<PAGE>   1
                                                                 EXHIBIT 10.4(c)

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

               This Employment Agreement (this "Agreement") is made and entered
into as of the 26th day of August, 1998, by and between Aames Financial
Corporation, a Delaware corporation (the "Parent"), and Neil B. Kornswiet, an
individual ("Executive"), with reference to the following:

                                    RECITALS

        A. WHEREAS, the parties entered into an Employment Agreement, dated as
of August 12, 1996 (the "Original Agreement") in connection with an Agreement
and Plan of Reorganization, dated at of August 12, 1996, by and between Aames
Financial Corporation (the "Parent"), One Stop Mortgage, Inc., a Wyoming
Corporation (the "Company"), and Aames Acquisition Corporation, a Delaware
corporation ("Merger Sub") pursuant to which Merger Sub merged with and into the
Company, resulting in the Company becoming a wholly owned subsidiary of Parent;

        B. WHEREAS, effective the 1st day of June 1997 the parties entered into
Amendment No. 1 to the Original Agreement (the "Amendment") pursuant to which
Executive was engaged as the President of the Parent and his base salary was
established at $900,000 per annum;

        C. WHEREAS, the parties wish to restate the Original Agreement and the
Amendment and amend the performance bonus provisions, change in control
provisions and extend the term.

                                    AGREEMENT

               NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:

               1. EMPLOYMENT AND DUTIES. The Parent hereby employs Executive to
serve as Chief Executive Officer and President and Chairman of the Board of the
Company, and President of the Parent, with the powers and duties customarily
accorded to such positions, including those powers and duties set forth in the
respective Bylaws of the Parent and Company for such office and such other
duties consistent therewith as may be assigned to Executive from time to time by
the Board of Directors of the Parent. Executive shall devote his entire business
time and attention to his duties hereunder and shall endeavor in good faith to
perform his duties in an efficient, faithful and business-like manner. During
the term of his employment, it is intended that Executive also serve as a
Director on the Board of Directors of the Company (the "Company Board") and a
Director on the Board of Directors of Parent (the "Parent Board"), and the
Parent will take action within its powers to include Executive among the slate
of directors proposed to be nominated by the Parent Board at any applicable
stockholders meeting.

               2. TERM. The initial term of this Agreement shall begin on the
date hereof and shall expire on the fifth anniversary of the date hereof unless
terminated earlier as set forth in Section 6 hereof or by mutual agreement of
the parties hereto (the "Initial Term"). At the expiration of the 



<PAGE>   2

Initial Term and each anniversary thereafter, the term of this Agreement shall
automatically be extended for an additional year (the "Extension Term") unless
either party shall have given written notice to the other party at least ninety
days prior to the end of the Initial Term or the Extension Term, as the case may
be, that it does not desire to extend the term of this Agreement. If Executive's
employment under this Agreement is extended for an Extension Term, it shall
thereafter or during any Extension Term be terminable (other than upon
expiration) only as provided in Section 6 or by mutual agreement of the parties
hereto.

               3.     COMPENSATION.

                      (a)    Base Salary. During the term of this Agreement,  
Executive shall be paid a base salary (the "Base Salary"), payable in accordance
with the Parent's normal payroll practices in the amount of $900,000 per year.
The amount of the Base Salary payable to Executive shall be reviewed at least
annually; provided, however, that Executive's Base Salary shall not be reduced
below $900,000 per annum during the term of this Agreement.

                   (b)    Performance Bonus.

                                i) In addition to Base Salary to be paid to
Executive hereunder, the Parent shall pay to Executive a quarterly bonus (the
"Performance Bonus") for each fiscal quarter or portion thereof during the term
of Executive's employment hereunder equal to the amount set forth in Exhibit A
to the Agreement which corresponds to the aggregate principal balance ("Volume
Targets") of mortgage loans originated through the retail, retail direct and
wholesale (broker) channels (the "Channels") set forth in Exhibit A; provided,
however, if or whenever the Company acquires the business assets or stock of
another entity that engages in a residential mortgage lending business (the "New
Business") and the New Business (or any part thereof) is merged or otherwise
combined with any of the Channels, the Compensation Committee or the Board of
Directors and Executive will use their reasonable best efforts to mutually agree
to new Volume Targets to account for the New Business for fiscal quarters ending
after such merger or combination; provided, in the event and for so long as no
such mutual agreement is reached, the Volume Targets in effect immediately prior
thereto will remain the Volume Targets.

                                ii) Within forty-five days following the end of
the first three fiscal quarters during any fiscal year which includes any
portion of the employment term hereunder, the Company shall deliver to Executive
a cash payment in the amount of the Performance Bonus.

                                iii) Within 90 days following the end of the
fourth quarter of any fiscal year which includes any portion of the employment
term hereunder, the Company shall deliver to Executive a cash payment in the
amount of the Performance Bonus.

                  (c) Stock Bonus. Executive shall be eligible to receive stock
options under the Parent's stock option plans with annual awards to be
determined by the Compensation Committee of the Parent Board. All options
granted to Executive by the Parent in connection with the Executive's employment
are hereinafter referred to collectively as the "Options."

                                       2
<PAGE>   3

               4. OTHER EXECUTIVE BENEFITS. During the term of this Agreement,
the Parent shall provide to Executive benefits commensurate with his position,
including each of the following benefits:

                (a) Medical and Dental Coverage. The Parent agrees to provide
coverage to Executive and dependent members of his family under the same medical
and dental plans as may be maintained from time to time in the discretion of the
Parent Board for the benefit of the Chief Executive Officer of Parent (the
"CEO") and the dependent members of his family.

                (b) Vacation. Executive shall be entitled to five (5) weeks of
paid vacation each year of employment with the Parent 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.

                (c) Business Expenses. The Parent will pay or reimburse
Executive for any out-of-pocket expenses incurred by Executive in the course of
providing his services hereunder, which comply with Parent's travel and expense
policies adopted from time to time by the Parent Board for the CEO. Such
reimbursement shall be made by the Parent in the same manner and within the same
time period as applicable to the other executive officers of the Parent.

                (d) Automobile. The Parent shall provide Executive with the use
of a luxury automobile that is selected by Executive. On the earlier of
significant damage or destruction or attaining three years of age, the Company
shall replace such automobile with a new automobile selected by Executive. The
Company shall pay all costs of insurance, repair, maintenance and operation of
such automobile.

                (e) Benefit Plans. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, stock purchase or other benefit plan
of the Parent and the Company now existing or hereafter adopted for the benefit
of employees generally or the senior executives of the Parent and the Company.

                (f) Life Insurance. Provided the following policies may be
obtained at a reasonable cost, the Parent shall provide Executive with a
$1,000,000 standard term life insurance policy and a $1,000,000 standard term
accidental death policy.

                (g) Disability. At which time the following policy may be
obtained at a reasonable cost, the Parent shall provide Executive with a
long-term disability policy which provides for an annual disability payment in
an amount equal to 125% of Executive's Base Salary.

               5.     CONFIDENTIAL INFORMATION

                (a) Non-Disclosure. Executive hereby agrees, during the term of
this Agreement, he will not disclose to any person or otherwise use or exploit
any proprietary or confidential information, including, without limitation,
trade secrets, processes, records of research, proposals, reports, methods,
processes, techniques, computer software or programming, or budgets 



                                       3
<PAGE>   4

or other financial information, regarding the Company, the Parent or any of
their respective subsidiaries or any of their respective businesses, properties,
customers or affairs (collectively, "Confidential Information") obtained by him
at any time during the term, except to the extent required by Executive's
performance of his assigned duties. Notwithstanding anything herein to the
contrary, the term "Confidential Information" shall not include information
which (i) is or becomes generally available to the public other than as a result
of disclosure by Executive in violation of this Agreement, (ii) is or becomes
available to Executive on a non-confidential basis from a source other than the
Company, the Parent or any of their respective subsidiaries, provided that such
source is not known by Executive to be furnishing such information in violation
of a confidentiality agreement with or other obligation of secrecy to the
Company, the Parent or any of their respective subsidiaries, (iii) has been made
available, or is made available, on an unrestricted basis to a third party by
the Company, by an individual authorized to do so or (iv) is known by Executive
prior to its disclosure to Executive. Executive may use and disclose
Confidential Information to the extent necessary to assert any right or defend
against any claim arising under this Agreement or pertaining to Confidential
Information or its use, to the extent necessary to comply with any applicable
statute, constitution, treaty, rule, regulation, ordinance or order, whether of
the United States, any state thereof, or any other jurisdiction applicable to
Executive, or if Executive receives a request to disclose all or any part of the
information contained in the Confidential Information under the terms of a
subpoena, order, civil investigative demand or similar process issued by a court
of competent jurisdiction or by a governmental body or agency, whether of the
United States or any state thereof, or any other jurisdiction applicable to
Executive.

                (b) Injunctive Relief. Executive agrees that the remedy at law
for any breach by him of the covenants and agreements set forth in this Section
5 may be inadequate and that in the event of any such breach, the Company, the
Parent or their 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 the breach of such
covenants and agreements.

               6.     TERMINATION.

                (a) Termination by Parent for "Cause" or Voluntarily by
Executive. The Parent may terminate this Agreement for "Cause" effective
immediately upon written notice thereof to Executive. For purposes of this
Agreement, "Cause" shall mean and be limited to the following events: (i) an act
of fraud, embezzlement or similar conduct by Executive involving the Company,
the Parent or any of their respective subsidiaries; (ii) any action by Executive
involving the arrest of Executive for violation of any criminal statute
constituting a felony if the Board reasonably determines that the continuation
of Executive's employment after such event would have an adverse impact on the
operations or reputation of the Company, the Parent or any of their respective
subsidiaries in the financial community; or (iii) a continuing, repeated willful
failure or refusal by Executive to perform his duties; provided, however, that
this Agreement may not be terminated under this subclause (iii) unless Executive
shall have first received written notice from the Board advising Executive of
the specific acts or omissions alleged to constitute a failure or refusal to
perform and such failure or refusal to perform continues after Executive shall
have had a reasonable opportunity to correct the acts or omissions cited in such
notice.

                                       4
<PAGE>   5

               In the event of termination for "Cause" or voluntarily by
Executive other than as permitted in Sections 6(b)(i) and (ii) and 6(c), (x)
Executive shall be entitled to receive that portion of the Base Salary and all
benefits accrued through the date of termination and (y) all Options that have
become exercisable as of the date of termination shall remain so for a period of
90 days.

                      (b)    Termination by Parent Other Than for "Cause."


                                i) Death. Provided that notice of termination
has not previously been given under any Section hereof, if Executive shall die
during the term of this Agreement, this Agreement and all of the Parent's
obligations hereunder shall terminate, except that Executive's estate or
designated beneficiaries shall be entitled to receive (A) all earned and unpaid
Base Salary through the date of termination; (B) the Base Salary and Performance
Bonus (as if the Volume Targets for a $1.5 million Performance Bonus had been
satisfied) and all benefits with respect to the then current contract year which
would have been payable or provided to Executive had the term ended two years
following the last day of the month in which Executive's death occurred; and (C)
all other benefits that may be due to Executive or Executive's estate or
beneficiaries under the general provisions of any benefit plan, stock incentive
plan or other plan in which Executive is then a participant, which benefits
shall continue to be provided for a period of two years following the date of
death. In addition, all Options that have become exercisable as of the date of
death shall remain so for a period of twelve (12) months.

                                ii) Disability. Provided that notice of
termination has not previously been given under any Section hereof, if Executive
becomes ill or is injured or disabled during the term such that Executive fails
to perform all or substantially all of the duties to be rendered hereunder and
such failure continues for a period in excess of 26 consecutive weeks (a
"Disability"), the Parent shall continue to employ Executive under this
Agreement for two years from the date of the Disability (which two year period
shall commence at the beginning of the 26 week period referred to herein) and
shall continue to pay Executive the Base Salary in effect on the date of the
Disability (determined at the beginning of the 26 week period referred to
herein), the Performance Bonus (as if the Volume Targets for a $1.5 million
Performance Bonus had been satisfied) and all benefits then in effect; provided,
that (A) the Parent may relieve Executive of his duties and responsibilities
hereunder to the extent permitted by law and (B) any long-term disability
payments received by Executive under any disability insurance plan made
available to Executive by the Parent if the premiums were paid by the Parent
shall be deducted from the salary and bonus payments otherwise required to be
paid to Executive hereunder. If during the term and subsequent to the Disability
commencement date (which shall be at any time following the end of the 26 week
period referred to herein) Executive shall fully recover, the Parent shall have
the right (exercisable within 60 days after receipt of notice from Executive of
such recovery), but not the obligation, to restore Executive to full-time
service at full compensation. If the Parent elects not to restore Executive to
full-time service, Executive shall be entitled to obtain other employment. If
Executive is not restored to full-time employment with the Parent, all Options
that have become exercisable as of the date of Disability (determined at the end
of the 26 week period referred to herein) shall remain so for a period of 12
months.

                                       5
<PAGE>   6

                                iii) Without Cause. If the Parent elects to
terminate Executive for any reason whatsoever other than as provided in Section
6(a) or if the Parent causes a Defacto Termination of Executive (as defined
below) (each, a "Severance Termination"), Executive shall receive the
"Separation Package." As used herein, the "Separation Package" shall consist of
(x) Base Salary for the Severance Period (at the annual rate in effect at the
date of the Severance Termination), plus (y) an amount equal to $30,000,000
minus the aggregate amount paid to Executive as Performance Bonuses since the
date of this Agreement (the "Performance Severance Payment") and (z) an amount,
if any, necessary to reimburse Executive on a net after tax basis for any
applicable federal excise tax. In addition, all Options which are scheduled to
vest following the date of the Severance Termination shall vest as of such date.
Further, all Options which have become exercisable as of the date of the
Severance Termination (including those which do so as a result of the provisions
of the preceding sentence) shall remain so for a period of 12 months. In the
event of a Severance Termination, Executive will also be provided with
reasonable office space and secretarial support as well as the same mailing
address and telephone number which Executive had during the term for up to six
months, and the Parent shall pay the costs of out placement services with a
provider of its choice at a level appropriate to Executive's title and position
as requested by Executive. For purposes of this paragraph, the "Severance
Period" shall be the longer of (x) three years, and (y) the remaining portion of
the Initial Term of Executive's employment hereunder. For purposes of this
paragraph, a "Defacto Termination" shall include any of the following events:
(i) the Parent shall fail to pay or shall reduce the Base Salary, Performance
Bonus or other benefits provided herein, except as permitted hereunder, or shall
otherwise breach any material provision hereof which breach is not cured within
10 days after receipt of notice thereof from Executive; (ii) the Parent shall
fail to cause Executive to remain President of the Parent and Chief Executive
Officer and President and Chairman of the Board of the Company; (iii) Executive
shall not be continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above (whether or not accompanied by a
change in title); (iv) the Parent shall require Executive's primary services to
be rendered in an area other than the Company's principal offices in Orange
County and the Parent's principal offices in Los Angeles County; or (v) after a
Change in Control (as defined below), the Parent increases the base salary for
senior executives of the Parent generally without similarly increasing the Base
Salary of Executive. For purposes of clause (iii), Executive shall be deemed not
to have been continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above if there shall occur any reduction in
the scope, level or nature of Executive's employment hereunder, or any demotion,
any phasing out or assignment to others, of the duties contemplated herein.

                      (c) Change in Control.

                                i) Following a Change in Control, the Parent
        shall promptly pay to Executive the Performance Severance Payment.
        Following a Change in Control and after payment to Executive of the
        Performance Severance Payment, in all other respects, this Agreement
        shall continue to be binding upon the Company and the Parent, and
        Executive shall be entitled to the payments provided for in this Section
        6 in the event of termination resulting from death, disability, cause,
        or a Separation Termination, all as provided for in Section 6(a) and
        6(b), except that Executive shall no longer be entitled to receive the
        Performance Bonus under Section 3(b) or under Sections 6(b)(i) or (ii)
        or the Performance Severance Payment under Section 6(b)(iii).

                                       6
<PAGE>   7

                                ii) Executive may (but shall not be obligated
        to) terminate this Agreement effective 30 days after the giving of such
        notice given at any time within two years following a Change in Control.
        In the event that Executive elects to terminate this Agreement pursuant
        to this Section 6(c)(ii), Executive shall be entitled to the Separation
        Package, minus the Performance Severance Payment to the extent the
        Performance Severance Payment has been paid pursuant to Section 6(c)(i).
        In addition, all Options then held by Executive which are not yet vested
        shall vest as of the date of such Change in Control. Further, all
        Options that have become exercisable as of the date of such Change in
        Control (including those which do so as a result of the provisions of
        the preceding sentence) shall remain so for the entire remaining term of
        the Options.

                       (d) Payment of Section 6 Amounts. Executive may elect to
have all amounts to be paid to Executive pursuant to this Section 6 payable (i)
over the remaining term of this Agreement or for such shorter period as
expressly provided for herein , as applicable, or (ii) in a lump sum within 30
days following termination or entitlement, as the case may be; provided,
however, in the case of death or disability, the Performance Bonus shall be
payable at such time as performance-based bonuses are paid to similarly situated
employees of the Parent. In the event Executive elects to be paid pursuant to
clause (i), Executive agrees promptly to notify the Parent in writing of
Executive's acceptance of full-time employment; within 15 days after receipt of
such notice, the Parent shall pay Executive in a lump sum any amounts which
remain otherwise due to Executive hereunder. 

                      (e) Stock and Similar Rights. Except with regard to
the vesting and exercise dates of Options as set forth in this Section 6,
Executive's rights under any other agreement or plan under which stock options,
restricted stock or similar awards are granted shall be determined in accordance
with the terms and provisions of such plans or agreements.

                      (f)  No Mitigation.  Payment of any sum under this Section
6 shall not be subject to any claim of mitigation.

                      (g)  Other Insurance Policies.  Upon any termination of 
Executive's employment, and upon reimbursement of the Company or the Parent of
all amounts paid by the Company or the Parent in connection with such policies,
Executive shall have the right to purchase or otherwise direct the disposition
or assignment of any disability insurance policy on him held by the Company or
the Parent (excluding only group disability insurance policies) upon the payment
of One Dollar ($1.00) as the total consideration for each such policy.

                      (h)    Officer and Director Positions. Executive agrees 
that if this Agreement is terminated for any reason, he shall immediately resign
from all officer and director positions he then holds with the Company, the
Parent, or any of their respective subsidiaries.

               7. CHANGE IN CONTROL. For purposes of this Agreement, a "Change
in Control" shall mean the occurrence of any of the following events which occur
after the date of the Original Agreement:

                      (a)    The  acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934) (a "Person") of beneficial 

                                       7
<PAGE>   8

ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act
("Rule 13d-3")) of more than 50% of the combined voting power of the then
outstanding voting securities of the Company or of 20% or more of the combined
voting power of the then outstanding securities of the Parent entitled to vote
generally in the election of directors (the "Outstanding Voting Securities of
Parent"); provided, however, that neither of the following acquisitions shall
constitute a Change in Control; (i) any acquisition by the Company, the Parent
or their respective subsidiaries or (ii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company, the Parent or
their respective subsidiaries or any corporation controlled by the Company,
Parent or any of their respective subsidiaries; or

                      (b) Individuals who, as of the date hereof constitute the
Parent Board (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of the Original Agreement whose election, or
nomination for election by the stockholders of the Company, shall be approved by
a vote of a least a majority of the directors then compromising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board; or

                      (c)  Approval by the stockholders of the Parent of a  
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such reorganization, merger, or consolidation, which may be the
Parent or any of its subsidiaries (the "Resulting Corporation") entitled to vote
generally in the election of directors (the "Resulting Corporation Voting
Securities") shall then be owned beneficially, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation, in substantially the same proportions as their respective
ownerships of Outstanding Voting Securities immediately prior to such
reorganization, merger, or consolidation; (ii) no Person (excluding the Company,
the Parent or any of their respective subsidiaries or any employee benefit plan
(or related trust) sponsored by any of them, the Resulting Corporation, and any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the combined voting power
of Outstanding Voting Securities) shall own beneficially, directly or indirectly
20% or more of the combined voting power of the Resulting Corporation Voting
Securities; and (iii) at least a majority of the members of the Board shall have
been members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or

                      (d) Approval by the stockholders of the Parent of (i) a  
complete liquidation or dissolution of the Parent or (ii) the sale or other
disposition of all or substantially all of the assets of the Company or Parent,
other than to a corporation (the "Buyer") with respect to which (x) following
such sale or other disposition, more than 60% of the combined voting power of
securities of Buyer entitled to vote generally in the election of directors
("Buyer Voting Securities"), shall be owned beneficially, directly or
indirectly, by Parent, any of its subsidiaries, any employee benefit plan
sponsored by the Company, the Parent or any their respective subsidiaries or by
all or substantially all of the Persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such sale or other
disposition, in substantially the same proportion as their 

                                       8
<PAGE>   9

respective ownership of Outstanding Voting Securities, immediately prior to such
sale or other disposition; (y) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or Buyer and any Person that
shall immediately prior to such sale or other disposition own beneficially,
directly or indirectly, 20% or more of the combined voting power of Outstanding
Voting Securities), shall own beneficially, directly or indirectly, 20% or more
of the combined voting power or, Buyer Voting Securities; and (z) at least a
majority of the members of the board of directors of Buyer shall have been
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition or
assets of the Company.

               8. INSURANCE. During the term, the Parent shall maintain, at no
cost to Executive, officers and directors liability insurance that would cover
Executive in an amount of no less than $45,000,000.

               9.     GENERAL PROVISIONS.

                      (a)   Notices. All notices, requirements, requests, 
demands, claims or other communications hereunder shall be in writing. Any
notice, requirement, request, demand, claim or other communication hereunder
shall be deemed duly given (i) if personally delivered, when so delivered, (ii)
if mailed, two (2) business days after having been set by registered or
certified mail, return-receipt requested, postage prepaid and addressed to the
intended recipient as set forth below, (iii) if given by telecopier, once such
notice or other communication is transmitted to the telecopier number specified
below, and the appropriate telephonic confirmation is received, provided that
such notice or other communication is promptly thereafter mailed in accordance
with the provisions of clause (ii) above or (iv) if sent through an overnight
delivery service under circumstances by which such service guarantees next day
delivery, the date following the date so sent:

               If to the Company, to:

                      Aames Financial Corporation
                      350 S. Grand Avenue
                      Los Angeles, California 90071
                      Attention:    Barbara S. Polsky, Esq.
                            Executive Vice President
                            and General Counsel


               If to Executive, to:

                      Neil B. Kornswiet
                      16105 Whitecap Lane
                      Huntington Beach, California 92649


                                       9
<PAGE>   10

Any party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.

                      (b)  Assignment. This Agreement and the benefits hereunder
are personal to the Parent and the Company and are not assignable or
transferable, nor may the services to be performed hereunder be assigned by the
Parent and the Company to any person, firm or corporation; provided however,
that this Agreement and the benefits hereunder may be assigned by the Parent and
the Company to any corporation into which the Parent and the Company may be
merged or consolidated, and this Agreement and the benefits hereunder will
automatically be deemed assigned to any such corporation, subject, however, to
Executive's right to terminate this Agreement to the extent provided in Section
6. In the event of any assignment of this Agreement to any corporation acquiring
all or substantially all of the assets of the Parent or the Company or to any
other corporation into which the Parent or the Company may be merged or
consolidated, the responsibilities and duties assigned to Executive by such
successor corporation shall be the responsibilities and duties of, and
compatible with the status of, a senior executive officer of such successor
corporation. The Parent or the Company may delegate any of its obligations
hereunder to any subsidiary of the Company, provided that such delegation shall
not relieve the Parent or the Company of any of its obligations hereunder.
Executive may not assign his rights hereunder or delegate his duties hereunder
to any Person.

                      (c) Complete Agreement. This Agreement contains the 
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes and cancels any and all previous written or oral
negotiations, commitments, understandings, agreements and any other writings or
communications in respect of such subject matter.

                      (d) Amendments.  This Agreement may be modified,
amended, superseded or terminated only by a writing duly signed by both parties.

                      (e) Severability. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.

                      (f) No Waiver. Any waiver by either party of a  breach
of any provisions of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of either party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall be
considered a waiver or to deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.

                      (g) Binding Effect. This Agreement shall be binding on, 
and shall inure to the benefit of, the parties hereto and their permitted
assigns, successors and legal representatives.

                                       10
<PAGE>   11

                      (h) Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same document.

                      (i) Governing Law. This Agreement has been negotiated and 
entered into in the State of California and shall be construed in accordance
with the laws of the State of California.

                      (j) Arbitration. The parties hereby expressly agree that
any controversy or claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rules of evidence shall apply. The costs
of the arbitrator shall be borne equally. Each party shall be responsible for
its own attorneys' fees and costs. However, the arbitrator shall have the right
to award costs and expenses (including actual attorneys' fees) to the prevailing
party as well as equitable relief. The award of the arbitrator shall be final
and binding and shall be enforceable in any court of competent jurisdiction.
Nothing in this paragraph shall preclude the parties from seeking an injunction
or other equitable relief from a court of competent jurisdiction under
appropriate circumstances.

                      (k) Headings. The headings included in this Agreement are
for the convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.

               IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                    AAMES FINANCIAL CORPORATION,
                                    a Delaware corporation


                                        /s/ BARBARA POLSKY
                                    --------------------------------
                                    By:     Barbara Polsky
                                    Its:    General Counsel and EVP



                                    EXECUTIVE


                                          /s/ NEIL B. KORNSWIET
                                    ---------------------------------
                                    Neil B. Kornswiet

                                       11