REVOLVING CREDIT AND SECURITY AGREEMENT (the “Agreement”) between COUNTRYWIDE WAREHOUSE LENDING (“Lender”) and AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (jointly, “Borrower”) dated as of July 1 , 2003

Exhibit 10.35(a)

REVOLVING CREDIT AND SECURITY AGREEMENT

(the “Agreement”)

between

COUNTRYWIDE WAREHOUSE LENDING

(“Lender”)

and

AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION

(jointly, “Borrower”)

dated as of

July 1 , 2003

TABLE OF CONTENTS

ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

Section 1.1		Defined Terms		1
Section 1.2		Principles of Construction		1
ARTICLE 2 AMOUNTS AND TERMS OF CREDIT
Section 2.1		Agreement to Lend		1
Section 2.2		Credit Limit		2
Section 2.3		Description of Collateral		2
Section 2.4		Maximum Amount of Advance		2
Section 2.5		Use of Proceeds		3
Section 2.6		Interest		3
Section 2.7		Note		3
Section 2.8		Guarantee		3
ARTICLE 3 PROCEDURES FOR REQUEST AND MAKING OF ADVANCES
Section 3.1		Additional Procedures Set Forth in Handbook		3
Section 3.2		Request for Advance		3
Section 3.3		Delivery of Collateral Documents		4
Section 3.4		Haircut		4
Section 3.5		Over/Under Account		4
Section 3.6		Disbursement of Funds		5
Section 3.7		Approved Payees		6
ARTICLE 4 PAYMENTS
Section 4.1		Principal		7
Section 4.2		Acceleration Event		7
Section 4.3		Reduction of Collateral Value as Alternative Remedy		7
Section 4.4		Designation as Noncompliant Mortgage Loan as Alternative Remedy 7
Section 4.5		Illegality or Impracticability		8
Section 4.6		Payments Pursuant to Sale to Investor		8
Section 4.7		Application of Payments from Borrower		8
Section 4.8		Method of Payment		9
Section 4.9		Notification of Payment		9
Section 4.10		Authorization to Debit		9
Section 4.11		Book Account		9
ARTICLE 5 FEES AND EXPENSES
Section 5.1		Payment of Fees		9
Section 5.2		Reimbursement of Expenses		10

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ARTICLE 6 SECURITY AGREEMENT
Section 6.1		Grant of Security Interest		10
Section 6.2		Servicing Rights		10
Section 6.3		Delivery of Additional Collateral or Mandatory Prepayment		10
Section 6.4		Custody of Collateral Documents		11
Section 6.5		Release of Collateral		12
ARTICLE 7 CONDITIONS PRECEDENT
Section 7.1		Initial Advance		12
Section 7.2		All Advances		13
Section 7.3		Intercreditor Agreements		14
Section 7.4		Satisfaction of Conditions		14
ARTICLE 8 REPRESENTATIONS AND WARRANTIES
Section 8.1		Representations and Warranties Concerning Borrower		14
Section 8.2		Representations and Warranties Concerning Collateral		17
Section 8.3		Continuing Representations andn Warranties		19
ARTICLE 9 AFFIRMATIVE COVENANTS
Section 9.1		Payment of Note		19
Section 9.2		Financial Statements and Other Reports		19
Section 9.3		Inspection of Properties and Books		20
Section 9.4		Notice		20
Section 9.5		Additional Financing		21
Section 9.6		Servicing of Mortgage Loans		21
Section 9.7		Evidence of Collateral		21
Section 9.8		Protection of Security		21
Section 9.9		Further Assurances		22
Section 9.10		Fidelity Bonds and Insurance		22
Section 9.11		Year 2000 Compliance		22
Section 9.12		Wet Mortgage Loans		22
ARTICLE 10  NEGATIVE COVENANTS
Section 10.1		Liabilities and Advances		23
Section 10.2		Deferral of Subordinated Debt		23
Section 10.3		Loss of Eligibility		23
Section 10.4		Financial Ratios		23
Section 10.5		Loans to Officers, Employees and Shareholders		23
Section 10.6		Liens		23
Section 10.7		Indebtedness		24

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Section 10.8		Consolidation, Merger and Sale of Assets		24
Section 10.9		Payment of Dividends and Retirement of Stock		24
Section 10.10		Collateral		24
ARTICLE 11 DEFAULTS AND REMEDIES
Section 11.1		Events of Default		24
Section 11.2		Remedies		25
Section 11.3		Sale of Collateral		26
Section 11.4		No Obligation to Pursue Remedy		27
Section 11.5		Reimbursement of Costs and Expenses		27
Section 11.6		Application of Proceeds		27
Section 11.7		Right of Set-Off		27
Section 11.8		Reasonable Assurances		28
ARTICLE 12  INDEMNIFICATION
Section 12.1		Indemnification		28
Section 12.2		Payment of Taxes		28
ARTICLE 13   TERM AND TERMINATION
Section 13.1		Term		28
Section 13.2		Voluntary Termination		28
Section 13.3		Extension of Term		29
ARTICLE 14  GENERAL
Section 14.1		Integration		29
Section 14.2		Amendments		29
Section 14.3		No Waiver		29
Section 14.4		Remedies Cumulative		29
Section 14.5		Assignment		29
Section 14.6		Successors and Assigns		29
Section 14.7		Participations		29
Section 14.8		Invalidity		30
Section 14.9		Additional Instruments		30
Section 14.10		Survival		30
Section 14.11		Notices		30
Section 14.12		Personal Identification Number		30
Section 14.13		Governing Law		31
Section 14.14		Agreement to Arbitrate Claims		31
Section 14.15		Counterparts		31
Section 14.16		Headings		31

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EXHIBITS

Exhibit A:		Glossary of Defined Terms
Exhibit B:		Note
Exhibit C:		Personal or corporate Guarantee (if applicable, attached)
Exhibit D:		Form of Collateral Data Record
Exhibit E:		Other Mortgage Loan Documents
Exhibit F:		Form of Bailee Agreement
Exhibit G:		Irrevocable Closing Instructions
Exhibit H:		Secretary's Certificate
Exhibit I:		Corporate Resolutions
Exhibit J:		Officer's Certificate
Exhibit K:		Assignment of Closing Protection Letter
Exhibit L:		Intentionally Omitted
Exhibit M:		Form of Intercreditor Agreement
Exhibit N:		Power of Attorney
Exhibit O:		Form of Trust Receipt
Exhibit P:		[Reserved]
Exhibit Q:		Request to Add New Wire Instructions
Exhibit R:		Intentionally Omitted
Exhibit S:		Acknowledgement of Password Confidentiality Agreement
Exhibit T:		Electronic Tracking Agreement - Warehouse Lender

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REVOLVING CREDIT
AND SECURITY AGREEMENT

THIS REVOLVING CREDIT AND SECURITY AGREEMENT (the “Agreement”) is made and entered into, as of July 1, 2003 (the “Effective Date”), by and between Countrywide Warehouse Lending, a California corporation (“Lender”), Aames Capital Corporation (“Aames Capital”), a California corporation, and Aames Funding Corporation (“Aames Funding”), a California corporation (Aames Capital and Aames Funding, jointly, the “Borrower”).

RECITALS

A. Borrower has requested Lender to provide Borrower with a line of credit from which Borrower may, from time to time, obtain advances of funds from Lender for the purpose of originating or acquiring residential mortgage loans.

B. As security for such advances, Borrower has agreed to grant to Lender a security interest in and lien upon certain mortgage loans originated and/or acquired by Borrower.

C. Lender has agreed to establish the line of credit requested by Borrower subject to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual rights and obligations provided herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower and Lender agree as follows:

ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

1.1 Defined Terms.     As used in this Agreement, capitalized terms shall have the meanings set forth in Exhibit A, unless the context otherwise requires. All such defined terms shall, unless specifically provided to the contrary, have the defined meanings set forth herein when used in any other agreement, certificate or document made or delivered pursuant hereto.

1.2 Principles of Constructions.

(a) Accounting Terms. Accounting terms not otherwise defined herein shall have the meanings given under GAAP.

(b) Number. All terms defined in this Agreement may be used in the singular or the plural, as the context requires.

(c) Successors and Assigns. Reference to any party shall mean that party and its successors and assigns permitted by the terms of this Agreement.

ARTICLE 2
AMOUNT AND TERMS OF CREDIT

2.1 Agreement to Lend. Subject to the terms and conditions of this Agreement (including Section 13.2 hereof) and provided that no Event of Default or Potential Default has occurred and is continuing, Lender agrees, from time to time during the term of this Agreement, to make Advances to Borrower; provided, however, that the total aggregate principal amount of Advances outstanding at any one time shall not exceed the Aggregate Credit Limit, the aggregate principal amount of any type of Advance shall not exceed the applicable Tranche Sublimit and the aggregate principal amount of Wet Mortgage Loans shall not exceed the Wet Mortgage Loans Sublimit.

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2.2 Credit Limit. The Aggregate Credit Limit and each Tranche Sublimit shall be as set forth in the Commitment Letter. Lender shall have the right, in its sole discretion, to reduce permanently, from time to time, the Aggregate Credit Limit and/or each Tranche Sublimit. In the event of any reduction pursuant to this Section 2.2, Lender shall give Borrower not fewer than ninety (90) days prior written notice thereof, which notice shall designate (a) the effective date of such reduction, (b) the amount of the reduction and (c) the credit limit(s) to which such reduction amount shall apply. Lender shall not be liable to Borrower for any costs, losses or damages arising from or relating to a reduction by Lender in the Aggregate Credit Limit or any Tranche Sublimit; provided, however, that Lender will refund to Borrower a prorated portion of the Commitment Fee equal to the greater of (i) (A) the Commitment Fee multiplied by (B) a fraction of which the numerator is the reduction of the Aggregate Credit Limit and the denominator is $200,000,000 multiplied by (C) a fraction of which the numerator is the number of days remaining prior to the expiration of this Agreement and the denominator is the term of this Agreement and (ii) in the case of reduction of the Aggregate Credit Limit which also results in a reduction of the Wet Mortgage Loans Sublimit which results in such Wet Mortgage Loans Sublimit being proportionately less than twenty percent (20%) of the Aggregate Credit Limit, (A) the Commitment Fee multiplied by (B) a fraction of which the numerator is the reduction of the Wet Mortgage Loans Sublimit and the denominator is the Wet Mortgage Loan Sublimit before any reduction multiplied by (C) a fraction of which the numerator is the number of days remaining prior to the expiration of this Agreement and the denominator is the term of this Agreement.

2.3 Description of Collateral.

(a) Required Collateral. With respect to each Advance, Borrower shall cause to be maintained with Lender Collateral consisting of a Mortgage Loan(s) with a Collateral Value not less than, at any date, the outstanding principal balance of the related Advance. With respect to each Advance, the Pledged Mortgage Loan shall be:

(i) if the Advance is a Tranche F Advance, a Subprime Mortgage Loan (1st mortgages, maximum loan amount of $600,000 for a 1st mortgage, purchased in connection with whole loan trades);

(ii) if the Advance is a Tranche G Advance, a Closed-End Second Lien Mortgage Loan;

(iii) if the Advance is a Tranche I Advance, a Subprime Mortgage Loan (1st or 2nd mortgages, purchased in connection with securitizations); or

(iv) if the Advance is a Tranche J Advance, a Noncomplaint Mortgage Loan.

Lender, in its sole discretion, shall determine the correct loan type for each Pledged Mortgage Loan.

(b) Wet Mortgage Loans as Collateral. The aggregate principal balance of all outstanding Advances secured by Wet Mortgage Loans shall not, at any time, exceed the Wet Mortgage Loans Sublimit.

2.4 Maximum Amount of Advance. Each Advance shall not exceed the lesser of:

(a) the applicable Tranche Sublimit, as determined by the type of Advance;

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(b) the Aggregate Credit Limit, minus the aggregate principal amount of all other Advances outstanding, if any; and

(c) the Collateral Value of the related Pledged Mortgage Loan(s).

2.5 Use of Proceeds. Borrower shall use the proceeds of each Advance solely for the purpose of originating and/or acquiring the related Pledged Mortgage Loan(s); provided, however, that Borrower may also use the proceeds of any Advance to payoff any warehouse lender or Borrower with respect to any Mortgage Loan which Borrower intends to pledge as a Pledged Mortgage Loan hereunder provided that (i) if the proceeds of the Advance are used to pay off a warehouse lender, (A) such warehouse lender is an Approved Payee and (B) such payoff is done in accordance with Lender’s applicable procedures and requirements and (ii) if the proceeds of the Advance are used to pay Borrower (such an Advance, a “Borrower Direct Advance”), (A) the related Collateral is shipped directly to a custodian approved by Lender within the Wet Mortgage Loans Maximum Dwell Timeand (B) such custodian has executed a custodial agreement with Lender which is reasonably acceptable to Lender. Notwithstanding anything contained herein to the contrary, in no event shall Borrower be entitled to request a Borrower Direct Advance, nor shall Lender be obligated to provide a Borrower Direct Advance, if the related Mortgage Loan(s) intended to be pledged by Borrower for such advance will be closed and funded for more than thirty (30) days on the date that such advance is to be made. All Advances, including Borrower Direct Advances, shall be subject to the terms and conditions of this Agreement.

2.6 Interest.

(a) Rate of Interest. Borrower shall pay Lender interest on each outstanding Advance from the date of disbursement until, but not including, the date of payment, at an annual rate equal to the sum of the Applicable Rate plus the applicable Margin; provided, however, that if a Pledged Mortgage Loan securing an Advance is deemed to be a Noncompliant Mortgage Loan, thereafter such Advance shall bear interest at an annual rate equal to the sum of the Applicable Rate plus the Tranche J Margin. Notwithstanding the foregoing, any Advance not paid when due (whether at stated maturity, upon acceleration or otherwise) shall bear interest from the date due until paid in full at an annual rate equal to the Default Rate.

(b) Time for Payment. Accrued interest for each Advance shall be due and payable on a monthly basis until the date on which the outstanding principal amount of the Advance is required to be paid. On the date that the Advance is required to be paid, all accrued interest not otherwise paid by Borrower shall be due and payable.

(c) Computations. All computations of interest and fees payable hereunder shall be based upon a year of three-hundred sixty (360) days.

2.7 Note. Borrower’s obligation to pay the principal of and interest on all Advances made by Lender is evidenced by the Note of even date herewith. All Advances under this Agreement shall constitute a single indebtedness, and all of the Collateral shall be security for the Note and for performance of all obligations of Borrower to Lender.

2.8 Guarantee. As additional support for the Advances, Borrower agrees to execute and deliver, or cause to be executed and delivered, to Lender such Guarantee and/or additional security agreements as Lender may request, in its sole discretion.

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ARTICLE 3
PROCEDURES FOR REQUEST AND MAKING OF ADVANCES

3.1 Additional Procedures Set Forth in Handbook. In making a request for an Advance, Borrower shall comply with those procedures set forth in this Agreement and the Handbook. Lender shall have the right to revise or supplement the Handbook to conform to current legal requirements or Lender practices by giving notice thereof to Borrower.

3.2 Requestfor Advance. Borrower shall initiate a request for an Advance by delivering to Lender, electronically or in writing, a Collateral Data Record for each Mortgage Loan intended to secure an Advance not later than the Advance Request Deadline. Borrower shall provide Lender not fewer than one (1) Business Days notice if Borrower intends to borrow an Advance or Advances equal to or greater than ten million dollars ($10,000,000); provided, however, Borrower need not provide a Collateral Data Record for each Mortgage Loan intended to secure such Advance or Advances prior to the Advance Request Deadline. Thereafter, Lender shall confirm to Borrower the terms of such Advance electronically or in writing. Lender shall have the right to revise or supplement the form of the Collateral Data Record by giving notice thereof to Borrower. If Borrower fails to borrow an Advance after Borrower has submitted a Collateral Data Record in connection with such borrowing, Borrower shall pay Lender the Breakage Fee and reimburse Lender for any out-of-pocket losses, costs and expenses incurred by Lender in connection with such failure to borrow the Advance, including, without limitation, costs relating to re-employment of funds obtained by Lender and fees payable to terminate the arrangements through which such funds were obtained. In addition, if following disbursement by Lender of any funds relating to an Advance, Borrower cancels or otherwise fails to borrow such Advance, Borrower shall pay Lender interest on such amount from the date of disbursement until, but not including, the date the funds are returned to Lender.

3.3 Delivery of Collateral Documents.

(a) Dry Mortgage Loans. Prior to the funding of any Advance secured from the date of funding by a Dry Mortgage Loan, Borrower shall deliver to Lender or its Custodian, or authorize and direct the Closing Agent to deliver to Lender or its Custodian, with respect to each Dry Mortgage Loan, the Collateral Documents along with those additional documents set forth in Sections 7.1 and 7.2, as applicable.

(b) Wet Mortgage Loans. If Lender makes an Advance secured by a Wet Mortgage Loan, prior to the funding of such Advance, Borrower shall deliver to Lender or its Custodian, or authorize and direct the Closing Agent to deliver to Lender or its Custodian, with respect to each Wet Mortgage Loan, those documents set forth in Sections 7.1 and 7.2, as applicable; provided, however, that Borrower shall deliver to Lender or its Custodian, all related Collateral Documents within the Wet Mortgage Loans Maximum Dwell Time.

(c) Other Mortgage Loan Documents. With respect to each Pledged Mortgage Loan, Borrower shall hold in trust for Lender those mortgage loan documents set forth in Exhibit E hereto.

3.4 Haircut. With respect to each Advance, Borrower shall ensure that there are sufficient funds on deposit in the Over/Under Account such that following the withdrawal of the Haircut by Lender, the balance of the Over/Under Account is equal to or greater than the minimum required balance, as set forth in the Commitment Letter.

3.5 Over/Under Account.

(a) Minimum Balance. Borrower shall at all times maintain a balance in the Over/Under Account of not than less than $250,000.00. Lender shall not be required to segregate and hold funds deposited by or on behalf of Borrower in the Over/Under Account separate and apart from Lender’s own funds or funds deposited by or held for other borrowers. If an Event of Default or Potential Default has occurred and is continuing, upon three (3) days notice to Borrower, Lender may increase the minimum balance Borrower is required to maintain in the Over/Under Account.

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(b) Deposits.

(i) Borrower. Borrower shall deposit funds in the Over/Under Account in accordance with the terms of this Agreement, including, without limitation, Sections 3.4 and 3.5(a).

(ii) Lender. Lender shall credit to the Over/Under Account all amounts in excess of those amounts due to Lender in accordance with the Principal Agreements on the date Lender receives or has received both (1) a payment by Borrower or an Investor pursuant to a Purchase Commitment and (2) a Purchase Advice relating to such payment without discrepancy; provided, however, that funds and Purchase Advices received by Lender after that time set forth in the Commitment Letter, shall be deemed to have been received on the next Business Day. Lender shall use reasonable efforts to notify Borrower on that same Business Day in the event there is a discrepancy between a wire transfer and the related Purchase Advice, and thereafter, Borrower shall notify Lender as to whether Lender should accept such payment despite the discrepancy between the amount received and the related Purchase Advice; provided, however, that if an Event of Default or Potential Default has occurred and is continuing, Lender is not obligated to receive approval from Borrower prior to accepting any amounts received and releasing the related Collateral.

(iii) Settlement Statement. Lender shall deliver to Borrower via facsimile or make available to Borrower via the Internet within twenty-four (24) hours following settlement of an Advance, or as soon thereafter as is reasonably possible, a settlement statement, which includes an explanation of all amounts credited by Lender to the Over/Under Account.

(c) Withdrawals.

(i) Borrower. If the amount credited to the Over/Under Account creates a balance in excess of the minimum balance required pursuant to Section 3.5(a) above, Borrower may submit a written request to Lender for return or payment of such excess funds. If Lender shall determine, in its reasonable discretion, that such amounts are not required to be retained in the Over/Under Account or paid to Lender, Lender shall deliver such funds to that account designated by Borrower.

(ii) Lender. Lender may, from time to time and without separate authorization by Borrower, withdraw funds from the Over/Under Account in accordance with the terms of this Agreement, including, without limitation:

(1) with respect to any Advance, to deliver the Haircut to the Closing Agent;

(2) to reimburse itself for any costs and expenses incurred by Lender in connection with this Agreement, as permitted herein;

(3) to pay itself any interest or principal that is due and owing;

(4) to Borrower as provided in Section 3.5(c)(i);

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(5) as security for the payment of the Note and of any other indebtedness of Borrower to Lender outstanding from time to time and for the performance of all of Borrower’s obligations hereunder; and

(6) without limiting the generality of Section 3.5(c)(ii)(5), as security for an Advance as provided in Section 6.3(a) or as repayment of an Advance as provided in Section 6.3(b).

(d) Failure to Maintain Balance. If, at any time, Borrower fails to maintain $250,000 (the “Minimum Balance”) in the Over/Under Account, Borrower shall deposit sufficient funds into the Over/Under Account by the close of business the next Business Day to maintain such Minimum Balance. It is understood and agreed that the current balance in the Over/Under Account, according to Lender’s records, will be available on Lender’s customer website(s) and it shall be the responsibility of Borrower to monitor the balance in the Over/Under Account to comply with its obligations hereunder. In the event Borrower fails to maintain such Minimum Balance as required herein, in addition to any other rights and remedies that Lender may have against Borrower, Borrower will be obligated to pay Lender accrued interest on that portion of the balance that Borrower has failed to maintain, at the Default Rate, from the time that such balance failed to be maintained until the time funds are deposited into or held in the Over/Account to comply with Borrower’s obligations hereunder. Without limiting the generality of the foregoing, it is understood and agreed that should the balance in the Over/Under Account become negative, Borrower will continue to owe Lender accrued interest as provided herein.

(e) Security Interest. Any funds of Borrower at any time deposited or held in the Over/Under Account, whether such funds are required to be deposited and held in the Over/Under Account pursuant to this Section 3.5 or otherwise, are hereby pledged as security in accordance with Section 6.1 hereof.

3.6 Disbursement of Funds.

(a) By Wire Transfer. To make an Advance, Lender shall wire funds, as applicable, upon compliance by Borrower with the terms of this Agreement; provided, however, that Lender shall not wire funds to any Closing Agent or warehouse lender that is not an Approved Payee unless such Lender has waived such condition pursuant to Section 3.7(iii). The wiring of funds by Lender to any Closing Agent or warehouse lender that is not an Approved Payee shall not make such Closing Agent or warehouse lender an Approved Payee. Any funds disbursed by Lender to Borrower or its Approved Payee by wire transfer shall be subject to all applicable federal, state and local laws and regulations and policy of the Board of Governors of the Federal Reserve System on Reduction of Payments System Risk as such policy may be changed or amended from time to time. Borrower acknowledges that as a result of such applicable law and policy, the transmission of a disbursement by wire transfer may be delayed.

(b) Advance Limitation to Closing Agent. Lender may refuse to wire funds to a Closing Agent pursuant to its policies as documented in the Handbook.

(c) Return of Funds. If a Wet Mortgage Loan pledged against an Advance is not closed within forty-eight (48) hours following delivery of the funds, Borrower shall direct Closing Agent to immediately return to Lender, such funds. Further, Borrower shall pay Lender all fees and interest accrued thereon immediately upon notification from Lender.

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3.7 Approved Payees.

(a) Closing Agents. In order for a Closing Agent to be designated an Approved Payee with respect to any Advance, Borrower must submit to Lender the following documents:

(i)  if the title company issuing the title policy that covers the applicable Pledged Mortgage Loan has not issued to Lender a blanket Closing Protection Letter, which covers closings conducted by this Closing Agent in the jurisdiction where this closing will take place:

(1) a valid blanket Closing Protection Letter, in a form acceptable to Lender, issued to Borrower or Lender by the title company, which is issuing the title insurance policy that covers the related Pledged Mortgage Loan, that covers closings conducted by the Closing Agent in the jurisdiction where this closing will take place and if applicable, an assignment to Lender of such Closing Protection Letter, substantially in the form of Exhibit K hereto; or

(2) a valid Closing Protection Letter, in a form acceptable to Lender, issued to Borrower or Lender by the title company, which is issuing the title insurance policy that covers the related Pledged Mortgage Loans, that covers the closing of this specific Pledged Mortgage Loan and if applicable, an assignment to Lender of such Closing Protection Letter, substantially in the form of Exhibit K hereto; or

(3) if Closing Protection Letters are not available or are limited in their applicability in the jurisdiction where the closing takes place, any other documents Lender may reasonably require, including without limitation an assignment to Lender of Borrower’s rights under its fidelity bond and errors and omissions policy, substantially in the form of Exhibit K hereto; and

(ii) evidence that the Irrevocable Closing Instructions, in the applicable form and signed by Borrower and Lender, have been delivered to such Closing Agent.

(iii) Waiver of Closing Protection Letter Requirements by Lender. Lender hereby agrees to waive the requirements of Section 3.7(a)(i) with respect to one or more Closing Agents and wire Advances to such Closing Agents provided that with respect to any one Closing Agent that the Maximum Individual Closing Agent Wet Loan Limit and/or Maximum Individual Closing Agent Dry Loan Limit is not exceeded, until Lender informs Borrower at least two Business Days prior of Lender’s decision not to waive the requirements of Section 3.7(a)(i).

(b) Warehouse Lenders. In order for a warehouse lender to be designated an Approved Payee with respect to any Advance, Borrower must submit to Lender a written request, including the name and address of the warehouse lender, demonstrating a need for such designation. Notwithstanding the foregoing, Lender reserves the right to refuse to designate any warehouse lender as an Approved Payee. Borrower understands and agrees that any designation of a warehouse lender as an Approved Payee may result in the modification of the terms and conditions under which Lender will continue to make Advances to Borrower. Notwithstanding the foregoing, each of Greenwich Capital Financial Products, Inc., Xxxxxx Xxxxxxx Xxxx Xxxxxx Mortgage Capital, Inc. and Xxxxxx Brothers Bank, FSB, is hereby deemed an Approved Payee.

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(c) Approval Process. Lender shall review the applicable documents and notify Borrower within one (1) Business Day as to whether such Closing Agent or warehouse lender has been designated by Lender, in its sole discretion, to be an Approved Payee with respect to such Advance. Lender may withdraw its approval of any Closing Agent or warehouse lender as an Approved Payee at any time, in its sole discretion; provided, however, that any Approved Payee shall remain an Approved Payee until such time as Lender may notify Borrower of its withdrawal of its approval thereof.

ARTICLE 4
PAYMENTS

4.1 Principal Payments and Prepayments. The outstanding principal amount of each Advance, with interest accrued and unpaid thereon, shall be payable in full upon the earliest to occur of (a) the Settlement Date of the Pledged Mortgage Loan; (b) the Maturity Date; (c) the occurrence of any Acceleration Event with respect to such Advance; or (d) the expiration or termination of this Agreement. Borrower may prepay any Advance hereunder in whole or in part at any time, without payment of any pre-payment penalty or premium, and such prepaid sums shall thereafter be available to be reborrowed by Borrower under the terms and conditions of this Agreement.

4.2 Acceleration Events. The occurrence of any of the following events shall be an Acceleration Event with respect to an Advance:

(a) the Pledged Mortgage Loan securing the Advance is deemed to be a Defective Mortgage Loan;

(b) Thirty (30) calendar days elapse from the date the Collateral Documents relating to the Pledged Mortgage Loan with respect to which the Advance was made were delivered to an Investor and such Investor has not returned the Collateral Documents or purchased the Pledged Mortgage Loan, unless an extension is granted by Lender, in its sole discretion;

(c) Ten (10) Business Days elapse from the date a Collateral Document relating to the Pledged Mortgage Loan with respect to which the Advance was made was delivered to Borrower for correction or completion, without being returned to Lender or its designee;

(d) Borrower fails to deliver to Lender the related Collateral Documents within the Wet Mortgage Loans Maximum Dwell Time or any Collateral Document delivered to Lender, upon examination by Lender, is found not to be in compliance with the requirements of this Agreement or the related Purchase Commitment and is not corrected within the Wet Mortgage Loans Maximum Dwell Time; or

(e) The sale of the Pledged Mortgage Loan with respect to which such Advance was made.

4.3 Reduction of Collateral Value as Alternative Remedy. In Lender’s sole discretion, in lieu of requiring full repayment of an outstanding Advance upon the occurrence of an Acceleration Event or maturity, Lender may, with at least one (1) Business Day prior notice to Borrower, elect to reduce the Collateral Value of the related Pledged Mortgage Loan (to as low as zero) and accordingly require a full or partial principal repayment of such Advance or the delivery of additional Collateral. The notice required under this section by Lender to Borrower may be satisfied by Lender by providing such notice via Lender’s customer website(s).

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4.4 Designation as Noncompliant Mortgage Loan as Alternative Remedy. In Lender’s sole discretion, in lieu of requiring full repayment of an outstanding Advance upon the occurrence of an Acceleration Event or maturity, Lender may elect, with at least one (1) Business Day prior notice to Borrower, to deem the related Pledged Mortgage Loan a Noncompliant Mortgage Loan, provided that (a) after such Pledged Mortgage Loan is deemed to be a Noncompliant Mortgage Loan, the aggregate original Collateral Value of all Noncompliant Mortgage Loans does not exceed the Tranche J Sublimit; (b) the Collateral Value of the Noncompliant Mortgage Loan is greater than the outstanding principal balance of the related Advance or Borrower provides additional Collateral or repays part of the Advance as provided in Section 6.3; and (c) Borrower delivers to Lender all documentation relating to the Pledged Mortgage Loan reasonably requested by Lender. The notice required under this section by Lender to Borrower may be satisfied by Lender by providing such notice via Lender’s customer website(s).

4.5 Illegality or Impracticability. Notwithstanding anything to the contrary in this Agreement, if any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof, or any circumstance affecting the London interbank market or the repurchase market for mortgage loans or mortgage-backed securities, shall make it unlawful or impractical for Lender to make or maintain Advances as contemplated by this Agreement (a) the commitment of Lender hereunder to make or to continue Advances shall be cancelled (b) each Advance then outstanding shall be due and payable upon the earlier to occur of (i) the date required by any financial institution providing funds to Lender, (ii) sale of the Pledged Mortgage Loan securing such Advance in accordance with the terms of this Agreement, and (iii) the date as of which Lender determines that so maintaining Advances is unlawful or impractical and (c) Lender will refund to Borrower a portion of the Commitment Fee equal to the Commitment Fee multiplied by a fraction of which the numerator is the number of days remaining prior to the expiration of the Agreement and the denominator is the term of this Agreement. Lender shall not be liable to Borrower for any costs, losses or damages arising from or relating from any actions taken by Lender pursuant to this Section 4.5.

4.6 Payments Pursuant to Sale to Investor. Borrower shall direct each Investor purchasing a Pledged Mortgage Loan to pay directly to Lender, by wire transfer of immediately available funds, the purchase price set forth in the applicable Purchase Commitment. In addition, Borrower shall provide Lender with a Purchase Advice relating to such payment. Borrower shall not attempt to modify or otherwise change the wire instructions for payment of the purchase price provided to Investor by Lender or Custodian. Lender shall apply all amounts received for the account of Borrower in accordance with Section 3.5(b)(ii) above. Lender may reject any amount received from an Investor and not release the related Pledged Mortgage Loan if (a) Lender does not receive a Purchase Advice in respect of any wire transfer or (b) such funds are not sufficient to pay all principal, interest and other costs relating to such Pledged Mortgage Loan owed by Borrower to Lender. If the amount received from the Investor does not equal or exceed all principal, interest and other costs owed by Borrower relating to such Pledged Mortgage Loan, Lender may deduct such amounts from the Over/Under Account or demand payment of such amount from Borrower. If Borrower receives any funds intended for Lender, Borrower shall hold such funds in trust for Lender and immediately pay to Lender all such amounts by wire transfer of immediately available funds.

4.7 Application of Payments. Payments made to Lender shall be applied in the following order of priority:

(a) first, to all costs, expenses and fees incurred or charged by Lender under this Agreement that are not related to a specific Advance;

(b) second, to any amounts due and owing to Lender pursuant to Section 6.3;

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(c) third, to all costs, expenses and fees incurred or charged by Lender under this Agreement that are related to the Advance in connection with which the payment is made;

(d) fourth, to interest accrued on the outstanding amount of the Advance in connection with which the payment is made;

(e) fifth, to interest due and owing on the outstanding amount of any other Advance, applied first

(f) sixth, to the outstanding principal amount of the Advance in connection with which the payment is made; and

(g) seventh, to the outstanding principal amount of any other Advance that is due and owing, applied first to the Advance with the earliest date.

After the payment has been applied as set forth above, Lender shall deposit in the Over/Under Account any amounts that remain.

4.8 Method of Payment. Except as otherwise specifically provided herein, all payments hereunder must be received by Lender on the date when due and shall be made in United States dollars by wire transfer of immediately available funds to such account designated by Lender from time to time. Whenever any payment to be made hereunder or under the Note shall be stated to be due on a day that is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and with respect to payments of principal, the interest thereon shall be payable at the applicable rate during such extension. All payments made by or on behalf of Borrower with respect to any Advance shall be applied to Borrower’s account in accordance with Section 3.5(b)(ii) above and shall be made in such amounts as may be necessary in order that all such payments after withholding for or on account of any present or future taxes, levies, imports, duties or other similar charges of whatsoever nature imposed by any government or any political subdivision or taxing authority hereof, other than any taxes on or measured by the net income of Lender pursuant to the state, federal and local tax laws of the jurisdiction where Lender’s principal office or offices or lending office or offices are located, compensate Lender for any additional cost or reduced amount receivable of making or maintaining advances as a result of such taxes, imports, duties or other charges. All payments to be made by or on behalf of Borrower with respect to any Advance shall be made without set-off, counterclaim or other defense.

4.9 Notification of Payment. Borrower shall provide Lender not fewer than one (1) Business Days notice if Borrower or an Investor intends to remit a payment to Lender equal to or greater than fifteen million dollars ($15,000,000).

4.10 Authorization to Debit. Borrower hereby expressly authorizes Lender to debit the Over/Under Account and, if an Event of Default or Potential Default has occurred and is continuing, any account maintained by Borrower with any depositary institution in respect of the Pledged Mortgage Loans, including without limitation, any operating, settlement or custodial account, for any and all amounts due Lender hereunder. Further, Lender may offset any amounts owed to Lender by Borrower against any amounts owed to Borrower by Lender or its Affiliates.

4.11 Book Account. Lender shall maintain an account on its books of all Advances made to Borrower and not yet repaid. Access to such information shall be available to Borrower via the Internet or by telephone or facsimile, if Borrower is unable to access the information electronically. Notwithstanding the foregoing, Borrower shall be responsible for maintaining its own account of Advances made and amounts due to Borrower and for paying such amounts when due; failure of Borrower to do so shall not excuse Borrower’s timely performance of all payment obligations under this Agreement.

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ARTICLE 5
FEES AND EXPENSES

5.1 Payment of Fees. Borrower shall pay to Lender those fees set forth in this Agreement or the Commitment Letter when they become due and owing, including the Breakage Fee, Commitment Fee, Defective Loan Fee, Document Deposit Fee, File Fee, Noncompliant Mortgage Loan Fee, Shipping Fee, Unused Facility Fee, Wet Deficiency Fee and Wire Transfer Fee. Without limiting the generality of the foregoing, the initial Commitment Fee shall be paid on or before the Effective Date and if this Agreement is renewed, thereafter on or before the anniversary of the Effective Date. Further, the Unused Facility Fee shall be paid quarterly in arrears, on the first day of the months of January, April, July and October, for each preceding calendar quarter. Lender shall be entitled to withdraw from the Over/Under Account or retain from payments made by Borrower or an Investor, subject to Section 4.6 above, any fees permitted under this Agreement that are due and owing. If such amounts on deposit in the Over/Under Account or payments received in connection with an Advance are not sufficient to pay Lender all amounts owed, Lender shall notify Borrower and Borrower shall pay to Lender, within one (1) Business Day, all unpaid amounts.

5.2 Reimbursement of Expenses. Borrower shall pay all reasonable out-of-pocket costs and expenses of Lender, including, without limitation, attorneys’ fees, in connection with the enforcement and administration of this Agreement, the Note and other documents and instruments related hereto or thereto and the making and repayment of the Advances and the payment of interest thereon.

ARTICLE 6
SECURITY AGREEMENT

6.1 Grant of Security Interest. As security for the payment of the Note and of any other indebtedness of Borrower to Lender outstanding from time to time and for the performance of all of Borrower’s obligations hereunder, Borrower hereby pledges, assigns and grants to Lender a first priority security interest in and lien upon the Collateral.

6.2 Servicing Rights. Provided that no Event of Default or Potential Default has occurred and is continuing, Borrower shall be entitled to service, receive and collect directly all sums payable in respect of the Pledged Mortgage Loans, except (a) amounts payable to Borrower for the purchase by any Investor under a Purchase Commitment of any Pledged Mortgage Loans that are funded in whole or in part with the proceeds of any Advance, which amounts shall be paid directly to Lender, or (b) as otherwise set forth in the Commitment Letter. Notwithstanding the foregoing, Lender shall be entitled to service, receive and collect all sums payable in respect of all the Pledged Mortgage Loans following the occurrence of any Event of Default or Potential Default for a specific Pledged Mortgage Loan if such Pledged Mortgage Loan is deemed to be a Noncompliant Mortgage Loan or Defective Mortgage Loan; provided, however, that Lender shall provide Borrower with at least one (1) Business Day prior notice of its intent to assume the servicing of any such loan, and upon receipt of such notice, Borrower shall have the right to immediately pay Lender any amounts owed Lender with respect to any such loan, including, without limitation, the related Advance(s) amount(s). In such cases where Lender has provided Borrower with notice of its intent to assume the servicing of any Pledged Mortgage Loan in accordance with the terms hereof and Borrower has decided not to repay the amounts owed Lender with respect to such loan as provided herein, (a) Lender may, in its own name or in the name of Borrower or otherwise, demand, xxx for, collect or receive any money or property at any time payable or receivable on account of or in exchange for the Pledged Mortgage Loan(s), but shall be under no obligation to do so; (b) Borrower shall, if Lender so requests, pay to Lender all amounts received by Borrower upon or in respect of the Pledged Mortgage Loan(s) or other Collateral, advising Lender as to the source of such funds; and (c) all amounts so received and collected by Lender shall be held by it as part of the Collateral. If Lender assumes the servicing of all or part of the Pledged Mortgage Loans, Borrower agrees to cooperate with Lender and do or accomplish all acts or things necessary to effect the transfer of the servicing to Lender, at Borrower’s sole expense, and to pay Lender twenty dollars ($20.00) per month, or portion thereof, for each Pledged Mortgage Loan serviced by Lender. Any assumption of the servicing related to any Pledged Mortgage Loan by Lender in accordance with the terms herein shall also be in accordance with all applicable laws.

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6.3 Delivery of Additional Collateral or Mandatory Prepayment. Lender shall have the right to redetermine the Collateral Value of each Pledged Mortgage Loan on a daily basis. If Lender shall determine, in its reasonable discretion, at any time, that the Collateral Value of a Pledged Mortgage Loan is less than the outstanding principal balance of the related Advance or the aggregate Collateral Value of the Pledged Mortgage Loans is less than the aggregate outstanding principal balance of the Advances, Borrower shall immediately repay one or more Advances in an amount sufficient to reduce the outstanding principal balance thereof to or below the Collateral Value of the Pledged Mortgage Loan(s), or, if Borrower requests and Lender consents, deliver to Lender for pledge hereunder additional Mortgage Loans satisfactory to Lender and/or cash, such that the Collateral Value of the additional Mortgage Loans and cash are equal to or greater than the difference between the Collateral Value of the then existing Pledged Mortgage Loans and the aggregate outstanding principal balance of the Advances If Borrower does comply with its obligations pursuant to this Section 6.3 within one (1) Business Day of Borrower’s receipt of notice from Lender, Lender may, in its sole discretion, withdraw from the Over/Under Account amounts to serve as additional security for an Advance pursuant to Section 6.3(a) above or to repay an Advance pursuant to Section 6.3(b) above.

6.4 Custody of Collateral Documents.

(a) Custodial Arrangements. Lender may appoint any Person to act as the Custodian to hold possession of the Collateral Documents (or a portion thereof) and to take actions at the direction of Lender. Borrower hereby consents to any and all such appointments and agrees to deliver the Collateral Documents to the Custodian upon the direction of Lender. Borrower further agrees that (i) the Custodian shall be exclusively the agent, bailee and/or custodian of Lender; (ii) receipt of the Collateral Documents by the Custodian shall be constructive receipt by Lender and shall perfect Lender’s security interest in the Collateral Documents; (iii) Borrower shall not have and shall not attempt to exercise any degree of control over the Custodian or any Collateral Document held by the Custodian; and (iv) Lender shall not be liable for any act or omission by the Custodian selected by Lender with reasonable care.

(b) Temporary Withdrawal of Collateral Documents for Correction. Lender may, at its option and in its sole but reasonable discretion, permit Borrower to withdraw, for a period not to exceed ten (10) Business Days, specified Collateral Documents for the purpose of correcting or completing such documents; provided, however, that Borrower sign a Trust Receipt and that the Collateral Documents relating to Pledged Mortgage Loans with an aggregate unpaid Advance amount of no greater than two million ($2,000,000) dollars shall be released to Borrower at any time. Notwithstanding the foregoing, Lender shall be deemed to be in possession of any Collateral Documents released pursuant to this Section 6.4(b), and the security interest granted to Lender in the related Pledged Mortgage Loan shall continued unimpaired until the Collateral Documents are returned to, or the proceeds thereof are received by, Lender.

(c) Delivery of Collateral Documents to Investors. Upon the written request of Borrower, Lender may, at its option and in its sole but reasonable discretion, deliver to the Investor set forth in the related Purchase Commitment, or its custodian, the Collateral Documents relating to a specified Pledged Mortgage Loan. All such Pledged Mortgage Loans and the related Collateral Documents shall at all times be covered by one or more Bailee Agreements, and Lender or its designee will not release Collateral Documents to an Investor unless Lender or its Custodian has received a signed Bailee Agreement from the Investor. Notwithstanding the foregoing, Lender shall be deemed to be in possession of any Collateral Documents released pursuant to this Section 6.4(c), and the security interest granted to Lender in the related Pledged Mortgage Loan shall continued unimpaired until the Collateral Documents are returned to, or proceeds thereof are received by, Lender. If the Investor does not purchase a Pledged Mortgage Loan as contemplated by the related Purchase Commitment, Borrower, upon the request of Lender, shall assist Lender in the recovery of any Collateral Documents not returned by the Investor to Lender.

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(d) Delivery of Collateral Documents Relating to Mortgage-Backed Securities. Upon the written request of Borrower, Lender may, at its option and in its sole but reasonable discretion, deliver to the certifying custodian the Collateral Documents relating to those Pledged Mortgage Loans that will be pooled to support a Mortgage-Backed Security. All such Pledged Mortgage Loans and the related Collateral Documents shall at all times be covered by a Bailee Agreement, and Lender or its designee will not release Collateral Documents to a certifying custodian unless Lender or its designee has received a signed tri-party custodial agreement from such custodian, in a form acceptable to Lender. Lender shall have no obligation to release any Collateral Documents to any certifying custodian that will not sign a custodial agreement acceptable to Lender. Notwithstanding the foregoing, Lender shall be deemed to be in possession of any Collateral Documents released pursuant to this Section 6.4(d), and the security interest granted to Lender in the related Pledged Mortgage Loan shall continued unimpaired until the Collateral Documents are returned to, or proceeds thereof are received by, Lender. Borrower shall pay for all costs of the certifying custodian and use its best efforts to ensure that the issuer delivers the Mortgage-Backed Securities to the certifying custodian.

6.5 Release of Collateral. Provided that no Event of Default or Potential Default has occurred and is continuing, Borrower may redeem a Pledged Mortgage Loan from pledge, by either:

(a) paying, or causing an Investor to pay, to Lender, subject to Sections 4.6 and 4.7 above, an amount greater than or equal to (i) the Collateral Value of the Pledged Mortgage Loan to be released, but in no event less that the amount of the Advance made with respect to such Mortgage Loan, plus (ii) accrued interest relating to the Advance secured by such Mortgage Loan, plus (iii) accrued fees relating to the Pledged Mortgage Loan or the Advance secured by such Mortgage Loan; or(b) delivering to Lender for pledge hereunder additional Mortgage Loan(s) satisfactory to Lender and/or cash, in aggregate amounts sufficient to cover the amount by which the aggregate amount of Advances then outstanding hereunder (plus accrued interest and accrued fees with respect thereto) exceeds the Collateral Value of the existing Pledged Mortgage Loan(s), excluding the Pledged Mortgage Loan(s) to be released.

(b) delivering to Lender for pledge hereunder additional Mortgage Loan(s) satisfactory to Lender and/or cash, in aggregate amounts sufficient to cover the amount by which the aggregate amount of Advances then outstanding hereunder (plus accrued interest and accrued fees with respect thereto) exceeds the Collateral Value of the existing Pledged Mortgage Loan(s), excluding the Pledged Mortgage Loan(s) to be released.

Upon receipt of the applicable amount, as set forth above, Lender shall deliver the related Collateral Documents to Borrower or Borrower’s designee, if such documents have not already been delivered pursuant to a Bailee Agreement.

6.6 Repurchase Transactions. Up and until the date that any Pledged Mortgage Loan is required to be sold by Borrower to an Investor, Lender may engage in repurchase transactions with respect to any or all of the Pledged Mortgage Loans or otherwise pledge, hypothecate, assign, transfer or convey any or all of the Pledged Mortgage Loans with a counterparty of Lender’s reasonable choice (such transactions, “Repo Transactions”). In connection with any Repo Transaction, Borrower hereby conveys legal title to the Pledged Mortgage Loans subject to such transaction for the limited purpose of effecting such transaction. Lender agrees to take all actions necessary to cause any Pledged Mortgage Loan subject to a Repo Transaction to be free and clear of any liens, rights, or obligations under such transaction on or prior to the date that such loan is to be sold by Borrower to the related investor. All Repo Transactions will occur without any additional obligations, costs or fees to Borrower and such transactions shall affect the obligations of Lender under this Agreement, including without limitation, the obligations to deliver Collateral to the related Investors. In addition, Lender agrees to indemnify and hold harmless Borrower in the event Lender breaches its obligations under this Section 6.6.

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ARTICLE 7
CONDITIONS PRECEDENT

7.1 Initial Advance. As conditions precedent to Lender’s obligation to make the initial Advance hereunder:

(a) Borrower shall have delivered to Lender, in form and substance satisfactory to Lender:

(i)  this Agreement signed by Borrower;

(ii)  the Commitment Letter signed by Borrower;

(iii)  the Note signed by Borrower;

(iv)  a Guarantee signed by each Guarantor, if stipulated in the Commitment Letter;

(v)  a Power of Attorney signed by Borrower;

(vi)  a certified copy of Borrower’s articles or certificate of incorporation and bylaws (or corresponding organizational documents if Borrower is not a corporation) and a certificate of good standing issued by the appropriate official in Borrower’s jurisdiction of organization, dated no less recently than one (1) month prior to the date hereof;

(vii)  a certificate of Borrower’s corporate secretary, substantially in the form of Exhibit H hereto, dated as of the Effective Date, as to the incumbency and authenticity of the signatures of the officers of Borrower executing the Principal Agreements and the resolutions of the board of directors of Borrower, substantially in the form of Exhibit I hereto;

(viii)  independently audited financial statements of Borrower (and its Subsidiaries, on a consolidated basis) for each of the two (2) fiscal years most recently ended (if available), containing a balance sheet and related statements of income, stockholders’ equity and cash flows, all prepared in accordance with GAAP, applied on a basis consistent with prior periods, and otherwise acceptable to Lender;

(ix)   if more than six (6) months has passed since the close of the most recently ended fiscal year, interim financial statements of Borrower covering the period from the first day of the current fiscal year to the last day of the most recently ended month;

(x)  financial statements of each of the Guarantors, signed by them, dated no less recently than three (3) months prior to the date of the initial Advance;

(xi)  copies of Borrower’s errors and omissions insurance policy or mortgage impairment insurance policy and blanket bond coverage policy or certificates of insurance for such policies, all in form and content satisfactory to Lender, showing compliance by Borrower with Section 9.10 below;

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(xii)  a subordination agreement, in form and substance satisfactory to Lender in its sole discretion, executed by each Guarantor and each Affiliate of Borrower that, as of the Effective Date, is a creditor of Borrower;

(xiii)  an Acknowledgement of Confidentiality of Password Agreement;

(xiv)  the initial Commitment Fee.

(xv)  letter agreement dated June 26, 2003 regarding Borrower’s use of Countrywide Securities Corporation as lead underwriter.

(b) Borrower shall have executed and filed with the appropriate governmental authorities, as determined by Lender, in the state of Borrower’s principal place of business and in the state of Borrower’s organization and in such other jurisdictions as may be required by Lender, Uniform Commercial Code Financial Statements (UCC-1) and/or such other instruments as may be necessary to perfect the security interest of Lender in the Collateral, and Borrower has provided satisfactory evidence of such filing to Lender.

(c) Lender shall have satisfactorily completed its due diligence review of Borrower’s operations, business, financial condition and underwriting and origination of Mortgage Loans.

7.2 All Advances. As conditions precedent to Lender’s obligation to make any Advance hereunder, including the initial Advance (unless otherwise indicated):

(a) Borrower shall have delivered to Lender, in form and substance satisfactory to Lender and not later than the Advance Request Deadline:

(i)  a Collateral Data Record for the Pledged Mortgage Loan, which Collateral Data Record may be an individual record or part of a group report and shall be authenticated by Borrower with the PIN or the handwritten signature of an authorized officer of Borrower;

(ii)  the Collateral Documents relating to the Pledged Mortgage Loan, unless such Pledged Mortgage Loan is a Wet Mortgage Loan;

(iii)  if required by the Commitment Letter, a copy of a Purchase Commitment for the related Pledged Mortgage Loan;

(iv)  written evidence that all Commitment Requirements have been satisfied;

(v)  if, at any time after the initial Advance, Borrower becomes a member of MERS, an Electronic Tracking Agreement - Warehouse Lender; and

(vi)  such other documents pertaining to the Advance as Lender may reasonably request, from time to time.(b)    an amount equal to the Haircut plus the minimum required balance, as set forth in Section 3.5(a), shall be on deposit in the Over/Under Account;

(b) an amount equal to the Haircut plus the minimum required balance, as set forth in Section 3.5(a), shall be on deposit in the Over/Under Account;

(c) Borrower shall have paid all Commitment Fees and Unused Facility Fees that are due;

(d) Borrower shall have designated an Approved Payee, if applicable, to whom such funds shall be delivered;

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(e) the representations and warranties of Borrower set forth in Article 8 hereof shall be true and correct in all material respects as if made on and as of the date of each Advance;

(f) Borrower and each Guarantor shall have performed all agreements to be performed by them hereunder and under the Guaranty, respectively, and after giving effect to the requested Advance, there shall exist no Event of Default or Potential Default hereunder; and

(g) Borrower shall not have (i) incurred any material liabilities, direct or contingent, other than in the ordinary course of its business, since the dates of Borrower’s most recent financial statements theretofore delivered to Lender or (ii) experienced any other material adverse change in its business or operations.

7.3 Intercreditor Agreements. Borrower shall use reasonable efforts to deliver to Lender an Intercreditor Agreement within sixty (60) calendar days following the Effective Date signed by each creditor that provides warehouse lines of credit, repurchase facilities or similar mortgage finance arrangements to Borrower. If Borrower fails to do so, Borrower understands and agrees that Lender may, in its sole discretion, determine that such failure adversely affects the creditworthiness of Borrower and may modify the terms and conditions under which it will continue to make Advances to Borrower. Lender shall not be liable to Borrower for any costs, losses or damages arising from or relating to any changes made by Lender to the terms and conditions under which it will continue to make Advances to Borrower.

7.4 Satisfaction of Conditions. The making of any Advance prior to or without the fulfillment by Borrower of all the conditions precedent thereto, whether or not known to Lender, shall not constitute a waiver by Lender of the requirements that all conditions, including the non-performed conditions, shall be required to be satisfied with respect to all Advances. All conditions precedent hereunder are imposed solely and exclusively for the benefit of Lender and may be freely waived or modified in whole or in part by Lender. Any waiver or modification asserted by Borrower to have been agreed by Lender must be in writing. Lender reserves the right to modify the terms and conditions under which it will continue to make Advances to Borrower based upon any change in the creditworthiness of Borrower or the performance of Borrower under this Agreement. Lender shall not be liable to Borrower for any costs, losses or damages arising from or relating to any changes made by Lender to the terms and conditions under which it will continue to make Advances to Borrower or Lender’s reasonable determination that Borrower has not satisfactorily complied with any applicable condition precedent.

ARTICLE 8
REPRESENTATIONS AND WARRANTIES

8.1 Representations and Warranties Concerning Borrower. Borrower represents and warrants to and covenants with Lender that the following are true and correct as of the Effective Date through and until the date on which all obligations of Borrower under this Agreement and the Note are fully satisfied:

(a) Due Incorporation and Good Standing. Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has the full legal power and authority to own its property and to carry on its business as currently conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary.

(b) Authorization. The execution, delivery and performance by Borrower of the Principal Agreements and all other documents and transactions contemplated thereby, are within Borrower’s corporate powers, have been duly authorized by all necessary corporate action and do not constitute or will not result in (i) a breach of any of the terms, conditions or provisions of Borrower’s articles or certificate of incorporation or bylaws (or corresponding organizational documents if Borrower is not a corporation); (ii) a material breach of any legal restriction or any agreement or instrument to which Borrower is now a party or by which it is bound; (iii) a material default or an acceleration under any of the foregoing; or (iv) the violation of any law, rule, regulation, order, judgment or decree to which Borrower or its property is subject.

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(c) Enforceable Obligation. The Principal Agreements and all other documents contemplated thereby constitute legal, binding and valid obligations of Borrower, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights.

(d) Approvals. The execution and delivery of the Principal Agreements and all other documents contemplated thereby and the performance of Borrower’s obligations thereunder do not require any license, consent, approval, authorization or other action of any Person, including any state, federal, governmental or regulatory authority, or if required, such license, consent, approval, authorization or other action has been obtained prior to the Effective Date.

(e) Compliance with Laws. Borrower is not in violation of any provision of any law, or of any judgment, award, rule, regulation, order, decree, writ or injunction of any court or public regulatory body or authority that might have a material adverse effect on the business, operations, assets or financial condition of Borrower.

(f) Financial Condition. All financial statements of Borrower and each Guarantor delivered to Lender fairly and accurately present the financial condition of the parties for whom such statements are submitted. The financial statements of Borrower have been prepared in accordance with GAAP consistently applied throughout the periods involved, and there are no contingent liabilities not disclosed thereby that would adversely affect the financial condition of Borrower. Since the close of the period covered by the latest financial statement delivered to Lender with respect to Borrower, there has been no material adverse change in the assets, liabilities or financial condition of Borrower nor is Borrower aware of any facts that, with or without notice or lapse of time or both, would or could result in any such material adverse change. No event has occurred, including, without limitation, any litigation or administrative proceedings (other than as disclosed by Borrower’s parent in its filings with the United States Securities and Exchange Commission or by Borrower under its reporting requirements to Lender herein), and no condition exists or, to the knowledge of Borrower, is threatened, that (i) might render Borrower unable to perform its obligations under the Principal Agreements and all other documents contemplated thereby; (ii) would constitute a Potential Default or Event of Default; or (iii) might materially adversely affect the financial condition of Borrower or the validity, priority or enforceability of the Principal Agreements or any other documents contemplated thereby.

(g) Other Credit Facilities. The only other credit facilities, including repurchase agreements for mortgage loans and mortgage-backed securities, of Borrower that are presently in effect and are secured by mortgage loans or provide for the purchase, repurchase or early funding of mortgage loan sales, are with Persons disclosed to Lender at the time of application, or thereafter disclosed to and approved by Lender (which approval will not be unreasonably withheld), that have executed and delivered an Intercreditor Agreement (or will execute and deliver an Intercreditor Agreement within sixty (60) days following the Effective Date in accordance with Section 7.3) or warehouse lenders that are Approved Payees.

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(h) Title to Assets. Borrower has good, valid, insurable (in the case of real property) and marketable title to all of its properties and other assets, whether real or personal, tangible or intangible, reflected on the financial statements delivered to Lender with respect to Borrower, except for such properties and other assets that have been disposed of in the ordinary course of business, and all such properties and other assets are free and clear of all material liens except as disclosed in such financial statements.

(i) Solvency. Borrower is solvent and will not take any action that constitutes an act, or would give rise to an event, of insolvency after giving effect to the transactions contemplated by the Principal Agreements, and Borrower, after giving effect to the transactions contemplated by the Principal Agreements, will have an adequate amount of capital to conduct its business in the foreseeable future.

(j) Litigation. Other than as disclosed by Borrower’s parent in its filings with the United States Securities and Exchange Commission or by Borrower under its reporting requirements to Lender herein, there are no actions, claims, suits or proceedings pending, or to the knowledge of Borrower, threatened or reasonably anticipated against or affecting Borrower in any court or before any arbitrator, government commission, board, bureau or other administrative agency that, if adversely determined, may reasonably be expected to result in any material and adverse change in the business, operations, assets, licenses, qualifications or financial condition of Borrower.

(k) Payment of Taxes. Borrower has filed all tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied upon it or its property or income that are due and payable, including interest and penalties, or has provided adequate reserves for the payment thereof.

(l) No Defaults. Borrower is not in default under any indenture, mortgage, deed of trust, agreement or other instrument or contractual or legal obligation to which it is a party or by which it is bound.

(m) ERISA. Borrower is in compliance in all material respects with the requirements of ERISA, and no Reportable Event has occurred under any Plan maintained by Borrower.

(n) Intentionally Omitted.

(o) True and Complete Disclosure. Borrower has made full disclosure to Lender of all information that could adversely affect the execution, delivery and performance by Borrower of its obligations under the Principal Agreements. All information furnished to Lender by or on behalf of Borrower in connection with the Principal Agreements or any transaction contemplated thereby, including, without limitation, all information set forth in the Credit Application, was true, accurate and complete in all material respects on the date furnished, and there has been no material adverse change in the condition, financial or otherwise, of Borrower from the time such information was provided to Lender.

(p) Priority of Liens. Borrower owns all Pledged Mortgage Loans, and Lender shall have, and this Agreement creates in favor of Lender, a valid, enforceable, perfected first priority lien and security interest in the Pledged Mortgage Loans and other Collateral, prior to the rights of all third Persons and subject to no other liens.

(q) Investment Company Act. Borrower is not an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(r) Subsidiaries. Borrower has no Subsidiaries, other than Aames Capital Acceptance Corporation and Aames Holding Corporation.

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8.2 Representations and Warranties Concerning Collateral. Borrower represents and warrants to and covenants with Lender that the following are true and correct with respect to each Pledged Mortgage Loan as of the related Advance Date through and until the date on which such Pledged Mortgage Loan is released as Collateral by Lender:

(a) Eligible Loan. The Mortgage Loan is a Subprime Mortgage Loan, Closed-End Second Lien Mortgage Loan or Nonperforming/Subperforming Mortgage Loan, as applicable. The Mortgage Loan is (or with respect to a Wet Mortgage Loan shall, upon disbursement be) a legal, valid and binding obligation of the Mortgagor thereunder, enforceable in accordance with its terms and subject to no offset, defense or counterclaim, obligating Mortgagor to make the payments specified therein.

(b) Purchase Commitment. If required in the Commitment Letter, the Mortgage Loan is covered by a Purchase Commitment that permits assignment thereof to Lender, does not exceed the availability under such Purchase Commitment, conforms to the requirements and specifications set forth in such Purchase Commitment and the related regulations, rules, requirements and/or handbooks of the applicable Investor and is eligible for sale to and insurance or guaranty by, respectively, the applicable Investor and any applicable Insurer.

(c) Collateral Data Record. The information contained in the Collateral Data Record is true, correct and complete in all material respects.

(d) Origination and Servicing. The Mortgage Loan has been originated and serviced in material compliance with all industry standards, applicable Investor and Insurer requirements and all applicable federal, state and local statutes, regulations and rules, including, without limitation, the Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z thereunder, the Federal Fair Credit Reporting Act, the Federal Equal Credit Opportunity Act, the Federal Real Estate Settlement Procedures Act of 1974, as amended, and Regulation X thereunder, and all applicable usury, licensing, real property, consumer protection and other laws.

(e) Mortgage Loan Documents. The Mortgage Loan is evidenced by instruments acceptable to the Investor, as applicable, given the type of Mortgage Loan. The Collateral Documents and other mortgage loan documents have been duly executed and delivered by the Mortgagor and create valid and legally binding obligations of the Mortgagor, enforceable in accordance with their terms, except as may be limited by bankruptcy or other laws affecting the enforcement of creditor’s rights generally, and there are no rights of rescission, set-offs, counterclaims or other defenses with respect thereto.

(f) Lien Position. The Mortgage Loan is secured by a valid first priority lien on the Mortgaged Property under the laws of the state where the related mortgaged property in located; provided, however, that if the Mortgage Loan is a Closed-End Second Lien Mortgage Loan, it is secured by a valid second lien on the Mortgaged Property.

(g) No Future Advances. The full original principal amount of each Mortgage Loan, net of any discounts, has been fully advanced or disbursed to the Mortgagor named therein, unless otherwise expressly agreed by the parties in writing. There is no requirement for future advances and any and all requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor have been satisfied.

(h) No Default. There is no default, breach, violation or event of acceleration existing under the Mortgage or the related Mortgage Note, and no event has occurred that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration. Borrower has not waived any default, breach, violation or event of acceleration.

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(i) No Waiver. The terms of the Mortgage Loan have not been waived, impaired, changed or modified, except to the extent such amendment or modification has been disclosed to Lender in writing and does not affect the salability of the Mortgage Loan pursuant to the applicable Purchase Commitment.

(j) Taxes and Insurance. All taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents that previously became due and owing have been paid or a escrow of funds has been established in an amount sufficient to pay for every such item that remains unpaid.

(k) Intentionally Omitted.

(l) Intentionally Omitted.

(m) Hazard Insurance. The Mortgage Loan is covered by a policy of hazard insurance, flood insurance and insurance against other insurable risks and hazards as required by the applicable Investor and the agreements applicable to such Mortgage Loan, in amounts not less than the outstanding principal balance of the Mortgage Loan or such maximum lesser amount as permitted by the applicable Investor and applicable law, all in a form usual and customary in the industry and that is in full force and effect, and all amounts required to have been paid under any such policy have been paid.

(n) Title Insurance. A valid and enforceable title insurance policy has been issued or a commitment to issue such title insurance policy has been obtained for the Mortgage Loan in an amount not less than the original principal amount of such Mortgage Loan, which title insurance policy insures that the Mortgage relating thereto is a valid first lien or second lien, as applicable, on the property therein described and that the mortgaged property is free and clear of all encumbrances and liens having priority over the first lien of the Mortgage (unless the Mortgage Loan is a Closed-End Second Lien Mortgage Loan) and otherwise in compliance with the requirements of the applicable Investor. The title insurance company that issued the applicable Closing Protection Letter has also issued or has committed to issue the title insurance policy.

(o) Assignment. The Assignment (i) has been duly authorized by all necessary corporate action by Borrower, duly executed and delivered by Borrower and is the legal, valid and binding obligation of Borrower enforceable in accordance with its terms, and (ii) complies with all applicable laws including all applicable recording, filing and registration laws and regulations and is adequate and legally sufficient for the purpose intended to be accomplished thereby, including, without limitation, the assignment of all of the rights, powers and benefits of Borrower as mortgagee.

(p) No Fraud. No material error, omission, misrepresentation, negligence, fraud or similar occurrence has taken place with respect to the Mortgage Loan on the part of any person, including, without limitation, the Mortgagor, any appraiser, any builder or developer or any other party involved in the origination of the Mortgage Loan or in the application of any insurance in relation to such Mortgage Loan.

8.3 Continuing Representations and Warranties. By submitting a Collateral Data Record hereunder, Borrower shall be deemed to have represented and warranted the truthfulness and completeness of the statements set forth in Sections 8.1 and 8.2.

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ARTICLE 9
AFFIRMATIVE COVENANTS

Borrower hereby covenants and agrees with Lender that during the term of this Agreement and for so long as there remain any obligations of Borrower to be paid or performed under the Principal Agreements:

9.1 Payment of Note. Borrower shall pay or cause to be paid the principal, interest and all other amounts due and payable hereunder and under the Note in accordance with the terms hereof and thereof.

9.2 Financial Statements and Other Reports.

(a) Quarterly Statements. Borrower shall deliver to Lender, within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of Borrower and Guarantor, financial statements of Borrower and Guarantor, including statements of income and changes in shareholders’ equity for the period from the beginning of such fiscal year to the end of such fiscal quarter and the related balance sheet as at the end of such fiscal quarter, all in reasonable detail and certified by the chief financial officer of Borrower and Guarantor, as applicable;

(b) Annual Statements. Borrower shall deliver to Lender, within ninety (90) days after the end of each fiscal year of Borrower and Guarantor, audited financial statements of Borrower and Guarantor, including statements of income and changes in shareholders’ equity for such fiscal year and the related balance sheet as at the end of such fiscal year, all in reasonable detail and accompanied by an opinion of a certified public accounting firm reasonably satisfactory to Lender including a management representation letter signed by the chief financial officer of Borrower and Guarantor stating that the financial statements fairly present the financial condition and results of operations of Borrower and Guarantor as of the end of, and for, such year;

(c) Officer’s Certificate. Together with the financial statements required to be delivered pursuant to Sections 9.2(a) and (b), Borrower shall deliver to Lender an officer’s certificate substantially in the form of Exhibit J hereto;

(d) [Intentionally left blank];

(e) Hedging Report. As may be reasonably requested by Lender from time to time, Borrower shall deliver to Lender, not later than 10:00 a.m., Pacific time, on each Monday, or Tuesday if Monday is not a Business Day, a reconciliation report, in a form reasonably satisfactory to Lender, including, without limitation, all outstanding Advances, related Purchase Commitments, availability under unused Purchase Commitments and all amounts outstanding and available under other warehouse lines of credit; and

(f) Other Reports. Borrower shall deliver to Lender, within thirty (30) days of filing or receipt (i) copies of all regular or periodic financial or other reports, if any, that Borrower files with any governmental, regulatory or other agency and (ii) copies of all audits, examinations and reports concerning the operations of Borrower from any Investor, Insurer or licensing authority. Borrower shall also deliver to Lender, with reasonable promptness, copies of such other reports in respect of the Pledged Mortgage Loans and such further information regarding the business, operations, properties or financial condition of Borrower, in such detail and at such times as Lender, in its reasonable discretion, may request. Borrower understands and agrees that all reports and information provided to Lender by or relating to Borrower may be disclosed to Lender’s Affiliates.

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9.3 Inspection of Properties and Books. Borrower shall keep accurate and complete records of the Pledged Mortgage Loans. Borrower shall permit authorized representatives of Lender to discuss the business, operations, assets and financial condition of Borrower with its officers and employees and to examine its books of account and make copies and/or extracts thereof, upon reasonable notice to Borrower at Borrower’s place of business during normal business hours. Borrower will provide its accountants with a copy of this Agreement promptly after the execution hereof and will instruct its accountants to answer candidly and fully any and all questions that any authorized representative of Lender may address to them in reference to the financial condition or affairs of Borrower. Borrower may have its representatives in attendance at any meetings between the officers or other representatives of Lender and Borrower’s accountants held in accordance with this authorization.

9.4 Notice. Borrower shall give Lender prompt written notice, in reasonable detail, of:

(a) any and all material changes to the information set forth in the Credit Application;

(b) any material action, suit or proceeding instituted by or against Borrower in any federal or state court or before any commission or other regulatory body (federal, state or local, foreign or domestic), or any such action, suit or proceeding threatened against Borrower; it is hereby agreed that any individual action, suit or proceeding instituted by or against Borrower which involves an amount, whether alleged or actual, equal to or greater than five million ($5,000,000) dollars shall be deemed material for purposes of this subsection;

(c) the filing, recording or assessment of any material federal, state or local tax lien against it, or any of its assets;

(d) the occurrence of any Potential Default or Event of Default;

(e) the actual or threatened suspension, revocation or termination of Borrower’s licensing or eligibility, in any respect, as may be applicable, as an approved, licensed lender, seller, mortgagee or servicer;

(f) the suspension, revocation or termination of any existing material warehouse lending credit facility or investor relationship to facilitate the sale and/or origination of residential mortgage loans;

(g) any demand, whether in the individual or aggregate, in excess of $10,000,000 by an Investor(s) or Insurer(s) in any given fiscal quarter for the repurchase of mortgage loans or indemnification;

(h) any potential or existing Pledged Mortgage Loan where a director or executive officer of Borrower is the Mortgagor or guarantor or where the related Mortgaged Property is being sold by a director or executive officer of Borrower;

(i) any Pledged Mortgage Loan ceases to be eligible Collateral for the security of the Advances;

(j) any Investor that threatens to set-off amounts owed by Borrower to such Investor against Pledged Mortgage Loans;

(k) any change in the Executive Management of Borrower; and

(l) any other action, event or condition of any nature that may lead to or result in a material adverse effect on the business, operations, assets or financial condition of Borrower or that, without notice or lapse of time or both, would constitute a default under any agreement, instrument or indenture to which Borrower is a party or to which Borrower, its properties or assets may be subject.

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9.5 Additional Financing. If Borrower intends to enter into any mortgage loan financing or repurchase arrangement in an amount that is equal to or greater than five million ($5,000,000) dollars, Borrower shall notify Lender not fewer than fifteen (15) Business Days after the execution of such arrangement.

9.6 Servicing of Mortgage Loans. Subject to Section 6.2 above, Borrower shall service all Pledged Mortgage Loans at Borrower’s expense and without charge of any kind to Lender. Borrower may delegate its obligations hereunder to service the Pledged Mortgage Loans (subject to Section 6.2) to an independent servicer satisfactory to Lender pursuant to a servicing agreement approved in writing by Lender. In any event, Borrower or its delegate shall service such Pledged Mortgage Loans with the degree of care and in accordance with the servicing standards generally prevailing in the industry, including those generally required by subprime industry.

9.7 Evidence of Collateral. Borrower shall indicate on its computer records that each Pledged Mortgage Loan has been included in the Collateral and, at the request of Lender, place on each of its written records pertaining to the Pledged Mortgage Loans a legend, in form and content satisfactory to Lender, indicating that such Pledged Mortgage Loan has been assigned to Lender.

9.8 Protection of Security. Borrower shall allow Lender (a) to inspect any Mortgaged Property relating to a Pledged Mortgage Loan; (b) to appear in or intervene in any proceeding or matter affecting any Pledged Mortgage Loan or other Collateral or the value thereof; (c) to initiate, commence, appear in and defend any foreclosure, action, bankruptcy or proceeding which could affect the security of the Collateral or the value thereof, or the rights and powers of Lender; (d) to contest by litigation or otherwise any lien asserted against the Pledged Mortgage Loans or other Collateral or against the related Mortgaged Property, the improvements, or the personal property identified therein; and/or (e) to make payments on account of such encumbrances, charges, or liens and to service any assigned Mortgage Loan and take any action it may deem appropriate to collect any Collateral or any part thereof or to enforce any rights with respect thereto. All costs and expenses, including attorneys’ fees (including, but not limited to, those incurred on appeal), that Lender may incur with respect to any of the foregoing and any expenditures it may make to protect or preserve the Collateral or the rights of Lender, shall be for the account of Borrower. Borrower shall repay the same to Lender upon demand with interest, at the Default Rate, from the date any such expenditure shall have been made until it is repaid.

9.9 Further Assurances. Borrower shall, at its expense, promptly procure, execute and deliver to Lender, upon request, all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of Borrower in this Agreement.

9.10 Fidelity Bonds and Insurance. Borrower shall maintain an insurance policy, in a form and substance satisfactory to Lender, covering against loss or damage relating to or resulting from any breach of fidelity by Borrower, or any officer, director, employee or agent of Borrower, any loss or destruction of documents (whether written or electronic), fraud, theft, misappropriation and errors and omissions. This policy shall provide coverage in an amount equal to one million dollars ($1,000,000) or that required by FNMA in Section 1.01 of the FNMA Guaranteed Mortgage Backed Securities Sellers’ and Servicers’ Guide, whichever is greater. Borrower shall not amend, cancel, suspend or otherwise materially change such policy without at least thirty (30) days prior written notice to Lender.

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9.11 Wet Mortgage Loans. In connection with the funding of each Wet Mortgage Loan, Borrower shall provide to the applicable Closing Agent, in addition to the Irrevocable Closing Instructions, final closing instructions, which shall, without limitation, make reference to the Irrevocable Closing Instructions and stipulate the title insurance company that will be issuing the applicable title insurance policy and Closing Protection Letter; provided, however, that Borrower shall not use these final closing instructions to modify or attempt to modify the terms of the Irrevocable Closing Instructions unless such modifications are agreed to in advance and in writing by Lender. Borrower shall not otherwise modify or attempt to modify the terms of the Irrevocable Closing Instructions without Lender’s prior written approval. If the Closing Agent is not a title insurance company, Borrower shall also (a) confirm that the closing is covered by a blanket Closing Protection Letter issued to Lender by the title insurance company stipulated in the final closing instructions; or (b) provide to Lender (1) a Closing Protection Letter covering the closing issued to Borrower by the title insurance company stipulated in the final closing instructions and (2) an Assignment of Closing Protection Letter relating to the above referenced Closing Protection Letter naming Lender as the assignee.

ARTICLE 10
NEGATIVE COVENANTS

In addition to any covenants contained in the Commitment Letter, Borrower (or where specified, Aames Capital) hereby covenants and agrees with Lender that during the term of this Agreement and for so long as there remain any obligations of Borrower to be paid or performed under this Agreement or under the Note, Borrower shall comply with the following:

10.1 Liabilities and Advances. Aames Capital shall not lend money or credit or make any advances to any Person (other than an Affiliate of Aames Capital) or acquire any stock, obligations or securities of, or any interest in, or make any capital contribution to any other Person (other than an Affiliate of Aames Capital) in an amount equal to or greater than one percent (1%) of Aames Capital’s Tangible Net Worth without at least thirty (30) days prior written notice to Lender, except for Mortgage Loans or other loans extended in the ordinary course of Borrower’s mortgage banking business. With respect to an Affiliate of Borrower, the same negative covenants of the foregoing sentence apply; provided, however, that with respect to the amount, such amount shall not be greater than ten percent (10%) of Seller’s Tangible Net Worth. Borrower shall not, either directly or indirectly, without the prior written consent of Lender, assume, guarantee, endorse, or otherwise become liable for the obligation of any Person except by endorsement of negotiable instruments for deposit or collection in the ordinary course of business.

10.2 Deferral of Subordinated Debt. Borrower shall not, either directly or indirectly, without the prior written consent of Lender, pay in advance of the stated maturity thereof any Subordinated Debt of Borrower or, if an Event of Default hereunder shall have occurred, make any payment of any kind thereafter on such Subordinated Debt until all obligations of Borrower hereunder and under the Note have been paid and performed in full.

10.3 Loss of Eligibility. Borrower shall not, either directly or indirectly, take, or fail to take, any action that would cause Borrower to lose all or any part of its status as an eligible lender, seller, mortgagee or servicer or willfully terminate its status as an eligible lender, seller, mortgagee or servicer without forty-five (45) days prior written notice to Lender.

10.4 Financial Ratios. Aames Capital shall not permit, at any time:

(a) Aames Capital’s Tangible Net Worth to be less than that amount set forth in the Commitment Letter;

(b) Aames Capital’s ratio of Total Liabilities and Warehouse Debt to Tangible Net Worth to exceed that amount set forth in the Commitment Letter;

(c) Aames Capital’s ratio of Total Liabilities to Tangible Net Worth to exceed that amount set forth in the Commitment Letter; nor

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(d) Aames Capital’s cash and Cash Equivalents to be less than the amount set forth in the Commitment Letter.

10.5 Loans to Officers, Employees and Shareholders. Borrower shall not, either directly or indirectly, without the prior written consent of Lender, have any outstanding personal loans or advances to any directors, officers, senior executive management or shareholders (except Aames Financial Corporation) at any given time in an aggregate amount equal to or greater than one percent (1%) of Aames Capital’s Tangible Net Worth.

10.6 Liens. Borrower shall not create, incur, assume or suffer to exist any lien upon the Pledged Mortgage Loans or other Collateral, other than as granter to Lender herein, or create, incur, assume or suffer any lien upon any of its other property and assets other than liens for taxes not yet due or taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established.

10.7 Indebtedness. Borrower shall not create, incur, assume or suffer to exist or otherwise become or be liable in respect of any new Debt in an amount equal to or greater than fifteen percent (15%) of Seller’s Tangible Net Worth without at least fifteen (15) days prior written notice to Lender except for:

(a) the Advances hereunder and any other Debt to Lender;

(b) Debt disclosed on the financial statements furnished to Lender prior to the Effective Date;

(c) Subordinated Debt;

(d) trade debt incurred in the ordinary course of business, paid within thirty (30) calendar days after the same has become due and payable or that is being contested in good faith, provided provision is made to the satisfaction of Lender for the eventual payment thereof in the event it is found that such contested trade debt is payable by Borrower; and

(e) Debt secured by liens permitted under Section 10.6 above.

It is also understood and agreed that Borrower may, without prior written notice to Lender, replace any Debt which was existing as of the Effective Date, which was otherwise disclosed to Lender and which is replaced with like or substantially comparable Debt, provided, however, that such replacement Debt does not cause Borrower to be in breach of its covenants and obligations hereunder.

10.8 Consolidation, Merger and Sale of Assets. Borrower shall not enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided, that Borrower may, upon thirty (30) days prior written notice to Lender thereof, merge or consolidate with (a) any wholly owned subsidiary of Borrower, or (b) any other Person if Borrower is the surviving corporation; and provided further, that if after giving effect thereto, no Potential Default or Event of Default would exist hereunder.

10.9 Payment of Dividends and Retirement of Stock. Borrower shall not, without the prior written approval of Lender, (a) declare or pay any dividends upon its shares of stock now or hereafter outstanding, except dividends payable in the capital stock of Borrower, or make any distribution of assets to its shareholders, whether in cash, property or securities, or (b) acquire, purchase, redeem or retire shares of its capital stock now or hereafter outstanding for value; provided, however, that the term “dividends” as used in this section will not include ordinary and necessary business and administrative expenses which are paid for the direct benefit of Borrower or Guarantor for which either seeks reimbursement from the other.

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10.10 Collateral. Borrower shall not:

(a) amend or modify, or waive any of the terms and conditions of, or settle or compromise any claim in respect of, any Pledged Mortgage Loan; or

(b) sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge or otherwise encumber (except pursuant to this Agreement) any of the Pledged Mortgage Loans or other Collateral or any interest therein.

ARTICLE 11
DEFAULTS AND REMEDIES

11.1 Events of Default. The occurrence of any of the following conditions or events shall be an Event of Default:

(a) failure of Borrower to pay any principal, interest or other amount due under the Principal Agreements within two (2) Business Days following the applicable due date;

(b) breach or default by Borrower with respect to any other material term of any other indebtedness or of any loan agreement, note, mortgage, security agreement, indenture, guaranty or other agreement to which Borrower is a party or by which it is bound, if the effect of such failure, default or breach is to cause, or to permit any holder thereof to cause, indebtedness of Borrower in the aggregate amount of $5,000,000 or more to become or be declared due prior to its stated maturity;

(c) the aggregate Collateral Value of those Pledged Mortgage Loans that are deemed to be Noncompliant Mortgage Loans is greater than or equal to the Tranche J Sublimit for a period of two (2) Business Days following Borrower’s receipt of notice from Lender (which notice thereof via Lender’s customer website(s) shall be deemed sufficient for purposes of this subsection);

(d) the aggregate Collateral Value of Pledged Mortgage Loans that are deemed to be Defective Mortgage Loans is $2,000,000 or more and Borrower has not remedied such an event within two (2) Business Days after receipt of notice from Lender; it is understood and agreed that notice required under this subsection by Lender to Borrower may be satisfied by Lender by providing such notice via Lender’s customer website(s);

(e) any of Borrower’s representations or warranties made in Section 8.1 or in any statement or certificate at any time given by Borrower in writing pursuant hereto or in connection herewith shall be false in any material respect on the date as of which made and such default shall not have been remedied within three (3) Business Days after receipt of notice from Lender to do so;

(f) Borrower shall default (i) in the performance of or compliance with any term contained in Articles 9 and 10 of this Agreement or referred to in Sections 11.1(a) through (e) above; or (ii) in the performance of or compliance of any other provision of this Agreement and such default shall not have been remedied within thirty (30) days after receipt of notice from the Lender of such default;

(g) an Insolvency Event shall have occurred with respect to Borrower or any Guarantor; or

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(h) one or more judgments or decrees shall be entered against Borrower involving a liability of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within sixty (60) days after entry thereof;

(i) any Plan maintained by Borrower or any subsidiary of Borrower shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by an appropriate United States District Court to administer any Plan, or the Pension Benefit Guaranty Corporation (or any successor thereto) shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan if as of the date thereof Borrower’s liability or any such subsidiary’s liability (after giving effect to the tax consequences thereof) to the Pension Benefit Guaranty Corporation (or any successor thereto) for unfunded guaranteed vested benefits under the Plan exceeds the then current value of assets accumulated in such Plan by more than one million dollars ($1,000,000) (or in the case of a termination involving Borrower as a “substantial employer” (as defined in ERISA) the withdrawing employer’s proportionate share of such excess shall exceed such amount);

(j)    if applicable, Borrower as employer under a Plan that is a multiemployer plan shall have made a complete or partial withdrawal from such Plan and the plan sponsor of such Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding fifty thousand dollars ($50,000); or

(k)    Borrower shall purport to disavow its obligations hereunder or shall contest the validity or enforceability of the Principal Agreements or Lender’s security interest in any Pledged Mortgage Loan or other Collateral.

With respect to any Event of Default which requires a determination to be made as to whether such Event of Default has occurred, such determination shall be made in Lender’s sole and reasonable discretion and Borrower hereby agrees to be bound by and comply with any such determination by Lender.

11.2 Remedies. Upon the occurrence of an Event of Default, Lender may, by written notice to Borrower declare all or any portion of the Advances to be due and payable whereupon the same shall become due and payable, together with all accrued interest thereon, and the obligation of Lender to make Advances shall thereupon terminate. Further, it is understood and agreed that upon the occurrence of an Event of Default, Borrower shall strictly comply with the negative covenants contained in Article 10 hereunder and in no event shall Borrower declare and pay any dividends, incur additional debt, make payments on existing debt or otherwise distribute or transfer any of Borrower’s property and assets to any Person without the prior written consent of Lender. Upon the occurrence of any Event of Default, Lender may also:

(a) enter the office(s) of Borrower and take possession of any of the Collateral including any records that pertain to the Collateral;

(b) foreclose upon or otherwise enforce its security interest in and lien on all of the Collateral or on any portion thereof to secure all payments and performance of obligations owed by Borrower under this Agreement;

(c) in accordance with applicable law, communicate with and notify Mortgagors of the Pledged Mortgage Loans and obligors under other Collateral or on any portion thereof, whether such communications and notifications are in verbal, written or electronic form, including, without limitation, communications and notifications that the Collateral has been assigned to Lender and that all payments thereon are to be made directly to Lender or its designee; settle compromise, or release, in whole or in part, any amounts owing on the Pledged Mortgage Loans or other Collateral or any portion of the Collateral, on terms acceptable to Lender; enforce payment and prosecute any action or proceeding with respect to any and all Collateral; and where any Pledged Mortgage Loans or other Collateral is in default, foreclose upon and enforce security interests in, such Collateral by any available judicial procedure or without judicial process and sell property acquired as a result of any such foreclosure;

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(d) in accordance with applicable law, collect payments from Mortgagors and/or assume servicing of, or contract with a third party to service, any or all Pledged Mortgage Loans requiring servicing and/or perform any obligations required in connection with Purchase Commitments, such third party’s fees to be paid by Borrower. In connection with collecting payments from Mortgagors and/or assuming servicing of any or all Pledged Mortgage Loans, Lender may take possession of and open any mail addressed to Borrower, remove, collect and apply all payments for Borrower, sign Borrower’s name to any receipts, checks, notes, agreements or other instruments or letters or appoint an agent to exercise and perform any of these rights;

(e) exercise all rights and remedies of a secured creditor under the Uniform Commercial Code of the State of California and/or the state in which Borrower’s principal place of business is located, including but not limited to selling the Collateral at public or private sale. Lender shall give Borrower not less than ten (10) days’ notice of any such public sale or of the date after which private sale may be held. Borrower agrees that ten (10) days’ notice shall be reasonable notice. At any such sale, the Collateral may be sold as an entirety or in separate parts, as Lender may determine. Lender may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by Lender until the selling price is paid by the purchaser thereof, but Lender shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of said Collateral so sold, free of any right or equity of redemption, which equity of redemption Borrower hereby releases. Lender may, however, instead of exercising the power of sale herein conferred upon it, proceed by a suit or suits at law or in equity to collect all amounts due upon all or any portion of the Collateral or to foreclose the pledge and sell all or any portion of the Collateral under a judgment or decree of a court or courts of competent jurisdiction, or both.

(f) proceed against Borrower on the Note or against the Guarantors under the Guaranty or both; and/or

(g) pursue any rights and/or remedies available at law or in equity against Borrower or the Guarantors or both.

11.3 Sale of Collateral. Following an Event of Default, Lender may securitize or otherwise sell the Collateral and Lender shall incur no liability as a result of such transaction. For the avoidance of doubt, Lender may sell the Collateral as part of a pool comprised of, all or part of, the Collateral and other mortgage loans owned by Lender; in such instance, the value of the Collateral shall be determined on a pro rata basis. Borrower hereby waives any claims it may have against Lender arising by reason of the fact that the price at which the Collateral may have been sold at such private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the outstanding Advances and the unpaid interest accrued thereon, even if Lender accepts the first offer received and does not offer the Collateral, or any part thereof, to more than one offeree.

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11.4 No Obligation to Pursue Remedy. Borrower waives any right to require Lender to (a) proceed against any Person, (b) proceed against or exhaust all or any of the Collateral or pursue its rights and remedies as against the Collateral in any particular order, or (c) pursue any other remedy in its power. Lender shall not be required to take any steps necessary to preserve any rights of Borrower against holders of mortgages prior in lien to the lien of any Mortgage Loan included in the Collateral or to preserve rights against prior parties. No failure on the part of Lender to exercise, and no delay in exercising, any right, power or remedy provided hereunder, at law or in equity shall operate as a waiver thereof; nor shall any single or partial exercise by Lender of any right, power or remedy provided hereunder, at law or in equity preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Without intending to limit the foregoing, all defenses based on the statute of limitations are hereby waived by Borrower. The remedies herein provided are cumulative and are not exclusive of any remedies provided at law or in equity.

11.5 Reimbursement of Costs and Expenses. Lender may, but shall not be obligated to, advance any sums or do any act or thing necessary to uphold and enforce the lien and priority of, or the security intended to be afforded by, any Pledged Mortgage Loan, including, without limitation, payment of delinquent taxes or assessments and insurance premiums. All advances, charges, costs and expenses, including reasonable attorneys’ fees and disbursements, incurred or paid by Lender in exercising any right, power or remedy conferred by this Agreement, or in the enforcement hereof, together with interest thereon, at the Default Rate, from the time of payment until repaid, shall become a part of principal balance outstanding under the Note.

11.6 Application of Proceeds. The proceeds of any sale or other enforcement of Lender’s security interest in all or any part of the Collateral shall be applied by Lender:

(a) first, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to Lender’s agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of Lender in connection therewith;

(b) second, to the payment of any other amounts due (other than principal and interest) under the Note or this Agreement;

(c) third, to the payment of interest accrued and unpaid on the Note;

(d) fourth, to the payment of the outstanding principal balance of the Note; and

(e) fifth, to the payment to Borrower, or to its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. If the proceeds of any such sale are insufficient to cover the costs and expenses of such sale, as aforesaid, and the payment in full of the Note and all other amounts due hereunder, Borrower shall remain liable for any deficiency.

11.7 Right of Set-Off. If Borrower shall default in the payment of the Note, any interest accrued thereon, or any other sums which may become payable thereunder or hereunder when due, or in the performance of any of its other obligations or liabilities under the Note or this Agreement, Lender shall have the right, at any time, and from time to time, without notice, to set-off and to appropriate or apply any and all deposits of money or property or any other indebtedness at any time held or owing by Lender to or for the credit of the account of Borrower against and on account of the obligations and liabilities of Borrower under the Note and this Agreement, irrespective of whether or not Lender shall have made any demand hereunder and whether or not said obligations and liabilities shall have matured; provided, however, that the aforesaid right to set-off shall not apply to any deposits of escrow monies being held on behalf of the Mortgagors under Pledged Mortgage Loans or other third parties.

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11.8 Reasonable Assurances. If, at any time during the term of the Agreement, Lender has reason to believe that Borrower is not conducting its business in accordance with, or otherwise is not satisfying: (i) all applicable statutes, regulations, rules, and notices of federal, state, or local governmental agencies or instrumentalities, all applicable requirements of Investors and Insurers and prudent industry standards or (ii) all applicable requirements of Lender, as set forth in this Agreement, then, Lender shall have the right to demand, pursuant to written notice from Lender to Borrower specifying with particularity the alleged act, error or omission in question, reasonable assurances from Borrower that such a belief is in fact unfounded, and any failure of Borrower to provide to Lender such reasonable assurances in form and substance reasonably satisfactory to Lender, within the time frame specified in such written notice, shall itself constitute an Event of Default hereunder, without a further cure period. Borrower hereby authorizes Lender to take such actions as may be necessary or appropriate to confirm the continued eligibility of Borrower for Advances hereunder, including without limitation (i) ordering credit reports and (ii) contacting Mortgagors, licensing authorities and Investors or Insurers.

ARTICLE 12
INDEMNIFICATION

12.1 Indemnification. Borrower shall indemnify and hold harmless Lender and any of its officers, directors, employees and agents and any subsequent holder of the Note from and against any and all liabilities, obligations, losses, damages, penalties, judgments, suits, costs, expenses and disbursements of any kind whatsoever that may be imposed upon, incurred by or asserted against Lender or such holder in any way relating to or arising out of the Principal Agreements or any other document referred to therein or any of the transactions contemplated thereby, except for liabilities, losses and damages solely resulting from the gross negligence or willful misconduct of Lender.

12.2 Payment of Taxes. Borrower shall pay and hold Lender and any holder of the Note harmless from and against any and all present and future stamp, documentary and other similar taxes with respect to the Collateral, the Principal Agreements and other documents related thereto and save Lender and any holder of the Note harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes.

ARTICLE 13
TERM AND TERMINATION

13.1 Term. Provided that no Event of Default or Potential Default has occurred and is continuing, and except as otherwise provided for herein, this Agreement shall commence on the Effective Date and continue for a term and maturity date as specified in the Commitment Letter. Following expiration or termination of this Agreement, all indebtedness due Lender under the Principal Agreements shall be immediately due and payable without notice to Borrower and without presentment, demand, protest, notice of protest or dishonor, or other notice of default, and without formally placing Borrower in default, all of which are hereby expressly waived by Borrower.

13.2 Voluntary Termination. Lender may, with or without cause, terminate this Agreement at any time on not less than sixty (60) days written notice to Borrower and demand payment of all outstanding Advances and other amounts at that time (whereupon all such outstanding amounts shall be immediately due and payable without notice to Borrower and without presentment, demand, protest, notice of protest or dishonor, or other notice of default, and without formally placing Borrower in default, all of which are hereby expressly waived by Borrower). Lender shall not be liable to Borrower for any costs, loss or damages arising from or relating to a termination by Lender in accordance with this Section 13.2 or as a result of an Event of Default; provided, however, that Lender will refund to Borrower a portion of the Commitment Fee equal to the Commitment Fee multiplied by the fraction of days this Agreement was terminated prior to its expiration, divided by the total number of days provided for in the term of this Agreement.

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13.3 Extension of Term. Upon mutual agreement of Borrower and Lender, the term of this Agreement may be extended. Such extension may be made subject to the recognition of the terms hereunder and to any other such conditions as Lender, in its sole discretion, may deem necessary or advisable. Under no circumstances shall such an extension by Lender be interpreted or construed as a forfeiture by Lender of any of its rights, entitlements or interest created hereunder. Borrower acknowledges and understands that Lender is under no obligation whatsoever to extend the term of this Agreement beyond the initial term.

ARTICLE 14
GENERAL

14.1 Integration. This Agreement, together with the other Principal Agreements, and all other documents executed pursuant to the terms hereof and thereof, constitute the entire agreement between the parties with respect to the subject matter hereof.

14.2 Amendments. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against whom the enforcement of such modification, waiver, amendment, discharge or change is sought.

14.3 No Waiver. No failure or delay on the part of Borrower or Lender or any holder of the Note in exercising any right, power or privilege hereunder and no course of dealing between Borrower and Lender or any holder of the Note shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder or under the Note preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

14.4 Remedies Cumulative. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies that Borrower or Lender of the holder of the Note would otherwise have. No notice or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Lender or the holder of the Note to any other or further action in any circumstances without notice or demand.

14.5 Assignment. The Principal Agreements may not be assigned by Borrower. The Principal Agreements, along with Lender’s right, title and interest, including its security interest, in any or all of the Collateral, may, at any time, be transferred or assigned, in whole or in part, by Lender, and any transferee or assignee thereof may enforce the Principal Agreements and such security interest directly against Borrower. It is anticipated that such an assignment will be made by Lender, and Borrower hereby irrevocably consents to such assignment. No notice of such assignment need be given by Lender to Borrower.

14.6 Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

14.7 Participations. Lender may from time to time sell or otherwise grant participations in this Agreement and the Note, and the holder of any such participation, if the participation agreement so provides, (i) shall, with respect to its participation, be entitled to all of the rights of Lender and (ii) may exercise any and all rights of setoff or banker’s lien with respect thereto, in each case as fully as though Borrower were directly indebted to the holder of such participation in the amount of such participation; provided, however, that Borrower shall not be required to send or deliver to any of the participants other than Lender any of the materials or notices required to be sent or delivered by it under the terms of this Agreement, nor shall it have to act except in compliance with the instructions of Lender.

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14.8 Invalidity. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had not been included.

14.9 Additional Instruments. Borrower shall execute and deliver such further instruments and shall do and perform all matters and things necessary or expedient to be done or observed for the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded by this Agreement.

14.10 Survival. All representations, warranties, covenants and agreements herein contained on the part of Borrower shall survive the making of any Advance and the execution of the Note and shall be effective so long as this Agreement is in effect or there remains any obligation of Borrower hereunder or under the Note to be paid or performed.

14.11 Notices. All notices, demands, consents, requests and other communications required or permitted to be given or made hereunder shall be in writing and shall be mailed (first class, return receipt requested and postage prepaid) or delivered in person or by overnight delivery service or by facsimile, addressed to the respective parties hereto at their respective addresses set forth below or, as to any such party, at such other address as may be designated by it in a notice to the other:

If to Borrower: That address set forth in the Commitment Letter

If to Lender:     Countrywide Warehouse Lending
0000 Xxxxxxxxx Xxxxxx Mail Stop:WH-51F
Xxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No: (000) 000-0000

All notices shall be conclusively deemed to have been properly given or made when duly delivered, if delivered in person or by overnight delivery service, or on the third (3rd) Business Day after being deposited in the mail, if mailed in accordance herewith, or upon transmission by the receiving party of a facsimile confirming receipt, if delivered by facsimile.

14.12 Personal Identification Number. Borrower shall adopt a Personal Identification Number or PIN to be entered into the computer system in connection with all documents transmitted from Borrower to Lender electronically. Further, any document required to be signed by Borrower may be signed by handwritten signature or transmitted electronically in conjunction with the PIN, except any written notification designating or changing the PIN and those documents required to be delivered pursuant to Section 7.1(a) above, which must be signed by hand. Borrower shall provide Lender with written notification of its PIN and any changes thereto; provided, however, that any change to the PIN may not become effective for twenty four (24) hours following Lender’s confirmation of receipt of such notice by Borrower. Borrower and Lender agree that transmitting a document in conjunction with the PIN shall have the same force and effect as a handwritten signature and shall be sufficient to verify that Borrower originated such document. Borrower shall employ security procedures to ensure that all transmissions of documents accompanied by the PIN are authorized, authentic, reliable and complete and shall promptly notify Lender if Borrower discovers the PIN has been improperly disclosed to any Person. Notwithstanding the foregoing or any other breach of security, Lender shall be entitled to rely upon the PIN of Borrower until such time as (a) Borrower provides Lender with written instructions to the contrary and (b) Lender has sufficient time to notify the appropriate employees and modify its computerized systems.

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14.13 Governing Law. This Agreement and the rights and obligations of the parties under the Principal Agreements shall be construed in accordance with and governed by the laws of the State of California, without regard to principles of conflicts of laws.

14.14 Agreement to Arbitrate Claims. Upon written request by either party that is submitted according to the applicable rules for arbitration, any claim, demand or cause of action, which arises out of or is related to this Agreement, (collectively “Claims”), shall be resolved by binding arbitration in the County of Los Angeles, California, in accordance with (i) the Federal Arbitration Act; (ii) the Code of Procedure (“Code”) of the National Arbitration Forum (“NAF”) and (iii) this Agreement, which shall control any inconsistency between it and the Code. Notwithstanding the foregoing, claims for injunctive or other relief for intellectual property violations, unfair competition and/or the use or unauthorized disclosure of trade secrets, inventions or other confidential information, shall be excluded from this agreement to arbitrate (“Excluded Claims”). The NAF shall provide each party a list of arbitrators and each party shall have the right to strike one name. The number of arbitrators on the list will be the number of parties plus one. The decision of an arbitrator on any Claims submitted to arbitration shall follow applicable substantive law and be in writing setting forth the findings of fact and law and the reasons supporting the decision. Such decision shall be final and binding upon the parties, subject to the right of appeal described below. Judgment upon any arbitration award may be entered in any court having jurisdiction. The arbitrator has exclusive authority to resolve any dispute relating to the applicability or enforceability of this Agreement, including the provisions of this section. Either party shall have the right to appeal to the appropriate court any errors of law in the decision rendered by the arbitrator. After a demand for arbitration is made, each party may conduct a limited number of depositions (including the production of documents) by mutual agreement or as permitted by the arbitrator. In the event of any lawsuit or other proceeding relating to an Excluded Claim, both parties agree to submit to jurisdiction in California and further agree that any cause of action relating to an Excluded Claim shall be brought in the state or federal courts in the County of Los Angeles, California.

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

14.16 Headings. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning or interpretation of any provisions hereof.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

BORROWER:		AAMES CAPITAL CORPORATION
		By: ____________________________
		Name: __________________________
		Title: ___________________________
		AAMES FUNDING CORPORATION
		By: ____________________________
		Name: __________________________
		Title: ___________________________
		LENDER: COUNTRYWIDE WAREHOUSE LENDING
		By: ____________________________
		Name: __________________________
		Title: ___________________________

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EXHIBIT A

GLOSSARY OF DEFINED TERMS

Acceleration Event:      Any of the conditions or events set forth in Section 4.2.

Acknowledgement of Confidentiality of Password Agreement:      That certain Acknowledgement of Confidentiality of Password Agreement attached hereto as Exhibit S.

Advance:      A disbursement by Lender under this Agreement, which shall be a Tranche F Advance, Tranche G Advance, Tranche I Advance or Tranche J Advance.

Advance Date:      The date on which an Advance is funded.

Advance Request Deadline:      That time, as set forth in the Commitment Letter, by which Borrower must submit to Lender certain documents in order to obtain an Advance.

Affiliate:      With respect to any specified entity, any other entity controlling or controlled by or under common control with such specified entity. For the purposes of this definition, “control” when used with respect to a specified entity means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” having meanings correlative to the foregoing.

Agency:     FNMA or FHLMC. Aggregate

Credit Limit:      The maximum aggregate principal amount of Advances that may be outstanding at any one time, as set forth in the Commitment Letter.

Amendment to Revolving Credit and Security Agreement - Cashier Checks and Funding Drafts:       If required by Lender, that certain Amendment to Revolving Credit and Security Agreement - Cashier Checks and Funding Drafts attached hereto as Exhibit R.

Applicable Rate:      With respect to any date of determination, the daily rate per annum (rounded up to three (3) decimal places) for one-month U.S. dollar denominated deposits as offered to prime banks in the London interbank market (“One-Month LIBOR”) as published on Bloomberg or in the Wall Street Journal. It is understood that the Applicable Rate with respect to Advances shall be initially set to the then current One-Month LIBOR in effect on the date the Advance is funded and shall thereafter be adjusted on a daily basis to the then current One-Month LIBOR for each day that the Advance remains outstanding.

Approved Payee:      A Closing Agent or warehouse lender approved by Lender in accordance with Section 3.7.

Assignment:      A duly executed assignment to Lender in recordable form of a Pledged Mortgage Loan, of the indebtedness secured thereby and of all documents and rights related to such Pledged Mortgage Loan.

Assignment of Closing Protection Letter:      An assignment assigning and subrogating Lender to all of Borrower’s rights in a Closing Protection Letter, substantially in the form of Exhibit K hereto.

Bailee Agreement:      A bailee agreement substantially in the form of Exhibit F hereto or in such other form and substance acceptable to Lender.

Bankruptcy Code:      Title 11 of the United States Code, now or hereafter in effect, or any successor thereto.

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Breakage Fee:      A fee equal to twenty-five dollars ($25.00), which is in addition to the File Fee, payable by Borrower if Borrower fails to borrow an Advance after Borrower has submitted a Collateral Data Record in connection with such borrowing.

Business Day:      Any day, excluding Saturday, Sunday and any day that is a legal holiday under the laws of the State of California.

Cash Equivalents:      Any (a) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and Eurodollar time deposits with maturities of ninety (90) days or less from the date of acquisition and overnight bank deposits of any commercial bank having capital, surplus and retained earnings in excess of $70,000,000, (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or p-1 or the equivalent thereof by Moody’s and in either case maturing within ninety (90) days after the day of acquisition, (e) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (f) securities with maturities of ninety (90) days or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition, or (g) shares of money market, mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition or (h) available borrowing capacity on unencumbered assets that could be drawn against (taking into account required haircuts) under committed warehouse or working capital facilities, on a consolidated basis any on any given day.

Closed-End Second Lien Mortgage Loan:      A second lien mortgage loan for a fixed amount drawn at closing and underwritten in accordance with Borrower’s underwriting guidelines for second lien mortgages, as same have been approved by Lender.

Closing Agent: The Person designated by Borrower and approved by Lender in accordance with Section 3.7 to receive Advances from Lender, for the account of Borrower, for the purpose of funding a Mortgage Loan.

Closing Protection Letter: A document issued by a title insurance company to Borrower and/or Lender and relied upon by Lender to provide closing protection for one or more mortgage loan closings and to insure Borrower and/or Lender, without limitation, against embezzlement by the Closing Agent and loss or damage resulting from the failure of the Closing Agent to comply with all applicable closing instructions.Collateral: Collateral shall mean and include all now existing and hereafter arising right, title and interest of Borrower in, under and to the following:

(a) all Mortgage Loans, now owned and hereafter acquired, including all Mortgage Notes and Mortgages evidencing such Mortgage Loans and the related Collateral Documents, for which an Advance has been made by Lender hereunder and not repaid in full and all Mortgage Loans, including all Mortgage Notes and Mortgages evidencing such Mortgage Loans and the related Collateral Documents, which, from time to time, are delivered, or caused to be delivered, to Lender (including delivery to a custodian or other third party on behalf of Lender) as additional security for the payment of the Note and for the performance of all of Borrower’s obligations hereunder;

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(b) all Mortgage-Backed Securities, now owned or hereafter acquired by Borrower, that are supported by any Mortgage Loan constituting Collateral hereunder, all right to the payment of monies in non-cash distributions on account thereof and all new, substituted and additional securities at any time issued with respect thereto;

(c) all rights of Borrower under all Purchase Commitments, now existing and hereafter arising, covering any part of the Collateral, all rights to deliver such Mortgage Loans and Mortgage-Backed Securities to permanent investors and other purchasers pursuant thereto and all proceeds resulting from the disposition of such Collateral thereto;

(d) all now existing and hereafter established accounts maintained with broker-dealers by Borrower for the purpose of carrying out transactions under Purchase Commitments relating to any part of the Collateral;

(e) all now existing and hereafter arising rights of Borrower to service, administer and/or collect on the Mortgage Loans included as Collateral hereunder and any and all rights to the payment of monies on account thereof;

(f) all now existing and hereafter arising accounts, contract rights and general intangibles constituting or relating to any of the Collateral;

(g) all mortgage insurance and all commitments issued by Insurers to insure or guaranty any Mortgage Loans included as Collateral, including, without limitation, the right to receive all insurance proceeds and condemnation awards that may be payable in respect of the premises encumbered by any Mortgage; and all other documents or instruments delivered to Lender in respect of the Mortgage Loans included as Collateral;

(h) All documents, files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records and other information and data of Borrower relating to Mortgage Loans included as Collateral;

(i) All rights, but not any obligations or liabilities, of Borrower with respect to the Investors;

(j) All property of Borrower, in any form or capacity now or at any time hereafter in the possession or control of Lender, including, without limitation, all deposit accounts and any funds at any time held therein, into which Proceeds of the foregoing Collateral are at any time deposited;

(k) All products and Proceeds of the foregoing Collateral; and

(l) Any funds of Borrower at any time deposited or held in the Over/Under Account.

Collateral Data Record:      A document, in the form attached hereto as Exhibit D, completed by Borrower and submitted to Lender.

Collateral Documents:      With respect to each Pledged Mortgage Loan

(a) the original Mortgage Note evidencing the Mortgage Loan, endorsed by Borrower in blank, with a complete chain from the originator to Borrower;

(b) an original assignment in blank, executed by Borrower, for the Mortgage securing the Mortgage Note, in recordable form but unrecorded, with a complete chain of intervening assignments from the originator to Borrower;

(c) a certified or true copy of the Mortgage securing the Mortgage Note bearing evidence of the recordation of such Mortgage with the appropriate governmental authority, or if such recording information is unavailable because the document has not yet come back from the recording office, then a copy of evidence that such original Mortgage was sent out for recording by a Closing Agent; and

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(d) an original or copy of the title insurance policy insuring the first lien or second lien position of the Mortgage, as applicable, in at least the original principal amount of the related Mortgage Note and containing only those exceptions permitted by the Purchase Commitment or an unconditional commitment to issue such a title insurance policy.

Collateral Value:      With respect to each Pledged Mortgage Loan for any date of determination, an amount equal to the following, as applicable, as same may be reduced in accordance with Section 4.3:

(a) if the Mortgage Loan has Standard Status, the product of the Mortgage Loan Value and:

(i) if the Mortgage Loan is a Subprime Mortgage Loan (1st mortgages, maximum loan amount of $600,000 for a 1st mortgage), the Tranche F Advance Rate;

(ii) if the Mortgage Loan is a Closed-End Second Lien Mortgage Loan, the Tranche G Advance Rate;

(iii) if the Mortgage Loan is a Subprime Mortgage Loan (1st or 2nd mortgages), the Tranche I Advance Rate; or

(iv) if the Mortgage Loan is a Nonperforming/Subperforming Mortgage Loan, the Tranche J Advance Rate.

(b) if the Mortgage Loan is a Noncompliant Mortgage Loan, the product of the Mortgage Loan Value and the Tranche J Advance Rate; or

(c) if the Mortgage Loan is a Defective Mortgage Loan, zero.

For purposes of the foregoing, “Mortgage Loan Value” shall mean the lesser of (i) the outstanding principal balance of the Mortgage Loan; (ii) the committed purchase price of the Mortgage Loan, as evidenced by the related Purchase Commitment; and (iii) the fair market value of the Mortgage Loan, as determined by Lender in its sole but reasonable discretion.

Commitment Fee:      The non-refundable, annual commitment fee, as set forth in the Commitment Letter.

Commitment Letter:      The document executed by Lender and Borrower, referencing this Agreement and setting forth the specifics of terms and provisions hereof with respect to the Advances.

Commitment Requirements:      Those terms and conditions, as set forth in the Commitment Letter, applicable to a specific type of Mortgage Loan.

Contingent Obligations:      Any obligation of Borrower arising from an existing condition or situation that involves uncertainty as to outcome and that will be resolved by the occurrence or nonoccurrence of some future event, including, without limitation, any obligation guaranteeing or intended to guarantee any Debt, leases, dividends or other obligations of any other Person in any manner, whether directly or indirectly; provided; however, that endorsements of instruments for deposit or collection in the ordinary course of business shall not be included. With respect to guarantees, the amount of the Contingent Obligation shall be equal to the stated or determinable amount of the primary obligation in respect of the guarantee or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof, as determined by Lender.

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Credit Application:      The credit application or “Lender Application Profile,” including all supporting documentation, submitted by Borrower to Lender with respect to this Agreement.

Custodian:      Deutsche Bank National Trust Company, or such other custodian selected by Lender in its sole discretion.

Debt:      The debt of Borrower consisting of, without duplication: (a) indebtedness for borrowed money, including principal, interest, fees and other charges; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations to pay the deferred purchase price of property or services; (d) obligations as lessee under leases that shall have been or should be in accordance with GAAP, recorded as capital leases; (e) obligations secured by any lien upon property or assets owned by Borrower, even though Borrower has not assumed or become liable for payment of such obligations; (f) obligations in connection with any letter of credit issued for the account of Borrower; (g) obligations under direct or indirect guarantees in respect of and obligations, contingent or otherwise, to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to above; and (h) all Contingent Obligations which are considered debt in accordance with GAAP.

Default Rate:      The maximum nonusurious interest rate, if any, that at any time, or from time to time, may be contracted for, taken, reserved, charged or received under the laws of the United States and the State of California.

Defective Loan Fee:      A fee equal to five hundred dollars ($500) payable by Borrower for each Pledged Mortgage Loan that is or becomes a Defective Mortgage Loan.Defective Mortgage Loan: A Pledged Mortgage Loan:

(a) that has been pledged as Collateral for longer than the Tranche J Maximum Dwell Time or is ineligible to be a Noncompliant Mortgage Loan because the aggregate original Collateral Value of other Pledged Mortgage Loans that are deemed to be Noncompliant Mortgage Loans is equal to or greater than the Tranche J Sublimit, and shall not have been remedied within three (3) Business Days after receipt of notice from Lender to do so;

(b) that is the subject of fraud by any Person involved in the origination of such Mortgage Loan and such fraud shall not have been remedied within three (3) Business Days after receipt of notice from Lender to do so;

(c) where the related Mortgaged Property is the subject of material damage or waste and such damage or waste shall not have been remedied within three (3) Business Days after receipt of notice from Lender to do so;

(d) in connection with which any other breach of a warranty or representation set forth in Section 8.2 occurs and remains uncured for a period of ten (10) calendar days;

(e) in connection with which a default occurs under the Pledged Mortgage Loan and remains uncured for a period of ten (10) calendar days; or

(f) where the related Mortgagor fails to make the first payment due under the Mortgage Note on or before the next scheduled payment due date and such default shall not have been remedied within three (3) Business Days after receipt of notice from Lender to do so; provided, however, that with respect to any Nonperforming/Subperforming Mortgage Loan where specific payment conditions have been set forth in the Commitment Letter, such Nonperforming/Subperforming Mortgage Loan shall only be deemed a Defective Mortgage Loan for failure of the Mortgagor to make payment if such failure constitutes a breach of the such specific payment conditions.

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Document Deposit Fee:      A fee of one dollar ($1.00) payable by Borrower for each Collateral Document delivered to Lender after the initial delivery date of the related Mortgage Loan File.

Dry Mortgage Loan:      A Mortgage Loan for which Lender or its custodian has possession of the related Collateral Documents, in a form and condition acceptable to Lender, prior to the funding of the Advance against which such Mortgage Loan is pledged or a Wet Mortgage Loan for which Lender or its Custodian has received the related Collateral Documents.

Effective Date:      That effective date set forth in the Commitment Letter.

Electronic Tracking Agreement - Warehouse Lender:     That certain Electronic Tracking Agreement -Warehouse Lender attached hereto as Exhibit T.

ERISA:      The Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute.

Executive Management:      Chairman of the board of directors, chief executive officer, president, and chief financial officer.

Event of Default:      Any of the conditions or events set forth in Section 11.1.

FHA:     The Federal Housing Administration of the United States Department of Housing and Urban Development and any successor thereto.

FHLMC:     The Federal Home Loan Mortgage Corporation and any successor thereto.

File Fee:      A fee, as set forth in the Commitment Letter, per each Mortgage Loan that is proposed to secure an Advance, payable upon submission of the related Collateral Data Record whether or not the Advance is actually made.

FNMA:      The Federal National Mortgage Association and any successor thereto.

GAAP:      Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession and that are applicable to the circumstances as of the date of determination.

GNMA:      Government National Mortgage Association or any successor thereto.

Guarantee:     A guarantee signed by the Guarantors, in the forms attached hereto as Exhibit C.

Guarantor:      Aames Financial Corporation.

Handbook:      The lending guide prepared by Lender, as same may be amended from time to time.

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Haircut:      With respect to each Advance, an amount equal to the difference between the amount Borrower has requested Lender to send to the Approved Payee and the Collateral Value of the Mortgage Loan pledged

HUD:      The United States Department of Housing and Urban Development or any successor thereto.

Insolvency Event:      The occurrence of any of the following events:

(a) &such Person shall become insolvent or generally fail to pay, or admit in writing its inability to pay, its debts as they become due, or shall voluntarily commence any proceeding or file any petition under any bankruptcy, insolvency or similar law or seeking dissolution, liquidation or reorganization or the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial portion of its property, assets or business or to effect a plan or other arrangement with its creditors, or shall file any answer admitting the jurisdiction of the court and the material allegations of an involuntary petition filed against it in any bankruptcy, insolvency or similar proceeding, or shall be adjudicated bankrupt, or shall make a general assignment for the benefit of creditors, or such Person, or a substantial part of its property, assets or business, shall be subject to, consent to or acquiesce in the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial property, assets or business;

(b) corporate action shall be taken by such Person for the purpose of effectuating any of the foregoing;

(c) an order for relief shall be entered in a case under the Bankruptcy Code in which such Person is a debtor; or

(d) involuntary proceedings or an involuntary petition shall be commenced or filed against such Person under any bankruptcy, insolvency or similar law or seeking the dissolution, liquidation or reorganization of such Person or the appointment of a receiver, trustee, custodian, conservator or liquidator for such Person or of a substantial part of the property, assets or business of such Person, or any writ, order, judgment, warrant of attachment, execution or similar process shall be issued or levied against a substantial part of the property, assets or business of such Person, and such proceeding or petition shall not be dismissed, or such execution or similar process shall not be released, vacated or fully bonded, within sixty (60) days after commencement, filing or levy, as the case may be.

Insurer:      A private mortgage insurer, which is acceptable to Lender in its sole discretion. Intercreditor Agreement: An agreement acceptable to Lender, which may be substantially in the form of Exhibit M hereto.

Investor:      FNMA, FHLMC, GNMA or a financially responsible private institution, which is deemed acceptable by Lender in its reasonable discretion, which purchases Mortgage Loans from Borrower from time to time.

Irrevocable Closing Instructions:      Closing instructions, including wire instructions, in the form of Exhibit G issued in connection with funds disbursed for the funding of a Wet Mortgage Loan.

Margin:      With respect to each Advance, the annual rate of interest set forth in the Commitment Letter, that shall be added to the Applicable Rate to determine the annual rate of interest for such Advance.

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Maturity Date: The date on which an Advance shall be paid in full, as set forth in the confirmation delivered to Borrower in accordance with Section 3.2.

Maximum Dwell Time:      With respect to Tranches A through I, the maximum number of days a Pledged Mortgage Loan can be pledged as Collateral against an Advance before such Pledged Mortgage Loan may be deemed to be a Noncompliant Mortgage Loan and with respect to Tranche J, the maximum number of days that a Pledged Mortgage Loan can be deemed to be a Noncompliant Mortgage Loan, all as set forth in the Commitment Letter.

Maximum Individual Closing Agent Dry Loan Limit:      The maximum aggregate amount of Pledged Mortgage Loans (including Wet Mortgage Loans) which may be outstanding at any given time with respect to any Closing Agent for which the Closing Protection Letter requirements of Section 3.7(a)(i) have been waived by Lender, as set forth in the Commitment Letter.

Maximum Individual Closing Agent Wet Loan Limit:      The maximum aggregate amount of Wet Mortgage Loans which may be outstanding at any given time with respect to any Closing Agent for which the Closing Protection Letter requirements of Section 3.7(a)(i) have been waived by Lender, as set forth in the Commitment Letter.

Maximum Loan Amount:      The maximum permitted original principal balance of a Pledged Mortgage Loan, as set forth in the Commitment Letter. Mortgage: A first-lien or second-lien mortgage, deed of trust, security deed or similar instrument on improved real property.

Mortgage-Backed Securities:      Any security, including, without limitation, a participation certificate, that is (a) guaranteed by GNMA that represents an interest in a pool of mortgages, deeds of trusts or other instruments creating a lien on real property; (b) issued by FNMA or FHLMC that represents interests in such a pool; or (c) privately placed and represents undivided interests in or otherwise supported by such a pool.

Mortgaged Property:      The real property securing repayment of the debt evidenced by a Mortgage Note.

Mortgage Loan:      A Subprime Mortgage Loan, Closed-End Second Lien Mortgage Loan or Nonperforming/Subperforming Mortgage Loan, which Mortgage Loan may be either a Dry Mortgage Loan or a Wet Mortgage Loan.

Mortgage Note:      A promissory note secured by a Mortgage and evidencing a Mortgage Loan. Mortgagor: The obligor of a Mortgage Loan.

Noncompliant Mortgage Loan:      As of any date of determination, a Pledged Mortgage Loan that has been:

(a) pledged as Collateral for more than the Maximum Dwell Time permitted, given the type of Collateral, but less than the Maximum Dwell Time for Tranche J;

(b) after being committed for sale to an Investor, such Pledged Mortgage Loan is rejected by the Investor for any reason; or

(c) determined to be ineligible for sale as a Mortgage Loan of the type originally stipulated.

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Noncompliant Mortgage Loan Fee:      A one-time fee, as set forth in the Commitment Letter, payable by Borrower for each Pledged Mortgage Loan that is deemed to be a Noncompliant Mortgage Loan.

Nonperforming/Subperforming Mortgage Loan:      A first or second lien mortgage loan that when originated Nonperforming/Subperforming Mortgage Loan) has a history of late payments during the past twelve months (the exact number permitted late payment to be determined by Lender in its sole discretion) or is currently past due more than thirty (30) days.

Note:     The promissory note delivered by Borrower to Lender, substantially in the form of Exhibit B hereto, and all renewals, extensions, increases, modifications and rearrangements thereof.

Over/Under Account:      That account maintained by Lender, as described in Section 3.5.

Person:      Includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

Personal Identification Number or PIN:      An electronic identification number, unique to Borrower, consisting of any combination of symbols, codes, letters or numerals.

Plan:     Any multiemployer plan or single-employer plan as defined in section 4001 of ERISA, that is maintained and contributed to by (or to which there is an obligation to contribute of), or at any time during the five (5) calendar years preceding the date of this Agreement was maintained or contributed to by (or to which there is an obligation to contribute of), Borrower or by a subsidiary of Borrower or an ERISA Affiliate.

Pledged Mortgage Loan:      A Mortgage Loan that has been pledged as Collateral for an Advance hereunder and not released to an Investor or Borrower pursuant to Section 6.5.Power of Attorney: That certain power of attorney attached hereto as Exhibit N.

Principal Agreements:      This Agreement, the Commitment Letter, the Note, the Guarantee(s) and all other documents and instruments evidencing or securing the Advances, as same may from time to time be supplemented, modified or amended.

Proceeds:      Whatever is receivable or received when Collateral or proceeds is sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, all rights to payment, including return premiums, with respect to any insurance relating thereto.

Purchase Advice:      In connection with each wire transfer to be made to Lender by Borrower or an Investor, a written or electronic notification setting forth (a) the loan number assigned by Lender or last name of the Mortgagor for each Mortgage Loan that secures an Advance in connection with which a payment is being made; (b) the amount of the wire transfer to be applied to the Advance secured by each such Mortgage Loan; and (c) the total amount of the wire.

Purchase Commitment:      A trade ticket or other written commitment, in form and substance satisfactory to Lender, issued in favor of Borrower by an Investor pursuant to which that Investor commits to purchase one or more Pledged Mortgage Loans, along with the related correspondent or whole loan purchase agreement by and between Borrower and the Investor, in form and substance satisfactory to Lender, governing the terms and conditions of any such purchases.

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Qualifying Investor:      A proposed purchaser of a Pledged Mortgage Loan that meets certain investor requirements set forth by Lender, as may be amended from time to time.

Reportable Event:      An event described in Section 4043(b) of ERISA with respect to a Plan as to which the thirty (30) days notice requirement has not been waived by the Pension Benefit Guaranty Corporation.

Settlement Date:      With respect to each Advance, the date on which Borrower or the Investor, on behalf of Borrower, pays all amounts due in connection with the purchase of the Pledged Mortgage Loan, as set forth in the related Purchase Commitment.

Shipping Fee:      That fee, as set forth in the Commitment Letter, payable by Borrower to Lender for each Mortgage Loan File, or portion thereof, Lender delivers to Borrower, an Investor or other designee.

Standard Status:      As of any date of determination, the Pledged Mortgage Loan has been pledged as Collateral for less than the Maximum Dwell Time and is not a Noncompliant Mortgage Loan or a Defective Mortgage Loan.

Subordinated Debt:      Debt of Borrower that has been subordinated as provided in Section 7.1(a)(xii) or as otherwise approved by Lender.

Subprime Mortgage Loan:      A first lien mortgage loan underwritten in accordance with Borrower’s underwriting guidelines for subprime mortgage loans, as same have been approved by Lender.

Tangible Net Worth:      With respect to any Person at any date, the excess of the total assets over total liabilities of such Person on such date, each to be determined in accordance with GAAP consistent with those applied in the preparation of Borrower’s financial statements less the sum of the following (without duplication): (a) the book value of all investments in non-consolidated subsidiaries, and (b) any other assets of Borrower and consolidated subsidiaries that would be treated as intangibles under GAAP including, without limitation, good will, research and development costs, trademarks, trade names, copyrights, patents, rights to refunds and indemnification and unamortized debt discount and expenses; provided further that, to the extent not already excluded, there shall be excluded from Tangible Net Worth, those assets of any Person which, if such Person were a HUD mortgagee, would be deemed by HUD to be non-acceptable in calculating adjusted net worth in accordance with its requirements in effect as of such date, as such requirements appear in the “Audit Guide for Use by Independent Public Accountants in Audits of HUD-Approved Nonsupervised Mortgagees, Loan Correspondents and Coinsuring Mortgagees” or any successor or replacement audit guide published by HUD; provided, that residual securities issued by such Person or its Subsidiaries shall not be treated as intangibles for purposes of this definition. Notwithstanding the foregoing, servicing rights shall be included in the calculation of total assets.

Total Liabilities:      The total liabilities of any Person on any given date of determination, to be determined in accordance with GAAP consistent with those applied in the preparation of the Person’s financial statements, as set forth in the Commitment Letter. For the purposes of this definition, Total Liabilities shall exclude trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered.

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Tranche F Advance, Tranche G Advance, Tranche I Advance and Tranche J Advance:      A disbursement by Lender under this Agreement that that is secured by the corresponding type of Mortgage Loan set forth in Section 2.3(a).

Tranche F Advance Rate, Tranche G Advance Rate, Tranche I Advance Rate and Tranche J Advance Rate:      With respect to each type of Advance, the corresponding advance rate set forth in the Commitment Letter.

Tranche F Margin, Tranche G Margin, Tranche I Margin and Tranche J Margin:      With respect to each type of Advance, the corresponding annual rate of interest set forth in the Commitment Letter that shall be added to the Applicable Rate to determine the annual rate of interest for such Advance.

Tranche F Sublimit, Tranche G Sublimit, Tranche I Sublimit and Tranche J Sublimit:      With respect to each type of Advance, the aggregate amount of credit at any time outstanding agreed to be made available by Lender to Borrower, as set forth in the Commitment Letter.

Tranche Sublimit:      Tranche F Sublimit, Tranche G Sublimit, Tranche I Sublimit or Tranche J Sublimit.

Trust Receipt:      A trust receipt substantially in the form of Exhibit O hereto.

Underwriter Approval:      Written evidence, in form and substance acceptable to Lender, that a Pledged Mortgage Loan has been underwritten to the satisfaction of the Investor issuing the applicable Purchase Commitment.

Unused Facility Fee:      A fee, as set forth in the Commitment Letter, payable by Borrower quarterly in arrears based upon the unused portion of the Aggregate Credit Limit; provided, however, that no fee shall be due if the average difference between the Aggregate Credit Limit and actual outstanding principal amount of all Advances, calculated on a daily basis, during such quarter is less than that percent of the Aggregate Credit Limit set forth in the Commitment Letter.

VA:      The Department of Veterans Affairs and any successor thereto.

Warehouse Credit:      The aggregate amount of credit, committed and uncommitted, available to Borrower through warehouse lines of credit, repurchase facilities or similar mortgage finance arrangements.

Warehouse Debt:      The aggregate amount of outstanding balance by Borrower warehouse lines of credit, repurchase facilities or similar mortgage finance arrangements.

Wet Deficiency Fee:      A fee, as set forth in the Commitment Letter, payable by Borrower for each calendar day that Borrower fails to deliver to Lender or its Custodian the Collateral Documents relating to any Wet Mortgage Loan pledged as Collateral following expiration of the Wet Mortgage Loans Maximum Dwell Time.

Wet Mortgage Loan:      A mortgage loan as to which Lender makes an Advance to Borrower by delivering funds to the applicable Closing Agent prior to receipt by Lender or its Custodian of the related Collateral Documents; provided, however, that Borrower has agreed to deliver to Lender such Collateral Documents in accordance with Section 3.3(b).

Wet Mortgage Loans Maximum Dwell Time:      That period of time, as set forth in the Commitment Letter, by which Borrower must deliver to Lender or its designee the Collateral Documents for a Wet Mortgage Loan.

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Wet Mortgage Loans Sublimit:      The maximum aggregate principal amount of Advances that may be secured by Wet Mortgage Loans at any time, as set forth in the Commitment Letter.

Wire Transfer Fee:      That fee, as set forth in the Commitment Letter, payable by Borrower for each disbursement by wire transfer made to Borrower or its Approved Payee or received by Lender from Borrower or its Investor or otherwise related to an Advance.

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EXHIBIT B

NOTE

$200,000,000; June 26, 2003

FOR VALUE RECEIVED, the undersigned AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (“Maker”) hereby unconditionally promises to pay to the order of Countrywide Warehouse Lending (“Payee”) at 0000 Xxxx Xxxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000 or such other address as may be given to Maker by Payee, the principal sum of $200,000,000, or so much thereof as may be advanced and outstanding hereunder, in lawful money of the United States of America, together with interest on the unpaid principal balance from day-to-day remaining at the rate provided in that certain Revolving Credit and Security Agreement and Commitment Letter executed of even date herewith by and between Maker and Payee (collectively and as amended from time to time, the “Agreement”). Payments of principal and interest on this Note shall be due and payable in accordance with the terms set forth in the Agreement, but if not sooner paid, all principal and interest on this Note shall be due and payable on the expiration or termination of the Agreement. All payments made hereon shall be applied in accordance with the Agreement.

This Note has been executed and delivered pursuant to, and is subject to the terms and provisions of, the Agreement. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Agreement. The holder of this Note shall be entitled to the benefits provided for in the Agreement. Reference is made to the Agreement for certain provisions pertaining to (a) the obligation of Payee to advance funds hereunder; (b) the events upon which the maturity of this Note may be accelerated or shall automatically be accelerated; (c) the requirement that certain payments of principal be made hereunder upon the occurrence of certain events; (d) Maker’s right to make prepayments of principal hereunder; and (e) late payment premiums.

Maker and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable on this Note, jointly and severally waive demand or payment, presentment, protest, notice of protest and non-payment or other notice of default, notice of acceleration and notice of intention to accelerate, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes, regardless of the number of such renewals, extensions, indulgences, releases or changes.

This Note shall be governed by and construed in accordance with the laws of the State of California without regard to the principles of conflicts of laws.

If this Note is placed in the hands of an attorney for collection, or is collected through any legal proceedings at law or in equity or in bankruptcy, receivership or other court proceedings, Maker promises to pay all costs and expenses of collection including, but not limited to, court costs and the reasonable attorneys’ fees of the holder hereof.

Maker:

AAMES CAPITAL CORPORATION		AAMES FUNDING CORPORATION
By: ____________________________		By: ____________________________
Name: __________________________		Name: __________________________
Title: ___________________________		Title: ___________________________

EXHIBIT C

(if applicable, attached)

EXHIBIT E

OTHER MORTGAGE LOAN DOCUMENTS

(1) the original recorded Mortgage, if not included in the Collateral Documents;

(2) the original policy of mortgagee’s title insurance or unexpired commitment for a policy of mortgagee’s title insurance, if not included in the Collateral Documents;

(3) the original Closing Protection Letter;

(4) if required by the Commitment Letter, the original Purchase Commitment;

(5) the survey, flood certificate, hazard insurance policy and flood insurance policy, as applicable;

(6) the original of any assumption, modification, written assurance, consolidation or extension agreement, rider, power of attorney or substitution of liability agreement if not included in the Collateral Documents;

(7) copy of each instrument necessary to complete identification of any exception set forth in the exception schedule in the title policy;

(8) the loan application;

(9) verification of employment and income, if applicable;

(10) verification of source and amount of downpayment;

(11) credit report on Mortgagor;

(12) appraisal of Mortgaged Property;

(13) the original executed disclosure statement;

(14) Tax receipts, insurance premium receipts, ledger sheets, payment records, insurance claim files and correspondence, current and historical computerized data files, underwriting standards used for origination and all other related papers and records; and

(15) all other documents relating to the Pledged Mortgage Loan.

EXHIBIT F

FORM OF BAILEE AGREEMENT

THIS BAILEE AGREEMENT (the “Agreement”) is made and entered into as of [DATE], by and between Countrywide Warehouse Lending (“Lender”) and [INVESTOR] (“Investor”).

For purposes of this agreement, the following terms are defined as follows:

DEFINITIONS

A. Lender: Countrywide Warehouse Lending, who has separately entered into a Revolving Credit and Security Agreement with various Borrowers, for the purpose of facilitating the Borrower’s closure and sale of first and second mortgage loans.

B. Borrowers: Various legal entities who have separately entered into a revolving credit and security agreement with Lender. Borrowers request Lender to provide a line of credit from which Borrower may, from time to time, obtain advances of funds from Lender for the purpose of originating or acquiring residential mortgage loans.

C. Investor: Financially responsible private institution, which is deemed acceptable by Lender in its sole discretion, purchasing mortgage loans from Borrowers pursuant to a Purchase Contract (as defined below) and standard industry guidelines.

RECITALS

A. Investor and Borrower have entered into or will enter into one or more purchase contracts or purchase commitments (“Purchase Contracts”) pursuant to which Investor proposes to purchase from Borrower certain residential mortgage loans and the mortgage note and other mortgage loan documentation relating thereto (the “Collateral”).

B. Lender has a security interest in the Collateral, and Deutsche Bank National Trust Company (“Deutsche”) has or will have possession of the Collateral and will be acting as the custodian of the Collateral during the time that Borrower is attempting to sell the Collateral to one or more Investors.

C. Borrower may, from time to time, request that Lender deliver, or cause to be delivered, to Investor Collateral relating to certain mortgage loans so that Investor may inspect such Collateral prior to the purchase of the related mortgage loans by Investor. Provided that such request is approved by Lender, Lender will cause Deutsche to ship the specific Collateral to Investor.

D. In connection with the shipping of Collateral to Investor, a Bailee Letter (as defined below) may be issued and attached to the Collateral package. Such Bailee Letter will contain, among other things, the specific Borrower’s name and a schedule identifying the related Collateral being shipped. In addition, the Bailee Letter will incorporate by reference the terms and conditions of this Agreement as governing Investor’s possession and use of such Collateral.

E. Investor shall hold any Collateral received by it as bailee for the exclusive benefit of Lender until such time as Investor either purchases such Collateral or returns such Collateral to Countrywide upon the terms and conditions set forth herein. Investor must return or remit full payment for the purchase the Collateral no later than fourteen (14) days from the date Investor receives such Collateral from Lender.

NOW, THEREFORE, in consideration of the agreements set forth herein and for other good and valuable consideration, the parties hereto agree as follows:

1. Delivery of Collateral. Upon written request from Borrower pursuant to that revolving credit and security agreement by and between Borrower and Lender (the “Credit Agreement”), and provided that such request is approved by Lender, Lender may, from time to time, cause Deutsche to deliver Collateral to Investor to be held by Investor as bailee for the exclusive benefit of Lender. Collateral shall be delivered to Investor at the following address or such other address Investor may designate in writing to Lender and Deutsche:

Investor Name:______________________________
Address:___________________________________
City, State, Zip:______________________________
Attn:_______________________________________

Enclosed with each such delivery of Collateral may be a bailee letter (a “Bailee Letter”) substantially in the form of Schedule 1 to this Agreement; provided, however, that the failure of any Collateral package to include a Bailee Letter shall not in any way affect Lender’s liens and security interests in the Collateral or the applicability of the terms and conditions of this Agreement to such Collateral.

2. Acknowledgment of Security Interest; Investor as Bailee. Investor hereby acknowledges the liens and security interests of Lender in and to any Collateral received by Investor, including, without limitation, the liens and security interests that arise as a result of the Credit Agreement, the Uniform Commercial Code (“UCC”) and applicable law. Investor hereby agrees to hold such Collateral as bailee for the exclusive benefit of Lender pursuant to the applicable provisions of the UCC and upon the terms and conditions set forth herein.

3. Termination of Obligations. Investor’s obligations as bailee with respect to any Collateral received by Investor shall terminate without further action by any party at such time as Investor has either (a) purchased such Collateral by remitting in full the purchase price with respect to such Collateral, which shall equal the sum of (i) the product of the unpaid principal balance multiplied by the purchase price percentage, as specified in the applicable Purchase Contract, including without limitation any service release premium or premium points due; and (ii) accrued but unpaid interest (the “Purchase Price”) by wire transfer in immediately available funds to the account of Lender specified below, or specifically to such other account as Lender may designate in writing to Investor, and such funds have been received in such account; or (b) delivered and returned to Deutsche the Collateral at the address set forth below or such other address as Lender or Deutsche may designate in writing to Investor. Payment of the Purchase Price to an account other than one specified by Lender in writing shall not constitute payment hereunder, and the Collateral shall remain subject to the liens and security interests granted to Lender and the other restrictions set forth in paragraph 4 below.

Instructions for wire transfer of funds:

Bank:      Bank of New York
ABA No.:      000000000
Account No.:      8900404337
Attention:      CWL Reference: Borrower’s Name

Address for return of Collateral:

[INSERT]

4. Restrictions on Use of Collateral. Until such time as any Collateral received by Investor has been purchased by Investor in accordance with the Purchase Contract and the Purchase Price has been remitted and received in full by Lender as set forth in paragraph 3 above, Investor acknowledges and agrees that (a) such Collateral shall remain subject to the liens and security interests granted to Lender; (b) such Collateral shall be held by Investor only for Investor’s inspection and shall not be delivered or released to any party, including, without limitation, Borrower, other than Deutsche or such other designee identified by Lender to Investor in writing; and (c) Investor will act only in accordance with Lender’s instructions with respect to such Collateral.

5. Termination of Security Interest. Upon receipt by Lender of the Purchase Price in full, with respect to any Collateral held by Investor, in immediately available funds in the account specified in paragraph 3 above, and by Borrower of a purchase advice relating to such wire transfer, Lender’s security interest in such Collateral so purchased shall automatically terminate and be cancelled and released without notice or demand.

6. Return of Collateral. Until such time as Investor has paid the Purchase Price in full with respect to any Collateral held by Investor, Lender or Deutsche shall have the right, upon written notice to Investor, to require Investor to deliver within two business days such Collateral to Deutsche, at the address set forth in paragraph 3 above. However, Investor must return or remit full payment for the purchase the Collateral no later than fourteen (14) days from the date Investor receives such Collateral from Lender.

7. No Adjustments to Purchase Price. Investor agrees that the Purchase Price paid to Lender with respect to any particular Collateral shall not be reduced due to any adjustments without the prior written approval of Lender, except those amounts specifically permitted in the related Purchase Contract; provided, however, that in no event shall such reductions exceed one-half percent (.5%) of the unpaid principal balance of the related Collateral without the prior written consent of Lender.

8. Counterparts. This Agreement may be executed in any number of counterparts, each of which counterpart when executed and delivered shall be an original, but together shall constitute one and the same instrument.

9. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of California, without regard to principles of conflicts of laws.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

LENDER:		COUNTRYWIDE WAREHOUSE LENDING
		By:_________________________
		Name:_______________________
		Title:________________________
		Date:________________________

INVESTOR:		[INVESTOR]
		By:_________________________
		Name:_______________________
		Title:________________________
		Date:________________________

Schedule 1
BAILEE LETTER

[Custodian Letterhead]

[Approved Purchaser](“Investor”)
__________________________
__________________________

Re:           ______________________________

Ladies and Gentlemen:

Countrywide Warehouse Lending (“Lender”) has been advised of an impending sale of certain mortgage loans from AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (“Borrower”) to Investor. In connection with such impending sale, Borrower has requested that Deutsche Bank National Trust Company (“Custodian”) ship, or cause to be shipped, the original mortgage note(s) and supporting collateral documentation related to some or all of such mortgage loans (as summarized on the attached schedule, collectively, the “Collateral”). In accordance with the terms and conditions of that certain Bailee Agreement dated June 26, 2003, by and between Lender and Investor (the “Bailee Agreement”), by receipt of the enclosed Collateral, Investor hereby agrees to the following:

(1) Investor acknowledges that the Collateral is subject to the liens and security interests of Lender as discussed in the Bailee Agreement;

(2) Investor agrees to hold the Collateral as bailee for the exclusive benefit of Lender subject to the terms of the Bailee Agreement; and

(3) Investor agrees to:

(a) Remit in full to Lender the Purchase Price relating to the Collateral as referenced in paragraph 3 of the Bailee Agreement using the following wire instructions:

Bank of New York
ABA#000000000
Credit: Countrywide Warehouse Lending - Payoff Account
Account #8900404337

Please reference the seller’s and mortgagor’s name whenever possible. and

(b) Upon request, if the Collateral has not yet been purchased by Investor, immediately return the Collateral to the Custodian at the following address:

[INSERT]

If you have any questions, please call 000-000-0000.

Sincerely,

By: ____________________________ Name:
Title:

EXHIBIT G

IRREVOCABLE CLOSING INSTRUCTIONS

June 26, 2003

______________________ (“Closing Agent”) ____________________________________
____________________________________
Dear _______________________________

Re:     Irrevocable Closing Instructions

Closing Protection Letter Issued By, if applicable: ____________________________

Ladies and Gentlemen:

This letter is being sent in accordance with that Revolving Credit and Security Agreement dated as of June 26, 2003 (the “Agreement”) between AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (“Borrower”) and Countrywide Warehouse Lending (“Lender”), the terms of which do not affect Closing Agent except as set forth herein.

Pursuant to the Agreement, you have been identified as either:

•	the title insurer to close and provide title insurance on certain mortgage loans made by Borrower; or o the closing agent to close and fund certain mortgage loans made by Borrower and covered by the above referenced closing protection letter (the “Mortgage Loans”).
•	the closing agent to close and fund certain mortgage loans made by Borrower and covered by the above referenced closing protection letter (the “Mortgage Loans”).

From time to time, Lender will wire to you, for the account of Borrower, funds representing the Advance(s) requested by Borrower under the terms of the Agreement to be used by you for the purpose of funding such Mortgage Loan(s) and for no other purpose. Notwithstanding anything to the contrary contained herein, you are not to distribute any of such funds to Borrower. You must immediately return the funds representing the Advance to Lender at the following account if one of the following conditions occur:

•	You do not close any Mortgage Loan within forty-eight (48) hours of the time you receive the applicable funds; or o You receive funds for a Mortgage Loan for which you have not been instructed by Borrower to (a) obtain title insurance from the title insurance company specified in the above referenced closing protection letter or (b) underwrite the title insurance.
•	You receive funds for a Mortgage Loan for which you have not been instructed by Borrower to (a) obtain title insurance from the title insurance company specified in the above referenced closing protection letter or (b) underwrite the title insurance.

Bank:
ABA No.:
Account No.:
Credit:
Reference: Bank of New York
021-000018
8900404337
Countrywide Warehouse Lending - Payoff Account
Aames Funding Corporation

If the Collateral Documents (as described below) have not been delivered to Lender prior to the funding of the Advance, within 48 (forty eight) hours of closing any Mortgage Loan, unless otherwise instructed by Lender, you must deliver to Borrower, or Lender’s custodian, the following Collateral Documents:

(a) the original mortgage note evidencing the Mortgage Loan, endorsed by Borrower in blank, with a complete chain from the originator to Borrower;

(b) if in your possession, an original assignment in blank executed by Borrower for the mortgage or deed of trust securing the mortgage note, in recordable form but unrecorded, with a complete chain of intervening assignments from the originator to Borrower;

(c) a certified copy of the executed mortgage or deed of trust securing the mortgage note; and

(d) an original or copy of the title insurance policy insuring the first lien or second lien position of the mortgage or deed of trust, as applicable, in at least the original principal amount of the related mortgage note and containing only those exceptions permitted by the purchase commitment, as set forth in the final closing instructions referred to below, or an unconditional commitment to issue such a title insurance policy, or a preliminary report and instructions received from Borrower relating to the issuance of such a title insurance policy.

The Collateral Documents shall be delivered to the following address:

Aames Home Loans
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Third Floor Collateral Dept.

With respect to each Mortgage Loan for which you act as Closing Agent, Borrower will deliver to you final closing instructions specific to such Mortgage Loan. In the event that the terms of the final closing instructions contradict the terms of these irrevocable closing instructions, the terms of these irrevocable closing instructions shall govern. Permission to change the scheduled closing date for any Mortgage Loan beyond the time permitted herein or permission to otherwise deviate from these irrevocable closing instructions must be furnished to you in a writing signed by Lender and Borrower.

By your participation in the closing and funding of a Mortgage Loan as Closing Agent, you agree to act as Lender’s bailee with respect to such Mortgage Loan and the Collateral Documents referenced above and you thereby acknowledge your responsibility to Lender as holder of a security interest in such Mortgage Loan, to care for and protect Lender’s security interest in such Mortgage Loan. Facsimile signatures on these instructions shall be deemed valid and binding to the same extent as the original.

AAMES CAPITAL CORPORATION		AAMES FUNDING CORPORATION
By: ____________________________		By: ____________________________
Name: __________________________		Name: __________________________
Title: ___________________________		Title: ___________________________

EXHIBIT H-1

SECRETARY’S CERTIFICATE

I, _______________________________, am the duly elected Secretary of AAMES CAPITAL CORPORATION (“Company”), and I hereby certify that:

1. Each of the persons listed below has been duly elected to and now holds the office of the Company set forth opposite his or her name and is currently serving, in such capacity, and the signature of each such person set forth opposite his or her title is his or her true and genuine signature:

Name Office Signature

2. Attached hereto as Exhibit A is a true and complete copy of the Articles of Incorporation of the Company, as in full force and effect. No amendment or other document relating to or affecting the Articles of Incorporation has been filed in the office of the Secretary of State of incorporation and no action has been taken by the Company or its shareholders, directors or officers in contemplation of the filing of any such amendment or other documents and no proceedings therefore have occurred;

3. Attached hereto as Exhibit B is a true and complete copy of the By-laws of the Company, as in full force and effect, and such By-laws have not been amended, except for amendments included in the copy attached hereto; and

4. Attached hereto as Exhibit C is true and complete copy of the resolutions duly and validly adopted either at a special or regular meeting or by unanimous consent that apply to the Revolving Credit and Security Agreement between Company and Lender, and such resolution have not been amended, modified or rescinded in any respect and remain in full force and effect without modification or amendment as of the date hereof.

Dated: ______________                     By: _____________________________________

EXHIBIT H-2

SECRETARY’S CERTIFICATE

I, _______________________________, am the duly elected Secretary of AAMES FUNDING CORPORATION (“Company”), and I hereby certify that:

1. Each of the persons listed below has been duly elected to and now holds the office of the Company set forth opposite his or her name and is currently serving, in such capacity, and the signature of each such person set forth opposite his or her title is his or her true and genuine signature:

Name Office Signature

2. Attached hereto as Exhibit A is a true and complete copy of the Articles of Incorporation of the Company, as in full force and effect. No amendment or other document relating to or affecting the Articles of Incorporation has been filed in the office of the Secretary of State of incorporation and no action has been taken by the Company or its shareholders, directors or officers in contemplation of the filing of any such amendment or other documents and no proceedings therefore have occurred;

3. Attached hereto as Exhibit B is a true and complete copy of the By-laws of the Company, as in full force and effect, and such By-laws have not been amended, except for amendments included in the copy attached hereto; and

4. Attached hereto as Exhibit C is true and complete copy of the resolutions duly and validly adopted either at a special or regular meeting or by unanimous consent that apply to the Revolving Credit and Security Agreement between Company and Lender, and such resolution have not been amended, modified or rescinded in any respect and remain in full force and effect without modification or amendment as of the date hereof.

Dated: ______________                     By: _____________________________________

EXHIBIT I-1

CORPORATE RESOLUTIONS

WHEREAS, AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (the collectively “Company”) desires to borrow up to $200,000,000 (“Loan”) from Countrywide Warehouse Lending (“Lender”) pursuant to a revolving credit and security agreement substantially in the form attached hereto (the “Revolving Credit and Security Agreement”).

NOW, THEREFORE, IT IS RESOLVED BY THE BOARD OF DIRECTORS OF THE COMPANY THAT:

1. Company is hereby authorized and directed to enter into and execute each of the following documents:

(a) the Revolving Credit and Security Agreement between Company and Lender, attached hereto;

(b) a secured promissory note by the Borrower payable to Lender in the face amount of $200,000,000, substantially in the form of Exhibit B hereto; and

(c) any and all other agreements and documents in connection with the Loan, (collectively, the “Loan Documents”).

2. Any one of the following officers are separately and independently authorized and directed to execute and deliver the Loan Documents, and to do any and all things which he or she may deem necessary or desirable in connection with the Loan, including approving, executing and delivering any increases, amendments or modifications thereto.

Name/Title Specimen Signature

3. Any one of the following officers and/or employees is separately and independently authorized to take the following actions in connection with the Loan and Loan Documents: (a) request advances; (b) sign receipts acknowledging delivery of funds and documents from Lender; (c) request and effect transfers of funds; and (d) ship and release documents to Lender:

Name Specimen Signature Restrictions, if any

Dated: ______________                     By: _____________________________________

EXHIBIT I-2

CORPORATE RESOLUTIONS

WHEREAS, AAMES CAPITAL CORPORATION (collectively the “Company”) desires to borrow up to $200,000,000 (“Loan”) from Countrywide Warehouse Lending (“Lender”) pursuant to a revolving credit and security agreement substantially in the form attached hereto (the “Revolving Credit and Security Agreement”).

NOW, THEREFORE, IT IS RESOLVED BY THE BOARD OF DIRECTORS OF THE COMPANY THAT:

1. Company is hereby authorized and directed to enter into and execute each of the following documents:

(a) the Revolving Credit and Security Agreement between Company and Lender, attached hereto;

(b) a secured promissory note by the Borrower payable to Lender in the face amount of $200,000,000, substantially in the form of Exhibit B hereto; and

(c) any and all other agreements and documents in connection with the Loan, (collectively, the “Loan Documents”).

2. Any one of the following officers are separately and independently authorized and directed to execute and deliver the Loan Documents, and to do any and all things which he or she may deem necessary or desirable in connection with the Loan, including approving, executing and delivering any increases, amendments or modifications thereto.

Name/Title Specimen Signature

Dated: ______________                     By: _____________________________________

EXHIBIT I-3

CORPORATE RESOLUTIONS

WHEREAS, AAMES FUNDING CORPORATION (the “Company”) desires to borrow up to $200,000,000 (“Loan”) from Countrywide Warehouse Lending (“Lender”) pursuant to a revolving credit and security agreement substantially in the form attached hereto (the “Revolving Credit and Security Agreement”).

NOW, THEREFORE, IT IS RESOLVED BY THE BOARD OF DIRECTORS OF THE COMPANY THAT:

1. Company is hereby authorized and directed to enter into and execute each of the following documents:

(a) the Revolving Credit and Security Agreement between Company and Lender, attached hereto;

(b) a secured promissory note by the Borrower payable to Lender in the face amount of $200,000,000, substantially in the form of Exhibit B hereto; and

(c) any and all other agreements and documents in connection with the Loan, (collectively, the “Loan Documents”).

2. Any one of the following officers are separately and independently authorized and directed to execute and deliver the Loan Documents, and to do any and all things which he or she may deem necessary or desirable in connection with the Loan, including approving, executing and delivering any increases, amendments or modifications thereto.

Name/Title Specimen Signature

Dated: ______________                     By: _____________________________________

EXHIBIT J-1

OFFICER’S CERTIFICATE

I, __________________, the duly elected _______________ of AAMES CAPITAL CORPORATION (“Borrower”), do hereby certify as follows:

1. The representations and warranties made by Borrower under the Principal Agreements (as defined in Revolving Credit and Security Agreement dated as of June 26, 2003 (the “Agreement”) between Borrower and Countrywide Warehouse Lending (“Lender”) are accurate and true on and as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof.

2. Borrower is in compliance with all of the terms and provisions set forth in the Principal Agreements on its part to be performed and observed, and no Event of Default or Potential Default (as defined in the Agreement) has occurred and is continuing.

3. Since _____________________, no material adverse change in the Executive Management (as defined in the Agreement), business, assets or financial or other condition of Borrower and its consolidated Subsidiaries (as defined in the Agreement) taken as a whole has occurred.

IN WITNESS WHEREOF, the undersigned has hereunto signed his/her name on ________________.

AAMES CAPITAL CORPORATION
By: __________________________
Name: ________________________
Title: _________________________

EXHIBIT J-2

OFFICER’S CERTIFICATE

I, __________________, the duly elected _______________ of AAMES FUNDING CORPORATION (“Borrower”), do hereby certify as follows:

1. The representations and warranties made by Borrower under the Principal Agreements (as defined in Revolving Credit and Security Agreement dated as of June 26, 2003 (the “Agreement”) between Borrower and Countrywide Warehouse Lending (“Lender”) are accurate and true on and as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof.

2. Borrower is in compliance with all of the terms and provisions set forth in the Principal Agreements on its part to be performed and observed, and no Event of Default or Potential Default (as defined in the Agreement) has occurred and is continuing.

3. Since _____________________, no material adverse change in the Executive Management (as defined in the Agreement), business, assets or financial or other condition of Borrower and its consolidated Subsidiaries (as defined in the Agreement) taken as a whole has occurred.

IN WITNESS WHEREOF, the undersigned has hereunto signed his/her name on ________________.

AAMES FUNDING CORPORATION
By: __________________________
Name: ________________________
Title: _________________________

EXHIBIT K

ASSIGNMENT OF CLOSING PROTECTION LETTER

AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (collectively “Assignor”) declares that for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it does hereby convey, transfer, assign, deliver and give to Assignee, and hereby expressly subrogates Countrywide Warehouse Lending (“Assignee”) unto, all of Assignor’s claims, demands, rights and causes of action, past, present or future, that Assignor has for loss or damage covered by the closing protection letter issued by _________________ (Title Company) attached hereto (Closing Protection Letter). Such rights being assigned by Assignor hereunder include, without limitation, the right to demand, xxx, collect, receive, protect, preserve and enforce performance under the Closing Protection Letter. Assignee shall succeed to all rights of recovery of Assignor under the Closing Protection Letter and Assignor shall execute such instruments and documents necessary and proper to further secure such rights to Assignee and shall not act in any manner hereafter to prejudice or impair the rights of Assignee. Assignor hereby grants Assignee an irrevocable mandate and power of attorney coupled with an interest with full power of substitution to transact this act of assignment and subrogation.

IN WITNESS WHEREOF, the Assignor has caused this assignment to be duly executed as of June 26, 2003.

AAMES CAPITAL CORPORATION		AAMES FUNDING CORPORATION
By: ____________________________		By: ____________________________
Name: __________________________		Name: __________________________
Title: ___________________________		Title: ___________________________

K-1

EXHIBIT L

Intentionally Omitted.

EXHIBIT M

FORM OF INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT (the “Agreement”) dated [INTERCREDITOR DATE] and is made by and among Countrywide Warehouse Lending (“Countrywide”) and [BANK] (“Bank”) (collectively with Countrywide, the “Lenders”).

RECITALS

A. Each Lender has extended credit to AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (“Borrower”), pursuant to the credit agreements more particularly identified following the signature block to this Agreement (each a “Credit Agreement”), and Borrower has granted to each Lender a lien on certain existing and future assets of Borrower.

B. Bank represents to Countrywide that the Credit Agreement with such Bank evidences the only mortgage warehouse line of credit extended by Bank to Borrower.

C. Countrywide and Bank desire to clarify and define their respective rights to the assets of Borrower vis-a-vis each other.

NOW, THEREFORE, in consideration of the mutual rights and obligations provided herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Countrywide and Bank agree as follows:

1. Mortgage Loans. Pursuant to the respective Credit Agreements, Borrower has granted to each Lender a security interest in any Mortgage Loan (as hereinafter defined) now or hereafter financed by and delivered to such Lender or its agent or custodian (with respect to any Mortgage Loan, the Bank which finances such Mortgage Loan shall be referred to herein as the “Financing Lender”). Notwithstanding anything to the contrary set forth in any Lender’s Credit Agreement or any financing statement filed in connection therewith, with respect to any individual Mortgage Loan, the rights of any Lender, other than the Financing Lender, in and to such Mortgage Loan shall be subject and subordinate to the rights of the Financing Lender in and to such Mortgage Loan. It is understood and agreed that delivery of the Mortgage Loan shall mean the delivery to the Financing Lender or its agent or custodian of the original note, which evidences the Mortgage Loan, and any related loan documents. As used herein, “Mortgage Loan” means a real estate secured loan, made by Borrower to an obligor or acquired by Borrower, including, without limitation: (a) a promissory note and related deed of trust (or mortgage) and/or security agreements; (b) all guaranties and insurance policies, including, without limitation, all mortgage and title insurance policies and all fire and extended coverage insurance policies and rights of Borrower to return premiums or payments with respect thereto; (c) all right, title and interest of Borrower in the property covered by said deed of trust (or mortgage); and (d) subject to Section 2 below, the takeout or purchase commitment, if any, related thereto.

2. Takeout/Purchase Commitments. Notwithstanding anything to the contrary set forth in any Lender’s Credit Agreement or any financing statement filed in connection therewith, the rights of the Lenders vis-a-vis each other in and to any takeout commitments and purchase commitments of Borrower (together with the rights to deliver property to investors pursuant thereto and the rights to proceeds thereof), now existing or hereafter arising, shall be as follows:

(a) to the extent any such commitment identifies or covers Mortgage Loans that are financed solely by one Lender, such Lender shall have a superior right to such commitment and the other Lender’s interest in such commitment shall be subordinate;

(b) to the extent any such commitment identifies or covers Mortgage Loans that are financed by more than one Lender, each such Lender’s rights to such commitment shall be on parity with one another but the benefits of such commitment shall be divided pro rata amongst such Lenders based upon the relative outstanding amounts of such Lenders on the date of default under the respective Credit Agreements and any other Lender’s (which does not have Mortgage Loans identified by any such commitment) interest in such commitment shall be subordinate; and

(c) to the extent any such commitment fails to identify or cover Mortgage Loans that are financed by any particular Lender, all Lenders shall have rights to such commitment on parity with one another but the benefits of such commitment shall be divided pro rata amongst all Lenders based upon the relative outstanding amounts of the Lenders on the date of default under the respective Credit Agreements.

3. Deposit/Bank Accounts. Notwithstanding anything to the contrary set forth in any Lender’s Credit Agreement or any financing statement filed in connection therewith, the rights of any Lender to (a) any deposit account, escrow account or other bank account of Borrower, now existing or hereafter arising, maintained or established with any other Lender (such Lender where the account is located being referred to herein as the “Depository Bank”), and (b) any funds from time to time held in any such account, shall be subject and subordinate to the rights of the Depository Bank in and to such account and the funds from time to time held therein.

4. Amendments; Severability; Successors; Governing Law. No modifications or amendments may be made to this Agreement without the written consent of each Lender party hereto. In the event that any provision of this Agreement shall be held to be invalid or unenforceable in any circumstance, such invalidity or unenforceability shall not affect any other provision of this Agreement. This Agreement shall be mutually binding upon, and inure to the mutual benefit of, the parties hereto and their respective successors and/or assigns. This Agreement shall be governed by the laws of the State of California, without regard to principles of conflicts of laws.

5. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which together constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

COUNTRYWIDE WAREHOUSE LENDING as Countrywide		[BANK] as Bank
By: ____________________________		By: ____________________________
Name: __________________________		Name: __________________________
Title: ___________________________		Title: ___________________________

EXHIBIT N-1

FORM OF POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, Countrywide Warehouse Lending (“Lender”) and AAMES CAPITAL CORPORATION (“Borrower”) have entered into the Revolving Credit and Security Agreement, dated as of June 26, 2003 (the “Agreement”), pursuant to which Lender has agreed to provide Borrower with a line of credit subject to the terms and conditions set forth therein;

WHEREAS, as security for advances extended under such line of credit, Borrower has agreed to grant to Lender a security interest in and lien upon the certain mortgage loans originated and/or acquired by Borrower; and

WHEREAS, Borrower has agreed to give to Lender a power of attorney on the terms and conditions contained herein in order for Lender to take any action that Lender may deem necessary or advisable to accomplish the purposes of the Agreement;

NOW, THEREFORE, Borrower hereby irrevocably constitutes and appoints Lender its true and lawful Attorney-in-Fact, with full power and authority hereby conferred in its name, place and stead and for its use and benefit, to do and perform the following in connection with the collateral pledged by Borrower as security under the Agreement (the “Collateral”) or as otherwise provided below:

(1) to receive, endorse and collect all checks made payable to the order of Borrower representing any payment on account of the Collateral;

(2) to assign or endorse any mortgage, deed of trust, promissory note or other instrument relating to the Collateral;

(3) to correct any assignment, mortgage, deed of trust or promissory note or other instrument relating to the Collateral, including, without limitation, unendorsing and re-endorsing a promissory note to another investor;

(4) to complete and execute lost note affidavits relating to the Collateral;

(5) to issue title requests and instructions relating to the Collateral;

(6) to give notice to any individual or entity of its security interest in the Collateral pledged by Borrower as security under the Agreement; and

(7) to service and administer the Collateral, including, without limitation, the receipt and collection of all sums payable in respect of the Collateral.

Borrower hereby ratifies and confirms all that said Attorney-in-Fact shall lawfully do or cause to be done by authority hereof.

Third parties without actual notice may rely upon the power granted under this Power of Attorney upon the exercise of such power by the Attorney-in-Fact.

AAMES CAPITAL CORPORATION
By: __________________________
Name: ________________________
Title: _________________________

WITNESS my hand this ____________ day of ________________, 20___.

STATE OF _________________      }
                                                     }      SS.
County of __________________           }

This instrument was acknowledged, subscribed and sworn to before me this _________ day of _________________, by ____________________________________________

_______________________________
Notary Public

My Commission Expires: ____________

EXHIBIT N-2

FORM OF POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, Countrywide Warehouse Lending (“Lender”) and AAMES FUNDING CORPORATION (“Borrower”) have entered into the Revolving Credit and Security Agreement, dated as of June 26, 2003 (the “Agreement”), pursuant to which Lender has agreed to provide Borrower with a line of credit subject to the terms and conditions set forth therein;

WHEREAS, as security for advances extended under such line of credit, Borrower has agreed to grant to Lender a security interest in and lien upon the certain mortgage loans originated and/or acquired by Borrower; and

WHEREAS, Borrower has agreed to give to Lender a power of attorney on the terms and conditions contained herein in order for Lender to take any action that Lender may deem necessary or advisable to accomplish the purposes of the Agreement;

NOW, THEREFORE, Borrower hereby irrevocably constitutes and appoints Lender its true and lawful Attorney-in-Fact, with full power and authority hereby conferred in its name, place and stead and for its use and benefit, to do and perform the following in connection with the collateral pledged by Borrower as security under the Agreement (the “Collateral”) or as otherwise provided below:

(1) to receive, endorse and collect all checks made payable to the order of Borrower representing any payment on account of the Collateral;

(2) to assign or endorse any mortgage, deed of trust, promissory note or other instrument relating to the Collateral;

(3) to correct any assignment, mortgage, deed of trust or promissory note or other instrument relating to the Collateral, including, without limitation, unendorsing and re-endorsing a promissory note to another investor;

(4) to complete and execute lost note affidavits relating to the Collateral;

(5) to issue title requests and instructions relating to the Collateral;

(6) to give notice to any individual or entity of its security interest in the Collateral pledged by Borrower as security under the Agreement; and

(7) to service and administer the Collateral, including, without limitation, the receipt and collection of all sums payable in respect of the Collateral.

Borrower hereby ratifies and confirms all that said Attorney-in-Fact shall lawfully do or cause to be done by authority hereof.

Third parties without actual notice may rely upon the power granted under this Power of Attorney upon the exercise of such power by the Attorney-in-Fact.

AAMES FUNDING CORPORATION
By: __________________________
Name: ________________________
Title: _________________________

WITNESS my hand this ____________ day of ________________, 20___.

STATE OF _________________      }
                                                     }      SS.
County of __________________           }

This instrument was acknowledged, subscribed and sworn to before me this _________ day of _________________, by ____________________________________________

_______________________________
Notary Public

My Commission Expires: ____________

EXHIBIT O

FORM OF TRUST RECEIPT

Date

AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (“Borrower”)
Client Address
Client City, State, Zipcode
Attention: Client Contact Name

Re: Revolving Credit and Security Agreement dated as of June 26, 2003 (the “Agreement”) between Borrower and Countrywide Warehouse Lending (“Lender”)

Reference is made to the above Agreement. Capitalized terms used and not otherwise defined herein have the meanings ascribed thereto in the Agreement.

The Collateral Documents set forth in Exhibit A hereto are delivered to you for correction and completion as indicated thereon. You are hereby instructed to make or cause such corrections and completions to be made and return such Collateral Documents to:

Countrywide Home Loans, Inc. (“Countrywide”)
0000 Xxxxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000

on the earlier of (a) demand by Countrywide or Lender or (b) ten (10) Business Days from the date of this Trust Receipt. Countrywide holds and owns a perfected first priority security interest and lien in such Collateral Documents. While such Collateral Documents are in your possession, Countrywide’s security interest therein shall continue and remain perfected, and you hold such Collateral Documents as Countrywide’s custodian, bailee and agent, subject only to our direction and control until returned to Countrywide as provided herein. You are liable for loss suffered by Lender and/or Countrywide as a result of loss or destruction of the Collateral Documents.

By your receipt of the Collateral Documents, you are bound by the terms and provisions of this Trust Receipt. Countrywide hereby requests that you acknowledge receipt of the Collateral Documents by signing and returning the enclosed copy of this Trust Receipt; provided, however, that your failure to do so shall not affect your agreement to be bound by the terms and provisions of this Trust Receipt.

Sincerely,

Countrywide Home Loans, Inc.

AAMES FUNDING CORPORATION
By: __________________________
Name: ________________________
Title: _________________________

ACKNOWLEDGED AND AGREED:

AAMES CAPITAL CORPORATION
By: __________________________
Name: ________________________
Title: _________________________

EXHIBIT P

[Reserved]

EXHIBIT Q

REQUEST TO ADD NEW WIRE INSTRUCTIONS

June 26, 2003

Correspondent Lending Division
0000 Xxxxxxxxx Xxxxxx, X/X XX-00X
Xxxx Xxxxx, XX 00000

Dear CLD Representative:

We have recently signed an agreement with Countrywide Warehouse Lending to finance our loans in process. Accordingly, can you add their wire instructions to our current listing of authorized wire instructions. We have also given CWL information as to Warehouse Lenders that have been terminated. You may rely on information provided by CWL to cancel wire instructions previously submitted on our behalf.

The CWL wire instructions are:

Bank of New York
ABA #000000000
Account #8900404337
Reference: AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION

Wire Transfer Department Phone #: 0-000-000-0000

Sincerely,

AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION

AAMES CAPITAL CORPORATION
By: __________________________
Name: ________________________
Title: _________________________

EXHIBIT R

Intentionally Omitted.

EXHIBIT S

ACKNOWLEDGEMENT OF PASSWORD CONFIDENTIALITY AGREEMENT

AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION ("Borrower") has entered into a Revolving Credit and Security Agreement with Countrywide Warehouse Lending ("Lender"). In connection therewith, Borrower is being provided access to the website at xxx.xxxxxxxxxxxxxxxx.xxx (the "Website"). As consideration for being provided access to and use of the Website, Borrower agrees that:

1. Borrower may only access the Website by using a user name and password issued by Lender.

2. Lender reserves the right to revoke or deactivate any user name and/or password at any time.

3. Borrower shall designate in writing an authorized representative (the “Authorized Representative”) to communicate with Lender regarding the authorized users of the Website. The Authorized Representative shall be responsible for notifying Lender of any changes, additions or deletions to the authorized users. Under no circumstances may user names and passwords be transferred between authorized users. Borrower shall be solely responsible for all actions of its Authorized Representative and shall immediately notify Lender of any change in its Authorized Representative. Lender shall be entitled to rely on the authority and directions of the Authorized Representative without further inquiry. Authorized Representative shall communicate with Lender in writing or via telephone by dialing [INSERT TELEPHONE NUMBER].

4. Borrower shall be solely responsible for safeguarding access to user names and passwords and for implementing controls to prevent unauthorized usage of the Website.

5. Borrower is responsible for all requests, approvals and other transactions on the Website accessed through user names and/or passwords issued to Borrower.

6. Lender shall be entitled to rely on all requests, approvals and other communications made on the Website through a user name and/or password issued to Borrower until such time as:

(a) Borrower provides Lender with written instructions to the contrary; and

(b) Lender has sufficient time to notify the appropriate employees and modify its computerized systems to deactivate the affected user name and/or password.

7. Any dispute regarding the use of user names and/or passwords shall be resolved in accordance with the terms and conditions of the Agreement.

By signing below you acknowledge your agreement to the terms and conditions set forth herein. Facsimile signatures shall be deemed valid and binding to the same extent as the original.

Borrower:                       AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION

Print Name:

Assigned:

Signature:

Number Assigned:
Date:

EXHIBIT T

ELECTRONIC TRACKING AGREEMENT - WAREHOUSE LENDER (ONLY APPLICABLE AT SUCH TIME AS BORROWER BECOMES A MEMBER OF MERS)

        THIS ELECTRONIC TRACKING AGREEMENT dated as of June 26, 2003 (this “Agreement”) among Countrywide Warehouse Lending (“Lender”), MERSCORP, Inc. (“Electronic Agent”), Mortgage Electronic Registration Systems, Inc. (“MERS”) and AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (collectively “Borrower”).

        WHEREAS, the Lender has agreed to extend a line of credit to the Borrower for the purpose of the Borrower lending money to potential homeowners for mortgage loans (the “Mortgage Loans”) pursuant to the terms and conditions of a Revolving Credit and Security Agreement dated as of June 26, 2003 by and between the Lender and Borrower, as amended from time to time (the “Credit Agreement”).

         WHEREAS, the Borrower is obligated to pledge the Mortgage Loans to the Lender and also to service the Mortgage Loans pursuant to the terms and conditions of the Credit Agreement and to complete all actions necessary to cause the issuance and delivery to the Lender of the Mortgage Notes (the “Mortgage Notes”), and

        WHEREAS, the Lender and the Borrower desire to have certain Mortgage Loans registered on the MERS® System (defined below) such that the mortgagee of record under each Mortgage (defined below) shall be identified as MERS;

         NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:

1. Definitions.

        Capitalized terms used in this Agreement shall have the meanings ascribed to them below.

        “Affected Loans” shall have the meaning assigned to such term in Section 4(b).

        “Assignment of Mortgage” shall mean, with respect to any Mortgage, an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related mortgaged property is located to effect the assignment of the Mortgage upon recordation.

        “Event of Default” shall mean an “Event of Default” as defined in the Credit Agreement.

        “MERS Procedures Manual” shall mean the MERS Procedures Manual attached as Exhibit B hereto, as it may be amended from time to time.

        “MERS Designated Mortgage Loan” shall have the meaning assigned to such term in Section 3.

        “MERS® System” shall mean the Electronic Agent’s mortgage electronic registry system, as more particularly described in the MERS Procedures Manual.

        “Mortgage” shall mean a lien, mortgage or deed of trust securing a Mortgage Note.

        “Mortgage Loan” shall mean each mortgage loan that is pledged by Borrower to Lender.

        “Mortgage Loan Documents” shall mean the originals of the Mortgage Notes and other documents and instruments.

        “Mortgage Note” shall mean a promissory note or other evidence of indebtedness of the obligor thereunder, representing a Mortgage Loan, and secured by the related Mortgage.

        “Mortgagor” shall mean the obligor on a Mortgage Note.

        “Notice of Default”

shall mean a notice from the Lender that an Event of Default has occurred and is continuing.

        “Opinion of Counsel” shall mean a written opinion of counsel in form and substance reasonably acceptable to the Lender.

        “Person” shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof).

2. Appointment of the Electronic Agent.

        The Lender and the Borrower, by execution and delivery of this Agreement, each does hereby appoint MERSCORP, Inc. as the Electronic Agent, subject to the terms of this Agreement, to perform the obligations set forth herein.

        MERSCORP, Inc., by execution and delivery of this Agreement, does hereby (i) agree with the Lender and the Borrower subject to the terms of this Agreement to perform the services set forth herein, and (ii) accept its appointment as the Electronic Agent.

3. Designation of MERS as Mortgagee of Record; Designation of Investor and Servicer of Record in MERS.

        The Borrower has designated or shall designate MERS as, and has taken or will take such action as is necessary to cause MERS to be, the mortgagee of record with respect to certain Mortgage Loans, and in accordance with the MERS Procedures Manual, the Borrower has designated or shall designate the Borrower as the servicer or subservicer in the MERS® System for each such Mortgage Loan (each such Mortgage Loan, upon such designation by MERS, a “MERS Designated Mortgage Loan”).

4. Obligations of the Electronic Agent.

o

         The Electronic Agent shall ensure that MERS, as the mortgagee of record under each MERS Designated Mortgage Loan, shall promptly forward all properly identified notices MERS receives in such capacity to the person or persons identified in the MERS® System as the servicer or if a subservicer is identified in the MERS® System, the subservicer for such MERS Designated Mortgage Loan.

        Upon receipt of a Notice of Default, in the form of Exhibit C, from the Lender in which the Lender shall identify the MERS Designated Mortgage Loans with respect to which the Borrower’s right to act as servicer of subservicer thereof has been terminated by the Lender (the “Affected Loans”), the Electronic Agent shall modify the investor fields and/or servicer fields to reflect the investor and/or servicer on the MERS® System as the Lender or the Lender’s designee with respect to such Affected Loans. Following such Notice of Default, the Electronic Agent shall follow the instructions of the Lender with respect to the Affected Loans without further consent of the Borrower, and shall deliver to the Lender any documents and/or information (to the extent such documents or information are in the possession or control of the Electronic Agent) with respect to the Affected Loans requested by the Lender.

        Upon the Lender’s request and instructions, and at the Borrower’s sole cost and expense, the Electronic Agent shall deliver to the Lender or the Lender’s designee, with respect to each Affected Loan as to which a request is made, an Assignment of Mortgage from MERS, in blank, in recordable form but unrecorded; provided, however, that the Electronic Agent shall not be required to comply with the foregoing unless the costs and expenses of doing so shall be paid by the Borrower or a third party.

         Upon the reasonable request of the Lender, the Electronic Agent shall review the field designated “interim funder” and shall remove any Person who is identified in the field designated “interim funder”. The Electronic Agent shall then leave the “interim funder” field blank.

        In the event that (i) the Borrower, the Electronic Agent or MERS shall be served by a third party with any type of levy, attachment, writ or court order with respect to any MERS Designated Mortgage Loan or (ii) a third party shall institute any court proceeding by which any MERS Designated Mortgage Loan shall be required to be delivered otherwise than in accordance with the provisions of this Agreement, the Electronic Agent shall promptly deliver or cause to be delivered to the other parties to this Agreement copies of all court papers, orders, documents and other materials concerning such proceedings.

        Upon the request of the Lender, the Electronic Agent shall run a query with respect to any and all specified fields with respect to any or all of the MERS Designated Mortgage Loans and, if requested by the Lender, shall change the information in such fields in accordance with the Lender’s instructions.

        MERS, as mortgagee of record for the MERS Designated Mortgage Loans, shall take all such actions as may be required by a mortgagee in connection with servicing the MERS Designated Mortgage Loans at the request of the applicable servicer identified on the MERS® System, including, but not limited to, executing and/or recording, any modification, waiver, subordination agreement, instrument of satisfaction or cancellation, partial or full release, discharge or any other comparable instruments, at the sole cost and expense of the Borrower.

        MERS shall cause certain officers of the Lender to be appointed officers of MERS with respect to the MERS Designated Mortgage Loans, with the power to wield all of the powers specified in the form of corporate resolution used to appoint such officer attached hereto as Exhibit D.

5. Access to Information.

        Upon the Lender’s request, the Electronic Agent shall furnish the Lender or its auditors information in its possession with respect to the MERS Designated Mortgage Loans and shall permit them to inspect the Electronic Agent’s and MERS’ records relating to the MERS Designated Mortgage Loans at all reasonable times during regular business hours.

6. Representations of the Electronic Agent and MERS.

        The Electronic Agent and MERS hereby represent and warrant as of the date hereof that:

        (a) each of the Electronic Agent and MERS has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under this Agreement, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Agreement;

        (b) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement;

        (c) this Agreement has been duly executed and delivered on behalf of the Electronic Agent and MERS and constitutes a legal, valid and binding obligation of the Electronic Agent and MERS enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether enforcement is sought in proceedings in equity or at law);

        (d) the Electronic Agent and MERS will maintain at all times insurance policies for fidelity and errors and omissions in amounts of at least three million dollars ($3,000,000) and five million dollars ($5,000,000) respectively, and a certificate and policy of the insurer shall be furnished to the Lender upon request and shall contain a statement of the insurer that such insurance will not be terminated prior to 30 days’ written notice to the Lender.

7. Covenants of MERS.

        MERS shall (a) not incur any indebtedness other than in the ordinary course of its business, (b) not engage in any dissolution, liquidation, consolidation, merger or sale of assets, (c) not engage in any business activity in which it is not currently engaged, (d) not take any action that might cause MERS to become insolvent, (e) not form, or cause to be formed, any subsidiaries, (f) maintain books and records separate from any other person or entity, (g) maintain its bank accounts separate from any other person or entity, (h) not commingle its assets with those of any other person or entity and hold all of its assets in its own name, (i) conduct its own business in its own name, (j) pay its own liabilities and expenses only out of its own funds, (k) observe all corporate formalities, (l) enter into transactions with affiliates only on each such transaction is intrinsically fair, commercially reasonable, and on the same terms as would be available in an arm’s length transaction with a person or entity that is not an affiliate, (m) pay the salaries of its own employees from its own funds, (n) maintain a sufficient number of employees in light of its contemplated business operations, (o) not guarantee or become obligated for the debts of any other entity or person, (p) not hold out its credit as being available to satisfy the obligation of any other person or entity, (q) not acquire the obligations or securities of its affiliates or owners, including partners, members or shareholders, as appropriate, (r) not make loans to any other person or entity or buy or hold evidence of indebtedness issued by any other person or entity (except for cash and investment-grade securities), (s) allocate fairly and reasonably any overhead expenses that are shared with an affiliate, including paying for office space and services performed by any employee of any affiliate, (t) use separate stationery, invoices, and checks bearing its own name, (u) not pledge its assets for the benefit of any other person or entity, (v) hold itself out as a separate identity, (w) correct any known misunderstanding regarding its separate identity, (x) not identify itself as a division of any other person or entity, and (y) maintain adequate capital in light of its contemplated business operations.

        MERS agrees that in no event shall MERS’ status as mortgagee of record with respect to any MERS Designated Mortgage Loan confer upon MERS any rights or obligations as an owner of any MERS Designated Mortgage Loan or the servicing rights related thereto, and MERS will not exercise such rights unless directed to do so by the Lender.

8. Covenants of Borrower.

        The Borrower covenants and agrees with the Lender that with respect to each MERS Designated Mortgage Loan, it will not identify any party, including Lender, in the field “interim funder” on the MERS® System without the express written consent of Lender.

        Borrower will provide the Lender with MERS Identification Numbers for each MERS Designated Mortgage Loan that the Lender has extended credit on for which MERS is the mortgagee of record.

9. No Adverse Interest of the Electronic Agent or MERS.

        By execution of this Agreement, the Electronic Agent and MERS each represents and warrants that it currently holds, and during the existence of this Agreement shall hold, no adverse interest, by way of security or otherwise, in any MERS Designated Mortgage Loan. The MERS Designated Mortgage Loans shall not be subject to any security interest, lien or right to set-off by the Electronic Agent, MERS, or any third party claiming through the Electronic Agent or MERS, and neither the Electronic Agent nor MERS shall pledge, encumber, hypothecate, transfer, dispose of, or otherwise grant any third party interest in, the MERS Designated Mortgage Loans.

10. Indemnification of the Lender.

        The Electronic Agent agrees to indemnify and hold the Lender and its designees harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, including reasonable attorneys’ fees, that the Lender may sustain arising out of any breach by the Electronic Agent of this Agreement, the Electronic Agent’s negligence, bad faith or willful misconduct, its failure to comply with the Lender’s instructions hereunder or to the extent caused by delays or failures arising out of the inability of the Lender or the Electronic Agent to access information on the MERS® System. The foregoing indemnification shall survive any termination or assignment of this Agreement.

11. Reliance of the Electronic Agent.

        In the absence of bad faith on the part of the Electronic Agent, the Electronic Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any request, instruction, certificate or other document furnished to the Electronic Agent, reasonably believed by the Electronic Agent to be genuine and to have been signed or presented by the proper party or parties and conforming to the requirements of this Agreement.

        Notwithstanding any contrary information which may be delivered to the Electronic Agent by the Borrower, the Electronic Agent may conclusively rely on any information or Notice of Default delivered by the Lender, and the Borrower shall indemnify and hold the Electronic Agent harmless for any and all claims asserted against it for any actions taken in good faith by the Electronic Agent in connection with the delivery of such information or Notice of Default.

12. Fees.

        It is understood that the Electronic Agent or its successor will charge such fees and expenses for its services hereunder as set forth in a separate agreement between the Electronic Agent and the Borrower. The Electronic Agent shall give prompt written notice of any disciplinary action instituted with respect to the Borrower’s failure to pay any fees required in connection with its use of the MERS® System, and will give written notice to the Borrower and the Lender at least thirty (30) days prior to any revocation of the Borrower’s membership in the MERS® System, such disciplinary action and/or notice of revocation will be rescinded if within ten (10) days of such notification Electronic Agent receives payment of past due fees (including all late charges) from Borrower and/or Lender. Whether or not such disciplinary action and/or notice of revocation has been rescinded, Electronic Agent will continue to provide all the services contemplated herein without interruption until the date of revocation, if applicable.

13. Resignation of the Electronic Agent; Termination.

         The Lender has entered into this Agreement with the Electronic Agent and MERS in reliance upon the independent status of the Electronic Agent and MERS, and the representations as to the adequacy of their facilities, personnel, records and procedures, its integrity, reputation and financial standing, and the continuance thereof. Neither the Electronic Agent nor MERS shall assign this Agreement or the responsibilities hereunder or delegate their rights or duties hereunder (except as expressly disclosed in writing to, and approved by, the Lender) or any portion hereof or sell or otherwise dispose of all or substantially all of its property or assets without providing the Lender with at least 60 days’ prior written notice thereof.

        Neither the Electronic Agent nor MERS shall resign from the obligations and duties hereby imposed on them except by mutual consent of the Electronic Agent, MERS and the Lender, or upon the determination that the duties of the Electronic Agent and MERS hereunder are no longer permissible under applicable law and such incapacity cannot be cured by the Electronic Agent and MERS. Any such determination permitting the resignation of the Electronic Agent and MERS shall be evidenced by an Opinion of Counsel to such effect delivered to the Lender which Opinion of Counsel shall be in form and substance acceptable to the Lender. No such resignation shall become effective until the Electronic Agent and MERS have delivered to the Lender all of the Assignments of Mortgage, in blank, in recordable form but unrecorded for each MERS Designated Mortgage Loan identified by the Lender as collateralized by the Lender.

14. Removal of the Electronic Agent.

        The Lender, with or without cause, may remove and discharge the Electronic Agent and MERS from the performance of its duties under this Agreement with respect to some or all of the MERS Designated Mortgage Loans by written notice from the Lender to the Electronic Agent and the Borrower.

        In the event of termination of this Agreement, at the Borrower’s sole cost and expense, the Electronic Agent shall follow the instructions of the Lender for the disposition of the documents in its possession pursuant to this Agreement, and deliver to the Lender an Assignment of Mortgage, in blank, in recordable form but unrecorded for each MERS Designated Mortgage Loan identified by the Lender as collateralized by the Lender. Notwithstanding the foregoing, in the event that the Lender terminates this Agreement with respect to some, but not all, of the MERS Designated Mortgage Loans, this Agreement shall remain in full force and effect with respect to any MERS Designated Mortgage Loans for which this Agreement is not terminated hereunder.

15. Notices.

        All written communications hereunder shall be delivered, via facsimile or by overnight courier, to the Electronic Agent and/or the Lender and/or the Borrower as indicated on the signature page hereto, or at such other address as designated by such party in a written notice to the other parties; provided, however, that all legal notices must be delivered by overnight courier. All such communications shall be deemed to have been duly given when a confirmation of successful transmission is printed when transmitted by facsimile, or in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

16. Term of Agreement.

        This Agreement shall continue to be in effect until terminated by either the Lender or the Electronic Agent sending written notice to the other parties of this Agreement at least thirty (30) days prior to said termination.

        Upon the termination of this Agreement by the Electronic Agent, the Electronic Agent shall, at the Electronic Agent’s sole cost and expense, execute and deliver to the Lender or its designee an Assignment of Mortgage with respect to each MERS Designated Mortgage Loan identified by the Lender, in blank, in recordable form but unrecorded. In the event that this Agreement is terminated by the Lender without cause, the duties of the Electronic Agent in the preceding sentence shall be at the sole cost and expense of the Borrower. In addition, the Lender and the Electronic Agent may, at the sole option of the Lender, enter into a separate agreement which shall be mutually acceptable to the parties with respect to any or all of the MERS Designated Mortgage Loans with respect to which this Agreement is terminated. Sections 6, 10, 21, 22 and 26 shall survive termination of this Agreement.

17. Authorizations.

        Any of the persons whose signatures and titles appear on Exhibit A hereto are authorized, acting singly, to act for the Lender, the Borrower or the Electronic Agent, as the case may be, under this Agreement. The parties may change the information on Exhibit A hereto from time to time but each of the parties shall be entitled to rely conclusively on the then current exhibit until receipt of a superseding exhibit.

18. Integration; Amendments; Waiver.

        This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof. This Agreement may be amended from time to time only by written agreement of the Lender, the Borrower and the Electronic Agent. No failure or delay on the part of any party in exercising any right, power or privilege hereunder and no course of dealing among the parties shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

19. Severability.

        If any provision of this Agreement is declared invalid by any court of competent jurisdiction, such invalidity shall not affect any other provision, and this Agreement shall be enforced to the fullest extent required by law.

20. Binding Effect.

        This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and assigns.

21. Governing Law.

        This Agreement shall be construed in accordance with, and governed by the law of the Commonwealth of Virginia. THE LENDER, THE BORROWER, THE ELECTRONIC AGENT AND MERS EACH IRREVOCABLY AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY COURT OF THE COMMONWEALTH OF VIRGINIA, OR IN THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF VIRGINIA, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT EXPRESSLY AND IRREVOCABLY ASSENT AND SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF ANY SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING.

22. Waiver of Jury Trial.

        THE LENDER, THE BORROWER, THE ELECTRONIC AGENT AND MERS EACH IRREVOCABLY AGREES TO WAIVE ITS RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING AGAINST IT ARISING OUT OF, OR RELATED IN ANY MANNER TO, THIS AGREEMENT OR ANY RELATED AGREEMENT.

23. Execution.

        This Agreement may be executed in one or more counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original; such counterparts, together, shall constitute one and the same agreement.

24. Cumulative Rights.

        The rights, powers and remedies of the Electronic Agent, MERS, the Borrower and the Lender under this Agreement shall be in addition to all rights, powers and remedies given to the Electronic Agent, MERS, the Borrower and the Lender by virtue of any statute or rule of law, or any other agreement, all of which rights, powers and remedies shall be cumulative and may be exercised successively or concurrently without impairing the Lender’s rights in the Mortgage Loans.

25. Status of Electronic Agent.

        Nothing herein contained shall be deemed or construed to create a partnership, joint venture between the parties hereto and the services of the Electronic Agent and MERS shall be rendered as independent contractors for the Lender and the Borrower. Other than the obligations of the Electronic Agent and MERS expressly set forth herein, the Electronic Agent and MERS shall have no power or authority to act as agent for the Lender or the Borrower pursuant to any grant of authority made under or pursuant to this Agreement.

26. Attorneys’ Fees.

        If any claim, legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement or because of a dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred in that claim, action or proceeding, in addition to any other relief to which such party may be entitled.

[SIGNATURE PAGE FOLLOWS]

        IN WITNESS WHEREOF, the Lender, the Borrower, the Electronic Agent and MERS have duly executed this Agreement as of the date first above written.

AAMES CAPITAL CORPORATION , as Borrower

By:______________________________________________________

Name:

Title:

AAMES FUNDING CORPORATION, as Borrower

By:______________________________________________________

Name:

Title:

Address for Notices:

Attention:

Telecopier No.:

Telephone No.:

Countrywide Warehouse Lending, as Lender

By:______________________________________________________

Name:

Title:

Address for Notices:

Attention:

Telecopier No.:

Telephone No.:

MERSCORP, INC., as Electronic Agent

By:______________________________________________________

Name:

Title:

Address for Notices:

Attention:

Telecopier No.:

Telephone No.:

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,

By:______________________________________________________

Name:

Title:

Address for Notices:

Attention:

Telecopier No.:

Telephone No.:

EXHIBIT A

LIST OF AUTHORIZED PERSONS

LENDER AUTHORIZATIONS:

Any of the persons whose signatures and titles appear below, or attached hereto, are authorized, acting singly, to act for the Lender under this Agreement:

By:__________________________		By:__________________________		By:__________________________
Name:________________________		Name:________________________		Name:________________________
Title:_________________________		Title:_________________________		Title:_________________________

ELECTRONIC AGENT AUTHORIZATIONS:

Any of the persons whose signatures and titles appear below, or attached hereto, are authorized, acting singly, to act for the Electronic Agent under this Agreement:

By:__________________________		By:__________________________		By:__________________________
Name:________________________		Name:________________________		Name:________________________
Title:_________________________		Title:_________________________		Title:_________________________

MERS AUTHORIZATIONS:

Any of the persons whose signatures and titles appear below, or attached hereto, are authorized, acting singly, to act for MERS under this Agreement:

By:__________________________		By:__________________________		By:__________________________
Name:________________________		Name:________________________		Name:________________________
Title:_________________________		Title:_________________________		Title:_________________________

BORROWER AUTHORIZATIONS:

Any of the persons whose signatures and titles appear below, or attached hereto, are authorized, acting singly, to act for the Borrower under this Agreement:

By:__________________________		By:__________________________		By:__________________________
Name:________________________		Name:________________________		Name:________________________
Title:_________________________		Title:_________________________		Title:_________________________

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EXHIBIT B

MERS PROCEDURES MANUAL

EXHIBIT C

NOTICE OF DEFAULT

_____________   ___, _____

MERSCORP, Inc.
[Address]

Ladies and Gentlemen:

P

        lease be advised that this Notice of Default is being issued pursuant to Section 4(b) of that certain Electronic Tracking Agreement (the “Electronic Tracking Agreement”), dated as of [ ___, 2000], by and among (the “Lender”), the AAMES CAPITAL CORPORATION AND AAMES FUNDING CORPORATION (the “Borrower”), MERSCORP, Inc. (the “Electronic Agent”) and Mortgage Electronic Registration Systems, Inc. (“MERS”). The Affected Loans are listed on the attached Schedule 1 (including the mortgage identification numbers). Accordingly, the Electronic Agent shall not accept instructions from the Borrower, the Servicer, any subservicer and from no party other than the Lender with respect to such Mortgage Loans, until otherwise notified by the Lender.

        Any terms used herein and not otherwise defined shall have such meaning specified in the Electronic Tracking Agreement.

By:__________________________

Title:_________________________

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EXHIBIT D

FORM OF CORPORATE RESOLUTION

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