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EXHIBIT 10.6
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement (this "Agreement")
is made and entered into as of June 1, 1997 by and between AAMES FINANCIAL
CORPORATION, a Delaware corporation (the "Company"), and XXXXXXX XXXXXX, an
individual ("Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into an Employment Agreement as
of May 8, 1996 (the "Original Agreement") as a material inducement to Executive
to accept employment with the Company;
WHEREAS, Executive and the Company amended and restated (the "First
Amended Agreement") the Original Agreement for the primary purpose of amending
the performance bonus provisions effective as of May 8, 1996, the date of the
Original Agreement;
WHEREAS, Executive and the Company desire to amend and restate the First
Amended Agreement for the primary purpose of reflecting Executive's position of
Executive Vice President and General Counsel and revised executive performance
bonus provisions.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive agree as
set forth below.
1. EMPLOYMENT AND DUTIES. The Company hereby employs Executive to serve as
Executive Vice President and General Counsel of the Company, with the powers and
duties customarily accorded to such position, and such other duties consistent
therewith as may be assigned to Executive from time to time by the Chief
Executive Officer (the "CEO") of the Company.
2. TERM. The initial term of this Agreement shall begin as of May 8, 1996.
The initial term shall expire on June 20, 2001 unless terminated earlier as set
forth in Section 6 hereof or by mutual agreement of the parties hereto (the
"Initial Term"). At the expiration of the Initial Term and each anniversary
thereafter, the term of this Agreement shall automatically be extended for an
additional year (the "Extension Term") unless either party shall have given
written notice to the other party at least ninety days prior to the end of the
Initial Term or the Extension Term, as the case may be, that it does not desire
to extend the term of this Agreement. If Executives' employment under this
Agreement is extended for an Extension Term, it shall thereafter or during
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any Extension Term be terminable (other than upon expiration) only as provided
in Section 6 or by mutual agreement of the parties hereto.
3. COMPENSATION
(a) Base Salary. During the term of this Agreement, Executive shall
be paid a base salary (the "Base Salary"), payable in accordance with the
Company's normal payroll practices. During the first year of the term of this
Agreement, Executive's Base Salary shall be $240,000. During the second year of
the term of this Agreement, Executive's Base Salary shall be $300,000. The
annual Base Salary payable to Executive shall be reviewed on an annual basis,
provided, however, that Executive's Base Salary shall not be reduced below
$300,000 per annum during the term of this Agreement.
(i) Performance Bonus. Executive shall be entitled to
participate in the Company's performance bonus plan for executive officers.
Under such plan, (i) from the effective date of the Original Agreement through
and including the quarter ended March 31, 1997, Executive was paid on a
quarterly basis a performance bonus measured by return on average equity during
the relevant period; and (ii) for the quarters ended June 30 and September 30,
1997 and for each quarter thereafter until the compensation committee of the
Board of Directors adopts a new performance bonus plan for executive officers,
Executive shall be paid a quarterly bonus of $72,000. Amounts paid and to be
paid shall be referred to as the "Performance Bonus." Upon adoption of a new
performance bonus plan, Executive shall be paid a quarterly bonus under the
provisions of such plan.
(b) Stock Bonus. On the commencement of the Initial Term, the
Company shall grant Executive incentive options to purchase 25,000 shares of the
Company's Common Stock (the "Options"). Of such Options, 5,000 shall vest
immediately upon grant and an additional 5,000 shall vest on each anniversary of
the commencement of the Initial Term. The Options will be exercisable at an
exercise price equal to $41 (the Closing Price of the Company's Common Stock on
the New York Stock Exchange on May 8, 1996). The Company shall register the
shares of Common Stock issuable upon exercise of the Options and shall use its
best efforts to maintain a current registration statement under the Securities
Act of 1933, as amended, in respect of such shares. The Options shall be issued
under the Company's stock incentive plans maintained for its executives and
shall contain standard anti-dilution mechanisms to adjust for stock dividends,
stock splits, reverse stock splits, recapitalizations, consolidations and
mergers as are provided for therein and shall provide for acceleration of
vesting upon the merger, consolidation, sale of all or substantially all of the
assets of the Company or similar reorganization.
(c) Discretionary Bonus. In addition to a Performance Bonus,
Executive shall be entitled to an additional bonus in any fiscal year in an
amount, if any, as shall be determined in the sole discretion of the Board of
Directors of the Company. Any such discretionary bonus shall be paid as soon as
practicable following the completion of each fiscal year.
4. Other Executive Benefits. During the term of this Agreement, the
Company shall provide to the Executive benefits commensurate with her position,
including each of the following benefits:
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(a) Medical and Dental Coverage. The Company agrees to provide
coverage to Executive and dependent members of her family under the same medical
and dental plans as may be maintained generally from time to time for officers
of the Company.
(b) Vacation. Executive shall be entitled to four weeks of paid
vacation during each year of the term of this Agreement. In each case, such
entitlement shall accrue pro rata over the contract year and shall be taken at
such time or times as shall not unreasonably interfere with the operations of
the Company.
(c) Business Expenses. The Company will pay or reimburse Executive
for any out-of-pocket expenses incurred by Executive in the course of providing
services hereunder, which comply with the Company's travel and expense policies
in effect generally from time to time for other officers of the Company. Such
reimbursement shall be made by the Company in the same manner and within the
same time period as applicable to the other executive officers of the Company.
(d) Benefit Plans. Executive shall be entitled to participate in any
pension, profit-sharing, stock option, stock purchase or other benefit plan of
the Company now existing or hereafter adopted for the benefit of employees
generally.
(e) Disability. Provided the following policy may be obtained at a
reasonable cost, the Company shall provide Executive with a long-term disability
policy which provides for an annual disability payment in an amount equal to
100% of Executive's Base Salary.
5. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. Executive hereby agrees, during the term of this
Agreement, she will not disclose to any person or otherwise use or exploit any
proprietary or confidential information, including, without limitation, trade
secrets, processes, records of research, proposals, reports, methods, processes,
techniques, computer software or programming, or budgets or other financial
information, regarding the Company, its business, properties, customers or
affairs (collectively, "Confidential Information") obtained by her at any time
during the term, except to the extent required by Executive's performance of
assigned duties for the Company. Notwithstanding anything herein to the
contrary, the term "Confidential Information" shall not include information
which is or becomes generally available to the public other than as a result of
disclosure by Executive in violation of this Agreement, is or becomes available
to Executive on a non-confidential basis from a source other than the Company,
provided that such source is not known by Executive to be furnishing such
information in violation of a confidentiality agreement with or other obligation
of secrecy to the Company, has been made available, or is made available, on an
unrestricted basis to a third party by the Company, by an individual authorized
to do so or is known by Executive prior to its disclosure to Executive.
Executive may use and disclose Confidential Information to the extent necessary
to assert any right or defend against any claim arising under this Agreement or
pertaining to Confidential Information or its use, to the extent necessary to
comply with any applicable statute, constitution,
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treaty, rule, regulation, ordinance or order, whether of the United States, any
state thereof, or any other jurisdiction applicable to Executive, or if
Executive receives a request to disclose all or any part of the information
contained in the Confidential Information under the terms of a subpoena, order,
civil investigative demand or similar process issued by a court of competent
jurisdiction or by a governmental body or agency, whether of the United States
or any state thereof, or any other jurisdiction applicable to Executive.
(b) Injunctive Relief. Executive agrees that the remedy at law for
any breach by her of the covenants and agreements set forth in this Section may
be inadequate and that in the event of any such breach, the Company may, in
addition to the other remedies that may be available to it at law, seek
injunctive relief prohibiting her (together with all those persons associated
with her) from the breach of such covenants and agreements.
6. Termination.
(a) Termination by Company for "Cause" or Voluntarily by Executive.
The Company may terminate this Agreement for "Cause" effective immediately upon
written notice thereof to Executive. For purposes of this Agreement, "Cause"
shall mean and be limited to the following events: an act of fraud,
embezzlement, gross dishonesty or similar conduct by Executive involving the
Company; any action by Executive involving the arrest of Executive, for
violation of any criminal statute consisting of a felony if the Board reasonably
determines that the continuation of Executive's employment after such event
would have an adverse impact on the operations or reputation of the Company in
the financial community; or continued insubordination or a refusal by Executive
to perform her duties hereunder in a manner deemed to be reasonably satisfactory
to the CEO; provided, however, that this Agreement may not be terminated under
this subclause unless Executive shall have first received written notice from
the CEO advising Executive of the specific acts or omissions alleged to
constitute a refusal to perform and such refusal to perform continues after
Executive shall have had a reasonable opportunity to correct the acts or
omissions cited in such notice.
In the event of termination for "Cause," voluntarily or by Executive
other than as permitted in Sections 6(b)(i) and 6(b)(ii) and 6(c), (x) Executive
shall be entitled to receive that portion of the Base Salary and all benefits
accrued through the date of termination and (y) all Options that have become
exercisable as of the date of termination shall become and shall remain so for a
period of 90 days.
(b) Termination by Company Other Than For "Cause".
(i) Death. Provided that notice of termination has not been
previously been given under any Section hereof, if Executive shall die during
the term of this Agreement, this Agreement and all of the Company's obligations
hereunder shall terminate, except that Executive's estate or designated
beneficiaries shall be entitled to receive all earned and unpaid Base Salary
through the date of termination; a pro-rated portion of the Performance Bonus,
if any, earned and paid for the year preceding the death of Executive; one
year's Base Salary (at the annual rate in effect at the date of death) plus an
amount equal to the Performance Bonus, if
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any, paid for the immediately preceding year; and all other benefits, if any,
that may be due to Executive or Executive's estate or general provisions of any
benefit plan, stock incentive plan or other plan in which Executive is then a
participant. In addition, of the Options which are scheduled to vest on the next
anniversary of the commencement of the Initial Term, a percentage of such number
of Options shall vest at the date of death determined by dividing the number of
days which have elapsed since the last such anniversary by the number 365 and
multiplying the result by 5. Further, all Options that have become exercisable
as of the date of death (including those which do so as a result of the
provisions of the preceding sentence) shall remain so for a period of 12 months.
(ii) Disability. Provided that notice of termination has not
previously been given under any Section hereof, if Executive becomes ill or is
injured or disabled during the term such that Executive fails to perform all or
substantially all of the duties to be rendered hereunder and such failure
continues for a period in excess of 26 consecutive weeks (a "Disability"), the
Company shall continue to employ Executive under this Agreement for one year
from the date of Disability (which one year period shall commence at the
beginning of the 26 week period referred to herein) and shall continue to pay
Executive the Base Salary in effect on the date of the Disability (determined at
the beginning of the 26 week period referred to herein), the Performance Bonus
and all benefits then in effect; provided, that the Company may relieve
Executive of her duties and responsibilities hereunder to the extent permitted
by law and any long-term disability payments received by Executive under any
disability insurance plan made available to Executive by the Company if the
premiums were paid by the Company shall be deducted from the salary and bonus
payments otherwise required to be paid to Executive hereunder. If during the
term and subsequent to the Disability commencement date (which shall be at any
time following the end of the 26 week period referred to herein) Executive shall
fully recover, the Company shall have the right (exercisable within 60 days
after receipt of notice from Executive of such recovery), but not the
obligation, to restore Executive to full-time service at full compensation. If
the Company elects not to restore Executive to full-time service, Executive
shall be entitled to obtain other employment. If Executive is not restored to
full-time employment with the Company, all stock options that have become
exercisable as of the date of Disability (determined at the end of the 26 week
period referred to herein) shall remain so for a period of 12 months.
(iii) Without Cause. If the Company elects to terminate
Executive for any reason other than as provided in Section 6(a) or if the
Company causes a Defacto Termination of Executive (as defined below) (each a
"Severance Termination"), Executive shall receive the "Separation Package." As
used herein, the "Separation Package" shall consist of two years' Base Salary
(at the annual rate in effect at the date of Severance Termination) plus an
amount equal to the Performance Bonus actually paid to Executive with respect to
the eight fiscal quarters preceding the date of the Severance Termination (or if
Executive has been employed for less than two years, the amount of Performance
Bonus paid to Executive for the entire period of employment multiplied by a
fraction, the numerator of which is the number eight and the denominator of
which is the actual number of fiscal quarters for which Executive was employed
by the Company). In addition, all Options granted over the term shall become
immediately exercisable on the date of termination and all vested options shall
remain exercisable for a period
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of 12 months thereafter. In the event of a Severance Termination, the Company
shall pay the costs of outplacement services with a provider of its choice at a
level appropriate to Executive's title and position as requested by Executive.
For purposes of this paragraph, a Defacto Termination shall include: (i) the
Company shall fail to pay or shall reduce the Base Salary, Performance Bonus or
other benefits in effect immediately prior to the Defacto Termination, except as
permitted hereunder, or shall otherwise breach any material provision hereof
which breach is not cured within 10 days after receipt of notice thereof from
Executive, (ii) the Company shall fail to cause Executive to remain the General
Counsel and Executive Vice President of the Company; (iii) Executive shall not
be continuously afforded the authority, powers, responsibilities and privileges
contemplated in Section 1 above (whether or not accompanied by a change in
title); or the Company shall require Executive's primary services to be rendered
in an area other than the Company's principal offices in the Los Angeles
metropolitan area. For purposes of clause (iii), Executive shall be deemed not
to have been continuously afforded the authority, power, responsibilities and
privileges contemplated in Section 1 above if there shall occur any reduction in
the scope, level or nature of Executive's employment hereunder, or any demotion,
any phasing out or assignment to others of the duties contemplated herein
(c) Change in Control.
(i) Following a Change in Control, this Agreement shall
continue to be binding upon the Company and Executive shall be entitled to the
payments provided for in this Section 6 in the event of termination resulting
from death, disability, cause, or a Separation Termination, all as provided for
in Section 6(a) and 6(b).
(ii) Executive may (but shall not be obligated to) terminate
this Agreement effective 30 days after the giving of such notice given at any
time within two years following a Change in Control. In the event that Executive
elects to terminate this Agreement pursuant to this Section 6(c)(ii), Executive
shall be entitled to receive the Separation Package. In addition, all of the
Options granted over the term shall become immediately exercisable as of the
date of such termination and shall remain so for a period of 12 months
thereafter. The option provided for in this Section 6(c)(ii) shall be applicable
with respect to each Change in Control notwithstanding Executive's failure to
exercise such option with respect to any prior Change in Control.
(d) Payment of Termination Amounts. Executive may elect to have all
amounts to be paid to Executive pursuant to this Section 6 payable (i) over the
remaining term of this Agreement or for such shorter period as expressly
provided for herein, as applicable, or (ii) in a lump sum within 30 days
following termination. In the event Executive elects to be paid pursuant to
clause (i), Executive agrees promptly to notify the Company in writing of
Executive's acceptance of full-time employment; within 15 days after receipt of
such notice, the Company shall pay Executive in a lump sum any amounts which
remain otherwise due to Executive hereunder.
(e) Stock and Similar Rights. Except with regard to the vesting and
exercise dates of Options as set forth in this Section 6, Executive's rights
under any other agreement of
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plan under which stock options, restricted stock or similar awards are granted
shall be determined in accordance with the terms and provisions of such plans or
agreements.
(f) No Mitigation or Offset. Payment of any sum under this Section 6
shall not be subject to any claim or mitigation nor shall the Company be
entitled to any right of offset with respect thereto.
7. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events which occur
after the date hereof.
(a) The acquisition of any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act ("Rule 13d-3")) of 20% or more of the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Voting Securities"); provided,
however, that neither of the following acquisitions shall constitute a Change of
Control; any acquisition by the Company or any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlling by the Company; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
stockholders of the Company, shall be approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board; or
(c) Approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case, unless following such reorganization,
merger or consolidation; more than 60% of the combined voting power of the then
outstanding voting securities of the corporation resulting from such
reorganization, merger or consolidation, which may be the Company (the
"Resulting Corporation") entitled to vote generally in the election of directors
(the "Resulting Corporation Voting Securities") shall then be owned
beneficially, directly or indirectly, by all or substantially all of the Persons
who were the beneficial owners of Outstanding Voting Securities immediately
prior to such reorganization, merger or consolidation, in substantially the same
proportions as their respective ownerships of Outstanding Voting Securities
immediately prior to such reorganization, merger or consolidation; no Person
(excluding the Company, any employee benefit plan (or related trust) of the
Company, the Resulting Corporation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 20% or more of the combined voting power of Outstanding Voting
Securities) shall own beneficially, directly or indirectly 20% or more of the
combined voting power of the Resulting Corporation Voting Securities; and at
least a majority of the members of the Board shall have been members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) sale or other disposition of
all or substantially all of the
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assets of the Company, other than to a corporation (the "Buyer") with respect to
which following such sale or other disposition, more than 60% of the combined
voting power of securities of Buyer entitled to vote generally in the election
of directors ("Buyer Voting Securities"), shall be owned beneficially, directly
or indirectly, by all or substantially all of the persons who were beneficial
owners of the Outstanding Voting Securities immediately prior to such sale or
other disposition, in substantially the same proportion as their respective
ownership of Outstanding Voting Securities, immediately prior to such sale or
other disposition; no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or Buyer and any Person that shall
immediately prior to such sale or other disposition own beneficially, directly
or indirectly, 20% or more of the combined voting power of Outstanding Voting
Securities), shall own beneficially, directly or indirectly, 20% of more of the
combined voting power or, Buyer Voting Securities; and (z) at least a majority
of the members of the board of directors of Buyer shall have been members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the board providing for such sale or other disposition or assets of the
Company.
8. INSURANCE. During the term, the Company shall maintain, at no cost to
Executive, officers and directors liability insurance that would cover Executive
in amounts which are customary for companies similarly situated to the Company.
9. GENERAL PROVISIONS.
(a) Notices. All notices, requirements, requests, demands, claims or
other communications hereunder shall be in writing. Any notice, requirement,
request, demand, claim or other communication hereunder shall be deemed duly
given if personally delivered, when so delivered, if mailed, two (2) business
days after having been sent registered or certified mail, return-receipt
requested, postage-prepaid, and addressed to the intended recipient as set forth
below, if given by telecopier, once such notice or other communication is
transmitted to the telecopier number specified below, and the appropriate
telephonic confirmation is received, provided that such notice or other
communication is promptly thereafter mailed in accordance with the provision of
clause (ii) above or if sent through an overnight delivery service under
circumstances by which service guarantees next delivery, the date following the
date so sent:
If to the Company to:
AAMES FINANCIAL CORPORATION
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Executive Vice President -- Human Resources
If to Executive:
Xx. Xxxxxxx Xxxxxx
0000 Xxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
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Any changes to the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other party notice in
the manner herein set forth.
(b) Assignment. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; provided, however, that this Agreement and the benefits
hereunder may be assigned by the Company to any corporation into which the
Company may be merged or consolidated, and this Agreement and the benefits
hereunder will automatically be deemed assigned to any such corporation, subject
however, to Executive's right to terminate this Agreement to the extent provided
in Section 6. In the event of any assignment of this Agreement to any
corporation acquiring all or substantially all of the assets of the Company or
to any other corporation into which the Company may be merged or consolidated,
the responsibilities and duties assigned to Executive by such successor
corporation shall be the responsibilities and duties of, and compatible with the
status of an executive officer of such successor corporation. The Company may
delegate any of its obligations hereunder to any subsidiary of the Company,
provided that such delegation shall not relieve the Company of any of its
obligations hereunder. Executive may not assign its rights hereunder or delegate
her duties to any Person.
(c) Complete Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes and cancels any and all previous written or oral negotiations,
commitments, understandings, agreements and any other writings or communications
in respect of such subject matter.
(d) Amendments. This Agreement may be modified, amended, superseded
or terminated only by a writing duly signed by both parties.
(e) Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
(f) No Waiver. Any waiver by either part of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any breach of such provision or of any breach of any other provision of this
Agreement. The failure of either part to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive such party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(g) Binding Effect. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their permitted assigns,
successors and legal representatives.
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(h) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same document.
(i) Governing Law. This Agreement has been negotiated and entered
into in the State of California and shall be construed in accordance with the
laws of the State of California.
(j) Arbitration. The parties hereby expressly agree to any
controversy or claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rule of evidence shall apply. The costs
of the arbitrator shall be borne equally. Each party shall be responsible for
its own attorneys' fees and costs. However, the arbitrator shall have the right
to award costs and expenses (including actual attorneys' fees) to the prevailing
party as well as equitable relief. The award of the arbitrator shall be final
and binding and shall be enforceable in any court of competent jurisdiction.
Nothing in this paragraph shall preclude the parties from seeking an injunction
or other equitable relief from a court of competent jurisdiction under
appropriate circumstances.
(k) Headings. The headings included in this Agreement are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized officer and Executive has executed the same
as of the day and year first above-written.
AAMES FINANCIAL CORPORATION
By:/s/ XXXX X. XXXXXXXX
-------------------------------------
Xxxx X. Xxxxxxxx
Chief Executive Officer
EXECUTIVE
/s/ XXXXXXX XXXXXX
----------------------------
Xxxxxxx Xxxxxx
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