Document:

<PAGE>

A. Jay Meyerson
Chief Executive Officer
Aames Financial Corporation
350 S. Grand Avenue, 52nd Floor
Los Angeles, California  90071

         RE:      INVESTMENT IN PREFERRED STOCK

Gentlemen:

         Pursuant to the Preferred Stock Purchase Agreement, by and between
Aames Financial Corporation (the "COMPANY") and Specialty Finance Partners
("SFP") dated as of May 19, 2000 (the "STOCK PURCHASE AGREEMENT") SFP agreed to
purchase from the Company shares of the Company's Series C Convertible Preferred
Stock, par value $0.001 per share (the "SERIES C PREFERRED STOCK") for a price
per share (the "PRICE") equal to the lower of $0.90 or the average of the
closing price of Company's Common Stock, par value $0.001 per share (the "COMMON
STOCK") for five trading days prior to the "Initial Closing" (as that term is
defined in the Stock Purchase Agreement) and the Company will also issue to SFP
warrants to purchase another 5 million shares of Series C Preferred Stock at the
Price (the "SFP TRANSACTION").

         This letter is intended to amend the Stock Purchase Agreement to the
extent inconsistent with the provisions herein and to provide for certain other
agreements between the parties with respect to the SFP Transaction. All
capitalized terms used herein, and not otherwise defined, shall have their
respective meanings as set forth in the Stock Purchase Agreement.

         PURCHASE OF SERIES D CONVERTIBLE PREFERRED STOCK

         The Stock Purchase Agreement is hereby amended as follows:

                  (a) At the Initial Closing, SFP shall purchase and the Company
         shall sell to SFP, 40,800,000 shares of Series C Preferred Stock for
         $0.85 per share (the "INITIAL SHARES").

                  (b) At the Initial Closing, the Company shall issue a warrant,
         substantially in the form attached hereto as EXHIBIT A, to SFP (the
         "SERIES C WARRANT") for the purchase of 5 million shares of Series C
         Convertible Preferred Stock. The Series C Warrant will expire at the
         Additional Closing and, upon exercise of the Series C Warrant, the
         issuance of the Series C Preferred Stock

<PAGE>

         thereunder will be subject to the receipt by the Company of appropriate
         consents of holders of Series B Preferred Stock and Series C Preferred
         Stock to issue such shares upon conversion as well as the filing, and
         the expiration of any waiting period, pursuant to Regulation 14(c)
         under the Securities Exchange Act of 1934.

                  (c) At the Additional Closing, the Company shall issue a
         warrant, substantially in the form attached hereto as EXHIBIT B, to SFP
         (the "SERIES D WARRANT") for the purchase of 5 million shares of Series
         D Convertible Preferred Stock, par value $0.001 per share (the "SERIES
         D PREFERRED STOCK"), PROVIDED, however that the number of shares
         subject to the Series D Warrant shall be reduced by the number of
         shares of Series C Preferred Stock acquired through the exercise of the
         Series C Warrant, if any.

                  (d) At the Additional Closing, SFP shall exchange each of the
         Initial Shares, and each share of Series C Preferred Stock acquired
         through the exercise of the Series C Warrant, if any, for one share of
         Series D Preferred Stock, subject to adjustment as provided for in the
         Certificate of Designations for the Series D Preferred Stock which
         shall be filed with the Delaware Secretary of State immediately prior
         to the Additional Closing, in substantially the same form as attached
         hereto as EXHIBIT C.

                  (e) At the Additional Closing, SFP shall purchase, and the
         Company shall sell to SFP, an aggregate of 18,023,529 shares of Series
         D Preferred Stock for $0.85 per share, subject to the terms and
         conditions of the Stock Purchase Agreement.

                  (f) The Series D Preferred Stock shall be subject to all of
         the limitations, covenants, representations and warranties or other
         agreements between the parties which are applicable to the Series C
         Preferred Stock and which are contained in the Stock Purchase
         Agreement.

                  (g) On or prior to the Additional Closing, the Company and SFP
         will execute an amendment to that certain Registration Rights
         Agreement, dated as of December 23, 1998, between the Company and
         Capital Z Financial Services Fund II, L.P. (the "REGISTRATION RIGHTS
         AGREEMENT"), such that the Series D Preferred Stock issued at the
         Additional Closing will be subject to the terms and conditions of the
         Registration Rights Agreement.

                  (h) The Stock Purchase Agreement, as amended hereby, is hereby
         ratified and confirmed.

         WAIVER OF CONVERSION RATIO

         SFP understands that, pursuant to the Certificate of Incorporation, the
SFP Transaction may cause the automatic adjustment of the "conversion ratio" (as
that term is used in the Certificate of Incorporation with respect to the Series
C Stock and the

<PAGE>

Company's Series B Convertible Preferred Stock, par value $0.001 per share
(the "SERIES B PREFERRED STOCK")) to be adjusted.

         SFP hereby covenants and agrees that it will support, and vote in favor
of, any proposal presented to the stockholders of Aames to eliminate as an
adjustment to the "conversion ratio" in effect on the date immediately preceding
the Initial Closing, any adjustment arising from the issuance of the Series C
Preferred Stock to be issued under the Stock Purchase Agreement (the
"CERTIFICATE AMENDMENT").

         SFP further covenants and agrees that, if SFP converts any shares of
its Series B Preferred Stock or Series C Preferred Stock into shares of Common
Stock between the date of the Initial Closing and the date that the Certificate
Amendment is filed, the Company shall apply the "conversion ratio" in effect on
the date immediately preceding the Initial Closing in calculating the number of
shares of Common Stock to be issued upon such conversion.

         WAIVER OF STATED VALUE

         SFP understands that, pursuant to the Certificate of Incorporation, the
"Post Recapitalization Stated Value" (as that terms is defined in the
Certificate of Designations with respect to the Series C Preferred Stock) of the
Series C Preferred Stock is $5.00 per share.

         SFP further covenants and agrees that the "Post Recapitalization Stated
Value" (as that terms is defined in the Certificate of Designations with respect
to the Series C Preferred Stock) for the Initial Shares, and any shares of
Series C Preferred Stock acquired by SFP as a result of the exercise of the
Series C Warrant, shall be equal to the Purchase Price per share.

                               [SIGNATURES FOLLOW]

<PAGE>

                                Very truly yours,

                                SPECIALTY FINANCE PARTNERS
                                     By its General Partner
                                     CAPITAL Z FINANCIAL SERVICES FUND II, L.P.,
                                              By its General Partner
                                              CAPITAL Z PARTNERS, L.P.,
                                                   By its General Partner
                                                   CAPITAL Z PARTNERS, LTD.

                                                   By:      /s/ Adam M. Mizel
                                                      -------------------------

                                                   Name:  Adam M. Mizel

                                                   Title:   Partner

ACCEPTED AND AGREED:

AAMES FINANCIAL CORPORATION

By:      /s/  A. Jay Meyerson
   ------------------------------

Name:    A. Jay Meyerson

Title:   Chief Executive Officer

Dated as of May 25, 2000.
------------------------

cc:      Jack Getzelman
         Managing Director
         Donaldson, Lufkin & Jenrettee Securities Corporation
         2121 Avenue of the Stars
         Los Angeles, California  90067-5014

<PAGE>

                                    EXHIBIT A
                            FORM OF SERIES C WARRANT

<PAGE>

                                    EXHIBIT B
                            FORM OF SERIES D WARRANT

<PAGE>

                                    EXHIBIT C
      FORM OF CERTIFICATE OF DESIGNATIONS FOR THE SERIES D PREFERRED STOCK

<PAGE>

THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY SUCH
APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS WARRANT.

                                     WARRANT

               To Purchase Series C Convertible Preferred Stock of

                           AAMES FINANCIAL CORPORATION

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               Page

<S>                                                                                                              <C>
ARTICLE 1. DEFINITIONS............................................................................................1

ARTICLE 2. EXERCISE OF WARRANT....................................................................................4
         Section 2.1.  Manner of Exercise.........................................................................4
         Section 2.2.  Payment of Taxes...........................................................................6
         Section 2.3.  Fractional Shares..........................................................................6

ARTICLE 3. TRANSFER, DIVISION AND COMBINATION.....................................................................6
         Section 3.1.  Transfer...................................................................................6
         Section 3.2.  Division and Combination...................................................................6
         Section 3.3.  Expenses...................................................................................7
         Section 3.4.  Maintenance of Books.......................................................................7

ARTICLE 4. ADJUSTMENTS............................................................................................7
         Section 4.1. Stock Dividends, Subdivisions, Combinations and Reclassifications...........................7
         Section 4.2. Issuance of Additional Shares of Common Stock or Convertible Securities.....................8
         Section 4.3. Other Provisions Applicable to Adjustments Under This Section...............................9
         Section 4.4. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets...........11
         Section 4.5. Notices....................................................................................11
         Section 4.6. Certificates...............................................................................12

ARTICLE 5. NO IMPAIRMENT.........................................................................................12

ARTICLE 6. RESERVATION AND AUTHORIZATION OF  SERIES C PREFERRED STOCK; REGISTRATION WITH OR  APPROVAL OF
                      ANY GOVERNMENTAL AUTHORITY.................................................................13

ARTICLE 7. STOCK AND WARRANT TRANSFER BOOKS......................................................................13

ARTICLE 8. RESTRICTIONS ON TRANSFERABILITY.......................................................................13
         Section 8.1.  Restrictive Legend........................................................................14
         Section 8.2.  Transfers.................................................................................14
         Section 8.3.  Termination of Restrictions...............................................................15

ARTICLE 9. SUPPLYING INFORMATION.................................................................................15

ARTICLE 10. LOSS OR MUTILATION...................................................................................16

ARTICLE 11. OFFICE OF THE COMPANY................................................................................16

ARTICLE 12. REGISTRATION RIGHTS..................................................................................16

ARTICLE 13. LIMITATION OF LIABILITY..............................................................................16

ARTICLE 14. REPRESENTATION OF HOLDER.............................................................................16

                                       i
<PAGE>

ARTICLE 15. MISCELLANEOUS........................................................................................17
         Section 15.1.  Nonwaiver and Expenses...................................................................17
         Section 15.2.  No Rights As Stockholder.................................................................17
         Section 15.3.  Notice Generally.........................................................................17
         Section 15.4.  Successors and Assigns...................................................................18
         Section 15.5.  Amendment................................................................................18
         Section 15.6.  Severability.............................................................................18
         Section 15.7.  Headings.................................................................................18
         Section 15.8.  Governing Law............................................................................18
         Section 15.10. Mutual Waiver of Jury Trial..............................................................18
</TABLE>

                                      ii
<PAGE>

THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY SUCH
APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS WARRANT.

                                     WARRANT

                         To Purchase 5,000,000 Shares of

                     Series C Convertible Preferred Stock of

                           AAMES FINANCIAL CORPORATION

                  THIS IS TO CERTIFY THAT Specialty Finance Partners, a
Bermuda general partnership ("SFP") or its registered assigns, is entitled,
at any time prior to the date on which the Additional Closing (as defined in
the Preferred Stock Purchase Agreement, dated as of May 19, 2000 and as
subsequently amended, by and between the Company and SFP) occurs (the
"Expiration Date"), to purchase from Aames Financial Corporation, a Delaware
corporation (the "Company"), 5,000,000 shares of Series C Convertible
Preferred Stock, par value $0.001 per share, of the Company (the "Series C
Preferred Stock"), subject to adjustment as provided herein, in whole or in
part, including fractional parts, at a purchase price of $0.85 per share (the
"Exercise Price"), subject to adjustment as set forth herein, all on the
terms and conditions and pursuant to the provisions hereinafter set forth.
Capitalized terms not otherwise defined herein are used as defined in the
Preferred Stock Purchase Agreement.

                                   ARTICLE 1.
                                   DEFINITIONS

                  As used in this Warrant, the following terms have the
respective meanings set forth below:

                  "Additional Shares of Series C Preferred Stock" shall mean
all shares of Series C Preferred Stock issued by the Company after the Issue
Date, other than Warrant Stock.

                  "Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.

                  "SFP" shall have the meaning set forth in the first
paragraph hereof.

                  "Commission" shall mean the Securities and Exchange
Commission.

<PAGE>

                  "Common Stock" shall mean the Common Stock of the Company,
par value $0.001 per share.

                  "Company" shall have the meaning set forth in the first
paragraph hereof.

                  "Conversion Price" shall have the meaning set forth in
Section 4.2 hereof.

                  "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are convertible into
or exchangeable, with or without payment of additional consideration in cash
or property, for Additional Shares of Series C Preferred Stock, either
immediately or upon the occurrence of a specified date or a specified event.

                  "Current Market Price" shall mean, when used with reference
to shares of Series C Preferred Stock, the closing price per share of Common
Stock on such date and, when used with reference to shares of Series C
Preferred Stock for any period shall mean the average of the daily closing
prices per share of Common Stock for such period. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Common Stock is not listed or admitted
to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last quoted sale
price or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. National Market System is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in the Common Stock selected by
the Board of Directors of the Corporation. If the Common Stock is not
publicly held or so listed or publicly traded, "Current Market Price" shall
mean the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the
Corporation based on an opinion of an independent investment banking firm
with an established national reputation as a value of securities, which
opinion may be based on such assumption as such firm shall deem to be
necessary and appropriate.

                  "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder.

                                       2
<PAGE>

                  "Exercise Price" shall have the meaning set forth in the
first paragraph hereof.

                  "Expiration Date" shall have the meaning set forth in the
first paragraph hereof.

                  "Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.

                  "GAAP" shall mean generally accepted accounting principles
in the United States of America as from time to time in effect.

                  "holder" shall mean, as the context requires, the Person in
whose name this Warrant is registered on the books of the Company maintained
for such purpose and/or the Person holding any Warrant Stock.

                  "Issue Date" shall mean the date on which this Warrant is
issued.

                  "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, corporation or other entity and shall
include any successor (by merger or otherwise) of such entity.

                  "Preferred Stock Purchase Agreement" shall mean the
Preferred Stock Purchase Agreement, dated as of May 19, 2000 between the
Company and SFP.

                  "Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of December 23, 1999, between the Company and
Capital Z Financial Services Fund II, L.P.

                  "Restricted Series C Preferred Stock" shall mean shares of
Series C Preferred Stock which are, or which upon their issuance on the
exercise of this Warrant would be, evidenced by a certificate bearing the
restrictive legend set forth in Section 8.1(a).

                  "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.

                  "Series B Preferred Stock" shall mean the Series B
Convertible Preferred Stock of the Company, par value $0.001 per share.

                  "Series C Preferred Stock" shall mean the Series C
Convertible Preferred Stock of the Company, par value $0.001 per share.

                                       3
<PAGE>

                  "Subsidiary" shall mean any corporation of which an
aggregate of more than 50% of the outstanding stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by the Company and/or one or more Subsidiaries of the
Company.

                  "Trading Day" means a day on which the principal national
securities exchange on which the Series C Preferred Stock is listed or
admitted to trading is open for the transaction of business or, if the Series
C Preferred Stock is not listed or admitted to trading on any national
securities exchange, a Business Day.

                  "Transaction" shall have the meaning set forth in Section
4.5 hereof.

                  "transfer" shall mean any transfer, sale, encumbrance,
hypothecation or other disposition of this Warrant or any Warrant Stock or of
any interest in either thereof.

                  "Transfer Notice" shall have the meaning set forth in
Section 8.2.

                  "Warrant Price" shall mean an amount equal to (i) the
number of shares of Series C Preferred Stock being purchased upon exercise of
this Warrant pursuant to Section 2.1, multiplied by (ii) the Exercise Price
as of the date of such exercise.

                  "Warrant Stock" shall mean the shares of Series C Preferred
Stock purchased by the holder of this Warrant upon the exercise thereof.

                                   ARTICLE 2.
                               EXERCISE OF WARRANT

                  Section 2.1. MANNER OF EXERCISE. From and after the date
hereof and until 5:00 P.M., New York time, on the Expiration Date, the holder
may exercise this Warrant for all or any part of the number of shares of
Series C Preferred Stock purchasable hereunder.

                  In order to exercise this Warrant, in whole or in part, the
holder shall deliver to the Company at its office at 2 California Plaza, 350
South Grand Avenue, 52nd Floor, Los Angeles, California 90071, or at the
office or agency designated by the Company pursuant to Section 11, (i) a
written notice of the holder's election to exercise this Warrant, which
notice shall specify the number of shares of Series C Preferred Stock to be
purchased, (ii) payment of the Warrant Price in the manner provided below,
and (iii) this Warrant. Such notice shall be

                                       4
<PAGE>

substantially in the form of the subscription form appearing at the end of
this Warrant as Exhibit A, duly executed by or on behalf of the holder. Upon
receipt thereof, the Company shall, as promptly as practicable, and in any
event within five (5) Business Days thereafter, take any and all actions,
including the filing of an Information Statement on Form 14C with the
Commission, necessary to execute or cause to be executed and deliver or cause
to be delivered to the holder a certificate or certificates representing the
aggregate number of full shares of Series C Preferred Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided, as soon as practicable after the receipt by the Company
of a written notice of the holder's election to exercise this Warrant. The
stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such holder shall request
in the notice and shall be registered in the name of the holder or, subject
to Section 8, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the notice,
together with the cash, check or checks and/or securities, if any, and this
Warrant, are received by the Company as described above and all taxes
required to be paid by the holder, if any, pursuant to Section 2.2 prior to
the issuance of such shares have been paid. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock, deliver to the holder
a new Warrant evidencing the rights of the holder to purchase the unpurchased
shares of Series C Preferred Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or, at
the request of the holder, appropriate notation may be made on this Warrant
and the same returned to the holder.

                  Payment of the Warrant Price shall be made at the option of
the holder by cash, wire transfer to an account in a bank located in the
United States designated for such purpose by the Company, or certified or
official bank check, or by transfer to the Company of shares of Series B
Preferred Stock or Series C Preferred Stock, or any combination thereof. In
the event of the application shares of Series B Preferred Stock or Series C
Preferred Stock to the payment of the Warrant Price, the amount to be
credited to the payment of the Warrant Price shall be stated value per share
(as described in the Company's Certificate of Incorporation, as amended) plus
an amount per share equal to all accrued and unpaid dividends thereon,
whether or not declared, to the date of such exercise, provided that no such
credit shall be made with respect to any such dividends if the holder of such
shares held such shares on the record date therefor.

                                       5
<PAGE>

                  Section 2.2. PAYMENT OF TAXES. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges
that may be imposed with respect to, the issue or delivery of the Warrant
Shares, unless such tax or charge is imposed by law upon the holder, in which
case such taxes or charges shall be paid by the holder. The Company shall not
be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of
Series C Preferred Stock issuable upon exercise of this Warrant in any name
other than that of the holder, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the satisfaction of the
Company that no such tax or other charge is due.

                  Section 2.3. FRACTIONAL SHARES. The Company shall not be
required to issue a fractional share of Series C Preferred Stock upon
exercise of this Warrant. As to any fraction of a share which the holder of
this Warrant would otherwise be entitled to purchase upon such exercise, the
Company shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Current Market Price per share of
Common Stock on the date of exercise.

                                   ARTICLE 3.
                       TRANSFER, DIVISION AND COMBINATION

                  Section 3.1. TRANSFER. Subject to compliance with Section
8, transfer of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company referred to in Section 2.1 or the office or agency designated by the
Company pursuant to Section 11, together with a written assignment of this
Warrant substantially in the form of Exhibit B hereto duly executed by the
holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall, subject to Section 8, execute and
deliver a new Warrant or Warrants in the name(s) of the assignee or assignees
and in the denomination(s) specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A
Warrant, if properly assigned in compliance with Section 8, may be exercised
by a new holder for the purchase of shares of Series C Preferred Stock
without having a new Warrant issued.

                  Section 3.2. DIVISION AND COMBINATION. Subject to Section
8, this Warrant may be divided or combined with other Warrants for the
purchase of Series C Preferred Stock upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and

                                       6
<PAGE>

denominations in which new Warrants are to be issued, signed by the holder or
its agent or attorney. Subject to compliance with Section 3.1 and with
Section 8, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.

                  Section 3.3.  EXPENSES.  The Company shall prepare, issue
and deliver at its own expense (other than transfer taxes) the new Warrant or
Warrants under this Section 3.

                  Section 3.4.  MAINTENANCE OF BOOKS.  The Company agrees to
maintain, at its aforesaid office or agency, books for the registration and
the registration of transfer of the Warrants.

                                   ARTICLE 4.
                                  ADJUSTMENTS

                  The number of shares of Series C Preferred Stock for which
this Warrant is exercisable, or the price at which such shares may be
purchased upon exercise of this Warrant, shall be subject to adjustment from
time to time as set forth in this Section 4. The Company shall give the
holder notice of any event described below which requires an adjustment
pursuant to this Section 4 at the time of such event.

                  Section 4.1.  STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS
AND RECLASSIFICATIONS. If the Company shall at any time or from time to time
after the Issue Date:

                  (a) pay a dividend or make a distribution, on the outstanding
         shares of Series C Preferred Stock in Additional Shares of Series C
         Preferred Stock,

                  (b) subdivide its outstanding shares of Series C Preferred
         Stock into a larger number of shares of Series C Preferred Stock,

                  (c) combine its outstanding shares of Series C Preferred Stock
         into a smaller number of shares of Series C Preferred Stock, or

                  (d) issue by reclassification of its shares of Series C
         Preferred Stock any shares of capital stock of the Company,

then, and in each such case, the number of shares of Series C Preferred Stock
issuable upon exercise of the Warrants evidenced hereby immediately prior to
such event or the record date therefor, whichever is earlier, shall be
adjusted so that the holder of any Warrant evidenced hereby thereafter
exercised shall be entitled to receive the number of shares of Series C
Preferred Stock or other securities of the Company which such holder would

                                       7

<PAGE>

have owned or have been entitled to receive after the happening of any of the
events described above, had such Warrant been exercised immediately prior to the
happening of such event or the record date therefor, whichever is earlier. An
adjustment made pursuant to this Section 4.1 shall become effective (x) in the
case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of Series
C Preferred Stock entitled to receive such dividend or distribution, or (y) in
the case of any such subdivision, reclassification or combination, at the close
of business on the day upon which such corporate action becomes effective.

                  Section 4.2. ISSUANCE OF ADDITIONAL SHARES OF SERIES C
PREFERRED STOCK OR CONVERTIBLE SECURITIES. In the case the Corporation shall,
after the Issue Date, issue or sell:

                  (a)        Additional Shares of Series C Preferred Stock at a
         price per share, or

                  (b)        Convertible Securities having a Conversion Price
         per share,

less than the Current Market Price (for a period of 15 consecutive Trading Days
prior to such date), then, and in each such case, the number of shares of Series
C Preferred Stock issuable upon exercise of the Warrants evidenced hereby shall
be adjusted so that the holder of each Warrant evidenced hereby shall be
entitled to receive, upon the exercise thereof, the number of shares of Series C
Preferred Stock determined by multiplying (A) the number of shares of Series C
Preferred Stock issuable upon exercise of the Warrants evidenced hereby on the
day immediately prior to such date by (B) a fraction, the numerator of which
shall be the sum of (1) the number of shares of Series C Preferred Stock
outstanding on the date on which such shares or Convertible Securities are
issued and (2) the number of Additional Shares of Series C Preferred Stock
issued, or into which the Convertible Securities may convert, and the
denominator of which shall be the sum of (x) the number of shares of Series C
Preferred Stock outstanding on such date and (y) the number of shares of Series
C Preferred Stock which the aggregate consideration receivable by the Company
for the total number of shares of Series C Preferred Stock so issued, or the
number of shares of Series C Preferred Stock which the aggregate of the
Conversion Price of such Convertible Securities so issued, would purchase at the
Current Market Price on such date.

                  An adjustment made pursuant to this Section 4.2 shall be made
on the next Business Day following the date on which any such issuance is made
and shall be effective retroactively immediately after the close of business on
such date. For purposes of this Section 4.2, the aggregate consideration
receivable by the Company in connection with the issuance of any securities
shall be deemed to be the sum of the aggregate

                                  8
<PAGE>

offering price to the public (before deduction of underwriting discounts or
commissions and expenses payable to third parties), and the "Conversion
Price" of any Convertible Securities is the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities (before deduction of underwriting discounts or
commissions and expenses payable to third parties) plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon
the conversion, exchange or exercise of any such Convertible Securities.

                  Neither (A) the issuance of any shares of Series C Preferred
Stock (whether treasury shares or newly issued shares) pursuant to a dividend or
distribution on, or subdivision, combination or reclassification of, the
outstanding shares of Series C Preferred Stock requiring an adjustment in the
number of shares of Series C Preferred Stock issuable upon exercise of the
Warrants evidenced hereby pursuant to Section 4.1, or pursuant to any employee
benefit plan or program of the Company or pursuant to any option, warrant,
right, or Convertible Security outstanding as of the date hereof (including, but
not limited to, the Rights, the Series B Preferred Stock, the Series C Preferred
Stock and the Warrants) nor (B) the issuance of shares of Series C Preferred
Stock pursuant thereto shall be deemed to constitute an issuance of Series C
Preferred Stock or Convertible Securities by the Company to which this Section
4.2 applies.

                  Upon expiration of any Convertible Securities which shall not
have been exercised or converted and for which an adjustment shall have been
made pursuant to this Section 4.2, the Conversion Price computed upon the
original issue thereof shall upon expiration be recomputed as if the only
additional shares of Series C Preferred Stock issued were such shares of Series
C Preferred Stock (if any) actually issued upon exercise or conversion of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue of such
Convertible Securities (whether or not exercised or converted) plus the
consideration actually received by the Corporation upon such exercise of
conversion.

Section 4.2.0.0.0.1.1.  [Reserved]

                  Section 4.3.  OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION. The following provisions shall be applicable to the making of
adjustments provided for in this Section 4:

                  (a) For purposes of this Section 4, the number of shares of
         Series C Preferred Stock at any time outstanding shall not include any
         shares of Series C Preferred Stock then owned or held by or for the
         account of the Company.

                  (b) The term "dividend", as used in this Section 4 shall mean
         a dividend or other distribution upon stock of

                                  9
<PAGE>

         the Company except pursuant to the Rights Agreement. Notwithstanding
         anything in this Section 4 to the contrary, the number of shares of
         Series C Preferred Stock issuable upon exercise of the Warrants
         evidenced hereby shall not be adjusted as a result of any dividend,
         distribution or issuance of securities of the Company pursuant to
         the Rights Agreement.

                  (c) Notwithstanding anything in this Section 4 to the
         contrary, the Company shall not be required to give effect to any
         adjustment in the number of shares of Series C Preferred Stock issuable
         upon exercise of the Warrants evidenced hereby unless and until the net
         effect of one or more adjustments (each of which shall be carried
         forward), determined as above provided, shall have resulted in a change
         in the number of shares of Series C Preferred Stock issuable upon
         exercise of the Warrants evidenced hereby by at least one-hundredth of
         one share of Series C Preferred Stock, and when the cumulative net
         effect of more than one adjustment so determined shall be to change the
         number of shares of Series C Preferred Stock issuable upon exercise of
         the Warrants evidenced hereby by at least one-hundredth of one share of
         Series C Preferred Stock, such change in the number of shares of Series
         C Preferred Stock issuable upon exercise of the Warrants evidenced
         hereby shall thereupon be given effect.

                  (d) The certificate of any firm of independent public
         accountants of recognized standing selected by the Board of Directors
         of the Company (which may be the firm of independent public accountants
         regularly employed by the Company) shall be presumptively correct for
         any computation made under this Section 4.

                  (e) If the Company shall take a record of the holders of its
         Series C Preferred Stock for the purpose of entitling them to receive a
         dividend or other distribution, and shall thereafter and before the
         distribution to stockholders thereof legally abandon its plan to pay or
         deliver such dividend or distribution, then, no adjustment in the
         number of shares of Series C Preferred Stock issuable upon exercise of
         the Warrants evidenced hereby shall be required by reason of the taking
         of such record.

                  (f) There shall be no adjustment of the number of shares of
         Series C Preferred Stock issuable upon exercise of the Warrants
         evidenced hereby in case of the issuance of any stock of the Company in
         a merger, reorganization, acquisition or other similar transaction
         except as set forth in Sections 4.1, 4.2 and 4.5.

                  (g) Notwithstanding anything herein to the contrary, the
         Company agrees not to enter into any transaction which, by reason of
         any adjustment hereunder, would cause the

                                     10
<PAGE>

         Exercise Price to be less than the par value per share of Series C
         Preferred Stock.

                  (h) Upon each adjustment to the number of shares of Series C
         Preferred Stock issuable upon exercise of the Warrants pursuant to
         Sections 4.1, 4.2 or 4.3, the Exercise Price effective immediately
         prior to the making of such adjustment shall thereafter be adjusted to
         be the amount obtained by (i) multiplying (A) the applicable number of
         shares of Series C Preferred Stock issuable upon exercise of the
         Warrants immediately prior to such adjustment by (B) the Exercise Price
         in effect immediately prior to such adjustment and (ii) dividing the
         product so obtained by the number of shares of Series C Preferred Stock
         issuable upon exercise of the Warrants immediately after such
         adjustment.

                  Section 4.4. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS. In case of any reorganization or
reclassification of outstanding shares of Series C Preferred Stock (other than a
reclassification covered by Section 4.1), or in case of any consolidation or
merger of the Company with or into another corporation, or in the case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety (each of the foregoing being referred
to as a "Transaction"), each such Warrant then outstanding shall thereafter be
exercisable for, in lieu of the Series C Preferred Stock issuable upon such
exercise prior to consummation of the Transaction, the kind and amount of shares
of stock and other securities and property receivable (including cash) upon the
consummation of the Transaction by a holder of that number of shares of Series C
Preferred Stock issuable upon exercise of such Warrant immediately prior to the
Transaction (including, on a pro rata basis, the cash, securities or property
received by holders of Series C Preferred Stock in any tender or exchange offer
that is a step in the Transaction).

                  Section 4.5. NOTICES TO WARRANTHOLDERS. In case at any time or
from time to time, prior to the Expiration Date, the Company shall pay any
dividend or make any other distribution to the holders of its Series C Preferred
Stock, or shall offer for subscription pro rata to the holders of its Series C
Preferred Stock any additional shares of stock of any class or any other right,
or there shall be any capital reorganization or reclassification of the Series C
Preferred Stock of the Company or consolidation or merger of the Company with or
into another corporation, or any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety, or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company, then, in any one or more of said cases the Company shall give at
least 20 days' prior written notice (the time of mailing of such notice shall be
deemed to be the time of giving thereof) to the registered holder of the
Warrants evidenced hereby at its address as shown on the books of the Company
maintained by the Transfer

                                  11
<PAGE>

Agent thereof of the date on which (i) the books of the Company shall close
or a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or
winding up shall take place, as the case may be, provided that in the case of
any Transaction to which Section 4.5 applies the Company shall give at least
30 days' prior written notice as aforesaid. Such notice shall also specify
the date as of which the holders of the Series C Preferred Stock of record
shall participate in said dividend, distribution or subscription rights or
shall be entitled to exchange their Series C Preferred Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.

                  Section 4.6. CERTIFICATES. Upon any adjustment of the number
of shares of Series C Preferred Stock issuable upon exercise of the Warrants
evidenced hereby or of the Exercise Price, then, and in each such case, the
Company shall promptly deliver to the holders of the Warrants and the Series C
Preferred Stock, a certificate signed by the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company setting forth in reasonable detail the event requiring
the adjustment and the method by which such adjustment was calculated and
specifying the increased or decreased number of shares of Series C Preferred
Stock issuable upon exercise of the Warrants evidenced hereby and the Exercise
Price then in effect following such adjustment.

                                   ARTICLE 5.
                                  NO IMPAIRMENT

                  The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the holder of the Warrant against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any shares of Series C Preferred Stock receivable upon the exercise of this
Warrant above the Exercise Price immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Series C Preferred Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (c) use its best efforts

                                  12
<PAGE>

to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.

                  Upon the request of the holder of the Warrant, the Company
will at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to the holder of this Warrant, the continuing
validity of this Warrant and the obligations of the Company hereunder.

                                   ARTICLE 6.
                        RESERVATION AND AUTHORIZATION OF
                 SERIES C PREFERRED STOCK; REGISTRATION WITH OR
                     APPROVAL OF ANY GOVERNMENTAL AUTHORITY

                  The Company covenants and agrees that, until the Expiration
Date, the Company shall at all times reserve and keep available for issue upon
the exercise of Warrants such number of its authorized but unissued shares of
Series C Preferred Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants. All shares of Series C Preferred Stock which shall be
so issuable, when issued upon exercise of Warrants and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued,
fully paid and nonassessable and free and clear of any liens, claims and
restrictions (other than as provided herein). No stockholder of the Company has
or shall have any preemptive rights to subscribe for such shares of Series C
Preferred Stock.

                  Before taking any action which would result in an adjustment
in the number of shares of Series C Preferred Stock for which this Warrant is
exercisable or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

                                   ARTICLE 7.
                        STOCK AND WARRANT TRANSFER BOOKS

                  The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.

                                   ARTICLE 8.
                         RESTRICTIONS ON TRANSFERABILITY

                  The Warrants and the Warrant Stock shall not be transferred
before satisfaction of the conditions specified in this Section 8, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and state securities laws with respect to the Transfer of any
Warrant or

                                       13
<PAGE>

any Warrant Stock. The holder, by acceptance of this Warrant, agrees to be
bound by the provisions of this Section 8.

                  Section 8.1.  RESTRICTIVE LEGEND.

                  (a) Except as otherwise provided in this Section 8, each
         certificate for Warrant Stock initially issued upon the exercise of
         this Warrant, and each certificate for Warrant Stock issued to any
         subsequent transferee of any such certificate, shall be stamped or
         otherwise imprinted with a legend in substantially the following form:

                  "The shares represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended, or
                  the securities laws of any state and are subject to the
                  conditions specified in a certain Warrant dated May [___]
                  2000, originally issued by Aames Financial Corporation. The
                  shares represented by this certificate may not be transferred
                  in violation of such Act and laws, the rules and regulations
                  thereunder or the provisions of the Warrant. A copy of the
                  form of said Warrant is on file with the Secretary of Aames
                  Financial Corporation. The holder of this certificate, by
                  acceptance of this certificate, agrees to be bound by the
                  provisions of such Warrant."

                  (b) Except as otherwise provided in this Section 8, each
         Warrant shall be stamped or otherwise imprinted with a legend in
         substantially the following form:

                  "This Warrant and the securities represented hereby have not
                  been registered under the Securities Act of 1933, as amended,
                  or the securities laws of any state and may not be sold or
                  otherwise transferred in the absence of such registration or
                  an exemption therefrom under such Act and under any such
                  applicable state laws, or in violation of the provisions of
                  this Warrant."

                  Section 8.2. TRANSFERS. Prior to any transfer or attempted
transfer of any Warrants or any shares of Restricted Series C Preferred Stock,
the holder of such Warrants or Restricted Series C Preferred Stock shall give
notice (a "Transfer Notice") to the Company of such holder's intention to effect
such transfer, describing the manner and circumstances of the proposed transfer,
and obtain from counsel a written opinion addressed and reasonably satisfactory
to the Company that the proposed transfer of such Warrants or such Restricted
Series C Preferred Stock may be effected without registration under the
Securities Act and applicable state securities laws. After receipt of the
Transfer Notice and written opinion, the Company

                                     14
<PAGE>

shall, within two Business Days thereof, so notify the holder of such
Warrants or such Restricted Series C Preferred Stock and such holder shall
thereupon be entitled to transfer such warrants or such Restricted Series C
Preferred Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Series C Preferred
Stock issued upon such transfer shall bear the restrictive legend set forth
in Section 8.1(a), and each Warrant issued upon such transfer shall bear the
restrictive legend set forth in Section 8.1(b), unless in the written opinion
of counsel addressed to the Company such legend is not required in order to
ensure compliance with the Securities Act.

                  Section 8.3. TERMINATION OF RESTRICTIONS. Notwithstanding the
foregoing provisions of Section 8, the restrictions imposed by this Section 8
upon the transferability of the Warrants, the Warrant Stock and the Restricted
Series C Preferred Stock (or Series C Preferred Stock issuable upon the exercise
of the Warrants) and the legend requirements of Section 8.1 shall terminate as
to any particular Warrant or share of Warrant Stock or Restricted Series C
Preferred Stock (or Series C Preferred Stock issuable upon the exercise of the
Warrants) (i) as to the Warrant Stock and Restricted Series C Preferred Stock,
when and so long as the resale of such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto, or (ii) as
to the Warrant, Warrant Stock and Restricted Series C Preferred Stock, when the
holder of the Warrant, Warrant Stock or Restricted Series C Preferred Stock
shall have delivered to the Company the written opinion of counsel addressed and
reasonably satisfactory to the Company stating that such legend is not required
in order to ensure compliance with the Securities Act. Whenever the restrictions
imposed by this Section shall terminate as to any share of Restricted Series C
Preferred Stock, as hereinabove provided, the holder thereof shall be entitled
to receive from the Company, at the Company's expense (except for any transfer
taxes), a new certificate representing such Series C Preferred Stock not bearing
the restrictive legend set forth in Section 8.1(a).

                                   ARTICLE 9.
                              SUPPLYING INFORMATION

                  The Company shall cooperate with the holder of the Warrant and
the holder of Restricted Series C Preferred Stock in supplying such information
as may be reasonably requested by such holder or reasonably necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrant or Restricted
Series C Preferred Stock.

                                       15
<PAGE>

                                   ARTICLE 10.
                               LOSS OR MUTILATION

                  Upon receipt by the Company from any holder of evidence
reasonably satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
the holder; PROVIDED, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.

                                   ARTICLE 11.
                              OFFICE OF THE COMPANY

                  As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.

                                   ARTICLE 12.
                               REGISTRATION RIGHTS

                  The Warrant Stock issuable upon exercise of this Warrant are
entitled to the benefits of the Registration Rights Agreement. The Company shall
keep a copy of the Registration Rights Agreement, and any amendments thereto, at
the office or agency designated by the Company pursuant to Section 11 and shall
furnish copies thereof to the holder upon request.

                                   ARTICLE 13.
                             LIMITATION OF LIABILITY

                  No provision hereof, in the absence of affirmative action by
the holder to purchase shares of Series C Preferred Stock, and no enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of the holder for the purchase price of any Series C Preferred Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

                                   ARTICLE 14.
                            REPRESENTATION OF HOLDER

                  The holder represents that it is acquiring the Warrant and the
Warrant Stock for the purpose of investment and not with a view to the resale or
distribution hereof or thereof; PROVIDED, that the disposition of holder's
property shall at all times be and remain within its control.

                                        16
<PAGE>

                                   ARTICLE 15.
                                  MISCELLANEOUS

                  Section 15.1. NONWAIVER AND EXPENSES. No course of dealing or
any delay or failure to exercise any right hereunder on the part of the parties
shall operate as a waiver of such right or otherwise prejudice the parties'
rights, powers or remedies. If the Company fails to comply with any provision of
this Warrant, the Company shall pay to the holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees incurred by the holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

                  Section 15.2. NO RIGHTS AS STOCKHOLDER. The Person in whose
name this Warrant is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes. The registered holder of this
Warrant shall not be entitled to any rights whatsoever as a stockholder of the
Company except as herein provided.

                  Section 15.3. NOTICE GENERALLY. Any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

                  (a) If to the holder, at its last known address appearing on
         the books of the Company maintained for such purpose.

                  (b)        If to the Company:

                             Aames Financial Corporation
                             2 California Plaza
                             350 South Grand Avenue
                             Los Angeles, California 90071
                             Attention:  Corporate Secretary
                             Fax No.: (323) 210-5026

                             with a copy to:

                             Troop Steuber Pasich Reddick & Tobey
                             2029 Century Park East
                             Los Angeles, California 90067
                             Attention:  C. N. Franklin Reddick, Esq.
                             Fax No.: (310) 728-2204

or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may

                                 17
<PAGE>

be waived in writing by the party entitled to receive such notice. Every
notice, demand, request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly given or served on
the date on which personally delivered, with receipt acknowledged, or three
(3) Business Days after the same shall have been deposited in the United
States mail.

                  Section 15.4. SUCCESSORS AND ASSIGNS. Subject to the
provisions of Sections 3.1 and 8, (i) this Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of
the Company and the successors and assigns of the holder, and (ii) the
provisions of this Warrant are intended to be for the benefit of all holders
from time to time of this Warrant, and shall be enforceable by any such
holders.

                  Section 15.5.  AMENDMENT.  The Warrants may be modified or
amended or the provisions thereof waived with the written consent of the
Company and the holders of the majority of the portion of this Warrant then
outstanding.

                  Section 15.6. SEVERABILITY. Wherever possible, each
provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant.

                  Section 15.7.  HEADINGS.  The headings used in this Warrant
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.

                  Section 15.8.  GOVERNING LAW.  This Warrant shall be
governed by and construed in accordance with the laws of the State of
Delaware, without giving effect to conflicts of law principles thereof.

                  Section 15.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
WARRANT.

                                      18
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Warrant to
be duly executed by its authorized officer on June 7, 2000.

                                         AAMES FINANCIAL CORPORATION

                                         By:
                                            -------------------------
                                            Name:
                                            Title:

                                      19
<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

                  The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for the purchase of _____ Shares of Series
C Preferred Stock of AAMES FINANCIAL CORPORATION and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Series C Preferred
Stock hereby purchased (and any securities or other property issuable upon
such exercise) be issued in the name of and delivered to __________________
whose address is ____________________ and, if such shares of Series C
Preferred Stock shall not include all of the shares of Series C Preferred
Stock issuable as provided in this Warrant, that a new Warrant of like tenor
and date for the balance of the shares of Series C Preferred Stock issuable
hereunder be delivered to the undersigned.

______________________                   (Name of Registered Owner)

______________________                   (Signature of Registered owner)

______________________                   (Street Address)

______________________                   (City) (State) (Zip Code)

NOTICE:           The signature on this subscription must correspond with the
                  name as written upon the face of the within Warrant in every
                  particular, without alteration or enlargement or any change
                  whatsoever.

<PAGE>

                                    EXHIBIT B

                                 ASSIGNMENT FORM

                  FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the
number of shares of Series C Preferred Stock set forth below:

Name and Address of Assignee           No. of Shares of Series C
Preferred Stock

and does hereby irrevocably constitute and appoint _________________
attorney-in-fact to register such transfer on the books of AAMES FINANCIAL
CORPORATION maintained for the purpose, with full power of substitution in
the premises.

Dated:______________________________________

Name:_______________________________________

Signature:__________________________________

Witness:____________________________________

NOTICE:           The signature on this assignment must correspond with the name
                  as written upon the face of the within Warrant in every
                  particular, without alteration or enlargement or any change
                  whatsoever.

<PAGE>

THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY SUCH
APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS WARRANT.

                                     WARRANT

               To Purchase Series D Convertible Preferred Stock of

                           AAMES FINANCIAL CORPORATION

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page

<S>                                                                                                              <C>
ARTICLE 1. DEFINITIONS............................................................................................1

ARTICLE 2. EXERCISE OF WARRANT....................................................................................4
         Section 2.1.  Manner of Exercise.........................................................................4
         Section 2.2.  Payment of Taxes...........................................................................6
         Section 2.3.  Fractional Shares..........................................................................6

ARTICLE 3. TRANSFER, DIVISION AND COMBINATION.....................................................................6
         Section 3.1.  Transfer...................................................................................6
         Section 3.2.  Division and Combination...................................................................6
         Section 3.3.  Expenses...................................................................................7
         Section 3.4.  Maintenance of Books.......................................................................7

ARTICLE 4. ADJUSTMENTS............................................................................................7
         Section 4.1. Stock Dividends, Subdivisions, Combinations and Reclassifications...........................7
         Section 4.2. Issuance of Additional Shares of Common Stock or Convertible Securities.....................8
         Section 4.3. Other Provisions Applicable to Adjustments Under This Section...............................9
         Section 4.4. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets...........11
         Section 4.5. Notices....................................................................................11
         Section 4.6. Certificates...............................................................................12

ARTICLE 5. NO IMPAIRMENT.........................................................................................12

ARTICLE 6. RESERVATION AND AUTHORIZATION OF  SERIES D PREFERRED STOCK; REGISTRATION WITH OR  APPROVAL OF
                      ANY GOVERNMENTAL AUTHORITY.................................................................13

ARTICLE 7. STOCK AND WARRANT TRANSFER BOOKS......................................................................13

ARTICLE 8. RESTRICTIONS ON TRANSFERABILITY.......................................................................13
         Section 8.1.  Restrictive Legend........................................................................14
         Section 8.2.  Transfers.................................................................................14
         Section 8.3.  Termination of Restrictions...............................................................15

ARTICLE 9. SUPPLYING INFORMATION.................................................................................15

ARTICLE 10. LOSS OR MUTILATION...................................................................................16

ARTICLE 11. OFFICE OF THE COMPANY................................................................................16

ARTICLE 12. REGISTRATION RIGHTS..................................................................................16

ARTICLE 13. LIMITATION OF LIABILITY..............................................................................16

ARTICLE 14. REPRESENTATION OF HOLDER.............................................................................16

                                       i
<PAGE>

ARTICLE 15. MISCELLANEOUS........................................................................................17
         Section 15.1.  Nonwaiver and Expenses...................................................................17
         Section 15.2.  No Rights As Stockholder.................................................................17
         Section 15.3.  Notice Generally.........................................................................17
         Section 15.4.  Successors and Assigns...................................................................18
         Section 15.5.  Amendment................................................................................18
         Section 15.6.  Severability.............................................................................18
         Section 15.7.  Headings.................................................................................18
         Section 15.8.  Governing Law............................................................................18
         Section 15.10. Mutual Waiver of Jury Trial..............................................................18
</TABLE>

                                      ii
<PAGE>

THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY SUCH
APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS WARRANT.

                                     WARRANT

                        To Purchase [5,000,000] Shares of

                     Series D Convertible Preferred Stock of

                           AAMES FINANCIAL CORPORATION

                  THIS IS TO CERTIFY THAT Specialty Finance Partners, a
Bermuda general partnership ("SFP") or its registered assigns, is entitled,
at any time prior to June __, 2005 (the "Expiration Date"), to purchase from
Aames Financial Corporation, a Delaware corporation (the "Company"),
[5,000,000] shares of Series D Convertible Preferred Stock, par value $0.001
per share, of the Company (the "Series D Preferred Stock"), subject to
adjustment as provided herein, in whole or in part, including fractional
parts, at a purchase price of $[_____]per share (the "Exercise Price"),
subject to adjustment as set forth herein, all on the terms and conditions
and pursuant to the provisions hereinafter set forth. Notwithstanding
anything to the contrary set forth in this Warrant, this Warrant shall not be
exercisable by the holder hereof until the day on which the Company files a
Certificate of Designations relating to the Series D Preferred Stock with the
Secretary of State of the State of Delaware. Capitalized terms not otherwise
defined herein are used as defined in the Preferred Stock Purchase Agreement.

                                   ARTICLE 1.
                                   DEFINITIONS

                  As used in this Warrant, the following terms have the
respective meanings set forth below:

                  "Additional Shares of Series D Preferred Stock" shall mean
all shares of Series D Preferred Stock issued by the Company after the Issue
Date, other than Warrant Stock.

                  "Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.

                  "SFP" shall have the meaning set forth in the first
paragraph hereof.

<PAGE>

                  "Commission" shall mean the Securities and Exchange
Commission.

                  "Common Stock" shall mean the Common Stock of the Company,
par value $0.001 per share.

                  "Company" shall have the meaning set forth in the first
paragraph hereof.

                  "Conversion Price" shall have the meaning set forth in
Section 4.2 hereof.

                  "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are convertible into
or exchangeable, with or without payment of additional consideration in cash
or property, for Additional Shares of Series D Preferred Stock, either
immediately or upon the occurrence of a specified date or a specified event.

                  "Current Market Price" shall mean, when used with reference
to shares of Series D Preferred Stock, the closing price per share of Common
Stock on such date and, when used with reference to shares of Series D
Preferred Stock for any period shall mean the average of the daily closing
prices per share of Common Stock for such period. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Common Stock is not listed or admitted
to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last quoted sale
price or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. National Market System is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in the Common Stock selected by
the Board of Directors of the Corporation. If the Common Stock is not
publicly held or so listed or publicly traded, "Current Market Price" shall
mean the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the
Corporation based on an opinion of an independent investment banking firm
with an established national reputation as a value of securities, which
opinion may be based on such assumption as such firm shall deem to be
necessary and appropriate.

                                       2
<PAGE>

                  "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder.

                  "Exercise Price" shall have the meaning set forth in the
first paragraph hereof.

                  "Expiration Date" shall have the meaning set forth in the
first paragraph hereof.

                  "Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.

                  "GAAP" shall mean generally accepted accounting principles
in the United States of America as from time to time in effect.

                  "holder" shall mean, as the context requires, the Person in
whose name this Warrant is registered on the books of the Company maintained
for such purpose and/or the Person holding any Warrant Stock.

                  "Issue Date" shall mean the date on which this Warrant is
issued.

                  "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, corporation or other entity and shall
include any successor (by merger or otherwise) of such entity.

                  "Preferred Stock Purchase Agreement" shall mean the
Preferred Stock Purchase Agreement, dated as of May __, 2000 between the
Company and SFP.

                  "Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of December 23, 1999, between the Company and
Capital Z Financial Services Fund II, L.P.

                  "Restricted Series D Preferred Stock" shall mean shares of
Series D Preferred Stock which are, or which upon their issuance on the
exercise of this Warrant would be, evidenced by a certificate bearing the
restrictive legend set forth in Section 8.1(a).

                  "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.

                  "Series B Preferred Stock" shall mean the Series B
Convertible Preferred Stock of the Company, par value $0.001 per share.

                                       3
<PAGE>

                  "Series D Preferred Stock" shall mean the Series D
Convertible Preferred Stock of the Company, par value $0.001 per share.

                  "Subsidiary" shall mean any corporation of which an
aggregate of more than 50% of the outstanding stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by the Company and/or one or more Subsidiaries of the
Company.

                  "Trading Day" means a day on which the principal national
securities exchange on which the Series D Preferred Stock is listed or
admitted to trading is open for the transaction of business or, if the Series
D Preferred Stock is not listed or admitted to trading on any national
securities exchange, a Business Day.

                  "Transaction" shall have the meaning set forth in Section
4.5 hereof.

                  "transfer" shall mean any transfer, sale, encumbrance,
hypothecation or other disposition of this Warrant or any Warrant Stock or of
any interest in either thereof.

                  "Transfer Notice" shall have the meaning set forth in
Section 8.2.

                  "Warrant Price" shall mean an amount equal to (i) the
number of shares of Series D Preferred Stock being purchased upon exercise of
this Warrant pursuant to Section 2.1, multiplied by (ii) the Exercise Price
as of the date of such exercise.

                  "Warrant Stock" shall mean the shares of Series D Preferred
Stock purchased by the holder of this Warrant upon the exercise thereof.

                                   ARTICLE 2.
                               EXERCISE OF WARRANT

                  Section 2.1. MANNER OF EXERCISE. From and after the date
hereof and until 5:00 P.M., New York time, on the Expiration Date, the holder
may exercise this Warrant for all or any part of the number of shares of
Series D Preferred Stock purchasable hereunder.

                  In order to exercise this Warrant, in whole or in part, the
holder shall deliver to the Company at its office at 2 California Plaza, 350
South Grand Avenue, 52nd Floor, Los Angeles, California 90071, or at the
office or agency designated by the Company pursuant to Section 11, (i) a
written notice of

                                       4
<PAGE>

the holder's election to exercise this Warrant, which notice shall specify
the number of shares of Series D Preferred Stock to be purchased, (ii)
payment of the Warrant Price in the manner provided below, and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription
form appearing at the end of this Warrant as Exhibit A, duly executed by or
on behalf of the holder. Upon receipt thereof, the Company shall, as promptly
as practicable, and in any event within five (5) Business Days thereafter,
execute or cause to be executed and deliver or cause to be delivered to the
holder a certificate or certificates representing the aggregate number of
full shares of Series D Preferred Stock issuable upon such exercise, together
with cash in lieu of any fraction of a share, as hereinafter provided. The
stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such holder shall request
in the notice and shall be registered in the name of the holder or, subject
to Section 8, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the notice,
together with the cash, check or checks and/or securities, if any, and this
Warrant, are received by the Company as described above and all taxes
required to be paid by the holder, if any, pursuant to Section 2.2 prior to
the issuance of such shares have been paid. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock, deliver to the holder
a new Warrant evidencing the rights of the holder to purchase the unpurchased
shares of Series D Preferred Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or, at
the request of the holder, appropriate notation may be made on this Warrant
and the same returned to the holder.

                  Payment of the Warrant Price shall be made at the option of
the holder by cash, wire transfer to an account in a bank located in the
United States designated for such purpose by the Company, or certified or
official bank check, or by transfer to the Company of shares of Series B
Preferred Stock or Series D Preferred Stock, or any combination thereof. In
the event of the application shares of Series B Preferred Stock or Series D
Preferred Stock to the payment of the Warrant Price, the amount to be
credited to the payment of the Warrant Price shall be stated value per share
(as described in the Company's Certificate of Incorporation, as amended) plus
an amount per share equal to all accrued and unpaid dividends thereon,
whether or not declared, to the date of such exercise, provided that no such
credit shall be made with respect to any such dividends if the holder of such
shares held such shares on the record date therefor.

                                       5
<PAGE>

                  Section 2.2. PAYMENT OF TAXES. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges
that may be imposed with respect to, the issue or delivery of the Warrant
Shares, unless such tax or charge is imposed by law upon the holder, in which
case such taxes or charges shall be paid by the holder. The Company shall not
be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of
Series D Preferred Stock issuable upon exercise of this Warrant in any name
other than that of the holder, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the satisfaction of the
Company that no such tax or other charge is due.

                  Section 2.3. FRACTIONAL SHARES. The Company shall not be
required to issue a fractional share of Series D Preferred Stock upon
exercise of this Warrant. As to any fraction of a share which the holder of
this Warrant would otherwise be entitled to purchase upon such exercise, the
Company shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Current Market Price per share of
Common Stock on the date of exercise.

                                   ARTICLE 3.
                       TRANSFER, DIVISION AND COMBINATION

                  Section 3.1. TRANSFER. Subject to compliance with Section
8, transfer of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company referred to in Section 2.1 or the office or agency designated by the
Company pursuant to Section 11, together with a written assignment of this
Warrant substantially in the form of Exhibit B hereto duly executed by the
holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall, subject to Section 8, execute and
deliver a new Warrant or Warrants in the name(s) of the assignee or assignees
and in the denomination(s) specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A
Warrant, if properly assigned in compliance with Section 8, may be exercised
by a new holder for the purchase of shares of Series D Preferred Stock
without having a new Warrant issued.

                  Section 3.2. DIVISION AND COMBINATION. Subject to Section
8, this Warrant may be divided or combined with other Warrants for the
purchase of Series D Preferred Stock upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and

                                       6
<PAGE>

denominations in which new Warrants are to be issued, signed by the holder or
its agent or attorney. Subject to compliance with Section 3.1 and with
Section 8, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.

                  Section 3.3.  EXPENSES.  The Company shall prepare, issue
and deliver at its own expense (other than transfer taxes) the new Warrant or
Warrants under this Section 3.

                  Section 3.4.  MAINTENANCE OF BOOKS.  The Company agrees to
maintain, at its aforesaid office or agency, books for the registration and
the registration of transfer of the Warrants.

                                   ARTICLE 4.
                                  ADJUSTMENTS

                  The number of shares of Series D Preferred Stock for which
this Warrant is exercisable, or the price at which such shares may be
purchased upon exercise of this Warrant, shall be subject to adjustment from
time to time as set forth in this Section 4. The Company shall give the
holder notice of any event described below which requires an adjustment
pursuant to this Section 4 at the time of such event.

                  Section 4.1.  STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS
AND RECLASSIFICATIONS. If the Company shall at any time or from time to time
after the Issue Date:

                  (a) pay a dividend or make a distribution, on the outstanding
         shares of Series D Preferred Stock in Additional Shares of Series D
         Preferred Stock,

                  (b) subdivide its outstanding shares of Series D Preferred
         Stock into a larger number of shares of Series D Preferred Stock,

                  (c) combine its outstanding shares of Series D Preferred Stock
         into a smaller number of shares of Series D Preferred Stock, or

                  (d) issue by reclassification of its shares of Series D
         Preferred Stock any shares of capital stock of the Company,

then, and in each such case, the number of shares of Series D Preferred Stock
issuable upon exercise of the Warrants evidenced hereby immediately prior to
such event or the record date therefor, whichever is earlier, shall be
adjusted so that the holder of any Warrant evidenced hereby thereafter
exercised shall be entitled to receive the number of shares of Series D
Preferred Stock or other securities of the Company which such holder would

                                       7

<PAGE>

have owned or have been entitled to receive after the happening of any of the
events described above, had such Warrant been exercised immediately prior to the
happening of such event or the record date therefor, whichever is earlier. An
adjustment made pursuant to this Section 4.1 shall become effective (x) in the
case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of Series
D Preferred Stock entitled to receive such dividend or distribution, or (y) in
the case of any such subdivision, reclassification or combination, at the close
of business on the day upon which such corporate action becomes effective.

                  Section 4.2.  ISSUANCE OF ADDITIONAL SHARES OF SERIES D
PREFERRED STOCK OR CONVERTIBLE SECURITIES. In the case the Corporation shall,
after the Issue Date, issue or sell:

                  (a)      Additional Shares of Series D Preferred Stock at a
price per share, or

                  (b)      Convertible Securities having a Conversion Price per
share,

less than the Current Market Price (for a period of 15 consecutive Trading Days
prior to such date), then, and in each such case, the number of shares of Series
D Preferred Stock issuable upon exercise of the Warrants evidenced hereby shall
be adjusted so that the holder of each Warrant evidenced hereby shall be
entitled to receive, upon the exercise thereof, the number of shares of Series D
Preferred Stock determined by multiplying (A) the number of shares of Series D
Preferred Stock issuable upon exercise of the Warrants evidenced hereby on the
day immediately prior to such date by (B) a fraction, the numerator of which
shall be the sum of (1) the number of shares of Series D Preferred Stock
outstanding on the date on which such shares or Convertible Securities are
issued and (2) the number of Additional Shares of Series D Preferred Stock
issued, or into which the Convertible Securities may convert, and the
denominator of which shall be the sum of (x) the number of shares of Series D
Preferred Stock outstanding on such date and (y) the number of shares of Series
D Preferred Stock which the aggregate consideration receivable by the Company
for the total number of shares of Series D Preferred Stock so issued, or the
number of shares of Series D Preferred Stock which the aggregate of the
Conversion Price of such Convertible Securities so issued, would purchase at the
Current Market Price on such date.

                  An adjustment made pursuant to this Section 4.2 shall be made
on the next Business Day following the date on which any such issuance is made
and shall be effective retroactively immediately after the close of business on
such date. For purposes of this Section 4.2, the aggregate consideration
receivable by the Company in connection with the issuance of any securities
shall be deemed to be the sum of the aggregate

                                      8
<PAGE>

offering price to the public (before deduction of underwriting discounts or
commissions and expenses payable to third parties), and the "Conversion
Price" of any Convertible Securities is the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities (before deduction of underwriting discounts or
commissions and expenses payable to third parties) plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon
the conversion, exchange or exercise of any such Convertible Securities.

                  Neither (A) the issuance of any shares of Series D Preferred
Stock (whether treasury shares or newly issued shares) pursuant to a dividend or
distribution on, or subdivision, combination or reclassification of, the
outstanding shares of Series D Preferred Stock requiring an adjustment in the
number of shares of Series D Preferred Stock issuable upon exercise of the
Warrants evidenced hereby pursuant to Section 4.1, or pursuant to any employee
benefit plan or program of the Company or pursuant to any option, warrant,
right, or Convertible Security outstanding as of the date hereof (including, but
not limited to, the Rights, the Series B Preferred Stock, the Series D Preferred
Stock and the Warrants) nor (B) the issuance of shares of Series D Preferred
Stock pursuant thereto shall be deemed to constitute an issuance of Series D
Preferred Stock or Convertible Securities by the Company to which this Section
4.2 applies.

                  Upon expiration of any Convertible Securities which shall not
have been exercised or converted and for which an adjustment shall have been
made pursuant to this Section 4.2, the Conversion Price computed upon the
original issue thereof shall upon expiration be recomputed as if the only
additional shares of Series D Preferred Stock issued were such shares of Series
D Preferred Stock (if any) actually issued upon exercise or conversion of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue of such
Convertible Securities (whether or not exercised or converted) plus the
consideration actually received by the Corporation upon such exercise of
conversion.

Section 4.2.0.0.0.1.1.  [Reserved]

                  Section 4.3.  OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION. The following provisions shall be applicable to the making of
adjustments provided for in this Section 4:

                  (a)      For purposes of this Section 4, the number of shares
         of Series D Preferred Stock at any time outstanding shall not include
         any shares of Series D Preferred Stock then owned or held by or for the
         account of the Company.

                  (b)      The term "dividend", as used in this Section 4 shall
         mean a dividend or other distribution upon stock of

                                      9
<PAGE>

         the Company except pursuant to the Rights Agreement. Notwithstanding
         anything in this Section 4 to the contrary, the number of shares of
         Series D Preferred Stock issuable upon exercise of the Warrants
         evidenced hereby shall not be adjusted as a result of any dividend,
         distribution or issuance of securities of the Company pursuant to the
         Rights Agreement.

                  (c)      Notwithstanding anything in this Section 4 to the
         contrary, the Company shall not be required to give effect to any
         adjustment in the number of shares of Series D Preferred Stock issuable
         upon exercise of the Warrants evidenced hereby unless and until the net
         effect of one or more adjustments (each of which shall be carried
         forward), determined as above provided, shall have resulted in a change
         in the number of shares of Series D Preferred Stock issuable upon
         exercise of the Warrants evidenced hereby by at least one-hundredth of
         one share of Series D Preferred Stock, and when the cumulative net
         effect of more than one adjustment so determined shall be to change the
         number of shares of Series D Preferred Stock issuable upon exercise of
         the Warrants evidenced hereby by at least one-hundredth of one share of
         Series D Preferred Stock, such change in the number of shares of Series
         D Preferred Stock issuable upon exercise of the Warrants evidenced
         hereby shall thereupon be given effect.

                  (d)      The certificate of any firm of independent public
         accountants of recognized standing selected by the Board of Directors
         of the Company (which may be the firm of independent public accountants
         regularly employed by the Company) shall be presumptively correct for
         any computation made under this Section 4.

                  (e)      If the Company shall take a record of the holders of
         its Series D Preferred Stock for the purpose of entitling them to
         receive a dividend or other distribution, and shall thereafter and
         before the distribution to stockholders thereof legally abandon its
         plan to pay or deliver such dividend or distribution, then, no
         adjustment in the number of shares of Series D Preferred Stock issuable
         upon exercise of the Warrants evidenced hereby shall be required by
         reason of the taking of such record.

                  (f)      There shall be no adjustment of the number of shares
         of Series D Preferred Stock issuable upon exercise of the Warrants
         evidenced hereby in case of the issuance of any stock of the Company in
         a merger, reorganization, acquisition or other similar transaction
         except as set forth in Sections 4.1, 4.2 and 4.5.

                  (g)      Notwithstanding anything herein to the contrary, the
         Company agrees not to enter into any transaction which, by reason of
         any adjustment hereunder, would cause the

                                      10
<PAGE>

         Exercise Price to be less than the par value per share of Series D
         Preferred Stock.

                  (h)      Upon each adjustment to the number of shares of
         Series D Preferred Stock issuable upon exercise of the Warrants
         pursuant to Sections 4.1, 4.2 or 4.3, the Exercise Price effective
         immediately prior to the making of such adjustment shall thereafter be
         adjusted to be the amount obtained by (i) multiplying (A) the
         applicable number of shares of Series D Preferred Stock issuable upon
         exercise of the Warrants immediately prior to such adjustment by (B)
         the Exercise Price in effect immediately prior to such adjustment and
         (ii) dividing the product so obtained by the number of shares of Series
         D Preferred Stock issuable upon exercise of the Warrants immediately
         after such adjustment.

                  Section 4.4.  REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS. In case of any reorganization or
reclassification of outstanding shares of Series D Preferred Stock (other than a
reclassification covered by Section 4.1), or in case of any consolidation or
merger of the Company with or into another corporation, or in the case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety (each of the foregoing being referred
to as a "Transaction"), each such Warrant then outstanding shall thereafter be
exercisable for, in lieu of the Series D Preferred Stock issuable upon such
exercise prior to consummation of the Transaction, the kind and amount of shares
of stock and other securities and property receivable (including cash) upon the
consummation of the Transaction by a holder of that number of shares of Series D
Preferred Stock issuable upon exercise of such Warrant immediately prior to the
Transaction (including, on a pro rata basis, the cash, securities or property
received by holders of Series D Preferred Stock in any tender or exchange offer
that is a step in the Transaction).

                  Section 4.5.  NOTICES TO WARRANTHOLDERS. In case at any
time or from time to time, prior to the Expiration Date, the Company shall
pay any dividend or make any other distribution to the holders of its Series
D Preferred Stock, or shall offer for subscription pro rata to the holders of
its Series D Preferred Stock any additional shares of stock of any class or
any other right, or there shall be any capital reorganization or
reclassification of the Series D Preferred Stock of the Company or
consolidation or merger of the Company with or into another corporation, or
any sale or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, or there shall be a voluntary
or involuntary dissolution, liquidation or winding up of the Company, then,
in any one or more of said cases the Company shall give at least 20 days'
prior written notice (the time of mailing of such notice shall be deemed to
be the time of giving thereof) to the registered holder of the Warrants
evidenced hereby at its address as shown on the books of the Company
maintained by the Transfer

                                      11
<PAGE>

Agent thereof of the date on which (i) the books of the Company shall close
or a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or
winding up shall take place, as the case may be, provided that in the case of
any Transaction to which Section 4.5 applies the Company shall give at least
30 days' prior written notice as aforesaid. Such notice shall also specify
the date as of which the holders of the Series D Preferred Stock of record
shall participate in said dividend, distribution or subscription rights or
shall be entitled to exchange their Series D Preferred Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.

                  Section 4.6.  CERTIFICATES. Upon any adjustment of the
number of shares of Series D Preferred Stock issuable upon exercise of the
Warrants evidenced hereby or of the Exercise Price, then, and in each such
case, the Company shall promptly deliver to the holders of the Warrants and
the Series D Preferred Stock, a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Company setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased number of shares of
Series D Preferred Stock issuable upon exercise of the Warrants evidenced
hereby and the Exercise Price then in effect following such adjustment.

                                   ARTICLE 5.
                                  NO IMPAIRMENT

                  The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the holder of the Warrant against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any shares of Series D Preferred Stock receivable upon the exercise of this
Warrant above the Exercise Price immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Series D Preferred Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (c) use its best efforts

                                      12
<PAGE>

to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.

                  Upon the request of the holder of the Warrant, the Company
will at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to the holder of this Warrant, the continuing
validity of this Warrant and the obligations of the Company hereunder.

                                   ARTICLE 6.
                        RESERVATION AND AUTHORIZATION OF
                 SERIES D PREFERRED STOCK; REGISTRATION WITH OR
                     APPROVAL OF ANY GOVERNMENTAL AUTHORITY

                  The Company covenants and agrees that, until the Expiration
Date, the Company shall at all times reserve and keep available for issue upon
the exercise of Warrants such number of its authorized but unissued shares of
Series D Preferred Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants. All shares of Series D Preferred Stock which shall be
so issuable, when issued upon exercise of Warrants and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued,
fully paid and nonassessable and free and clear of any liens, claims and
restrictions (other than as provided herein). No stockholder of the Company has
or shall have any preemptive rights to subscribe for such shares of Series D
Preferred Stock.

                  Before taking any action which would result in an adjustment
in the number of shares of Series D Preferred Stock for which this Warrant is
exercisable or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

                                   ARTICLE 7.
                        STOCK AND WARRANT TRANSFER BOOKS

                  The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.

                                   ARTICLE 8.
                         RESTRICTIONS ON TRANSFERABILITY

                  The Warrants and the Warrant Stock shall not be transferred
before satisfaction of the conditions specified in this Section 8, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and state securities laws with respect to the Transfer of any
Warrant or

                                      13
<PAGE>

any Warrant Stock. The holder, by acceptance of this Warrant, agrees to be
bound by the provisions of this Section 8.

                  Section 8.1.  RESTRICTIVE LEGEND.

                  (a)      Except as otherwise provided in this Section 8, each
         certificate for Warrant Stock initially issued upon the exercise of
         this Warrant, and each certificate for Warrant Stock issued to any
         subsequent transferee of any such certificate, shall be stamped or
         otherwise imprinted with a legend in substantially the following form:

                  "The shares represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended, or
                  the securities laws of any state and are subject to the
                  conditions specified in a certain Warrant dated May [___]
                  2000, originally issued by Aames Financial Corporation. The
                  shares represented by this certificate may not be transferred
                  in violation of such Act and laws, the rules and regulations
                  thereunder or the provisions of the Warrant. A copy of the
                  form of said Warrant is on file with the Secretary of Aames
                  Financial Corporation. The holder of this certificate, by
                  acceptance of this certificate, agrees to be bound by the
                  provisions of such Warrant."

                  (b)     Except as otherwise provided in this Section 8, each
         Warrant shall be stamped or otherwise imprinted with a legend in
         substantially the following form:

                  "This Warrant and the securities represented hereby have not
                  been registered under the Securities Act of 1933, as amended,
                  or the securities laws of any state and may not be sold or
                  otherwise transferred in the absence of such registration or
                  an exemption therefrom under such Act and under any such
                  applicable state laws, or in violation of the provisions of
                  this Warrant."

                  Section 8.2.  TRANSFERS. Prior to any transfer or attempted
transfer of any Warrants or any shares of Restricted Series D Preferred Stock,
the holder of such Warrants or Restricted Series D Preferred Stock shall give
notice (a "Transfer Notice") to the Company of such holder's intention to effect
such transfer, describing the manner and circumstances of the proposed transfer,
and obtain from counsel a written opinion addressed and reasonably satisfactory
to the Company that the proposed transfer of such Warrants or such Restricted
Series D Preferred Stock may be effected without registration under the
Securities Act and applicable state securities laws. After receipt of the
Transfer Notice and written opinion, the Company

                                      14
<PAGE>

shall, within two Business Days thereof, so notify the holder of such
Warrants or such Restricted Series D Preferred Stock and such holder shall
thereupon be entitled to transfer such warrants or such Restricted Series D
Preferred Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Series D Preferred
Stock issued upon such transfer shall bear the restrictive legend set forth
in Section 8.1(a), and each Warrant issued upon such transfer shall bear the
restrictive legend set forth in Section 8.1(b), unless in the written opinion
of counsel addressed to the Company such legend is not required in order to
ensure compliance with the Securities Act.

                  Section 8.3.  TERMINATION OF RESTRICTIONS. Notwithstanding the
foregoing provisions of Section 8, the restrictions imposed by this Section 8
upon the transferability of the Warrants, the Warrant Stock and the Restricted
Series D Preferred Stock (or Series D Preferred Stock issuable upon the exercise
of the Warrants) and the legend requirements of Section 8.1 shall terminate as
to any particular Warrant or share of Warrant Stock or Restricted Series D
Preferred Stock (or Series D Preferred Stock issuable upon the exercise of the
Warrants) (i) as to the Warrant Stock and Restricted Series D Preferred Stock,
when and so long as the resale of such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto, or (ii) as
to the Warrant, Warrant Stock and Restricted Series D Preferred Stock, when the
holder of the Warrant, Warrant Stock or Restricted Series D Preferred Stock
shall have delivered to the Company the written opinion of counsel addressed and
reasonably satisfactory to the Company stating that such legend is not required
in order to ensure compliance with the Securities Act. Whenever the restrictions
imposed by this Section shall terminate as to any share of Restricted Series D
Preferred Stock, as hereinabove provided, the holder thereof shall be entitled
to receive from the Company, at the Company's expense (except for any transfer
taxes), a new certificate representing such Series D Preferred Stock not bearing
the restrictive legend set forth in Section 8.1(a).

                                   ARTICLE 9.
                              SUPPLYING INFORMATION

                  The Company shall cooperate with the holder of the Warrant and
the holder of Restricted Series D Preferred Stock in supplying such information
as may be reasonably requested by such holder or reasonably necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrant or Restricted
Series D Preferred Stock.

                                      15
<PAGE>

                                   ARTICLE 10.
                               LOSS OR MUTILATION

                  Upon receipt by the Company from any holder of evidence
reasonably satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
the holder; PROVIDED, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.

                                   ARTICLE 11.
                              OFFICE OF THE COMPANY

                  As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.

                                   ARTICLE 12.
                               REGISTRATION RIGHTS

                  The Warrant Stock issuable upon exercise of this Warrant are
entitled to the benefits of the Registration Rights Agreement. The Company shall
keep a copy of the Registration Rights Agreement, and any amendments thereto, at
the office or agency designated by the Company pursuant to Section 11 and shall
furnish copies thereof to the holder upon request.

                                   ARTICLE 13.
                             LIMITATION OF LIABILITY

                  No provision hereof, in the absence of affirmative action by
the holder to purchase shares of Series D Preferred Stock, and no enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of the holder for the purchase price of any Series D Preferred Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

                                   ARTICLE 14.
                            REPRESENTATION OF HOLDER

                  The holder represents that it is acquiring the Warrant and the
Warrant Stock for the purpose of investment and not with a view to the resale or
distribution hereof or thereof; PROVIDED, that the disposition of holder's
property shall at all times be and remain within its control.

                                      16
<PAGE>

                                   ARTICLE 15.
                                  MISCELLANEOUS

                  Section 15.1.  NONWAIVER AND EXPENSES. No course of dealing or
any delay or failure to exercise any right hereunder on the part of the parties
shall operate as a waiver of such right or otherwise prejudice the parties'
rights, powers or remedies. If the Company fails to comply with any provision of
this Warrant, the Company shall pay to the holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees incurred by the holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

                  Section 15.2.  NO RIGHTS AS STOCKHOLDER. The Person in whose
name this Warrant is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes. The registered holder of this
Warrant shall not be entitled to any rights whatsoever as a stockholder of the
Company except as herein provided.

                  Section 15.3.  NOTICE GENERALLY. Any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

                  (a)      If to the holder, at its last known address appearing
         on the books of the Company maintained for such purpose.

                  (b)      If to the Company:

                           Aames Financial Corporation
                           2 California Plaza
                           350 South Grand Avenue
                           Los Angeles, California 90071
                           Attention:  Corporate Secretary
                           Fax No.: (323) 210-5026

                           with a copy to:

                           Troop Steuber Pasich Reddick & Tobey
                           2029 Century Park East
                           Los Angeles, California 90067
                           Attention:  C. N. Franklin Reddick, Esq.
                           Fax No.: (310) 728-2204

or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may

                                      17
<PAGE>

be waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the same shall have been deposited in the United States mail.

                  Section 15.4. SUCCESSORS AND ASSIGNS. Subject to the
provisions of Sections 3.1 and 8, (i) this Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Company and the successors and assigns of the holder, and (ii) the provisions of
this Warrant are intended to be for the benefit of all holders from time to time
of this Warrant, and shall be enforceable by any such holders.

                  Section 15.5.  AMENDMENT.  The Warrants may be modified or
amended or the provisions thereof waived with the written consent of the Company
and the holders of the majority of the portion of this Warrant then outstanding.

                  Section 15.6. SEVERABILITY. Wherever possible, each provision
of this Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Warrant.

                  Section 15.7.  HEADINGS.  The headings used in this Warrant
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.

                  Section 15.8.  GOVERNING LAW.  This Warrant shall be governed
by and construed in accordance with the laws of the State of Delaware, without
giving effect to conflicts of law principles thereof.

                  Section 15.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES
ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS WARRANT.

                                       18
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer on July ___, 2000.

                           AAMES FINANCIAL CORPORATION

                           By:________________________
                              Name:
                              Title:

                                       19
<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

                  The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _____ Shares of Series D Preferred
Stock of AAMES FINANCIAL CORPORATION and herewith makes payment therefor, all at
the price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Series D Preferred Stock hereby purchased
(and any securities or other property issuable upon such exercise) be issued in
the name of and delivered to __________________ whose address is
____________________ and, if such shares of Series D Preferred Stock shall not
include all of the shares of Series D Preferred Stock issuable as provided in
this Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Series D Preferred Stock issuable hereunder be delivered to the
undersigned.

______________________                (Name of Registered Owner)

______________________                (Signature of Registered owner)

______________________                (Street Address)

______________________                (City) (State) (Zip Code)

NOTICE:           The signature on this subscription must correspond with the
                  name as written upon the face of the within Warrant in every
                  particular, without alteration or enlargement or any change
                  whatsoever.

<PAGE>

                                    EXHIBIT B

                                 ASSIGNMENT FORM

                  FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Series D Preferred Stock set forth below:

Name and Address of Assignee           No. of Shares of Series D Preferred Stock

and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of AAMES FINANCIAL CORPORATION maintained
for the purpose, with full power of substitution in the premises.

Dated:____________________________________

Name:_____________________________________

Signature:________________________________

Witness:__________________________________

NOTICE:           The signature on this assignment must correspond with the name
                  as written upon the face of the within Warrant in every
                  particular, without alteration or enlargement or any change
                  whatsoever.

<PAGE>

--------------------------------------------------------------------------------

                 CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS,
                PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
                  OR OTHER SPECIAL RIGHTS, AND QUALIFICATIONS,
                     LIMITATIONS OR RESTRICTIONS THEREOF, OF
                     SERIES D CONVERTIBLE PREFERRED STOCK OF
                           AAMES FINANCIAL CORPORATION

--------------------------------------------------------------------------------

                  AAMES FINANCIAL CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation (the "Board of Directors") pursuant to
authority of the Board of Directors as required by Section 151 of the Delaware
General Corporation Law:

                  RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors in accordance with the provisions of the Certificate
of Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of the
Corporation's previously authorized preferred stock, par value $0.001 per share
(the "Preferred Stock"), and hereby states the designation and number thereof,
and fixes the voting powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions
thereof, as follows:

                      SERIES D CONVERTIBLE PREFERRED STOCK:

                            I. DESIGNATION AND AMOUNT

                  The designation of this series of shares shall be "Series D
Convertible Preferred Stock" (the "Series D Preferred Stock") par value $0.001
per share; the stated value per share shall be $[0.90] (the "Stated Value"); and
the number of shares constituting such series shall be [121,851,622]. The number
of shares of the Series D Preferred Stock may be decreased from time to time by
a resolution or resolutions of the Board of Directors; provided, however, that
such number shall not be decreased below the aggregate number of shares of the
Series D Preferred Stock then outstanding.

                                    II. RANK

                  A. With respect to dividends, the Series D Preferred Stock
shall rank (i) senior to each other class or series of Preferred Stock, except
for the Series B Convertible Preferred Stock, par value $0.001 per share, of the
Corporation (the "Series B Preferred Stock") and the Series C Convertible
Preferred Stock, par value $0.001 per share, of the Corporation (the "Series C
Preferred Stock"); (ii) on a parity with the Series B Preferred Stock and the
Series C Preferred Stock; and (iii) senior to the Corporation's Common Stock,
par value $.001 per share (the "Common Stock"), and, except as specified above,
all other classes and series of capital stock of the Corporation hereafter
issued by the Corporation. With respect to dividends, all

<PAGE>

equity securities of the Corporation to which the Series D Preferred Stock
ranks senior, including the Common Stock, are collectively referred to herein
as the "Junior Dividend Securities"; all equity securities of the Corporation
with which the Series D Preferred Stock ranks on a parity, including the
Series B Preferred Stock and the Series C Preferred Stock, are collectively
referred to herein as the "Parity Dividend Securities"; and all equity
securities of the Corporation (other than convertible debt securities) to
which the Series D Preferred Stock ranks junior, with respect to dividends,
are collectively referred to herein as the "Senior Dividend Securities."

                  B. With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the Series D Preferred Stock shall rank (i) senior to each other
class or series of Preferred Stock, except for the Series B Preferred Stock and
the Series C Preferred Stock; (ii) on a parity with the Series B Preferred Stock
and the Series C Preferred Stock; and (iii) senior to the Common Stock, and,
except as specified above, all other classes and series of capital stock of the
Corporation hereafter issued by the Corporation. With respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, all equity securities of the
Corporation to which the Series D Preferred Stock ranks senior, including the
Common Stock, are collectively referred to herein as "Junior Liquidation
Securities"; all equity securities of the Corporation (other than convertible
debt securities) to which the Series D Preferred Stock ranks on parity,
including the Series B Preferred Stock and the Series C Preferred Stock, are
collectively referred to herein as "Parity Liquidation Securities"; and all
equity securities of the Corporation to which the Series D Preferred Stock ranks
junior are collectively referred to herein as "Senior Liquidation Securities."

                  C. The Series D Preferred Stock shall be subject to the
creation of Junior Dividend Securities and Junior Liquidation Securities
(collectively, "Junior Securities"), but no Parity Dividend Securities or Parity
Liquidation Securities (collectively, "Parity Securities") (other than the
Series B Preferred Stock) or Senior Dividend Securities or Senior Liquidation
Securities (collectively, "Senior Securities") shall be created except in
accordance with the terms hereof.

                                 III. DIVIDENDS

                  A. DIVIDENDS. Subject to the terms of paragraph D below,
shares of Series D Preferred Stock shall accumulate dividends at a rate of 6.5%
per annum (the "Dividend Rate"), which dividends shall be paid quarterly in
cash, in four equal quarterly installments on the last day of March, June,
September and December of each year, or if any such date is not a Business Day,
the Business Day next preceding such day (each such date, regardless of whether
any dividends have been paid or declared and set aside for payment on such date,
a "Dividend Payment Date"), to holders of record (the "Registered Holders") as
they appear on the stock record books of the Corporation on the fifteenth day
prior to the relevant Dividend Payment Date; provided, however, that during the
Accrual Period (as defined in Article IX hereof) the Corporation shall have the
option to accrue such dividends, which dividends, to the extent so accrued,
shall compound quarterly. Dividends shall accrue and accumulate on the Stated
Value of each share of Series D Preferred Stock. Dividends shall be paid only
when, as and if declared

                                       2
<PAGE>

by the Board of Directors out of funds at the time legally available for the
payment of dividends. Dividends shall begin to accumulate on outstanding
shares of Series D Preferred Stock from the date of issuance and shall be
deemed to accumulate from day to day whether or not earned or declared until
paid. Dividends shall accumulate on the basis of a 360-day year consisting of
twelve 30-day months (four 90-day quarters) and the actual number of days
elapsed in the period for which payable.

                  B. ACCUMULATION. Dividends on the Series D Preferred Stock
shall be cumulative, and from and after (i) any Dividend Payment Date on which
any dividend that has accumulated or been deemed to have accumulated through
such date has not been paid in full (other than by reason of the election of the
Corporation to accrue dividends during the Accrual Period); or (ii) any payment
date set for a redemption on which such redemption payment has not been paid in
full, additional dividends shall accumulate in respect of the amount of such
unpaid dividends or unpaid redemption payment (the "Arrearage") at 125% of the
stated dividend rate (or such lesser rate as may be the maximum rate that is
then permitted by applicable law). Such additional dividends in respect of any
Arrearage shall be deemed to accumulate from day to day whether or not earned or
declared until the Arrearage is paid, shall be calculated as of such successive
Dividend Payment Date, and shall constitute an additional Arrearage from and
after any Dividend Payment Date to the extent not paid on such Dividend Payment
Date. References in any Article herein to dividends that have accumulated or
that have been deemed to have accumulated with respect to the Series D Preferred
Stock shall include the amount, if any, of any Arrearage together with any
dividends accumulated or deemed to have accumulated on such Arrearage pursuant
to the immediately preceding two sentences. Additional dividends in respect of
any Arrearage may be declared and paid at any time, in whole or in part, without
reference to any regular Dividend Payment Date, to Registered Holders as they
appear on the stock record books of the Corporation on such record date as may
be fixed by the Board of Directors (which record date shall be no less than 10
days prior to the corresponding payment date). Dividends in respect of any
Arrearage shall be paid in cash.

                  C. METHOD OF PAYMENT. Dividends paid on the shares of Series D
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series D Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. After February 10, 2001, dividends that are declared
and paid in an amount less than the full amount of dividends accumulated on the
Series D Preferred Stock (and on any Arrearage) shall be applied first to the
earliest dividend which has not theretofore been paid. All cash payments of
dividends on the shares of Series D Preferred Stock shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.

                           IV. LIQUIDATION PREFERENCE

                  A. LIQUIDATION PREFERENCE. The holders of the outstanding
shares of Series D Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets are capital or surplus of any
nature, an amount per share equal to the sum of (i) the dividends, if any,
accumulated or deemed to have accumulated thereon to the date of final

                                       3
<PAGE>

distribution to such holders, whether or not such dividends are declared; and
(ii) the Stated Value thereof, before any payment shall be made or any assets
distributed to the holders of any Junior Liquidation Securities. After any
such payment in full after the consummation of the Recapitalization, the
holders of Series D Preferred Stock shall not, as such, be entitled to any
further participation in any distribution of assets of the Corporation.

                  C. PARITY SECURITIES. All the assets of the Corporation
available for distribution to stockholders after the liquidation preferences of
any Senior Liquidation Securities shall be distributed ratably (in proportion to
the full distributable amounts to which holders of Series D Preferred Stock and
Parity Liquidation Securities, if any, are respectively entitled upon such
dissolution, liquidation or winding up) among the holders of the
then-outstanding shares of Series D Preferred Stock and Parity Liquidation
Securities, if any, when such assets are not sufficient to pay in full the
aggregate amounts payable thereon.

                  D. MERGER NOT A LIQUIDATION. Neither a consolidation or merger
of the Corporation with or into any other Person or Persons, nor a sale,
conveyance, lease, exchange or transfer of all or part of the Corporation's
assets for cash, securities or other property to a Person or Persons shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Article IV, but the holders of shares of Series D Preferred
Stock shall nevertheless be entitled from and after any such consolidation,
merger or sale, conveyance, lease, exchange or transfer of all or part of the
Corporation's assets to the rights provided by this Article IV following any
such transaction. Notice of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when, and the place or places where, the amounts distributable to each holder of
shares of Series D Preferred Stock in such circumstances shall be payable, shall
be given by first-class mail, postage prepaid, mailed not less than 30 days
prior to any payment date stated therein, to holders of record as they appear on
the stock record books of the Corporation as of the date such notices are first
mailed.

                                  V. REDEMPTION

                  A. OPTIONAL REDEMPTION. Commencing on the earlier to occur of
(x) the February 10, 2009 and (y) the date on which fewer than 25% of the shares
of Series D Preferred Stock issued on the Issue Date remain outstanding, and at
all times thereafter, the Corporation may, at its option, redeem all (but not
less than all) outstanding shares of Series D Preferred Stock on a date
specified by the Corporation (the "Optional Redemption Date") by paying the
Redemption Price therefor in cash out funds legally available for such purpose.

                  B. NOTICE AND REDEMPTION PROCEDURES. Notice of the redemption
of shares of Series D Preferred Stock pursuant to paragraph A of this Article V
(a "Notice of Redemption") shall be sent to the holders of record of the shares
of Series D Preferred Stock to be redeemed by first class mail, postage prepaid,
at each such holder's address as it appears on the stock record books of the
Corporation not more than 120 nor fewer than 90 days prior to the Optional
Redemption Date, as applicable, which date shall be set forth in such notice
(the "Redemption Date"); provided that failure to give such Notice of Redemption
to any holder, or any defect in such Notice of Redemption to any holder shall
not affect the validity of the proceedings for the

                                       4
<PAGE>

redemption of any shares of Series D Preferred Stock held by any other
holder. In order to facilitate the redemption of shares of Series D Preferred
Stock, the Board of Directors may fix a record date for the determination of
the holders of shares of Series D Preferred Stock to be redeemed not more
than 30 days prior to the date the Notice of Redemption is mailed. On or
after the Optional Redemption Date, as applicable, each holder of the shares
called for redemption shall surrender the certificate evidencing such shares
to the Corporation at the place designated in such notice and shall thereupon
be entitled to receive payment of the Redemption Price for such shares. From
and after the Optional Redemption Date, as applicable, all dividends on
shares of Series D Preferred Stock shall cease to accumulate and all rights
of the holders thereof as holders of Series D Preferred Stock shall cease and
terminate, except to the extent the Corporation shall default in payment
thereof on the Optional Redemption Date, as applicable.

                  C. DEPOSIT OF FUNDS. The Corporation shall, on or prior to the
Optional Redemption Date, as applicable, pursuant to paragraph B of this Article
V, deposit with its transfer agent or other redemption agent in the Borough of
Manhattan, The City of New York having a capital and surplus of at least
$500,000,000 selected by the Board of Directors, as a trust fund for the benefit
of the holders of the shares of Series D Preferred Stock to be redeemed, cash
that is sufficient in amount to redeem the shares to be redeemed in accordance
with the Notice of Redemption, with irrevocable instructions and authority to
such transfer agent or other redemption agent to pay to the respective holders
of such shares, as evidenced by a list of such holders certified by an officer
of the Corporation, the Redemption Price upon surrender of their respective
share certificates. Such deposit shall be deemed to constitute full payment of
the Redemption Price for such shares to the holders, and from and after the date
of such deposit, all rights of the holders of the shares of Series D Preferred
Stock that are to be redeemed as stockholders of the Corporation with respect to
such shares, except the right to receive the Redemption Price upon the surrender
of their respective certificates, shall cease and terminate. No dividends shall
accumulate on any shares of Series D Preferred Stock after the Optional
Redemption Date, as applicable, for such shares (unless the Corporation shall
fail to deposit cash sufficient to redeem all such shares). In case holders of
any shares of Series D Preferred Stock called for redemption shall not, within
two years after such deposit, claim the cash deposited for redemption thereof,
such transfer agent or other redemption agent shall, upon demand, pay over to
the Corporation the balance so deposited. Thereupon, such transfer agent or
other redemption agent shall be relieved of all responsibility to the holders
thereof and the sole right of such holders, with respect to shares to be
redeemed, shall be to receive the Redemption Price as general creditors of the
Corporation. Any interest accrued on any funds so deposited shall belong to the
Corporation, and shall be paid to it from time to time on demand.

                          VI. RESTRICTIONS ON DIVIDENDS

                  So long as any shares of the Series D Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or make
any payment on account of, or set apart for payment money for a sinking or other
similar fund for, the repurchase, redemption or other retirement of, any Junior
Securities or Parity Securities or any warrants, rights or options exercisable
for or convertible into any Junior Securities or Parity Securities (other than
the repurchase, redemption

                                       5
<PAGE>

or other retirement of debentures or other debt securities that are
convertible or exchangeable into any Junior Securities or Parity Securities),
or make any distribution in respect of the Junior Securities, either directly
or indirectly, and whether in cash, obligations or shares of the Corporation
or other property (other than distributions or dividends in Junior Securities
to the holders of Junior Securities), and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to purchase
or redeem any Junior Securities or Parity Securities or any warrants, rights,
calls or options exercisable for or convertible into any Junior Securities or
Parity Securities (other than the repurchase, redemption or other retirement
of debentures or other debt securities that are convertible or exchangeable
into any Junior Securities or Parity Securities or the repurchase, redemption
or other retirement of Junior Securities or Parity Securities in exchange for
Junior Securities or Parity Securities) unless prior to or concurrently with
such declaration, payment, setting apart for payment, repurchase, redemption
or other retirement or distribution, as the case may be, all accumulated and
unpaid dividends on shares of the Series D Preferred Stock not paid on the
dates provided for in paragraph A of Article III hereof (including Arrearages
and accumulated dividends thereon) shall have been paid, except that when
dividends are not paid in full as aforesaid upon the shares of Series D
Preferred Stock, all dividends declared on the Series D Preferred Stock and
any series of Parity Dividend Securities shall be declared and paid pro rata
so that the amount of dividends so declared and paid on Series D Preferred
Stock and such series of Parity Dividend Securities shall in all cases bear
to each other the same ratio that accumulated dividends (including interest
accrued on or additional dividends accumulated in respect of such accumulated
dividends) on the shares of Series D Preferred Stock and such Parity Dividend
Securities bear to each other.

                               VII. VOTING RIGHTS

                  A. The holders of Series D Preferred Stock shall be entitled
to the number of votes per share of Series D Preferred Stock equal to the number
of shares of Common Stock for which such share of Series D Preferred Stock is
then convertible pursuant to Article VIII at each meeting of stockholders of the
Corporation with respect to any and all matters presented to the stockholders of
the Corporation for their action and consideration, other than the election of
directors.

                  B. So long as any shares of the Series D Preferred Stock are
outstanding, (i) each share of Series D Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock, other than
the election of directors; and (ii) the shares of Series D Preferred Stock shall
vote together with shares of Common Stock and shares of Series B Preferred Stock
and the Series C Preferred Stock as a single class.

                  C. Without the written consent (if action by written consent
is permitted) or affirmative vote of the holders of a majority of the
outstanding shares of Series D Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, voting together as a single class, the Corporation
shall not (i) authorize, create or issue, or increase the authorized amount of,
(x) any Senior Securities or Parity Securities or (y) any class or series of
capital stock or any security convertible into or exercisable for any class or
series of capital stock, redeemable mandatorily or redeemable at the option of
the holder thereof or (ii) enter into any Transaction (as defined in

                                       6
<PAGE>

paragraph H of Article VIII). Such vote or consent shall be taken in
accordance with the procedures specified in paragraph E below.

                  D. Without the written consent (if action by written consent
is permitted) or affirmative vote of the holders of at least a majority of the
outstanding shares of Series D Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, voting together as a single class, the Corporation
shall not (i) amend, alter or repeal any provision of the Certificate of
Incorporation or the Bylaws, if the amendment, alteration or repeal alters or
changes the powers, preferences or special rights of the Series D Preferred
Stock so as to affect them materially and adversely or (ii) authorize or take
any other action if such action alters or changes any of the rights of the
Series D Preferred Stock in any respect or otherwise would be inconsistent with
the provisions of this Certificate of Designations and the holders of any class
or series of the capital stock of the Corporation is entitled to vote thereon.
Such vote or consent shall be taken in accordance with the procedures specified
in paragraph E below.

                  E. The foregoing rights of holders of shares of Series D
Preferred Stock to take any actions as provided in this Article VII may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action, if action by written consent of stockholders of the Corporation is
then permitted.

                  The Chairman of the Board of the Corporation may call, and
upon written request of holders of record of 35% of the outstanding shares of
Series D Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
addressed to the Secretary of the Corporation at the principal office of the
Corporation shall call, a special meeting of the holders of shares entitled to
vote as provided herein. Such meeting shall be held within 30 days after
delivery of such request to the Secretary, at the place and upon the notice
provided by law and in the By-laws of the Corporation for the holding of
meetings of stockholders.

                  At each meeting of stockholders at which the holders of shares
of Series D Preferred Stock shall have the right to take any action, the
presence in person or by proxy of the holders of record of one-third of the
total number of shares of Series D Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum. At any such meeting or
at any adjournment thereof:

                  (A) the absence of a quorum of the holders of shares of Series
         D Preferred Stock shall not prevent the election of directors to be
         elected by the holders of shares of Series B Preferred Stock or the
         taking of any action as provided in this Article VII; and

                  (B) in the absence of a quorum of the holders of shares of
         Series D Preferred Stock, Series C Preferred Stock and Series B
         Preferred Stock, a majority of the holders of such shares present in
         person or by proxy shall have the power to adjourn the meeting as to
         the actions to be taken by the holders of shares of Series D Preferred
         Stock, Series B

                                       7
<PAGE>

         Preferred Stock and Series C Preferred Stock, from time to time and
         place to place without notice other than announcement at the meeting
         until a quorum shall be present.

                  For taking of any action as provided in this Article VII by
the holders of shares of Series D Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, each such holder shall have one vote for each share of
such stock standing in his name on the transfer books of the Corporation as of
any record dated fixed for such purpose or, if no such date be fixed, at the
close of business on the Business Day next preceding the day on which notice is
given, or if notice if waived, at the close of business on the Business Day next
preceding the day on which the meeting is held.

                  F. The Corporation shall not enter into any agreement or issue
any security that prohibits, conflicts or is inconsistent with, or would be
breached by, the Corporation's performance of its obligations hereunder.

                                VIII. CONVERSION

                  The holders of the Series D Preferred Stock shall have
conversion rights as follows:

         A.       Each share of Series D Preferred Stock shall be convertible at
                  the direction of, and by notice to the Corporation from, (i)
                  the holder thereof or (ii) the holders of a majority of the
                  outstanding shares of Series D Preferred Stock, at any time,
                  at the office of the Corporation or any transfer agent for
                  such Series, into one (1) fully paid and nonassessable share
                  of Common Stock subject to adjustment from time to time as
                  provided below (as so adjusted, the "conversion ratio"),
                  PROVIDED, that any conversion pursuant to clause (ii) above of
                  less than all of the outstanding shares of Series D Preferred
                  Stock shall be on a pro rata basis amongst all holders of
                  Series D Preferred Stock.

         B.       If a holder of Series D Preferred Stock gives notice (an
                  "Optional Conversion Notice") of conversion under paragraph A
                  above, such holder shall surrender with such Optional
                  Conversion Notice the duly endorsed certificate or
                  certificates for the Series D Preferred Stock being converted,
                  at the office of the Corporation or of any transfer agent for
                  such Series, and shall state therein the name or names in
                  which the certificate or certificates for shares of Common
                  Stock are to be issued. If the holders of a majority of the
                  outstanding shares of Series D Preferred Stock give notice of
                  conversion under paragraph A above, the Corporation shall
                  notify all other record holders of Series D Preferred Stock (a
                  "Mandatory Conversion Notice"). Following receipt of a
                  Mandatory Conversion Notice, the holders of Series D Preferred
                  Stock shall surrender the certificate or certificates therefor
                  duly endorsed, at the office of the Corporation or of any
                  transfer agent for such Series, and shall state therein the
                  name or names in which the certificate or certificates for
                  shares of Common Stock are to be issued. The Corporation
                  shall, as soon as practicable after the surrender of a Series
                  D Preferred Stock certificate or certificates pursuant to an
                  Optional Conversion Notice or Mandatory Conversion

                                       8
<PAGE>

                  Notice, issue and deliver at such office to such holder, or to
                  the nominee or nominees of such holder, a certificate or
                  certificates for the number of shares of Common Stock to which
                  such holder shall be entitled as aforesaid. Such conversion
                  shall be deemed to have been made immediately prior to the
                  close of business on the date of such Optional Conversion
                  Notice or Mandatory Conversion Notice, as applicable, and the
                  person or persons entitled to receive the shares of Common
                  Stock issuable upon such conversion shall be treated for all
                  purposes as the recordholder or holders of such shares of
                  Common Stock as of such date. The issuance of certificates or
                  shares of Common Stock upon conversion of shares of Series D
                  Preferred Stock shall be made without charge for any issue,
                  stamp or other similar tax in respect of such issuance.

         C.       No fractional shares shall be issued upon conversion of any
                  shares of Series D Preferred Stock and the number of shares of
                  Common Stock to be issued shall be rounded down to the nearest
                  whole share, and the holder of Series D Preferred Stock shall
                  be paid in cash for any fractional share.

         D.       In case at any time or from time to time the Corporation shall
                  pay any dividend or make any other distribution to the holders
                  of its Common Stock or other class of securities, or shall
                  offer for subscription pro rata to the holders of its Common
                  Stock or other class of securities any additional shares of
                  stock of any class or any other right, or there shall be any
                  capital reorganization or reclassification of the Common Stock
                  of the Corporation or consolidation or merger of the
                  Corporation with or into another corporation, or any sale or
                  conveyance to another corporation of the property of the
                  Corporation as an entirety or substantially as an entirety, or
                  there shall be a voluntary or involuntary dissolution,
                  liquidation or winding up of the Corporation, then, in any one
                  or more of said cases the Corporation shall give at least 20
                  days' prior written notice (the time of mailing of such notice
                  shall be deemed to be the time of giving thereof) to the
                  registered holders of the Series D Preferred Stock at the
                  addresses of each as shown on the books of the Corporation
                  maintained by the Transfer Agent thereof of the date on which
                  (i) the books of the Corporation shall close or a record shall
                  be taken for such stock dividend, distribution or subscription
                  rights or (ii) such reorganization, reclassification,
                  consolidation, merger, sale or conveyance, dissolution,
                  liquidation or winding up shall take place, as the case may
                  be, provided that in the case of any Transaction to which
                  paragraph H applies the Corporation shall give at least 30
                  days' prior written notice as aforesaid. Such notice shall
                  also specify the date as of which the holders of the Common
                  Stock of record shall participate in said dividend,
                  distribution or subscription rights or shall be entitled to
                  exchange their Common Stock for securities or other property
                  deliverable upon such reorganization, reclassification,
                  consolidation, merger, sale or conveyance or participate in
                  such dissolution, liquidation or winding up, as the case may
                  be. Failure to give such notice shall not invalidate any
                  action so taken.

                                       9
<PAGE>

         E.       The Corporation shall at all times reserve and keep available
                  out of its authorized but unissued shares of Common Stock,
                  solely for the purpose of effecting the conversion of the
                  shares of Series D Preferred Stock, such number of its shares
                  of Common Stock as shall from time to time be sufficient to
                  effect the conversion of all outstanding shares of Series D
                  Preferred Stock, and if at any time the number of authorized
                  but unissued shares of Common Stock shall not be sufficient to
                  effect the conversion of all then outstanding shares of Series
                  D Preferred Stock, then in addition to such other remedies as
                  shall be available to the holder of Series D Preferred Stock,
                  the Corporation will take such corporate action as may, in the
                  opinion of its counsel, be necessary to increase its
                  authorized but unissued shares of Common Stock to such number
                  of shares as shall be sufficient for such purposes.

         F.       Any notice required by the provisions of paragraph D to be
                  given the holders of shares of Series D Preferred Stock shall
                  be deemed given if sent by facsimile transmission, by telex,
                  or if deposited in the United States mail, postage prepaid,
                  and addressed to each holder of record at his, her or its
                  address appearing on the books of the Corporation.

         G.       The conversion ratio shall be subject to adjustment from time
                  to time as follows:

                           (i) In case the Corporation shall at any time or from
                  time to time after the Issue Date (A) pay a dividend or make a
                  distribution, on the outstanding shares of Common Stock in
                  shares of Common Stock, (B) subdivide the outstanding shares
                  of Common Stock into a larger number of shares of Common
                  Stock, (C) combine the outstanding shares of Common Stock into
                  a smaller number of shares or (D) issue by reclassification of
                  the shares of Common Stock any shares of capital stock of the
                  Corporation, then, and in each such case, the conversion ratio
                  in effect immediately prior to such event or the record date
                  therefor, whichever is earlier, shall be adjusted so that the
                  holder of any shares of Series D Preferred Stock thereafter
                  surrendered for conversion shall be entitled to receive the
                  number of shares of Common Stock or other securities of the
                  Corporation which such holder would have owned or have been
                  entitled to receive after the happening of any of the events
                  described above, had such shares of Series D Preferred Stock
                  been surrendered for conversion immediately prior to the
                  happening of such event or the record date therefor, whichever
                  is earlier. An adjustment made pursuant to this clause (i)
                  shall become effective (x) in the case of any such dividend or
                  distribution, immediately after the close of business on the
                  record date for the determination of holders of shares of
                  Common Stock entitled to receive such dividend or
                  distribution, or (y) in the case of any such subdivision,
                  reclassification or combination, at the close of business on
                  the day upon which such corporate action becomes effective.

                           (ii) In the case the Corporation shall, after the
                  Issue Date, issue shares of Common Stock at a price per share,
                  or securities convertible into or

                                       10
<PAGE>

                  exchangeable for shares of Common Stock ("Convertible
                  Securities") having a "Conversion Price" (as defined below)
                  less than the Current Market Price (for a period of 15
                  consecutive trading days prior to such date), then, and in
                  each such case, the conversion ratio shall be adjusted so
                  that the holder of each share of Series D Preferred Stock
                  shall be entitled to receive, upon the conversion thereof,
                  the number of shares of Common Stock determined by
                  multiplying (A) the applicable conversion ratio on the day
                  immediately prior to such date by (B) a fraction, the
                  numerator of which shall be the sum of (1) the number of
                  shares of Common Stock outstanding on the date on which such
                  shares or Convertible Securities are issued and (2) the
                  number of additional shares of Common Stock issued, or into
                  which the Convertible Securities may convert, and the
                  denominator of which shall be the sum of (x) the number of
                  shares of Common Stock outstanding on such date and (y) the
                  number of shares of Common Stock which the aggregate
                  consideration receivable by the Corporation for the total
                  number of shares of Common Stock so issued, or the number of
                  shares of Common Stock which the aggregate of the Conversion
                  Price of such Convertible Securities so issued, would
                  purchase at such Current Market price on such date. An
                  adjustment made pursuant to this clause (ii) shall be made
                  on the next Business Day following the date on which any
                  such issuance is made and shall be effective retroactively
                  immediately after the close of business on such date. For
                  purposes of this clause (ii), the aggregate consideration
                  receivable by the Corporation in connection with the
                  issuance of any securities shall be deemed to be the sum of
                  the aggregate offering price to the public (before deduction
                  of underwriting discounts or commissions and expenses
                  payable to third parties), and the "Conversion Price" of any
                  Convertible Securities is the total amount received or
                  receivable by the Corporation as consideration for the issue
                  or sale of such Convertible Securities (before deduction of
                  underwriting discounts or commissions and expenses payable
                  to third parties) plus the minimum aggregate amount of
                  additional consideration, if any, payable to the Corporation
                  upon the conversion, exchange or exercise of any such
                  Convertible Securities. Neither (A) the issuance of any
                  shares of Common Stock (whether treasury shares or newly
                  issued shares) pursuant to a dividend or distribution on, or
                  subdivision, combination or reclassification of, the
                  outstanding shares of Common Stock requiring an adjustment
                  in the conversion ratio pursuant to clause (i) of this
                  paragraph G, or pursuant to any employee benefit plan or
                  program of the Corporation or pursuant to any option,
                  warrant, right, or Convertible Security outstanding as of
                  the date hereof (including, but not limited to, the Rights,
                  the Series B Preferred Stock, the Series D Preferred Stock
                  and the Warrants) nor (B) the issuance of shares of Common
                  Stock pursuant thereto shall be deemed to constitute an
                  issuance of Common Stock or Convertible Securities by the
                  Corporation to which this clause (ii) applies. Upon
                  expiration of any Convertible Securities which shall not
                  have been exercised or converted and for which an adjustment
                  shall have been made pursuant to this clause (ii), the
                  Conversion Price computed upon the original issue thereof
                  shall upon such expiration be recomputed as if the only
                  additional shares of Common Stock issued were such

                                      11
<PAGE>

                  shares of Common Stock (if any) actually issued upon exercise
                  of such Convertible Securities and the consideration received
                  therefor was the consideration actually received by the
                  Corporation for the issue of such Convertible Securities
                  (whether or not exercised or converted) plus the
                  consideration actually received by the Corporation upon such
                  exercise of conversion.

                           (iii)    In case the Corporation shall at any time or
                  from time to time after the Issue Date declare, order, pay or
                  make a dividend or other distribution (including, without
                  limitation, any distribution of stock or other securities or
                  property or rights or warrants to subscribe for securities of
                  the Corporation or any of its Subsidiaries by way of dividend
                  or spin-off), on its Common Stock, other than (A) regular
                  quarterly dividends payable in cash in an aggregate amount not
                  to exceed 15% of net income from continuing operations before
                  extraordinary items of the Corporation, determined in
                  accordance with generally accepted accounting principles,
                  during the period (treated as one accounting period)
                  commencing on July 1, 1998, and ending on the date such
                  dividend is paid or (B) dividends or distributions of shares
                  of Common Stock which are referred to in clause (i) of this
                  paragraph G, then, and in each such case, the conversion ratio
                  shall be adjusted so that the holder of each share of Series D
                  Preferred Stock shall be entitled to receive, upon the
                  conversion thereof, the number of shares of Common Stock
                  determined by multiplying (1) the applicable conversion ratio
                  on the day immediately prior to the record date fixed for the
                  determination of stockholders entitled to receive such
                  dividend or distribution by (2) a fraction, the numerator of
                  which shall be the then Current Market Price per share of
                  Common Stock for the period of 20 Trading Days preceding such
                  record date, and the denominator of which shall be such
                  Current Market Price per share of Common Stock for the period
                  of 20 Trading Days preceding such record date less the Fair
                  Market Value (as defined in Article IX) per share of Common
                  Stock (as determined in good faith by the Board of Directors
                  of the Corporation, a certified resolution with respect to
                  which shall be mailed to each holder of shares of Series D
                  Preferred Stock) of such dividend or distribution; PROVIDED,
                  HOWEVER, that in the event of a distribution of shares of
                  capital stock of a Subsidiary of the Corporation (a
                  "Spin-Off") made to holders of shares of Common Stock, the
                  numerator of such fraction shall be the sum of the Current
                  Market Price per share of Common Stock for the period of 20
                  Trading Days preceding the 35th Trading Day after the
                  effective date of such Spin-Off and the Current Market Price
                  of the number of shares (or the fraction of a share) of
                  capital stock of the Subsidiary which is distributed in such
                  Spin-Off in respect of one share of Common Stock for the
                  period of 20 Trading Days preceding such 35th Trading Day and
                  the denominator of which shall be the current market price per
                  share of the Common Stock for the period of 20 Trading Days
                  proceeding such 35th Trading Day. An adjustment made pursuant
                  to this clause (iii) shall be made upon the opening of
                  business on the next Business Day following the date on which
                  any such dividend or distribution is made and shall be
                  effective retroactively immediately after the

                                      12
<PAGE>

                  close of business on the record date fixed for the
                  determination of stockholders entitled to receive such
                  dividend or distribution; PROVIDED, HOWEVER, if the proviso
                  to the preceding sentence applies, then such adjustment shall
                  be made and be effective as of such 35th Trading Day after the
                  effective date of such Spin-Off.

                           (iv)     For purposes of this paragraph G, the number
                  of shares of Common Stock at any time outstanding shall not
                  include any shares of Common Stock then owned or held by or
                  for the account of the Corporation.

                           (v)      The term "dividend", as used in this
                  paragraph G shall mean a dividend or other distribution upon
                  stock of the Corporation except pursuant to the Rights
                  Agreement (as defined in Article IX). Notwithstanding anything
                  in this Article VIII to the contrary, the conversion ratio
                  shall not be adjusted as a result of any dividend,
                  distribution or issuance of securities of the Corporation
                  pursuant to the Rights Agreement.

                           (vi)     Anything in this paragraph G to the contrary
                  notwithstanding, the Corporation shall not be required to give
                  effect to any adjustment in the conversion ratio unless and
                  until the net effect of one or more adjustments (each of which
                  shall be carried forward), determined as above provided, shall
                  have resulted in a change of the conversion ratio by at least
                  one-hundredth of one share of Common Stock, and when the
                  cumulative net effect of more than one adjustment so
                  determined shall be to change the conversion ratio by at least
                  one-hundredth of one share of Common Stock, such change in
                  conversion ratio shall thereupon be given effect.

                           (vii)    The certificate of any firm of independent
                  public accountants of recognized standing selected by the
                  Board of Directors of the Corporation (which may be the firm
                  of independent public accountants regularly employed by the
                  Corporation) shall be presumptively correct for any
                  computation made under this paragraph G.

                           (viii)   If the Corporation shall take a record of
                  the holders of its Common Stock for the purpose of entitling
                  them to receive a dividend or other distribution, and shall
                  thereafter and before the distribution to stockholders thereof
                  legally abandon its plan to pay or deliver such dividend or
                  distribution, then thereafter no adjustment in the number of
                  shares of Common Stock issuable upon exercise of the right of
                  conversion granted by this paragraph G or in the conversion
                  ratio then in effect shall be required by reason of the taking
                  of such record.

                           (ix)     There shall be no adjustment of the
                  conversion ratio in case of the issuance of any stock of the
                  Corporation in a merger, reorganization, acquisition or other
                  similar transaction except as set forth in paragraph G(i),
                  G(ii) and H of this Article VIII.

                                      13
<PAGE>

         H.       In case of any reorganization or reclassification of
                  outstanding shares of Common Stock (other than a
                  reclassification covered by paragraph G(i) of this Article
                  VIII), or in case of any consolidation or merger of the
                  Corporation with or into another corporation, or in the case
                  of any sale or conveyance to another corporation of the
                  property of the Corporation as an entirety or substantially as
                  an entirety (each of the foregoing being referred to as a
                  "Transaction"), each share of Series D Preferred Stock then
                  outstanding shall thereafter be convertible into, in lieu of
                  the Common Stock issuable upon such conversion prior to
                  consummation of such Transaction, the kind and amount of
                  shares of stock and other securities and property receivable
                  (including cash) upon the consummation of such Transaction by
                  a holder of that number of shares of Common Stock into which
                  one share of Series D Preferred Stock was convertible
                  immediately prior to such Transaction (including, on a pro
                  rata basis, the cash, securities or property received by
                  holders of Common Stock in any tender or exchange offer that
                  is a step in such Transaction). In case securities or property
                  other than Common Stock shall be issuable or deliverable upon
                  conversion as aforesaid, then all reference in this paragraph
                  H shall be deemed to apply, so far as appropriate and as
                  nearly as may be, to such other securities or property.

         I.       Upon any adjustment of the conversion ratio then in effect and
                  any increase or decrease in the number of shares of Common
                  Stock issuable upon the operation of the conversion set forth
                  in Article VIII, then, and in each such case, the Corporation
                  shall promptly deliver to the registered holders of the Series
                  D Preferred and Common Stock, a certificate signed by the
                  President or a Vice President and by the Treasurer or an
                  Assistant Treasurer or the Secretary or an Assistant Secretary
                  of the Corporation setting forth in reasonable detail the
                  event requiring the adjustment and the method by which such
                  adjustment was calculated and specifying the conversion ratio
                  then in effect following such adjustment and the increased or
                  decreased number of shares issuable upon the conversion set
                  forth in this Article VIII.

                                      14
<PAGE>

                           IX. ADDITIONAL DEFINITIONS

                  For the purposes of this Certificate of Designations of Series
D Preferred Stock, the following terms shall have the meanings indicated:

                  "Accrual Period" means the end of the first quarterly period
following February 10, 2001.

                  "Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date hereof, except that a Person
shall be deemed to Beneficially Own all such securities that such Person has the
right to acquire whether such right is exercisable immediately or after the
passage of time). The terms "Beneficial Ownership" and "Beneficial Owner" have
correlative meanings.

                  "Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.

                  "Bylaws" means the Bylaws of the Corporation, as amended.

                  "Current Market Price", when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing price per
share of Common Stock or such other securities on such date and, when used with
reference to shares of Common Stock or other securities for any period shall
mean the average of the daily closing prices per share of Common Stock or such
other securities for such period. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. National Market System or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock or such other securities selected by the Board of Directors
of the Corporation. If the Common Stock or such other securities are not
publicly held or so listed or publicly traded, "Current Market Price" shall mean
the Fair Market Value per share of Common Stock or of such other securities as
determined in good faith by the Board of Directors of the Corporation based on
an opinion of an independent investment banking firm with an established
national reputation as a valuer of securities, which opinion may be based on
such assumption as such firm shall deem to be necessary and appropriate.

                                      15
<PAGE>

                  "Equity Securities" of any Person means any and all common
stock, preferred stock and any other class of capital stock of, and any
partnership or limited liability company interests of such Person or any other
similar interests of any Person that is not a corporation, partnership or
limited liability company.

                  "Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, from time to
time.

                  "Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.

                  "Group" has the meaning set forth in Rule 13d-5 under the
Exchange Act.

                  "Issue Date" shall mean the first date on which shares of
Series D Preferred Stock are issued.

                  "Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated organization,
or a government or any agency or political subdivision thereof.

                  "Redemption Price" of a share of Series D Preferred Stock
shall mean the sum of (a) the dividends, if any, accumulated or deemed to have
accumulated thereon to the Optional Redemption Date, as applicable, whether or
not such dividends are declared PLUS Stated Value thereof subject, to adjustment
for splits, reclassifications, recombinations or similar events.

                  "Rights" shall mean any rights to purchase securities of the
Corporation issued pursuant to any Rights Agreement.

                  "Rights Agreement" shall mean the Rights Agreement, dated as
of June 21, 1996, between the Company and Wells Fargo Bank as rights agent, and
all amendments, supplements and replacements thereof.

                  "Stated Value" shall be equal to $[0.90].

                  "Subsidiary" means, as to any Person, any other Person of
which more than 50% of the shares of the Voting Securities or other voting
interests are owned or controlled, or the ability to select or elect 50% or more
of the directors or similar managers is held, directly or indirectly, by such
first Person and one or more of its Subsidiaries.

                  "Trading Day" means a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange a Business Day.

                  "Voting Securities" means, (i) with respect to the Company,
the Equity Securities of the Company entitled to vote generally for the election
of directors of the Company, and (ii)

                                      16
<PAGE>

with respect to any other Person, any securities of or interests in such
Person entitled to vote generally for the election of directors or any
similar managing person of such Person.

                                X. MISCELLANEOUS

                  A.      NOTICES. Any notice referred to herein shall be in
writing and, unless first-class mail shall be specifically permitted for such
notices under the terms hereof, shall be deemed to have been given upon
personal delivery thereof, upon transmittal of such notice by telecopy (with
confirmation of receipt by telecopy or telex) or five days after transmittal
by registered or certified mail, postage prepaid, addressed as follows:

                           (i)      if to the Corporation, to its office at 2
                                    California Plaza, 350 South Grand Avenue,
                                    Los Angeles, California 90071 (Attention:
                                    General Counsel)

                                    or to the transfer agent for the Series D
                                    Preferred Stock;

                           (ii)     if to a holder of the Series D Preferred
                                    Stock, to such holder at the address of such
                                    holder as listed in the stock record books
                                    of the Corporation (which may include the
                                    records of any transfer agent for the Series
                                    D Preferred Stock); or

                           (iii)    to such other address as the Corporation or
                                    such holder, as the case may be, shall have
                                    designated by notice similarly given.

                  B.      REACQUIRED SHARES. Any shares of Series D Preferred
Stock redeemed, purchased or otherwise acquired by the Corporation, directly
or indirectly, in any manner whatsoever shall be retired and canceled
promptly after the acquisition thereof (and shall not be deemed to be
outstanding for any purpose) and, if necessary to provide for the lawful
redemption or purchase of such shares, the capital represented by such shares
shall be reduced in accordance with the Delaware General Corporation Law. All
such shares of Series D Preferred Stock shall upon their cancellation and
upon the filing of an appropriate certificate with the Secretary of State of
the State of Delaware, become authorized but unissued shares of Preferred
Stock, par value $0.001 per share, of the Corporation and may be reissued as
part of another series of Preferred Stock, par value $0.001 per share, of the
Corporation subject to the conditions or restrictions on issuance set forth
herein.

                  C.      ENFORCEMENT. Any registered holder of shares of Series
D Preferred Stock may proceed to protect and enforce its rights and the
rights of such holders by any available remedy by proceeding at law or in
equity to protect and enforce any such rights, whether for the specific
enforcement of any provision in this Certificate of Designations or in aid of
the exercise of any power granted herein, or to enforce any other proper
remedy.

                  D.      TRANSFER TAXES. Except as otherwise agreed upon

pursuant to the terms of this Certificate of Designations, the Corporation
shall pay any and all documentary, stamp or similar issue or transfer taxes
and other governmental charges that may be imposed under the

                                      17
<PAGE>

laws of the United States of America or any political subdivision or taxing
authority thereof or therein in respect of any issue or delivery of Common
Stock on conversion of, or other securities or property issued on account of,
shares of Series D Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Corporation shall not, however,
be required to pay any such tax or other charge that may be imposed in
connection with any transfer involved in the issue or transfer and delivery
of any certificate for Common Stock or other securities or property in a name
other than that in which the shares of Series D Preferred Stock so exchanged,
or on account of which such securities were issued, were registered and no
such issue or delivery shall be made unless and until the Person requesting
such issue has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been
paid or is not payable.

                  E.      TRANSFER AGENT. The Corporation may appoint, and from
time to time discharge and change, a transfer agent for the Series D
Preferred Stock. Upon any such appointment or discharge of a transfer agent,
the Corporation shall send notice thereof by first-class mail, postage
prepaid, to each holder of record of shares of Series D Preferred Stock.

                  F.      RECORD DATES. In the event that the Series D Preferred
Stock shall be registered under either the Securities Act of 1933, as amended,
or the Exchange Act, the Corporation shall establish appropriate record dates
with respect to payments and other actions to be made with respect to the Series
D Preferred Stock.

                                      18
<PAGE>

                  IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Assistant Secretary, this ___ day
of ____________ , 2000.

                                            AAMES FINANCIAL CORPORATION

                                            By:__________________________
                                                     Name:
                                                     Title:

                                      19<PAGE>

                                                                     EXHIBIT 4.2

                              ARTICLES OF AMENDMENT
                  TO SECOND RESTATED ARTICLES OF INCORPORATION
                                       OF
                               RADISYS CORPORATION

         1. The name of the corporation is RadiSys Corporation (the
"Corporation").

         2. Article IV(A) of the Second Restated Articles of Incorporation of
the Corporation is amended and restated to read in its entirety as follows:

            The aggregate number of shares which the corporation shall have
            authority to issue shall consist of 100,000,000 shares of common
            stock, without par value ("Common Stock"), and 10,000,000 shares of
            preferred stock, par value $.01 per share ("Preferred Stock").

         3. The amendment was adopted by the shareholders of the Corporation on
May 16, 2000.

         4. Shareholder action was required to adopt the amendment. The
shareholder vote was as follows:

<TABLE>
<CAPTION>
                             Outstanding                 Number                     Votes                      Votes
    Designation                 Shares                  of Votes                  Cast For                  Cast Against
    -----------                 ------                  --------                  --------                  ------------
<S>                           <C>                      <C>                       <C>                         <C>
       Common                 16,853,421               16,853,421                13,452,482                  1,100,138
</TABLE>

         5. The person to contact about this filing is Mary P. Pounds at (503)
294-9832.

Dated: May 17, 2000.

                                         RADISYS CORPORATION

                                         By:      STEPHEN F. LOUGHLIN
                                            -----------------------------------
                                                  Stephen F. Loughlin
                                                  Vice President of Finance and
                                                  Administration and
                                                  Chief Financial Officer

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