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                                                                 EXHIBIT 10.3(c)


                               AMENDMENT NO. 1 TO
                           SECOND AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

                  This Amendment No. 1 to Second Amended and Restated 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 Cary H. Thompson, an individual ("Executive"), with
reference to the following:

                                    RECITALS

                  WHEREAS, Executive and the Company entered into an Employment
Agreement as of March 11, 1996 as a material inducement to Executive to accept
employment with the Company;

                  WHEREAS, Executive and the Company entered into an Amended and
Restated Employment Agreement as of June 21, 1996 to clarify the intent of the
parties and a Second Amended and Restated Agreement as of May 8, 1997 to reflect
Executive's new position as Chief Executive Officer of the Company and revised
compensation arrangement (the "Second Amended Agreement"); and

                  WHEREAS, Executive and the Company desire to amend the Second
Amended Agreement for the purpose of modifying the vesting of Options in the
event of a Change of Control.

                                    AGREEMENT

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

                  1. Section 6(c)(ii) is amended in its entirety to read as
follows:

                                    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 receive the Separation Package.
In addition, all Options then held by Executive which are not yet vested shall
vest as of the date of the 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. The option provided for
in this Section 6(c)(ii) shall be applicable with respect to 



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each Change in Control notwithstanding Executive's failure to exercise such
option with respect to any prior Change in Control.

                  2. Capitalized terms used herein have the meanings ascribed to
such terms in the Second Amended Agreement. Except as otherwise amended hereby,
the Second Amended Agreement remains in full force and effect.

                  IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 1 to Second Amended and Restated Employment Agreement as of the
day and year first above written.



                                            AAMES FINANCIAL CORPORATION,
                                            a Delaware corporation


                                                 /s/ BARBARA S. POLSKY         
                                            ----------------------------------
                                            By:      Barbara S. Polsky
                                            Its:     Executive Vice President



                                            EXECUTIVE


                                                   /s/ CARY H. THOMPSON 
                                            ----------------------------------
                                            Cary H. Thompson


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