AMENDMENT NUMBER 1 TO
                               SECURITY AGREEMENT

                  AMENDMENT NUMBER 1 TO SECURITY  AGREEMENT (this  "Amendment"),
dated as of May 25, 1999 by and among UNION ACCEPTANCE  FUNDING  CORPORATION,  a
Delaware  corporation,  as  debtor  (in  such  capacity,  the  "Debtor"),  UNION
ACCEPTANCE CORPORATION, an Indiana corporation ("UAC"),  individually and in its
capacity  as  collection  agent  (in such  capacity,  the  "Collection  Agent"),
ENTERPRISE FUNDING  CORPORATION,  a Delaware  corporation (the "Company"),  MBIA
INSURANCE CORPORATION, a New York stock insurance company, as financial guaranty
insurer (the "Insurer") and NATIONSBANK,  N.A., a national  banking  association
("NationsBank"),  individually and as collateral agent for the Company, the Bank
Investors,  and the Insurer (in such capacity,  the "Collateral Agent") amending
that certain  Security  Agreement  dated as of September 18, 1998 (the "Security
Agreement").

                  WHEREAS,  the parties hereto  mutually  desire to make certain
amendments to the Security Agreement as hereinafter set forth.

                  NOW, THEREFORE, the parties hereby agree as follows:

                  SECTION  1.  Defined  Terms.  As used in this  Amendment,  and
except as otherwise provided in this Section 1, capitalized terms shall have the
same meanings assigned thereto in the Security Agreement.

         (a) Section 1.1 of the Security Agreement is hereby amended by deleting
the  definition of "Delinquent  Receivable"  and replacing it with the following
(solely for convenience changed language is italicized):

              ""Delinquent Receivable" shall mean an Eligible Receivable: (i) as
              to which any payment,  or part thereof (provided that such part is
              in excess of  $10.00),  remains  unpaid for more than  thirty (30)
              days from the due date for such  payment  and (ii)  which is not a
              Defaulted Receivable."

         (b) Section 1.1 of the Security Agreement is hereby amended by deleting
the definition of "Required  Reserve  Account  Amount" and replacing it with the
following (solely for convenience changed language is italicized):

              ""Required  Reserve  Account  Amount"  shall mean,  at any time of
              determination,  an amount equal to the product of (a) the Required
              Reserve Account  Percentage and (b) the Net Investment  divided by
              the Noteholder's Percentage."

         (c) Section 1.1 of the Security  Agreement is hereby  amended by adding
thereto  a new  defined  term  "Required  Reserve  Account  Percentage"  in  the
appropriate alphabetical order, and such definition shall read as follows:

              ""Required  Reserve Account  Percentage" shall mean the percentage
              specified in the following table  corresponding  to the percentage
              of type 54 or type 55 loans (i.e.  "non-prime"  loans) in relation
              to the Net Receivables Balance:


-------------------------------------------- -----------------------------------
Percentage of Non-Prime Receivables          Required Reserve Account Percentage
-------------------------------------------- -----------------------------------
2.51% or greater                             3.00%
-------------------------------------------- -----------------------------------
0.0 to 2.50%                                 2.75%
-------------------------------------------- -----------------------------------

                  SECTION 2.   Amendment to Section  2.3(a).   The  introductory
paragraph  of Section  2.3(a) of the Security  Agreement  is hereby  deleted and
replaced  with  the  following  (solely  for  convenience,   added  language  is
italicized):

              "(a)  On each  Determination  Date,  the  Collection  Agent  shall
              allocate all Collections  received during the preceding Settlement
              Period as Receipts of Interest or Receipts of  Principal.  On each
              Remittance Date, Receipts of Interest plus all earnings during the
              related  Settlement Period on amounts on deposit in the Prefunding
              Account to the extent not required  pursuant to Section 2.11 to be
              distributed  to  the  Collection   Agent  in   reimbursement   for
              previously  advanced  Interest  Reserve  Advances plus all amounts
              deposited in the Prefunding  Interest Reserve Account with respect
              to the  related  Settlement  Period  (together  with any  earnings
              thereon during such Settlement  Period) plus any Interest  Reserve
              Advance  made by the  Collection  Agent  on such  Remittance  Date
              pursuant to Section  2.11 plus any payments to the Debtor under an
              Acceptable Hedging  Arrangement (it being understood that prior to
              a  Termination   Event  and  provided  that   Acceptable   Hedging
              Arrangements  are in place,  proceeds from the  termination of any
              Acceptable Hedging Arrangements in connection with a Take-Out will
              be released to the Debtor and not  constitute  "Available  Funds")
              plus all amounts to be applied pursuant to Section  2.14(c)(ii)(y)
              (the aggregate of such amounts in respect of any remittance  date,
              the "Available Funds") shall be applied,  without duplication,  by
              the Collection Agent as follows:"

                  SECTION  3.  Amendment  to  Section  9.6.  Section  9.6 of the
Security Agreement is hereby amended to add thereto a new paragraph (c) and such
paragraph shall read as follows:

              "(c)  The  parties  hereto  agree  that  the   counterparties   to
              Acceptable Hedging Arrangements shall be third party beneficiaries
              of this  Agreement and that the  provisions of Section 2.3 (a) may
              not be amended without the prior consent of such counterparties. "

                  SECTION 4. Limited  Scope.  This  amendment is specific to the
circumstances  described above and does not imply any future amendment or waiver
of rights  allocated to the Debtor,  the  Collection  Agent,  the Insurer or the
Collateral Agent under the Security Agreement.

                  SECTION 5. Governing Law. THIS AMENDMENT  SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  SECTION 6. Severability;  Counterparts.  This Amendment may be
executed  in any  number of  counterparts  and by  different  parties  hereto in
separate  counterparts,  each of which when so executed shall be deemed to be an
original and all of which when taken together shall  constitute one and the same
instrument.   Any  provisions  of  this   Amendment   which  are  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

                  SECTION 7.  Ratification.  Except as expressly affected by the
provisions  hereof, the Security Agreement as amended shall remain in full force
and  effect in  accordance  with its terms and  ratified  and  confirmed  by the
parties  hereto.  On and after the date hereof,  each  reference in the Security
Agreement  to "this  Agreement",  "hereunder",  "herein" or words of like import
shall  mean and be a  reference  to the  Security  Agreement  as amended by this
Amendment.



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<PAGE>


                  IN WITNESS  WHEREOF,  the  parties  hereto have  executed  and
delivered this Amendment Number 1 as of the date first written above.

                                             ENTERPRISE FUNDING CORPORATION,
                                         as Company



                                   By: /s/ Kevin P. Burns
                                       --------------------------------------
                                           Name: Kevin P. Burns
                                           Title: Vice President

                                       UNION ACCEPTANCE FUNDING
                                         CORPORATION, as Debtor



                                   By: /s/ Leeanne W. Graziani
                                       --------------------------------------
                                           Name: Leeanne W. Graziani
                                           Title: President


                                   UNION ACCEPTANCE CORPORATION,
                                         individually and as Collection Agent



                                   By: /s/ Melanie S. Otto
                                       --------------------------------------
                                           Name: Melanie S. Otto
                                           Title: Vice President




<PAGE>


                                         MBIA INSURANCE CORPORATION,
                                         as Insurer



                                   By: /s/ John D. Lohrs
                                       --------------------------------------
                                             Name: John D. Lohrs
                                             Title: Managing Director

                                         NATIONSBANK, N.A.,
                                         individually and as Collateral Agent



                                   By: /s/ Elliott T. Lemon
                                       --------------------------------------
                                             Name: Elliott T. Lemon
                                             Title: Vice President