AMENDMENT NO. 2 TO THE
MASTER LOAN AND SECURITY AGREEMENT

      AMENDMENT NO. 2, dated as of November 22, 2002 (this “Amendment”), to the
Master Loan and Security Agreement, dated as of November 16, 2001 (as previously
amended, supplemented or otherwise modified, the “Existing Loan Agreement”, and
as amended hereby and as further amended, supplemented or otherwise modified
from time to time, the “Loan Agreement”), among AAMES CAPITAL CORPORATION
(“Aames Capital”), AAMES FUNDING CORPORATION (“Aames Funding” and together with
Aames Capital, each a “Borrower” and collectively, the “Borrowers”) and MORGAN
STANLEY DEAN WITTER MORTGAGE CAPITAL INC. (the “Lender”).

RECITALS

      The Borrowers and the Lender are parties to the Existing Loan Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
given to them in the Existing Loan Agreement.

      The Borrower and the Lender have agreed, subject to the terms and
conditions of this Amendment, that the Existing Loan Agreement be amended to
revise certain provisions including, but not limited to, extending the
Termination Date.

      Accordingly, the Borrower and the Lender hereby agree, in consideration of
the mutual premises and mutual obligations set forth herein, that the Existing
Loan Agreement is hereby amended as follows:

      Section 1.  Amendments.

           (a)  Section 1.01 of the Existing Loan Agreement is hereby amended by
deleting the definition of “Termination Date” in its entirety and substituting
in lieu thereof the following new definition:

      “‘Termination Date’ shall mean May 15, 2003 or such earlier date on which
this Loan Agreement shall terminate in accordance with the provisions hereof or
by operation of law.”

           (b)  The Existing Loan Agreement is hereby amended by deleting
Section 7.17 in its entirety and substituting in lieu thereof the following new
Section 7.17:

      “7.17  Committed Warehouse Facilities. Aames Capital shall at all times
maintain committed revolving facilities, other than Lender's committed revolving
facility, greater than or equal to $600,000,000.”

      Section 2.  Facility Fee. The Borrowers agree to pay, jointly and
severally, to the Lender on or prior to the Amendment Effective Date (defined
below) a facility fee equal to 50 basis points (0.50%) of the Maximum Credit
(the “Facility Fee”) for the period from the Amendment Effective Date to the
Termination Date, such payment to be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Lender at the account
set forth in Section 3.01(a) of the Loan Agreement.

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      Section 3.  Conditions Precedent. This Amendment shall become effective on
the date (the “Amendment Effective Date”) on which the following conditions
precedent shall have been satisfied:

      3.1  Delivered Documents. On the Amendment Effective Date, the Lender
shall have received the following documents, each of which shall be satisfactory
to the Lender in form and substance:

           (a)  Amendment. This Amendment, executed and delivered by a duly
authorized officer of each Borrower and the Lender;

           (b)  Legal Opinion. A legal opinion of counsel to the Borrowers, in
form and substance satisfactory to the Lender;

           (c)  Organizational Documents. A good standing certificate and
certified copies of the charter and by-laws (or equivalent documents) of each
Borrower and of all corporate or other authority for each Borrower with respect
to the execution, delivery and performance of this Amendment (and the Lender may
conclusively rely on such certificate until it receives notice in writing from
the Borrower to the contrary); and

           (d)  Other Documents. Such other documents as the Lender or counsel
to the Lender may reasonably request.

      3.2  Facility Fee. The Lender shall have received the Facility Fee.

      3.3  No Default. On the Amendment Effective Date, (i) each Borrower shall
be in compliance with all the terms and provisions set forth in the Existing
Loan Agreement on its part to be observed or performed, (ii) the representations
and warranties made and restated by the Borrowers pursuant to Section 4 of this
Amendment shall be true and complete on and as of such date with the same force
and effect as if made on and as of such date, and (iii) no Default shall have
occurred and be continuing on such date.

      Section 4.  Representations and Warranties. Each Borrower hereby
represents and warrants to the Lender that it is in compliance with all the
terms and provisions set forth in the Loan Documents on its part to be observed
or performed, and that no Default has occurred or is continuing, and hereby
confirms and reaffirms the representations and warranties contained in Section 6
of the Loan Agreement.

      Section 5.  Limited Effect. Except as expressly amended and modified by
this Amendment, the Existing Loan Agreement shall continue to be, and shall
remain, in full force and effect in accordance with its terms; provided,
however, that reference therein and herein to the “Loan Documents” shall be
deemed to include, in any event, (i) the Existing Loan Agreement, (ii) Amendment
No. 1 to the Master Loan and Security Agreement, dated as of November 14, 2002,
(iii) this Amendment, (iv) the Note, (v) the Custodial Agreement and (vi) the
Custodial Joinder Agreement. Each reference to the Loan Agreement in any of the
Loan Documents shall be deemed to be a reference to the Loan Agreement as
amended hereby. The execution of this Amendment by the Lender shall not operate
as a waiver of any of its rights, powers or privileges under the Loan Agreement
or under any of the other Loan Documents except as expressly set forth herein.

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      Section 6.  Counterparts. This Amendment may be executed by each of the
parties hereto on any number of separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
instrument.

      Section 7.  GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PROVISIONS THEREOF.

      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.

     

BORROWER           AAMES CAPITAL CORPORATION                       By
  _____________________________              Name:          Title:       AAMES
FUNDING CORPORATION           By   _____________________________      
       Name:          Title:       LENDER       MORGAN STANLEY DEAN WITTER
MORTGAGE CAPITAL INC                       By   __________________________      
        Name: Andrew B. Neuberger           Title: Vice President  

 

 

 

 

 

 

 

 

 

 

 

 

 

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