock").
The following two paragraphs are hereby added to Article FOURTH of the
Certificate of Incorporation of the Corporation after the first paragraph but
before the second paragraph:
Simultaneously with the effective date of this
amendment (the "EFFECTIVE DATE"), each share of the
Corporation's common stock, par value $0.001 per share issued
and outstanding immediately prior to the Effective Date (the
"PRE-SPLIT COMMON STOCK") shall automatically and without any
action on the part of the holder thereof be reclassified as
and changed (the "Reverse Common Stock Split") into 0.2 of one
share of common stock, par value of $0.001 per share (the
"POST-SPLIT COMMON STOCK"). Each holder of a certificate or
certificates which immediately prior to the Effective Date
represented outstanding shares of Pre-Split Common Stock (the
"PRE-SPLIT CERTIFICATES," whether one or more) shall be
entitled to receive upon surrender of such Pre-Split
Certificates to the Corporation's Secretary for cancellation,
a certificate or certificates (the "POST-SPLIT CERTIFICATES,"
whether one or more) representing the number of whole shares
of Post-Split Common Stock into which and for which the shares
of Pre-Split Common Stock formerly represented by such
Pre-Split Certificates so surrendered, are reclassified
pursuant to the terms hereof. No script or fractional shares
certificates will be issued for Pre-Split Common Stock in
connection with the Reverse Common Stock Split. Each holder of
shares of Old Common Stock not divisible by five as of the
effective date of the Reverse Common Stock Split will, in lieu
of receiving fractional shares, have the option for 60 days
after such effective date to either (a) purchase from other
stockholders otherwise entitled to fractional shares a
sufficient fractional share interest to 'round-up' to a full
share of New Common
-85-
<PAGE>
Stock, to the extent such fractions of shares are available
from other stockholders, at a price equal to the product of
(x) the fractional shares to which a holder would otherwise
be entitled, multiplied by (y) five times the closing sale
price per share of the Old Common Stock as listed on the
New York Stock Exchange ("NYSE") on the business day prior
to the Effective Date, or (b) sell such holder's fractional
share interest to other stockholders at the same price (the
"Fractional Share Program"). The period during which
stockholders will be able to make the aforementioned
election will expire 60 days after the Effective Date. Any
stockholder whose transmittal form is not received by the
Exchange Agent selected by the Corporation within such
period will be deemed to have elected to sell any
fractional share interest held by such stockholder. Any
fractional share interests not purchased by other
stockholders will be aggregated and sold on the open market
by the Exchange Agent. From and after the Effective Date,
Pre-Split Certificates shall represent only the right to
receive Post-Split Certificates pursuant to the provisions
hereof. If more than one Pre-Split Certificate shall be
surrendered at one time for the account of the same
stockholder, the number of full shares of Post-Split Common
Stock for which the Post-Split Certificates shall be issued
shall be computed on the basis of the aggregate number of
shares represented by the Pre-Split Certificates so
surrendered. If any Post-Split Certificate is to be issued
in a name other than that in which the Pre-Split
Certificate surrendered for exchange are issued, the
Pre-Split Certificates so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and the
person or persons requesting such exchange shall affix any
requisite stock transfer tax stamps to the Pre-Split
Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the
Corporation's Secretary that such taxes are not payable.
From and after the Effective Date the amount of capital
represented by the shares of Post-Split Common Stock into
which and for which the shares of the Pre-Split Common
Stock are reclassified pursuant to the terms hereof shall
be the same as the amount of capital represented by the
shares of Pre-Split Common Stock so reclassified, until
thereafter reduced or increased in accordance with
applicable law;
Simultaneously with the Effective Date, each share of
the Corporation's Series C Convertible Preferred Stock, par
value of $0.001 per share issued and outstanding immediately
prior to the Effective Date (the "PRE-SPLIT SERIES C PREFERRED
STOCK") shall automatically and without any action on the part
of the holder thereof be reclassified as and changed (the
"REVERSE SERIES C PREFERRED STOCK SPLIT") into 0.2 of one
share of Post-Split Series C Convertible Preferred Stock, par
value $0.001 per share ("POST-SPLIT SERIES C PREFERRED
STOCK"). Each holder of a certificate or certificates which
immediately prior to the Effective Date represented
outstanding shares of Pre-Split Series C Preferred Stock (the
"PRE-SPLIT SERIES C PREFERRED CERTIFICATES," whether one or
more) shall be entitled to receive upon surrender of such
Pre-Split Series C Preferred Certificates to the Corporation's
Secretary for cancellation, a certificate or certificates (the
"POST-SPLIT SERIES C CERTIFICATES," whether one or more)
representing the number of whole
-86-
<PAGE>
shares of Post-Split Series C Preferred Stock into which
and for which the shares of Pre-Split Series C Preferred
Stock formerly represented by such Pre-Split Series C
Preferred Certificates so surrendered, are reclassified
pursuant to the terms hereof. No script or fractional
shares certificates will be issued for Pre-Split Series C
Preferred Stock in connection with the Reverse Series C
Preferred Stock Split. Each holder of shares of Old Series
C Preferred Stock not divisible by five as of the effective
date of the Reverse Series C Preferred Stock Split will, in
lieu of receiving fractional shares, have the option for 60
days after such effective date to either (a) purchase from
other stockholders otherwise entitled to fractional shares
a sufficient fractional share interest to 'round-up' to a
full share of New Series C Preferred Stock, to the extent
such fractions of shares are available from other
stockholders, at a price equal to the product of (x) the
fractional shares to which a holder would otherwise be
entitled, multiplied by (y) five times the closing sale
price per share of the Old Common Stock as listed on the
NYSE on the business day prior to the Effective Date, or
(b) sell such holder's fractional share interest to other
stockholders at the same price (the "Fractional Share
Program"). The period during which stockholders will be
able to make the aforementioned election will expire 60
days after the Effective Date. Any stockholder whose
transmittal form is not received by the Exchange Agent
selected by the Corporation within such period will be
deemed to have elected to sell any fractional share
interest held by such stockholder. Any fractional share
interests not purchased by other stockholders will be
aggregated and sold on the open market by the Exchange
Agent. From and after the Effective Date, Pre-Split Series
C Certificates shall represent only the right to receive
Post-Split Series C Certificates pursuant to the provisions
hereof. If more than one Pre-Split Series C Certificate
shall be surrendered at one time for the account of the
same stockholder, the number of full shares of Post-Split
Series C Preferred Stock for which the Post-Split Series C
Certificates shall be issued shall be computed on the basis
of the aggregate number of shares represented by the
Pre-Split Series C Certificates so surrendered. If any
Post-Split Series C Certificate is to be issued in a name
other than that in which the Pre-Split Series C Certificate
surrendered for exchange are issued, the Pre-Split Series C
Certificates so surrendered shall be properly endorsed and
otherwise in proper form for transfer, and the person or
persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Pre-Split Series C
Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the
Corporation's Secretary that such taxes are not payable.
From and after the Effective Date the amount of capital
represented by the shares of Post-Split Series C Preferred
Stock into which and for which the shares of the Pre-Split
Series C Preferred Stock are reclassified pursuant to the
terms hereof shall be the same as the amount of capital
represented by the shares of Pre-Split Series C Preferred
Stock so reclassified, until thereafter reduced or
increased in accordance with applicable law;
The following paragraph is hereby added to the end of Article FOURTH of
the Certificate of Incorporation of the Corporation:
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<PAGE>
The Corporation's Series A Preferred Stock and Series
B Preferred Stock shall not be affected by the filing of this
Amendment.
The Effective Date of this Certificate of Amendment is April 14, 2000
at 12:01 a.m. eastern time.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to the Certificate of Incorporation of the Corporation as of this 13th
day of April, 2000.
By: /s/ John F. Madden, Jr.
------------------------
John F. Madden, Jr.
Secretary
-88-
<PAGE>
EXHIBIT B
FORM OF WARRANT
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY SUCH
APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS WARRANT.
WARRANT
To Purchase Series C Convertible Preferred Stock of
AAMES FINANCIAL CORPORATION
-89-
<PAGE>
FORM8K48.DOC
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS Page
ARTICLE 1. DEFINITIONS............................................................................................1
ARTICLE 2. EXERCISE OF WARRANT....................................................................................3
Section 2.1. Manner of Exercise..........................................................................3
Section 2.2. Payment of Taxes............................................................................5
Section 2.3. Fractional Shares...........................................................................5
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION.....................................................................5
Section 3.1. Transfer....................................................................................5
Section 3.2. Division and Combination....................................................................5
Section 3.3. Expenses....................................................................................6
Section 3.4. Maintenance of Books........................................................................6
ARTICLE 4. ADJUSTMENTS............................................................................................6
Section 4.1. Stock Dividends, Subdivisions, Combinations and Reclassifications...........................6
Section 4.2. Issuance of Additional Shares of Series C Preferred Stock or
Securities................................................................................7
Section 4.3. Certain Other Distributions.................................................................8
Section 4.4. Other Provisions Applicable to Adjustments Under This Section...............................8
Section 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets...........10
Section 4.6. Notices....................................................................................10
Section 4.7. Certificates...............................................................................11
ARTICLE 5. NO IMPAIRMENT.........................................................................................11
ARTICLE 6. RESERVATION AND AUTHORIZATION OF SERIES C PREFERRED STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY.....................................................12
ARTICLE 7. STOCK AND WARRANT TRANSFER BOOKS......................................................................12
ARTICLE 8. RESTRICTIONS ON TRANSFERABILITY.......................................................................12
Section 8.1. Restrictive Legend........................................................................12
Section 8.2. Transfers.................................................................................13
Section 8.3. Termination of Restrictions...............................................................13
ARTICLE 9. SUPPLYING INFORMATION.................................................................................14
ARTICLE 10. LOSS OR MUTILATION...................................................................................14
ARTICLE 11. OFFICE OF THE COMPANY................................................................................14
ARTICLE 12. REGISTRATION RIGHTS..................................................................................14
ARTICLE 13. LIMITATION OF LIABILITY..............................................................................15
ARTICLE 14. REPRESENTATION OF HOLDER.............................................................................15
i
<PAGE>
ARTICLE 15. MISCELLANEOUS........................................................................................15
Section 15.1. Nonwaiver and Expenses...................................................................15
Section 15.2. No Rights As Stockholder.................................................................15
Section 15.3. Notice Generally.........................................................................15
Section 15.4. Successors and Assigns...................................................................16
Section 15.5. Amendment................................................................................16
Section 15.6. Severability.............................................................................16
Section 15.7. Headings.................................................................................16
Section 15.8. Governing Law............................................................................16
Section 15.9. Mutual Waiver of Jury Trial..............................................................16
</TABLE>
ii
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY SUCH
APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS WARRANT.
WARRANT To Purchase 5,000,000 Shares of Series C Convertible Preferred Stock
of AAMES FINANCIAL CORPORATION
THIS IS TO CERTIFY THAT Specialty Finance Partners, a Bermuda
general partnership ("SFP") or its registered assigns, is entitled, at any time
prior to May __, 2005 (the "Expiration Date"), to purchase from Aames Financial
Corporation, a Delaware corporation (the "Company"), 5,000,000 shares of Series
C Convertible Preferred Stock, par value $0.001 per share, of the Company (the
"Series C Preferred Stock"), subject to adjustment as provided herein, in whole
or in part, including fractional parts, at a purchase price of $[_____] per
share (the "Exercise Price"), subject to adjustment as set forth herein, all on
the terms and conditions and pursuant to the provisions hereinafter set forth.
Capitalized terms not otherwise defined herein are used as defined in the
Preferred Stock Purchase Agreement.
ARTICLE 1.
DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Series C Preferred Stock" shall mean all
shares of Series C Preferred Stock issued by the Company after the Issue Date,
other than Warrant Stock.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"SFP" shall have the meaning set forth in the first paragraph
hereof.
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall mean the Common Stock of the Company, par
value $0.001 per share.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Conversion Price" shall have the meaning set forth in Section
4.2 hereof.
"Convertible Securities" shall mean evidences of indebtedness
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Series C Preferred Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, when used with reference to
shares of Series C Preferred Stock, the closing price per share of Common Stock
on such date and, when used with reference to shares of Series C Preferred Stock
for any period
<PAGE>
shall mean the average of the daily closing prices per share of Common Stock
for such period. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. National Market System is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in the Common Stock selected by
the Board of Directors of the Corporation. If the Common Stock is not
publicly held or so listed or publicly traded, "Current Market Price" shall
mean the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the
Corporation based on an opinion of an independent investment banking firm
with an established national reputation as a value of securities, which
opinion may be based on such assumption as such firm shall deem to be
necessary and appropriate.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder.
"Exercise Price" shall have the meaning set forth in the first
paragraph hereof.
"Expiration Date" shall have the meaning set forth in the
first paragraph hereof.
"Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"holder" shall mean, as the context requires, the Person in
whose name this Warrant is registered on the books of the Company maintained for
such purpose and/or the Person holding any Warrant Stock.
"Issue Date" shall mean the date on which this Warrant is
issued.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, corporation or other entity and shall
include any successor (by merger or otherwise) of such entity.
2
<PAGE>
"Preferred Stock Purchase Agreement" shall mean the Preferred
Stock Purchase Agreement, dated as of May __, 2000 between the Company and SFP.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of December 23, 1999, between the Company and Capital
Z Financial Services Fund II, L.P.
"Restricted Series C Preferred Stock" shall mean shares of
Series C Preferred Stock which are, or which upon their issuance on the exercise
of this Warrant would be, evidenced by a certificate bearing the restrictive
legend set forth in Section 8.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.
"Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock of the Company, par value $0.001 per share.
"Series C Preferred Stock" shall mean the Series C Convertible
Preferred Stock of the Company, par value $0.001 per share.
"Subsidiary" shall mean any corporation of which an aggregate
of more than 50% of the outstanding stock having ordinary voting power to elect
a majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by the Company and/or one or more Subsidiaries of the Company.
"Trading Day" means a day on which the principal national
securities exchange on which the Series C Preferred Stock is listed or admitted
to trading is open for the transaction of business or, if the Series C Preferred
Stock is not listed or admitted to trading on any national securities exchange,
a Business Day.
"Transaction" shall have the meaning set forth in Section
4.5 hereof.
"transfer" shall mean any transfer, sale, encumbrance,
hypothecation or other disposition of this Warrant or any Warrant Stock or of
any interest in either thereof.
"Transfer Notice" shall have the meaning set forth in Section
8.2.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Series C Preferred Stock being purchased upon exercise of this
Warrant pursuant to Section 2.1, multiplied by (ii) the Exercise Price as of the
date of such exercise.
"Warrant Stock" shall mean the shares of Series C Preferred
Stock purchased by the holder of this Warrant upon the exercise thereof.
ARTICLE 2.
EXERCISE OF WARRANT
Section 2.1. MANNER OF EXERCISE. From and after the date hereof and until 5:00
P.M., New York time, on the Expiration Date, the
3
<PAGE>
holder may exercise this Warrant for all or any part of the number of shares
of Series C Preferred Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the
holder shall deliver to the Company at its office at 2 California Plaza, 350
South Grand Avenue, 52nd Floor, Los Angeles, California 90071, or at the
office or agency designated by the Company pursuant to Section 11, (i) a
written notice of the holder's election to exercise this Warrant, which
notice shall specify the number of shares of Series C Preferred Stock to be
purchased, (ii) payment of the Warrant Price in the manner provided below,
and (iii) this Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by or on behalf of the holder. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within five (5) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the holder a certificate or certificates representing the
aggregate number of full shares of Series C Preferred Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as
such holder shall request in the notice and shall be registered in the name
of the holder or, subject to Section 8, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the holder or any other Person so designated to be named therein shall be
deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash, check or checks and/or
securities, if any, and this Warrant, are received by the Company as
described above and all taxes required to be paid by the holder, if any,
pursuant to Section 2.2 prior to the issuance of such shares have been paid.
If this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant
Stock, deliver to the holder a new Warrant evidencing the rights of the
holder to purchase the unpurchased shares of Series C Preferred Stock called
for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant, or, at the request of the holder, appropriate
notation may be made on this Warrant and the same returned to the holder.
Payment of the Warrant Price shall be made at the option of
the holder by cash, wire transfer to an account in a bank located in the
United States designated for such purpose by the Company, or certified or
official bank check, or by transfer to the Company of shares of Series B
Preferred Stock or Series C Preferred Stock, or any combination thereof. In
the event of the application shares of Series B Preferred Stock or Series C
Preferred Stock to the payment of the Warrant Price, the amount to be
credited to the payment of the Warrant Price shall be stated value per share
(as described in the Company's Certificate
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of Incorporation, as amended) plus an amount per share equal to all accrued
and unpaid dividends thereon, whether or not declared, to the date of such
exercise, provided that no such credit shall be made with respect to any such
dividends if the holder of such shares held such shares on the record date
therefor.
Section 2.2. PAYMENT OF TAXES. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery of the Warrant Shares, unless
such tax or charge is imposed by law upon the holder, in which case such
taxes or charges shall be paid by the holder. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with
any transfer involved in the issue of any certificate for shares of Series C
Preferred Stock issuable upon exercise of this Warrant in any name other than
that of the holder, and in such case the Company shall not be required to
issue or deliver any stock certificate until such tax or other charge has
been paid or it has been established to the satisfaction of the Company that
no such tax or other charge is due.
Section 2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Series C Preferred Stock upon exercise of this Warrant.
As to any fraction of a share which the holder of this Warrant would
otherwise be entitled to purchase upon such exercise, the Company shall pay a
cash adjustment in respect of such final fraction in an amount equal to the
same fraction of the Current Market Price per share of Common Stock on the
date of exercise.
ARTICLE 3.
TRANSFER, DIVISION AND COMBINATION
Section 3.1. TRANSFER. Subject to compliance with Section 8, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section
2.1 or the office or agency designated by the Company pursuant to Section 11,
together with a written assignment of this Warrant substantially in the form
of Exhibit B hereto duly executed by the holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company
shall, subject to Section 8, execute and deliver a new Warrant or Warrants in
the name(s) of the assignee or assignees and in the denomination(s) specified
in such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 8, may be exercised by a new holder for the purchase
of shares of Series C Preferred Stock without having a new Warrant issued.
Section 3.2. DIVISION AND COMBINATION. Subject to Section 8, this Warrant may
be divided or combined with other Warrants for the purchase of Series C
Preferred Stock upon presentation hereof
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at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued, signed by the holder or its agent or attorney. Subject to compliance
with Section 3.1 and with Section 8, as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. Section 3.3. EXPENSES. The Company
shall prepare, issue and deliver at its own expense (other than transfer
taxes) the new Warrant or Warrants under this Section 3. Section 3.4.
MAINTENANCE OF BOOKS. The Company agrees to maintain, at its aforesaid office
or agency, books for the registration and the registration of transfer of the
Warrants.
ARTICLE 4.
ADJUSTMENTS
The number of shares of Series C Preferred Stock for which
this Warrant is exercisable, or the price at which such shares may be
purchased upon exercise of this Warrant, shall be subject to adjustment from
time to time as set forth in this Section 4. The Company shall give the
holder notice of any event described below which requires an adjustment
pursuant to this Section 4 at the time of such event. Section 4.1. STOCK
DIVIDENDS, SUBDIVISIONS, COMBINATIONS AND RECLASSIFICATIONS. If the Company
shall at any time or from time to time after the Issue Date:
(a) pay a dividend or make a distribution, on the
outstanding shares of Series C Preferred Stock in
Additional Shares of Series C Preferred Stock,
(b) subdivide its outstanding shares of Series C Preferred
Stock into a larger number of shares of Series C Preferred
Stock,
(c) combine its outstanding shares of Series C Preferred
Stock into a smaller number of shares of Series C
Preferred Stock, or
(d) issue by reclassification of its shares of Series C
Preferred Stock any shares of capital stock of the
Company,
then, and in each such case, the number of shares of Series C Preferred Stock
issuable upon exercise of the Warrants evidenced hereby immediately prior to
such event or the record date therefor, whichever is earlier, shall be
adjusted so that the holder of any Warrant evidenced hereby thereafter
exercised shall be entitled to receive the number of shares of Series C
Preferred Stock or other securities of the Company which such holder would
have owned or have been entitled to receive after the happening of any of the
events described above, had such Warrant been exercised immediately prior to
the happening of such event or the record date therefor, whichever is
earlier. An adjustment made pursuant to this Section 4.1 shall become
effective (x) in the
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case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of
Series C Preferred Stock entitled to receive such dividend or distribution,
or (y) in the case of any such subdivision, reclassification or combination,
at the close of business on the day upon which such corporate action becomes
effective.
Section 4.2. ISSUANCE OF ADDITIONAL SHARES OF SERIES C PREFERRED
STOCK OR CONVERTIBLE SECURITIES. In the case the Corporation shall, after the
Issue Date, issue or sell:
(a) Additional Shares of Series C Preferred Stock at a
price per share, or
(b) Convertible Securities having a Conversion Price per
share,
less than the Current Market Price (for a period of 15 consecutive Trading
Days prior to such date), then, and in each such case, the number of shares
of Series C Preferred Stock issuable upon exercise of the Warrants evidenced
hereby shall be adjusted so that the holder of each Warrant evidenced hereby
shall be entitled to receive, upon the exercise thereof, the number of shares
of Series C Preferred Stock determined by multiplying (A) the number of
shares of Series C Preferred Stock issuable upon exercise of the Warrants
evidenced hereby on the day immediately prior to such date by (B) a fraction,
the numerator of which shall be the sum of (1) the number of shares of Series
C Preferred Stock outstanding on the date on which such shares or Convertible
Securities are issued and (2) the number of Additional Shares of Series C
Preferred Stock issued, or into which the Convertible Securities may convert,
and the denominator of which shall be the sum of (x) the number of shares of
Series C Preferred Stock outstanding on such date and (y) the number of
shares of Series C Preferred Stock which the aggregate consideration
receivable by the Company for the total number of shares of Series C
Preferred Stock so issued, or the number of shares of Series C Preferred
Stock which the aggregate of the Conversion Price of such Convertible
Securities so issued, would purchase at the Current Market Price on such date.
An adjustment made pursuant to this Section 4.2 shall be
made on the next Business Day following the date on which any such issuance
is made and shall be effective retroactively immediately after the close of
business on such date. For purposes of this Section 4.2, the aggregate
consideration receivable by the Company in connection with the issuance of
any securities shall be deemed to be the sum of the aggregate offering price
to the public (before deduction of underwriting discounts or commissions and
expenses payable to third parties), and the "Conversion Price" of any
Convertible Securities is the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities
(before deduction of underwriting discounts or commissions and expenses
payable to third parties) plus the minimum aggregate amount of additional
consideration, if any,
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payable to the Corporation upon the conversion, exchange or exercise of any
such Convertible Securities.
Neither (A) the issuance of any shares of Series C Preferred
Stock (whether treasury shares or newly issued shares) pursuant to a dividend or
distribution on, or subdivision, combination or reclassification of, the
outstanding shares of Series C Preferred Stock requiring an adjustment in the
number of shares of Series C Preferred Stock issuable upon exercise of the
Warrants evidenced hereby pursuant to Section 4.1, or pursuant to any employee
benefit plan or program of the Company or pursuant to any option, warrant,
right, or Convertible Security outstanding as of the date hereof (including, but
not limited to, the Rights, the Series B Preferred Stock, the Series C Preferred
Stock and the Warrants) nor (B) the issuance of shares of Series C Preferred
Stock pursuant thereto shall be deemed to constitute an issuance of Series C
Preferred Stock or Convertible Securities by the Company to which this Section
4.2 applies.
Upon expiration of any Convertible Securities which shall
not have been exercised or converted and for which an adjustment shall have
been made pursuant to this Section 4.2, the Conversion Price computed upon
the original issue thereof shall upon expiration be recomputed as if the only
additional shares of Series C Preferred Stock issued were such shares of
Series C Preferred Stock (if any) actually issued upon exercise or conversion
of such Convertible Securities and the consideration received therefor was
the consideration actually received by the Corporation for the issue of such
Convertible Securities (whether or not exercised or converted) plus the
consideration actually received by the Corporation upon such exercise of
conversion.
Section 4.2.0.0.0.1.1. [Reserved]
Section 4.3. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments
provided for in this Section 4:
(a) For purposes of this Section 4, the number of shares
of Series C Preferred Stock at any time outstanding shall
not include any shares of Series C Preferred Stock then
owned or held by or for the account of the Company.
(b) The term "dividend", as used in this Section 4 shall
mean a dividend or other distribution upon stock of the
Company except pursuant to the Rights Agreement.
Notwithstanding anything in this Section 4 to the
contrary, the number of shares of Series C Preferred Stock
issuable upon exercise of the Warrants evidenced hereby
shall not be adjusted as a result of any dividend,
distribution or issuance of securities of the Company
pursuant to the Rights Agreement.
(c) Notwithstanding anything in this Section 4 to the
contrary, the Company shall not be required to give effect
to any adjustment in the number of shares of Series C
Preferred Stock issuable upon
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exercise of the Warrants evidenced hereby unless and
until the net effect of one or more adjustments (each
of which shall be carried forward), determined as above
provided, shall have resulted in a change in the number
of shares of Series C Preferred Stock issuable upon
exercise of the Warrants evidenced hereby by at least
one-hundredth of one share of Series C Preferred Stock,
and when the cumulative net effect of more than one
adjustment so determined shall be to change the number
of shares of Series C Preferred Stock issuable upon
exercise of the Warrants evidenced hereby by at least
one-hundredth of one share of Series C Preferred Stock,
such change in the number of shares of Series C
Preferred Stock issuable upon exercise of the Warrants
evidenced hereby shall thereupon be given effect.
(d) The certificate of any firm of independent public
accountants of recognized standing selected by the Board
of Directors of the Company (which may be the firm of
independent public accountants regularly employed by the
Company) shall be presumptively correct for any
computation made under this Section 4.
(e) If the Company shall take a record of the holders of
its Series C Preferred Stock for the purpose of entitling
them to receive a dividend or other distribution, and
shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or
deliver such dividend or distribution, then, no adjustment
in the number of shares of Series C Preferred Stock
issuable upon exercise of the Warrants evidenced hereby
shall be required by reason of the taking of such record.
(f) There shall be no adjustment of the number of shares
of Series C Preferred Stock issuable upon exercise of the
Warrants evidenced hereby in case of the issuance of any
stock of the Company in a merger, reorganization,
acquisition or other similar transaction except as set
forth in Sections 4.1, 4.2 and 4.5.
(g) Notwithstanding anything herein to the contrary, the
Company agrees not to enter into any transaction which, by reason of
any adjustment hereunder, would cause the Exercise Price to be less
than the par value per share of Series C Preferred Stock.
(h) Upon each adjustment to the number of shares of Series C
Preferred Stock issuable upon exercise of the Warrants pursuant to
Sections 4.1, 4.2 or 4.3, the Exercise Price effective immediately
prior to the making of such adjustment shall thereafter be adjusted to
be the amount
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obtained by (i) multiplying (A) the applicable number of
shares of Series C Preferred Stock issuable upon exercise of the
Warrants immediately prior to such adjustment by (B) the Exercise Price
in effect immediately prior to such adjustment and (ii) dividing the
product so obtained by the number of shares of Series C Preferred Stock
issuable upon exercise of the Warrants immediately after such
adjustment.
Section 4.4. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case of any reorganization or reclassification of
outstanding shares of Series C Preferred Stock (other than a reclassification
covered by Section 4.1), or in case of any consolidation or merger of the
Company with or into another corporation, or in the case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety (each of the foregoing being
referred to as a "Transaction"), each such Warrant then outstanding shall
thereafter be exercisable for, in lieu of the Series C Preferred Stock
issuable upon such exercise prior to consummation of the Transaction, the
kind and amount of shares of stock and other securities and property
receivable (including cash) upon the consummation of the Transaction by a
holder of that number of shares of Series C Preferred Stock issuable upon
exercise of such Warrant immediately prior to the Transaction (including, on
a pro rata basis, the cash, securities or property received by holders of
Series C Preferred Stock in any tender or exchange offer that is a step in
the Transaction).
Section 4.5. NOTICES TO WARRANTHOLDERS. In case at any time or from time to
time, prior to the Expiration Date, the Company shall pay any dividend or
make any other distribution to the holders of its Series C Preferred Stock,
or shall offer for subscription pro rata to the holders of its Series C
Preferred Stock any additional shares of stock of any class or any other
right, or there shall be any capital reorganization or reclassification of
the Series C Preferred Stock of the Company or consolidation or merger of the
Company with or into another corporation, or any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, or there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company, then, in any one or
more of said cases the Company shall give at least 20 days' prior written
notice (the time of mailing of such notice shall be deemed to be the time of
giving thereof) to the registered holder of the Warrants evidenced hereby at
its address as shown on the books of the Company maintained by the Transfer
Agent thereof of the date on which (i) the books of the Company shall close
or a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or
winding up shall take place, as the case may be, provided that in the case of
any Transaction to which Section 4.5 applies the Company shall give at least
30 days' prior written notice as aforesaid. Such notice shall also specify
the date as of which the holders of the Series C Preferred Stock of record
shall participate in said dividend,
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distribution or subscription rights or shall be entitled to exchange their
Series C Preferred Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale or
conveyance or participate in such dissolution, liquidation or winding up, as
the case may be. Failure to give such notice shall not invalidate any action
so taken.
Section 4.6. CERTIFICATES. Upon any adjustment of the number of shares of
Series C Preferred Stock issuable upon exercise of the Warrants evidenced
hereby or of the Exercise Price, then, and in each such case, the Company
shall promptly deliver to the holders of the Warrants and the Series C
Preferred Stock, a certificate signed by the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased number of shares of
Series C Preferred Stock issuable upon exercise of the Warrants evidenced
hereby and the Exercise Price then in effect following such adjustment.
ARTICLE 5.
NO IMPAIRMENT
The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the holder of the Warrant against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any shares of Series C Preferred Stock receivable upon the exercise of this
Warrant above the Exercise Price immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Series C Preferred Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (c) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of the holder of the Warrant, the Company
will at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to the holder of this Warrant, the continuing
validity of this Warrant and the obligations of the Company hereunder.
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ARTICLE 6.
RESERVATION AND AUTHORIZATION OF
SERIES C PREFERRED STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company covenants and agrees that, until the Expiration
Date, the Company shall at all times reserve and keep available for issue
upon the exercise of Warrants such number of its authorized but unissued
shares of Series C Preferred Stock as will be sufficient to permit the
exercise in full of all outstanding Warrants. All shares of Series C
Preferred Stock which shall be so issuable, when issued upon exercise of
Warrants and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued, fully paid and nonassessable and free and
clear of any liens, claims and restrictions (other than as provided herein).
No stockholder of the Company has or shall have any preemptive rights to
subscribe for such shares of Series C Preferred Stock.
Before taking any action which would result in an
adjustment in the number of shares of Series C Preferred Stock for which this
Warrant is exercisable or in the Exercise Price, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
ARTICLE 7.
STOCK AND WARRANT TRANSFER BOOKS
The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise
or transfer of any Warrant.
ARTICLE 8.
RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred
before satisfaction of the conditions specified in this Section 8, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and state securities laws with respect to the Transfer of any
Warrant or any Warrant Stock. The holder, by acceptance of this Warrant,
agrees to be bound by the provisions of this Section 8.
Section 8.1. RESTRICTIVE LEGEND.
(a) Except as otherwise provided in this Section 8, each
certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant
Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state and are subject to the
conditions specified in a certain Warrant dated May [___]
2000, originally issued by Aames Financial Corporation. The
shares represented by this
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certificate may not be transferred in violation of such Act
and laws, the rules and regulations thereunder or the
provisions of the Warrant. A copy of the form of said
Warrant is on file with the Secretary of Aames Financial
Corporation. The holder of this certificate, by acceptance
of this certificate, agrees to be bound by the provisions
of such Warrant."
(b) Except as otherwise provided in this Section 8, each
Warrant shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended,
or the securities laws of any state and may not be sold or
otherwise transferred in the absence of such registration or
an exemption therefrom under such Act and under any such
applicable state laws, or in violation of the provisions of
this Warrant."
Section 8.2. TRANSFERS. Prior to any transfer or attempted transfer of any
Warrants or any shares of Restricted Series C Preferred Stock, the holder of
such Warrants or Restricted Series C Preferred Stock shall give notice (a
"Transfer Notice") to the Company of such holder's intention to effect such
transfer, describing the manner and circumstances of the proposed transfer,
and obtain from counsel a written opinion addressed and reasonably
satisfactory to the Company that the proposed transfer of such Warrants or
such Restricted Series C Preferred Stock may be effected without registration
under the Securities Act and applicable state securities laws. After receipt
of the Transfer Notice and written opinion, the Company shall, within two
Business Days thereof, so notify the holder of such Warrants or such
Restricted Series C Preferred Stock and such holder shall thereupon be
entitled to transfer such warrants or such Restricted Series C Preferred
Stock, in accordance with the terms of the Transfer Notice. Each certificate,
if any, evidencing such shares of Restricted Series C Preferred Stock issued
upon such transfer shall bear the restrictive legend set forth in Section
8.1(a), and each Warrant issued upon such transfer shall bear the restrictive
legend set forth in Section 8.1(b), unless in the written opinion of counsel
addressed to the Company such legend is not required in order to ensure
compliance with the Securities Act.
Section 8.3. TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing
provisions of Section 8, the restrictions imposed by this Section 8 upon the
transferability of the Warrants, the Warrant Stock and the Restricted Series
C Preferred Stock (or Series C Preferred Stock issuable upon the exercise of
the Warrants) and the legend requirements of Section 8.1 shall terminate as
to any particular Warrant or share of Warrant Stock or Restricted Series C
Preferred Stock (or Series C Preferred
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Stock issuable upon the exercise of the Warrants) (i) as to the Warrant Stock
and Restricted Series C Preferred Stock, when and so long as the resale of
such security shall have been effectively registered under the Securities Act
and disposed of pursuant thereto, or (ii) as to the Warrant, Warrant Stock
and Restricted Series C Preferred Stock, when the holder of the Warrant,
Warrant Stock or Restricted Series C Preferred Stock shall have delivered to
the Company the written opinion of counsel addressed and reasonably
satisfactory to the Company stating that such legend is not required in order
to ensure compliance with the Securities Act. Whenever the restrictions
imposed by this Section shall terminate as to any share of Restricted Series
C Preferred Stock, as hereinabove provided, the holder thereof shall be
entitled to receive from the Company, at the Company's expense (except for
any transfer taxes), a new certificate representing such Series C Preferred
Stock not bearing the restrictive legend set forth in Section 8.1(a).
ARTICLE 9.
SUPPLYING INFORMATION
The Company shall cooperate with the holder of the Warrant
and the holder of Restricted Series C Preferred Stock in supplying such
information as may be reasonably requested by such holder or reasonably
necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Series C Preferred Stock.
ARTICLE 10.
LOSS OR MUTILATION
Upon receipt by the Company from any holder of evidence
reasonably satisfactory to the Company of the ownership of and the loss,
theft, destruction or mutilation of this Warrant and indemnity reasonably
satisfactory to it and in case of mutilation upon surrender and cancellation
hereof, the Company will execute and deliver in lieu hereof a new Warrant of
like tenor to the holder; provided, in the case of mutilation, no indemnity
shall be required if this Warrant in identifiable form is surrendered to the
Company for cancellation.
ARTICLE 11.
OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the
Company shall maintain an office or agency (which may be the principal
executive offices of the Company) where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in
this Warrant.
ARTICLE 12.
REGISTRATION RIGHTS
The Warrant Stock issuable upon exercise of this Warrant
are entitled to the benefits of the Registration Rights Agreement. The
Company shall keep a copy of the Registration Rights Agreement, and any
amendments thereto, at the office or agency designated by the Company
pursuant to Section 11 and shall furnish copies thereof to the holder upon
request.
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ARTICLE 13.
LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action
by the holder to purchase shares of Series C Preferred Stock, and no
enumeration herein of the rights or privileges of the holder hereof, shall
give rise to any liability of the holder for the purchase price of any Series
C Preferred Stock or as a stockholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.
ARTICLE 14.
REPRESENTATION OF HOLDER
The holder represents that it is acquiring the Warrant and
the Warrant Stock for the purpose of investment and not with a view to the
resale or distribution hereof or thereof; provided, that the disposition of
holder's property shall at all times be and remain within its control.
ARTICLE 15.
MISCELLANEOUS
Section 15.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the parties shall
operate as a waiver of such right or otherwise prejudice the parties' rights,
powers or remedies. If the Company fails to comply with any provision of this
Warrant, the Company shall pay to the holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees incurred by the holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
Section 15.2. NO RIGHTS AS STOCKHOLDER. The Person in whose name this Warrant
is registered shall be deemed the owner hereof and of the Warrants evidenced
hereby for all purposes. The registered holder of this Warrant shall not be
entitled to any rights whatsoever as a stockholder of the Company except as
herein provided.
Section 15.3. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the holder, at its last known address appearing
on the books of the Company maintained for such purpose.
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(b) If to the Company:
Aames Financial Corporation
2 California Plaza
350 South Grand Avenue
Los Angeles, California 90071
Attention: Cary Thompson
Fax No.: (323) 210-4537
with a copy to:
Troop Steuber Pasich Reddick & Tobey
2029 Century Park East
Los Angeles, California 90067
Attention: C. N. Franklin Reddick, Esq.
Fax No.: (310) 728-2204
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, or three (3) Business
Days after the same shall have been deposited in the United States mail.
Section 15.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 8, (i) this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of the holder, and (ii) the provisions of this Warrant
are intended to be for the benefit of all holders from time to time of this
Warrant, and shall be enforceable by any such holders.
Section 15.5. AMENDMENT. The Warrants may be modified or amended or the
provisions thereof waived with the written consent of the Company and the
holders of the majority of the portion of this Warrant then outstanding.
Section 15.6. SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Warrant.
Section 15.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
Section 15.8. GOVERNING LAW. This Warrant 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.
Section 15.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES),
16
<PAGE>
THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER THIS WARRANT.
17
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to
be duly executed by its authorized officer on May [__], 2000.
AAMES FINANCIAL CORPORATION
By:
------------------------------------
Name:
Title:
18
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for the purchase of _____ Shares of Series
C Preferred Stock of AAMES FINANCIAL CORPORATION and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Series C Preferred
Stock hereby purchased (and any securities or other property issuable upon
such exercise) be issued in the name of and delivered to __________________
whose address is ____________________ and, if such shares of Series C
Preferred Stock shall not include all of the shares of Series C Preferred
Stock issuable as provided in this Warrant, that a new Warrant of like tenor
and date for the balance of the shares of Series C Preferred Stock issuable
hereunder be delivered to the undersigned.
(Name of Registered Owner)
- ----------------------
(Signature of Registered owner)
- ----------------------
(Street Address)
- ----------------------
(City) (State) (Zip Code)
- ----------------------
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
19
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the
number of shares of Series C Preferred Stock set forth below:
<TABLE>
<CAPTION>
Name and Address of Assignee No. of Shares of Series C Preferred Stock
<S> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ____________
attorney-in-fact to register such transfer on the books of AAMES FINANCIAL
CORPORATION maintained for the purpose, with full power of substitution in
the premises.
Dated:
---------------------------
Name:
----------------------------
Signature:
-----------------------
Witness:
-------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
20
<PAGE>
EXHIBIT 99.1
<PAGE>
[LOGO]
Financial Corporation
Contact: Investor Relations Department
Aames Financial Corporation
(323) 210-5311
FOR IMMEDIATE RELEASE
AAMES FINANCIAL CORPORATION ANNOUNCES SALE OF $50.0 MILLION OF PREFERRED STOCK
TO MAJOR STOCKHOLDER
NEW YORK STOCK EXCHANGE APPROVES REQUEST OF AAMES FINANCIAL CORPORATION
FOR AN EXCEPTION TO THE NYSE STOCKHOLDER APPROVAL POLICY
BASED ON NYSE FINANCIAL DISTRESS EXCEPTION
RIGHTS OFFERING TO HOLDERS OF COMMON STOCK AND PREFERRED STOCK IS PLANNED
LOS ANGELES, CALIFORNIA, MAY 19, 2000 - AAMES FINANCIAL CORPORATION
(NYSE: AAM), a leader in subprime home equity lending, today announced that the
New York Stock Exchange (the "Exchange") has agreed to permit the Company to
rely on the Exchange's Financial Distress Exception (the "Financial Distress
Exception") to the Exchange's Stockholder Approval Policy (the "Stockholder
Approval Policy") and issue $50.0 million of Series C Convertible Preferred
Stock to Specialty Finance Partners, the Company's largest stockholder and an
affiliate of Capital Z Financial Services Fund II, L.P. ("Capital Z"), without
seeking stockholder approval.
Description of Transaction
The investment by Capital Z consists of (i) an equity investment in the
Company by Capital Z in the amount of $50.0 million in exchange for shares of
Series C Preferred Stock (the "Shares") at the lower of $0.90 per share or the
average market trading price for the five days prior to the closing transaction
(the "Price") and (ii) warrants to purchase another five million shares of
Series C Preferred Stock at the Price per share.
The equity portion of the transaction will be completed in two steps.
The first 40.0 million shares would be sold on or after May 30, 2000 (the
"Initial Closing"). The remaining shares would be sold on the earliest possible
date that the Company is authorized to issue additional shares of Series C
Preferred Stock pursuant to Rule 14C of the Securities Exchange Act of 1934 (the
"Subsequent Closing"). In addition to normal closing conditions, the investment
is subject to several other conditions including a fairness opinion to be
delivered by a nationally recognized investment banking firm, the receipt by the
Company of waivers from certain of the Company's financing providers, and a
material adverse change provision in the stock purchase agreement.
The Company is also in negotiations with an affiliate of Capital Z
pursuant to which the Company will enter into a forward residual purchase
facility that would purchase up to $75.0 million of assets created by the
Company in securitization transactions during the next 24 months.
22
<PAGE>
Rights Offering
Existing stockholders will have the right to purchase a proportional
amount of shares of Series C Preferred Stock at the Price pursuant to a rights
offering that will commence as soon as practicable after the Initial Closing
(and subject to the appropriate regulatory approvals) to all holders of the
Company's Common Stock and all holders of the Company's Series C Preferred
Stock, other than Capital Z and its affiliates.
Exception to Stockholder Approval Requirement
The issuance of the shares of Series C Convertible Preferred Stock to
Capital Z would normally require approval of the Company's stockholders
according to the Stockholder Approval Policy of the Exchange. However, the
Financial Distress Exception is available if the delay necessary to seek
stockholder approval would seriously jeopardize the financial viability of the
Company and if the Company's Audit Committee expressly approves the Company's
reliance on the Financial Distress Exception.
The Audit Committee of the Board of Directors has determined that the
delay necessary in securing such stockholder approval would seriously jeopardize
the financial viability of the Company. The determination was based primarily on
adverse market conditions, lack of available liquidity to fund the Company's
loan production, the lack of other available alternative sources of liquidity
and covenants in certain of the Company's warehouse and repurchase lines and
indentures relating to the Company's public debt that require the Company to
maintain certain levels of liquidity. Upon making such a determination, the
Audit Committee expressly approved the Company's omission to seek the
stockholder approval that would otherwise have been required under the
Stockholder Approval Policy and the Exchange accepted the Company's application
for reliance on the Financial Distress Exception.
In reliance on the Financial Distress Exception, the Company is mailing
to all stockholders on or about May 19, 2000 a letter notifying them of its
intention to issue the shares on, or after, May 30, 2000 to Capital Z without
seeking their approval.
Aames Financial Corporation is a leading home equity lender, and at
March 31, 1999 operated 101 retail Aames Home Loan offices and 7 wholesale
branches nationwide.
From time to time the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance and results of the Company's business include the
following: negative cash flow and continued access to outside sources of cash to
fund operations; dependence on funding sources; third party rights to terminate
mortgage servicing; high delinquencies and losses in our securitization trusts;
prepayment risk; changes in interest rates; basis risk; prolonged interruptions
or reductions in the secondary market for mortgage loans; timing of loan sales;
dependence on broker network; competition; concentration of operations in
California and Florida; economic conditions; contingent risks on loans we sell;
government regulation; changes in federal income tax laws; Year 2000 compliance;
our ability to pay dividends and the concentrated ownership of our controlling
stockholder. For a more complete discussion of these risks and uncertainties,
see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Factors" in the Company's Annual Report on Form
10-K and 10-K/A for the fiscal year ended June 30, 1999 and "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors" in Form 10-Q for the quarter ended December 31, 1999,
and subsequent Company Filings with the United States Securities and Exchange
Commission.
23
<PAGE>
EXHIBIT 99.2
24
<PAGE>
[LOGO]
Contact: Investor Relations Department
Aames Financial Corporation
(323) 210-5311
FOR IMMEDIATE RELEASE
Aames Financial Corporation Reports Third Quarter Results
RECORDS $61.5 MILLION NET LOSS FOR THE THREE MONTHS ENDED MARCH 31, 2000;
EQUITY PARTNER AGREES TO INVEST $50.0 MILLION;
COMPANY IS NEGOTIATING A $75.0 MILLION RESIDUAL PURCHASE FACILITY;
RIGHTS OFFERING TO HOLDERS OF COMMON AND PREFERRED STOCK PLANNED;
NEW YORK STOCK EXCHANGE APPROVES REQUEST FOR WAIVER OF STOCKHOLDER APPROVAL
POLICY
LOS ANGELES, CALIFORNIA, MAY 19, 2000 - AAMES FINANCIAL CORPORATION
(NYSE: AAM), a leader in subprime home equity lending, today reported the
results of operations for the three and nine months ended March 31, 2000. The
Company announced a net loss of $61.5 million consisting of a valuation
adjustment to its residual interests in the amount of $47.3 million and a net
operating loss of $14.2 million for the quarter ended March 31, 2000. The
Company also announced that it entered into an agreement with its lead
stockholder for an additional equity investment of $50.0 million and is
negotiating a facility to sell, on an ongoing basis, residual interests created
in securitizations with an affiliate of that stockholder which could, if
completed, provide the Company an additional $75.0 million of residual proceeds
over the next 24 months. In addition, the Company's Board of Directors approved
a rights offering of shares of preferred stock to existing stockholders at the
same price per share as is being offered to the lead stockholder. The Company
also announced that the New York Stock Exchange had approved its application for
a waiver of the stockholder approval requirements for the equity transaction.
Results of Operations
Net loss for the three and nine months ended March 31, 2000 was $61.5
million and $108.4 million, respectively, as compared to net loss of $36.0
million and $233.9 million for the same periods a year ago. Excluding the $47.3
million write-down, the Company had a net operating loss for the quarter of
$14.2 million. On a basic and diluted per share basis, net loss per share for
the three month period was $10.25 compared to $5.91 in the prior year. For the
nine month period, on a basic and diluted per share basis, net loss per share
was $18.38 compared to $37.84 for the prior year's period.
Total revenue for the three and nine months ended March 31, 2000 was
$(2.0) million and $71.9 million, as compared to $36.8 million and $(59.8)
million for the three and nine months ended March 31, 1999, respectively.
A. Jay Meyerson, the Company's Chief Executive Officer, stated, "As it
does periodically, the Company has reviewed the value of its residual assets in
light of recent loan losses resulting from its increased focus on early
25
<PAGE>
loss mitigation as well as the continuing adverse effects of previous large
bulk correspondent purchases and broker programs that have been discontinued.
This write-down reflects the Company's commitment to address the issues that
affect residual valuation and, in light of the rising interest rate
environment, to take appropriate measures to adjust the balance sheet. The
quarterly net operating loss reflects the Company's dependence on a weak
whole loan sales market for dispositions and the Company's constrained loan
production in March resulting from its reliance on working capital to fund
its mortgage loan production."
"While I am disappointed in the Company's recent results, going forward
the Company's strategic initiatives which are now underway are designed to
reposition the Company's operating environment and origination processes for
profitability and growth. The $50.0 million equity infusion should provide the
liquidity the Company needs to execute its business plan. Moreover, I believe
that the $75.0 million residual facility will position the Company to re-enter
the securitization market for a larger portion of its loan dispositions,
enabling it to realize higher gains on loan sales and grow its servicing
portfolio all of which will begin to rebuild stockholder value," Meyerson said.
Adam Mizel, a partner of Capital Z, commented, "Our additional
investment reflects our belief that the Company, under Jay Meyerson's leadership
and with the capital to access multiple outlets for its product, will be well
positioned to be the recognized leading independent subprime home equity
company."
Loan Production
The Company reported that total loan production for the quarter ended
March 31, 2000 was $446.7 million as compared to $580.9 million for the quarter
ended December 31, 1999 and $401.7 for the quarter ended March 31, 1999. For the
nine months ending March 31, 2000, the Company reported that total loan
production decreased to $1.6 billion from $1.7 billion for the same period in
1999. Retail loan production was $261.6 million and $959.1 million for the three
and nine months ended March 31, 2000 as compared to $226.4 million and $866.7
million for the same periods in 1999. Wholesale loan production was $179.8
million and $561.6 million for the three and nine months ended March 31, 2000 as
compared to $156.1 and $582.2 for the same periods in 1999. Mr. Meyerson said,
"It is encouraging to see that our core retail and broker loan production volume
is growing despite the reduction in correspondent production and that the
product we are producing is becoming more profitable."
Mr. Meyerson commented, "Loan production for the March 2000 quarter was
constrained by the Company's dependence on working capital to fund mortgage
loans, its decision to raise prices and the improvement of credit quality
standards. We expect loan production to begin to grow again as the Company
completes the $50.0 million sale of preferred stock, which will fulfill our
short term liquidity needs. The residual facility, I believe, is a big step
forward in addressing the Company's long term liquidity needs."
Neil Notkin, the Executive Vice President of Sales and Marketing for
the Company's broker production unit said, "With these additional financial
resources we will not only continue to serve the broker community with
traditional and unique subprime products but also continue to improve our
delivery process and provide unparalleled service and support."
The Company reported growth in its retail internet production which
began operations in the later part of the quarter ended December 31, 1999.
Retail production for the quarter ended March 31, 2000 included $8.3 million of
internet production, as compared to $6.1 million for the quarter ended December
31, 1999. Mr. Meyerson said, "Though internet originations are relatively new to
the Company, we are excited about the growth potential of this new technology
and we are moving forward with internet applications for our broker channel as
well."
Meyerson said that the Company sold $434.9 million and $1.7 billion of
loans during the three and nine months ended March 31, 2000, respectively,
compared to $393.9 million and $1.6 billion of loans sold during the comparable
periods in 1999.
26
<PAGE>
Mr. Meyerson reported that the Company's loan servicing portfolio at
March 31, 2000 decreased to $3.7 billion from $3.9 billion and $4.0 billion, net
of run-off, from the prior quarter and from the same period in 1999,
respectively. Meyerson said, "After two consecutive quarters of growth in its
servicing portfolio, the Company did not add any new loans to its servicing
portfolio this quarter because of its reliance on the whole loan market for loan
dispositions. Whole loan sale transactions are generally done on a servicing
released basis. As a result, the servicing portfolio has decreased in size this
quarter after experiencing normal run-off. The equity transaction and residual
facility transactions announced today will provide the Company the necessary
liquidity and an alternative structure for the disposition of loans through
whole loan sales. With these pieces in place, the Company can return to its
strategy of selling loans through a combination of securitizations and whole
loan sales to maximize profitability and cash flows and increase the servicing
portfolio."
Equity Infusion, Negotiation of Residual Sale Facility and Rights Offering
On May 19, 2000 the Company entered into an agreement with Specialty
Finance Partners, the Company's lead stockholder which is controlled by Capital
Z Financial Services Fund II, L.P., for the sale of $50.0 million of the
Company's Series C Convertible Preferred Stock for the lesser of $0.90 per
share, or the average market trading price for the five days prior to the
initial closing, plus the issuance of warrants to purchase an additional 5.0
million shares of Series C Convertible Preferred Stock at the same price. In
addition to normal closing conditions, the investment is subject to several
other conditions including a fairness opinion to be delivered by a nationally
recognized investment banking firm, the receipt by the Company of waivers from
certain of the Company's financing providers, and a material adverse change
provision in the stock purchase agreement.
The Company is also in negotiations with an affiliate of Capital Z for
a facility which will allow the Company to sell, on an on-going basis, up to
$75.0 million of residual assets over the next 24 months.
"The Company expects to close the first phase of the equity transaction
before the end of the month. The remainder of the equity will be closed in June
and the residual purchase facility will be entered into as quickly as possible,"
Meyerson said. "These transactions, taken together, will provide the Company
with needed liquidity and a profitable outlet for its loan production. With our
management team and business plan, I believe that these new resources will allow
management to execute on its business plan and position the Company as a strong
competitor in the subprime mortgage loan sector."
The Company also announced that it will offer to all holders of its
Common Stock and Series C Convertible Preferred Stock other than Specialty
Finance Partners, and its affiliates, the right to purchase additional shares of
Series C Preferred Stock at the same price as Specialty Finance Partners.
"The Company's stockholders have patiently supported the Company and
the Board of Directors determined that all stockholders should have the same
opportunity to participate in this round of financing on the same terms as
Specialty Finance Partners," Meyerson said.
Waiver of NYSE Stockholder Approval Rule
In a separate press release issued today, the Company announced that
the New York Stock Exchange (the "Exchange") has agreed to permit the Company to
rely on the "Financial Distress Exception" to the Exchange's "Stockholder
Approval Policy" and issue $50.0 million of Series C Convertible Preferred Stock
to Specialty Finance Partners, the Company's largest stockholder, without
seeking stockholder approval.
Aames Financial Corporation is a leading home equity lender, and at
March 31, 2000 operated 101 retail Aames Home Loan offices and 7 wholesale
branches nationwide.
27
<PAGE>
From time to time the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance and results of the Company's business include the
following: negative cash flow and continued access to outside sources of cash to
fund operations; dependence on funding sources; third party rights to terminate
mortgage servicing; high delinquencies and losses in our securitization trusts;
prepayment risk; changes in interest rates; basis risk; prolonged interruptions
or reductions in the secondary market for mortgage loans; timing of loan sales;
dependence on broker network; competition; concentration of operations in
California and Florida; economic conditions; contingent risks on loans we sell;
government regulation; changes in federal income tax laws; Year 2000 compliance;
our ability to pay dividends and the concentrated ownership of our controlling
stockholder. For a more complete discussion of these risks and uncertainties,
see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Factors" in the Company's Annual Report on Form
10-K and 10-K/A for the fiscal year ended June 30, 1999 and "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors" in Form 10-Q for the quarter ended December 31, 1999,
and subsequent Company Filings with the United States Securities and Exchange
Commission.
Financial Tables Follow
28
<PAGE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
-------------- --------------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $19,396,000 20,764,000
Loans held for sale, at lower of cost or market 383,282,000 559,869,000
Accounts receivable 46,470,000 56,964,000
Residual interests, at estimated fair market value 297,577,000 332,327,000
Mortgage servicing rights, net 14,325,000 20,928,000
Equipment and improvements, net 10,235,000 13,495,000
Prepaid and other 14,176,000 15,013,000
Income tax refund receivable - 1,737,000
-------------- --------------
Total assets 785,461,000 1,021,097,000
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings $275,470,000 281,220,000
Revolving warehouse facilities and repurchase facilities 386,165,000 535,997,000
Accounts payable and accrued expenses 58,797,000 50,505,000
Income taxes payable 8,533,000 7,819,000
-------------- --------------
Total liabilities 728,965,000 875,541,000
-------------- --------------
Commitments and Contingencies:
- -
Stockholders' equity:
Series A Preferred Stock, par value $0.001 per share;
500,000 shares authorized; none outstanding - -
Series B Convertible Preferred Stock, par value $0.001 per share;
29,704,000 and 100,000,000 shares authorized ; 26,704,000 and
26,704,000 shares outstanding 27,000 27,000
Series C Convertible Preferred Stock, par value $0.001per share;
107,105,000 and 100,000,000 shares authorized; 20,166,600
and 15,009,200 shares outstanding 20,000 15,000
Common Stock, par value $0.001 per share 400,000,000 and
50,000,000 shares authorized; 6,213,000 and 6,203,000
shares outstanding 6,000 6,000
Additional paid-in capital 367,338,000 342,278,000
Retained deficit (310,895,000) (196,770,000)
-------------- --------------
Total stockholders' equity 56,496,000 145,556,000
-------------- --------------
Total liabilities and stockholders' equity $785,461,000 1,021,097,000
-------------- --------------
-------------- --------------
</TABLE>
<PAGE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------- -----------------------------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000 1999
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue:
Gain on sale of loans $ 9,053,000 $ 8,236,000 $ 40,403,000 $ 36,665,000
Write-down of residual interests and
mortgage servicing rights (47,300,000) (8,100,000) (82,490,000) (194,551,000)
Origination fees 7,671,000 10,283,000 29,429,000 32,067,000
Loan servicing 3,958,000 7,559,000 12,133,000 20,675,000
Interest 24,627,000 18,836,000 72,387,000 45,296,000
--------------- -------------- -------------- --------------
Total revenue, including write-down
of residual interests and mortgage
servicing rights (1,991,000) 36,814,000 71,862,000 (59,848,000)
--------------- -------------- -------------- --------------
Expenses:
Compensation 25,922,000 21,759,000 71,404,000 65,460,000
Production 5,805,000 9,390,000 21,420,000 30,879,000
General and administrative 14,204,000 11,300,000 45,506,000 38,472,000
Interest 13,010,000 9,474,000 39,444,000 31,759,000
Nonrecurring charge-off of servicing
receivable - 37,044,000 - 37,044,000
--------------- -------------- -------------- --------------
Total expenses 58,941,000 88,967,000 177,774,000 203,614,000
--------------- -------------- -------------- --------------
Loss before income taxes (60,932,000) (52,153,000) (105,912,000) (263,462,000)
Provision (benefit) for income taxes 533,000 (16,174,000) 2,458,000 (29,582,000)
--------------- -------------- -------------- --------------
Net loss $ (61,465,000) $ (35,979,000) $(108,370,000) $(233,880,000)
--------------- -------------- -------------- --------------
--------------- -------------- -------------- --------------
Net loss per share:
Basic $ (10.25) $ (5.91) $ (18.38) $ (37.84)
--------------- -------------- -------------- --------------
--------------- -------------- -------------- --------------
Diluted $ (10.25) $ (5.91) $ (18.38) $ (37.84)
--------------- -------------- -------------- --------------
--------------- -------------- -------------- --------------
Dividends per share $ - $ - $ - $ 0.16
--------------- -------------- -------------- --------------
--------------- -------------- -------------- --------------
Weighted average number of shares outstanding:
Basic 6,210,000 6,201,000 6,209,000 6,199,000
--------------- -------------- -------------- --------------
--------------- -------------- -------------- --------------
Diluted 6,210,000 6,201,000 6,209,000 6,199,000
--------------- -------------- -------------- --------------
--------------- -------------- -------------- --------------
</TABLE>
<PAGE>
AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
THREE AND NINE MONTH STATISTICS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------- ---------------------------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(In thousands)
ORIGINATION VOLUME:
<S> <C> <C> <C> <C>
Broker network $ 261,573 $ 226,420 $ 959,111 $ 866,713
Retail 179,792 156,059 561,582 582,173
Correspondent 5,355 19,270 30,403 228,138
------------ ------------ ------------ ------------
Total $ 446,720 $ 401,749 $1,551,096 $1,677,024
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SERVICING PORTFOLIO $3,684,000 $4,045,000
SERVICED IN HOUSE $3,386,000 $4,045,000
LOAN SALES:
Loans pooled and sold
in securitizations $ - $ - $ 803,557 $ 650,000
Whole loan sales 434,854 393,914 912,072 940,138
------------ ------------ ------------ ------------
$ 434,854 $ 393,914 $1,715,629 $1,590,138
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
