Document:

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                                                                EXHIBIT 10.12(b)
                             SECURED PROMISSORY NOTE

$50,000                                                       October 1, 1999
 ------

         FOR VALUE RECEIVED, C. John Kohler(the "Maker"), hereby promises to
pay to the order of Aames Financial Corporation, a Delaware corporation
("Aames"), 2 California Plaza, 350 South Grand Avenue, Los Angeles, CA 90071
or such address as Aames shall have given to the Maker, the principal sum of
FIFTY THOUSAND DOLLARS and 00/100 ($50,000), plus interest, which shall
accrue from the date hereof, on the unpaid principal balance of this Note at
such address, at the rate of 6.5% per annum (computed on the basis of a
360-day year) until the principal amount hereof has been repaid in full, on
October 1, 2004.

         The Maker shall have the option to prepay the principal amount and
accrued interest on this Note, in whole or in part, at any time, without
payment of premium or penalty. During the period in which this Note is
outstanding, the Maker shall make an annual mandatory prepayment against the
outstanding principal balance of, and accrued interest on, this Note an
amount equal to 25% of the aggregate cash bonuses (if any) paid to Maker in
respect of the fiscal year ended immediately prior to such payment date, net
of income taxes payable thereon, such payments to be made within two business
days after receipt of the cash bonus paid at the end of such fiscal year and
to be applied FIRST, against any accrued and unpaid interest on this Note and
THEN, to the outstanding principal balance of this Note. In addition, upon
receipt by the Maker of any proceeds from the transfer of the securities
pledged under the Pledge Agreement (as defined below) or dividends, interest
payments or other distributions of cash in respect of such pledged
securities, the Maker shall make an immediate prepayment in respect of the
Note in an amount equal to the after tax amount of such proceeds, dividends,
payments or distributions, with such prepayments to be applied first to the
payment of all interest accrued on, and then to the payment of unpaid
principal of, this Note.

         Payments of principal and interest shall be made in such currency of
the United States as at the time of payment shall be legal tender for the
payment of public and private debts.

         Aames and the Maker have entered into a pledge agreement dated the
date hereof (the "PLEDGE AGREEMENT") providing, among other things, for the
securing of this Note by a pledge of the Pledged Collateral (as defined in
the Pledge Agreement). If any of the following events (each, an "EVENT OF
DEFAULT") shall occur:

                                    -1-
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         (a) the Maker shall default in the payment of any part of the principal
     or interest on this Note when the same shall become due and payable,
     whether at maturity, by acceleration or otherwise and such default
     continues for more than 10 days after receipt of notice from Aames;

         (b) the Maker's employment with Aames shall have ceased for any reason
     whatsoever or for no reason, whether such cessation is voluntary or
     involuntary, and regardless of whether the Maker may claim such cessation
     of employment constitutes a wrongful termination of employment;

         (c) the Maker shall (i) become insolvent or be unable, or admit in
     writing his inability, to pay his debts as they mature; (ii) make a general
     assignment for the benefit of creditors; (iii) be adjudicated as bankrupt
     or insolvent or file a voluntary petition in bankruptcy; (iv) file a
     petition or an answer seeking an arrangement with creditors to take
     advantage of any insolvency law; or (v) file an answer admitting to the
     material obligations or consent to, or default in answering, or fail to
     have dismissed within 60 days after the filing thereof, a petition filed
     against him in any bankruptcy or insolvency proceeding; or

         (d) any breach of the Maker's obligations under the Pledge Agreement
     shall have occurred and be continuing or any representation or warranty
     made thereunder shall be false in any material respect,

         then, the holder of this Note may at any time by written notice to
the Maker, declare the entire unpaid principal of and the interest accrued on
this Note through the date of such Event of Default to be forthwith due and
payable, without other notices or demands of any kind, all of which are
hereby waived by the Maker.

         The Maker agrees to pay to the holder hereof all expenses incurred
by such holder, including reasonable attorneys' fees, in enforcing and
collecting this Note.

         The Maker hereby forever waives presentment, demand, presentment for
payment, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.

         This Note shall be paid without deduction by reason of any set-off,
defense or counterclaim of the Maker.

This Note shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to conflicts of law principles
thereof, shall be binding upon the

                                    -2-

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heirs or legal representatives of the Maker and shall inure to the benefits
of the successors and assigns of Aames.

                                                     /s/ C. John Kohler
                                                     ---------------------------
                                                     C. John Kohler

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                                                                EXHIBIT 10.12(C)
                                PLEDGE AGREEMENT

                  PLEDGE AGREEMENT ("AGREEMENT"), dated as of October 1, 1999,
made by C. John Kohler, an individual residing at [XXXADDRESS DELETED FOR
PRIVACYXXX](the "PLEDGOR"), to Aames Financial Corporation, a Delaware
corporation ("AAMES").

                  WHEREAS, on the date hereof, the Pledgor is purchasing shares
of Aames' Series C Convertible Preferred Stock, par value $0.001 per share
("SERIES C PREFERRED STOCK"), pursuant to a Management Investment Agreement,
dated the date hereof, between Pledgor and Aames (the "MANAGEMENT INVESTMENT
AGREEMENT"); and

                  WHEREAS, as part of the transactions contemplated by the
Management Investment Agreement, the Pledgor is executing and delivering to
Aames a Secured Promissory Note dated as of the date hereof in favor of Aames
(the "AAMES NOTE") as part of the purchase price for the Series C Preferred
Stock, and in accordance with the terms and conditions set forth herein,
pledging the Series C Preferred Stock, together with any shares of Aames' common
stock, par value $0.001 per share that may be acquired upon conversion of the
Series C Preferred Stock (the "UNDERLYING COMMON SHARES, and, together with the
shares of Series C Preferred Stock, the "PLEDGED SHARES").

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, and in order to induce Aames to
accept the Aames Note, the Pledgor hereby agrees as follows:

         SECTION 1. PLEDGE. The Pledgor hereby pledges to Aames, and grants to
Aames a security interest in, the following (the "PLEDGED COLLATERAL"):

                  (i) the Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other property of any
character whatsoever (including, without limitation, shares of Common Stock)
from time to time received, receivable or otherwise distributed or distributable
in respect of or in exchange for any or all of the Pledged Shares; and

                  (ii) all proceeds of any and all of the foregoing collateral
(including, without limitation, proceeds that constitute property of the types
described above).

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                  SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures
the payment of all obligations, whether for principal, interest, fees, expenses
or otherwise, now or hereafter existing, of the Pledgor under the Aames Note and
under this Agreement (all such obligations of the Pledgor being the
"OBLIGATIONS"). Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Obligations and
would be owed by the Pledgor to Aames under the Aames Note or this Agreement but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving the Pledgor.

                  SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Aames pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Aames. Aames shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to have registered in the
name of Aames or any of its nominees any or all of the Pledged Collateral,
subject only to the revocable rights specified in Section 6(a). For the better
perfection of Aames's rights in and to the Pledged Collateral, the Pledgor shall
forthwith, upon the pledge of any Pledged Collateral hereunder, cause such
Pledged Collateral to be registered in the name of Aames or such nominee or
nominees of Aames as Aames shall direct, subject only to the revocable rights
specified in Section 6(a). In addition, Aames shall have the right at any time
to exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.

         SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:

                  (a) Neither the execution nor the delivery by the Pledgor of
         this Agreement nor the consummation by the Pledgor of the transactions
         contemplated hereby, nor compliance with nor fulfillment by the Pledgor
         of the terms and provisions hereof, will conflict with or result in a
         breach of the terms, conditions or provisions of or constitute a
         default under any lease, contract, instrument, mortgage, deed of trust,
         trust deed or deed to secure debt evidencing or securing indebtedness
         for borrowed money, financing lease, law, rule, regulation, judgment,
         order,

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         award, decree or other restriction of any kind to which the
         Pledgor is a party or by which he is bound.

                  (b) This Agreement has been duly executed and delivered by the
         Pledgor and is the legal, valid and binding obligation of the Pledgor,
         enforceable against the Pledgor in accordance with its terms.

                  (c) There is no action, lawsuit, claim, counterclaim,
         proceeding, or investigation (or group of related actions, lawsuits,
         claims, proceedings or investigations) pending or, to the knowledge of
         the Pledgor, threatened, relating to or challenging the Pledgor's
         obligations under this Agreement or the pledge of the Pledged
         Collateral hereunder.

                  (d) The Pledgor is the legal and beneficial owner of the
         Pledged Collateral free and clear of any lien, security interest,
         option or other charge or encumbrance except for the security interest
         created by this Agreement.

                  (e) The pledge of the Pledged Shares pursuant to this
         Agreement creates a valid and perfected first priority security
         interest in the Pledged Collateral, securing the payment of the
         Obligations.

                  (f) No consent of any other person or entity and no
         authorization, approval, or other action by, and no notice to or filing
         with, any governmental authority or regulatory body is required (i) for
         the pledge by the Pledgor of the Pledged Collateral pursuant to this
         Agreement or for the execution, delivery or performance of this
         Agreement by the Pledgor, (ii) for the perfection or maintenance of the
         security interest created hereby (including the first priority nature
         of such security interest) or (iii) for the exercise by Aames of the
         voting or other rights provided for in this Agreement or the remedies
         in respect of the Pledged Collateral pursuant to this Agreement (except
         as may be required in connection with any disposition of any portion of
         the Pledged Collateral by laws affecting the offering and sale of
         securities generally).

                  (g) There are no conditions precedent to the effectiveness of
         the Pledgor's obligations under this Agreement that have not been
         satisfied or waived.

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                  SECTION 5. FURTHER ASSURANCES. (a) The Pledgor agrees that at
any time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that Aames may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Aames to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral.

                  (b) The Pledgor hereby authorizes Aames to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Pledged Collateral without the signature of the Pledgor where
permitted by law. A photocopy or other reproduction of this Agreement or any
financing statement covering the Pledged Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

         SECTION 6. VOTING RIGHTS; DIVIDENDS, ETC. (a) so long as no Event of
Default (as defined in the Aames Note) or event which, with the giving of notice
or the lapse of time, or both, would become such an Event of Default shall have
occurred and be continuing:

                  (i) The Pledgor shall be entitled to exercise or refrain from
         exercising any and all voting and other consensual rights pertaining to
         the Pledged Collateral or any part thereof for any purpose not
         inconsistent with the terms of this Agreement or the Aames Note;
         PROVIDED, HOWEVER, that the Pledgor shall not exercise or refrain from
         exercising any such right if, in Aames's judgment, such action would
         have a material adverse effect on the value of the Pledged Collateral
         or any part thereof.

                  (ii) The Pledgor shall be entitled to any and all dividends
         paid in respect of the Pledged Collateral; PROVIDED, HOWEVER, that any
         and all dividends paid or payable other than in cash in respect of, and
         instruments and other property received, receivable or otherwise
         distributed in respect of or in exchange for, any Pledged Collateral,
         shall be, and shall be forthwith delivered to Aames to hold as, Pledged
         Collateral and shall, if received by the Pledgor, be received in trust
         for the benefit of Aames, be segregated from the other property or
         funds of the Pledgor, and be forthwith delivered to Aames as Pledged
         Collateral in the same form as so received (with any

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         necessary endorsement or assignment); and PROVIDED, FURTHER, that
         the after tax amount of any cash dividends, proceeds, or other
         distributions paid in respect of the Pledged Collateral shall be
         applied as an immediate prepayment in respect of the Aames Note,
         with such prepayments to be applied first to the payment of all
         interest accrued on, and then to the payment of unpaid principal of,
         the Aames Note.

                  (iii) Aames shall execute and deliver (or cause to be executed
         and delivered) to the Pledgor all such proxies and other instruments as
         the Pledgor may reasonably request for the purpose of enabling the
         Pledgor to exercise the voting and other rights which it is entitled to
         exercise pursuant to paragraph (i) above and to receive the dividends
         which it is authorized to receive and retain pursuant to paragraph (ii)
         above.

                  (b) Upon the occurrence and during the continuance of an Event
of Default or an event which, with the giving of notice or the lapse of time, or
both, would become an Event of Default:

                  (i) All rights of the Pledgor (x) to exercise or refrain from
         exercising the voting and other consensual rights which it would
         otherwise be entitled to exercise pursuant to Section 6(a)(i) shall,
         upon notice to the Pledgor by Aames, cease and (y) to receive the
         dividends payments which it would otherwise be authorized to receive
         and retain pursuant to Section 6(a)(ii) shall automatically cease, and
         all such rights shall thereupon become vested in Aames (or its
         designee), who shall thereupon have the sole right to exercise or
         refrain from exercising such voting and other consensual rights and to
         receive and hold as Pledged Collateral such dividends.

                  (ii) All dividends which are received by the Pledgor contrary
         to the provisions of paragraph (i) of this Section 6(b) shall be
         received in trust for the benefit of Aames, shall be segregated from
         other funds of the Pledgor and shall be forthwith paid over to Aames as
         Pledged Collateral in the same form as so received (with any necessary
         endorsement).

                  SECTION 7. TRANSFERS AND OTHER LIENS. The Pledgor agrees that
it will not (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral
or (ii) create or

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permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Pledged Collateral, except for
the security interest under this Agreement and except for any such sale the
proceeds from which are used to repay all unpaid principal of, and accrued
interest on, the Aames Note (with such proceeds first being applied to
accrued interest and then to principal).

                  SECTION 8. APPOINTMENT OF ATTORNEY-IN-FACT. The Pledgor hereby
appoints Aames Financial Corporation the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in Aames's discretion to take any action and to
execute any instrument that Aames may deem necessary or advisable to accomplish
the purposes of this Agreement (subject to the rights of the Pledgor under
Section 6), including, without limitation, to receive, indorse and collect all
instruments made payable to the Pledgor representing any dividend or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same.

                  SECTION 9. AAMES MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein and does not cure such failure within 10 days
after its receipt of written notice from Aames, Aames may itself perform, or
cause performance of, such agreement, and the expenses of Aames incurred in
connection therewith shall be payable by the Pledgor under Section 12.

                  SECTION 10. AAMES' DUTIES. The powers conferred on Aames
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the safe
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Aames shall have no duty as to any
Pledged Collateral as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not Aames has or is deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged Collateral.
Aames shall be deemed to have exercised reasonable care in the custody and
preservation of any Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Aames accords
its own property.

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         SECTION 11. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing:

                  (a) Aames may exercise in respect of the Pledged Collateral,
         in addition to other rights and remedies provided for herein or
         otherwise available to it, all the rights and remedies of a secured
         party on default under the Uniform Commercial Code in effect in the
         State of Delaware at that time (the "Code") (whether or not the Code
         applies to the affected Collateral), and may also, without notice
         except as specified below, sell the Pledged Collateral or any part
         thereof in one or more parcels at public or private sale, at any
         exchange or broker's board or elsewhere, for cash, on credit or for
         future delivery, and upon such other terms as Aames may deem
         commercially reasonable. The Pledgor agrees that, to the extent notice
         of sale shall be required by law, at least ten days' notice to the
         Pledgor of the time and place of any public sale or the time after
         which any private sale is to be made shall constitute reasonable
         notification. Aames shall not be obligated to make any sale of Pledged
         Collateral regardless of notice of sale having been given. Aames may
         adjourn any public or private sale from time to time by announcement at
         the time and place fixed therefor, and such sale may, without further
         notice, be made at the time and place to which it was so adjourned.

                  (b) Any cash held by Aames as Pledged Collateral and all cash
         proceeds received by Aames in respect of any sale of, collection from
         or other realization upon all or any part of the Pledged Collateral
         may, in the discretion of Aames, be held by Aames as collateral for,
         and/or then or at any time thereafter be applied (after payment of any
         amounts payable to Aames pursuant to Section 12) in whole or in part by
         Aames against, all or any part of the Obligations in such order as
         Aames shall elect. Any surplus of such cash or cash proceeds held by
         Aames and remaining after payment in full of all the Obligations shall
         be paid over to the Pledgor or to whomsoever may be lawfully entitled
         to receive such surplus.

                  SECTION 12. EXPENSES. The Pledgor will upon demand pay to
Aames the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which Aames may
incur in connection with (i) the exercise or enforcement of any of the rights of
Aames

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hereunder or (ii) the failure by the Pledgor to perform or observe any of the
provisions hereof.

                  SECTION 13. SECURITY INTEREST ABSOLUTE. The obligations of the
Pledgor under this Agreement are independent of the Obligations, and a separate
action or actions may be brought and prosecuted against the Pledgor to enforce
this Agreement. All rights of Aames and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:

                  (i) any lack of validity or enforceability of the Aames Note
         any other agreement or instrument relating thereto;

                  (ii) any change in the time, manner or place of payment of, or
         in any other term of, all or any of the obligations, or any other
         amendment or waiver of or any consent to any departure from the Aames
         Note;

                  (iii) any taking, exchange, release or nonperfection of any
         other collateral, or any taking, release or amendment or waiver of or
         consent to departure from any guaranty, for all or any of the
         Obligations;

                  (iv) any manner of application of collateral, or proceeds
         thereof, to all or any of the Obligations, or any manner of sale or
         other disposition of any collateral for all or any of the Obligations
         or any other assets of the Pledgor;

                  (v) any other circumstance which might otherwise constitute a
         defense available to, or a discharge of, the Pledgor.

                  SECTION 14. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed by the parties hereto, and no consent to any
departure by one party herefrom, shall in any event be effective unless the same
shall be in writing and signed by the other party, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

                  SECTION 15. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and

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sent by express courier, telecopied, telegraphed, telexed or hand-delivered,
if to the Pledgor, at his address first set forth above; and, if to Aames, at
its address at 2 California Plaza, 350 South Grand Avenue, Los Angeles, CA
90071, Attention: Cary Thompson; or, as to each party, at such other address
as shall be designated by such party in a written notice to the other party.
All such notices and communications shall, when sent by express courier, be
effective three days after being sent, when telecopied, telegraphed, telexed
or hand-delivered, be effective when telecopied, delivered to the telegraph
company, confirmed by telex answerback or delivered, respectively.

                  SECTION 16. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER
AAMES NOTE. This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
payment in full of the Obligations and all other amounts payable under this
Agreement, (ii) be binding upon the Pledgor, its successors and assigns and
(iii) inure to the benefit of, and be enforceable by, Aames and its successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), Aames may assign or otherwise transfer all or any portion of its rights
and obligations under the Aames Note to any other person or entity, and such
other person or entity shall thereupon become vested with all the benefits in
respect thereof granted to Aames herein or otherwise. Upon the payment in full
of the Obligations and all other amounts payable under this Agreement, the
security interest granted hereby shall terminate and all rights to the Pledged
Collateral shall revert to the Pledgor. Upon any such termination, Aames will,
at the Pledgor's expense, return to the Pledgor such of the Pledged Collateral
as shall not have been sold or otherwise applied pursuant to the terms hereof
and execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination.

                  SECTION 17. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
DELAWARE. Unless otherwise defined herein or in the Aames Note, terms defined in
Article 9 of the Code are used herein as therein defined.

<PAGE>

                  IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.

                                                      /s/ C. John Kohler
                                                -------------------------
                                                 Pledgor

ACKNOWLEDGED AND AGREED:

AAMES FINANCIAL CORPORATION

By:   /s/ Barbara S. Polsky
   --------------------------------
     Name:  Barbara S. Polsky
     Title: Executive Vice President

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