AAMES FINANCIAL CORP/DE, PRE 14A, 1999-03-22

AAMES FINANCIAL CORP/DE
PRE 14A, 1999-03-22
LOAN BROKERS

Previous: PREMIER CONCEPTS INC /CO/, SC 13D, 1999-03-22

Next: LAKEHEAD PIPE LINE PARTNERS L P, 10-K405, 1999-03-22

<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

AAMES FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

---------------------------------------------------------------------
(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

---------------------------------------------------------------------
(3) Filing Party:

---------------------------------------------------------------------
(4) Date Filed:

---------------------------------------------------------------------
<PAGE> 2
[AAMES LOGO]

March ___, 1999

Dear Stockholder:

You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Aames Financial Corporation (the "Company") to be held at the
Hotel Inter-Continental, 251 S. Olive Street, Los Angeles, California 90012, on
________, __________, 1999, at _______ p.m., Los Angeles time (the "Meeting").
The Meeting was originally scheduled for December 18, 1998 (the "Originally
Scheduled Meeting") and was later postponed by the Company to allow for the
completion of negotiations with the Company's new equity partner, Capital Z
Financial Services Fund II, L.P. ("Capital Z").

On December 23, 1998, the Company entered into a Preferred Stock
Purchase Agreement (the "Agreement") with Capital Z pursuant to which Capital Z,
and parties designated by it, agreed to make an equity investment in the Company
of up to $101.5 million (the "Capital Z Transaction"). The initial phase of the
Capital Z Transaction occurred on February 10, 1999 when Capital Z, and parties
designated by it, purchased 76,500 shares of Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock (collectively, the "Senior
Preferred Stock") for $1,000 per share, for an aggregate investment of $76.5
million. Subject to the approval of the Stock Proposals (as defined below), the
second phase of the Capital Z Transaction will include an offering to holders of
the Company's common stock of non-transferable rights to purchase up to $25
million of Series C Convertible Preferred Stock at $1.00 per share (the "Rights
Offering") and a sale to Capital Z of its designees of up to $25 million of the
Series C Convertible Preferred Stock not otherwise sold in the Rights Offering.

At the Meeting, you will be asked to consider and vote upon several
proposals related to the Capital Z Transaction. Specifically, you will be asked
to consider proposals to amend the Company's Amended and Restated Certificate of
Incorporation to increase the authorized amount of the Company's common stock
and a proposal to increase the authorized amount of the Company's Senior
Preferred Stock (the "Stock Proposals") and a proposal to effect a 1,000-for-1
forward stock split of the preferred stock (the "Stock Split"). The Stock
Proposals and Stock Split are necessary to complete a recapitalization of the
Company and are conditions for consummating the Rights Offering. In addition,
you will also be asked to consider a proposal to adopt the 1999 Stock Option
Plan.

Pursuant to the terms of the Senior Preferred Stock, if the Company
fails to effect the Stock Proposals and the Stock Split and file the applicable
amendment to the Certificate of Incorporation that are necessary to complete a
recapitalization of the Company prior to June 30, 1999 (the "Recapitalization"),
(i) the dividend rate on the Senior Preferred Stock will increase from 6.5% to
15% per annum, and (ii) a warrant to purchase up to 3 million shares of Common
Stock held by Capital Z Management, Inc., an affiliate of Capital Z, will become
exercisable at an exercise price of $1.00 per share.

In addition to the proposals related to the Capital Z Transaction, you
will be asked to vote in the election of directors and to ratify the appointment
of Ernst & Young LLP, the Company's independent accountants.

The enclosed materials supercede and replace the materials that were
sent to you for the Originally Scheduled Meeting and we therefore encourage you
to read carefully the enclosed Notice of Annual Meeting and Proxy Statement,
which more fully describe the proposals to be considered at the Meeting.

It is important that your shares be represented at the Meeting, whether
or not you plan to attend personally. Therefore, you are requested to complete,
sign and date the enclosed proxy card and return it as soon as possible in the
enclosed envelope so that your shares will be represented. Please note that
proxy cards returned for the Originally Scheduled Meeting are invalid and, in
order for your shares to be counted, you should return the enclosed proxy card.
If you attend the Meeting in person, you may vote in person even if you have
previously returned your proxy card.

We appreciate your support.

Sincerely,

Steven Gluckstern
Chairman of the Board
<PAGE> 3
AAMES FINANCIAL CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ____________, 1999

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Aames Financial Corporation (the "Company") will be held at the
Hotel Inter-Continental, 251 S. Olive Street, Los Angeles, California 90012, on
_________, ____________, 1999, at ________ p.m., Los Angeles time, for the
purpose of voting upon:

1. Common Stock Proposal. A proposal to approve an amendment to
the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") to increase
the Company's authorized Common Stock, $0.001 par value per
share (the "Common Stock"), by 350,000,000 shares to an
aggregate of 400,000,000 shares (the "Common Stock Proposal").

2. Preferred Stock Proposal. A proposal to approve an amendment
to the Certificate of Incorporation to increase the Company's
authorized Preferred Stock, $0.001 par value per share (the
"Preferred Stock"), by 199,000,000 shares to an aggregate of
200,000,000 shares (the "Preferred Stock Proposal" and,
together with the Common Stock Proposal, the "Stock
Proposals").

3. Stock Split. A proposal to approve an amendment to the
Certificate of Incorporation to effect a 1,000-for-1 forward
stock split of the Company's Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock (collectively,
the "Senior Preferred Stock") outstanding as of March ___,
1999 (the "Stock Split").

4. Election of Series B Directors. The election of four Series B
Directors to hold office until the 1999 Annual Meeting of
Stockholders and thereafter until such directors' successors
are duly elected and qualified.

5. Election of Class III Common Stock Director. The election of
one Class III Common Stock director to hold office until the
2001 Annual Meeting of Stockholders and until such director's
successor is duly elected and qualified;

6. 1999 Stock Option Plan. The adoption of the Company's 1999
Stock Option Plan;

7. Ratification of Accountants. The ratification of the
appointment of Ernst & Young LLP as the Company's independent
accountants for the fiscal year ending June 30, 1999; and

8. Other Business. Such other business as may properly come
before the Meeting and any adjournment(s) thereof.

The Meeting was originally scheduled for December 18, 1998 (the
"Originally Scheduled Meeting"). Due to ongoing negotiations with Capital Z
Financial Services Fund II, L.P., a Bermuda limited partnership ("Capital Z"),
which the Company believed would lead to an equity investment by Capital Z, the
Company elected to postpone the Originally Scheduled Meeting to avoid the
additional expense of a special meeting of the stockholders of the Company in
connection with a transaction with Capital Z. On December 23, 1998, the Company
entered into a Preferred Stock Purchase Agreement, which was amended on February
10, 1999 (as amended, the "Agreement"), with Capital Z, pursuant to which
Capital Z and certain other investors designated by it (collectively, with
Capital Z, the "Preferred Stock Investors") purchased $76.5 million of the
Company's Senior Preferred Stock and Capital Z or its designees agreed to
purchase up to $25 million of additional Series C Convertible Preferred Stock to
the extent not purchased by the Company's common stockholders in a contemplated
Rights Offering (discussed in the attached Proxy Statement). Under the
Agreement, the Company has agreed to solicit its stockholders' approval of the
Stock Proposals as more fully described in the attached Proxy Statement. This
notice supercedes and replaces in all respects the notice sent to

<PAGE> 4
stockholders for the Originally Scheduled Meeting.

Only stockholders of record of the Company at the close of business on
_________, 1999 are entitled to notice of, and to vote at, the Meeting and any
adjournment(s) thereof.

All stockholders are cordially invited to attend the Meeting in person.
However, to ensure your representation at the Meeting, you are urged to
complete, sign, date and return the enclosed Proxy as promptly as possible in
the postage prepaid envelope enclosed for that purpose. Proxies returned for the
Originally Scheduled Meeting will not be counted for the Meeting and therefore
you must mark, sign and return this new Proxy to ensure your representation at
the Meeting. Any stockholder attending the Meeting may vote in person, even
though he or she has returned a Proxy.

By Order of the Board of Directors

Barbara S. Polsky
Secretary

Los Angeles, California
March ___, 1999

IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. PROXIES RETURNED FOR THE
ORIGINALLY SCHEDULED MEETING WILL NOT BE COUNTED AS VOTING AT THE MEETING.

YOUR BOARD OF DIRECTORS HAS REVIEWED AND CONSIDERED THE TERMS AND CONDITIONS OF
THE STOCK PROPOSALS AND THE STOCK SPLIT. THE BOARD BELIEVES THAT THE STOCK
PROPOSALS AND THE STOCK SPLIT ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE STOCK
PROPOSALS AND THE STOCK SPLIT AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THEIR
APPROVAL.

YOUR BOARD OF DIRECTORS HAS REVIEWED AND CONSIDERED THE TERMS AND CONDITIONS OF
THE 1999 STOCK OPTION PLAN. THE BOARD BELIEVES THAT THE 1999 STOCK OPTION PLAN
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE 1999 STOCK OPTION PLAN AND RECOMMENDS
THAT STOCKHOLDERS VOTE "FOR" ITS APPROVAL.

1
<PAGE> 5
AAMES FINANCIAL CORPORATION
350 S. Grand Avenue, 52nd Floor
Los Angeles, California 90071
(323) 210-5000
-------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ______________, 1999

INTRODUCTION

GENERAL

This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Directors of Aames Financial Corporation, a Delaware
corporation (the "Company"), for use at the 1998 Annual Meeting of Stockholders
(the "Meeting") to be held at the Hotel Inter-Continental, 251 S. Olive Street,
Los Angeles, California 90012, at _______ p.m., Los Angeles time, on _________,
__________, 1999, and at any adjournment(s) thereof. The Meeting was postponed
from December 18, 1998 (the "Originally Scheduled Meeting"). Due to ongoing
negotiations with Capital Z Financial Services Fund II, L.P., a Bermuda limited
partnership ("Capital Z"), which the Company believed would lead to an equity
investment by Capital Z, the Company elected to postpone the Originally
Scheduled Meeting to avoid the additional expense of a special meeting of the
stockholders of the Company in connection with a transaction with Capital Z. On
December 23, 1998, the Company entered into a Preferred Stock Purchase
Agreement, which was amended on February 10, 1999 (as amended, the "Agreement"),
with Capital Z, pursuant to which Capital Z and certain other investors
designated by it (collectively, with Capital Z, the "Preferred Stock Investors")
purchased $76.5 million of the Company's Senior Preferred Stock and Capital Z or
its designees agreed to purchase up to $25 million of additional Series C
Convertible Preferred Stock to the extent not purchased by the Company's common
stockholders in a contemplated Rights Offering. Under the Agreement, the Company
has agreed to solicit its stockholders' approval of the Stock Proposals and the
Stock Split as more fully described in this Proxy Statement. This Proxy
Statement and the accompanying Proxy supercede and replace in all respects the
Proxy Statement and Proxy mailed to stockholders for the Originally Scheduled
Meeting. It is anticipated that this Proxy Statement and the accompanying Proxy
will be mailed to stockholders on or about ___________, 1999.

MATTERS TO BE CONSIDERED

At the Meeting, the stockholders of the Company will vote upon: (i) the
proposal (the "Common Stock Proposal") to amend the Company's Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation") to
increase the Company's authorized Common Stock, $0.001 par value per share (the
"Common Stock"); (ii) the proposal to amend the Certificate of Incorporation to
increase the Company's authorized Preferred Stock (the "Preferred Stock
Proposal" and, together with the Common Stock Proposal, the "Stock Proposals"),
(iii) the proposal to amend the Certificate of Incorporation to effect a
1,000-for-1 forward stock split of the Senior Preferred Stock outstanding as of
March ___, 1999 (the "Stock Split"); (iv) the election of four Series B
Convertible Preferred Stock directors (the "Series B Directors") for terms
ending at the 1999 Annual Meeting of Stockholders of the Company; (v) the
election of one Class III Common Stock director (the "Common Stock Director")
for a term ending on the 2001 Annual Meeting of Stockholders of the Company;
(vi) the approval of the 1999 Stock Option Plan; (vii) the ratification of the
appointment of Ernst & Young LLP as the Company's independent accountants for
the fiscal year ending June 30, 1999; and (viii) such other matters as may
properly come before the Meeting and any adjournment(s) thereof.

REVOCABILITY OF PROXIES

A Proxy for use at the Meeting is enclosed. The enclosed Proxy supercedes and
replaces in all respects the Proxy materials mailed to the stockholders for the
Originally Scheduled Meeting. Any stockholder who executes and delivers such
Proxy has the right to revoke it at any time before it is exercised by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed Proxy bearing a later date, or by attending the Meeting and voting

2
<PAGE> 6
in person. Subject to such revocation, all shares represented by a properly
executed Proxy received in time for the Meeting will be voted by the Proxy
holders in accordance with the instructions on the Proxy. Proxies for the
Originally Scheduled Meeting which have been executed and returned will not be
counted as voting at the Meeting. If no instruction is specified with respect to
a matter to be acted upon, the shares represented by the Proxy will be voted (i)
to approve the Common Stock Proposal, (ii) to approve the Preferred Stock
Proposal, (iii) to approve the Stock Split, (iv) for the election of the
nominees for Series B Directors set forth herein, (v) for the election of the
nominee for Common Stock Director set forth herein, (vi) to approve the adoption
of the 1999 Stock Option Plan, (vii) for the ratification of the appointment of
Ernst & Young LLP as the Company's independent accountants for the fiscal year
ending June 30, 1999 and (viii) if any other business is properly presented at
the Meeting, in accordance with the recommendations of the Board of Directors.

COSTS OF SOLICITATION OF PROXIES

The expenses of preparing, assembling, printing and mailing this Proxy
Statement and the materials used in the solicitation of Proxies will be borne by
the Company. It is contemplated that the Proxies will be solicited through the
mails but officers, directors and regular employees of the Company may solicit
Proxies personally. Although there is no formal agreement to do so, the Company
may reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding the Proxy materials to
stockholders whose stock in the Company is held of record by such entities. In
addition, the Company may use the services of individuals or companies it does
not regularly employ in connection with the solicitation of Proxies if
management determines it advisable.

VOTING SECURITIES

The close of business on __________, 1999 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Meeting and any adjournment(s) thereof. As of March ___, 1999, 31,015,893
shares of the Company's Common Stock, no shares of the Company's Series A
Preferred Stock, 26,704 shares of the Company's Series B Convertible Preferred
Stock and 50,046 shares of the Company's Series C Convertible Preferred Stock
were outstanding.

A majority of the outstanding shares of Common Stock and a majority of
the outstanding shares of Senior Preferred Stock must be represented in person
or by proxy at the Meeting in order to constitute a quorum for the transaction
of business. A stockholder is entitled to cast one vote for each share of Common
Stock and one thousand votes for each share of Senior Preferred Stock held on
the Record Date for each proposal for which he or she is entitled to vote.

Approval of the Common Stock Proposal requires (i) the affirmative vote
of a majority of the votes entitled to be cast by holders of all outstanding
shares of Common Stock and all outstanding shares of Senior Preferred Stock,
voting together as a single class, and (ii) the affirmative vote of a majority
of the votes entitled to be cast by the holders of all outstanding shares of
Common Stock, voting as a separate class.

Approval of the Preferred Stock Proposal requires (i) the affirmative
vote of a majority of the votes entitled to be cast by the holders of all
outstanding shares of Common Stock and all outstanding shares of Senior
Preferred Stock, voting together as a single class, and (ii) the affirmative
vote of a majority of the votes entitled to be cast by the holders of all
outstanding shares of Senior Preferred Stock, voting as a separate class.

Approval of the Stock Split requires (i) the affirmative vote of a
majority of the votes entitled to be cast by the holders of all outstanding
shares of Common Stock and all outstanding shares of Senior Preferred Stock,
voting together as a single class, and (ii) the affirmative vote of a majority
of the votes entitled to be cast by the holders of all outstanding shares of
Senior Preferred Stock, voting as a separate class.

The election of each of the Series B Directors requires the affirmative
vote of a majority of the votes entitled to be cast by holders of Series B
Convertible Preferred Stock which are present and voting (either in person or by
proxy) at the Meeting. Holders of the Common Stock and holders of the Series C
Convertible Preferred Stock are not entitled to vote in the election of the
Series B Directors.

3
<PAGE> 7
The election of the Common Stock Director requires the affirmative vote
of a majority of the votes entitled to be cast by holders of Common Stock and
Series B Convertible Preferred Stock who are present and voting (either in
person or by proxy) at the Meeting, voting as a single class. Holders of the
Series C Convertible Preferred Stock are not entitled to vote in the election of
the Common Stock Director.

Adoption of the 1999 Stock Option Plan and the ratification of the
appointment of Ernst & Young LLP as the Company's independent accountants for
the fiscal year ending June 30, 1999 requires the affirmative vote of a majority
of the votes entitled to be cast by holders of outstanding shares of Common
Stock and outstanding shares of Senior Preferred Stock, which are present and
voting (either in person or by proxy) at the Meeting, voting as a single class.

The holders of the Senior Preferred Stock and each of the executive
officers and directors of the Company have indicated that they intend to vote
shares of Common Stock and Senior Preferred Stock held by them in favor of each
of the proposals to be presented at the Meeting. In furtherance thereof, the
holders of the Senior Preferred Stock are contractually obligated to cast their
votes in favor of the Stock Proposals, the Stock Split, the election of the
nominees identified in this Proxy Statement for election as Series B Directors,
the election of the nominee identified in this Proxy Statement for election as
the Common Stock Director and the approval of the 1999 Stock Option Plan. In
addition, Cary Thompson, the Chief Executive Officer and a director of the
Company, and Neil Kornswiet, the President of the Company, are contractually
obligated to cast their votes in favor of the Stock Proposals and the Stock
Split. At the Record Date, the holders of the Senior Preferred Stock and the
executive officers and directors of the Company controlled the vote of an
aggregate of 1,890,560 shares of the Common Stock, 26,704 shares of the Series B
Convertible Preferred Stock and 50,046 shares of the Series C Convertible
Preferred Stock, constituting in the aggregate 6.10%, 100% and 100% of the
Common Stock, Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock, respectively. Accordingly, adoption of each of the proposals to
be presented at the Meeting other than the Common Stock Proposal is assured. In
addition, if holders of at least 43.91% of the outstanding shares of Common
Stock join the executive officers and directors of the Company in voting in
favor of the Common Stock Proposal, the Common Stock Proposal will also be
adopted.

In accordance with the laws of the State of Delaware and the
Certificate of Incorporation and Bylaws, for election of directors, only proxies
and ballots indicating votes "For all nominees," "Withhold authority to vote all
nominees" or specifying that votes be withheld from one or more designated
nominees are counted to determine the total number of votes present and entitled
to be cast, and broker non-votes are not counted. Therefore, abstentions and
broker non-votes have no effect on the outcome of the election. For the adoption
of the Stock Proposals and the Stock Split, which are decided by the affirmative
vote of a majority of the votes entitled to be cast by the holders of all
outstanding shares of stock entitled to vote on such proposals, abstentions and
broker non-votes have the same effect as a vote against such proposals. For the
adoption of all other proposals, which are decided by a majority of the shares
present (in person or by proxy) and entitled to vote, only proxies and ballots
indicating votes "For," "Against" or "Abstain" on the proposal or providing the
designated proxies with the right to vote in their judgment and discretion on
the proposal are counted to determine the number of shares present and entitled
to vote, and broker non-votes are not counted. Thus abstentions have the same
effect as a vote against a proposal but broker non-votes have no effect on the
outcome of the proposal.

4
<PAGE> 8
STOCK PROPOSALS

APPROVE THE AMENDMENT OF THE CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF COMMON STOCK

APPROVE THE AMENDMENT OF THE CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF PREFERRED STOCK

APPROVE THE AMENDMENT OF THE CERTIFICATE OF
INCORPORATION TO EFFECT A STOCK SPLIT
OF THE PREFERRED STOCK

INTRODUCTION

On December 23, 1998 the Company entered into the Agreement with
Capital Z, which was amended on February 10, 1999, which Agreement provides for
an equity investment of up to $101.5 million (the "Investment") in the Company.
The Investment is to be made in three stages, as follows: (i) on February 10,
1999 (the "Initial Closing") the Preferred Stock Investors purchased 26,704
shares of the Series B Convertible Preferred Stock of the Company and 49,796
shares of the Series C Convertible Preferred Stock of the Company for $1,000 per
share, or an aggregate purchase price of $76.5 million; (ii) as soon as
practicable following the Meeting, subject to the approval of each of the Stock
Proposals and the Stock Split (defined below), the Company intends to commence a
public offering to the holders of the Common Stock of the Company of
non-transferable subscription rights (the "Subscription Rights") to purchase up
to $25 million of Series C Convertible Preferred Stock for $1.00 per share (the
"Rights Offering"), and (iii) Capital Z has agreed to purchase up to $25 million
of additional shares of Series C Convertible Preferred Stock to the extent not
purchased by the Company's common stockholders in the Rights Offering (the
"Standby Commitment").

On February 10, 1999, the Board of Directors approved the proposed
amendments to the Certificate of Incorporation, subject to stockholder approval,
to increase the amount of the Company's authorized capital stock and to effect a
1,000-for-1 forward stock split of the outstanding Senior Preferred Stock (the
"Stock Split").

THE STOCK PROPOSALS AND THE STOCK SPLIT

The Certificate of Incorporation presently authorizes the issuance of
50,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. Of
such 50,000,000 presently authorized shares of Common Stock, 31,015,893 shares
were issued and outstanding on the Record Date. Of such 1,000,000 shares of
presently authorized Preferred Stock, 26,704 shares of Series B Convertible
Preferred Stock were issued and outstanding on the Record Date and 50,046 shares
of Series C Convertible Preferred Stock were issued and outstanding on the
Record Date. In addition, an aggregate of ___________ shares of Common Stock
have been reserved for issuance as of the Record Date under outstanding options,
warrants and other rights to purchase Common Stock of the Company.

A vote for the Stock Proposals will approve the proposed amendments to
the Certificate of Incorporation to increase the Company's authorized number of
shares of Common Stock by 350,000,000 to 400,000,000 shares and Preferred Stock
by 199,000,000 to 200,000,000 shares. A vote for the Stock Split will approve
the proposed amendment to the Certificate of Incorporation to effect the Stock
Split. The amendment to increase the authorized Common Stock is presented to the
stockholders as the Common Stock Proposal, the amendment to increase the
authorized Preferred Stock is presented to stockholders as the Preferred Stock
Proposal, and the amendment to effect the Stock Split is presented to the
stockholders as the Stock Split. The proposed amendments to the Certificate of
Incorporation in each case described herein are set forth in Exhibit "B"
attached hereto.

Upon adoption of the Stock Proposals and the Stock Split, the Company
will file an amendment to the Certificate of Incorporation with the Secretary of
State of the State of Delaware, effect the Stock Split and reserve 101,500,000
shares of Common Stock for issuance upon conversion of the Senior Preferred
Stock.

5
<PAGE> 9

If the Stock Proposals are adopted, the additional shares of Common
Stock and Preferred Stock could be issued at the discretion of the Board of
Directors without any further action by the stockholders, except as required by
applicable law or regulation, in connection with acquisitions, efforts to raise
additional equity for the Company, and other corporate purposes.

VOTE REQUIRED

Approval of the Common Stock Proposal requires (i) the affirmative vote
of a majority of the votes entitled to be cast by the holders of all outstanding
shares of Common Stock and all outstanding shares of Senior Preferred Stock,
voting together as a single class, and (ii) the affirmative vote of a majority
of the votes entitled to be cast by the holders of all outstanding shares of
Common Stock, voting as a separate class.

Approval of the Stock Split requires (i) the affirmative vote of a
majority of the votes entitled to be cast by the holders of all outstanding
shares of Common Stock and all outstanding shares of Senior Preferred Stock,
voting together as a single class, and (ii) the affirmative vote of a majority
of the votes entitled to be cast by the holders of the outstanding Senior
Preferred Stock, voting as a separate class.

The holders of the Senior Preferred Stock and each of the executive
officers and directors of the Company have indicated that they intend to vote
shares of Common Stock and Senior Preferred Stock held by them in favor of each
of the proposals to be presented at the Meeting. In furtherance thereof, the
holders of the Senior Preferred Stock and Cary Thompson, the Chief Executive
Officer and a director of the Company, and Neil Kornswiet, the President and a
director of the Company, are contractually obligated to cast their votes in
favor of the Stock Proposals and the Stock Split. At the Record Date, the
holders of the Senior Preferred Stock and the executive officers and directors
of the Company controlled the vote of an aggregate of 1,890,560 shares of the
Common Stock, 26,704 shares of the Series B Convertible Preferred Stock and
50,046 shares of the Series C Convertible Preferred Stock, constituting in the
aggregate 6.10%, 100% and 100% of the Common Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock, respectively.
Accordingly, adoption of the Preferred Stock Proposal is assured. In addition,
if holders of at least 43.91% of the outstanding shares of Common Stock join the
executive officers and directors of the Company in voting in favor of the Common
Stock Proposal, the Common Stock Proposal will also be adopted.

Approval of the Common Stock Proposal and approval of the Preferred
Stock Proposal is not, in either case, contingent upon approval of the other
Stock Proposal. Approval of the Stock Split is contingent upon the approval of
the Stock Proposals.

REASONS FOR INCREASING AUTHORIZED CAPITAL AND EFFECTING THE STOCK SPLIT

The stockholders of the Company are urged to consider and approve the
Stock Proposals, which will increase the authorized Common Stock and Preferred
Stock and effect the Stock Split of the Senior Preferred Stock, for the
following reasons.

Lack of Authorized Shares. The Company has either issued or reserved
for issuance substantially all 50,000,000 shares of Common Stock currently
authorized by the Certificate of Incorporation. At the Record Date, only
18,984,107 shares of Common Stock remained available for future issuance, all of
which have been reserved for use. At the Record Date, there were insufficient
shares of authorized Common Stock to provide for the conversion of outstanding
Senior Preferred Stock, there would have been insufficient shares of authorized
Common Stock for the 1999 Stock Option Plan (if adopted by the stockholders) and
there were insufficient shares of authorized Preferred Stock to provide for the
Rights Offering. The Stock Proposals and the Stock Split must be approved if the
Company is to have the ability to (i) effect the Rights Offering, (ii) provide
for the conversion of outstanding Senior Preferred Stock, or (iii) issue
additional shares of Common Stock or Preferred Stock.

6
<PAGE> 10
Agreement with Capital Z. As part of the Agreement, the Company agreed
to solicit approval of the stockholders for the Stock Proposals and the Stock
Split, in part to facilitate the Rights Offering. The Rights Offering may not be
consummated unless and until the Stock Proposals and the Stock Split are adopted
and the applicable amendments to the Certificate of Incorporation are filed with
the Secretary of State of the State of Delaware. Pursuant to the terms of the
Senior Preferred Stock, if the Company fails to effect the Stock Proposals and
the Stock Split and file the applicable amendment to the Certificate of
Incorporation that are necessary to complete a recapitalization of the Company
prior to June 30, 1999 (the "Recapitalization"), (i) the dividend rate on the
Senior Preferred Stock will increase from 6.5% to 15% per annum, and (ii) a
warrant to purchase up to 3 million shares of Common Stock held by Capital Z
Management, Inc., an affiliate of Capital Z, will become exercisable at an
exercise price of $1.00 per share. Further, prior to giving effect to the
approval of the Stock Proposals and the Stock Split, in addition to its regular
dividend rights and rights in liquidation based on its stated value per share,
the Senior Preferred Stock will participate in dividends and rights in
liquidation with holders of the Common Stock in any remaining assets of the
Company.

Rights Offering. As soon as practicable following the date of this
Proxy Statement, subject to the approval of the proposals to be presented at the
Meeting, the Company intends to distribute the Subscription Rights without
charge as a dividend to record holders of the Common Stock (the "Record
Holders"). Each of the Record Holders will receive the Subscription Rights, each
of which shall entitle the holder thereof to subscribe for one share of the
Series C Convertible Preferred Stock for each share of the Common Stock held on
the Record Date. Each whole Subscription Right will entitle the Record Holder to
subscribe for one share of the Series C Convertible Preferred Stock at $1.00 per
share (the "Subscription Price"). The Subscription Rights will not be
transferable by the Record Holders. All Subscription Rights will cease to be
exercisable by Record Holders at 5 p.m. eastern time, on that date which is 30
days from the commencement of the Rights Offering, unless extended by the
Company (the "Expiration Date"). Consummation of the Rights Offering will be
contingent on stockholder approval of each of the Stock Proposals and the Stock
Split and the filing of the applicable amendments to the Certificate of
Incorporation with the Secretary of State of the State of Delaware.

Neil Kornswiet, President and a director of the Company, has agreed to
purchase 1,667,000 shares of the Series C Convertible Preferred Stock
(representing his pro rata ownership interest in the Common Stock) by fully
exercising the Subscription Rights to be issued to him based upon the number of
shares of the Company's Common Stock held by him, in the Rights Offering at the
Subscription Price. Immediately following such purchase, Mr. Kornswiet will
beneficially hold an aggregate of 2,397,860 shares Common Stock of the Company
and 1,667,000 shares of the Series C Preferred Stock of the Company,
constituting an aggregate of 1.52% of the combined voting power of the Company.

Capital Z has agreed to purchase at the Expiration Date all
unsubscribed shares of Series C Convertible Preferred Stock for $1.00 per share.

The Company reserves the right, in its sole discretion, at any time
prior to delivery of the shares of Series C Convertible Preferred Stock offered
in the Rights Offering, to terminate the Rights Offering by giving oral or
written notice thereof to the subscription agent and making a public
announcement thereof. A stockholder who votes in favor of the Stock Proposals
(or either of them) is not committed to purchase shares of Series C Convertible
Preferred Stock in the Rights Offering.

Following the completion of the Rights Offering, Capital Z will hold
Senior Preferred Stock representing 100% of the voting rights entitled to elect
Series B Directors, 46.3% of the voting rights entitled to elect Common Stock
Directors and, assuming that all shares of Series C Convertible Preferred Stock
offered in the Rights Offering are purchased by the holders of the Common Stock
of the Company, 56.5% of the combined voting power of the Company with respect
to all matters other than the election of Directors. If none of the shares of
Series C Convertible Preferred Stock offered in the Rights Offering are
purchased by the holders of Common Stock of the Company, Capital Z would hold
Senior Preferred Stock representing 75.3% of the combined voting power of the
Company with respect to all matters other than the election of Directors.

If the Rights Offering is consummated and all $25 million of Series C
Convertible Preferred Stock is sold, the Company will receive net proceeds from
such offering in the approximate amount of [$ ]. The Company intends to use
the net proceeds to recapitalize the Company's equity base and for general
corporate purposes.

7
<PAGE> 11
THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY THE SERIES C CONVERTIBLE PREFERRED STOCK. AN OFFER IS BEING MADE
ONLY THROUGH A SEPARATE PROSPECTUS.

THE BOARD OF DIRECTORS MAKES NO RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD
EXERCISE THEIR SUBSCRIPTION RIGHTS.

BACKGROUND AND PURPOSE OF THE STOCK PROPOSALS AND THE STOCK SPLIT

The Company has historically operated, and expects to continue to
operate, on a negative cash flow basis. The more significant of the Company's
cash requirements is a result of the Company's use of securitization as a loan
disposition strategy and, prior to September 1998, the Company's primary loan
disposition strategy. As a Company that operates on a negative cash flow basis,
it depends upon the securitization market, the credit and capital markets and
the whole loan market for its liquidity.

In June 1997, the Board of Directors determined that operating a
negative cash flow company presented the Company with a unique set of
circumstances in light of capital market and economic uncertainties and the
increasingly competitive environment in the subprime home equity sector. The
Board of Directors engaged Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") to work with the Company in developing a means to maximize opportunities
for the Company and its stockholders, whether by remaining independent and
growing the Company internally and through acquisition, or selling the Company
or entering into a business combination transaction.

From June 1997 through September 1998, DLJ contacted over 50
institutions to solicit their interest in acquiring or investing in the Company.
These institutions consisted of a wide range of potential strategic acquirors
including commercial banks, thrifts, insurance companies, diversified consumer
finance companies, credit card companies and other mortgage banks with a cost of
funds substantially lower than the Company's. DLJ also contacted a number of
private equity/leverage buyout funds that focus in the specialty finance sector.
The Company engaged in discussions with several of the parties contacted by DLJ
regarding various business combination transactions. Several of those parties
conducted significant due diligence. As a result of this effort, on April 27,
1998, the Company obtained a $38 million equity investment from private entities
controlled by Ronald Perelman and Gerald Ford, Chairman of the Board and Chief
Executive Officer of Golden State Bancorp Inc. (the "Perelman/Ford Investment").
After the Perelman/Ford Investment, the Company continued to engage in
discussions with various parties, including Golden State Bancorp Inc., who had
previously conducted due diligence, but no offers to acquire or make further
investments in the Company were made.

In October 1998, global conditions in the capital and credit markets
unexpectedly became extraordinarily negative which had an adverse impact on the
subprime home equity finance sector generally and the Company specifically.
These market conditions negatively impacted the Company's securitization gains,
severely restricted the Company's access to credit facilities, precluded access
to public equity and debt markets and adversely affected the premiums received
in the whole loan market. The combination of these factors have resulted in a
severe liquidity crisis for the Company. The primary reason for engaging in the
discussions with strategic partners was no longer the maximization of growth
opportunities for the Company and its stockholders. Rather, locating a strategic
partner became necessary to avoid a sale of the Company's strategic assets or
the taking of other actions that could jeopardize the Company's ability to
continue to operate as a going concern.

During the weeks leading up to the completion of the Agreement, the
following conditions impacted the Company's liquidity and operations:

Gain on Sale. The Company's gain on sale from its $650 million
securitization completed in September 1998 was significantly reduced due to the
loss on its U.S. Treasury hedge position.

Warehouse Credit Lines. While the Company retained access to warehouse
and other credit facilities with borrowing limits aggregating in excess of $1.0
billion, changes in advance rates imposed by some of the lenders effectively
limited the Company to a single committed $300 million warehouse line. This line
is scheduled to expire on April 8, 1999. The Company believed that without a
change in market conditions or a change in the Company's liquidity

8
<PAGE> 12
position, it was unlikely that additional or replacement credit facilities of
sufficient size could be arranged. Further, provisions in the Company's then
current warehouse line required the Company to maintain a certain level of
profitability over two consecutive quarters. The expected loss in the second
fiscal quarter would violate this provision as well as provisions requiring the
Company to maintain a certain level of net worth and to satisfy certain debt to
equity ratios. If the Company were unable to obtain the necessary waivers it
would in such a case be in default under the line and the line could have been
terminated prior to its expiration. In the event of a termination of the line
and if alternative sources of warehouse funds were not obtained, the Company
would have had to terminate its loan production operations. The Company received
the necessary waivers on February 5, 1999.

Public Equity and/or Debt Markets. Historically, the Company funded
negative cash flow primarily from the sale of its equity and debt securities.
However, the global liquidity crisis made the capital markets inaccessible to
the Company. Further, the drop in home equity stock prices and the consequent
unavailability of the public equity and debt markets exacerbated the Company's
liquidity constraints. Additionally, although at the time the Company had not
yet finalized its financial statements for the second fiscal quarter and did not
yet know the amount of the loss that would be recorded, the Company considered
that it was possible that the expected loss in the second fiscal quarter would
cause the Company to violate a leverage ratio requirement contained in an
indenture governing its public debt. The Company received the necessary waiver
on February 9, 1999 which was conditioned upon the occurrence of the Initial
Closing.

Whole Loan Sales. The Company attempted to address its liquidity
constraints by employing its previously disclosed strategy of evaluating the
market conditions, cash flow and profitability of whole loan sales relative to
the securitization market and selling its loans in the whole loan market.
However, gains associated with whole loan sales for cash were generally at
levels lower than those recognized when such loans were securitized. Further,
prices then being paid by whole loan purchasers were less than the Company's
cost of production. Accordingly, sales of loans in the whole loan market
contributed to the anticipated loss in the quarter ended December 31, 1998.
Additionally, so long as the Company sold whole loans on a servicing released
basis, the Company would no longer grow its servicing portfolio. Moreover, the
weakness in the asset-backed market caused other subprime lenders to rely on the
whole loan market for their loan disposition strategy. The result was an
abundance in the supply, and a lowering of the prices paid (in some cases to
prices lower than the Company's cost of producing loans), for whole loans and
tightening of underwriting guidelines applied by the whole loan purchasers. The
Company raised its prices and modified its underwriting guidelines for its loan
products in response to these changes which was expected to, and did, have the
effect of decreasing loan production in the second fiscal quarter.

Servicing Advances. The Company's liquidity crisis was further
exacerbated by the requirement of the Company, as servicer of the loans it has
securitized, to advance interest on delinquent loans in the securitized pools on
a monthly basis. This short-term cash requirement arises once each month.
Generally, the Company is obligated to make the servicing payment in the middle
of the month. The cash advances are then reimbursed from payments received on
performing loans in the pools, typically within 10 days. The Company did not
have sufficient funds to make the payment in December 1998. However, an
immediate insolvency crisis was averted when one of the Company's lenders
expanded the Company's credit facility to provide the funds necessary to satisfy
the December obligation. Under the terms of the credit facility, funds were also
available to help satisfy the January advance but only if the Agreement was then
in full force and effect, as well as the satisfaction of other conditions. The
lender would not, however commit to fund servicing advances in subsequent
months. If the Company were unable to arrange for funds necessary to make the
servicing payment the Company would very likely have had to engage in
extraordinary transactions, such as seeking subservicing arrangements that
include the obligation to make servicing advances or strategic asset sales, to
provide the liquidity necessary to operate. Management believed that any such
transaction would have had a material adverse effect on the Company's results of
operation. Further, there could be no assurance that any such extraordinary
transaction could have been consummated. In that event, the Company would very
likely have been terminated as servicer. Any such termination would have had a
material adverse effect on the Company and jeopardized its ability to continue
to operate as a going concern.

As the Company's liquidity position weakened dramatically in the second
fiscal quarter of 1998, the Company's efforts to locate a strategic partner
intensified. In early October 1998, DLJ contacted Capital Z to inquire whether
it would be interested in making an investment in the Company. Capital Z reacted
positively to the inquiry. On or about October 13, 1998, Capital Z presented the
Company with a letter agreement (the "Original Letter Agreement") containing the
terms under which Capital Z would be interested in commencing due diligence.
Under the Original Letter Agreement, the Company granted Capital Z exclusive
access to the Company's books, records and personnel until

9
<PAGE> 13
November 5, 1998 in order to evaluate whether it was interested in making an
equity investment in the Company. The Company agreed not to solicit offers for
alternative transactions until the earlier of the third business day following
the submission of a proposal by Capital Z, but not later than November 10, 1998
(or November 5, 1998 if no proposal was submitted by Capital Z on or prior to
such date). The Company agreed to pay a fee of (i) $2.0 million upon the
submission of a proposal, (ii) $1.0 million upon consummation of the investment,
and (iii) $5.5 million if the Company consummated an alternative transaction
with a third party at any time within 12 months of the date of the Original
Letter Agreement, unless Capital Z declined to consummate the investment due to
due diligence concerns, and agreed to reimburse all of Capital Z's expenses.

On October 13, 1998, the Board of Directors held a special meeting to
discuss the proposed Capital Z transaction as well as whether to permit due
diligence. After careful consideration of the provisions of the Original Letter
Agreement and in light of the Company's then current liquidity position, the
Board of Directors authorized the commencement of due diligence and further
authorized management to enter into the Original Letter Agreement and a related
confidentiality agreement. On October 13, the Company and Capital Z entered into
the Original Letter Agreement setting forth the terms pursuant to which Capital
Z would agree to conduct due diligence in contemplation of a proposed investment
in the Company.

Between October 14, 1998 and November 3, 1998, Capital Z and its
representatives visited the Company's facilities in Los Angeles and Irvine,
California and met with representatives of the Company and DLJ to conduct a
preliminary due diligence examination of the Company and to discuss the
operations, business and prospects of the Company.

On November 3, 1998, the Company received a draft proposal from Capital
Z including the basic terms of the investment (the "Original Draft Proposal").
The Original Draft Proposal consisted of an investment by Capital Z of up to
$100 million in a newly designated series of preferred stock at a price of $1.00
per share. Under the Original Draft Proposal, Capital Z would fund at least $75
million at closing and would also agree to purchase up to an additional $25
million of preferred stock, based on the results of an offering to existing
holders of Common Stock of non-transferable rights to purchase up to $25 million
of a newly designated series of preferred stock at the same price and on the
same terms and conditions as Capital Z.

On November 9, 1998, at a regular meeting, the Board of Directors
discussed the status and terms of the Original Draft Proposal. DLJ made a
detailed presentation to the Board of Directors regarding the principal economic
terms of the Original Draft Proposal and DLJ's financial analysis of the
proposed transaction and reviewed with the Board of Directors its other
strategic options, including a sale of strategic assets of the Company or a
voluntary liquidation of assets. Following the DLJ Presentation, the Board of
Directors appointed three outside directors to serve on the Strategic Planning
Committee (the "Committee"). The Committee was authorized to negotiate the terms
and conditions of the proposed investment with Capital Z, evaluate and determine
whether to consummate a transaction with Capital Z, review and approve
definitive agreements with respect thereto and take any and all other actions
which a Board of Directors is authorized to take in connection therewith.

On November 11, 1998, the Committee held a special meeting for the
purpose of discussing the Original Draft Proposal in further detail. Between
November 11, 1998 and November 16, 1998, management negotiated with Capital Z
regarding the Original Draft Proposal and the terms of a new letter agreement
(the "Letter Agreement").

On November 16, 1998, the Company received the Letter Agreement and a
draft proposal in the form of a term sheet, which contained updated provisions
of the Original Draft Proposal (the "Draft Proposal"). The Letter Agreement
contained provisions that limited the Company's ability to consummate a business
combination transaction or equity infusion with third parties until the sooner
to occur of December 31, 1998 or notification by Capital Z that it did not want
to proceed with the investment, including restrictions on the Company's ability
to solicit, initiate or facilitate any business combination or equity investment
by a third party, subject to the Company's right to send certain confidential
information agreed to by Capital Z and the Company ("Information Privilege") to
unsolicited third party offerees, a right on the part of Capital Z to "match" a
competitive offer made by a third party, and the fees imposed on the Company if
an alternative transaction were consummated. Pursuant to the Letter Agreement,
the Company was obligated to pay Capital Z (i) $2.0 million upon the submission
of the Term Sheet, (ii) $1.0 million upon consummation of the investment, and
(iii) $5.5 million if the Company consummated an Alternative Transaction with a
third party (subject to certain exceptions) at any time within 12 months of the
date of the Letter Agreement, unless Capital Z

10
<PAGE> 14
declined to consummate the investment due to due diligence concerns, and agreed
to reimburse all of Capital Z's expenses.

On November 16, 1998, the Committee held a special meeting to discuss
the Letter Agreement and the Draft Proposal. Counsel to the Company reviewed the
terms of the Letter Agreement with the Committee in detail. The Committee
concluded that the investment was the best and the only solution to the
Company's long-term liquidity needs, other than a liquidation of its assets. The
Committee further determined that, based on the results of the search in the
market previously conducted by DLJ and DLJ's report on the state of the capital
markets at that time, it was unlikely that a third party bid would be presented
that could be consummated in time to meet the liquidity requirements of the
Company. Thereafter, the Committee approved the Letter Agreement.

On December 16, 1998, the Company received an unsolicited contact from
a third party regarding a possible business transaction. The Company informed
Capital Z of the third party contact and, pursuant to the Amended Letter
Agreement, the Company forwarded an Information Package to the third party. The
third party did not conduct any further due diligence and did not make an offer
to the Company.

The Board of Directors held a special meeting on December 17, 1998, at
which meeting counsel and management advised the Board of Directors as to the
status of the negotiations. The Board of Directors reviewed, with management and
counsel, drafts of the Agreement and the related ancillary agreement.

Negotiations were completed December 21, 1998. On December 21, 1998,
the Committee met and reviewed the final draft of the Agreement and the
ancillary agreements. Counsel to the Company reviewed with the Committee each of
the Agreements and other ancillary agreements. DLJ made a financial presentation
evaluating the proposed transaction from a financial point of view and delivered
its opinion that the terms of the proposed investment and the price to be paid
by the Preferred Stock Investors for the Senior Preferred Stock were fair to the
Company from a financial point of view. The Committee unanimously approved the
Agreement and the ancillary agreements. The Committee also recommended necessary
amendments to the Certificate of Incorporation and stockholder rights plan and
authorized management to take all appropriate action with respect to any filings
or other matters necessary to consummate the investment by Capital Z, which were
ratified on February 10, 1999 by the Board of Directors.

Between October 14 and December 23, Capital Z conducted extensive legal
and operative due diligence on the Company and retained an outside consulting
firm to evaluate the Company. On December 23, 1998, the Company and Capital Z
entered into the Agreement.

On January 14, 1999, the Company received notification that the New
York Stock Exchange (the "NYSE") would permit the Company to issue the Senior
Preferred Stock pursuant to the Agreement without having to seek approval of the
stockholders of the Company. Under the Shareholder Approval Policy (the
"Policy") of the NYSE, the issuance of the Senior Preferred Stock would normally
require approval of the stockholders of the Company. However, the Audit
Committee of the Company's Board of Directors determined that the delay
necessary to secure approval of the Company's stockholders would seriously
jeopardize the financial viability of the Company. Based on that determination,
the NYSE accepted the Company's application for an exception to the Policy.

On February 10, 1999, the Company and Capital Z amended the Agreement
to provide for the sale of an additional 1,500 shares of Series C Convertible
Preferred Stock, at $1,000 per share, for $1.5 million. On February 10, 1999,
Capital Z informed the Company that it intended to designate Georges C. St.
Laurent, Jr., a director of the Company, to purchase the additional shares.

The Initial Closing occurred on February 10, 1999, wherein the Company
completed the sale of 26,704 shares of Series B Convertible Preferred Stock to
Capital Z, and the sale of 49,796 shares of Series C Convertible Preferred Stock
to Capital Z and Mr. St. Laurent, a designee of Capital Z, for the aggregate
gross purchase price of $76.5 million. Also, on February 10, 1999, the Company
completed the sale to Cary H. Thompson of 250 shares of Series C Convertible
Preferred Stock, at $1,000 per share, for $250,000, in satisfaction of Mr.
Thompson's obligations under the Management Investment Agreement, dated as of
December 23, 1998, by and between the Company and Mr. Thompson. Thus, the total
gross proceeds from the sale of Senior Preferred Stock received by the Company
at the Initial Closing was $76.75 million.

11
<PAGE> 15
BOARD OF DIRECTORS RECOMMENDATIONS

THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE STOCK PROPOSALS AND
THE STOCK SPLIT AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE TO
APPROVE EACH OF THEM.

12
<PAGE> 16
ELECTION OF SERIES B DIRECTORS

The Bylaws of the Company provide that the Board of Directors shall
consist of no fewer than three and no more than nine members as determined from
time to time by the Board of Directors. The Board of Directors currently
consists of nine directors divided into two groups. One group, consisting of
four Directors (the "Series B Directors"), are elected by the holders of the
Series B Convertible Preferred Stock and the other group, consisting of five
Directors (the "Common Stock Directors"), are elected by the holders of the
Common Stock and the holders of the Series B Convertible Preferred Stock, voting
as a single class. The Common Stock Directors are further divided into three
classes with staggered terms: Class I, consisting of two Directors, with a term
expiring in 2000, Class II, consisting of two Directors, with a term expiring in
1999, and Class III, consisting of one Director, with a term expiring in 2001.
At each annual meeting of stockholders, all of the Series B Directors are
elected for a one-year term and Common Stock Directors constituting one of the
classes with staggered terms are elected for three-year terms.

The Company has agreed, from and after the Initial Closing, to nominate
four designees of the holders of Series B Convertible Preferred Stock to be
elected as the Series B Directors at each annual meeting of stockholders. The
nominees for election as Series B Directors identified below have been
designated by Capital Z.

At the Meeting, the four Series B Directors will be elected for a term
expiring at the next Annual Meeting of Stockholders. Series B Directors may be
removed without cause by the vote of a majority of the holders of Series B
Convertible Preferred Stock then entitled to vote.

Unless otherwise instructed, the Proxy holders will vote the Proxies
received for the nominees named below. If the nominee(s) are unable or unwilling
to serve as directors at the time of the Meeting or any adjournment thereof, the
Proxies will be voted for such other nominee as shall be designated by the
current Board of Directors to fill any vacancy. The Company has no reason to
believe that such nominees will be unwilling or unable to serve if elected as a
director.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES LISTED BELOW.

The Board of Directors proposes the election of the following nominees
as Series B Directors:

Steven M. Gluckstern
Mani A. Sadeghi
Adam M. Mizel
David A. Spuria

If elected, the nominees are expected to serve until the next Annual
Meeting of Stockholders. The election of each of the nominees for Series B
Director requires the affirmative vote of a majority of the votes entitled to be
cast by holders of Series B Convertible Preferred Stock who are present (either
in person or by proxy) at the Meeting. The holders of the Series B Convertible
Preferred Stock have agreed to cast their votes in favor of the nominees listed
above. Accordingly, election of each of the nominees is assured.

13
<PAGE> 17
ELECTION OF CLASS III COMMON STOCK DIRECTOR

The Bylaws of the Company provide that the Board of Directors shall
consist of no fewer than three and no more than nine members as determined from
time to time by the Board of Directors. The Board of Directors currently
consists of nine directors divided into two groups. One group, consisting of
four Directors (the "Series B Directors"), are elected by the holders of the
Series B Convertible Preferred Stock and the other group, consisting of five
Directors (the "Common Stock Directors"), are elected by the holders of the
Common Stock and the holders of the Series B Convertible Preferred Stock, voting
as a single class. The Common Stock Directors are further divided into three
classes with staggered terms: Class I, consisting of two Directors, with a term
expiring in 2000, Class II, consisting of two Directors, with a term expiring in
1999, and Class III, consisting of one Director, with a term expiring at the
Meeting. At each annual meeting of stockholders, all of the Series B Directors
are elected for a one-year term and Common Stock Directors constituting one of
the classes with staggered terms are elected for three-year terms.

The Company has agreed, from and after the Initial Closing, to nominate
one designee of Capital Z to be elected as a Common Stock Director at each
annual meeting of stockholders in which the applicable group is to be elected.
The nominee for election as a Common Stock Director identified below has been
designated by Capital Z.

At the Meeting, the Common Stock Director will be elected for a term
expiring at the 2001 Annual Meeting of Stockholders. The Common Stock Directors
may be removed only for cause with the vote of a majority of the votes entitled
to be cast by the holders of Common Stock and Series B Convertible Preferred
Stock.

Unless otherwise instructed, the Proxy holders will vote the Proxies
received for the nominee named below. If the nominee is unable or unwilling to
serve as a director at the time of the Meeting or any adjournment thereof, the
Proxies will be voted for such other nominee as shall be designated by the
current Board of Directors to fill any vacancy. The Company has no reason to
believe that such nominee will be unwilling or unable to serve if elected as a
director.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES LISTED BELOW.

The Board of Directors proposes the election of the following nominee
as the Class III Common Stock Director:

Eric Rahe

If elected, the nominee is expected to serve until the 2001 Annual
Meeting of Stockholders. The election of the nominee for Common Stock Director
requires the affirmative vote of a majority of votes entitled to be cast by the
holders of Common Stock and Series B Convertible Preferred Stock who are present
(either in person or by proxy) at the Meeting, voting as a single class. The
holders of the Series B Convertible Preferred Stock and each of the executive
officers and directors of the Company have indicated that they intend to vote
all shares of Common Stock and/or Series B Convertible Preferred Stock held by
them in favor of the nominee listed above. In furtherance thereof, the holders
of the Series B Convertible Preferred Stock and Messrs. Thompson and Kornswiet
are contractually obligated to cast their votes in favor of the election of the
nominee identified above. Accordingly, the election of such nominee is assured.

14
<PAGE> 18
MANAGEMENT

INFORMATION WITH RESPECT TO NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS

The following table sets forth certain information with respect to the
nominees, continuing directors and executive officers of the Company as of
February 28, 1999:

<TABLE>
<CAPTION>
Year Term
Name Age Position Expires
- ---- --- -------- ---------
<S> <C> <C> <C>

NOMINEES:

Steven M. Gluckstern 47 Chairman of the Board 1999
Adam M. Mizel 29 Director 2001
Eric Rahe 30 Director 1999
Mari A. Sandeghi 35 Director 1999
David A. Spuria 38 Director 1999

CONTINUING DIRECTORS:

George W. Coombe, Jr. 73 Director 2000
Neil B. Kornswiet 41 President and Director 2000
Georges C. St. Laurent, Jr. 62 Director 1999
Cary H. Thompson 41 Chief Executive Officer and 1999
Director

OTHER EXECUTIVE OFFICERS:

Mark E. Costello 48 Executive Vice President -
Loan Production
Barbara S. Polsky 44 Executive Vice President,
General Counsel and Secretary
David A. Sklar 45 Executive Vice President -
Finance & Chief Financial
Officer (Chief Accounting Officer)
</TABLE>

The executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors. There is no family relationship between
any director and any executive officer of the Company.

GEORGE W. COOMBE, JR. is a Senior Fellow at the Stanford Law School
teaching International Commercial Arbitration. From 1990 to 1995, Mr. Coombe was
a partner in the law firm of Graham & James and from 1975 to 1990, he was
Executive Vice President and General Counsel of Bank of America. From 1968 to
1975, Mr. Coombe served as Assistant General Counsel and Corporate Secretary of
General Motors Corporation.

STEVEN M. GLUCKSTERN, was elected a Director and appointed Chairman of
the Board of Directors of the Company in February, 1999. Mr. Gluckstern has
served as a Chairman of the Board of Capital Z Management and Partner of Capital
Z Partners, Ltd. since July 1998, as Chairman of Zurich Centre Group LLP since
1996 and as Chairman of Zurich Reinsurance (North America), Inc. since 1993.

15
<PAGE> 19
NEIL B. KORNSWIET was elected President in February, 1999, and has
served as a Director since September 1996. Mr. Kornsweit was appointed
Co-Chairman of the Board in November 1997, a position he held until February
1999. Mr. Kornswiet founded One Stop Mortgage, Inc. ("One Stop") in August 1995
and was its Chairman, Chief Executive Officer and President from September 1995
through its acquisition by the Company in August 1996. Mr. Kornswiet continues
to serve as Chairman, Chief Executive Officer and President of One Stop, now a
wholly owned subsidiary of the Company. Mr. Kornswiet was also named an
Executive Vice President of the Company in September 1996 and President of the
Company in May 1997. From 1992 to 1995, Mr. Kornswiet was President of Quality
Mortgage, a privately held mortgage banking company. From 1983 to 1992, Mr.
Kornswiet was a lawyer specializing in consumer credit and other regulatory
matters for financial institutions and mortgage banking companies.

ADAM M. MIZEL was elected a Director in February 1999. Mr. Mizel has
served as a Senior Vice President and Director of Capital Z Management, Inc. and
a partner of Capital Z Partners since August of 1998. From April of 1994 through
August of 1998, Mr. Mizel served as Vice President and Managing Director at
Zurich Center Insurance.

ERIC RAHE was elected a Director in February 1999. Mr. Rahe has served
as a principal of Capital Z Partners, Ltd. since August 1998. From August 1996
through July 1998, Mr. Rahe served as both an Associate and Vice President of
Insurance Partners, a private equity fund focused on the insurance industry.
From January 1994 through August 1996, Mr. Rahe was an Analyst and an Associate
at the investment banking firm of Donaldson, Lufkin & Jenrette Securities
Corporation.

MANI A. SADEGHI was elected a Director in February 1999. Mr. Sadeghi
has served as Chief Executive Officer of Equifin Capital Partners, LLC, which
provides private equity investment management and advisory services, since June
of 1998. Mr. Sadeghi has also served as Group President of AT&T Capital
Corporation from September 1996 until February 1998, as Corporate Development
Officer from September 1994 to September 1996 and as the Director of Strategic
Planning and Business Development at GE Capital Corporation from July 1992
through September 1994.

DAVID A. SPURIA was elected a Director in February 1999. Mr. Spuria has
served as General Counsel of Capital Z Partners Ltd. and Capital Z Management,
Inc. since July of 1998. Mr. Spuria was as a partner from January 1995 through
July of 1998 and an associate from March of 1992 through January of 1995 with
the law firm of Weil, Gotshal & Manges, LLP.

GEORGES C. ST. LAURENT, JR. has served as a Director of the Company
since November 1997. Mr. St. Laurent, who held the position of Co-Chairman of
the Board from November 1997 through February 1999, is the former Chairman of
the Board and Chief Executive Officer of Western Bank, Oregon (1988 to 1997).
Currently, Mr. St. Laurent is a principal in various real estate, agricultural
and forestry related ventures and also serves as a director of Baxter
International, Inc. and The Perkin Elmer Corporation.

CARY H. THOMPSON has served as a Director of the Company since January
1992. He was named Chief Operating Officer of the Company in March 1996 and
Chief Executive Officer of the Company in May 1997. From May 1994 until joining
the Company, Mr. Thompson served as Managing Director-Head of United States
Financial Institutions Group for NatWest Markets. From June 1989 to May 1994,
Mr. Thompson was Senior Vice President-Head of West Coast Financial Institutions
Group for Oppenheimer & Co. Mr. Thompson is also on the Board of Directors of
Fidelity National Financial, Inc., a title insurance company.

MARK E. COSTELLO joined the Company in March 1995 as Vice President -
Correspondent Lending. He was named Senior Vice President - Correspondent
Lending in October 1995 and Executive Vice President - Loan Production in May
1997. Prior to joining the Company, he was Director of Wholesale Lending for
Advanta Mortgage Corporation USA. From 1980 to 1993, Mr. Costello was a Vice
President with Citibank, New York, in the mortgage and consumer banking areas.

BARBARA S. POLSKY joined the Company in May 1996 as Senior Vice
President and General Counsel. In May 1997, she became Executive Vice President
and General Counsel and in June 1997 she was appointed Secretary of the Company.
Prior to joining the Company, Ms. Polsky was a partner in the law firm of
Manatt, Phelps & Phillips, LLP, where she specialized in financial institution
and corporate securities matters.

16
<PAGE> 20
DAVID A. SKLAR joined the Company in May 1997 as Executive Vice
President-Finance. In November 1997, he was named Executive Vice
President-Finance and Chief Financial Officer. Prior to joining the Company he
was Executive Vice President and Chief Financial Officer of Imperial Bancorp and
subsidiaries.

BOARD MEETINGS AND COMMITTEES

The Board of Directors held a total of 14 meetings during the fiscal
year ended June 30, 1998. Among its committees, the Board of Directors has an
Audit Committee and a Compensation Committee. During the fiscal year ended June
30, 1998, each director, with the exception of Lee Masters, attended at least
75% of the meetings of the Board of Directors and Committees on which he served.

The Audit Committee met 5 times and the Compensation Committee met 7
times during the fiscal year ended June 30, 1998. The Audit Committee's
functions include recommending to the Board of Directors the engagement of the
Company's independent accountants, discussing the scope and results of the audit
with the accountants, discussing the Company's financial accounting and
reporting principles and the adequacy of the Company's financial controls with
the accountants and the Company's management, discussing the results of internal
audits with management and reviewing and evaluating the Company's accounting
policies and internal accounting controls. The Compensation Committee reviews,
approves and recommends to the Board of Directors all short-term compensation
and compensation plans for the CEO (and President, if not the CEO) of the
Company, and the Named Executive Officers as well as approves and authorizes as
to employees, grants under the Corporation's stock option plans. See "Report of
the Compensation Committee on Executive Compensation" attached to this Proxy
Statement as Exhibit "A." In addition, a Stock Option Committee will be
established with the authority to grant options to the Chief Executive Officer
and to the four highest compensated officers other than the Chief Executive
Officer. Grants made by the Stock Option Committee will be subject to
ratification by the Compensation Committee. Currently, the members of the Audit
Committee are Messrs. Coombe, Mizel and Rahe, the members of the Compensation
Committee are Messrs. Gluckstern, Mizel and St. Laurent and the members of the
Stock Option Committee are Messrs. Coombe and St. Laurent.

In November 1998, the Board of Directors also formed a Strategic
Planning Committee which consists of Messrs. Coombe, Kinder and St. Laurent. The
Strategic Planning Committee was authorized to negotiate the terms and
conditions of the investment by Capital Z, evaluate and determine whether to
consummate the transaction with Capital Z, review and approve definitive
agreements with respect thereto and take any and all other actions which a Board
of Directors is authorized to take in connection therewith. Mr. Kinder resigned
from the Board of Directors of the Company, effective February 10, 1999.

COMPENSATION OF DIRECTORS

Each director who is not an officer of or otherwise employed by the
Company as either an employee or a consultant is entitled to receive an annual
retainer of $8,000, a fee of $2,000 for each regular or special Board meeting
attended in person, $500 for each regular or special committee meeting attended
in person or by telephone, and $1,000 for each regular or special Board meeting
attended by telephone.

17
<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; EMPLOYMENT AGREEMENTS

On December 23, 1998, the Company and Capital Z entered into the
Agreement, as amended on February 10, 1999, providing for an equity investment
by Capital Z and its designees of up to $101.5 million in the Company. Pursuant
to the Agreement, the Company issued to Capital Z at the Initial Closing 26,704
shares of Series B Convertible Preferred Stock and 48,296 shares of Series C
Convertible Preferred Stock for $1,000 per share for an aggregate of $75
million. Georges C. St. Laurent, Jr., a Director of the Company, pursuant to the
Agreement as a designee of Capital Z, purchased 1,500 shares of Series C
Convertible Preferred Stock for $1,000 per share for an aggregate investment of
$1.5 million. Pursuant to the Agreement, the Company will distribute
Subscription Rights to its Common Stockholders providing them the right to
purchase, in the aggregate, up to 25 million shares of the Series C Convertible
Preferred Stock of the Company for $1.00 per share for an aggregate of $25
million as soon as practicable following adoption of the Stock Proposals and the
Stock Split. Capital Z has agreed to purchase any and all of the shares of
Series C Convertible Preferred Stock not purchased by the holders of Common
Stock in the Rights Offering. Following the Initial Closing, Capital Z
transferred ownership of its Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock to Specialty Finance Partners, Ltd., a Bermuda
limited partnership ("Specialty Partners"), 99.6% of which is owned by Capital Z
and 0.4% of which is owned by Equifin Capital Partners, Ltd. ("Equifin
Capital").

On January 4, 1999, Capital Z Management, Inc. ("Cap Z Management"), an
affiliate of Capital Z, received, as a fee for the Standby Commitment, a warrant
to purchase 1.25 million shares of the Company's Common Stock at an initial
exercise price of $1.00 per share. In addition, on February 10, 1999, the
Company paid to Cap Z Management a $1 million transaction fee in connection with
the transactions contemplated by the Agreement and issued to Capital Z
Management an additional warrant (the "Contingent Warrant") to purchase up to 3
million shares of the Company's Common Stock at an initial exercise price of
$1.00 per share, which is exercisable only if the Recapitalization (as defined
herein) is not completed by June 30, 1999. In addition, in connection with the
transactions contemplated by the Agreement, the Company has paid to Cap Z
Management aggregate additional fees of $2 million and has agreed to reimburse
Cap Z Management for all of its expenses incurred in connection with the
negotiation and execution of the Agreement and the transactions contemplated
thereby.

On February 10, 1999, pursuant to the Agreement, the Company entered
into an Agreement For Management Advisory Services (the "Equifin Agreement")
with Equifin Capital Management, LLC ("Equifin Management"), pursuant to which
the Company is obligated to pay to Equifin Management, a quarterly management
advisory fee of $250,000 for a period of five (5) years. On February 10, 1999,
pursuant to the Equifin Agreement, the Company paid to Equifin $250,000 in
consideration of consulting services rendered prior to the execution of the
Equifin Agreement and as an advance for consulting services to be rendered in
the quarter ending March 31, 1999.

Each of Messrs. Gluckstern, Mizel, Rahe and Spuria, Directors of the
Company, have a direct or indirect interest in Capital Z and Cap Z Management.
Mr. Sadeghi, a Director of the Company, has a material equity interest in
Equifin Management and Equifin Capital. Messrs. Gluckstern, Mizel and Spuria are
members of Capital Z Partners, Ltd., a Bermuda corporation ("Cap Z Ltd."), which
is the general partner of Capital Z Partners, L.P. ("Cap Z Partners"), which is
the general partner of Capital Z. Messrs. Gluckstern and Mizel are limited
partners of Cap Z Partners and shareholders of Cap Z Management. Messrs.
Gluckstern and Mizel are officers of Cap Z Management. Mr. Rahe is a principal
of Cap Z Ltd. and a limited partner of Cap Z Partners. Mr. Sadeghi is the Chief
Executive Officer of Equifin Management and Equifin Capital. Cap Z Ltd. is a
member of and has an economic interest in Equifin Capital. Mr. Spuria is General
Counsel of Cap Z Ltd. and Cap Z Management.

On August 28, 1996, the Company acquired One Stop, a residential
mortgage lender. Prior to the acquisition, One Stop was owned by Neil B.
Kornswiet, currently the President and a Director of the Company. In the
acquisition, the Company issued approximately 3.5 million shares of the Common
Stock, 2.4 million shares of which was issued to Mr. Kornswiet. In addition, Mr.
Kornsweit has agreed to purchase 1,667,000 shares of Series C Convertible
Preferred Stock in the Rights Offering for $1.00 per share. Mr. Kornswiet
continues to serve as President, Chief Executive Officer and Chairman of the
Board of Directors of One Stop. See "Executive Compensation."

On January 26, 1998, the Board of Directors approved the Executive and
Director Loan Program under which directors and executive officers of the
Company are entitled to obtain a mortgage loan from the Company at the Company's
cost of funds (plus 25 basis points) as determined by an approved, independent
investment banking firm. All

18
<PAGE> 22
loans made under the Executive and Director Loan Program are fixed rate, fully
amortized, 15- or 30-year loans with no prepayment penalties and are
underwritten to the Company's underwriting guidelines in effect at the time of
the loan. Participants in this program are not charged any loan fees except for
those fees or costs charged by third parties. The following executive officers
and directors have home refinance loans with the Company for the following
principal amount and outstanding balance (as of March 9, 1999) at an interest
rate of 6.5%: [Mark E. Costello, executive officer, $325,000 loan amount,
$309,003.38 outstanding balance]; Barbara S. Polsky, executive officer, $400,500
loan amount, $396,023.55 outstanding balance; David A. Sklar, executive officer,
$379,300 loan amount, $375,424.40 outstanding balance; Cary H. Thompson,
executive officer and director, $240,500 loan amount, $239,623.27 outstanding
balance.

From time to time certain officers, directors and employees of the
Company, as well as members of their immediate families, acted as private
investors in loan transactions originated by the Company. All such loans are
originated on terms and conditions which are no more favorable than loans
originated by the Company for other nonaffiliated private investors except that
such persons receive 75% of any prepayment fees collected by the Company on such
loans. The Company discontinued its private investor program in August 1997.

Cary Thompson, the Company's Chief Executive Officer and a director of
the Company and the owner of 21,900 shares of the Company's Common Stock and 250
shares of the Company's Series C Convertible Preferred Stock, and Neil
Kornswiet, the Company's President and a director of the Company and the owner
of 1,812,860 shares Company's Common Stock (collectively, the "Management
Shareholders"), have each entered into a Management Voting Agreement with
Capital Z (the "Management Voting Agreement") pursuant to which the Management
Investors have agreed to vote all of the shares of capital stock beneficially
owned by them (the "Management Shares") in favor of the Common Stock Proposal,
the Preferred Stock Proposal, the Stock Split and against any proposal for an
alternative transaction or any other matter which would materially impede,
interfere with or delay any of the transaction contemplated by the Agreement. In
the event the Stock Proposals and the Stock Split (the "Recapitalization") are
not consummated prior to June 30, 1999, the Management Shareholders have agreed
to vote all Management Shares as directed by the Board of Directors. The
Management Voting Agreement will terminate at the completion of the
Recapitalization and with respect to any Management Shares which are transferred
as permitted by the Management Voting Agreement.

On December 23, 1998, each of the Management Shareholders entered into
a Management Investment Agreement with the Company. Pursuant to the Management
Investment Agreements, Cary Thompson purchased 250 shares of Series C
Convertible Preferred Stock for $1,000 per share at the Initial Closing
(equivalent to 250,000 shares at $1.00 per share if the Recapitalization is
effected) and Neil Kornswiet is obligated to purchase 1,667,000 shares of Series
C Convertible Preferred Stock in the Rights Offering for $1.00 per share.

The Company entered into an employment agreement with Cary H. Thompson,
Chief Executive Officer of the Company, in March 1996 (amended in May 1997 and
August 1998) (the "Original Thompson Employment Agreement") pursuant to which
Mr. Thompson was employed as Chief Executive Officer at a base salary of
$900,000 per year. He was also entitled to receive, at the expense of the
Company, the use of an automobile (including all maintenance and expenses
associated therewith), a standard term life insurance policy in the amount of $1
million, a standard term accidental death policy in the amount of $1 million,
under certain circumstances, a long-term disability policy providing an annual
disability payment equal to 125% of his base salary and coverage for him and the
dependent members of his family under the Company's medical and dental policies.
Pursuant to the Original Thompson Employment Agreement, at the time he was
hired, Mr. Thompson was also granted a bonus in the form of non-qualified
options to purchase 1,125,000 shares of the Common Stock and additional
non-qualified options to purchase 670,950 shares of the Common Stock to assist
him in providing for federal and state income taxes payable as a result of such
bonus options and in recognition of the fact that the Company may benefit from
federal and state tax deductions as a result. In the event of a Severance
Termination (as defined in the agreement) or a voluntary termination following a
Change in Control (generally, a 20% change in the voting power of the Common
Stock, certain changes in Board membership, a merger or complete liquidation or
dissolution of the Company), the Company was obligated to pay Mr. Thompson two
years' base salary plus an amount based on the performance bonuses previously
paid. In addition, all options held by him were to vest as of the Severance
Termination and remain exercisable for 12 months following such date. In
addition, in the event of a Change in Control, all options would become
immediately vested and remain exercisable for the entire remaining term of the
option.

19
<PAGE> 23
Concurrently with the execution of the Agreement, the Company entered
into a five-year employment agreement with Cary H. Thompson, the Company's Chief
Executive Officer (the "New Thompson Employment Agreement"). The New Thompson
Employment Agreement was effective on the date of the Initial Closing, at which
time the Original Thompson Employment Agreement was terminated. The New Thompson
Employment Agreement supercedes and invalidates any of Mr. Thompson's rights and
benefits accruing under all other employment, change in control, stock option
and any and all other agreements between Mr. Thompson and the Company that
provide for the payment of compensation or benefits to Mr. Thompson other than
(i) benefits provided under the Company's 401(k) plan, (ii) the use of an
automobile (including all maintenance and expenses associated therewith) at the
expense of the Company, and (iii) stock options granted to Mr. Thompson under
the Company's various stock option plans and stock options granted outside of
such plans. Under the New Thompson Employment Agreement, Mr. Thompson will earn
an annual base salary of $600,000 and is entitled to receive cash bonuses after
the 1999 calendar year of between 0-100% of Mr. Thompson's annual base salary,
with an expected bonus of $400,000 and a bonus in excess of 100% of his annual
base salary for extraordinary performance which shall be payable in accordance
with a budget approved by the Board of Directors of the Company and the
achievement of other non-financial goals adopted by the Board. Mr. Thompson is
also entitled to receive, at the expense of the Company, (i) not less than $2
million of standard term life insurance, (ii) medical and dental benefits for
Mr. Thompson and members of his family, (iii) a long-term disability policy
providing for payments in an amount equal to 60% of Mr. Thompson's annual base
salary, provided such policy can be obtained for a reasonable cost, (iv) other
benefits under the Company's savings, pension and retirement plans and other
benefit plans or programs maintained by the Company for the benefit of its
executives, and (v) reimbursement of reasonable business expenses incurred in
accordance with the Company's policies. Under the New Thompson Employment
Agreement, the Company will grant to Mr. Thompson an option to purchase
2,580,162 shares of the Company's common stock pursuant to the Company's 1999
Stock Option Plan. Upon termination of employment by Mr. Thompson for "Good
Reason", as defined in the New Thompson Employment Agreement or by the Company
without "Cause", as defined in the New Thompson Employment Agreement, Mr.
Thompson will be entitled to receive severance benefits for a period of 12
months, payable in accordance with the Company's payroll policy, an amount equal
to (i) $2 million, if the termination occurs within one year of the Initial
Closing, (ii) $1.5 million, if the termination occurs during the second year,
(iii) $1.0 million if the termination occurs in the third year, and (iv) $0.5
million if the termination occurs after the fourth anniversary of the Initial
Closing. The New Thompson Employment Agreement requires that, for so long as
Capital Z or its designated purchasers, owns at least 25% of the outstanding
voting securities of the Company, Mr. Thompson may not to sell, assign or
otherwise transfer during his employment with the Company, in any twelve month
period, more than 25% of the aggregate amount of shares of Company stock which
Mr. Thompson owned immediately prior to the Initial Closing, subject to waiver
by the Board of Directors in the event of extraordinary hardship.

The Company entered into an employment agreement with Neil B.
Kornswiet, the Company's President and One Stop's Chairman, President and Chief
Executive Officer on August 28, 1997 with an original expiration date of August
27, 2002. The agreement was amended and restated and extended for an additional
two years in August 1998 (as amended, the "Original Kornswiet Employment
Agreement"). Under the Original Kornswiet Employment Agreement, Mr. Kornswiet
earned a base salary of $900,000 per year and was entitled to an annual
performance bonus equal to between $1.35 million and $1.65 million depending on
the retail and broker loan production of the Company (the "Performance Bonus").
Mr. Kornswiet was also entitled to receive, at the expense of the Company, the
use of an automobile (including all maintenance and expenses associated
therewith), a standard term life insurance policy in the amount of $1 million, a
standard term accidental death policy in the amount of $1 million, under certain
circumstances, a long-term disability policy providing an annual disability
payment equal to 125% of his base salary and coverage for him and the dependent
members of his family under the Company's medical and dental policies. In the
event of a Change in Control (as defined in the Original Thompson Employment
Agreement) Mr. Kornswiet would have received $30 million minus the amount of any
Performance Bonus previously paid (the "Performance Severance Payment"). In the
event of a Severance Termination (as defined in the agreement) or a voluntary
termination following a Change in Control, Mr. Kornswiet would receive his base
salary for three years (or the remaining term of the agreement, if longer), the
Performance Severance Payment to the extent not previously paid and an amount,
if any, necessary to reimburse him on a net after-tax basis for any applicable
federal excise tax. In addition, in the event of a Change in Control, all
options would become immediately vested and remain exercisable for the entire
remaining term of the option.

Concurrently with the execution of the Agreement with Capital Z, the
Company entered into a five-year employment agreement with Neil B. Kornswiet,
which supersedes the prior employment agreement (the "New Kornswiet Employment
Agreement"). The New Kornswiet Employment Agreement became effective on the date
of

20
<PAGE> 24
the Initial Closing. The New Kornswiet Employment Agreement supercedes and
invalidates any of Mr. Kornswiet's rights and benefits accruing under all other
employment, change in control and any and all other agreements between Mr.
Kornswiet and the Company and its subsidiaries that provide for the payment of
compensation or benefits to Mr. Kornswiet other than (i) benefits provided under
the Company's 401(k) plan, (ii) the use of an automobile (including all
maintenance and expenses associated therewith) at the expense of the Company,
and (iii) stock options granted to Mr. Kornswiet under the Company's various
stock option plans and, upon amendments being adopted, certain stock options
granted to, and forfeited by, employees of One Stop which were assumed by the
Company in connection with the Company's acquisition of One Stop. Under the New
Kornswiet Employment Agreement, Mr. Kornswiet will earn an annual base salary of
$600,000 and is entitled to receive (i) payment of $1,460,000 which represents
Mr. Kornswiet's June 1998 bonus which was previously deferred by Mr. Kornswiet,
(ii) a guaranteed cash bonus for calendar year 1999 in the amount of $540,000 in
the form of a recourse loan which will be forgiven and deemed paid in full so
long as Mr. Kornswiet remains employed by the Company through the first
anniversary of the effective date of the New Kornswiet Employment Agreement or,
if less than one year, through the date his employment is terminated by death,
disability, by Mr. Kornswiet for "Good Reason" (as defined in the New Kornsweit
Employment Agreement) or by the Company without "Cause" (as defined in the New
Kornsweit Employment Agreement), (iv) a cash supplemental bonus for Mr.
Kornswiet's first year of employment payable within 2-1/2 months after the first
anniversary of the effective date subject to the Board of Directors'
determination that the Company has completed a satisfactory program of cost
reductions by such anniversary date, (v) cash bonuses after the 1999 calendar
year of between 0-100% of Mr. Kornswiet's annual base salary, with an expected
bonus of $400,000 and a bonus in excess of 100% of his annual base salary for
extraordinary performance which shall be payable in accordance with a budget
approved by the Board of Directors of the Company and the achievement of other
non-financial goals adopted by the Board, (vi) a loan equal to $1,167,000 which
shall be non recourse provided that Mr. Kornswiet remains employed by the
Company through the date of the first anniversary of the effective date of the
New Kornswiet Employment Agreement or, if less than one year, termination of
employment based upon death, disability, by Mr. Kornswiet with good reason or by
the Company without Cause. Mr. Kornswiet is also entitled to receive, at the
expense of the Company, (i) not less than $2 million of standard term life
insurance, (ii) medical and dental benefits for Mr. Kornswiet and members of his
family, (iii) a long-term disability policy providing for payments in an amount
equal to 60% of Mr. Kornswiet's annual base salary, provided such policy can be
obtained for a reasonable cost, (iv) other benefits under the Company's savings,
pension and retirement plans and other benefit plans or programs maintained by
the Company for the benefit of its executives, and (v) reimbursement of
reasonable business expenses incurred in accordance with the Company's policies.
Under the New Kornswiet Employment Agreement, the Company will grant Mr.
Kornswiet an option to purchase 3,214,642 shares of the Company's Common Stock
pursuant to the Company's 1999 Stock Option Plan. Upon termination of employment
by Mr. Kornswiet for Good Reason, or by the Company without Cause, Mr. Kornswiet
will be entitled to receive severance benefits for a period of 12 months,
payable in accordance with the Company's payroll policy, an amount equal to (i)
$2 million, if the termination occurs within one year of the Initial Closing,
(ii) $1.5 million, if the termination occurs during the second year, (iii) $1.0
million if the termination occurs in the third year, and (iv) $0.5 million if
the termination occurs after the fourth anniversary of the Initial Closing. The
New Kornswiet Employment Agreement requires that, for so long as Capital Z or
its designated purchasers, owns at least 25% of the outstanding voting
securities of the Company, Mr. Kornswiet may not to sell, assign or otherwise
transfer during his employment with the Company, in any twelve month period,
more than 25% of the aggregate amount of shares of Company stock which Mr.
Kornswiet owned immediately prior to the Initial Closing, subject to waiver by
the Board of Directors in the event of extraordinary hardship.

Effective June 1, 1997, the Company entered into a two-year employment
agreement with Mark E. Costello, Executive Vice President-Loan Production. Under
the agreement, Mr. Costello is entitled to a base salary of $200,000 per year
and a quarterly bonus under the Company's performance bonus plan for executive
officers. If Mr. Costello's employment is terminated without cause, he will
receive an amount equal to six months' base salary. If Mr. Costello's employment
is terminated or he voluntarily resigns for Good Reason (defined to include a
material reduction in his duties or base salary) in connection with a Change in
Control (generally, a 50% change in the voting power of the Common Stock,
certain changes in Board membership, a merger or complete liquidation or
dissolution of the Company), he will receive two years' base salary plus an
amount equal to the performance bonus paid to him with respect to the eight
fiscal quarters preceding the date of termination. In connection with the
Initial Closing, Mr. Costello waived all of his rights under his employment
agreement and agreed to purchase 100 shares of Series C Convertible Convertible
Preferred Stock for $1,000 per share or $100,000, 50% of which will be paid by
delivery to the Company of a 6.5% full recourse promissory note.

21
<PAGE> 25
The Company entered into a second amended and restated employment
agreement with Barbara S. Polsky, Executive Vice President, General Counsel and
Secretary, effective June 1, 1997, with a term expiring on June 20, 2001. The
agreement provides for a base salary of $300,000 per year and a quarterly bonus
under the Company's performance bonus plan for executive officers. Ms. Polsky is
also entitled to a long term disability policy providing for an annual
disability payment in an amount equal to 100% of her base salary. In the event
of a termination without cause, Ms. Polsky will receive two years' base salary
plus an amount equal to the performance bonus paid to her for eight fiscal
quarters preceding the date of termination. In addition, all options previously
granted would become immediately exercisable. In the event of a termination or
voluntary resignation in connection with a Change in Control (defined the same
as in the Original Thompson Employment Agreement), Ms. Polsky would receive the
same benefits as in a termination without cause. The Senior Preferred Stock
issued to Capital Z at the Initial Closing was a Change in Control as defined in
Ms. Polsky's employment agreement. The Company is currently discussing the
possibility of a waiver of the Change in Control provision in Ms. Polsky's
employment agreement with Ms. Polsky.

The Company entered into an amended and restated employment agreement
with Joseph Magnus, Executive Vice President, Chief Credit Officer, effective
June 1, 1997 with a term expiring on January 15, 2000. Mr. Magnus resigned his
executive officer position on November 20, 1998. The agreement provided for a
base salary of $160,000 per year and a quarterly bonus under the Company's
performance bonus plan for executive officers. If Mr. Magnus' employment would
have terminated without cause, he would have received an amount equal to six
months' base salary. If Mr. Magnus' employment would have terminated or he
voluntarily resigned for Good Reason (defined to include a material reduction in
his duties or base salary) in connection with a Change in Control (generally, a
20% change in the voting power of the Common Stock, certain changes in Board
membership, a merger or complete liquidation or dissolution of the Company), he
would have received two years' base salary plus an amount equal to the
performance bonus paid to him with respect to the eight fiscal quarters
preceding the date of termination. In addition, all of the Options granted over
the term shall become immediately exercisable as of the date of such termination
and shall remain so for a period of 12 months thereafter.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the last fiscal year, executive compensation for the Company was
administered by the Compensation Committee of the Board. Messrs. Kinder, Masters
and St. Laurent who are not, and have never been, officers or employees of the
Company, served as members of the Compensation Committee during the 1998 fiscal
year. The Compensation Committee currently consists of Messrs. Gluckstern, Mizel
and St. Laurent.

REPORT OF THE COMPENSATION COMMITTEE

The Report of the Compensation Committee of the Board of Directors of
the Company, describing the compensation policies and the compensation
philosophy of the Company's executive compensation policy and certain
determinations with respect to bonuses and stock option grants for the year
ended June 30, 1998, is attached to this Proxy Statement as Exhibit "A."

22
<PAGE> 26
PRINCIPAL STOCKHOLDERS

The following table sets forth as of March 1, 1999, certain information
relating to the ownership of the Common Stock (which includes shares of Common
Stock issuable upon conversion of Senior Preferred Stock), Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Common Stock, (ii) each of the Company's directors and
nominees, (iii) each of the Named Executive Officers (as defined under
"Executive Compensation -- Summary Compensation Table") and (iv) all of the
Company's executive officers and directors as a group. Except as may be
indicated in the footnotes to the table and subject to applicable community
property laws, each of such persons has sole voting and investment power with
respect to the shares beneficially owned. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Under this Rule, certain shares may be
deemed to be beneficially owned by more than one person (such as where persons
share voting power or investment power). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the shares
(for example, upon exercise of an option) within 60 days of the date as of which
the information is provided; in computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason of
these acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date.

<TABLE>
<CAPTION>
Title of Class Name and Address Number of Shares Percent of Class
- -------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>

Common Stock Capital Z Financial Services Fund II, L.P.
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005.................... 75,000,000 (1) 70.74%

Common Stock Thirty-Five East Investments LLC
35 East 62nd Street
New York, New York......................... 6,388,233 (2) 18.16%

Common Stock Turtle Creek Revocable Trust
200 Crescent Court, Suite 1350
Dallas, Texas 75201........................ 1,597,057 (2) 4.98%

Common Stock George W. Coombe, Jr (3).................... 4,300 (4) *
Common Stock Mark E. Costello (3)........................ 37,375 (5) *
Common Stock Steven M. Gluckstern (6).................... -- (7) *
Common Stock Neil B. Kornswiet (3)....................... 2,387,860 (8) 7.65%
Common Stock Joseph A. Magnus (3)(9)..................... -- *
Common Stock Adam Mizel (6).............................. -- (6) *
Common Stock Barbara S. Polsky (3)....................... 68,750 (10) *
Common Stock Eric Rahe (6)............................... -- (7) *
Common Stock Mani A. Sadeghi (6)......................... -- (7) *
Common Stock David A. Sklar (3).......................... 54,000 (11) *
Common Stock David A. Spuria (6)......................... -- (7) *
Common Stock Georges C. St. Laurent, Jr (3).............. 1,553,300 (12) 4.78%
Common Stock Cary H. Thompson (3)........................ 1,532,200 (13) 4.71%
Common Stock All executive officers, directors and nominees
as a group (13 persons)..................... 5,637,785 (14) 6.22%

Series B Convertible Capital Z Financial Services Fund II, L.P.
Preferred Stock (15) One Chase Manhattan Plaza, 44th Floor
New York, New York 10005.................... 26,704 (16) 100%

Series C Convertible Capital Z Financial Services Fund II, L.P.
Preferred Stock One Chase Manhattan Plaza, 44th Floor
New York, New York 10005.................... 48,296 (17) 96.50%

Series C Convertible Georges C. St. Laurent, Jr (3).............. 1,500 (18) 2.99%
Preferred Stock
</TABLE>

23
<PAGE> 27
<TABLE>
<S> <C> <C> <C>
Series C Convertible Cary H. Thompson (3)........................ 250 (19) *
Preferred Stock

Series C Convertible All executive officers, directors and nominees
Preferred Stock as a group (13 persons) (20)................ 1,750 3.49%
</TABLE>

- ---------
* Less than one percent.

(1) Consists of 75,000,000 shares of Common Stock issuable upon conversion
of Senior Preferred Stock. As disclosed in the Schedule 13D filed with
the Securities and Exchange Commission (the "SEC") on January 4, 1999,
as a result of the execution of a Management Voting Agreement, dated as
of December 23, 1998, between Capital Z, Cary H. Thompson, Neil B.
Kornsweit, stockholders and certain executive officers of the Company,
Capital Z may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to
be the beneficial owner of 3,320,519 shares of Common Stock of the
Company. Capital Z has disclaimed beneficial ownership of these shares.
In addition, Capital Z Management, as a result of the receipt of a
warrant to purchase 1,250,000 shares of Common Stock of the Company,
may be deemed to be the beneficial owner of 1,250,000 shares of Common
Stock of the Company. Capital Z has disclaimed ownership of these
shares. Capital Z also holds 26,704 shares of Series B Convertible
Preferred Stock and 48,296 shares of Series C Convertible Preferred
Stock which, upon completion of the Recapitalization, will be
convertible into 75,000,000 shares of Common Stock and, prior to the
Recapitalization have voting and dividend rights, and rights upon
liquidation.

(2) Includes, in the case of Thirty-Five East Investments LLC ("35 East"),
4,162,368 shares of Common Stock issuable upon exercise of warrants
and, in the case of Turtle Creek Revocable Trust ("Turtle Creek"),
1,040,591 shares of Common Stock issuable upon the exercise of
warrants. Reference is made to the Schedule 13D filed jointly by 35
East and Turtle Creek with the SEC on March 19, 1998. 35 East and
Turtle Creek filed jointly, however each disclaimed beneficial
ownership in any shares of Common Stock beneficially owned by the
other.
(3) The address of each individual is in care of the Company at 350 S.
Grand Avenue, 52nd Floor, Los Angeles, California 90071.
(4) Includes 3,300 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days
of March 1, 1999.
(5) Includes 32,575 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days
of March 1, 1999.
(6) The address of each individual is in care of Capital Z, One Chase
Manhattan Plaza, 44th Floor, New York, New York 10005.
(7) Each of Messrs. Gluclastern, Mizel, Rahe, Sadeghi, and Spuria have
disclaimed beneficial ownership of the Senior Preferred Stock held
by Capital Z.
(8) Includes 575,000 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days
of March 1, 1999.
(9) Joseph A. Magnus resigned as an executive officer of the Company on
November 20, 1998.
(10) Represents shares of Common Stock underlying options which are
currently exercisable within 60 days of March 1, 1999.
(11) Consists of 54,000 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days
of March 1, 1999.
(12) Includes 3,300 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days
of March 1, 1999, and, assuming the approval of the Recapitalization by
the stockholders, includes 1,500,000 shares of Common Stock issuable
upon conversion of Series C Convertible Preferred Stock.
(13) Includes 1,260,300 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days
of March 1, 1999 and, assuming the approval of the Recapitalization by
the stockholders, includes 250,000 shares of Common Stock issuable upon
conversion of Series C Convertible Preferred Stock.
(14) Includes 1,997,225 shares of Common Stock underlying options which are
currently exercisable or which will become exercisable within 60 days
of March 1, 1999 and, assuming the approval of the Recapitalization by
the stockholders, includes 1,750,000 shares of Common Stock issuable
upon conversion of Series C Convertible Preferred Stock.
(15) Capital Z holds 100% of the issued and outstanding Series B Convertible
Preferred Stock. None of the Directors, nominees and Named Executive
Officers beneficially hold any shares of Series B Convertible Preferred
Stock.
(16) Upon completion of the Stock Split, Capital Z will own 26,704,000
shares of Series B Convertible Preferred Stock, which will be 100% of
the Series B Convertible Preferred Stock issued and outstanding. Upon
completion of the Recapitalization, the 26,704,000 shares of Series B
Convertible Preferred Stock held by Capital Z will be convertible into
26,704,000 shares of Common Stock.
(17) Upon completion of the Stock Split, Capital Z will own 48,296,000
shares of Series C Convertible Preferred Stock, which will be 96.50% of
the Series C Convertible Preferred Stock issued and outstanding. Upon

24
<PAGE> 28
completion of the Recapitalization, the 48,296,000 shares of Series C
Convertible Preferred Stock held by Capital Z will be convertible into
48,296,000 shares of Common Stock.
(18) Upon completion of the Stock Split, Mr. St. Laurent will own 1,500,000
shares of Series C Convertible Preferred Stock, which will be 2.99% of
the Series C Convertible Preferred Stock issued and outstanding. Upon
completion of the Recapitalization, the 1,500,000 shares of Series C
Convertible Preferred Stock held by Mr. St. Laurent will be convertible
into 1,500,000 shares of Common Stock.
(19) Upon completion of the Stock Split, Mr. Thompson will own 250,000
shares of Series C Convertible Preferred Stock, which will be less than
1.00% of the Series C Convertible Preferred Stock issued and
outstanding. Upon completion of the Recapitalization, the 250,000
shares of Series C Convertible Preferred Stock held by Mr. Thompson
will be convertible into 48,296,000 shares of Common Stock.
(20) Other than in the case of Messrs. St. Laurent and Thompson, none of the
Directors, nominees or Named Executive Officers beneficially hold any
shares of Series C Convertible Preferred Stock.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows information concerning all compensation paid
for services to the Company in all capacities during the last three fiscal years
or accrued within the current fiscal year as to the current Chief Executive
Officer of the Company and each of the other four most highly compensated
executive officers of the Company who served in such capacity at the end of the
last fiscal year (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------------------------- ------------
Name and Fiscal Other Annual Stock Option All Other
Principal Position Year Salary Bonus Compensation(1) Awards Compensation
- ------------------ ------ ---------- ---------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>

Neil B. Kornswiet 1998 $ 900,000 $5,297,449 -- -- $40,800(2)
President(3) 1997 666,042 4,408,863 -- 555,000 N/A
1996 N/A N/A -- N/A N/A

Cary H. Thompson 1998 $ 900,000 $ -- -- -- $ 4,800(4)
Chief Executive Officer(5) 1997 634,805 1,073,339 -- -- N/A
1996 125,000 298,000 -- 1,821,825 N/A

Barbara S. Polsky 1998 $ 300,000 $ 244,000 -- 60,000 $13,000(6)
Executive Vice President, 1997 245,000 318,120 -- 10,000 N/A
General Counsel and 1996 35,538 -- -- 56,350 N/A
Secretary(7)

Mark E. Costello 1998 $ 200,000 $ 224,188 -- 30,000 $12,800(8)
Executive Vice President 1997 165,000 466,968 -- 12,500 4,500(5)
Loan Production(9) 1996 130,000 201,000 -- 11,250 2,438(5)

Joseph Magnus 1998 $ 180,000 $ 220,000 -- 30,000 $10,116(10)
Executive Vice President 1997 69,641 466,968 -- -- N/A
Chief Credit Officer(11) 1996 N/A N/A -- N/A N/A
</TABLE>

- ---------

(1) The aggregate amount of all perquisites and personal benefits received
by each of the Named Executive Officers in each of fiscal years 1996,
1997 and 1998 was not in excess of $50,000 or 10% of the total of
annual salary and bonus reported for such Named Executive Officer.
(2) Consists of $36,000 in employer contributions to the Company's Deferred
Compensation Plan and $4,800 in employer contributions to the Company's
Section 401(k) plan.
(3) Mr. Kornswiet joined the Company in August 1996.
(4) Consists of employer contributions to the Company's Section 401(k)
plan.

25
<PAGE> 29
(5) Mr. Thompson joined the Company in March 1996 and became the Chief
Executive Officer in May 1997.
(6) Consists of $8,200 in employer contributions to the Company's Deferred
Compensation Plan and $4,800 in employer contributions to the Company's
Section 401(k) plan.
(7) Ms. Polsky joined the Company in May 1996.
(8) Consists of $8,000 in employer contributions to the Company's Deferred
Compensation Plan and $4,800 in employer contributions to the Company's
Section 401(k) plan.
(9) Mr. Costello joined the Company as an officer in March 1995.
(10) Consists of $6,400 in employer contributions to the Company's Deferred
Compensation Plan and $3,716 in employer contributions to the Company's
Section 401(k) plan.
(11) Mr. Magnus joined the Company in January 1997 and resigned on November
20, 1998.

26
<PAGE> 30
OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information regarding grants of
stock options made during the fiscal year ended June 30, 1998 to the Named
Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
Percent of Annual Rates of Stock
Number of Total Options Exercise Price Appreciation for
Shares Underlying Granted to or Base Option Term (1)
Options Employees in Price Per Expiration ------------------------
Name Granted (2) Fiscal Year (3) Share (4) Date 5% 10%
- ---- ----------------- ----------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>

Neil B. Kornswiet -- -- -- -- -- --
Cary H. Thompson -- -- -- -- -- --
Barbara S. Polsky (5) 60,000 6.63% $13.44 11/18/2007 $506,896 $1,284,805
Mark E. Costello (5) 30,000 3.32% $13.44 11/18/2007 $253,448 $ 642,402
Joseph A. Magnus (5)(6) 30,000 3.32% $13.44 11/18/2007 $253,448 $ 642,402
</TABLE>

(1) The potential realizable value is based on the assumption that the
Common Stock of the Company appreciates at the annual rate shown
(compounded annually) from the date of grant until the expiration of
the option term. These amounts are calculated pursuant to the
applicable requirements of the SEC and do not represent a forecast of
the future appreciation of the Company's Common Stock.

(2) All of the options set forth in this chart were granted for a term of
10 years.

(3) Options covering an aggregate of 904,300 shares were granted to
eligible employees during the fiscal year ended June 30, 1998.

(4) Options were granted at an exercise price equal to the fair market
value of the Company's Common Stock, as determined by reference to the
closing price reported on the NYSE on the last trading day prior to the
date of grant. The exercise price and tax withholding obligations
related to exercise may be paid by delivery of already owned shares,
subject to certain conditions.

(5) These options become exercisable as to 1/5 of the shares on November
18, 1997. The remaining shares vest at a rate of 20% on each
anniversary of the date of grant thereafter until fully vested.

(6) On November 20, 1998, Mr. Magnus resigned as an executive officer of
the Company.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS

The following table sets forth, for each of the Named Executive
Officers, certain information regarding the exercise of stock options during the
fiscal year ended June 30, 1998 and the value of options held at fiscal year
end.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)

<TABLE>
<CAPTION>
Value of All
Number of Shares Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Options at Fiscal
Year-End Year-End(2)(3)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>

Neil B. Kornswiet -- -- 550,000 / -- -- / --
Cary Thompson -- -- 900,303 / 719,997 $2,168,494 / $1,012,500
Barbara S. Polsky -- -- 49,750 / 76,500 $ 4,200 / $ 15,600
Mark Costello -- -- 18,075 / 37,250 $ 33,038 / $ 7,800
Joseph A. Magnus -- -- 25,000 / 52,500 $ 2,340 / $ 8,160
</TABLE>

(1) All amounts shown in this table have been adjusted to reflect the
three-for-two split of the Common Stock effected on February 21, 1997.

(2) Based upon the last reported sale price of the Common Stock on the NYSE
on June 30, 1998 ($13.75) less the option exercise price.

(3) As of March 1, 1999, none of the options outstanding were in-the-money.
The closing price on March 16, 1999 was $1.375.

27
<PAGE> 31
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the SEC. Executive officers, directors, and
greater-than-ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such forms received by it and written
representations from the Company's reporting persons that they have complied
with the relevant filing requirements, the Company believes that, during the
year ended June 30, 1998, all relevant Section 16(a) filing requirements were
complied with.

SECTION 401(k) PLAN

The Company has a tax-qualified cash or deferred profit sharing plan
(the "401(k) Plan") covering all employees over the age of 21 who have completed
six months of service with the Company prior to a plan entry date. Pursuant to
the 401(k) Plan, eligible employees may make salary deferral (before-tax)
contributions of up to 15% of their compensation per plan year up to a specified
maximum contribution as determined by the Internal Revenue Service. The 401(k)
Plan also includes provisions which authorize the Company to make discretionary
contributions. Such contributions, if made, are allocated among all eligible
employees as determined under the 401(k) Plan. No discretionary contributions
were made by the Company for the calendar year 1998. The trustees under the
401(k) Plan invest the assets of each participant's account in selected
investment options at the direction of such participant.

DEFERRED COMPENSATION PLAN

In April 1997, the Company implemented a deferred compensation plan for
highly compensated employees and directors of the Company. The plan is unfunded
and non-qualified. Eligible participants may defer a portion of their
compensation (including bonuses) and receive a Company matching amount up to 4%
of their annual base salary. The Company may also make discretionary
contributions to the plan. For the 1998 fiscal year, the Company made no
matching or discretionary contributions to the plan. In October, 1998, the
Company suspended contributions to the Deferred Compensation Plan.

28
<PAGE> 32
PERFORMANCE GRAPH

Set forth below is a line graph comparing the annual percentage change
in the cumulative return to the stockholders of the Company's Common Stock with
the cumulative return of the NYSE Stock Market (US Companies) Index and the
Index for NYSE/AMEX/NASDAQ Stocks (SIC 6160-6169 US Companies) Mortgage Bankers
and Brokers for the period commencing July 1, 1993 and ending on June 30, 1998.
The information contained in the performance graph shall not be deemed
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing. The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.

<TABLE>
<CAPTION>
Jun 93 Jun 94 Jun 95 Jun 96 Jun 97 Jun 98
<S> <C> <C> <C> <C> <C> <C>
Aames Financial Corporation 100 87.73 193.01 578.01 449.72 337.35
NY Stock Exchange Index 100 98.43 117.16 144.20 185.64 232.33
Peer Group 100 91.54 128.34 187.59 216.97 243.50
</TABLE>

29
<PAGE> 33
PROPOSAL TO APPROVE THE ADOPTION OF THE
AAMES FINANCIAL CORPORATION 1999 STOCK OPTION PLAN

INTRODUCTION

The proposed Aames Financial Corporation 1999 Stock Option Plan (the
"1999 Plan") was adopted by the Company's Board of Directors effective as of
February 10, 1999, subject to the approval of the 1999 Plan by the stockholders.
The 1999 Plan supersedes the Company's 1991 Stock Incentive Plan, 1999 Stock
Incentive Plan, 1996 Stock Incentive Plan, 1997 Stock Option Plan and 1997
Non-Qualified Stock Option Plan and provides for the issuance of options to
purchase shares of the Company's Common Stock ("Shares") to selected directors,
officers, employees and consultants of the Company and its subsidiaries. Subject
to adjustment for stock splits, stock dividends and other similar events, the
total number of Shares reserved for issuance under the 1999 Plan shall be
14,612,008 Shares.

Although this Proxy Statement contains a summary of the principal
features of the 1999 Plan, this summary is not intended to be complete and
reference should be made to Exhibit "C" to this Proxy Statement for the complete
text of the 1999 Plan.

PURPOSE

The 1999 Plan is intended as an incentive and to encourage stock
ownership by officers and certain other key employees of the Company in order to
increase their proprietary interest in the Company's success and to encourage
them to remain in the employ of the Company.

EFFECTIVE DATE; DURATION

The 1999 Plan is effective as of the Initial Closing, subject to
(i) the approval by the stockholders of the Company and (ii) the consummation,
on or prior to June 30, 1999, of the Recapitalization. The expiration date of
the 1999 Plan, after which no options may be granted, is December 31, 2008.

ADMINISTRATION

The 1999 Plan will be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"), which will consist of not less
than three members, two of whom will be appointed by Capital Z during any period
that Capital Z and/or its designated purchasers under the Agreement own at least
25% of the outstanding voting securities of the Company. The Committee
determines which individuals may participate in the 1999 Plan and the type,
extent and terms of the options to be granted.

ELIGIBILITY AND NONDISCRETIONARY GRANTS

The 1999 Plan provides that options may be granted to officers and
other key employees of the Company (excluding members of the Committee), subject
to the limitations on incentive stock options. In addition, options which are
not incentive stock options may be granted to consultants or other key persons
(excluding members of the Committee) who the Committee determines should receive
options under the 1999 Plan. The approximate number of individuals eligible to
participate in the 1999 Plan is fifty.

TERMS OF OPTIONS

The terms of options granted under the 1999 Plan are determined by the
Committee. In the sole and absolute discretion of the Committee, such options
may be either "incentive stock options" within the meaning of Section 422 of the
Code ("ISOs"), or non-statutory options. However, to the extent that the
aggregate market value of the Shares with respect to which ISOs are exercisable
for the first time by any individual under the 1999 Plan and all other incentive
plans of the Company and any Parent or subsidiary of the Company during any
calendar year exceeds $100,000, such options shall not be treated as ISOs. Each
option will be evidenced by an option agreement between the Company and the
optionee to whom such option is granted on such terms and conditions as shall be
determined by the Committee from time to time. The terms of the option
agreements need not be identical. Each option is, however, subject to the
following terms and conditions:

30
<PAGE> 34
Exercise of the Option. The Committee determines when options granted
under the 1999 Plan may be exercisable. Payment for Shares purchased under an
option granted under the 1999 Plan must be made in full upon exercise of the
option, by certified bank or cashier's check payable to the order of the Company
or by any other means acceptable to the Company.

Option Price. Unless otherwise provided by the Committee in the option
agreement, the option exercise price of each option granted under the 1999 Plan
will not be less than the Fair Market Value of the stock at the time the option
is granted. The ISO exercise price shall equal or exceed the fair market value
of the Shares on the date the option is granted. The exercise price for ISOs
granted to individuals beneficially holding at least 10% of the outstanding
securities of the Company shall equal or exceed 110% of the fair market value of
the Shares on the date the option is granted.

Termination of Options. All options granted under the 1999 Plan expire
ten years from the date of grant, or such shorter period as is determined by the
Committee. No option is exercisable by any person after such expiration. In the
event that any outstanding option under the Plan for any reason expires, is
terminated or is canceled prior to the end of the period during which options
may be granted, the Shares called for by the unexercised portion of such option
may again be subject to an option under the 1999 Plan.

Non-Transferability of Options. No option granted under the 1999 Plan
shall be transferable except by will or the laws of descent and distribution.
During the lifetime of the optionee, the option shall be exercisable only by
him. The Committee may, however, in its sole discretion, allow for transfer of
options which are not ISOs to other persons or entities, subject to such
conditions or limitations as it may establish.

Non-Transferability of Underlying Stock. Unless otherwise provided in
an option agreement or agreed to by the Compensation Committee at the time of
exercise, all option holders agree not to sell or otherwise transfer more than
25% of the Common Stock purchased pursuant to an option in any given year and in
the aggregate not to sell or otherwise transfer more than 25% of such stock
during any period commencing on the effective date of the 1999 Plan.

Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1999 Plan as may be
determined by the Committee.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

The aggregate number of shares of Stock which may be purchased pursuant
to options granted under the 1999 Plan, the maximum number of shares for which
options may be granted to any one person the number of shares of Stock covered
by each outstanding option and the price per share thereof in each such option
shall be appropriately adjusted for any increase or decrease in the number of
outstanding shares of stock resulting from a stock split or other subdivision or
consolidation of shares of Stock or for other capital adjustments or payments of
stock dividends or distributions or other increases or decreases in the
outstanding shares of Stock without receipt of consideration by the Company. Any
adjustment shall be conclusively determined by the Committee.

In the event of any change in the outstanding shares of Stock by reason
of any recapitalization, merger, consolidation, spin-off, combination or
exchange of shares or other corporate change, or any distributions to common
shareholders other than cash dividends, the Committee shall make such
substitution or adjustment, if any, as it deems to be equitable, as to the
number or kind of shares of Stock or other securities issued or reserved for
issuance pursuant to the Plan, and the number or kind of shares of Stock or
other securities covered by outstanding options, and the option price thereof.

CHANGE IN CONTROL

Except as otherwise provided in a particular option agreement, in the
event of a Change in Control (as defined in the 1999 Plan), all options shall
become immediately exercisable with respect to 100% of the shares subject to
such options. Provided, however, that subject to certain exceptions, no event
shall be treated as a Change in Control unless a Capital Z Realization Event has
occurred (as defined in the 1999 Plan).

31
<PAGE> 35
MARKET VALUE

The market value of the shares of Common Stock on the New York Stock
Exchange on March 15, 1999 was $1.50 per share.

SHARES SUBJECT TO THE 1999 PLAN

As noted above, the total number of shares of Common Stock reserved for
issuance under the 1999 Plan is 14,612,008. No single person may receive options
for more than 7,306,004 shares of Common Stock during the term of the 1999 Plan.

AMENDMENT AND TERMINATION OF THE 1999 PLAN

The Board of Directors may, without the consent of the Company's
stockholders or optionees under the 1999 Plan, at any time terminate the 1999
Plan entirely and at any time or from time to time amend or modify the 1999
Plan. No such amendment or termination shall adversely affect options already
granted under the 1999 Plan without the optionee's consent. Approval of the
stockholders is required to amend the 1999 Plan for the purpose of (a)
increasing the total number of Shares which may be purchased pursuant to options
granted under the 1999 Plan, except adjustments made for recapitalizations, or
(b) expand the class of employees eligible to receive options under the Plan.

FEDERAL INCOME TAX CONSEQUENCES

The following is a brief description of the federal income tax
treatment which will generally apply to options granted under the 1999 Plan,
based on federal income tax laws in effect on the date of this Proxy Statement.
The exact federal income tax treatment of options will depend on the specific
circumstances of the recipient. No information is provided herein with respect
to estate, inheritance, gift, state or local tax laws, although there may be
certain tax consequences upon the receipt or exercise of an option or the
disposition of any acquired shares under those laws.

Incentive Stock Options. Generally, the optionee is not taxed and the
Company is not entitled to a deduction on the grant or the exercise of an ISO.
If the optionee sells the shares acquired upon the exercise of an ISO ("ISO
Shares") at any time after the later of (i) one year after the date of transfer
of shares to the optionee pursuant to the exercise of such ISO or (ii) two years
after the date of grant of such ISO (the "ISO Holding Period"), then the
optionee will recognize capital gain or loss equal to the difference between the
sales price and the exercise price paid for the ISO Shares, and the Company will
not be entitled to any deduction. If the optionee disposes of the ISO Shares at
any time during the ISO Holding Period, then (i) the optionee will recognize
capital gain in an amount equal to the excess, if any, of the sales price over
the fair market value of the ISO Shares on the date of exercise, I99) the
optionee will recognize ordinary income equal to the excess, if any, of the
lesser of the sales price or the fair market value of the ISO Shares on the date
of exercise, over the exercise price paid for the ISO Shares, (iii) the optionee
will recognize capital loss equal to the excess, if any, of the exercise price
paid for the ISO Shares over the sales price of the ISO Shares and (iv) the
Company will generally be entitled to a deduction in an amount equal to the
amount of ordinary income recognized by the optionee.

For purposes of computing an optionee's "alternative minimum tax," an
ISO is treated as a Non-qualified Stock Option, as discussed below. Thus, the
amount by which the fair market value of IS Shares on the date of exercise (or
such later date as discussed below under "Special Rules for Insiders") exceeds
the exercise price will be included as a positive adjustment in the calculation
of an optionee's "alternative minimum taxable income" ("AMTI"). The "alternative
minimum tax" imposed on individual taxpayers is generally equal to the amount by
which 26% or 28% (depending on the optionee's AMTI) of the individual's AMTI
(reduced by certain exemption amounts) exceeds his or her regular income tax
liability for the year. A taxpayer's alternative minimum tax attributable to
this spread may be credited against the taxpayer's regular tax liability in
later years to the extent that the regular tax liability exceeds the alternative
minimum tax in any such year.

Non-qualified Stock Options. The grant of a Non-qualified stock option
is generally not a taxable event for the optionee. Upon exercise of the option,
the optionee will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the stock acquired upon exercise of the
Non-qualified stock option ("Non-qualified Option Shares") (determined as if the
date of the exercise) over the exercise price of such option, and the Company
will be entitled to a deduction equal to such amount. See "Special Rules for
Insiders," below. A subsequent sale of the Non-qualified Stock Option Shares
generally will give rise to capital gain or loss equal to the difference between
the sales price and the sum of the

32
<PAGE> 36
exercise price paid for such shares plus the ordinary income recognized with
respect to such shares. Such gain or loss will be treated as short-term
depending on the optionee's holding period for the shares involved in the
disposition. If an optionee receives a Non-qualified stock option having an
exercise price that is only a small fraction of the value of the underlying
Non-qualified Option Shares on the date of grant, such optionee may be required
to include the value of the option in taxable income at the time of grant.

Special Rules for Insiders. If an optionee is a director, officer or
stockholder subject to Section 16 of the Exchange Act (an "Insider") and
exercises an option within six months of the date of grant, the timing of the
recognition of any ordinary income should be deferred until (and the amount of
ordinary income should be determined based on the fair market value (or sales
price in the case of a disposition) of the Common Stock upon the earlier of the
following two dates: (i) six months after the date of grant or (ii) a
disposition of the Common Stock, unless the Insider makes an election under
Section 83(b) of the Code (an "83(b) Election") within 30 days after exercise to
recognize ordinary income based on the value of the Common Stock on the date of
exercise. In addition, special rules apply to an Insider who exercises an option
having an exercise price greater than the fair market value of the underlying
Common Stock on the date of exercise.

Miscellaneous Tax Issues. Special rules will apply in cases where an
optionee pays the exercise price of the option or applicable withholding tax
obligations under the 1999 Plan by delivering previously owned Common Stock or
by reducing the amount of Common Stock otherwise issuable pursuant to the
Option. The surrender or withholding of such shares will in certain
circumstances result in the recognition of income with respect to such shares.
The 1999 Plan provides that, in the event of certain changes in ownership or
control of the Company, the right to exercise options otherwise subject to a
vesting schedule may be accelerated. In the event such acceleration occurs and
depending upon the individual circumstances of the recipient, certain amounts
with respect to such Options may constitute "excess parachute payments" under
the "golden parachute" provisions of the Code. Pursuant to these provisions, a
recipient will be subject to a 20% excise tax on any "excess parachute payments"
and the Company will be denied any deduction with respect to such payment. It
should be noted that while the Company's intent is to prevent Section 162(m) of
the Code from limiting the deductibility of options, no advance determination
will be obtained from the Internal Revenue Service in this regard. For this
reason, and because of possible unforeseen future events, it is impossible to
determine the precise extent to which the Company will be entitled to a tax
deduction in connection with the exercise of options.

NEW PLAN BENEFITS

The following table sets forth the grants the Company is currently
obligated under employment agreements to provide to the following Named
Executive Officers under the 1999 Plan.

<TABLE>
<CAPTION>
Number of Shares of Common
Name and Position Stock Underlying Options
----------------- --------------------------
<S> <C>

Cary H. Thompson 2,630,162
Chief Executive Officer

Neil B. Kornsweit
President 3,214,642
</TABLE>

All of these options will have an exercise price of $1.00 per share.
All options will vest and become exercisable on the ninth anniversary of the
date of grant, subject to earlier vesting based upon the attainment of certain
stock price targets. Vested options may only be exercised, however, upon
completion of certain service requirements. Upon a change of control, all
unvested options become vested and exercisable, subject to certain conditions.
The Company intends to grant options to purchase up to 6,075,000 shares of
Common Stock under the 1999 Plan to other Named Executive Officers. Information
with respect to compensation paid and other benefits, including options, granted
in respect of the 1998 fiscal year to the Named Executive Officers is set forth
in the Summary Compensation Table.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

The Board of Directors has unanimously approved the adoption of the
1999 Plan. The affirmative vote of a majority of votes entitled to be cast by
the holders of outstanding shares of Common Stock and Senior Preferred Stock who
are present (either in person or by Proxy) at the Meeting, voting as a single
class, is required for the adoption of the 1999 Plan. Unless marked otherwise,
proxies received will be voted for the adoption of the 1999 Plan.

33
<PAGE> 37
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
APPROVAL OF THE AAMES FINANCIAL CORPORATION 1999 STOCK OPTION PLAN.

34
<PAGE> 38
PROPOSAL TO RATIFY THE APPOINTMENT OF
INDEPENDENT ACCOUNTANTS

The Board of Directors has appointed Ernst & Young LLP to serve as
independent accountants of the Company to audit the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ending June
30, 1999. Representatives of Ernst & Young LLP are expected to be present at the
Meeting, will have an opportunity to make a statement if they desire to do so
and will respond to appropriate questions from stockholders.

The ratification of the appointment of Ernst & Young LLP as the
Company's independent accountants will require the affirmative vote of a
majority of the votes entitled to be cast by the holders of outstanding shares
of Common Stock and Senior Preferred Stock, who are present (either in person or
by Proxy) at the Meeting, voting as a single class.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP.

PROPOSALS OF STOCKHOLDERS

A proper proposal submitted by a stockholder for presentation at the
Meeting and received at the Company's executive offices no later than _______,
1999, will be included in the Company's Proxy Statement and form of Proxy
relating to the 1999 Annual Meeting. In addition, in the event a stockholder
proposal is not received by the Company by _______, 1999, the proxy to be
solicited by the Board of Directors for the 1999 Annual Meeting will confer
discretionary authority on the holders of the proxy to vote the shares if the
proposal is presented at the 1999 Annual Meeting without any discussion of the
proposal in the proxy statement for such meeting. SEC rules and regulations
provide that if the date of the Company's 1999 Annual Meeting is advanced or
delayed more than 30 days from the anniversary date of the 1998 Annual Meeting,
stockholder proposals intended to be included in the proxy materials for the
1999 Annual Meeting must be received by the Company within a reasonable time
before the Company begins to print and mail the proxy materials for the 1999
Annual Meeting. Upon determination by the Company that the date of the 1999
Annual Meeting will be advanced or delayed by more than 30 days from the
anniversary date of the 1998 Annual Meeting, the Company will disclose such
change in the earliest possible quarterly report on Form 10-Q. Please address
your proposals to Aames Financial Corporation, 350 S. Grand Ave., 52nd Floor,
Los Angeles, California 90071, Attention: Corporate Secretary.

OTHER MATTERS

The Board of Directors is not aware of any matter to be acted upon at
the Meeting other than described in this Proxy Statement. Unless otherwise
directed, all shares represented by the persons named in the accompanying Proxy
will be voted in favor of the proposals described in this Proxy Statement. If
any other matter properly comes before the Meeting, however, the Proxy holders
will vote thereon in accordance with their best judgment.

ANNUAL REPORT TO STOCKHOLDERS

The Company's Annual Report to Stockholders for the fiscal year ended
June 30, 1998 was mailed to stockholders on October 14, 1998.

35
<PAGE> 39
REPORT ON FORM 10-K

THE COMPANY UNDERTAKES, UPON WRITTEN REQUEST, TO PROVIDE, WITHOUT
CHARGE, TO EACH PERSON FROM WHOM THE ACCOMPANYING PROXY IS SOLICITED A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1998, AS
FILED WITH THE SEC, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO,
BUT EXCLUDING EXHIBITS THERETO. REQUESTS SHOULD BE ADDRESSED TO AAMES FINANCIAL
CORPORATION, 350 S. GRAND AVENUE, LOS ANGELES, CALIFORNIA 90071, ATTN: EXECUTIVE
VICE PRESIDENT - FINANCE.

DATED: ON BEHALF OF THE BOARD OF DIRECTORS

Barbara S. Polsky
Secretary

36
<PAGE> 40
EXHIBIT "A"

REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION

The following report of the Compensation Committee of the Board of
Directors shall not be deemed to be incorporated by reference into any previous
filing by the Company under either the Securities Act of 1933, as amended
("Securities Act"), or the Securities Exchange Act of 1934, as amended
("Exchange Act"), that incorporates future Securities Act or Exchange Act
filings in whole or in part by reference.

During the 1998 fiscal year, the Compensation Committee of the Board of
Directors was comprised of Dr. Melvyn Kinder, Georges St. Laurent and Lee
Masters who are non-employee directors of the Company. The Board of Directors
delegated to the Compensation Committee the responsibility for developing and
administering policies which govern the total compensation program for the Named
Executive Officers of the Company. The Committee also administered the Company's
stock option plans.

The goal of the Company's executive compensation program is to retain,
motivate and reward management through the compensation policies and awards,
while aligning their interests more closely with that of the Company and
stockholders. In furtherance of this goal, the program consists of three main
components: (1) base salary; (2) bonuses which are either discretionary or based
on individual and Company performance; and (3) stock options to provide
long-term incentives for performance and to align executive officer and
stockholder interests.

EXECUTIVE COMPENSATION

Base salaries for the Named Executive Officers were established by the
Compensation Committee based on the recommendations of management which
considered, and applied subjectively as appropriate, individual performance and
achievement, areas of responsibility, position, the extent to which the
officers' skills were in demand or were marketed to other companies or
industries and internal and external comparability. Base salaries for other
executive officers were established by the Chief Executive Officer who applies
the same criteria. The base salary for Mr. Kornswiet was initially established
under the terms of an employment agreement entered into in connection with the
Company's acquisition of One Stop, a company of which Mr. Kornswiet was the
Chief Executive Officer, President and sole stockholder. Under the initial terms
of the employment agreement, Mr. Kornswiet was appointed Executive Vice
President of the Company and Chief Executive Officer and President of One Stop.
Upon his appointment as President of the Company in May 1997, Mr. Kornswiet's
employment agreement was revised by the Compensation Committee to increase his
annual base salary from $750,000 to $900,000.

Bonuses paid to the Company's executive officers (excluding the Chief
Executive Officer and President) are based on Company performance under the
terms of the Company's performance bonus plan. See -- "Performance Bonus Plan."
Under the terms of his then existing employment agreement, during the 1998
fiscal year, Mr. Kornsweit was entitled to a cash bonus equal to 7.5% of One
Stop's pre-tax adjusted net income (as defined in the employment agreement). In
fiscal 1999 and through the Initial Closing, Mr. Kornswiet was entitled to a
cash bonus equal to between $1.35 million and $1.65 million depending on the
retail and broker loan production of the Company. Mr. Kornsweit had agreed to
defer his bonus due for 1998's fourth fiscal quarter. He was paid that bonus in
February 1999 in connection with the Initial Closing. The other employees were
entitled to discretionary bonuses.

The Compensation Committee believes that it is important for key
employees to have long-term incentives through an equity interest in the
Company. Accordingly, from time to time, the Company has granted key employees
stock options pursuant to the Company's stock option arrangements. The Committee
granted options upon the recommendations of management. As of June 30, 1998, the
Company's six key employees (excluding the Company's Chief Executive Officer)
held options to acquire 971,575 shares of the Company's Common Stock.

PERFORMANCE BONUS PLAN

In October 1995, the Compensation Committee adopted a performance bonus plan
(the "Old Performance Bonus Plan") for executives, other than those primarily
responsible for the origination and purchase of loans, which provided for a
performance-based cash bonus equal to a specified dollar level (the "Payment
Amount") for every percentage point for which return on average equity exceeds a
specified return (the "Target ROE"). The Target ROE was set at fifteen percent.
The Compensation Committee believed that a fifteen percent return was generally
perceived as a good return on equity for a financial services company, and only
performance in excess of a good return should be rewarded through the
performance-based compensation program. Each Performance Bonus Plan participant
was given a Payment Amount based on the participant's contribution to, and
impact upon, the success of the Company. For fiscal 1998, the range in Payment
Amounts for Old Performance Bonus Plan participants was from $4,000 to $15,000.
Commencing June 1997 through the fiscal quarter ending December 31, 1997, the
quarterly bonuses paid to Old Performance Bonus Plan participants were fixed at
the third 1997 fiscal quarter levels pending review of the Old

A-1
<PAGE> 41
Performance Bonus Plan by the Compensation Committee. In November 1997 and as
amended in May 1998, the Compensation Committee determined that a bonus based on
return on average equity may not provide the appropriate management incentives
for a company that historically operated on a negative cash flow basis and
requires continuous access to the capital markets and adopted the New
Performance Bonus Plan. All executive officers, other than the Chief Executive
Officer and the President, participated in the New Performance Bonus Plan. Under
the New Performance Bonus Plan, bonuses were paid quarterly and were tied to (i)
the achievement by each participant of certain predetermined goals established
annually by the Chief Executive Officer subject, in the case of the Named
Executive Officers, to approval by the Compensation Committee, (ii) the
achievement by the Company of net income goals established annually by the Chief
Executive Officer and presented to the Board of Directors, and (iii) maximum
levels of bonus for each individual established annually by the Chief Executive
Officer subject, in the case of the Named Executive Officers, to approval by the
Compensation Committee. Participants received the full quarterly bonus in each
quarter where at least seventy percent of the individual and Company performance
goals are met. Where the Company achieved at least seventy percent of its goals,
but the participant achieved less than seventy percent of his or her goals,
bonuses may be paid based on the participant's percentage of achievement of his
or her individual goals.

As a consequence of the Initial Closing, executive and employee
performance bonus goals and amounts are currently being revised.

EXECUTIVE COMPENSATION--CHIEF EXECUTIVE OFFICERS

On May 7, 1997, Mr. Thompson, the Company's then Chief Operating
Officer, assumed the duties of Chief Executive Officer. Prior to May 7, 1997,
Mr. Thompson's compensation was established under the terms of an employment
agreement entered into in March 1996 and amended in May 1997 and August 1998
with the approval of the Compensation Committee. Under that agreement, as
amended, Mr. Thompson was paid a base salary of $500,000 and received a
performance bonus under the Company's Performance Bonus Plan with a Payment
Amount of $45,000 for each percentage point for which return on average equity
exceeded the Target ROE. The employment agreement also provided for the grant of
stock options covering 1,795,950 shares. The Compensation Committee believed
that the grant of the options to Mr. Thompson was necessary to attract Mr.
Thompson to the Company and provided the appropriate level of long-term
incentive to foster continued strong growth in stockholder values.

Upon his appointment as Chief Executive Officer in May 1997, Mr.
Thompson's employment agreement was revised by the Compensation Committee to
increase his base salary to $900,000. Further, at Mr. Thompson's request, the
Compensation Committee replaced the performance bonus provisions of his
agreement with a discretionary bonus subject to the approval of the Board or the
stockholders. Considering the number of stock options Mr. Thompson was granted
at the time he became Chief Executive Officer, the Committee believes his
compensation is primarily performance based.

STATEMENT REGARDING TAX POLICY COMPLIANCE

Section 162(m) of the Code limits the deductible allowable to the
Company for compensation paid to the chief executive officer and each of the
four other most highly compensated executive officers to $1 million. Qualified
performance-based compensation is excluded from this limitation if certain
requirements are met, including receipt of stockholder approval or if amounts
are paid pursuant to a written contract that was in effect on February 17, 1993
and not subsequently materially modified. Under certain circumstances, the
Compensation Committee, in its discretion, may authorize payments, such as
salary, bonuses or otherwise that may cause an executive officer's income to
exceed the deductible limits. The fiscal 1998 compensation paid to Mr.
Kornswiet in excess of $1 million exceeded the deductible limits.

Compensation Committee: Melvyn Kinder, Chairman
Lee Masters
Georges St. Laurent

A-2
<PAGE> 42
EXHIBIT "B"

PROPOSED AMENDMENTS TO
ARTICLE FOURTH OF THE COMPANY'S
CERTIFICATE OF INCORPORATION

CURRENT CERTIFICATE OF INCORPORATION

Article Fourth of the Certificate of Incorporation currently reads as
follows:

"FOURTH: The total number of shares which the Corporation shall have
the authority to issue is 51,000,000, consisting of 50,000,000 shares
of common stock, par value $0.001 per share (the "Common Stock") and
1,000,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock")."

AMENDMENT UPON APPROVAL OF THE COMMON STOCK PROPOSAL

Upon approval of the Common Stock Proposal, without consideration of
the Preferred Stock Proposal or the Stock Split, Article Fourth of the
Certificate of Incorporation would be amended to read as follows:

"FOURTH: The total number of shares which the Corporation shall have
the authority to issue is 451,000,000, consisting of 400,000,000 shares
of common stock, par value $0.001 per share (the "Common Stock") and
1,000,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock").

AMENDMENT UPON APPROVAL OF THE PREFERRED STOCK PROPOSAL

Upon approval of the Preferred Stock Proposal, without consideration of
the Common Stock Proposal and the Stock Split, Article Fourth of the Certificate
of Incorporation would be amended to read as follows:

"FOURTH: The total number of shares which the Corporation shall have
the authority to issue is 250,000,000, consisting of 50,000,000 shares
of common stock, par value $0.001 per share (the "Common Stock") and
200,000,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock").

AMENDMENT UPON APPROVAL OF THE COMMON STOCK PROPOSAL AND THE PREFERRED STOCK
PROPOSAL

Upon approval of the Common Stock Proposal and the Preferred Stock
Proposal, without consideration of the Stock Split, Article Fourth of the
Certificate of Incorporation would be amended to read as follows:

"FOURTH: The total number of shares which the Corporation shall have
the authority to issue is 600,000,000, consisting of 400,000,000 shares
of common stock, par value $0.001 per share (the "Common Stock") and
200,000,000 shares of preferred stock, par value $0.001 per share (the
"Preferred Stock").

AMENDMENT UPON APPROVAL OF THE PREFERRED STOCK PROPOSAL AND THE STOCK SPLIT

Upon approval of the Preferred Stock Proposal and the Stock Split,
without consideration of the Common Stock Proposal, Article Fourth of the
Certificate of Incorporation would be amended to read as follows:

<PAGE> 43
Simultaneously with the effective date of this amendment (the
"EFFECTIVE DATE"), each share of the Corporation's Series B Convertible
Preferred Stock having a par value of $0.001 per share issued and
outstanding immediately prior to the Effective Date (the "PRE-SPLIT
SERIES B PREFERRED STOCK") shall automatically and without any action
on the part of the holder thereof be reclassified as and changed into
one thousand (1,000) shares of Series B Convertible Preferred Stock,
par value of $0.001 per share (the "POST-SPLIT SERIES B STOCK"). Each
holder of a certificate or certificates which immediately prior to the
Effective Date represented outstanding shares of Pre-Split Series B
Preferred Stock (the "PRE-SPLIT SERIES B CERTIFICATES," whether one or
more) shall be entitled to receive upon surrender of such Pre-Split
Series B Certificates to the Corporation's Secretary for cancellation,
a certificate or certificates (the "POST-SPLIT SERIES B CERTIFICATES,"
whether one or more) representing the number of whole shares of
Post-Split Series B Preferred Stock into which and for which the shares
of Pre-Split Series B Preferred Stock formerly represented by such
Pre-Split Series B Certificates so surrendered, are reclassified
pursuant to the terms hereof. From and after the Effective Date,
Pre-Split Series B Certificates shall represent only the right to
receive Post-Split Series B Certificates pursuant to the provisions
hereof. If more than one Pre-Split Series B Certificate shall be
surrendered at one time for the account of the same stockholder, the
number of full shares of Post-Split Series B Preferred Stock for which
the Post-Split Series B Certificates shall be issued shall be computed
on the basis of the aggregate number of shares represented by the
Pre-Split Series B Certificates so surrendered. If any Post-Split
Series B Certificate is to be issued in a name other than that in which
the Pre-Split Series B Certificate surrendered for exchange are issued,
the Pre-Split Series B Certificates so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and the person or
persons requesting such exchange shall affix any requisite stock
transfer tax stamps to the Pre-Split Series B Certificates surrendered,
or provide funds for their purchase, or establish to the satisfaction
of the Corporation's Secretary that such taxes are not payable. From
and after the Effective Date the amount of capital represented by the
shares of Post-Split Series B Stock into which and for which the shares
of the Pre-Split Series B Stock are reclassified pursuant to the terms
hereof shall be the same as the amount of capital represented by the
shares of Pre-Split Series B Stock so reclassified, until thereafter
reduced or increased in accordance with applicable law;

Simultaneously with the Effective Date, each share of the Corporation's
Series C Convertible Preferred Stock having a par value of $0.001 per
share issued and outstanding immediately prior to the Effective Date
(the "PRE-SPLIT SERIES C PREFERRED STOCK") shall automatically and
without any action on the part of the holder thereof be reclassified as
and changed into one thousand (1,000) shares of Series C Convertible
Preferred Stock, par value of $0.001 per share (the "POST-SPLIT SERIES
C STOCK"). Each holder of a certificate or certificates which
immediately prior to the Effective Date represented outstanding shares
of Pre-Split Series C Preferred Stock (the "PRE-SPLIT SERIES C
CERTIFICATES," whether one or more) shall be entitled to receive upon
surrender of such Pre-Split Series C Certificates to the Corporation's
Secretary for cancellation, a certificate or certificates (the
"POST-SPLIT SERIES C CERTIFICATES," whether one or more) representing
the number of whole shares of Post-Split Series C Preferred Stock into
which and for which the shares of Pre-Split Series C Preferred Stock
formerly represented by such Pre-Split Series C Certificates so
surrendered, are reclassified pursuant to the terms hereof. From and
after the Effective Date, Pre-Split Series C Certificates shall
represent only the right to receive Post-Split Series C Certificates
pursuant to the provisions hereof. If more than one Pre-Split Series C
Certificate shall be surrendered at one time for the account of the
same stockholder, the number of full shares of Post-Split Series C
Preferred Stock for which the Post-Split Series C Certificates shall be
issued shall be computed on the basis of the aggregate number of shares
represented by the Pre-Split Series C Certificates so surrendered. If
any Post-Split Series C Certificate is to be issued in a name other
than that in which the Pre-Split Series C Certificate surrendered for
exchange are issued, the Pre-Split Series C Certificates so surrendered
shall be properly endorsed and otherwise in proper form for transfer,
and the person or persons requesting such exchange shall affix any
requisite stock transfer tax stamps to the Pre-Split Series C
Certificates surrendered, or provide funds for their purchase, or
establish to the satisfaction of the Corporation's Secretary that such
taxes are not payable. From and after the Effective Date the amount of
capital represented by the shares of Post-Split Series C Stock into
which and for which the shares of the Pre-Split Series C Stock are
reclassified pursuant to the terms hereof shall be the same as the
amount of capital represented by the shares of Pre-Split Series C Stock
so reclassified, until thereafter reduced or increased in accordance
with applicable law;

The Corporation's Series A Preferred Stock shall not be affected by the
filing of this Amendment."

<PAGE> 44
AMENDMENT UPON APPROVAL OF THE COMMON STOCK PROPOSAL, THE PREFERRED STOCK
PROPOSAL AND THE STOCK SPLIT

Upon approval of the Common Stock Proposal, the Preferred Stock
Proposal and the Stock Split, Article Fourth of the Certificate of Incorporation
would be amended to read as follows:

Simultaneously with the effective date of this amendment (the
"EFFECTIVE DATE"), each share of the Corporation's Series B Convertible
Preferred Stock having a par value of $0.001 per share issued and
outstanding immediately prior to the Effective Date (the "PRE-SPLIT
SERIES B PREFERRED STOCK") shall automatically and without any action
on the part of the holder thereof be reclassified as and changed into
one thousand (1,000) shares of Series B Convertible Preferred Stock,
par value of $0.001 per share (the "POST-SPLIT SERIES B STOCK"). Each
holder of a certificate or certificates which immediately prior to the
Effective Date represented outstanding shares of Pre-Split Series B
Preferred Stock (the "PRE-SPLIT SERIES B CERTIFICATES," whether one or
more) shall be entitled to receive upon surrender of such Pre-Split
Series B Certificates to the Corporation's Secretary for cancellation,
a certificate or certificates (the "POST-SPLIT SERIES B CERTIFICATES,"
whether one or more) representing the number of whole shares of
Post-Split Series B Preferred Stock into which and for which the shares
of Pre-Split Series B Preferred Stock formerly represented by such
Pre-Split Series B Certificates so surrendered, are reclassified
pursuant to the terms hereof. From and after the Effective Date,
Pre-Split Series B Certificates shall represent only the right to
receive Post-Split Series B Certificates pursuant to the provisions
hereof. If more than one Pre-Split Series B Certificate shall be
surrendered at one time for the account of the same stockholder, the
number of full shares of Post-Split Series B Preferred Stock for which
the Post-Split Series B Certificates shall be issued shall be computed
on the basis of the aggregate number of shares represented by the
Pre-Split Series B Certificates so surrendered. If any Post-Split
Series B Certificate is to be issued in a name other than that in which
the Pre-Split Series B Certificate surrendered for exchange are issued,
the Pre-Split Series B Certificates so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and the person or
persons requesting such exchange shall affix any requisite stock
transfer tax stamps to the Pre-Split Series B Certificates surrendered,
or provide funds for their purchase, or establish to the satisfaction
of the Corporation's Secretary that such taxes are not payable. From
and after the Effective Date the amount of capital represented by the
shares of Post-Split Series B Stock into which and for which the shares
of the Pre-Split Series B Stock are reclassified pursuant to the terms
hereof shall be the same as the amount of capital represented by the
shares of Pre-Split Series B Stock so reclassified, until thereafter
reduced or increased in accordance with applicable law;

<PAGE> 45
be properly endorsed and otherwise in proper form for transfer, and the
person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Pre-Split Series C Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Corporation's Secretary that such taxes are not
payable. From and after the Effective Date the amount of capital
represented by the shares of Post-Split Series C Stock into which and
for which the shares of the Pre-Split Series C Stock are reclassified
pursuant to the terms hereof shall be the same as the amount of capital
represented by the shares of Pre-Split Series C Stock so reclassified,
until thereafter reduced or increased in accordance with applicable
law;

The Corporation's Series A Preferred Stock shall not be affected by the
filing of this Amendment."

<PAGE> 46
PROXY

AAMES FINANCIAL CORPORATION

ANNUAL MEETING OF STOCKHOLDERS
___________, 1999

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned holder(s) of Common Stock of Aames Financial Corporation, a
Delaware corporation (the "Company"), hereby acknowledge(s) receipt of the Proxy
Statement and the Notice of the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on ___________, 1999, at ________, Los Angeles
time, at the Hotel Inter-Continental, 251 S. Olive Street, Los Angeles,
California, and hereby further revokes all previous proxies and appoints Barbara
S. Polsky, David A. Sklar and Ralph W. Flick as proxies of the undersigned, with
full power of substitution for and in the name of the undersigned, at the Annual
Meeting and any adjournment(s) thereof with the same effect as if the
undersigned were present, for the following purposes:

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)

<PAGE> 47
<TABLE>
<S> <C>
COMMON STOCK Please mark your vote as [X]
indicated in this example.

1. To approve an amendment to the FOR AGAINST ABSTAIN 4. ELECTION OF DIRECTORS: FOR the WITHHOLD
Company's Certificate of [ ] [ ] [ ] The election of the following nominee AUTHORITY
Incorporation to increase the person as a director of the listed (TO VOTE
Company's authorized Common Stock Company, as provided in the (except FOR ALL THE
by 350,000,000 shares, to an Company's Proxy Statement. as marked NOMINEES
aggregate of 400,000,000 shares. to the LISTED)
contrary)
2. To approve an amendment to the FOR AGAINST ABSTAIN Eric Rahe [ ] [ ]
Company's Certificate of [ ] [ ] [ ]
Incorporation to a) increase the Instruction: To vote against any
Company's authorized Preferred one nominee, write that nominee's
Stock by 199,000,000 shares to an name in the space provided below:
aggregate of 200,000,000 shares, and _________________________________
b) to effect a 1,000-for-1 forward
split of the Company's Series B
Convertible Preferred Stock and 5. The adoption of the Company's FOR AGAINST ABSTAIN
Series C Convertible Preferred 1999 Stock Option Plan. [ ] [ ] [ ]
Stock.

3. To approve an amendment to FOR AGAINST ABSTAIN
the Company's Certificate [ ] [ ] [ ] 6. The ratification of the FOR AGAINST ABSTAIN
of Incorporation to effect a appointment of Ernst & Young LLP [ ] [ ] [ ]
1,000-for-1 forward split of the as the independent accountants of
Company's Series B Convertible the Company for fiscal 1999.
Preferred Stock and Series C
Convertible Preferred Stock
outstanding as of _________.
_____ THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
YOU HAVE INDICATED ABOVE. IF NO INDICATION HAS BEEN
MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR THE ABOVE NOMINEE AND IN FAVOR OF THE
PROPOSALS AND, AS THE PROXY DEEMS ADVISABLE, ON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.

YOUR VOTE IS IMPORTANT TO THE COMPANY

PLEASE SIGN AND RETURN YOUR PROXY BY TEARING OFF THE
TOP PORTION OF THIS SHEET AND RETURNING IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.

Signature(s) __________________________________, Signature, if held jointly _____________________ Date________________________, 1999
(Please sign exactly as your name appears on your stock certificate.) When signing as attorney, executor, administrator, trustee
or guardian, please give full title. If more than one trustee, all should sign. All joint owners should sign. If a corporation,
sign in full corporation name by President or other authorized officer. If a partnership, sign in partnership name by authorized
person. Persons signing in a fiduciary capacity should indicate their full title in such capacity.
</TABLE>