X. Xxx Xxxxxxxx
Chief Executive Officer
Aames Financial Corporation
000 X. Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
RE: INVESTMENT IN PREFERRED STOCK
Gentlemen:
Pursuant to the Preferred Stock Purchase Agreement, by and between Aames
Financial Corporation (the "COMPANY") and Specialty Finance Partners ("SFP")
dated as of May 19, 2000 (the "STOCK PURCHASE AGREEMENT") SFP agreed to purchase
from the Company shares of the Company's Series C Convertible Preferred Stock,
par value $0.001 per share (the "SERIES C PREFERRED STOCK") for a price per
share (the "PRICE") equal to the lower of $0.90 or the average of the closing
price of Company's Common Stock, par value $0.001 per share (the "COMMON STOCK")
for five trading days prior to the "Initial Closing" (as that term is defined in
the Stock Purchase Agreement) and the Company will also issue to SFP warrants to
purchase another 5 million shares of Series C Preferred Stock at the Price (the
"SFP TRANSACTION").
This letter is intended to amend the Stock Purchase Agreement to the extent
inconsistent with the provisions herein and to provide for certain other
agreements between the parties with respect to the SFP Transaction. All
capitalized terms used herein, and not otherwise defined, shall have their
respective meanings as set forth in the Stock Purchase Agreement.
PURCHASE OF SERIES D CONVERTIBLE PREFERRED STOCK
The Stock Purchase Agreement is hereby amended as follows:
(a) At the Initial Closing, SFP shall purchase and the Company shall
sell to SFP, 40,800,000 shares of Series C Preferred Stock for $0.85 per
share (the "INITIAL SHARES").
(b) At the Initial Closing, the Company shall issue a warrant,
substantially in the form attached hereto as EXHIBIT A, to SFP (the "SERIES
C WARRANT") for the purchase of 5 million shares of Series C Convertible
Preferred Stock. The Series C Warrant will expire at the Additional Closing
and, upon exercise of the Series C Warrant, the issuance of the Series C
Preferred Stock
thereunder will be subject to the receipt by the Company of appropriate
consents of holders of Series B Preferred Stock and Series C Preferred
Stock to issue such shares upon conversion as well as the filing, and the
expiration of any waiting period, pursuant to Regulation 14(c) under the
Securities Exchange Act of 1934.
(c) At the Additional Closing, the Company shall issue a warrant,
substantially in the form attached hereto as EXHIBIT B, to SFP (the "SERIES
D WARRANT") for the purchase of 5 million shares of Series D Convertible
Preferred Stock, par value $0.001 per share (the "SERIES D PREFERRED
STOCK"), PROVIDED, however that the number of shares subject to the Series
D Warrant shall be reduced by the number of shares of Series C Preferred
Stock acquired through the exercise of the Series C Warrant, if any.
(d) At the Additional Closing, SFP shall exchange each of the Initial
Shares, and each share of Series C Preferred Stock acquired through the
exercise of the Series C Warrant, if any, for one share of Series D
Preferred Stock, subject to adjustment as provided for in the Certificate
of Designations for the Series D Preferred Stock which shall be filed with
the Delaware Secretary of State immediately prior to the Additional
Closing, in substantially the same form as attached hereto as EXHIBIT C.
(e) At the Additional Closing, SFP shall purchase, and the Company
shall sell to SFP, an aggregate of 18,023,529 shares of Series D Preferred
Stock for $0.85 per share, subject to the terms and conditions of the Stock
Purchase Agreement.
(f) The Series D Preferred Stock shall be subject to all of the
limitations, covenants, representations and warranties or other agreements
between the parties which are applicable to the Series C Preferred Stock
and which are contained in the Stock Purchase Agreement.
(g) On or prior to the Additional Closing, the Company and SFP will
execute an amendment to that certain Registration Rights Agreement, dated
as of December 23, 1998, between the Company and Capital Z Financial
Services Fund II, L.P. (the "REGISTRATION RIGHTS AGREEMENT"), such that the
Series D Preferred Stock issued at the Additional Closing will be subject
to the terms and conditions of the Registration Rights Agreement.
(h) The Stock Purchase Agreement, as amended hereby, is hereby
ratified and confirmed.
WAIVER OF CONVERSION RATIO
SFP understands that, pursuant to the Certificate of Incorporation, the SFP
Transaction may cause the automatic adjustment of the "conversion ratio" (as
that term is used in the Certificate of Incorporation with respect to the Series
C Stock and the
Company's Series B Convertible Preferred Stock, par value $0.001 per share (the
"SERIES B PREFERRED STOCK")) to be adjusted.
SFP hereby covenants and agrees that it will support, and vote in favor of,
any proposal presented to the stockholders of Aames to eliminate as an
adjustment to the "conversion ratio" in effect on the date immediately preceding
the Initial Closing, any adjustment arising from the issuance of the Series C
Preferred Stock to be issued under the Stock Purchase Agreement (the
"CERTIFICATE AMENDMENT").
SFP further covenants and agrees that, if SFP converts any shares of its
Series B Preferred Stock or Series C Preferred Stock into shares of Common Stock
between the date of the Initial Closing and the date that the Certificate
Amendment is filed, the Company shall apply the "conversion ratio" in effect on
the date immediately preceding the Initial Closing in calculating the number of
shares of Common Stock to be issued upon such conversion.
WAIVER OF STATED VALUE
SFP understands that, pursuant to the Certificate of Incorporation, the
"Post Recapitalization Stated Value" (as that terms is defined in the
Certificate of Designations with respect to the Series C Preferred Stock) of the
Series C Preferred Stock is $5.00 per share.
SFP further covenants and agrees that the "Post Recapitalization Stated
Value" (as that terms is defined in the Certificate of Designations with respect
to the Series C Preferred Stock) for the Initial Shares, and any shares of
Series C Preferred Stock acquired by SFP as a result of the exercise of the
Series C Warrant, shall be equal to the Purchase Price per share.
[SIGNATURES FOLLOW]
Very truly yours,
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: /s/ Xxxx X. Xxxxx
------------------------------
Name: Xxxx X. Xxxxx
Title: Partner
ACCEPTED AND AGREED:
--------------------
AAMES FINANCIAL CORPORATION
---------------------------
By: /s/ X. Xxx Xxxxxxxx
------------------------------
Name: X. Xxx Xxxxxxxx
Title: Chief Executive Officer
Dated as of May 25, 2000.
-------------------------
cc: Xxxx Xxxxxxxxx
Managing Director
Xxxxxxxxx, Xxxxxx & Jenrettee Securities Corporation
0000 Xxxxxx xx xxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
EXHIBIT A
FORM OF SERIES C 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
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS.........................................................1
ARTICLE 2. EXERCISE OF WARRANT.................................................5
Section 2.1. Manner of Exercise...........................................5
Section 2.2. Payment of Taxes.............................................6
Section 2.3. Fractional Shares............................................6
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION..................................7
Section 3.1. Transfer.....................................................7
Section 3.2. Division and Combination.....................................7
Section 3.3. Expenses.....................................................7
Section 3.4. Maintenance of Books.........................................7
ARTICLE 4. ADJUSTMENTS.........................................................8
Section 4.1. Stock Dividends, Subdivisions, Combinations and
Reclassifications............................................8
Section 4.2. Issuance of Additional Shares of Common Stock or
Convertible Securities.......................................9
Section 4.3. Other Provisions Applicable to Adjustments Under
This Section................................................10
Section 4.4. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets......................12
Section 4.5. Notices.....................................................12
Section 4.6. Certificates................................................13
ARTICLE 5. NO IMPAIRMENT......................................................13
ARTICLE 6. RESERVATION AND AUTHORIZATION OF SERIES C
PREFERRED STOCK; REGISTRATION WITH OR APPROVAL
OF ANY GOVERNMENTAL AUTHORITY......................................14
ARTICLE 7. STOCK AND WARRANT TRANSFER BOOKS...................................15
ARTICLE 8. RESTRICTIONS ON TRANSFERABILITY....................................15
Section 8.1. Restrictive Legend..........................................15
Section 8.2. Transfers...................................................16
Section 8.3. Termination of Restrictions.................................16
ARTICLE 9. SUPPLYING INFORMATION..............................................17
ARTICLE 10. LOSS OR MUTILATION................................................17
ARTICLE 11. OFFICE OF THE COMPANY.............................................17
ARTICLE 12. REGISTRATION RIGHTS...............................................18
i
ARTICLE 13. LIMITATION OF LIABILITY...........................................18
ARTICLE 14. REPRESENTATION OF HOLDER..........................................18
ARTICLE 15. MISCELLANEOUS.....................................................18
Section 15.1. Nonwaiver and Expenses.....................................18
Section 15.2. No Rights As Stockholder...................................18
Section 15.3. Notice Generally...........................................19
Section 15.4. Successors and Assigns.....................................19
Section 15.5. Amendment..................................................20
Section 15.6. Severability...............................................20
Section 15.7. Headings...................................................20
Section 15.8. Governing Law..............................................20
Section 15.10. Mutual Waiver of Jury Trial...............................20
ii
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
the date on which the Additional Closing (as defined in the Preferred Stock
Purchase Agreement, dated as of May 19, 2000 and as subsequently amended, by and
between the Company and SFP) occurs (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
$0.85 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 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
2
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.
"Preferred Stock Purchase Agreement" shall mean the Preferred Stock
Purchase Agreement, dated as of May 19, 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).
3
"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.
4
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 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 0 Xxxxxxxxxx Xxxxx, 000 Xxxxx Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, 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, take any and all actions,
including the filing of an Information Statement on Form 14C with the
Commission, necessary to 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, as soon as practicable after the receipt by the Company of a written
notice of the holder's election to exercise this Warrant. 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,
5
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 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.
6
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 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
7
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 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:
8
(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, 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)
9
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.
10
(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 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.
11
(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 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
12
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, 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
13
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.
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.
14
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 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 Xxxxxxx 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."
15
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 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).
16
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.
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
17
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.
18
(b) If to the Company:
Aames Financial Corporation
0 Xxxxxxxxxx Xxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Secretary
Fax No.: (000) 000-0000
with a copy to:
Troop Xxxxxxx Xxxxxx Xxxxxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: X. X. Xxxxxxxx Xxxxxxx, Esq.
Fax No.: (000) 000-0000
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.
19
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), 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.
20
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer on June __, 2000.
AAMES FINANCIAL CORPORATION
By:
------------------------------
Name:
Title:
21
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.
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:
Name and Address of Assignee No. of Shares of Series C Preferred Stock
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.
EXHIBIT B
---------
FORM OF SERIES D 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 D Convertible Preferred Stock of
AAMES FINANCIAL CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS.........................................................1
ARTICLE 2. EXERCISE OF WARRANT.................................................5
Section 2.1. Manner of Exercise...........................................5
Section 2.2. Payment of Taxes.............................................6
Section 2.3. Fractional Shares............................................6
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION..................................7
Section 3.1. Transfer.....................................................7
Section 3.2. Division and Combination.....................................7
Section 3.3. Expenses.....................................................7
Section 3.4. Maintenance of Books.........................................7
ARTICLE 4. ADJUSTMENTS.........................................................8
Section 4.1. Stock Dividends, Subdivisions, Combinations and
Reclassifications............................................8
Section 4.2. Issuance of Additional Shares of Common Stock
or Convertible Securities....................................9
Section 4.3. Other Provisions Applicable to Adjustments Under
This Section................................................10
Section 4.4. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets......................12
Section 4.5. Notices.....................................................12
Section 4.6. Certificates................................................13
ARTICLE 5. NO IMPAIRMENT......................................................13
ARTICLE 6. RESERVATION AND AUTHORIZATION OF SERIES D PREFERRED
STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY..........................................................14
ARTICLE 7. STOCK AND WARRANT TRANSFER BOOKS...................................15
ARTICLE 8. RESTRICTIONS ON TRANSFERABILITY....................................15
Section 8.1. Restrictive Legend..........................................15
Section 8.2. Transfers...................................................16
Section 8.3. Termination of Restrictions.................................16
ARTICLE 9. SUPPLYING INFORMATION..............................................17
ARTICLE 10. LOSS OR MUTILATION................................................17
ARTICLE 11. OFFICE OF THE COMPANY.............................................17
ARTICLE 12. REGISTRATION RIGHTS...............................................18
i
ARTICLE 13. LIMITATION OF LIABILITY...........................................18
ARTICLE 14. REPRESENTATION OF HOLDER..........................................18
ARTICLE 15. MISCELLANEOUS.....................................................18
Section 15.1. Nonwaiver and Expenses.....................................18
Section 15.2. No Rights As Stockholder...................................18
Section 15.3. Notice Generally...........................................19
Section 15.4. Successors and Assigns.....................................19
Section 15.5. Amendment..................................................20
Section 15.6. Severability...............................................20
Section 15.7. Headings...................................................20
Section 15.8. Governing Law..............................................20
Section 15.10. Mutual Waiver of Jury Trial...............................20
ii
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 D 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
June __, 2005 (the "Expiration Date"), to purchase from Aames Financial
Corporation, a Delaware corporation (the "Company"), [5,000,000] shares of
Series D Convertible Preferred Stock, par value $0.001 per share, of the Company
(the "Series D 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.
Notwithstanding anything to the contrary set forth in this Warrant, this Warrant
shall not be exercisable by the holder hereof until the day on which the Company
files a Certificate of Designations relating to the Series D Preferred Stock
with the Secretary of State of the State of Delaware. 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 D Preferred Stock" shall mean all shares of
Series D 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 D 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 D Preferred Stock, the closing price per share of Common Stock on such
date and, when used with reference to shares of Series D Preferred Stock for any
period 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
2
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.
"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 D Preferred Stock" shall mean shares of Series D
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).
3
"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 D Preferred Stock" shall mean the Series D 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 D Preferred Stock is listed or admitted to trading
is open for the transaction of business or, if the Series D 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 D 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 D Preferred Stock purchased
by the holder of this Warrant upon the exercise thereof.
4
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 holder may exercise this
Warrant for all or any part of the number of shares of Series D 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 0 Xxxxxxxxxx Xxxxx, 000 Xxxxx Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, 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 D 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 D
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 D 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.
5
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 D
Preferred Stock, or any combination thereof. In the event of the application
shares of Series B Preferred Stock or Series D 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 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 D 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 D 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
6
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 D
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 D
Preferred Stock upon presentation hereof 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 D 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.
7
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 D Preferred Stock in Additional Shares of Series D Preferred
Stock,
(b) subdivide its outstanding shares of Series D Preferred Stock into
a larger number of shares of Series D Preferred Stock,
(c) combine its outstanding shares of Series D Preferred Stock into a
smaller number of shares of Series D Preferred Stock, or
(d) issue by reclassification of its shares of Series D Preferred
Stock any shares of capital stock of the Company,
then, and in each such case, the number of shares of Series D 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 D 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 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 D 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 D PREFERRED STOCK OR
CONVERTIBLE SECURITIES. In the case the Corporation shall, after the Issue Date,
issue or sell:
(a) Additional Shares of Series D Preferred Stock at a price per
share, or
(b) Convertible Securities having a Conversion Price per share,
8
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
D 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 D
Preferred Stock determined by multiplying (A) the number of shares of Series D
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 D Preferred Stock
outstanding on the date on which such shares or Convertible Securities are
issued and (2) the number of Additional Shares of Series D 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 D
Preferred Stock outstanding on such date and (y) the number of shares of Series
D Preferred Stock which the aggregate consideration receivable by the Company
for the total number of shares of Series D Preferred Stock so issued, or the
number of shares of Series D 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, payable to the Corporation upon the
conversion, exchange or exercise of any such Convertible Securities.
Neither (A) the issuance of any shares of Series D 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 D Preferred Stock requiring an adjustment in the number of shares of
Series D 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
9
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 D Preferred Stock and the Warrants) nor (B) the issuance of
shares of Series D Preferred Stock pursuant thereto shall be deemed to
constitute an issuance of Series D 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 D Preferred Stock issued were such shares of Series D 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 D
Preferred Stock at any time outstanding shall not include any shares of
Series D 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 D 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 D Preferred Stock issuable upon 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
10
change in the number of shares of Series D Preferred Stock issuable upon
exercise of the Warrants evidenced hereby by at least one-hundredth of one
share of Series D 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 D Preferred Stock issuable upon exercise of the Warrants
evidenced hereby by at least one-hundredth of one share of Series D
Preferred Stock, such change in the number of shares of Series D 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 D
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 D 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 D
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 D Preferred Stock.
(h) Upon each adjustment to the number of shares of Series D 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 obtained by
(i) multiplying (A) the applicable number of shares of Series D Preferred
Stock issuable upon exercise of the Warrants immediately prior to such
adjustment by (B) the
11
Exercise Price in effect immediately prior to such adjustment and (ii)
dividing the product so obtained by the number of shares of Series D
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 D 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 D 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 D
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 D 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 D Preferred Stock, or shall
offer for subscription pro rata to the holders of its Series D 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 D 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
12
days' prior written notice as aforesaid. Such notice shall also specify the date
as of which the holders of the Series D Preferred Stock of record shall
participate in said dividend, distribution or subscription rights or shall be
entitled to exchange their Series D 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 D 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 D 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 D 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 D 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 D 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
13
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.
ARTICLE 6.
RESERVATION AND AUTHORIZATION OF
SERIES D 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
D Preferred Stock as will be sufficient to permit the exercise in full of all
outstanding Warrants. All shares of Series D 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 D
Preferred Stock.
Before taking any action which would result in an adjustment in the number
of shares of Series D 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
14
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 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 Xxxxxxx 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 D Preferred Stock, the holder of
such Warrants or Restricted Series D Preferred Stock shall give notice (a
"Transfer Notice") to the Company of such xxxxxx's intention to effect such
transfer, describing the manner and circumstances of the proposed transfer, and
obtain from counsel a written opinion
15
addressed and reasonably satisfactory to the Company that the proposed transfer
of such Warrants or such Restricted Series D 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 D Preferred Stock and such holder shall thereupon be
entitled to transfer such warrants or such Restricted Series D Preferred Stock,
in accordance with the terms of the Transfer Notice. Each certificate, if any,
evidencing such shares of Restricted Series D 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 D
Preferred Stock (or Series D 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 D Preferred
Stock (or Series D Preferred Stock issuable upon the exercise of the Warrants)
(i) as to the Warrant Stock and Restricted Series D 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 D Preferred Stock, when the holder of the
Warrant, Warrant Stock or Restricted Series D 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 D 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 D 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 D Preferred Stock in supplying such information as may be
reasonably requested by such
16
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 D 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.
ARTICLE 13.
LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the holder to
purchase shares of Series D 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 D Preferred Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
17
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.
18
(b) If to the Company:
Aames Financial Corporation
0 Xxxxxxxxxx Xxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Secretary
Fax No.: (000) 000-0000
with a copy to:
Troop Xxxxxxx Xxxxxx Xxxxxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: X. X. Xxxxxxxx Xxxxxxx, Esq.
Fax No.: (000) 000-0000
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.
19
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), 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.
20
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer on July ___, 2000.
AAMES FINANCIAL CORPORATION
By:
------------------------------
Name:
Title:
21
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 D 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 D 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 D Preferred Stock shall not
include all of the shares of Series D 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 D 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.
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 D Preferred Stock set forth below:
Name and Address of Assignee No. of Shares of Series D Preferred Stock
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.
EXHIBIT C
FORM OF CERTIFICATE OF DESIGNATIONS FOR THE SERIES D PREFERRED STOCK
--------------------------------------------------------------------------------
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS, AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES D 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,
and fixes the voting powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions
thereof, as follows:
SERIES D CONVERTIBLE PREFERRED STOCK:
I. DESIGNATION AND AMOUNT
The designation of this series of shares shall be "Series D Convertible
Preferred Stock" (the "Series D Preferred Stock") par value $0.001 per share;
the stated value per share shall be $[0.90] (the "Stated Value"); and the number
of shares constituting such series shall be [121,851,622]. The number of shares
of the Series D 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 D Preferred Stock then outstanding.
II. RANK
A. With respect to dividends, the Series D 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") and 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 B Preferred Stock and 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 D 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 D Preferred Stock ranks on a parity, including the Series B
Preferred Stock and 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 D
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 D
Preferred Stock shall rank (i) senior to each other class or series of Preferred
Stock, except for the Series B Preferred Stock and the Series C Preferred Stock;
(ii) on a parity with the Series B Preferred Stock and 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 D 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 D Preferred Stock ranks on
parity, including the Series B Preferred Stock and the Series C Preferred Stock,
are collectively referred to herein as "Parity Liquidation Securities"; and all
equity securities of the Corporation to which the Series D Preferred Stock ranks
junior are collectively referred to herein as "Senior Liquidation Securities."
C. The Series D 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 D
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. Dividends shall accrue and accumulate on the Stated Value of
each share of Series D 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.
2
Dividends shall begin to accumulate on outstanding shares of Series D 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 D 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 D 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 D 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 D Preferred Stock
shall be allocated pro rata on a share-by-share basis among all such shares then
outstanding. After February 10, 2001, dividends that are declared and paid in an
amount less than the full amount of dividends accumulated on the Series D
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 D 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.
IV. LIQUIDATION PREFERENCE
A. LIQUIDATION PREFERENCE. The holders of the outstanding shares of Series
D 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 Stated Value thereof,
before any payment shall be made or any assets distributed to the holders of any
Junior
3
Liquidation Securities. After any such payment in full after the consummation of
the Recapitalization, the holders of Series D 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 D 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 D 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 D 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 D 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. OPTIONAL REDEMPTION. Commencing on the earlier to occur of (x) the
February 10, 2009 and (y) the date on which fewer than 25% of the shares of
Series D 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 D 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.
B. NOTICE AND REDEMPTION PROCEDURES. Notice of the redemption of shares of
Series D Preferred Stock pursuant to paragraph A of this Article V (a "Notice of
Redemption") shall be sent to the holders of record of the shares of Series D
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,
as applicable, 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 D
Preferred Stock held by any other holder. In order to facilitate the redemption
of shares of Series D Preferred Stock, the Board of Directors may fix a record
date for the determination of the holders of shares of Series D Preferred Stock
to be
4
redeemed not more than 30 days prior to the date the Notice of Redemption is
mailed. On or after the Optional Redemption Date, as applicable, 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, as applicable, all
dividends on shares of Series D Preferred Stock shall cease to accumulate and
all rights of the holders thereof as holders of Series D Preferred Stock shall
cease and terminate, except to the extent the Corporation shall default in
payment thereof on the Optional Redemption Date, as applicable.
C. DEPOSIT OF FUNDS. The Corporation shall, on or prior to the Optional
Redemption Date, as applicable, pursuant to paragraph B 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 D 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 D 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 D Preferred Stock after the Optional
Redemption Date, as applicable, 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 D 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 D 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
5
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 D 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 D Preferred Stock,
all dividends declared on the Series D 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 D 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 D Preferred Stock and such Parity Dividend Securities bear to each other.
VII. VOTING RIGHTS
A. The holders of Series D Preferred Stock shall be entitled to the number
of votes per share of Series D Preferred Stock equal to the number of shares of
Common Stock for which such share of Series D 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 D Preferred Stock are outstanding,
(i) each share of Series D 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 D Preferred Stock shall vote
together with shares of Common Stock and shares of Series B Preferred Stock and
the Series C Preferred Stock as a single class.
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 D Preferred Stock, 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 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 D
6
Preferred Stock, 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 D 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 D 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 D 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 D
Preferred Stock, Series B Preferred Stock and 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.
At each meeting of stockholders at which the holders of shares of Series D
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 D Preferred Stock, Series B Preferred Stock and 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 D
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 D
Preferred Stock, 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 D Preferred Stock, Series B Preferred Stock and
Series C 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 D Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, each such holder shall have one vote for each share of such
stock standing in his name on the transfer books
7
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.
VIII. CONVERSION
The holders of the Series D Preferred Stock shall have conversion rights as
follows:
A. Each share of Series D 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 D Preferred Stock, at any time, at the office of the
Corporation or any transfer agent for such Series, into one (1) fully
paid and nonassessable share of Common Stock subject to adjustment
from time to time as provided below (as so adjusted, the "conversion
ratio"), PROVIDED, that any conversion pursuant to clause (ii) above
of less than all of the outstanding shares of Series D Preferred Stock
shall be on a pro rata basis amongst all holders of Series D Preferred
Stock.
B. If a holder of Series D 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 D 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 D Preferred Stock give notice of conversion under paragraph A
above, the Corporation shall notify all other record holders of Series
D Preferred Stock (a "Mandatory Conversion Notice"). Following receipt
of a Mandatory Conversion Notice, the holders of Series D 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 after the
surrender of a Series D 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
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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 D 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 D 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 D 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
D 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. 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 D
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 D 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 D Preferred Stock, then in addition to such other remedies as
shall be available to the holder of Series
9
D 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 D 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 D 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 D 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 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 D 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
10
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 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 D
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 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
11
(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 D 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 D 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
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.
12
(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 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 D 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
13
by a holder of that number of shares of Common Stock into which one
share of Series D 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 D 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.
14
IX. ADDITIONAL DEFINITIONS
For the purposes of this Certificate of Designations of Series
D Preferred Stock, the following terms shall have the meanings indicated:
"Accrual Period" means the end of the first quarterly period following
February 10, 2001.
"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
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.
15
"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.
"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 D
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.
"Redemption Price" of a share of Series D Preferred Stock shall mean the
sum of (a) the dividends, if any, accumulated or deemed to have accumulated
thereon to the Optional Redemption Date, as applicable, whether or not such
dividends are declared PLUS Stated Value thereof 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 Xxxxx Fargo Bank as rights agent, and all
amendments, supplements and replacements thereof.
"Stated Value" shall be equal to $[0.90].
"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)
16
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 0 Xxxxxxxxxx Xxxxx, 000 Xxxxx
Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (Attention: General
Counsel)
or to the transfer agent for the Series D Preferred Stock;
(ii) if to a holder of the Series D 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 D 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.
X. XXXXXXXXXX SHARES. Any shares of Series D 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 D 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 D 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
17
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 D 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 D 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 D 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 D Preferred Stock.
F. RECORD DATES. In the event that the Series D 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 D Preferred
Stock.
18
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Assistant Secretary, this ___ day of ____________ ,
2000.
AAMES FINANCIAL CORPORATION
By:
------------------------------
Name:
Title:
19
