EXHIBIT 99.2
AAMES INVESTMENT CORPORATION
REGISTRATION RIGHTS AND GOVERNANCE AGREEMENT
REGISTRATION RIGHTS AND GOVERNANCE AGREEMENT, dated as of
November 1, 2004 (this "AGREEMENT"), among Specialty Finance Partners ("SFP"),
together with the other stockholders listed on Schedule I hereto (collectively,
the "STOCKHOLDERS"), and Aames Investment Corporation, a Maryland corporation
(the "COMPANY").
R E C I T A L S
WHEREAS, SFP, pursuant to an Agreement and Plan of Merger, dated
as of July 21, 2004, by and among the Company, Aames Financial Corporation
("AAMES FINANCIAL"), Aames Newco, Inc. and Aames TRS, Inc. (the "MERGER
AGREEMENT"), shall receive a combination of common stock, par value $0.01 per
share (the "COMMON STOCK"), of the Company and cash in exchange for SFP's shares
of Aames Financial common stock, par value $0.01 per share; and
WHEREAS, the Company has agreed to grant the Stockholders certain
registration and governance rights; and
WHEREAS, the Company and the Stockholders desire to define the
registration rights of the Stockholders on the terms and subject to the
conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms have the
respective meanings set forth below:
COMMISSION: shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act;
EXCHANGE ACT: shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder;
HOLDER: shall mean any holder of Registrable Securities;
INITIATING HOLDER: shall mean (a) SFP or (b) any Holder or
Holders of Registrable Securities aggregating at least 35% of the aggregate
number of shares of Common Stock held by all Holders;
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PERSON: shall mean an individual, partnership, joint-stock
company, corporation, limited liability company, trust or unincorporated
organization, and a government or agency or political subdivision thereof;
REGISTER, REGISTERED and REGISTRATION: shall mean a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement;
REGISTRABLE SECURITIES: (A) the shares of Common Stock issued to
the Stockholders pursuant to the Merger Agreement, (B) any additional shares of
Common Stock acquired by the Stockholders (but not their assignees, unless any
such assignee shall have acquired at least a number of shares of Common Stock
equal to 15% of the shares of Common Stock originally issued to the Stockholders
pursuant to the Merger Agreement, adjusted for splits, combinations, and similar
events), (C) any capital stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
shares of Common Stock referred to in clauses (A) or (B) above, until, in the
case of any such securities, (i) a registration statement covering such
securities has been declared effective by the Commission and such securities
have been disposed of pursuant to such effective Registration Statement or (ii)
such securities have been disposed of in open market transactions pursuant to
Rule 144 under the Securities Act (or similar rule then in effect);
REGISTRATION EXPENSES: shall mean (x) all expenses incurred by
the Company in compliance with Sections 2(a) and (b) hereof, excluding Selling
Expenses, but including, without limitation, all registration and filing fees,
printing expenses, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company) and (y) all reasonable fees and disbursements of one
counsel retained by the Holders of a majority of the Registrable Securities to
be included in a particular registration;
SECURITY, SECURITIES: shall have the meaning set forth in Section
2(1) of the Securities Act;
SECURITIES ACT: shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder;
SELLING EXPENSES: shall mean all underwriting and selling
discounts, fees and commissions applicable to the sale of Registrable
Securities; and
STOCKHOLDER DESIGNEE: shall mean a person designated for election
to the Board of Directors by the Stockholders as provided in Section 3.
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2. REGISTRATION RIGHTS
(a) Requested Registration.
(i) Request for Registration. If the Company shall receive from
an Initiating Holder, at any time not sooner than one hundred twenty
(120) days following the First Merger Effective Time (as defined in
the Merger Agreement), a written request that the Company effect any
registration with respect to all or a part of the Registrable
Securities, the Company will:
(A) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders;
and
(B) as soon as reasonably practicable, use its reasonable
best efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under
the Securities Act) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities
of any Holder or Holders joining in such request as are specified
in a written request received by the Company within 10 business
days after written notice from the Company is given under Section
2(a)(i)(A) above; provided that such registration statement shall
not become effective prior to the termination or waiver of each
lock-up agreement between Friedman, Billings, ▇▇▇▇▇▇ & Co. Inc.
on the one hand and the Company and any Holder joining in such
registration on the other hand, and provided further that the
Company shall not be obligated to effect, or take any action to
effect, any such registration pursuant to this Section 2(a):
(v) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of
process in effecting such registration, qualification or
compliance, unless the Company is already subject to service
in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations
thereunder;
(w) after the Company has effected five (5) such
registrations pursuant to this Section 2(a) requested by an
Initiating Holder, and, in each case, such registrations
have been declared or ordered effective and the sales of
such Registrable Securities shall have closed;
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(x) if the Registrable Securities requested by all
Holders to be registered pursuant to such request do not
have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of at least
$10,000,000;
(y) if at the time of any request to register
Registrable Securities, the Company is engaged or intends to
engage in an acquisition, financing or other material
transaction which, in the good faith determination of the
Board of Directors of the Company, would be adversely
affected by the requested registration to the material
detriment of the Company, or the Board of Directors of the
Company determines in good faith that the registration would
require the disclosure of material information that the
Company has a bona fide business purpose for preserving as
confidential, and that the Company is not otherwise required
by applicable securities laws or regulations to disclose, in
which event, the Company may, at its option, direct that
such request be delayed for a period not in excess of ninety
days from the date of the determination by the Board of
Directors, as the case may be, such right to delay a request
to be exercised by the Company not more than once in any
twelve-month period; or
(z) with respect to Holders who are officers, directors
or employees of the Company, if at the time of any request
to register Registrable Securities, directors, officers, or
employees of the Company are not permitted to offer or sell
securities in accordance with the Company's policies.
The registration statement filed pursuant to the request of an
Initiating Holder may, subject to the provisions of Section 2(a)(ii) below,
include other securities, other than Registrable Securities, of the Company
which are held by the other stockholders ("OTHER STOCKHOLDERS") of the Company.
The Holders holding a majority of the Registrable Securities
requested to be registered may, at any time prior to the effective date of the
registration statement relating to such registration, revoke such request,
without liability to the Company, such Holders, any of the other Holders or the
Other Stockholders, by providing a written notice to the Company revoking such
request, provided that such revoked request shall count against the
registrations available to the Holders pursuant to Section 2(a)(i)(B)(w) unless
such Holders pay the costs and expenses associated with such revoked request.
(ii) Underwriting. If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 2(a). If shares held by Other
Stockholders are requested by such Other Stockholders to be included
in any registration pursuant to this Section 2, the Company shall
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condition such inclusion on their acceptance of the further applicable
provisions of this Section 2. The Initiating Holders whose Registrable
Securities are to be included in such registration and the Company
shall (together with all Other Stockholders proposing to distribute
their securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the underwriter
or underwriters selected for such underwriting by such Initiating
Holders and reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 2(a), if the representative advises
the Holders in writing that marketing factors (including, without
limitation, pricing considerations) require a limitation on the number
of shares to be underwritten or a limitation on the inclusion of
shares held by directors and officers of the Company, the securities
of the Company held by Other Stockholders shall be excluded from such
registration to the extent so required by such limitation. If, after
the exclusion of such shares, further reductions are still required,
the Registrable Securities of the Company held by each Holder other
than the Initiating Holders shall be excluded from such registration
to the extent so required by such limitation. Thereafter, if still
further reductions are required, the number of Registrable Securities
included in the registration by each Initiating Holder shall be
reduced on a pro rata basis (based on the number of Registrable
Securities held by such Initiating Holder), by such minimum number of
Registrable Securities as is necessary to comply with such request. No
Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. If any Other Stockholder who has
requested inclusion in such registration as provided above disapproves
of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the
Initiating Holders. The securities so withdrawn shall also be
withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities or other securities to be
underwritten, the Company and officers and directors of the Company
(including representatives and designees of SFP) may include its or
their securities for its or their own account in such registration if
the representative so agrees and if the number of Registrable
Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be
limited.
(iii) Other Registration Rights. The Company shall not grant any
registration rights inconsistent with the provisions of this Section
2(a) and in granting any demand registration rights hereafter shall
provide that the Holders shall have the right to notice of the
exercise of any such demand registration right and to participate in
such registration on a pro rata basis.
(b) Company Registration.
(i) If, at any time not sooner than one hundred twenty (120) days
following the First Merger Effective Time, the Company shall determine
to register any of its equity securities either for its own account or
any Other Stockholders, other than a registration relating solely to
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employee benefit plans, or a registration relating solely to a
Commission Rule 145 transaction, or a registration on any registration
form which does not permit secondary sales or does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable
Securities, the Company will:
(A) promptly give to each of the Holders a written notice
thereof; and
(B) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by the Holders
within fifteen (15) days after receipt of the written notice from
the Company described in clause (A) above, except as set forth in
Section 2(b)(ii) below.
The Company may terminate, in its sole and absolute discretion,
any registration described in this Section 2(b) at any time prior to the
effectiveness of the applicable registration statement. Upon such termination,
the Company's obligations under this Section 2(b) with respect to such
terminated registration shall terminate.
(ii) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting,
the Company shall so advise each of the Holders as a part of the
written notice given pursuant to Section 2(b)(i)(A). In such event,
the right of each of the Holders to registration pursuant to this
Section 2(b) shall be conditioned upon such Holders' participation in
such underwriting and the inclusion of such Holders' Registrable
Securities in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such registration shall
(together with the Company and the Other Stockholders distributing
their securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the underwriter
or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 2(b), if the
representative determines that marketing factors require a limitation
on the number of shares to be underwritten or a limitation on the
inclusion of shares held by directors and officers of the Company, the
representative may (subject to the allocation priority set forth
below) limit the number of Registrable Securities to be included in
the registration and underwriting to not less than twenty five percent
(25%) of the total number of shares to be included in such
underwritten offering, subject to the Company's compliance with any
registration obligations to any Demanding Holders (as hereinafter
defined) participating in such registration. The Company shall so
advise all holders of securities requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following
manner: The securities of the Company held by officers, directors
(including representatives and designees of SFP) and Other
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Stockholders (other than Registrable Securities and other than
securities held by holders who by contractual right demanded such
registration ("DEMANDING HOLDERS")) shall be excluded from such
registration and underwriting to the extent required by such
limitation, and, if a limitation on the number of shares is still
required, the number of shares that may be included in the
registration and underwriting by each of the Holders other than the
Demanding Holders shall be excluded from such registration to the
extent so required by such limitation. Thereafter, if still further
reductions are required, the number of shares included in the
registration by each of the Demanding Holders shall be reduced, on a
pro rata basis (based on the number of shares held by such Demanding
Holders), by such minimum number of shares as is necessary to comply
with such limitation. If any of the Holders or any officer, director
or Other Stockholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to
the Company and the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(iii) Number and Transferability. Each of the Holders shall be
entitled to have its shares included in an unlimited number of
registrations pursuant to this Section 2(b).
(c) Shelf Registration.
(i) If requested by the Initiating Holder, at any time not sooner
than one hundred twenty (120) days following the First Merger
Effective Time, the Company shall file a "shelf" registration
statement pursuant to Rule 415 (if then available) under the
Securities Act (the "SHELF REGISTRATION") with respect to the resale
of all or any portion of the Registrable Securities, as requested by
the Initiating Holder. If such request is made, the Company shall (A)
use its reasonable best efforts to have the Shelf Registration
declared effective as promptly as practicable (but in no event prior
to the termination or waiver of each lock-up agreement between
Friedman, Billings, ▇▇▇▇▇▇ & Co. Inc. on the one hand and the Company
and any Holder intending to use the Shelf Registration on the other
hand) and (B) use its reasonable best efforts to keep the Shelf
Registration continuously effective from the date such Shelf
Registration is declared effective until the date specified in Section
2(i) in order to permit the prospectus forming a part thereof to be
usable by Holders during such period. The Shelf Registration may not
include other securities of the Company which are held by Other
Stockholders.
(ii) The Company shall supplement or amend the Shelf
Registration, (A) as required by the registration form utilized by the
Company or by the instructions applicable to such registration form or
by the Securities Act or the rules and regulations promulgated
thereunder, (B) to include in such Shelf Registration any additional
securities that become Registrable Securities by operation of the
definition thereof and (C) following the written request of an
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Initiating Holder pursuant to Section 2(c)(iii) below, to cover offers
and sales of all or a part of the Registrable Securities by means of
an underwriting including the incorporation of any information
required pursuant to Section 2(e)(x) below. The Company shall furnish
to the Holders of the Registrable Securities to which the Shelf
Registration relates copies of any such supplement or amendment
sufficiently in advance (but in no event less than five business days
in advance) of its use and/or filing with the Commission to allow the
Holders a meaningful opportunity to comment thereon.
(iii) The Holders may, at their election and upon written notice
by the Initiating Holders to the Company, effect offers and sales
under the Shelf Registration by means of one or more underwritten
offerings, in which case the provisions of Section 2(a)(ii) above
shall apply to any such underwritten distribution of securities under
the Shelf Registration and such underwriting shall, if sales of
Registrable Securities pursuant thereto shall have closed, be regarded
as the exercise of one of the registration rights contemplated by
Section 2(a) hereof.
(iv) The rights of the Holders to request and effect a Shelf
Registration hereunder and the Company's obligations to keep a Shelf
Registration effective shall be subject to the restrictions and
limitations set forth in Section 2(a)(i)(B).
(d) Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
this Section 2 (including all Registration Expenses incurred in connection with
the Shelf Registration and any supplements or amendments thereto, whether or not
it becomes effective, and whether all, none or some of the Registrable
Securities are sold pursuant to the Shelf Registration) shall be borne by the
Company, and all Selling Expenses shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of their shares so
registered; provided, however, that if, as a result of the withdrawal of a
request for registration by any of the Holders, as applicable, the registration
statement does not become effective, the Holders and Other Stockholders
requesting registration may elect to bear the Registration Expenses (pro rata on
the basis of the number of their shares so included in the registration request,
or on such other basis as such Holders and Other Stockholders may agree), in
which case such registration shall not be counted as a registration pursuant to
Section 2(a)(i)(B)(w).
(e) Registration Procedures. In the case of each registration
effected by the Company pursuant to this Section 2, the Company will keep the
Holders holding Registrable Securities requested to be included in such
registration ("PARTICIPATING HOLDERS") advised in writing as to the initiation
of each registration and as to the completion thereof. At its expense, the
Company will:
(i) other than the Shelf Registration, the obligations in respect
of which are set forth in Section 2(c)(i)(B) above, keep such
registration effective for a period of one hundred eighty (180) days
or until the Participating Holders, as applicable, have completed the
distribution described in the registration statement relating thereto,
whichever first occurs;
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(ii) furnish to each Participating Holder, and to any underwriter
before filing with the Commission, copies of any registration
statement (including all exhibits) and any prospectus forming a part
thereof and any amendments and supplements thereto (including, upon
request, all documents incorporated or deemed incorporated by
reference therein) prior to the effectiveness of such registration
statement and including each preliminary prospectus, any summary
prospectus or any term sheet (as such term is used in Rule 434 under
the Securities Act)) and any other prospectus filed under Rule 424
under the Securities Act, which documents, other than exhibits and
documents incorporated or deemed incorporated by reference, will be
subject to the review of the Participating Holders and any such
underwriter for a period of at least five business days, and the
Company shall not file any such registration statement or such
prospectus or any amendment or supplement to such registration
statement or prospectus to which any Participating Holder or any such
underwriter shall reasonably object within five business days after
the receipt thereof; a Participating Holder or such underwriter(s), if
any, shall be deemed to have reasonably objected to such filing only
if the registration statement, amendment, prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission;
(iii) furnish to each Participating Holder and to any
underwriter, such number of conformed copies of the applicable
registration statement and of each amendment and supplement thereto
(in each case including all exhibits) and such number of copies of the
prospectus forming a part of such registration statement (including
each preliminary prospectus, any summary prospectus or any term sheet
(as such term is used in Rule 434 under the Securities Act)) and any
other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, including without limitation documents incorporated or
deemed to be incorporated by reference prior to the effectiveness of
such registration, as each of the Participating Holders or any such
underwriter, from time to time may reasonably request;
(iv) to the extent practicable, promptly prior to the filing of
any document that is to be incorporated by reference into any
registration statement or prospectus forming a part thereof subsequent
to the effectiveness thereof, and in any event no later than the date
such document is filed with the Commission, provide copies of such
document to the Participating Holders, if requested, and to any
underwriter, make representatives of the Company available for
discussion of such document and other customary due diligence matters;
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(v) make available at reasonable times for inspection by the
Participating Holders, any underwriter participating in any
disposition pursuant to such registration and any attorney or
accountant retained by the Holders or any such underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company and cause the officers, directors and
employees of the Company to supply all information reasonably
requested by the Participating Holders and any such underwriters,
attorneys or accountants in connection with such registration
subsequent to the filing of the applicable registration statement and
prior to the effectiveness of the applicable registration statement,
subject to the execution of a customary confidentiality agreement;
(vi) use its reasonable best efforts (x) to register or qualify
all Registrable Securities and other securities covered by such
registration under such other securities or blue sky laws of such
States of the United States of America where an exemption is not
available and as the sellers of Registrable Securities covered by such
registration shall reasonably request, (y) to keep such registration
or qualification in effect for so long as the applicable registration
statement remains in effect, and (z) to take any other action which
may be reasonably necessary or advisable to enable such sellers to
consummate the disposition in such jurisdictions of the securities to
be sold by such sellers, except that the Company shall not for any
such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction where it is not so qualified,
or to subject itself to taxation in any such jurisdiction, or to
execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act or applicable rules or regulations
thereunder;
(vii) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental agencies
or authorities as may be necessary in the opinion of counsel to the
Company and counsel to the Participating Holders of Registrable
Securities to enable the Holders thereof to consummate the disposition
of such Registrable Securities in accordance with the plan of
distribution described in the applicable registration statement;
(viii) subject to Section 2(i) hereof, promptly notify each
Holder of Registrable Securities covered by a registration statement
(A) upon discovery that, or upon the happening of any event as a
result of which, the prospectus forming a part of such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
(B) of the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
proceedings for that purpose, (C) of any request by the Commission for
(1) amendments to such registration statement or any document
incorporated or deemed to be incorporated by reference in any such
registration statement, (2) supplements to the prospectus forming a
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part of such registration statement or (3) additional information, (D)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any
of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and at the request of
any such Holder promptly prepare and furnish to it a reasonable number
of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ix) use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of any such registration, or
the lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction;
(x) if requested by a Participating Holder, or any underwriter,
subject to receipt of any required information from such Holder or
underwriter, promptly incorporate in such registration statement or
prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as the Participating Holder and any
underwriter may reasonably request to have included therein,
including, without limitation, information relating to the "plan of
distribution" of the Registrable Securities, information with respect
to the number of shares of Registrable Securities being sold to such
underwriter, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such
offering and make all required filings of any such prospectus
supplement or post-effective amendment as soon as practicable after
the Company is notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(xi) furnish to the Participating Holders, addressed to them, an
opinion of counsel for the Company, dated the date of the closing
under the underwriting agreement, if any, or the date of effectiveness
of the registration statement if such registration is not an
underwritten offering, and use its reasonable best efforts to furnish
to the Participating Holders, addressed to them, a "cold comfort"
letter signed by the independent certified public accountants who have
certified the Company's financial statements included in such
registration, covering substantially the same matters with respect to
such registration (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such
other matters as the Participating Holders may reasonably request;
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(xii) provide promptly to the Participating Holders upon request
any document filed by the Company with the Commission pursuant to the
requirements of Section 13 and Section 15 of the Exchange Act; and
(xiii) use its reasonable best efforts to cause all Registrable
Securities included in any registration pursuant hereto to be listed
on each securities exchange on which securities of the same class are
then listed or, if not then listed on any securities exchange, to be
eligible for trading in any over-the-counter market or trading system
in which securities of the same class are then traded.
(f) Indemnification.
(i) The Company will indemnify each of the Holders, as
applicable, each of its officers, directors and partners, and each
person controlling each of the Holders (within the meaning of the
Securities Act), with respect to each registration which has been
effected pursuant to this Section 2, and each underwriter, if any, and
each person who controls any underwriter, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any preliminary, final or summary
prospectus, offering circular or other document (including any related
registration statement, notification or the like, or any amendment or
supplement to any of the foregoing) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
any violation (or alleged violation) by the Company of the Securities
Act or the Exchange Act or any rule or regulation thereunder or of any
applicable state or common law applicable to the Company and relating
to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and (subject to
Section 2(f)(iii)) will reimburse each of the Holders, each of its
officers, directors and partners, and each person controlling each of
the Holders, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon and in conformity with written
information furnished to the Company by the Holders or underwriter and
stated to be specifically for use therein. The foregoing
indemnification shall remain in effect regardless of any investigation
by any indemnified party and shall survive any transfer or assignment
by a Holder of its Registrable Securities or of its rights pursuant to
this Agreement.
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(ii) Each of the Holders will, if Registrable Securities held by
it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify on a several,
but not joint basis, the Company, each of its directors and officers
and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or
such underwriter, each Other Stockholder and each of their officers,
directors, and partners, and each person controlling such Other
Stockholder against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) made by such Holder of a
material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or
alleged omission) made by such Holder to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such
directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance
upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of each of the Holders
hereunder shall be limited to an amount equal to the net proceeds to
such Holder of securities sold pursuant to such registration statement
or prospectus.
(iii) Each party entitled to indemnification under this Section
2(f) (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld) and the Indemnified Party may
participate in such defense at the Indemnified Party's expense (unless
the Indemnified Party shall have reasonably concluded upon advice from
counsel that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which
case the reasonable fees and expenses of one firm of counsel (and one
local counsel) shall be at the expense of the Indemnifying Party), and
provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 2 except to the extent the
Indemnifying Party is materially prejudiced thereby. No Indemnifying
Party, in the defense of any such claim or litigation shall, except
with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnified Party of a release from all liability with respect to
such claim or litigation. Each Indemnified Party shall promptly
furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with the defense of such claim
and litigation resulting therefrom.
13
(iv) If the indemnification provided for in this Section 2(f) is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage
or expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on
the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant
equitable considerations, provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of any such fraudulent misrepresentation. The
relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by reference to, among other things, whether the
untrue (or alleged untrue) statement of a material fact or the
omission (or alleged omission) to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. Notwithstanding the foregoing, no Holder will be required to
contribute any amount pursuant to this paragraph (f) in excess of the
total price at which the Registrable Securities of such Holder were
offered to the public (less underwriting discounts and commissions, if
any). Each Holder's obligations to contribute pursuant to this
paragraph are several in the proportion that the proceeds of the
offering received by such Holder bears to the total proceeds of the
offering received by all the applicable Holders and not joint.
(v) The foregoing indemnity agreement of the Company and Holders
is subject to the condition that, insofar as they relate to any loss,
claim, liability or damage made in a prospectus, preliminary
prospectus or other offering document but eliminated or remedied in an
amended prospectus, preliminary prospectus or other offering document
delivered to an underwriter or Holder, as applicable (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the benefit
of (A) any underwriter if a copy of the Final Prospectus was furnished
to the underwriter and was not furnished to the person asserting the
loss, liability, claim or damage at or prior to the time such action
is required by the Securities Act or (B) in circumstances where no
underwriter is acting as such in the offer and sale in question, any
Holder who (1) either directly or through its agent provided the
preliminary prospectus to the Person asserting the loss, liability,
claim or damage, (2) was furnished with a copy of the Final
Prospectus, and (3) did not furnish or cause to be furnished the Final
Prospectus to the Person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the
Securities Act.
14
(vi) Any indemnification payments required to be made to an
Indemnified Party under this Section 2(f) shall be made as the related
claims, losses, damages, liabilities or expenses are incurred.
(g) Information by the Holders. Each of the Holders holding
securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 2. No Investor shall be required, in connection with
any underwriting agreements entered into in connection with any registration, to
provide any information, representations or warranties, or covenants with
respect to the Company, its business or its operations, and such Stockholders
shall not be required to provide any indemnification with respect to any
registration statement except as specifically provided for in Section 2(f)(ii)
hereof.
(h) Rule 144 Reporting.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
to the public without registration, the Company agrees to:
(i) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act ("RULE
144"), at all times;
(ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(iii) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 and
of the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as the Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.
(i) Termination. The registration rights set forth in this
Section 2 shall not be available to any Holder if, in the opinion of counsel to
the Company, all of the Registrable Securities then owned by such Holder could
be sold in any 90-day period pursuant to Rule 144 (without giving effect to the
provisions of Rule 144(k)) or at such time that no Registrable Securities are
outstanding. The Company will arrange for a provision to the transfer agent for
such shares of an opinion of counsel in connection with any such sale under Rule
144.
15
(j) Assignment. The registration rights set forth in Section 2
hereof may be assigned, in whole or in part, to any transferee of Registrable
Securities (who shall be considered thereafter to be a Holder and shall be bound
by all obligations and limitations of this Agreement).
(k) The Holders agree that, upon receipt of any notice from the
Company pursuant to Section 2(e)(viii), they shall immediately discontinue the
disposition of Registrable Securities pursuant to the registration statement
applicable to such Registrable Securities until they have received copies of the
amended or supplemented prospectus as described in Section 2(e)(viii). The
Holders shall destroy all copies in their possession of the registration
statement and related materials covering such Registrable Securities at the time
of receipt of the Company's notice.
3. BOARD REPRESENTATION
(a) Board Representation. At the First Merger Effective Time and
until the date on which the Stockholders own, collectively, less than 5% of the
then outstanding shares of Common Stock (the "STOCKHOLDER DESIGNEE PERIOD"), the
Board of Directors shall consist of seven (7) directors; provided, however, that
for a proper corporate purpose, the size of the Board of Directors may be
increased or thereafter decreased to not less than seven (7); and provided,
further, that during the first five years of the Stockholder Designee Period,
the number of directors as so increased may not exceed a maximum of ten (10)
directors (unless the Stockholders own, collectively, less than 10% of the then
outstanding shares of Common Stock, in which event the number of directors as so
increased may be greater than ten so long as the Stockholders have approximate
proportionate representation on the Board of Directors (rounded to the nearest
whole number)). During the Stockholder Designee Period for so long as the
Stockholders own, collectively, 10% or more of the then outstanding shares of
Common Stock, each committee of the Board of Directors, other than any committee
formed for the purpose of considering matters relating to the Stockholders and
other than such committees on which membership of a Stockholder Designee is
prohibited by applicable law or by the rules of the New York Stock Exchange,
shall have as a member at least one (1) Stockholder Designee.
(b) At or before the First Merger Effective Time, the initial
size of the Board of Directors shall be fixed at seven and the Company shall
cause ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Spass to be elected or appointed to the Board of
Directors as Stockholder Designees. At all times during the Stockholder Designee
Period, the Company agrees, subject to Section 3(d), to support the nomination
for election of, and use its reasonable best efforts to cause to be elected as,
directors at each annual meeting of stockholders of the Company: (i) two (2)
Stockholder Designees, so long as the Stockholders beneficially own,
collectively, 12.5% or more of the then outstanding shares of Common Stock; (ii)
one (1) Stockholder Designee, so long as the Stockholders beneficially own,
16
collectively, 5% or more but less than 12.5% of the then outstanding shares of
Common Stock (each a "BENEFICIAL OWNERSHIP THRESHOLD"); and (iii) at least four
(4) other persons, each of whom (A) is recommended by the nominating committee
of the Board of Directors or any Board committee performing that function (the
"Nominating Committee"), or if there is no such committee, a majority of the
independent directors and (B) qualifies as "independent" under Section 303A.02
of the New York Stock Exchange Listed Company Manual. If any vacancy occurs by
reason of a Stockholder Designee ceasing to serve as a director (whether by
death, resignation, disqualification or removal for cause) at any time between
meetings of the Company's stockholders, the Company shall use its reasonable
best efforts to cause such vacancy to be filled and, subject to Section 3(d),
only a Stockholder Designee shall be qualified to fill such vacancy, provided
that the Stockholders, at the time of such vacancy, are still entitled to name
one or two Stockholder Designees, as the case may be.
The foregoing provisions shall be effected in the Company's
initial By-laws or pursuant to an amendment thereto in a form reasonably
acceptable to the parties to this Agreement, which provisions of the By-laws
shall not be further amended by the Board of Directors during the Stockholder
Designee Period without the consent of SFP, except that the Board of Directors
shall have the right to increase or decrease the size of the Board of Directors
to the extent provided in Section 3(a) hereof. It is agreed that such By-laws
may provide that the foregoing provisions will be of no further force or effect
at such time as the Stockholders beneficially own, collectively, less than 5% of
the outstanding shares of Common Stock.
(c) Any Stockholder Designee elected to serve on the Board of
Directors at an annual meeting of stockholders of the Company shall hold office
until such Stockholder Designee's successor is elected and qualifies or until
such Stockholder Designee's earlier death, resignation, disqualification or
removal for cause, without regard to any decrease in the Stockholders'
beneficial ownership of outstanding shares of Common Stock below any Beneficial
Ownership Threshold.
(d) Notwithstanding the provisions of this Section 3, the
Stockholders shall not be entitled to designate a Stockholder Designee in the
event that (i) the Company receives a written opinion of its outside counsel
that a Stockholder Designee would not be qualified under any applicable law,
rule or regulation to serve as a director of the Company or (ii) directors
constituting a majority of the Nominating Committee not including any
Stockholder Designee serving on such committee (or if there is no Nominating
Committee, the Board of Directors, including a majority of the independent
directors not including any Stockholder Designee) determine, in the good faith
exercise of their duties as directors, that a particular Stockholder Designee
should not be nominated or elected a director applying on a consistent basis the
director qualification criteria established by the Board of Directors and set
forth in the relevant committee charter published by the Company. In any such
event, the Stockholders shall withdraw the designation of such proposed
Stockholder Designee and designate a replacement therefor (which replacement
Stockholder Designee shall also be subject to the requirements of this Section
3(d)). The Company shall use its reasonable best efforts to notify the
Stockholders of any objection to a Stockholder Designee sufficiently in advance
of the date on which proxy materials are mailed by the Company in connection
with such election of directors to enable the Stockholders to propose a
replacement Stockholder Designee in accordance with the terms of this Agreement.
17
(e) Each Stockholder Designee serving on the Board of Directors
shall be entitled to all compensation and stock incentives granted to directors
who are not employees of the Company on the same terms provided to, and subject
to the same limitations applicable to, such directors.
4. MISCELLANEOUS
(a) Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
contracts made and to be performed entirely within such State.
(c) Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof.
(d) Notices.
(i) All communications under this Agreement shall be in writing
and shall be delivered by hand or by facsimile or mailed by overnight
courier or by registered or certified mail, postage prepaid:
(A) if to the Company, to Aames Investment Corporation, 2
California Plaza, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, facsimile no. (323) ___-____ or at such other address or
facsimile number as it may have furnished in writing to the
Stockholders;
(B) if to the Stockholders, at the address or facsimile
number listed on Schedule I hereto, or at such other address or
facsimile number as may have been furnished in writing to the
Company.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if
mailed by courier, on the first business day following the date of
such mailing; and if mailed by registered or certified mail, on the
third business day after the date of such mailing.
18
(e) Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, any consents, waivers and
modifications which may hereafter be executed may be reproduced by the parties
hereto by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and the parties hereto may destroy any
original document so reproduced. The parties hereto agree and stipulate that any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Stockholders in
the regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties.
(g) Entire Agreement; Amendment and Waiver. This Agreement
constitutes the entire understanding of the parties hereto and supersedes all
prior understanding among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, only with the written
consent of the Company and the Stockholders holding a majority of the then
outstanding Registrable Securities. (h) Severability. In the event that any part
or parts of this Agreement shall be held illegal or unenforceable by any court
or administrative body of competent jurisdiction, such determination shall not
effect the remaining provisions of this Agreement which shall remain in full
force and effect.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which together shall be considered one and the same agreement.
19
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first set forth above.
AAMES INVESTMENT CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: General Counsel
STOCKHOLDERS:
SPECIALTY FINANCE PARTNERS
By: Capital Z Partners, Ltd.,
its ultimate general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Counsel
CAPITAL Z MANAGEMENT LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Counsel
20
SCHEDULE I
NAME AND ADDRESS OF STOCKHOLDERS:
Specialty Finance Partners
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Capital Z Management LLC
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇