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                                                               EXHIBIT 10.23(a)



                              EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is between Aames Financial
Corporation, a Delaware corporation (the "COMPANY"), and Cary H. Thompson (the
"EXECUTIVE"). This Agreement shall become effective (the "EFFECTIVE DATE") on
the "Initial Closing Date," as such term is defined in the Purchase Agreement
(defined below).

                                   BACKGROUND

               A. As of the Effective Date, the Company is or will be engaged
primarily in originating, selling and servicing home mortgage loans.

               B. The Executive is currently a stockholder and officer of the
Company, and as part of the closing (the "Closing") under the Preferred Stock
Purchase Agreement by and among the Company and Capital Z Financial Services
Fund II, L.P. ("Purchaser"), dated the 23rd day of December, 1998 (the "PURCHASE
AGREEMENT"), the Company has agreed that, after the Effective Date, the Company
will continue to employ the Executive to provide services for the benefit of the
Company on the terms of this Agreement. If the Closing does not occur, this
Agreement shall have no force or effect and the Employment Agreement dated May
8, 1997 shall remain in force.

               C. In exchange for the benefits provided for under this
Agreement, except as otherwise specifically provided in this Agreement or in
Exhibit A hereto, as of the Effective Date, the Executive hereby waives any and
all rights and benefits accruing under all other employment, change in control,
stock option and any and all other agreements (except for benefits provided
under the Company's 401(k) plan or continued pursuant to Section 3C hereof, and
stock options granted under the Aames Financial Corporation 1997 Non-Qualified
Stock Option Plan, as Amended and Restated Effective May 22, 1998, the Aames
Financial Corporation 1997 Stock Option Plan, the Aames Financial Corporation
1996 Stock Incentive Plan, as amended, the Aames Financial Corporation 1995
Stock Incentive Plan the Aames Financial Corporation 1991 Stock Incentive Plan
and under the Stock Option Agreement between the Company and the Executive dated
June 21, 1996, as amended August 26, 1998 (all of which shall be preserved)),
between Executive and the Company and its subsidiaries that provide for the
payment of compensation or benefits to Executive.

In consideration of the foregoing and the mutual agreements set forth below, the
parties agree as follows:





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                           AGREEMENT - PRINCIPAL TERMS

        1. Employment and Duties. The Company shall employ the Executive as its
Chief Executive Officer, and the Executive accepts such employment on the terms
and conditions of the Agreement. The Executive shall, while this Agreement
remains in effect, have the duties, responsibilities, powers, and authority
customarily associated with such position. The Executive shall report to, and
follow the direction of, the Board of Directors of the Company (the "BOARD").
During each year of the Term (as hereinafter defined), the Company shall
nominate the Executive for election as a member of the Board. In addition, the
Executive also shall perform such other and unrelated services and duties as the
Board may assign to him. The Executive shall diligently, competently, and
faithfully perform all duties, and shall devote his entire business time,
energy, attention, and skill to the performance of duties for the Company and
its affiliates and will use his best efforts to promote the interests of the
Company and its affiliates.

        2. Term of Employment. Unless sooner terminated as provided in this
Agreement, the initial term under this Agreement shall be five (5) years,
starting on the Effective Date (the "INITIAL TERM"). The term of employment
shall be renewed automatically for successive periods of one (1) year each (a
"RENEWAL TERM") after the expiration of the Initial Term and any subsequent
Renewal Term, unless the Board provides the Executive, or the Executive provides
the Board, with written notice to the contrary at least one hundred twenty (120)
days prior to the end of the Initial Term or any Renewal Term. The Initial Term
and the Renewal Terms are referred to collectively as "TERMS."

        3. Compensation.

               A. Salary. The Company shall pay the Executive an annual salary
of $600,000 (the "BASE SALARY"), payable in substantially equal installments in
accordance with the Company's payroll policy. The amount of Base Salary payable
to Executive shall be reviewed at least annually; provided, however, that
Executive's Base Salary shall not be reduced below $600,000 per annum during the
term of this Agreement.

               B. Performance Bonus; Other Limitations. The Executive shall be
entitled to an annual cash bonus on the basis outlined in Exhibit A. The
covenants set forth in Exhibit A shall be binding upon the parties to the same
extent as if set forth herein.

               C. Automobile. The Company's current policy with regard to the
provision of an automobile to the Executive shall be maintained during the Term
until such time as the Compensation Committee of the Board determines otherwise
and provides other benefits not materially less favorable to Executive.




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               D. Vacation. Executive shall be entitled to 5 weeks of paid
vacation each year of employment with the Company for 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.

               E. Insurance. During the Term, the Company shall maintain, at no
cost to Executive, directors and officers liability insurance that covers the
Executive in an amount of not less than $45,000,000.

               F. Stock Options. The Company shall grant to the Executive on the
Effective Date an option to purchase 2,630,162 shares of the Company's common
stock pursuant to and subject to the provisions of the Company's 1999 Stock
Option Plan. Such option shall be subject to the terms of an option agreement
substantially in the form annexed hereto as Exhibit B.

               G. Other Benefits. While this Agreement remains in effect, the
Company shall continue to provide the Executive with (i) not less than
$2,000,000 of standard term life insurance; (ii) medical and dental benefits for
the Executive and his dependents substantially comparable to that provided
immediately prior to the execution of this Agreement; (iii) a long-term
disability policy providing for payments in an amount equal to 60% of the
Executive's Base Salary, provided such a policy may be obtained at reasonable
cost; and (iv) the Executive shall participate in such other savings, pension
and retirement plans and other benefit plans or programs maintained by the
Company for the benefit of its executives.

        4. Expenses. The Company shall reimburse the Executive for all
reasonable business expenses, that are incurred in accordance with the Company's
policies as in effect from time to time, provided the Executive submits
appropriate receipts or other documentation acceptable to the Company and as
required by the Internal Revenue Service to qualify as ordinary and necessary
business expenses under the Internal Revenue Code of 1986, as amended.

        5. Termination. Notwithstanding anything in Paragraph 2 of this
Agreement to the contrary, the term of this Agreement and Executive's services
under this Agreement shall terminate upon the first to occur of the following
events:

               A. At the end of the applicable Term of this Agreement, including
any Renewal Terms.

               B. Upon the Executive's date of death or the date the Executive
is given written notice that the Company has properly determined that he is
disabled. For purposes of this Agreement, the Executive shall be properly deemed
to be disabled if the Executive, as a result of illness or incapacity, shall be
unable



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to perform substantially his required duties for a period of 120 consecutive
days or for any aggregate period of 183 days in any twelve (12) month period.
The Company shall notify the Executive that his employment has been terminated
by written notice. The termination shall be effective on the tenth (10th)
business day after the Executive receives the notice, unless the Executive
returns to full-time performance of his duties before such tenth (10th) business
day.

               C. On the date the Company provides the Executive with written
notice that he is being terminated for "cause." For purposes of this Agreement,
and as reasonably determined by the Company, the Executive shall be deemed
terminated for cause if the Company terminates the Executive after finding that
the Executive: (1) shall have been determined by a court of law to have
committed any felony including, but not limited to, a felony involving fraud,
theft, misappropriation, dishonesty, embezzlement, or any other crime involving
moral turpitude, or if the Executive shall have been arrested or indicted for
violation of any criminal statute constituting a felony, provided the Company
reasonably determines that the continuation of the Executive's employment after
such event would have an adverse impact on the operation or reputation of the
Company or its affiliates (subsequent references to the "Company" in this
Paragraph 5C shall be deemed to refer to the Company or its affiliates); (2)
shall have committed one or more acts of gross negligence or willful misconduct,
either within or outside the scope of his employment that, in the good faith
opinion of the Board, materially impair the goodwill or business of the Company
or cause material damage to its property, goodwill, or business, or would, if
known, subject the Company to public ridicule; (3) shall have refused or failed
to a material degree to perform his duties hereunder (continuing without cure
for ten (10) days after receipt of written notice of need to cure); (4) shall
have violated any material written Company policy provided to the Executive
during or prior to the Term (continuing without cure for ten (10) days after
receipt of written notice of need to cure) and that has caused material harm to
the Company; or (5) knew or should have known, that the Company materially, and
knowingly or intentionally breached any representation, warranty, or covenant
under the Purchase Agreement, or that the Executive shall have materially and
knowingly or intentionally breached any provision this Agreement; provided,
however, that no termination of Executive's employment for Cause shall be deemed
to have occurred unless Executive is given notice of the reason therefore
including the allegations which may constitute reason for such termination and
after (a) Executive is provided an opportunity to be heard by the Board or the
Executive Committee thereof, and (b) such decision has been upheld by the Board
or Executive Committee.

               D. On the date the Executive terminates his employment for "Good
Reason." For purposes of this Agreement,



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"GOOD REASON" shall mean termination by the Executive within ninety (90) days of
learning of the acts which are the basis for alleging Good Reason, because of
the occurrence of any of the following acts, without the Executive's consent:
(1) he has been demoted to a position of materially less stature or importance
within the Company than the position described in Paragraph 1, (2) he has been
assigned to duties that are of materially less importance than those required to
be performed pursuant to Paragraph 1 of this Agreement, (3) the Company has
failed to pay or provide material compensation or benefits that are required to
be provided in this Agreement, or (4) the Company's principal executive offices
have been relocated to any county other than Los Angeles County, CA or Orange
County, CA., provided that no such termination shall be treated as for Good
Reason unless the Executive shall have given the Company thirty (30) days
advance written notice of his intention to terminate his employment for Good
Reason, and the Company shall have failed to cure such acts within such thirty
(30) day period.

               E. On the date the Executive terminates his employment for any
reason, other than Good Reason, provided that the Executive shall give the
Company thirty (30) days written notice prior to such date of his intention to
terminate this Agreement.

               F. On the date the Company terminates the Executive's employment
for any reason, other than a reason otherwise set forth in this Paragraph 5. Any
purported termination of the Executive's employment for Cause which is finally
determined to be without Cause shall be treated for all purposes of this
Agreement as a termination pursuant to this Paragraph 5F.

        6. Compensation Upon Termination. If the Executive's services are
terminated pursuant to Paragraph 5, the Executive shall be entitled to the Base
Salary through his final date of active employment, plus any accrued but unused
vacation pay. If the Executive's services are terminated pursuant to Paragraph
5D or 5F, the Executive shall in addition be entitled to receive severance
benefits for a period of 12 months payable in substantially equal installments
in accordance with the Company's payroll policy, in an amount equal to (i) $2
million, if such termination occurs within one year from the Effective Date,
(ii) $1.5 million, if such termination occurs after the first and on or before
the second anniversary of the Effective Date, (iii) $1.0 million, if such
termination occurs after the second and on or before the third anniversary of
the Effective Date, (iv) $0.5 million, if such termination occurs after the
fourth anniversary of the Effective Date, and (v) plus an amount, if any,
(regardless of the date of termination) necessary to reimburse the Executive on
a net after-tax basis for any applicable federal excise tax, provided in each
case the Executive signs an agreement that releases the Company from actions,
suits, claims, proceedings, and demands related to the period of employment



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and/or termination of employment. Executive agrees that if his employment is
terminated for any reason, he shall immediately resign from all officer and
director positions he then holds with the Company and each of its parents,
affiliates and subsidiaries.

               7. Offset. In the event severance benefits become payable to the
Executive pursuant to Paragraph 6 above, such benefits, to the extent not
theretofore paid, shall be reduced, on a dollar-for-dollar basis, by (i) any
outstanding amounts owed by Executive to the Company and (ii) the amount of any
compensation for services earned by Executive on account of his employment or
consulting services with another business or on account of his self employment,
from any source, whether paid currently or deferred. In such event, Executive
shall cooperate with the Company and shall provide such information to the
Company as it may reasonably require in order to calculate the amount of the
reduction described above.

        8. COBRA. If the Executive's services are terminated pursuant to
Paragraph 5, the Executive shall also be entitled to any benefits mandated under
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") or required
under the terms of any death, insurance, or retirement plan, program, or
agreement provided by the Company and to which the Executive is a party or in
which the Executive is a participant, including, but not limited to, any
short-term or long-term disability plan or program, if applicable. If the
Executive elects COBRA continuation coverage, the Company shall pay for such
health insurance coverage for the shorter of 12 months or the remaining Term at
the same rate as it pays for health insurance coverage for its active employees
(with the Executive required to pay for any employee-paid portion of such
coverage). After the expiration of the period set forth in the prior sentence
concludes, the Executive shall be responsible for the payment of all further
premiums attributable to COBRA continuation coverage at the same rate as the
Company charges all COBRA beneficiaries. However, no provision of this Agreement
shall be construed to extend the period of time over which such COBRA
continuation coverage is required to be provided to the Executive and/or his
dependents.

        9. Arbitration. Any dispute between the parties hereto respecting the
meaning and intent of this Agreement or any of its terms and provisions shall be
submitted for expedited arbitration in Los Angeles, California, in accordance
with the National Rules of the American Arbitration Association for the
Resolution of Employment Disputes then in effect, and the arbitration
determination resulting from any such submission shall be final and binding upon
the parties hereto. Judgment upon any arbitration award may be entered in any
court of competent jurisdiction. The parties further agree that either party may
at any time seek provisional relief, including, but not limited to a temporary
restraining order or a preliminary injunction from



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any state or federal court in California, in connection with any dispute being
submitted for arbitration.



        10. Exclusive Employment; Confidentiality; Non-Solicitation.

               A. Executive agrees to perform his duties, responsibilities and
obligations hereunder efficiently and to the best of his ability. Executive also
agrees that he will not engage in any other business activities, pursued for
gain, profit or other pecuniary advantage, that are competitive with the
activities of the Company. Executive agrees that all of his activities as an
employee of the Company shall be in conformity with all present and future
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement.

                B. Executive acknowledges that his employment by the Company
will bring him into close contact with many trade secrets and other confidential
affairs of the Company and its clients and customers, including, without
limitation, non-public information pertaining to ideas, knowledge, operations,
computer hardware and software, systems, costs, profits, markets, sales,
products, programs, interfaces, networks, protocols, data bases, key personnel,
pricing policies, operational methods, concepts, data, equipment, models,
compensation, suppliers, servicing, broker lists, customer lists, customers,
potential customers, rate sheets, plans, concepts, strategies, or products,
advertising, technical processes and applications and other business affairs and
methods, plans for future developments and other information not readily
available to the public or the Company's competitors or clients (collectively
referred to hereinafter as "Information"). In consideration of the foregoing,
the Executive agrees that he: (1) will keep secret and confidential all
Information and will not use it for his own benefit or disclose it to, or use it
for the benefit of, anyone other than the Company, either during or after his
employment by the Company, except with the prior written consent of the Company;
(2) will take all reasonable action that the Company deems necessary or
appropriate to prevent unauthorized use or disclosure of or to protect the
Company's interest in Information; (3) will deliver promptly to the Company upon
termination of his employment by the Company or at any other time the Company
may so request, all memoranda, notes, documentation, equipment, files,
flowcharts, program listings, data listings, records, reports and other tangible
manifestations of the Information (and all copies thereof), that he may then
possess or have under his control; and (4) will, unless the Company otherwise
agrees in writing, and without additional compensation, promptly disclose and,
upon request, assign to the Company all rights to work product and business
opportunities related to the present or, to the extent presented to the Board of
Directors prior to termination of employment, contemplated business of the
Company.




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                C. Executive further agrees that if his employment is terminated
during the three year period beginning on the Effective Date, he will abide by
the limitations set forth in the following sentence (i) for a period of six
months from the date of termination, if his employment is terminated pursuant to
Paragraph 5B, 5D or 5F, and (ii) for a period of one year from the date of
termination, if his employment is terminated by the Company pursuant to
Paragraph 5C or if his employment is terminated by the Executive without Good
Reason (the applicable period is referred to below as the "Nonsolicitation
Period"). During the Nonsolicitation Period, the Executive agrees that he will
not, without the Company's express written consent, himself or through any
organization with which he is associated: (i) hire any person who was employed
by the Company on the Executive's date of termination of employment or at any
time within six months prior thereto or hire any agent, consultant, or
independent contractor of the Company, or of any organization with respect to
which the Company has agreed to a similar prohibition and of which the Employee
has knowledge, or induce or attempt to induce any such person to discontinue
such employment or affiliation with the Company or such organization, as the
case may be, or (ii) induce or attempt to induce any client or customer of the
Company on the date of termination to discontinue any business relationship or
to refrain from entering into a new business relationship with the Company.

         D. Executive confirms and acknowledges that (i) he was represented by
counsel of his own choosing during the negotiation of the limitations set forth
in Paragraphs 10 and 11 of this Agreement, (ii) his strict adherence to the
limitations imposed upon him thereunder, or under any agreement referenced
therein, was a material factor in Purchaser's entering into the Purchase
Agreement and agreeing to consummate the transactions contemplated thereby, and
to pay the Executive the cash and equity-based compensation called for in this
Agreement, (iii) the Company's ability to maintain continuing relationships with
its employees without disruption was a material factor in Purchaser's entering
into the Purchase Agreement and agreeing to consummate the transactions
contemplated thereby, (iv) his failure to adhere to the obligations imposed by
Paragraphs 10 and 11 of this Agreement will expose such Purchaser to substantial
and irreparable harm. Accordingly, Executive agrees that the remedy at law for
any breach by him of the covenants and agreements set forth in this Paragraph 10
or in Paragraph 11 below may be inadequate and that in the event of any such
breach, the Company or its respective subsidiaries may, in addition to the other
remedies that may be available to it at law, seek injunctive relief prohibiting
him (together with all those persons associated with him) from breach of such
covenants and agreements.

        11. Non-Competition. The Company's obligation to provide the
compensation due upon termination pursuant to the last sentence of Paragraph 6
hereof shall be contingent upon his not,



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directly or indirectly, owning, managing, operating, joining or controlling,
becoming employed by or participating in the ownership, management, operation or
control of, or becoming a consultant to or connected in any other manner with,
any business, firm or corporation which is materially similar to or materially
competes with the Company, provided, however, that the foregoing shall not
preclude the Executive from providing investment banking services not involving
the Company. For these purposes, Executive's ownership of securities of a public
company not in excess of one percent of any class of such securities shall not
be considered to be competition with the Company.

                            AGREEMENT - MISCELLANEOUS

        12. Entire Agreement. This Agreement sets forth the entire and final
agreement and understanding of the Company and the Executive and contains all of
the agreements made between them with respect to the subject matter hereof. This
Agreement supersedes any and all other agreements, either oral or in writing,
between the Company and the Executive with respect to Executive's provision of
services to the Company. No change or modification of this Agreement shall be
valid unless in writing and signed by the Company and the Executive.

        13. Enforcement; Severability. Should a decision be entered by a court
of competent jurisdiction that the character, duration or geographical scope of
any provision of this Agreement is unreasonable, or that any provision of this
Agreement is invalid or unenforceable for any reason, in whole or in part, then
the Company and the Executive agree that such provision shall be construed by
the court in such a manner as to impose all those restrictions on the
Executive's conduct that are reasonable in light of the circumstances and as are
necessary to assure to the Company the benefits of this Agreement and to render
the provision valid and enforceable, and this Agreement shall be construed and
enforced to the maximum extent permitted by law, as if such provision had been
originally incorporated in this Agreement as so modified, restricted, or
reformulated or as if such provision had not been originally included in this
Agreement, as the case may be. The parties further agree to seek a lawful
substitute for any provision found to be unlawful; provided, that, if the
parties are unable to agree upon a lawful substitute, the parties desire and
request that the arbitrator or other authority called upon to decide the
enforceability of this Agreement modify those provisions such that, once
modified, this Agreement will be enforceable to the maximum extent permitted by
the law in existence at the time of the requested enforcement.

        14. Miscellaneous.

                D. Notices. All notices required in connection with this
Agreement shall be sufficiently given only if transmitted in writing and (i)
personally delivered, or sent by first class, registered or certified mail,
return receipt requested, postage



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prepaid, or by recognized overnight courier, (ii) sent by facsimile, provided a
hard copy is mailed on that date to the party for whom such notices are
intended, or (iii) sent by other means at least as fast and reliable as first
class mail. A written notice shall be deemed to have been given to the recipient
party on the earliest of (1) the date it shall be delivered to the address
required by this Agreement; (2) the date delivery shall have been refused at the
address required by this Agreement; (3) with respect to notices sent by mail or
overnight courier, the date as of which the Postal Service or overnight courier,
as the case may be, shall have indicated such notice to be undeliverable at the
address required by this Agreement; or (4) with respect to a facsimile, the date
on which the facsimile is sent and receipt is confirmed. Any and all notices
referred to in this Agreement, or which either party desires to give to the
other shall, in the case of the Executive, be addressed to his residence address
given to the Company by the Executive in writing for this purpose, or failing
receipt of such notice, to the last residence address on the Company's records,
or in the case of the Company, to its principal office with a copy to Capital
Z's principal office.

                E. Waiver of Breach. A waiver by the Company of a breach of any
provision of this Agreement by the Executive shall not operate or be construed
as a waiver of any subsequent breach by the Executive. No waiver shall be valid
unless it is in writing and signed by an authorized officer of the Company
(other than the Executive).

                F. Assignment. The Executive acknowledges that the services he
is to render are unique and personal. Accordingly, the Executive may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
the Company.

                G. Construction. The heading in this Agreement are inserted for
convenience only and are not to be considered a construction of the provisions
hereof. The Background recitals are incorporated in this Agreement as an
integral part hereof and shall be considered as substantive and not precatory
language.

                H. Execution of Agreement. This Agreement may be executed in
several counterparts, each of which shall be considered an original, but which
when taken together, shall constitute one agreement.






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                I. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California.



COMPANY:                                     EXECUTIVE:



o    By:   /s/ Barbara S. Polsky                  /s/  Cary H. Thompson
           --------------------------             --------------------------






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                                    EXHIBIT A

-   For bonuses after the 1999 calendar year, Executive shall receive a cash
    bonus paid annually on a calendar year basis ranging from 0-100% of total
    Base Salary, with an expected bonus of $400,000 and a bonus in excess of
    100% of Base Salary for extraordinary performance. Bonuses shall be paid
    according to a budget approved by the Board of Directors of the Company and
    the achievement of other non-financial goals adopted by such Board.

-   For so long as Capital Z and/or its Designated Purchasers under the Purchase
    Agreement own at least 25% of the voting securities of the Company,
    Executive covenants and agrees not to sell, assign or otherwise transfer, in
    any one twelve month period, more than 25% of the aggregate amount of shares
    of Company stock which the Executive owned immediately prior to the
    Effective Date. The Company, by action of its Board of Directors, agrees to
    consider whether to waive all or part of such limitation in the event of
    extraordinary hardship, which consent shall not be unreasonably withheld.





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