STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 19, 1998
By and Between
AAMES FINANCIAL CORPORATION
and
TURTLE CREEK REVOCABLE TRUST
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TABLE OF CONTENTS
Page
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SECTION 1 Definitions
1.1 Certain Definitions................................................... 1
1.2 Other Definitions..................................................... 3
SECTION 2 Purchase and Sale of the Shares and Warrants
2.1 Purchase and Sale..................................................... 4
2.2 The Closing........................................................... 4
2.3 Delivery.............................................................. 4
SECTION 3 Representations and Warranties of the Company
3.1 Organization, etc..................................................... 5
3.2 Qualification to do Business.......................................... 5
3.3 Capitalization........................................................ 5
3.4 Authorization; No Breach.............................................. 6
3.5 Material Contracts; Defaults.......................................... 7
3.6 Regulatory Matters.................................................... 7
3.7 Compliance with Laws.................................................. 8
3.8 Authorization of Shares and Warrants.................................. 9
3.9 Ownership of Shares and Warrants...................................... 9
3.10 Financial Reports and Regulatory Documents............................ 9
3.11 Litigation............................................................11
3.12 Tax Matters...........................................................11
3.13 Anti-takeover Provisions..............................................11
3.14 Brokers or Finders....................................................11
3.15 Disclosure............................................................11
3.16 Risk Management Instruments...........................................12
3.17 Books and Records.....................................................12
3.18 Insurance.............................................................12
3.19 Environmental Matters.................................................12
3.20 Employee Benefit Plans................................................14
3.21 Labor Matters.........................................................15
SECTION 4 Representations, Warranties andAcknowledgments of the Purchaser
4.1 Execution, Delivery and Performance...................................16
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4.2 Investment.............................................................16
4.3 Organization...........................................................16
4.4 No Breach..............................................................16
4.5 Financing..............................................................17
SECTION 5 Conditions to the Purchaser=s Obligations for the Closing
5.1 Representations and Warranties.........................................17
5.2 Registration Rights Agreement..........................................17
5.3 Warrant Agreement......................................................18
5.4 Opinion of the Company's Counsel.......................................18
5.5 HSR Act................................................................20
5.6 Amendment of the Rights Agreement......................................20
5.7 Proceedings............................................................20
5.8 Closing Documents......................................................21
5.9 Waiver.................................................................21
SECTION 6 Conditions to the Company's Obligations for the Closing
6.1 Representations and Warranties.........................................21
6.2 Legal Matters..........................................................21
6.3 Closing Documents......................................................22
6.4 HSR Act................................................................22
6.5 Waiver.................................................................22
6.6 Concurrent Purchase Agreement..........................................22
SECTION 7 Covenants
7.1 Financial Statements and Other Information.............................22
7.2 Directors..............................................................23
7.3 HSR Act Filing.........................................................23
7.4 Conditions to Closing..................................................23
7.5 Use of Proceeds........................................................23
7.6 Pledge of Shares.......................................................23
7.7 No-Action Letter.......................................................24
SECTION 8 Miscellaneous
8.1 Expenses...............................................................25
8.2 Additional Purchases of Common Stock...................................25
8.3 Amendments and Waivers.................................................25
-ii- 4
8.4 Termination............................................................25
8.5 Survival of Representations and Warranties.............................25
8.6 Successors and Assigns.................................................25
8.7 Severability...........................................................26
8.8 Entire Agreement.......................................................26
8.9 Descriptive Headings; Language Interpretation..........................26
8.10 Governing Law..........................................................27
8.11 Waiver of Jury Trial...................................................27
8.12 Notices................................................................27
8.13 Remedies...............................................................28
8.14 Counterparts...........................................................28
8.15 Publicity..............................................................28
8.16 Legend.................................................................29
8.17 Transfer Opinion.......................................................29
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INDEX TO EXHIBITS
Exhibit Number
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Registration Rights Agreement A
Warrant Agreement B
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March 19, 1998, by and between Aames Financial Corporation, a Delaware corporation (the "Company") and Turtle Creek Revocable Trust, a trust formed under the laws of the state of Texas (the "Purchaser").
WHEREAS, the Company desires to sell 556,466 shares (the "Shares") of Common Stock and warrants to purchase an additional 556,466 shares of Common Stock, on the terms and conditions set forth herein; and
WHEREAS, the Purchaser desires to purchase the Shares and the Warrants on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto agree as follows:
SECTION 1
Definitions
1.1 Certain Definitions. The terms specified in this Section 1.1 shall, for all purposes of this Agreement, have the meanings herein specified, unless the context expressly otherwise requires.
"Affiliate" means a person that directly, or indirectly through one of more intermediaries, controls or is controlled by, or is under common control with, the person specified.
"Closing" shall have the meaning assigned to such term in Section 2.2.
"Common Stock" shall mean the Company's common stock, par value $.001 per share.
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"Concurrent Purchase Agreement" shall mean the Stock Purchase Agreement, dated the date hereof, by and between the Company and the Concurrent Purchaser.
"Concurrent Purchaser" shall mean Thirty-Five East Investments LLC.
"Documents" shall mean, collectively, this Agreement, the Warrant Agreement and the Registration Rights Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any federal statute from time to time in effect which has replaced such statute.
"Governmental Authority" means any court, administrative agency or commission or other federal, state or local governmental authority or instrumentality.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Material Adverse Effect" means any effect that (i) is material and adverse to the financial position, results of operations, business or prospects of the Company and its Subsidiaries taken as a whole, or (ii) would materially impair the ability of either the Purchaser or the Company to perform its obligations under any of the Documents or otherwise, provided, however, that in determining whether a Material Adverse Effect has occurred there shall be excluded any effect on the referenced party the cause of which is (i) any change in consumer finance or similar laws, rules or regulations of general applicability or interpretations thereof by courts or governmental authorities and (ii) any change in generally accepted accounting principles or regulatory accounting principles applicable to finance companies generally.
"Officer's Certificate" shall mean a certificate signed by the chief executive officer and the chief financial officer of the Company, stating that (i) the person signing such certificate has made or has caused to be made such investigations as are necessary in order to permit
-2- 8 him to verify the accuracy of the information set forth in such certificate, and (ii) to the best of such person's knowledge, such certificate does not misstate any material fact or omit to state any material fact necessary to make the certificate not misleading.
"Registration Rights Agreement" shall have the meaning set forth in Section 5.2 hereof.
"Regulatory Documents" shall have the meaning set forth in Section 3.10.
"Rights" shall mean securities or obligations convertible into or exercisable or exchangeable for, or giving any person any right to subscribe for or acquire, or any options, calls or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of Common Stock.
"Rights Agreement" shall mean the Rights Agreement dated as of June 21, 1996, between the Company and Wells Fargo Bank.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, or any federal statute from time to time in effect which has replaced such statute.
"Subsidiary" shall mean any corporation of which shares of stock having a majority of the general voting power in electing the Board of Directors are, at the time as of which any determination is being made, owned by the Company either directly or through its Subsidiaries, any partnership in which the Company or any Subsidiary is a general partner and any joint venture in which the Company or any Subsidiary is a joint venturer.
"Warrant Agreement" shall have the meaning set forth in Section 5.3 hereof.
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"Warrant Shares" shall mean the shares of Common Stock issuable upon exercise of the Warrants.
"Warrants" shall mean the warrants to purchase an aggregate of up to 556,466 shares of Common Stock at a price of $17.2031 per share upon the occurrence of a Purchase Event (as defined in the Warrant Agreement), subject to adjustment as provided herein and in the Warrant Agreement.
1.2 Other Definitions. In addition to the terms defined in Section 1.1 hereof, certain other terms are defined elsewhere in this Agreement, and, whenever such terms are used in this Agreement, they shall have their respective defined meanings, unless the context expressly otherwise requires.
SECTION 2
Purchase and Sale of the Shares and Warrants
2.1 Purchase and Sale. On the terms and subject to the conditions set forth herein, the Company will issue to the Purchaser and the Purchaser will purchase from the Company the Shares at a purchase price of $13.7625 per share, for an aggregate purchase price of $7,658,363.32 (the "Purchase Price"). In addition, on the terms and subject to the conditions set forth herein, in consideration for the purchase of the Shares, the Company will issue to the Purchaser the Warrants. If the Company shall adjust, split, combine or reclassify its shares of Common Stock between the date hereof and the date of Closing, the purchase price per share, the number of shares of Common Stock purchased hereby, the number of Warrants issued and the exercise price of such Warrants shall be adjusted so that the Purchaser's interest shall not be diluted.
2.2 The Closing. The delivery of and payment for the Shares and Warrants will take place at the offices of Sullivan & Cromwell, 444 South Flower Street, Los Angeles, California 90071, no later than five business days after all waiting periods applicable to the transactions contemplated by this Agreement and the Concurrent Purchase Agreement
-4- 10 under the HSR Act have expired or been terminated, and on the same day as the closing of the Concurrent Purchase Agreement or such other time and date or such other place, as the parties shall mutually agree in writing (the "Closing").
2.3 Delivery. At the Closing, the Company will deliver to the Purchaser the Shares and the Warrants, registered in the Purchaser's or its nominee's name, against payment therefor by the Purchaser of the Purchase Price in immediately available funds by wire transfer to such account as the Company may designate in writing.
SECTION 3
Representations and Warranties of the Company
The Company hereby represents and warrants to the Purchaser that:
3.1 Organization, etc. Each of the Company and its Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation. Each of the Company and its Subsidiaries has all requisite corporate power and authority to own and operate its properties, to carry on its businesses as now conducted and to carry out and perform its obligations under the terms of this Agreement, the Warrant Agreement and the Registration Rights Agreement.
3.2 Qualification to do Business. The Company is duly licensed or qualified and is in good standing as a foreign corporation in the State of California and each other jurisdiction wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it requires such licensing or qualification. Each of the Subsidiaries is duly licensed or otherwise qualified in each state where in the nature of the business transacted by such Subsidiary or the nature of the property owned or leased by it requires such licensing or qualification and where failure to be so licensed or
-5- 11 qualified would reasonably be expected to, singly or in the aggregate, have a Material Adverse Effect on the Company.
3.3 Capitalization.
(a) The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. At March 17, 1998, there was outstanding 27,823,317 shares of Common Stock and 0 shares of preferred stock. At February 28, 1998, the Company had outstanding 5,037,121 options to purchase shares of Common Stock, which options were duly granted pursuant to the 1991 Stock Incentive Plan, 1995 Stock Incentive Plan, 1996 Stock Incentive Plan, 1997 NonQualified Stock Option Plan, 1997 Stock Option Plan and outside of any such plans. Each such plan has been duly approved by the Board of Directors and, except for the 1997 Non-Qualified Stock Option Plan, stockholders of the Company. 5,315,505 shares of Common Stock are reserved for issuance upon exercise of such options, 6,106,617 shares of Common Stock are reserved for issuance upon conversion of the Company's 5.5% Subordinated Convertible Debentures due 2006. 500,000 Shares of preferred stock are reserved for issuance upon exercise of the Rights distributed to holders of Common Stock pursuant to the Rights Agreement, 1,124,184 shares of Common Stock are reserved for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan and 562,500 shares of Common Stock are reserved for issuance under the Company's Stock Purchase Plan.
(b) Except as described in Section 3.3(a), the Company has no outstanding Rights, except for Warrants which will be issued pursuant to this Agreement and the Concurrent Purchase Agreement.
(c) All of the outstanding shares of the capital stock of the Company are validly issued, fully paid and nonassessable and, upon the issuance and sale of the Shares, the Shares will be validly issued, fully paid and nonassessable, and upon the valid exercise (including payment of the exercise price) of the Warrants, the Warrant Shares will be validly issued, fully paid and nonassessable.
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3.4 Authorization; No Breach. The execution, delivery and performance of each of the Documents and all other agreements and instruments contemplated thereby and the consummation of all transactions contemplated thereby have been duly authorized by all requisite corporate action of the Company. Assuming due execution by the Purchaser, each of the Documents and all other agreements and instruments contemplated thereby constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, equitable subordination, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing. The execution and delivery by the Company of each of the Documents and all other agreements and other instruments contemplated and the consummation of the transactions contemplated thereby do not and will not (with or without the giving of notice, the lapse of time or both) result in the creation of any lien, security interest, charge or encumbrance upon the Company's or any Subsidiary's capital stock or assets or (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) give any third party the right to accelerate any obligation under or (iv) result in a violation of, the Certificate of Incorporation or Bylaws of the Company, or, any law, statute, rule, regulation, instrument, order, judgment or decree to which the Company or any of its properties is subject, or any contract to which the Company is a party or by which it is bound or to which any of its properties is subject, assuming that all applicable waiting periods under the HSR Act have expired or been terminated and all applicable filings pursuant to state securities laws, the HSR Act, the Securities Act, the Exchange Act and the rules and regulations of the New York Stock Exchange have been made.
3.5 Material Contracts; Defaults. Except for those agreements and other documents filed as exhibits to its Regulatory Documents or as set forth in Schedule 3.5, neither the Company nor any of its subsidiaries is a party to, bound by or subject to any agreement, contract,
-7- 13 arrangement, commitment or understanding (whether written or oral) (i) that is a "material contract" within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii) that materially restricts the conduct of business by it or any of its Subsidiaries. Except as disclosed in the Regulatory Documents, neither the Company nor any of its Subsidiaries is in default in any material respect under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its respective assets, business, or operations may be bound or affected, or under which it or its respective assets, business, or operations receives benefits, or under any other contract if such default could reasonably be expected to have a Material Adverse Effect on the Company, and in either case there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default.
3.6 Regulatory Matters. (a) No consent, approval, authorization, registration or qualification of any Governmental Authority or any third party is required to be obtained by the Company or any of its Subsidiaries in connection with the execution, delivery or performance by the Company of each of the Documents, except such consents, approvals, authorizations, registrations or qualifications as may be required under state securities laws, the HSR Act, the Securities Act, the Exchange Act and the rules and regulations of the New York Stock Exchange.
(b) Neither the Company nor any of its Subsidiaries or any of their properties is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, any federal or state governmental agency or authority charged with the supervision or regulation of companies which originate, process, underwrite, sell, securitize or service loans (collectively, the "Regulatory Authorities").
(c) Neither the Company nor any of its Subsidiaries has been advised by any Regulatory Authority that such Regulatory Authority is contemplating issuing or
-8- 14 requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, commitment letter, supervisory letter or similar submission.
3.7 Compliance with Laws. The Company and each of its Subsidiaries:
(a) Is in compliance with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, ...
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