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                               UAFC-2 CORPORATION,
                                  as Borrower,

                          UNION ACCEPTANCE CORPORATION,
                                  as Servicer,

                           the INVESTORS named herein,

                      VARIABLE FUNDING CAPITAL CORPORATION,


                          FIRST UNION SECURITIES, INC.,
                                 as Deal Agent,

                        ASSET GUARANTY INSURANCE COMPANY,
                                   as Insurer,

                                       and

                           FIRST UNION NATIONAL BANK,
                     as Collateral Agent and Liquidity Agent

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


                                  $200,000,000

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

                           LOAN AND SECURITY AGREEMENT

                           Dated as of August 1, 2000
                    ---------------------------------------





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<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

                                   ARTICLE One

                            DEFINITIONS; CONSTRUCTION

Section 1.01. Definitions..................................................... 1
Section 1.02. Accounting Terms and Determinations.............................24
Section 1.03. Computation of Time Periods.....................................24


                                   ARTICLE Two

                                   PREFUNDINGS

Section 2.01. Prefunding; Procedures for Prefundings..........................25
Section 2.02. Withdrawals from the Prefunding Account.........................26
Section 2.03. Optional Changes in Facility Amount; Extension
                        of Commitment Termination Date........................26
Section 2.04. The Note........................................................27
Section 2.05. Optional Principal Repayments...................................27
Section 2.06. Interest Payments...............................................28
Section 2.07. Mandatory Payments and Prepayments..............................29
Section 2.08. Payments, Computations, Etc.....................................29
Section 2.09. Breakage Costs..................................................29
Section 2.10. Increased Costs; Capital Adequacy; Illegality...................30
Section 2.11. Taxes...........................................................31


                                  ARTICLE Three

                                    SECURITY

Section 3.01. Collateral......................................................33
Section 3.02. Release of Collateral; No Legal Title...........................33
Section 3.03. Protection of Security Interest; Deal Agent as
                        Attorney-in-Fact......................................33
Section 3.04. Payments on Receivables; Application of Payments................34


                                  ARTICLE Four

                           ADMINISTRATION AND ACCOUNTS

Section 4.01. Servicer........................................................36
Section 4.02. Books and Records...............................................38
Section 4.03. Appointment to Act as Borrower's Agent..........................38
Section 4.04. Delivery of Certain Reports.....................................38
Section 4.05. Establishment of Accounts; Investment of Funds..................38
Section 4.06. Collections; Collection Account; Allocation of
                Available Funds; Draws on Policy..............................39
Section 4.07. Prefunding Interest Reserve Account; Prefunding Interest
                Reserve Deposits; Interest Reserve Advances;
                Reimbursements................................................41
Section 4.08. Yield Supplement Account, Deposits; Withdrawals.................42
Section 4.09. Reserve Account; Releases.......................................43


                                  ARTICLE Five

                      CONDITIONS OF CLOSING AND PREFUNDINGS

Section 5.01. Conditions to Closing...........................................44
Section 5.02. Conditions Precedent to Prefundings.............................46
Section 5.03. Conditions Precedent to Withdrawals from the Prefunding Account.47


                                   ARTICLE Six

                         REPRESENTATIONS AND WARRANTIES

Section 6.01. Representations and Warranties of the Borrower..................48


                                  ARTICLE Seven

                        GENERAL COVENANTS OF THE BORROWER

Section 7.01. Covenants of Borrower and UAC...................................53
Section 7.02. Hedging Agreement...............................................60


                                  ARTICLE Eight

                               TERMINATION EVENTS

Section 8.01. Termination Events..............................................61
Section 8.02. Actions Upon Termination Date...................................63
Section 8.03. Exercise of Remedies............................................64
Section 8.04. Waiver of Certain Laws..........................................65
Section 8.05. Power of Attorney...............................................65


                                  ARTICLE Nine

                                 INDEMNIFICATION

Section 9.01. Indemnities by the Borrower.....................................66


                                   ARTICLE Ten

          THE DEAL AGENT, THE COLLATERAL AGENT AND THE LIQUIDITY AGENT

Section 10.01. Authorization and Action.......................................68
Section 10.02. Delegation of Duties...........................................68
Section 10.03. Exculpatory Provisions.........................................69
Section 10.04. Reliance.......................................................69
Section 10.05. Non-Reliance on Deal Agent, Liquidity Agent and Other Lenders..69
Section 10.06. Reimbursement and Indemnification..............................70
Section 10.07. Deal Agent, the Collateral Agent and Liquidity
                        Agent in their Individual Capacities..................70
Section 10.08. Successor Deal Agent, Collateral Agent or Liquidity Agent......70


                                 ARTICLE Eleven

                           ASSIGNMENTS; PARTICIPATIONS

Section 11.01. Assignments and Participations.................................72


                                 ARTICLE Twelve

                                  MISCELLANEOUS

Section 12.01. Amendments and Waivers.........................................75
Section 12.02. Notices, Etc...................................................75
Section 12.03. No Waiver, Rights and Remedies.................................75
Section 12.04. Binding Effect.................................................75
Section 12.05. Term of this Agreement.........................................75
Section 12.06. GOVERNING LAW; CONSENT TO JURISDICTION;
                        WAIVER OF OBJECTION TO VENUE..........................76
Section 12.07. WAIVER OF JURY TRIAL...........................................76
Section 12.08. Costs, Expenses and Taxes......................................76
Section 12.09. No Proceedings.................................................77
Section 12.10. Recourse Against Certain Parties...............................77
Section 12.11. Confidentiality................................................77
Section 12.12. Execution in Counterparts; Severability; Integration...........78
Section 12.13. No Recourse....................................................78


                                    EXHIBITS

Exhibit A    - Forms of Prefunding Request...................................A-1
Exhibit B    - Form of Note..................................................B-1
Exhibit C    - Form of Assignment and Acceptance.............................C-1
Exhibit D    - Credit and Collection Policy..................................D-1
Exhibit E    - Form of Hedging Agreement.....................................E-1
Exhibit F    - Form of Policy................................................F-1
Exhibit G    - List of Lock-Box Banks and Lock-Box Accounts..................G-1
Exhibit H    - List of Actions and Suits.....................................H-1
Exhibit I    - Schedule of Location of Records...............................I-1
Exhibit J    - Form of Withdrawal Notice.....................................J-1
Exhibit K    - Form of Purchase Agreement....................................K-1
Exhibit L    - Form of Repurchase Agreement..................................L-1
Exhibit M    - Form of Settlement Statement..................................M-1
Exhibit N    - Form of Warehouse Transfer Agreement..........................N-1



<PAGE>


                           LOAN AND SECURITY AGREEMENT

         This Loan and Security  Agreement,  dated as of July 1, 2000,  is among
UAFC-2 Corporation, a Delaware corporation, as borrower (the "Borrower"),  Union
Acceptance  Corporation,  an Indiana corporation,  as servicer (the "Servicer"),
the  investors  named  herein  (the   "Investors"),   Variable  Funding  Capital
Corporation  ("VFCC"), a Delaware corporation,  First Union Securities,  Inc., a
Delaware corporation, as deal agent (in such capacity, the "Deal Agent") for the
Secured Parties (as defined herein),  Asset Guaranty  Insurance  Company,  a New
York stock  insurance  company,  as insurer  (the  "Insurer"),  and First  Union
National  Bank, a national  banking  association,  as collateral  agent (in such
capacity,  the "Collateral Agent") and as liquidity agent (in such capacity, the
"Liquidity Agent").

                              W I T N E S S E T H:

         WHEREAS,  VFCC has agreed to  advance  funds to the  Borrower  upon the
terms and subject to the conditions set forth herein;

         NOW THEREFORE,  in consideration of the premises and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

                                  ARTICLE One

                            DEFINITIONS; CONSTRUCTION

Section 1.01. Definitions.  Capitalized terms used herein that are not otherwise
defined shall have the meanings  ascribed  thereto in the  Servicing  Agreement.
Whenever used herein, unless the context otherwise requires, the following words
and phrases shall have the following meanings:

         "Accounts" mean the Collection  Account,  the Prefunding  Account,  the
Prefunding  Interest  Reserve  Account,   the  Reserve  Account  and  the  Yield
Supplement Account.

         "Additional Amount" has the meaning set forth in Section 2.11(a).

         "Adjusted  LIBOR Rate"  means,  on any day, an interest  rate per annum
equal to the sum of (i) the  quotient,  expressed  as a  percentage  and rounded
upwards, if necessary,  to the nearest 1/100 of 1%, obtained by dividing (a) the
LIBOR  Rate by (b) 100% minus the  Eurodollar  Reserve  Percentage  and (ii) the
LIBOR Margin.

         "Adjusted  Prefunding  Account  Amount"  means an  amount  equal to the
quotient of (i) the Prefunding Account Amount and (ii) 100% less the quotient of
(a) the Required Reserve Account Percentage and (b) the Noteholder's Percentage.

         "Adverse Claim" means a lien, security interest,  charge or encumbrance
or other right or claim in, of or on any Person's  assets or properties in favor
of any other Person.

         "Affected Party" has the meaning set forth in Section 2.10(a).

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

         "Aggregate  Outstanding  Balance"  means  the  sum of  the  Outstanding
Balances of all Receivables.

         "Aggregate  Unpaids"  means, at any time, an amount equal to the sum of
(i) the aggregate accrued and unpaid Carrying Costs at such time, (ii) an amount
equal  to the  Lender's  existing  obligations  which  comprise  Carrying  Costs
thereafter  and  (iii)  all  other  amounts  due  and  owing  (exclusive  of Net
Investment  but  including  Breakage  Costs)  by the  Borrower  to  VFCC  or the
Investors hereunder and under the other Transaction Documents at such time.

         "Agreement"  means  this  Loan  and  Security  Agreement,  as  amended,
restated or supplemented from time to time.

         "Alternative  Rate" means,  with respect to the Net  Investment and any
day, an interest  rate per annum  equal to the  Adjusted  LIBOR Rate or the Base
Rate,  as the Deal  Agent  shall  select  in  accordance  with  this  Agreement;
provided,  however, that the "Alternative Rate" shall be the Base Rate if at the
time such rate is selected the relevant  Lender has notified the Deal Agent that
a Eurodollar Disruption Event has occurred.

         "Amortization  Period"  means the period  beginning on the  Termination
Date and ending on the Facility Termination Date.

         "APR" means annualized percentage rate.

         "Assignment  and   Acceptance"   means  an  assignment  and  acceptance
agreement entered into by an Investor and an Eligible Assignee,  and accepted by
the Deal Agent, in substantially the form of Exhibit C hereto.

         "Available  Funds" means,  with respect to each Remittance Date and the
related  Settlement Period, the sum of (i) all Collections (other than Principal
Receipts)  received during such Settlement Period along with all earnings on the
Collection  Account,  (ii) all earnings during the related  Settlement Period on
amounts on deposit in the  Prefunding  Account to the extent not  required to be
distributed to the Servicer in reimbursement  for previously  advanced  Interest
Reserve Advances, (iii) 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),  (iv) any Interest  Reserve
Advance made by the Servicer on such  Remittance  Date  pursuant to Section 4.07
and (v) any payments to the Borrower under a Hedging  Agreement made during such
Settlement  Period  exclusive  of  amounts  related to hedge  payments  received
pursuant to a Hedging  Agreement in  conjunction  with  Warehouse  Transfers and
Securitizations.

         "Bankruptcy Code" means the Federal  Bankruptcy Code, as amended (Title
11 of the United States Code).

         "Base  Rate"  means,  a rate per annum  equal to the greater of (i) the
prime  rate of  interest  announced  by the  Liquidity  Agent from time to time,
changing  when and as said prime rate changes (such rate not  necessarily  being
the lowest or best rate  charged by the  Liquidity  Agent) and (ii) the  Federal
Funds Rate plus 1.0%.

         "Borrower" has the meaning set forth in the Preamble.

         "Borrower's  Account"  means  the  bank  account  of the  Borrower,  as
notified  to the Deal Agent from time to time in writing by the  Borrower,  into
which all amounts  withdrawn  from the  Prefunding  Account  pursuant to Section
2.02(a) and all other amounts  distributable to the Borrower shall be deposited,
which  account,  as of the Closing Date, is in the name UAFC-2,  Account  Number
59-0109154 with an ABA Routing No. of 274070484.

         "Breakage Costs" has the meaning set forth in Section 2.09.

         "Business Day" means any day other than a Saturday or a Sunday on which
(i) commercial banking  institutions are not required or authorized to be closed
in New  York,  New York,  Bonita  Springs,  Florida,  Indianapolis,  Indiana  or
Charlotte,  North  Carolina  and  (ii)  if the  term  "Business  Day" is used in
connection  with the Adjusted LIBOR Rate, such day must also be a LIBOR Business
Day.

         "Capped Costs" means,  with respect to any Remittance  Date, the lesser
of (i) sum of the  Increased  Costs  and the  Additional  Amounts  and  (ii) the
product of (A) 1/12, (B) 1.00% and (C) the average daily Net  Investment  during
the related Settlement Period.

         "Carrying Costs" means for any Settlement Period the sum of:

                  (i) the sum of the following costs for such Settlement  Period
         determined  on an accrual basis in  accordance  with GAAP  consistently
         applied:

                          (a)       Interest with respect to the Net Investment;

                          (b)       reimbursement owed to any successor Servicer
                                    for  any   unreimbursed   Interest   Reserve
                                    Advances made by such successor Servicer;

                          (c)       any past due amounts not paid in clauses (i)
                                    and (ii) with  respect  to prior  Settlement
                                    Periods; and

                          (d)       the Increased Costs and Additional  Amounts;
                                    and

                  (ii) the Program  Fee and the  Facility  Fee accrued  from the
         first day through the last day of such Settlement Period whether or not
         such amount is payable during such Settlement Period.

         "Closing Date" means August 8, 2000.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Collateral"  means all  right,  title  and  interest  of the  Borrower
whether now existing or hereafter acquired,  in, to and under any and all of the
following:

                  (i) the  Receivables  and all  collections  due (including any
         payments made under any guarantee or similar  credit  enhancement  with
         respect to the  Contracts),  to become due or received by any Person in
         payment of any of the foregoing;

                  (ii) each security  interest in the Financed Vehicles securing
         the  Receivables,  including  all  proceeds  from  any  sale  or  other
         disposition of such Financed Vehicles;

                  (iii)    the Accounts and all funds held in such accounts;

                  (iv)  all  rights  of the  Borrower  in  and  to  all  Hedging
         Agreements, Hedging Transactions and all amounts payable by all Hedging
         Counterparties to the Borrower under or in connection with such Hedging
         Agreements and Hedging Transactions;

                  (v) all Contract Documents and all interest of the Borrower in
         the documents included in the Contract  Documents,  including,  without
         limitation,  rights of  recourse  of the  Borrower  against  the Seller
         and/or any Dealer under the Contract Documents or any Dealer Agreement;

                  (vi) all rights of the  Borrower  in all  Insurance  Policies,
         whether now existing or hereafter acquired, and all proceeds thereof;

                  (vii) all  security  interests,  Liens,  guaranties  and other
         encumbrances  in favor of or assigned or transferred to the Borrower in
         and to the Contracts and Financed Vehicles;

                  (viii) all deposit accounts, monies, deposits, funds, accounts
         and instruments relating to the foregoing;

                  (ix) the  Transaction  Documents  and any  Warehouse  Transfer
         Agreement;

                  (x)      the Policy; and

                  (xi)     all income and proceeds of the foregoing.

         "Collateral Agent" has the meaning set forth in the Preamble.

         "Collection Account" has the meaning set forth in Section 4.05.

         "Collections"  means, with respect to the related Settlement Period and
the Receivables, all cash collections and other cash proceeds of the Receivables
during such Settlement  Period,  including,  without  limitation,  all Principal
Receipts,  all Finance Charges,  any amount received by the Borrower pursuant to
Section 7.01 of the Sale and Purchase  Agreement II and any refunded  portion of
extended  warranty  protection  plan costs or of insurance  costs (for  example,
physical  damage,  credit life or  disability)  included in the original  amount
financed  under the  Receivables  and cash  proceeds  of Related  Security  with
respect to the  Receivable;  provided  that  amounts  received in respect of any
Receivable  which  constitutes,  in  accordance  with the Credit and  Collection
Policy,  a payment of a late payment charge,  an insufficient  funds charge or a
prepayment  charge will not be considered a Collection  and shall be retained by
the Servicer and not deposited into the Collection Account.

         "Commercial Paper" means any short-term promissory notes issued by VFCC
with respect to financing the Net Investment.

         "Commitment"  means,  with respect to any Investor,  the  commitment of
such Investor to fund the Net  Investment  in an aggregate  amount not to exceed
the amount set forth  opposite such  Investor's  name on the signature  pages of
this  Agreement,  as such amount may be modified  in  accordance  with the terms
hereof.

         "Commitment  Termination  Date" means August 7, 2001 or such later date
to which the  Commitment  Termination  Date may be extended in  accordance  with
Section 2.03(b).

         "Contract" means any retail  installment  sales contract or installment
loan and security  agreement  executed by an Obligor that has been originated or
acquired by the Seller,  UAC or UAC Finance in the ordinary  course of business,
is secured by the related  Financed  Vehicle and in which the Borrower  acquires
from the Seller or a Warehouse  Transferor all right,  title and interest of the
Seller or such Warehouse  Transferor pursuant to the Sale and Purchase Agreement
II or a Warehouse Transfer Agreement, as applicable.

         "Contract  Documents"  means,  with respect to each  Contract,  (i) the
Contract; (ii) the Title Documents,  together with evidence of perfection of the
security  interest in the related Financed Vehicle granted by such Contract,  as
determined  by the Servicer to be permitted or required to perfect such security
interest  under  the laws of the  applicable  jurisdiction;  (iii)  the  related
assignments; and (iv) all other papers and computerized records customarily kept
by the Servicer in servicing contracts and loans comparable to the Contracts.

         "CP Rate" means,  with respect to any Settlement  Period,  the weighted
average  of the per annum  rates  paid or  payable  by VFCC from time to time as
interest on or  otherwise  (by means of interest  rate hedges or  otherwise)  in
respect of the promissory  notes issued by VFCC that are allocated,  in whole or
in part,  by the Deal Agent (on behalf of VFCC) to fund or maintain  its portion
of the Net Investment  during such Settlement  Period, as determined by the Deal
Agent (on  behalf of VFCC) and  reported  to the  Borrower,  which  rates  shall
include  the  commissions  of  placement  agents and  dealers in respect of such
promissory  notes, to the extent such commissions are allocated,  in whole or in
part, to such promissory notes by the Deal Agent (on behalf of VFCC);  provided,
however,  that if any component of such rate is a discount rate, for purposes of
this definition,  the Deal Agent shall for such component use the rate resulting
from  converting such discount rate to an  interest-bearing  equivalent rate per
annum.

         "Credit and Collection  Policy" means the credit and collection  policy
of UAC as in effect on the date  hereof  relating to the  Contracts  and related
Financed  Vehicles,  set  forth in  Exhibit  D, as the same  may be  amended  or
modified from time to time in accordance with Section 7.01(n).

         "Daily Interest  Amount" means, for any day, the product of (i) the Net
Investment and (ii) the Interest Rate divided by 360.

         "Deal Agent" has the meaning set forth in the Preamble.

         "Deal Agent's Account" means an account specified by the Deal Agent or,
so long as VFCC is the sole Lender  hereunder,  in the name of VFCC,  at Bankers
Trust (account number 01 41 96 47 and ABA Routing No. 021 001 033).

         "Dealer"  means a motor  vehicle  dealer  that is a party  to a  Dealer
Agreement.

         "Dealer  Agreement" means an agreement  between a Dealer and UAC or UAC
Finance,  which sets forth the respective  rights and obligations of the parties
with respect to the origination of Contracts by the Dealer.

         "Defaulted  Receivable" means, for any Settlement Period, a Receivable:
(i) as to which any  payment,  or part  thereof (in excess of  $10.00),  remains
unpaid for 120 days or more as of the last day of such Settlement  Period,  (ii)
which has been or should have been  identified by the Servicer as  uncollectible
in accordance with the Servicer's  customary practices on or before the last day
of such Settlement  Period or (iii) as to which the related Financed Vehicle has
been repossessed from the Obligor during such Settlement Period.

         "Deferral"  has the  meaning  set forth in the  Credit  and  Collection
Policy.

         "Delinquent  Receivable"  means  a  Receivable:  (i)  as to  which  any
payment,  or part  thereof  (provided  that such amount 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.

         "Determination  Date" means,  with respect to each Remittance Date, the
second Business Day preceding such Remittance Date.

         "Derivatives"   means  (i)  any   exchange-traded  or  over-the-counter
forward,  future,  option, swap, cap, collar, floor or foreign exchange contract
or any  combination  of the  foregoing,  whether for  physical  delivery or cash
settlement,  relating to any  interest  rate,  interest  rate  index,  currency,
currency  exchange rate,  currency  exchange rate index,  debt instrument,  debt
price, debt index,  depository instrument,  depository price,  depository index,
equity instrument,  equity price,  equity index,  commodity,  commodity price or
commodity index, (ii) any similar transaction, contract, instrument, undertaking
or security  or (iii) any  transaction,  contract,  instrument,  undertaking  or
security containing any of the foregoing.

         "Dollars" or "$" means the lawful currency of the United States.

         "Duff & Phelps" means Duff & Phelps Credit Rating Co.

         "Eligible  Assignee" means a Person either (i) whose short-term  rating
is at least  "A-1"  from  Standard & Poor's  and "P-1"  from  Moody's,  or whose
obligations  under this  Agreement are  guaranteed by a Person whose  short-term
rating is at least "A-1" from  Standard & Poor's and "P-1" from  Moody's or (ii)
who is  satisfactory  to VFCC,  the Deal Agent,  Standard & Poor's and  Moody's,
subject,  in the case of any Person chosen pursuant to clause (ii), to the prior
written consent of the Borrower.

         "Eligible   Institution"  means  the  Collateral  Agent  or  any  other
depository  institution  organized  under the laws of the  United  States or any
state thereof or the District of Columbia,  the deposits in which are insured by
the FDIC and whose  short-term  unsecured  debt at all times  shall  satisfy the
Short-Term Rating Requirement.

         "Eligible  Investment"  means (i) negotiable  instruments or securities
represented by  instruments in bearer or registered or in book-entry  form which
evidence  (A)  obligations  fully  guaranteed  by the United  States or (B) time
deposits in, or bankers  acceptances  issued by, any  depository  institution or
trust  company  incorporated  under the laws of the  United  States or any state
thereof (or any  domestic  branch or agency of any foreign  bank) and subject to
supervision   and   examination  by  federal  or  state  banking  or  depository
institution authorities;  provided,  however, that at the time of the investment
or contractual  commitment to invest  therein,  the  certificates  of deposit or
short-term deposits, if any, or long-term unsecured debt obligations (other than
any such  obligation  whose rating is based on  collateral or on the credit of a
Person  other  than  such  institution  or  trust  company)  of such  depository
institution  or trust  company,  in the case of (1)  certificates  of deposit or
short-term  deposits,  shall have a rating not lower than one of the two highest
investment categories granted by Moody's and Standard & Poor's or Duff & Phelps,
if such  investment is rated by Duff & Phelps,  or Fitch,  if such investment is
rated by Fitch;  (2)  certificates of deposit,  at the time of the investment or
contractual  commitment to invest therein,  shall satisfy the Short-Term  Rating
Requirement;  or (3)  investments  in money market funds,  shall be rated in the
highest  investment  category,  (ii) demand  deposits in the name of the Secured
Parties or the Deal  Agent on behalf of the  Secured  Parties in any  depository
institution  or  trust  company  referred  to in  clause  (i) (B)  above,  (iii)
commercial  paper  (having  original or remaining  maturities of no more than 30
days) which,  at the time of the investment or contractual  commitment to invest
therein, the Short-Term Rating Requirement;  (iv) Eurodollar time deposits which
satisfy  the  Short-Term  Rating  Requirement;  and  (v)  repurchase  agreements
involving any of the Eligible  Investments  described in clauses (i)(A),  (i)(B)
and (iv) hereof so long as the other part to the repurchase  agreement satisfies
at the time of the investment therein the Short-Term Rating Requirement.

         "Eligible Receivable" means a Receivable:

                  (i)  that (a) has  been  either  originated  by or  through  a
factory  authorized  Dealer,  a  nationally  recognized  rental  car outlet or a
nationally  recognized used car  superstore,  in each case located in the United
States and which,  together with the Contract related thereto,  has been validly
assigned by such Dealer or other  entity to UAC or UAC  Finance,  has been fully
and properly executed by the parties thereto,  and has been advanced directly to
or for the  benefit of the Obligor  for the  purchase  of the  related  Financed
Vehicle,  (b) has been  sold by UAC to the  Seller,  or, if  applicable,  by UAC
Finance to UAC then to the Seller, and by the Seller to the Borrower pursuant to
the Sale and Purchase  Agreement II or has been acquired pursuant to a Warehouse
Transfer Agreement,  and to which the Borrower has good title thereto,  free and
clear of all Adverse Claims and (c) the Contract  related to which shall contain
customary and  enforceable  provisions  such that the rights and remedies of the
holder thereof shall be adequate for the  realization  against the collateral of
the benefits of the security provided thereby;

                  (ii)  the  Obligor  of  which is  recorded  in the  Servicer's
records as having a United States  billing  address,  is a natural person and is
not a government or a governmental subdivision or agency;

                  (iii) which is not a Defaulted  Receivable  at the time of the
initial creation of an interest of the Deal Agent therein;

                  (iv) which is not a Delinquent  Receivable  at the time of the
initial  creation of an interest of the Deal Agent therein;  provided,  however,
that if a Receivable is a Delinquent  Receivable at the time of initial creation
of an  interest  of  the  Deal  Agent  and  at any  time  subsequently  is not a
Delinquent  Receivable,  such Receivable may become an Eligible  Receivable from
such time going  forward  subject to other  eligibility  requirements  described
herein;

                  (v) for which there have been no  modifications to the related
Contract other than pursuant to a Deferral or as otherwise required by law;

                  (vi) which,  according to the related Contract,  shall provide
for level monthly payments (provided that the payment in the first or last month
in the  life of the  Receivable  may be  minimally  different  from  such  level
payment) that fully amortize the amount financed over the original term;

                  (vii) for which the  related  Contract  has  provided  for the
calculation of interest payable thereunder under either the "simple interest" or
"Rule of 78's" or the "sum of the periodic time balances" method;

                  (viii) for which the  related  Contract  provides  for no more
than 84 monthly payments;

                  (ix)  which is an  "eligible  asset" as  defined  in Rule 3a-7
under the Investment Company Act;

                  (x) which is "chattel  paper"  within the meaning of Article 9
of the Relevant UCC, and which is secured by a first priority  perfected lien on
the related Financed  Vehicle,  free and clear of any Adverse Claim or for which
all necessary steps to result in such a first priority perfected lien shall have
been taken;

                  (xi) which is  denominated  and payable only in Dollars in the
United States;

                  (xii) which arises under a Contract  that,  together  with the
Receivable,  is in full force and effect and  constitutes  the legal,  valid and
binding  obligation of the related Obligor  enforceable  against such Obligor in
accordance  with its terms and is not  subject to any  offset,  counterclaim  or
other defense at such time;

                  (xiii)  which,  together with the related  Contract,  does not
contravene in any material  respect any laws,  rules or  regulations  applicable
thereto (including,  without limitation, laws, rules and regulations relating to
usury laws, the Federal  Truth-in-Lending Act, the Equal Credit Opportunity Act,
the Fair Credit  Reporting  Act,  the Fair Debt  Collection  Practices  Act, the
Federal Trade Commission Act, the Magnuson-Moss  Warranty Act, Regulations B and
Z of the Federal  Reserve  Board,  various  state  adaptations  of the  National
Consumer Act and of the Uniform  Consumer Credit Code, and other consumer credit
laws and equal credit opportunity and disclosure laws) and with respect to which
no part of such  Contract is in violation of any such law, rule or regulation in
any material respect;

                  (xiv) with  respect to any  Receivables  originated  after the
date hereof, is a Tier I Receivable,  and, regardless of the date of origination
of such Receivables, was not originated as a Non-Prime Receivable;

                  (xv) which (a) satisfies all  applicable  requirements  of the
Credit and Collection Policy, (b) arises under a Contract which does not require
the related  Obligor to consent to the  transfer of the rights and duties of the
Borrower  under  such  Contract,  and which does not  contain a  confidentiality
provision  that  purports to restrict  the ability of the Deal Agent to exercise
its rights under the Transaction Documents and any Warehouse Transfer Agreement,
including,  without  limitation,  its right to review the  Contract,  (c) arises
under a Contract  with  respect to which UAC,  UAC  Finance,  the Seller and the
Borrower have each  performed all  obligations  required to be performed by them
thereunder,  and  delivery of the  Financed  Vehicle to the related  Obligor has
occurred and (d) complies with such other criteria and  requirements as VFCC may
from time to time reasonably specify to the Borrower following 60 days' notice;

                  (xvi)  the  Obligor  of which  has been  directed  to make all
payments to a specified account of the Servicer; and

                  (xvii) with respect to any Undocumented Receivable,  for which
the Undocumented Receivable Date has not passed.

         "Entitlement  Orders" has the meaning set forth in Section 8-102 of the
1994 Official Text of the Uniform Commercial Code.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, and the regulations promulgated and rulings issued thereunder.

         "ERISA  Affiliate"  means (i) any corporation  which is a member of the
same controlled  group of corporations  (within the meaning of Section 414(b) of
the  Code)  as  the  Borrower,   (ii)  a  trade  or  business  (whether  or  not
incorporated)  under common control (within the meaning of Section 414(c) of the
Code) with the Borrower or (iii) a member of the same  affiliated  service group
(within  the  meaning  of  Section  414(m)  of the  Code) as the  Borrower,  any
corporation  described in clause (i) above or any trade or business described in
clause (ii) above.

         "Eurodollar  Disruption Event" means with respect to the portion of the
Net Investment as to which Interest accrues or is to accrue at a rate based upon
the Adjusted LIBOR Rate, any of the following:  (i) a determination  by a Lender
that it would be contrary  to law or to the  directive  of any  central  bank or
other governmental  authority (whether or not having the force of law) to obtain
United States Dollars in the London  interbank  market to make, fund or maintain
such  portion of the Net  Investment;  (ii) the  inability of a Lender to obtain
timely  information for purposes of determining the Adjusted LIBOR Rate; (iii) a
determination  by a Lender  that the rate at which  deposits  of  United  States
Dollars are being offered to such Lender in the London interbank market does not
accurately  reflect  the cost to such Lender of making,  funding or  maintaining
such portion of the Net Investment;  or (iv) the inability of a Lender to obtain
United States Dollars in the London  interbank  market to make, fund or maintain
such portion of the Net Investment.

         "Eurodollar  Reserve  Percentage"  means,  on any day,  the  applicable
reserve  percentage  (expressed as a decimal)  prescribed by the Federal Reserve
Board  for  determining  reserve  requirements  for  "Eurocurrency  Liabilities"
pursuant  to  Regulation  D or any other  applicable  regulation  of the Federal
Reserve Board that prescribes reserve  requirements  applicable to "Eurocurrency
Liabilities" as presently defined in Regulation D.

         "Excess Carry Costs and Aggregate Unpaids" means an amount equal to the
excess of the sum of (i) all  Carrying  Costs  accrued  through but not yet paid
through the date of a  prepayment  made  pursuant  to Section  2.05 and (ii) all
Aggregate  Unpaids  payable under this Agreement to any party through such date,
including any fees or other amounts  payable  pursuant to Section 9.01, over the
amount on deposit in the Collection Account exclusive of Principal Receipts.

         "Excess Delinquent Receivables Balance" means an amount,  calculated on
the day a Take-Out occurs and for each day until the next Take-Out occurs, equal
to the  excess,  if  any,  of (i)  the  Outstanding  Balance  of all  Delinquent
Receivables  which are Eligible  Receivables at any time of  determination  over
(ii) the product of 2.5% and the Net  Receivables  Balance  (calculated  without
giving  effect  to  clause  (iii)  of the  definition  thereof)  at any  time of
determination;  provided,  that if the  Excess  Delinquent  Receivables  Balance
shall,  at any time  since the most  recent  Take-Out,  be less than or equal to
zero, the Excess Delinquent  Receivables Balance shall be deemed to be zero from
such time until the next Take-Out shall occur.

         "Facility Amount" means (i) prior to the Termination Date, $200,000,000
and (ii) on and after the Termination Date, $0.00.

         "Facility Fee" means,  for any Settlement  Period, a fee payable by the
Borrower on the related Remittance Date in an amount equal to the product of (i)
the  Facility  Fee Rate,  (ii) the  Facility  Amount as of the first day of such
Settlement  Period and (iii) a fraction  the  numerator of which is equal to the
actual number of days comprising  such Settlement  Period and the denominator of
which is equal to 360.

         "Facility  Fee Cap" means the product of (i)  0.125%,  (ii) the average
daily balance of the Net  Investment  during the related  Settlement  Period and
(iii) a fraction the  numerator  of which is equal to the actual  number of days
comprising such Settlement Period and the denominator of which is equal to 360.

         "Facility Fee Rate" has the meaning set forth in the Fee Letter.

         "Facility  Termination  Date" means the date following the  Termination
Date on which the Aggregate  Unpaids,  amounts owed to the Insurer,  and the Net
Investment have been indefeasibly paid in full.

         "Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum (rounded upwards, if necessary,  to the nearest 1/100 of 1%) equal for
each day during such period to the weighted  average of the federal  funds rates
as quoted by First Union and  confirmed  in Federal  Reserve  Board  Statistical
Release H.15(519) or any successor or substitute  publication  selected by First
Union (or, if such day is not a Business Day, for the preceding  Business  Day),
or,  if for  any  reason  such  rate  is not  available  on any  day,  the  rate
determined,  in the sole opinion of First Union, to be the rate at which federal
funds are being  offered for sale in the national  federal  funds market at 9:00
a.m. (Charlotte, North Carolina time) on such day.

         "Federal  Reserve  Board"  means the Board of  Governors of the Federal
Reserve System, and its successors.

         "Fee Letter" means the letter,  dated as of the Closing Date, among the
Borrower,  the Deal Agent and First Union setting forth, among other things, the
Facility  Fee Rate,  the Program  Fee Rate,  the  Structuring  Fee and the LIBOR
Margin, as amended, modified, restated or replaced from time to time.

         "Final  Scheduled  Remittance Date" means the Remittance Date occurring
96 months following the Commitment Termination Date.

         "Finance  Charges"  means,  with  respect to a Contract,  any  finance,
interest or similar  charges owing by an Obligor or another  Person  pursuant to
such Contract.

         "Financed Vehicle" means, with respect to any Contract, any new or used
automobile,  van or  light-duty  truck,  together with all  accessions  thereto,
securing the related Obligor's indebtedness thereunder.

         "First  Union"  means First Union  National  Bank,  a national  banking
association, and its successors or assigns.

         "Fitch" means Fitch IBCA, Inc.

         "FSI" means First Union Securities,  Inc., a Delaware corporation,  and
its successors.

         "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.

         "Governmental  Authority" means, with respect to any Person, any nation
or government,  any state or other  political  subdivision  thereof,  any entity
exercising  executive,  legislative,   judicial,  regulatory  or  administrative
functions of or  pertaining to  government  and any court or  arbitrator  having
jurisdiction over such Person.

         "Hedging  Agreement"  means each  agreement  between the Borrower and a
Hedging  Counterparty  that complies with the  requirements  of Section 7.02 and
that is in the form of  Exhibit  E  hereto.  The form of  Hedging  Agreement  in
Exhibit E hereto and such form of  agreement  shall not be modified  without the
written  consent of the Deal Agent and the  Insurer if such  modification  would
adversely  affect in a material  manner the rights or  benefits  of any  Secured
Party under this Agreement.

         "Hedging   Breakage   Costs"   means,   with  respect  to  any  Hedging
Transaction,  any  amount  payable  by  the  Borrower  to  the  related  Hedging
Counterparty  for the  early  termination  of such  Hedging  Transaction  or any
portion thereof.

         "Hedging  Collateral" means all of the rights of the Borrower,  whether
now existing or hereafter acquired,  in and to, all Hedging Agreements,  Hedging
Transactions  and  all  present  and  future  amounts  payable  by  all  Hedging
Counterparties  to  the  Borrower  under  or in  connection  with  such  Hedging
Agreements and Hedging Transactions with such Hedging Counterparties.

         "Hedging  Counterparty"  means any entity  which (A) (i) on the date of
entering into any Hedging Transaction is an interest rate swap dealer whose debt
obligations  satisfy the Short-Term Rating  Requirement and the Long-Term Rating
Requirement,  and (ii) in a Hedging  Agreement (a) consents to the assignment of
the Borrower's rights under the Hedging Agreement to the Deal Agent on behalf of
the Secured Parties pursuant to Section 7.02(a) and (b) agrees that in the event
that its debt obligations no longer satisfy the Short-Term Rating Requirement or
the Long-Term Rating  Requirement,  it shall transfer its rights and obligations
under each Hedging  Transaction to another entity that meets the requirements of
this definition and has entered into a Hedging Agreement with the Borrower on or
prior to the date of such transfer or (B) is otherwise acceptable to the Insurer
and the Deal Agent.

         "Hedging Transaction" means each transaction between the Borrower and a
Hedging  Counterparty  which is entered  into  pursuant  to Section  7.02 and is
governed by a Hedging Agreement.

         "Increased  Costs"  means  amounts  required  to be paid to an Affected
Party pursuant to Section 2.10.

         "Indebtedness"  means,  with respect to any Person and any day, without
duplication,  (i) all  indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than current  liabilities
incurred in the  ordinary  course of business  and  payable in  accordance  with
customary trade practices) or which is evidenced by a note,  bond,  debenture or
similar  instrument,  (ii) all  obligations of such Person under capital leases,
(iii) all obligations of such Person in respect of acceptances issued or created
for the account of such Person,  (iv) all liabilities secured by any Lien on any
property  owned by such  Person  even  though  such  Person  has not  assumed or
otherwise  become  liable  for the  payment  thereof  and (v) all  indebtedness,
obligations or liabilities of that Person in respect of Derivatives.

         "Indemnified Amounts" has the meaning set forth in Section 9.01.

         "Indemnified Parties" has the meaning set forth in Section 9.01.

         "Insolvency   Proceeding"  means,  with  respect  to  any  Person,  any
bankruptcy,  insolvency,  readjustment  of debt,  reorganization,  marshaling of
assets and liabilities or similar proceeding of or relating to such Person.

         "Insurance Agreement" means the insurance and indemnity agreement dated
August 4, 2000 among the Servicer, the Borrower, the Insurer and accepted by the
Deal Agent.

         "Insurance  Policy"  means,  with  respect to a Financed  Vehicle,  the
policies  of  comprehensive  and  collision  insurance  policy or  credit  life,
disability or other applicable  policies  covering such Financed Vehicles or the
related Obligors.

         "Insurance  Proceeds"  means,  with  respect to any  Financed  Vehicle,
Receivable or Obligor,  recoveries paid to the Servicer or the Borrower under an
Insurance Policy and any rights thereunder or proceeds therefrom  (including any
self-insurance).

         "Insurer"  means  Asset  Guaranty  Insurance  Company,  a member of the
Enhance Financial Services Group, and its successors.

         "Insurer  Default" means the  occurrence and  continuance of any of the
following:

                  (i) the Insurer  shall fail to pay when, as and in the amounts
         required, any amount payable under the Policy;

                  (ii) the  Superintendent of Insurance of the State of New York
         (or any Person  succeeding to the duties of such  Superintendent)  (for
         the purpose of this paragraph (ii), the  "Superintendent")  shall apply
         for an order (A) pursuant to Section 7402 of the New York Insurance Law
         (or any successor provision thereto), directing him to rehabilitate the
         Insurer, (B) pursuant to Section 7404 of the New York Insurance Law (or
         any  successor  provision  thereto),  directing  him to  liquidate  the
         business of the Insurer or (C) pursuant to Section 7416 of the New York
         Insurance  Law (or any successor  provision  thereto),  dissolving  the
         corporate  existence of the Insurer and such  application  shall not be
         dismissed  or  withdrawn  during a period of 60  consecutive  days or a
         court of  competent  jurisdiction  enters an order  granting the relief
         sought;

                  (iii) the  Superintendent  shall determine that the Insurer is
         insolvent  within the meaning of Section 1309 of the New York Insurance
         Law or any successor section; or

                  (iv) the  Insurer  shall  commence a  voluntary  case or other
         proceeding seeking rehabilitation, liquidation, reorganization or other
         relief  with  respect to itself or its debts  under any  insolvency  or
         similar law.

         "Interest" means, with respect to a Settlement  Period,  the sum of the
Daily  Interest  Amounts  for  each  day in such  Settlement  Period;  provided,
however,  that (i) no provision of this  Agreement  shall  require or permit the
collection of Interest in excess of the maximum  permitted by applicable law and
(ii) Interest shall not be considered  paid by any  distribution  if at any time
such distribution is rescinded or must otherwise be returned for any reason.

         "Interest  Rate" means,  with respect to any day, to the extent the Net
Investment (i) was funded through the issuance of Commercial Paper, a rate equal
to the CP Rate,  and (ii) was not funded  through  the  issuance  of  Commercial
Paper, a rate equal to the Alternative Rate provided,  however, that in no event
shall the Interest Rate exceed 25% or the Maximum Lawful Rate.

         "Interest  Reserve Advance" means, with respect to any Remittance Date,
the amount, if any (which shall not be less than zero), equal to (i) the product
of (a) the daily weighted  average  amount on deposit in the Prefunding  Account
during the related  Settlement  Period, (b) the Targeted Interest Rate and (c) a
fraction the numerator of which is the number of days in such Settlement  Period
and the  denominator  of which is 360 minus (ii) the amount  earned  during such
Settlement Period on amounts on deposit in the Prefunding Account.

         "Investment  Company Act" means the Investment  Company Act of 1940, as
amended.

         "Investor"  means  each  Person  named  herein  who  commits to fund or
purchase  pursuant  to the  Liquidity  Agreement  all or a  portion  of the  Net
Investment  and each Person that  becomes an Investor  hereunder  pursuant to an
Assignment and Acceptance.

         "Investor Register" has the meaning set forth in Section 11.01(c).

         "Issuer"  means  VFCC and any other  Lender  whose  principal  business
consists  primarily of issuing  Commercial Paper or other securities to fund its
acquisition  and  maintenance of  receivables,  accounts,  instruments,  chattel
paper, general intangibles and other similar collateral.

         "Lenders" means VFCC and the Investors.

         "LIBOR  Business  Day" means any day of the year other than a Saturday,
Sunday  or  any  day on  which  banking  institutions  in New  York,  New  York,
Charlotte,   North  Carolina  or  London,  England  generally  are  required  or
authorized to be closed.

         "LIBOR Margin" has the meaning set forth in the Fee Letter.

         "LIBOR Rate" means for any day or Settlement  Period,  an interest rate
per annum equal to:

                  (i) the  posted  rate for  30-day  deposits  in United  States
         Dollars  appearing  on  Telerate  page 3750 as of 11:00  a.m.  (London,
         England  time) on the first day of such  Settlement  Period or, if such
         day is not a LIBOR  Business  Day, the posted rate that appeared on the
         immediately preceding LIBOR Business Day; or

                  (ii) if no such rate  appears  on  Telerate  page 3750 at such
         time and day, then the LIBOR Rate shall be determined by First Union at
         its  principal  office in Charlotte,  North  Carolina as its rate (each
         such determination, absent manifest error, to be conclusive and binding
         on all parties hereto and their  assignees) at which 30-day deposits in
         United  States  Dollars  are being,  have been,  or would be offered or
         quoted by First Union to major banks in the applicable interbank market
         for  Eurodollar  deposits  at or about  11:00  a.m.  (Charlotte,  North
         Carolina time) on such day.

         "Lien"  means a security  interest,  lien,  charge,  pledge,  equity or
encumbrance of any kind,  other than tax liens,  mechanics'  liens and any liens
that attach to any property by operation of law.

         "Liquidity  Agent" means First Union in its capacity as Liquidity Agent
pursuant to the Liquidity Agreement, and its successors and assigns.

          "Liquidity Agreement" means the liquidity purchase agreement, dated as
of the Closing Date,  among VFCC,  the Deal Agent,  the Liquidity  Agent,  First
Union, as an investor, and each other liquidity bank that is a party thereto, as
amended or supplemented from time to time.

         "Liquidation  Proceeds" means gross amounts received by the Servicer in
connection  with the attempted  realization of the full amounts due or to become
due for any Receivable which has become a Defaulted Receivable, whether from the
sale or other  disposition  of the related  Financed  Vehicle,  the  proceeds of
repossession  or any  collection  effort,  the  proceeds  of recourse or similar
payments payable under the related  Contract,  receipt of Insurance  Proceeds or
otherwise,  net of any expenses reasonably incurred in such sale,  repossession,
collection effort recourse or other disposition.

         "Lock-Box  Accounts"  means an account or  accounts  maintained  by the
Servicer  at a Lock-Box  Bank for the  purpose  of  receiving  Collections  from
Receivables.

         "Lock-Box  Banks" means each of the banks set forth in Exhibit G hereto
and such banks as may be added thereto or deleted therefrom  pursuant to Section
4.06(a).

         "Long-Term Rating  Requirement" means a long-term unsecured debt rating
of not less than "A" by Standard & Poor's and not less than "A-2" by Moody's.

         "Maximum  Lawful Rate" means the highest  rate of interest  permissible
under applicable law.

         "Minimum  Required  APR" means,  as of any date of  determination,  the
greater of (i) the money market yield of the rate quoted on a discount basis for
commercial  paper having a 30 day maturity,  as made available and  subsequently
published by the Board of Governors of the Federal  Reserve  System in H.15(519)
under the heading  "commercial paper" plus 1.425% per annum and (ii) the current
yield to maturity of the United States  Treasury  Security  having a maturity of
two years (or if there is more than one such security, the average of the yields
to maturity thereof) plus 1.425% per annum.

         "Moody's" means Moody's Investors Service, Inc., and its successors.

         "Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3)  of ERISA which is or was at any time during the current  year or the
immediately  preceding  five years  contributed  to by the Borrower or any ERISA
Affiliate on behalf of its employees.

         "Negative  Carry"  means,  with  respect  to  any  Prefunding  Date,  a
percentage equal to (i) for the amounts in the Prefunding  Account  deposited by
VFCC,  (a) the money  market  yield of the rate  quoted on a discount  basis for
commercial  paper having a 30 day maturity,  as made available and  subsequently
published by the Board of Governors of the Federal  Reserve  System in H.15(519)
under the heading  "commercial  paper," plus (b) 1.425%,  minus (c) the Targeted
Interest Rate and (ii) for the amounts in the  Prefunding  Account funded by the
Investors,  (a) the Adjusted LIBOR Rate, (b) plus 1.425%, minus (c) the Targeted
Interest Rate.

         "Net Asset Test" means a test that is  satisfied  if the product of the
Net Receivables Balance and the Noteholder's Percentage is more than or equal to
the Net Investment less the Adjusted Prefunding Account Amount.

         "Net Investment"  means the sum of the cumulative  amount of Prefunding
Deposits made since the Closing Date minus the sum of:

                  (i) the aggregate amount released from the Prefunding  Account
         and applied to reduce the Net Investment;

                  (ii)  the  aggregate   amount  released  from  the  Prefunding
         Interest Reserve Account and applied to reduce the Net Investment;

                  (iii) the aggregate amount of Principal  Receipts  remitted to
         the  Deal  Agent to  reduce  the Net  Investment  pursuant  to  Section
         4.06(d);

                  (iv) amounts distributed to the Deal Agent pursuant to Section
         4.06(c) to bring the Net Asset Test into compliance;

                  (v) draws on the Policy  distributed  and applied in reduction
         of the Net Investment;

                  (vi)  miscellaneous  funds  received and applied to reduce the
         Net Investment pursuant to the Transaction  Documents and any Warehouse
         Transfer Agreement;  provided that the Net Investment shall be restored
         in the amount of any Collections so received and applied if at any time
         the  distribution of such Collections is rescinded or must otherwise be
         returned  for any reason;  provided  further,  that as to the  Insurer,
         draws made under the Policy  will not reduce the  principal  amount due
         under the Note.

         "Net Receivables  Balance" means at any time the sum of the Outstanding
Balances of the Eligible  Receivables at such time reduced by the sum of (i) the
amount by which the Outstanding Balances of all Undocumented Receivables exceeds
the lesser of (a) 20% of the  Outstanding  Balances of all Eligible  Receivables
and (b) $15,000,000,  (ii) the Outstanding  Balances of all Eligible Receivables
which are  Defaulted  Receivables  and (iii) the Excess  Delinquent  Receivables
Balance.

         "Net Yield" means,  as calculated  on each  Determination  Date for the
related Settlement Period, the product, expressed as a percentage, of (i) 12 and
(ii) a fraction,  the numerator of which is (a) Available  Funds less the sum of
(1) the aggregate  amount of Carrying  Costs  (exclusive of Increased  Costs and
Additional  Amounts in excess of Capped Costs)  accrued  during such  Settlement
Period and (2) the aggregate Outstanding Balance of all Receivables which became
Defaulted  Receivables during such Settlement Period net of the aggregate amount
of  Liquidation  Proceeds  received  during  such  Settlement  Period,  and  the
denominator of which is (b) the average daily Net Investment for such Settlement
Period.

         "Non-Prime  Receivable" means (i) receivables originated by Performance
Acceptance  Corporation,  (ii)  receivables  originated by UAC doing business as
Performance  Acceptance  Corporation,  (iii) receivables originated by UAC under
its "Tier II" underwriting  policy, all of such receivables  identified in (i) -
(iii) above having been exclusively identified on the records of the Servicer as
types 54, 55, 14 or 15.

         "Note" has the meaning set forth in Section 2.04(a).

         "Noteholder's  Percentage"  means  an  amount  equal  to 100%  less the
product  of (i) 2 and (ii) the  amount,  if any,  by which the  Target Net Yield
exceeds the Net Yield as of the most recent Determination Date. The Noteholder's
Percentage  shall  initially  equal  100%.  For the purpose of  calculating  the
Noteholder's  Percentage,  the Net Yield will equal the Target Net Yield for any
Settlement Period during which the Net Investment equals zero on any day.

         "Obligations"  means  all  loans,  advances,   debts,  liabilities  and
obligations for monetary  amounts owing by the Borrower to the Secured  Parties,
the  Liquidity  Agent or any of their  respective  assigns,  as the case may be,
whether due or to become due, matured or unmatured,  liquidated or unliquidated,
contingent  or  non-contingent,  and all  covenants  and duties  regarding  such
amounts, of any kind or nature,  present or future,  arising under or in respect
of Net Investment or any Hedging Agreement, as amended or supplemented from time
to time,  whether or not  evidenced  by any  separate  note,  agreement or other
instrument,  including,  without limitation, all principal,  interest (including
interest that accrues after the commencement  against the Borrower of any action
under the Bankruptcy  Code),  Breakage  Costs,  Hedging  Breakage  Costs,  fees,
including,  without limitation, any and all arrangement fees, loan fees, Program
Fees,  Facility Fees and any and all other fees,  expenses,  costs or other sums
(including  attorney  costs)  chargeable to the Borrower  under the  Transaction
Documents.

         "Obligor"  means a Person  obligated  to make  payments  pursuant  to a
Contract, including any guarantor thereof.

         "Officer's  Certificate"  means a certificate  signed by any officer of
the  Borrower or the  Servicer,  as the case may be, and  delivered  to the Deal
Agent.

         "Outstanding  Balance" means, with respect to a Receivable,  the amount
advanced  under the related  Contract  toward the purchase  price of the related
Financed  Vehicle and related costs minus all receipts of principal with respect
to such Receivable.

         "Permitted  Liens"  means Liens in favor of the Deal Agent as agent for
the Secured Parties created pursuant to this Agreement.

         "Person" means any individual,  corporation, limited liability company,
estate,  partnership,  joint venture,  association,  joint stock company,  trust
(including any beneficiary thereof),  unincorporated  organization or government
or any agency or political subdivision thereof.

         "Policy" means the financial  guaranty  insurance  policy issued by the
Insurer  with  respect  to  the  Note,   including  any  endorsements   thereto,
substantially in the form of Exhibit F hereto.

         "Potential  Servicer Default" means an event which but for the lapse of
time, the giving of notice or both, would constitute a Servicer Default.

         "Potential Termination Event" means an event which but for the lapse of
time, the giving of notice or both, would constitute a Termination Event.

         "Prefunding"  means the deposit by VFCC or an Investor of a  Prefunding
Deposit into the Prefunding Account pursuant to Section 2.01.

         "Prefunding Account" has the meaning set forth in Section 4.05.

         "Prefunding  Account  Amount"  means  the  amount  on  deposit  in  the
Prefunding Account.

         "Prefunding  Date"  means the first  calendar  day of each month (or if
such day is not a Business Day, the next succeeding Business Day) and such other
dates  which are  agreed  upon by the  Borrower  and the Deal Agent at least one
Business Day in advance on which  deposits to, or releases  from, the Prefunding
Account  may be  effected;  provided,  that there shall in no event be more than
three additional Prefunding Dates in any period between any two Remittance Dates
(without Deal Agent  approval) and provided,  further,  that no Prefunding  Date
shall occur on and after the Termination Date.

         "Prefunding  Deposit"  means,  with respect to a Prefunding  Date,  the
deposit of funds into the Prefunding  Account by VFCC or the Investors  pursuant
to  Section  2.01 in an amount not to exceed  the  product  of the  Noteholder's
Percentage and the aggregate principal amount of Eligible Receivables  projected
by the Borrower to be acquired or originated  through the day preceding the next
Prefunding Date.

         "Prefunding  Interest  Reserve  Account"  has the  meaning set forth in
Section 4.05.

         "Prefunding  Interest  Reserve  Deposit"  has the  meaning set forth in
Section 4.07(a).

         "Prefunding   Request"   means  a  written  notice  from  the  Borrower
requesting  a  Prefunding  and  including  the items  required by Section  2.01,
substantially in the form of Exhibit A hereto.

         "Premium" has the meaning set forth in the Premium Letter.

         "Premium Letter" has the meaning set forth in the Insurance Agreement.

         "Principal  Receipts"  means amounts  designated as Principal  Receipts
pursuant  to  Sections  2.05 and 3.04 and all  Collections  other  than (i) that
portion of  Collections  which are  properly  designated  as Finance  Charges in
accordance  with the  Credit  and  Collection  Policy  and (ii) any  Liquidation
Proceeds in respect of Defaulted  Receivables and Related  Security with respect
thereto.

         "Program Fee" means, for any Settlement  Period, the fee payable by the
Borrower  pursuant to the Fee Letter equal to the sum of the  product,  for each
day during such  Settlement  Period,  of (i) the Program Fee Rate,  (ii) the Net
Investment  on such day and (iii) a fraction,  the numerator of which is one and
the denominator of which is 360.

         "Program Fee Rate" has the meaning set forth in the Fee Letter.

         "Pro Rata  Share"  means with  respect to any  Investor  on any date of
determination, the percentage equivalent of a fraction the numerator of which is
such Investor's Commitment and the denominator of which is the Facility Amount.

         "Rating  Agency" means Standard & Poor's,  Moody's and any other rating
agency that has been  requested to issue a rating with respect to the Commercial
Paper issued by the Issuer.

         "Receivable"  means  indebtedness  owed to the  Borrower  by an Obligor
(without  giving  effect to any transfer  hereunder)  under a Contract,  whether
constituting  an  account,  chattel  paper,  instrument  or general  intangible,
arising out of or in connection with the sale of new or used  automobiles,  vans
or light-duty  trucks or the rendering of services by the originating  Dealer in
connection  therewith,  and includes the right of payment of any finance charges
and other obligations of the Obligor with respect thereto. A Receivable shall be
identified with an account type 26 on the Servicer's  master  servicing  records
(so long as UAC is the Servicer).  Notwithstanding the foregoing,  once the Deal
Agent has  released its security  interest in a  Receivable,  it shall no longer
constitute a Receivable.

         "Registrar of Titles" means the agency, department or office having the
responsibility  for maintaining  records of titles to motor vehicles and issuing
documents  evidencing  such  titles in the  jurisdiction  in which a  particular
Financed Vehicle is registered.

         "Related Security" means with respect to any Receivable:

                  (i) all of the  Borrower's  interest in the Financed  Vehicles
         (including   repossessed  vehicles)  or  in  any  document  or  writing
         evidencing any security interest in any Financed Vehicle and all of the
         Borrower's  interest  in all  rights to  payment  under  all  insurance
         contracts  with  respect  to a  Financed  Vehicle,  including,  without
         limitation,  any monies  collected  from whatever  source in connection
         with any default of an Obligor with  respect to a Financed  Vehicle and
         any proceeds from claims or refunds of premiums on any physical damage,
         lender's single interest,  credit life,  disability and hospitalization
         insurance policies covering Financed Vehicles or Obligors;

                  (ii) all of the  Borrower's  interest  in all  other  security
         interests or Liens and property  subject  thereto from time to time, if
         any,  purporting  to secure  payment of the Contract  related  thereto,
         whether  pursuant to such  Contract  or  otherwise,  together  with all
         financing  statements  signed by an  Obligor  and  security  agreements
         describing any collateral securing such Contract;

                  (iii)  all  of the  Borrower's  interest  in  all  guaranties,
         insurance and other  agreements or arrangements  of whatever  character
         from time to time  supporting or securing  payment of such  Receivable,
         whether  pursuant  to  the  Contract  related  to  such  Receivable  or
         otherwise;

                  (iv) all of the  Borrower's  interest in all rights to payment
         under  all  service   contracts  and  other  contracts  and  agreements
         associated  with the Receivable  and all of the Borrower's  interest in
         all recourse rights against the related Dealer (excluding any rights in
         any dealer reserve);

                  (v) all of the Borrower's  interest in all records,  documents
         and  writings   evidencing  or  related  to  such  Receivables  or  the
         Contracts; and

                  (vi)     all proceeds of the foregoing.

         "Relevant UCC" means the Uniform  Commercial  Code as from time to time
in effect in all applicable jurisdictions.

         "Remittance Date" means, for each Settlement  Period,  the tenth day of
the next  succeeding  calendar  month or, if such day is not a Business Day, the
next succeeding Business Day.

         "Reportable Event" means any of the events set forth in Section 4043(c)
of ERISA for which the 30 day notice provision has not been waived.

         "Required  Investors"  means  at  a  particular  time,  Investors  with
aggregate Commitments in excess of 66-2/3% of the Facility Amount.

         "Required  Reserve  Account Amount" means on any day the product of (i)
the Required Reserve Account  Percentage and (ii) the Net Investment  divided by
the Noteholder's Percentage.

         "Required Reserve Account Percentage" means 2.75%.

         "Required  Yield  Deposit  Amount" has the meaning set forth in Section
4.08(a).

         "Requirements   of  Law"  means  for  any  Person  the  certificate  of
incorporation or articles of association and by-laws or other  organizational or
governing  documents of such Person, and any law, treaty,  rule or regulation or
order or determination of an arbitrator or Governmental  Authority, in each case
applicable  to or binding  upon such  Person or to which such Person is subject,
whether federal, state or local (including,  without limitation, usury laws, the
Federal  Truth in Lending Act, and  Regulations  B, U, T, X and Z of the Federal
Reserve Board).

         "Reserve Account" has the meaning set forth in Section 4.05.

         "Reserve Account  Guaranty" means the amount available  pursuant to any
guaranty of the amount  required to be kept in the Reserve  Account  pursuant to
this Agreement and the other Transaction Documents. Any Reserve Account Guaranty
shall be  approved by VFCC and the  Insurer  and shall  satisfy  the  Short-Term
Rating Requirement and the Long-Term Rating Requirement.

         "Responsible  Officer" means, when used with respect to the Servicer or
the  Borrower,  any  officer of the  Servicer  or the  Borrower,  including  any
president,  vice  president,  assistant  vice  president,  secretary,  assistant
secretary or any other officer thereof customarily  performing functions similar
to those  performed by the  individuals  who at the time shall be such officers,
respectively,  or to whom any matter is referred because of his or her knowledge
of or familiarity with the particular subject.

         "Sale and Purchase  Agreement I" means the sale and purchase  agreement
dated  as of  August  1,  2000  between  the  Seller  and  UAC,  as  amended  or
supplemented from time to time.

         "Sale and Purchase  Agreement II" means the sale and purchase agreement
dated as of August 1, 2000  between the Seller and the  Borrower,  as amended or
supplemented from time to time.

         "Schedule  of  Contracts"  means a  listing  by  account  number of the
Contracts as requested and amended from time to time by the Deal Agent  pursuant
to Section 3.03(a).

         "Secured Parties" means (i) each Lender, (ii) each Hedging Counterparty
that is either a Lender or any Affiliate of a Lender if such Affiliate  executes
a  counterparty  to the  Agreement  agreeing  to be bound  by the  terms of this
Agreement applicable to a Secured Party and (iii) the Insurer.

         "Securities  Intermediary"  means  First  Union,  and any other  entity
acting in the  capacity  of a  "securities  intermediary"  as defined in Section
8-102(14) of the Relevant UCC.

         "Securitization" means a structured finance transaction  established by
or on behalf of the  Borrower  or an  Affiliate  thereof  in which the  released
Receivables  and the related  Contracts will be subject and which  satisfies the
optional repayment conditions set forth in Section 2.05.

         "Seller"  means  Union  Acceptance  Funding  Corporation,   an  Indiana
corporation, and its successors.

         "Servicer" has the meaning set forth in the Preamble.

         "Servicer Default" has the meaning set forth in Section 4.01(c).

         "Servicing Agreement" means the servicing agreement, dated as of August
1 2000,  between UAC, as servicer,  and UAFC-2,  as amended or supplemented from
time to time.

         "Servicing Audits" means certain procedures  determined by the Insurer,
agreed upon by the  Borrower  and  performed at the expense of the Servicer by a
nationally  recognized firm of independent public accountants  acceptable to the
Insurer or other third party  acceptable  to both the Insurer and the  Borrower,
including, but not limited to: verification of the accuracy monthly reports, and
related  reviews  of the  Servicer's  accounts,  records  and  files,  and  cash
routines.

         "Servicing  Fee"  means,  for any  Settlement  Period,  the fee payable
pursuant to Section 4.06 on the related  Remittance Date to the Servicer,  in an
amount  equal  to 1.0% per  annum on the  amount  of the  Aggregate  Outstanding
Balance as of the first day of such Settlement Period.

         "Settlement Period" means any calendar month;  provided,  however, that
(i) the initial  Settlement  Period shall  commence on the Closing Date and (ii)
any Settlement  Period that  commences  before the  Termination  Date that would
otherwise end after the Termination Date shall end on the Termination Date.

         "Settlement  Statement" means a monthly  statement  setting forth as of
the last day of the  related  Settlement  Period,  among other  things,  (i) the
outstanding   principal   balance   of  the   Receivables,   (ii)   collections,
delinquencies,   defaults,   yield,  and  certain  other  information  including
calculations  necessary to determine  compliance with the covenants contained in
the  Transaction  Documents for the most recently  ended fiscal month;  provided
however that if such  information  is not available for the most recently  ended
fiscal month, such information shall be provided as of the next preceding fiscal
month and (iii)  other  reporting  as  reasonably  required  by VFCC  and/or the
Insurer per  Exhibit M hereto,  as such  Exhibit  may be modified as  reasonably
requested by VFCC and the Insurer.

         "Short-Term  Rating  Requirement"  means a  short-term  unsecured  debt
rating of not less than (i)  "A-1+"  from  Standard  & Poor's,  (ii)  "P-1" from
Moody's, (iii) "D-1+" from Duff & Phelps (if the related institution, instrument
or  security  is rated by Duff &  Phelps)  and (iv)  "F-1+'  from  Fitch (if the
related institution, instrument or security is rated by Fitch).

         "Solvent"  means,  as to any  Person  at any  time,  having  a state of
affairs such that all of the following conditions are met: (i) the fair value of
the property  owned by such Person is greater  than the amount of such  Person's
liabilities  (including  disputed,  contingent and unliquidated  liabilities) as
such value is  established  and  liabilities  evaluated  for purposes of Section
101(32) of the  Bankruptcy  Code;  (ii) the present  fair  salable  value of the
property  owned by such Person in an orderly  liquidation  of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become  absolute and  matured;  (iii) such Person is
able to  realize  upon its  property  and pay its debts  and  other  liabilities
(including disputed,  contingent and unliquidated liabilities) as they mature in
the normal course of business; (iv) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities  mature; and (v) such Person is not engaged in
business  or a  transaction,  and is not  about to  engage  in a  business  or a
transaction,  for which such Person's  property  would  constitute  unreasonably
small capital.

         "Standard  &  Poor's"  means  Standard  & Poor's  Ratings  Services,  a
Division of The McGraw-Hill Companies, Inc., and its successors.

         "Structured  Financing"  any  release of  Receivables  to the  Borrower
pursuant to Section  2.05 being  effected  in  connection  with an  underwritten
transaction  (i)  in  which  an  underwriter  agrees  to  purchase  the  related
securities pursuant to an underwriting  agreement and (ii) for which the closing
date of such  transaction  is within 10 Business Days of the date of pricing and
within the  requirements  of the  Securities  and Exchange  Commission  or (b) a
securitization   transaction  in  which  Special  Purpose  Accounts   Receivable
Cooperative Corporation, a special purpose commercial paper conduit sponsored by
CIBC,  has agreed to in writing a price for which it will purchase  asset-backed
securities  from the UACSC  1999  Master  Owner  Trust,  subject  to  conditions
customarily  contained  in  an  underwriting   agreement  and  subject  to  such
transaction  closing  within 5 Business Days of the date the purchase  price was
established.

         "Structuring Fee" has the meaning set forth in the Fee Letter.

         "Take-Out"  means (i) a  Securitization,  (ii) a Warehouse  Transfer or
(iii) other release by the Deal Agent of Receivables  and the related  Contracts
from the  Collateral  pursuant  to Section  2.05;  provided,  however,  any such
Securitization, Warehouse Transfer or release shall constitute a "Take-Out" only
if the related Take-Out Percentage is not greater than 25%.

         "Take-Out  Percentage"  means,  with  respect  to  any  Securitization,
Warehouse  Transfer or release pursuant to Section 2.05, the percentage equal to
(i) 100%  minus (B) a  fraction  (expressed  as a  percentage)  equal to (A) the
aggregate  Outstanding  Balance  of  the  Receivables  being  released  by  such
Securitization, Warehouse Transfer or release divided by (B) the Net Receivables
Balance as of the cut-off  date of such  Securitization,  Warehouse  Transfer or
release.

         "Target Net Yield" means 5.0%.

         "Targeted  Interest Rate" means,  for any Settlement  Period,  2.5% per
annum or such  lower  per annum  rate set forth in a written  notice by the Deal
Agent to the Borrower and the  Servicer,  such other rate to be effective  three
Business Days after the date of such notice.

         "Taxes" means any present or future  taxes,  levies,  imposts,  duties,
charges,  assessments or fees of any nature (including  interest,  penalties and
additions thereto) that are imposed by any Government Authority.

         "Termination Date" means the earliest to occur of (i) the date that the
Liquidity  Agreement  shall  cease  to be in full  force  and  effect;  (ii) the
Commitment  Termination  Date; (iii) the Business Day designated by the Borrower
to VFCC as the  Termination  Date at any time  following 60 days' prior  written
notice; and (iv) the occurrence of a Termination Date pursuant to Section 8.01.

         "Termination Event" has the meaning set forth in Section 8.01(a).

         "Tier I Receivable"  means a Receivable  originated in accordance  with
the Tier I underwriting policy contained in the Credit and Collection Policy.

         "Title  Documents"  means,  with respect to any Financed  Vehicle,  the
certificate  of title for, or other evidence of ownership of (as the Servicer or
Borrower maintains in accordance with its customary  procedures),  such Financed
Vehicle,  (which may  include  written  evidence  from the Dealer  selling  such
Financed Vehicle that such  certificate,  or evidence of ownership,  showing the
Seller or the appropriate Affiliate of UAC as first lienholder, has been applied
for).

         "Transaction  Documents"  means this Agreement,  the Note, the Sale and
Purchase  Agreement  I,  the Sale  and  Purchase  Agreement  II,  the  Servicing
Agreement, the Insurance Agreement, the Liquidity Agreement, the Fee Letter, all
Hedging Agreements and any other document,  certificate,  opinion,  agreement or
writing the  execution of which is necessary or  incidental  to carrying out the
transactions  contemplated  by  this  Agreement  or any of the  other  foregoing
documents.

         "UAC" means Union Acceptance Corporation,  an Indiana corporation,  and
its successors and assigns.

         "UAC  Entities"  means each of UAC, UAC Finance,  the Seller,  UARC and
UAFC-2.

         "UAC Finance" means UAC Finance  Corporation,  an Indiana  corporation,
and its successors and assigns.

         "UAFC-2"  means UAFC-2  Corporation,  a Delaware  corporation,  and its
successors and assigns.

         "UARC"  means  Union  Acceptance  Receivables  Corporation,  a Delaware
corporation, or any other bankruptcy remote Affiliate of UAC, and its successors
and assigns.

         "United States" means the United States of America.

         "Undocumented Receivable" means any Receivable as to which, at the time
of the assignment of such Receivable,  and the Contract related thereto,  to UAC
or UAC Finance by the Dealer which originated such Receivable or, at the time of
the  origination  of such  Receivable  by UAC, the Servicer has not received all
required Obligor-related documentation.

         "Undocumented  Receivable Date" means,  with respect to an Undocumented
Receivable,  the date 20 days  following  the date of the initial draft drawn by
the originating  Dealer on UAC or UAC Finance in connection with the origination
of such Receivable.

         "Unrestricted  Cash"  has  the  meaning  set  forth  in  the  Insurance
Agreement.

          "VFCC" means Variable Funding Capital Corporation, and its successors.

         "VFCC   Administration   Agreement"  means  the  Amended  and  Restated
Administration  Agreement,  dated as of July 1, 1998,  between  VFCC and FSI, as
amended, restated or supplemented from time to time.

         "Withdrawal Notice" has the meaning set forth in Section 2.02(a).

         "Warehouse  Transfer"  means the transfer of Receivables  pursuant to a
Warehouse Transfer Agreement.

         "Warehouse Transfer Agreement" means an agreement  substantially in the
form of Exhibit N hereto  pursuant to which the Borrower  purchases  Receivables
from,  or  sells  Receivables  to,  an  Affiliate  of UAC in  connection  with a
warehouse or securitized financing. The form of agreement in Exhibit N shall not
be modified  without  the  written  consent of the Deal Agent and the Insurer if
such modification  would adversely affect in a material manner the rights of any
Secured Party under this Agreement.

         "Warehouse  Transferor"  means  a  transferor  of a  Receivable  to the
Borrower pursuant to a Warehouse Transfer Agreement.

         "Year-End Purchase  Agreement" means an agreement  substantially in the
form of Exhibit K hereto which form of agreement  shall not be modified  without
the written consent of the Deal Agent and the Insurer if such modification would
adversely affect in a material manner the rights of any Secured Party under this
Agreement.

         "Year-End Repurchase Agreement" means an agreement substantially in the
form of Exhibit L hereto which form of agreement  shall not be modified  without
the written consent of the Deal Agent and the Insurer if such modification would
adversely affect in a material manner the rights of any Secured Party under this
Agreement.

         "Year-End  Transfer" means either a purchase of all Receivables by UARC
from UAFC-2 pursuant to a Year-End  Purchase  Agreement or the repurchase of the
Receivables from UARC by UAFC-2 pursuant to a Year-End Repurchase Agreement.

         "Yield Supplement Account" has the meaning set forth in Section 4.05.

Section 1.02.  Accounting Terms and Determinations.  Unless otherwise defined or
specified herein, all accounting terms shall be construed herein, all accounting
determinations  hereunder shall be made, all financial statements required to be
delivered  hereunder  shall  be  prepared  and all  financial  records  shall be
maintained in accordance with GAAP.

Section 1.03.  Computation  of Time  Periods.  Unless  otherwise  stated in this
Agreement,  in the  computation  of a period of time from a specified  date to a
later  specified  date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding."



<PAGE>


                                  ARTICLE Two

                                   PREFUNDINGS

Section  2.01.  Prefunding;   Procedures  for  Prefundings.  On  the  terms  and
conditions  hereinafter  set forth,  the Borrower may, prior to each  Prefunding
Date on which  the  Borrower  intends  to  request  funds for  deposit  into the
Prefunding  Account,  request that the Lenders make an advance of such funds. No
later than 4:00 p.m. (Charlotte,  North Carolina time) one Business Day prior to
a proposed  Prefunding  Date,  the Borrower  shall notify the Deal Agent and the
Insurer of such  proposed  Prefunding  Date and  Prefunding by delivering to the
Deal Agent and the Insurer (i) a duly executed and completed Prefunding Request,
which will  include,  among  other  things,  the  proposed  Prefunding  Date,  a
calculation of the Net Investment and the Net Asset Test (after giving effect to
such  Prefunding),  the Prefunding  Deposit  requested (which amount shall be at
least equal to $1,000,000 or integral multiples of $10,000 in excess thereof and
shall  be no  greater  than  the  Borrower's  reasonable  best  estimate  of the
aggregate  amount of Eligible  Receivables  projected  to be  acquired  from the
Seller  by the  Borrower  pursuant  to the Sale  and  Purchase  Agreement  II or
acquired pursuant to a Warehouse  Transfer  Agreement during the period from the
Prefunding Date to but not including the next succeeding  Prefunding Date) and a
representation that the conditions precedent contained in Section 5.02 have been
satisfied and (ii) an updated Schedule of Contracts (if reasonably  requested by
the Deal Agent at least one Business Day prior to the Prefunding  Date).  If any
such  Prefunding  Request  is  delivered  to the  Deal  Agent  after  4:00  p.m.
(Charlotte,  North  Carolina  time)  one  Business  Day  prior  to the  proposed
Prefunding Date, such Prefunding Request shall be deemed to be received prior to
4:00 p.m.  (Charlotte,  North Carolina time) on the next succeeding Business Day
and the proposed  Prefunding Date of such proposed Prefunding shall be deemed to
be the Business Day following such deemed receipt.  Any Prefunding Request shall
be irrevocable.

         Following  receipt  of a  Prefunding  Request,  the  Deal  Agent  shall
determine  whether the Prefunding  will be made by VFCC or by the Investors.  If
the Deal Agent determines, at its sole discretion, that VFCC has adequate access
to the commercial paper market to fund the Prefunding  Deposit,  VFCC shall make
the  Prefunding.  Upon a  determination  by the  Deal  Agent,  made at its  sole
discretion,  that VFCC does not have  adequate  access to the  commercial  paper
market to fund the Prefunding Deposit,  (i) the Deal Agent shall promptly notify
the Liquidity Agent,  the Investors,  the Insurer and the Borrower in writing of
such  inadequacy  and (ii) the  Investors  shall fund such  Prefunding  Deposit.
Notwithstanding the foregoing, under no circumstances shall a Prefunding be made
unless the conditions of Section 5.02 are satisfied.

         Under no circumstances  shall the Prefunding  Deposit cause (i) the Net
Investment  to exceed  the  Facility  Amount and (ii) any  Investor  to make any
Prefunding on any Prefunding Date in excess of the lesser of (a) such Investor's
Pro Rata Share of the portion of the  Prefunding  Deposit not funded by VFCC and
(b) the amount by which such Investor's Commitment exceeds such Investor's share
of the Net Investment prior to such Prefunding Date.

         Subject to the terms and  conditions  set forth  herein,  no later than
4:30 p.m.  (Charlotte,  North Carolina time) on the Prefunding Date on which the
Prefunding  Deposit is to be made,  VFCC or the  Investors,  as the case may be,
shall  deposit  into the  Prefunding  Account the  Prefunding  Deposit.  On each
Prefunding  Date,  the Borrower  shall deposit (or cause to be withheld from the
Prefunding  Deposit) to the credit of the Reserve  Account an amount equal to an
amount  necessary to fund the Reserve  Account to the Required  Reserve  Account
Amount.

Section 2.02.     Withdrawals from the Prefunding Account.

(a) On any Business  Day,  upon  receipt by the Deal Agent,  the Insurer and the
Collateral  Agent not later than 11:00 a.m.,  Charlotte,  North Carolina time of
written  certification  substantially  in the form of  Exhibit J (a  "Withdrawal
Notice"),  from the  Borrower  setting  forth,  among other  things,  the amount
requested to be released from the  Prefunding  Account and  certifying  that (i)
after giving effect to the withdrawal from the Prefunding Account, the Net Asset
Test will be satisfied,  (ii) the amount on deposit in the Reserve  Account will
not be less than the Required Reserve Account Amount (calculated (A) immediately
prior to the proposed  withdrawal and (B) as if such  withdrawal has been made),
(iii) the Borrower will have made any deposit into the Yield Supplement  Account
required  pursuant to Section 4.08, if any, and (iv) the Servicer is and will be
in compliance with the  requirements of this Agreement with respect of such date
of withdrawal,  the Collateral  Agent, at the written direction of the Servicer,
shall make the amount  requested  to be  released  from the  Prefunding  Account
available to the Borrower at the  Borrower's  Account via wire  transfer in same
day funds not later than 4:00 p.m., Charlotte,  North Carolina time on such date
of withdrawal.

(b) On each  Prefunding  Date, all amounts on deposit in the Prefunding  Account
(exclusive of earnings thereon) shall be, at the Borrower's  option,  either (i)
released  to the Deal  Agent for the  account  of VFCC and the  Investors  to be
applied in reduction of the Net  Investment,  or (ii) retained in the Prefunding
Account and  applied to reduce the amount of the  Prefunding  Deposit  otherwise
required to be made by VFCC or the Investors,  as applicable,  on the succeeding
Prefunding Date. Notwithstanding the foregoing, however, on the first Remittance
Date to occur  on or  after  the  Termination  Date,  all  amounts  on  deposit,
exclusive of earnings  thereon,  in the Prefunding  Account shall be released to
the Deal Agent,  for the account of VFCC and the Investors,  as applicable,  and
applied  in  reduction  of the Net  Investment  and  earnings  thereon  shall be
deposited in the Collection Account for application as Available Funds.

Section  2.03.  Optional  Changes in Facility  Amount;  Extension of  Commitment
Termination Date.

(a) The  Borrower  shall be  entitled  at its  option,  at any time prior to the
occurrence of a Termination  Date, to reduce the Facility  Amount in whole or in
part;  provided  that the  Borrower  shall  give  prior  written  notice of such
reduction  to the Deal Agent and the Insurer and that any partial  reduction  of
the Facility  Amount shall be a minimum of $5,000,000  or integral  multiples of
$1,000,000 in excess thereof. Any request for a reduction in the Facility Amount
shall be  irrevocable  and the  Borrower  shall  deliver  no more than four such
requests in any 12-month period.

(b)  Provided no  Termination  Date has  occurred,  the  Borrower may by written
notice to the Deal Agent and the Insurer make  written  request for VFCC and the
Investors to extend the Commitment  Termination Date for an additional period of
up to 364 days. The Deal Agent will give prompt notice to VFCC and each Investor
of its receipt of such request for extension of the Commitment Termination Date.
VFCC and each Investor shall make a determination,  in their sole discretion and
after a full credit review, within 30 days following receipt of any such request
as to whether or not they will agree to extend the Commitment  Termination Date;
provided,  however,  that the  failure of VFCC or any  Investor to make a timely
response to the Borrower's  request for extension of the Commitment  Termination
Date shall be deemed to  constitute a refusal by VFCC or such  Investor,  as the
case  may  be,  to  extend  the  Commitment  Termination  Date.  The  Commitment
Termination  Date shall only be extended  upon the consent of VFCC,  the Insurer
and all of the Investors.

Section 2.04.     The Note.

(a) The Net  Investment  of the Lenders  hereunder  shall be evidenced by a duly
executed promissory note payable to the order of the Deal Agent as agent for the
Lenders in  substantially  the form of Exhibit B hereto (the  "Note").  The Note
shall be dated the Closing Date and shall be in a principal  amount equal to the
Facility Amount and shall otherwise be duly completed.

(b) The Deal Agent is hereby  authorized to enter on a schedule  attached to the
Note notations (which may be computer generated) with respect to each Prefunding
Deposit made by each Lender hereunder: (i) the date and principal amount thereof
and  (ii)  each  payment  and  repayment  of  principal  thereof  and  any  such
recordation  shall  constitute  prima  facie  evidence  of the  accuracy  of the
information so recorded. The failure of the Deal Agent to make any such notation
on the  schedule  attached to the Note shall not limit or  otherwise  affect the
obligation of the Borrower to repay the Net  Investment  in accordance  with its
terms as set forth herein.

Section  2.05.  Optional  Principal  Repayments.  On any Business Day before the
Termination  Date (but not more  frequently  than once per calendar  week),  the
Borrower  shall  have  the  right  to  prepay  all or  any  portion  of the  Net
Investment,  in conjunction with a Warehouse Transfer, a Securitization or other
release  of  Receivables  by the Deal Agent  pursuant  to this  Section,  and to
require  the  release  of the  security  interest  in and  lien  on the  related
Contracts and  Receivables in conjunction  with such  prepayment.  It shall be a
condition  precedent to any such prepayment of the Net Investment  that: (i) the
amount  prepaid is at least  $5,000,000  or  integral  multiples  of $100,000 in
excess thereof (unless  otherwise agreed to in writing by the Deal Agent);  (ii)
in addition to any other  amount paid  pursuant to this  Section,  the  Borrower
shall pay to VFCC and the Investors,  as applicable,  an additional amount equal
to the amount necessary to cause the Net Asset Test to be satisfied after giving
effect to the proposed release; (iii) the Borrower shall deposit an amount equal
to Excess Carrying Costs and Aggregate Unpaids into the Collection Account; (iv)
the  Borrower  shall have given the Deal  Agent and the  Insurer at least  seven
days' prior written  notice of its intention to request  release with respect to
such  Contracts and  Receivables  which shall be  irrevocable;  (v) after giving
effect to such release the amount on deposit in the Reserve  Account shall be at
least equal to the Required Reserve Account Amount;  (vi) the Borrower certifies
that  following  such  prepayment,  the Borrower will be in compliance  with the
provisions of this  Agreement;  (vii) no such reduction shall take effect unless
the Borrower has complied with the terms of any Hedging Agreement  requiring one
or more Hedging  Transactions  be  terminated in whole or in part as a result of
any such  reduction and  provisions  for the payment of Hedging  Breakage  Costs
shall have been made;  (viii)  with  respect to any  Receivables  released  by a
partial prepayment, the Borrower certifies that, in identifying and/or selecting
such  Receivables,  the procedures  utilized by it were consistent with standard
selection  criteria and prior  practice and were not adverse to the interests of
the Secured  Parties;  and (ix) all  amounts due and owing to the Insurer  shall
have been paid in full. The Net Investment will be reduced by the sum of (i) the
amount  deposited  into the  Collection  Account  pursuant to clause (ii) of the
preceding sentence and (ii) any other amounts remitted to the Collection Account
by the Borrower in excess of the amounts  required to be remitted by it pursuant
to this Section and such amounts will be treated as Principal Receipts.

         The Deal Agent  shall  provide  prompt  notice to the  Lenders  and the
Liquidity  Agent following  receipt of any notice of intent to prepay.  Upon the
deposit to the Collection Account and the payment by the Borrower of the amounts
described  in this  Section,  the Deal Agent  shall  execute  and deliver to the
Borrower,  at the  Borrower's  expense,  such  documents or  instruments  as are
necessary to  terminate  the Deal Agent's  interest in the  Receivables  and the
Contracts related thereto.  Any such documents shall be prepared by or on behalf
of the Borrower.

Section 2.06.     Interest Payments.

(a) Interest shall accrue on the Net Investment during each Settlement Period at
the  applicable  Interest  Rate.  The  Borrower  shall pay  Interest  on the Net
Investment  until the date that the Net Investment is reduced to zero.  Interest
shall accrue  during each  Settlement  Period and be payable on each  Remittance
Date as  described  in Section  4.06,  unless  earlier  paid  pursuant  to (i) a
prepayment  in  accordance  with Section 2.05 or (ii) a repayment in  accordance
with Section 2.07.

(b) The Deal Agent shall  determine the CP Rate and Interest  (including  unpaid
Interest and fees, if any, due and payable on a prior Remittance Date) to be due
on each Remittance  Date in respect of the Borrower for each  Settlement  Period
and shall  advise  the  Borrower  of the  Interest  by the second  Business  Day
preceding the Determination Date relating to such Settlement Period.

(c)  Notwithstanding  any  other  provision  of  this  Agreement  or  the  other
Transaction Documents, if at any time the rate of interest payable by any Person
under the Transaction  Documents  exceeds the Maximum Lawful Rate, then, so long
as the Maximum  Lawful Rate would be  exceeded,  such rate of interest  shall be
equal to the Maximum Lawful Rate. If at any time thereafter the rate of interest
so payable is less than the Maximum  Lawful Rate,  such Person shall continue to
pay  interest at the Maximum  Lawful Rate until such time as the total  interest
received  from such Person is equal to the total  interest  that would have been
received  had  applicable  law not limited the interest  rate so payable.  In no
event shall the total interest received by a Lender under this Agreement and the
other  Transaction  Documents exceed the amount which such Lender could lawfully
have received,  had the interest due been  calculated  since the Closing Date at
the Maximum Lawful Rate.

(d) The Deal Agent agrees to exercise its discretion in choosing the Alternative
Rate such that any time Interest is calculated based upon the Alternative  Rate,
such rate  shall be the lesser of the  Adjusted  LIBOR Rate and the Base Rate to
the extent available pursuant to the terms of this Agreement.

Section 2.07.  Mandatory  Payments and  Prepayments.  The  Borrower,  subject to
Section 12.13, promises to pay to:

(a)      the Deal Agent, for the respective accounts of the Secured Parties:

(i)      on the  Termination  Date, the Net Investment in full in the manner and
         priorities provided in Section 4.06;

(ii)     all  payments  and  prepayments  made  pursuant  to clause (i) shall be
         accompanied  by payment of amounts that may be due pursuant to Sections
         2.09 or 9.01;

(b)      all other amounts required to be paid by the Borrower on any Remittance
         Date in the manner and priorities set forth in Section 4.06.

Section 2.08.     Payments, Computations, Etc.

(a)  Unless  otherwise  expressly  provided  herein,  all  amounts to be paid or
deposited by the  Borrower  hereunder  shall be paid or deposited in  accordance
with the terms hereof no later than 2:30 p.m.  (Charlotte,  North Carolina time)
on the day  when  due in  lawful  money  of the  United  States  in  immediately
available funds to the Deal Agent's Account. Except as otherwise provided in the
definition  of the term  "Interest  Rate,"  the  Borrower  shall,  to the extent
permitted  by law,  pay to each  Lender  interest  on all  amounts  not  paid or
deposited  when due  hereunder  at 1% per annum above the Base Rate,  payable on
demand; provided,  however, that such interest rate shall not at any time exceed
the Maximum Lawful Rate. All  computations  of interest and all  computations of
the Interest Rate and other fees hereunder  shall be made on the basis of a year
of 360 days for the actual number of days (including the first but excluding the
last day) elapsed.

(b) Whenever any payment hereunder shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding  Business Day,
and such extension of time shall in such case be included in the  computation of
payment of Interest,  other interest or any fee payable  hereunder,  as the case
may be.

(c) All payments  hereunder shall be made without set-off or counterclaim and in
such amounts as may be necessary  in order that all such  payments  shall not be
less than the  amounts  otherwise  specified  to be paid under  this  Agreement.
Promptly following the Facility  Termination Date, the Deal Agent shall mark the
Note "Paid" and return it to the Borrower.

Section 2.09.  Breakage Costs.  The Borrower shall pay to the Deal Agent for the
account of each Lender,  upon the written request of the Liquidity Agent or Deal
Agent,  such amount or amounts as shall compensate any Lender for any loss, cost
or expense (but excluding  lost profits)  incurred by such Lender (as reasonably
determined  by such  Lender) as a result of failure of the  Borrower to give the
Deal Agent at least seven days notice of any  prepayment  of the Net  Investment
(and interest thereon)  (collectively,  the "Breakage Costs"). The determination
by a Lender of the  amount of any such loss or  expense  shall be set forth in a
written notice to the Borrower and shall be conclusive absent manifest error.

Section 2.10.     Increased Costs; Capital Adequacy; Illegality.

(a) If  either  (i)  the  introduction  of or  any  change  (including,  without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by a
Lender or any affiliate  thereof (each, an "Affected  Party") with any guideline
or request  from any  central  bank or other  governmental  agency or  authority
(whether or not having the force of law), shall (A) subject an Affected Party to
any Tax (except for Taxes on the  overall  net income of such  Affected  Party),
duty or other charge with respect to the Net Investment,  or on any payment made
hereunder,  (B)  impose,  modify  or deem  applicable  any  reserve  requirement
(including,  without limitation,  any reserve requirement imposed by the Federal
Reserve Board, but excluding any reserve  requirement,  if any,  included in the
determination  of  Interest),  special  deposit or similar  requirement  against
assets  of,  deposits  with or for the  amount  of, or credit  extended  by, any
Affected Party or (C) impose any other condition affecting the Net Investment or
a Lender's rights hereunder,  the result of which is to increase the cost to any
Affected  Party or to reduce the amount of any sum received or  receivable by an
Affected  Party under this  Agreement,  then within 30 days after demand by such
Affected Party (which demand shall be  accompanied by a statement  setting forth
the basis for such  demand),  the Borrower  shall pay directly to such  Affected
Party such  additional  amount or amounts as will compensate such Affected Party
for such additional or increased cost incurred or such reduction suffered.

(b) If either (i) the introduction of or any change in or in the  interpretation
of any law, guideline, rule, regulation, directive or request or (ii) compliance
by any Affected Party with any law, guideline,  rule,  regulation,  directive or
request from any central bank or other governmental authority or agency (whether
or not having the force of law), including, without limitation, compliance by an
Affected Party with any request or directive regarding capital adequacy,  has or
would  have the  effect of  reducing  the rate of return on the  capital  of any
Affected  Party as a  consequence  of its  obligations  hereunder  or arising in
connection  herewith to a level below that which any such  Affected  Party could
have  achieved  but for such  introduction,  change or  compliance  (taking into
consideration  the  policies  of such  Affected  Party  with  respect to capital
adequacy) by an amount deemed by such Affected  Party to be material,  then from
time to time,  within 30 days after demand by such Affected  Party (which demand
shall be  accompanied  by a statement  setting forth the basis for such demand),
the Borrower shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such reduction.

(c) If as a result of any event or  circumstance  similar to those  described in
Section 2.10(a) or 2.10(b),  any Affected Party is required to compensate a bank
or other financial institution  providing liquidity support,  credit enhancement
or other  similar  support  to such  Affected  Party  in  connection  with  this
Agreement or the funding or  maintenance of the Net  Investment,  then within 30
days  after  demand  by such  Affected  Party,  the  Borrower  shall pay to such
Affected  Party  such  additional  amount  or  amounts  as may be  necessary  to
reimburse such Affected Party for any such amounts paid by it.

(d) In determining  any amount  provided for in this Section,  an Affected Party
may use any reasonable  averaging and  attribution  methods.  Any Affected Party
making a claim under this Section shall submit to the Borrower a certificate  as
to such additional or increased cost or reduction,  which  certificate  shall be
conclusive absent manifest error.

(e) If a Lender shall notify the Deal Agent that a Eurodollar  Disruption  Event
as described in clause (i) of the  definition of "Eurodollar  Disruption  Event"
has occurred, the Deal Agent shall in turn so notify the Borrower, whereupon the
portion of the Net  Investment  in respect of which  Interest  accrues at a rate
based upon the LIBOR Rate shall immediately begin to accrue Interest at the Base
Rate.

Section 2.11.     Taxes.

(a) All payments made by the Borrower in respect of the Net  Investment  and all
payments made by the Borrower  under this  Agreement will be made free and clear
of and without  deduction or withholding for or on account of any Taxes,  unless
such  withholding  or deduction is required by law. In such event,  the Borrower
shall pay to the  appropriate  taxing  authority  any such Taxes  required to be
deducted or withheld and the amount payable to each Lender or the Deal Agent (as
the case may be) will be increased (such increase, the "Additional Amount") such
that every net payment made under this Agreement  after deduction or withholding
for or on account of any Taxes (including, without limitation, any Taxes on such
increase)  is not less than the  amount  that  would  have been paid had no such
deduction or withholding been deducted or withheld.  The foregoing obligation to
pay Additional Amounts, however, will not apply with respect to Taxes related to
the net  income  or  franchise  taxes  imposed  on a Lender  or the Deal  Agent,
respectively,  with  respect to payments  required to be made by the Borrower or
Deal Agent under this Agreement,  by a taxing  jurisdiction in which such Lender
or Deal Agent is  organized  or is paying  taxes as of the Closing  Date (as the
case may be).  If a Lender or the Deal  Agent pays any Taxes in respect of which
the Borrower is obligated to pay  Additional  Amounts  under this  Section,  the
Borrower shall promptly reimburse such Lender or Deal Agent in full.

(b) The  Borrower  will  indemnify  each  Lender and the Deal Agent for the full
amount of Taxes in respect of which the  Borrower is required to pay  Additional
Amounts (including, without limitation, any Taxes imposed by any jurisdiction on
such Additional  Amounts) paid by such Lender or the Deal Agent (as the case may
be) and any  liability  (including  penalties,  interest and  expenses)  arising
therefrom or with respect thereto;  provided,  however,  that the Lender or Deal
Agent  making a  demand  for  indemnity  payment  hereunder  shall  provide  the
Borrower,  with a  certificate  from the  relevant  taxing  authority  or from a
Responsible  Officer  of such  Lender or the Deal  Agent  stating  or  otherwise
evidencing that such Lender or the Deal Agent has made payment of such Taxes and
will provide a copy of or extract from documentation, if available, furnished by
such  taxing  authority  evidencing  assertion  or payment of such  Taxes.  This
indemnification  shall be made  within  ten days from the date the Lender or the
Deal Agent (as the case may be) makes written demand therefor.

(c) Within 30 days after the date of any  payment by the  Borrower  of any Taxes
pursuant to this Section,  the Borrower  will furnish to the Deal Agent,  at its
address  set forth under its name on the  signature  pages  hereof,  appropriate
evidence of payment thereof.

(d) If a Lender is not created or organized  under the laws of the United States
or a political subdivision thereof, such Lender shall, to the extent that it may
then do so under applicable laws and regulations,  deliver to the Borrower, with
a copy to the Deal  Agent,  (i)  within 15 days  after the date  hereof,  or, if
later,  the date on which such Lender becomes a Lender hereof two (or such other
number as may from time to time be prescribed by applicable laws or regulations)
duly completed  copies of IRS Form W-8ECI or Form W-8BEN (or any successor forms
or other  certificates or statements  which may be required from time to time by
the  relevant   United  States  taxing   authorities   or  applicable   laws  or
regulations),  as appropriate, to permit the Borrower to make payments hereunder
for the  account  of such  Lender,  as the case  may be,  without  deduction  or
withholding  of United States  federal income or similar Taxes and (ii) upon the
obsolescence  of or after the occurrence of any event requiring a change in, any
form or certificate  previously  delivered pursuant to this Section,  two copies
(or such other number as may from time to time be prescribed by applicable  laws
or regulations) of such additional,  amended or successor forms, certificates or
statements as may be required under applicable laws or regulations to permit the
Borrower to make  payments  hereunder  for the account of such  Lender,  without
deduction or withholding of United States federal income or similar Taxes.

(e) For any period  with  respect to which a Lender or the Deal Agent has failed
to provide the Borrower  with the  appropriate  form,  certificate  or statement
described in Section  2.11(d)  (other than if such failure is due to a change in
law occurring after the date of this Agreement),  the Deal Agent or such Lender,
as the case may be,  shall not be entitled  to  indemnification  under  Sections
2.11(a) or 2.11(b) with respect to any Taxes.

(f) Within 30 days of the written  request of the  Borrower  therefor,  the Deal
Agent and the applicable  Lender,  as appropriate,  shall execute and deliver to
the Borrower such certificates,  forms or other documents which can be furnished
consistent  with the  facts and which are  reasonably  necessary  to assist  the
Borrower in applying for refunds of Taxes remitted hereunder; provided, however,
that the Deal  Agent and such  Lender  shall not be  required  to  deliver  such
certificates, forms or other documents if in their respective sole discretion it
is determined that the deliverance of such  certificate,  form or other document
would have a material  adverse  affect on the Deal Agent or Lender and  provided
further, however, that the Borrower shall reimburse the Deal Agent or Lender for
any reasonable  expenses incurred in the delivery of such  certificate,  form or
other document.

(g) If, in connection  with an agreement or other document  providing  liquidity
support,  credit  enhancement  or  other  similar  support  to  the  Lenders  in
connection  with  this  Agreement  or the  funding  or  maintenance  of the  Net
Investment,  the Lenders are required to  compensate  a bank or other  financial
institution in respect of Taxes under  circumstances  similar to those described
in this Section,  then within ten days after demand by the Lenders, the Borrower
shall pay to the Lenders such  additional  amount or amounts as may be necessary
to reimburse the Lenders for any amounts paid by them.


<PAGE>

                                 ARTICLE Three


                                    SECURITY

Section 3.01.     Collateral.

(a)  As  security  for  the  prompt,   complete  and  indefeasible  payment  and
performance  in full  when  due,  whether  by  lapse of  time,  acceleration  or
otherwise, of the Obligations,  the Borrower hereby grants to the Deal Agent, on
behalf of the Secured Parties,  a first priority  perfected security interest in
the Collateral.

(b) The provisions of Section  3.01(a) do not constitute and are not intended to
result in a creation or an assumption by the Deal Agent,  the Liquidity Agent or
any Secured  Party of any  obligation  of the  Borrower  or any other  Person in
connection  with  any or all  of  the  Collateral  or  under  any  agreement  or
instrument  relating thereto.  Anything herein to the contrary  notwithstanding,
(i) the exercise by the Deal Agent, as agent for the Secured Parties,  of any of
its rights in the  Collateral  shall not  release the  Borrower  from any of its
duties or obligations  under the Collateral and (ii) none of the Deal Agent, the
Liquidity  Agent or any Secured  Party shall have any  obligations  or liability
under the Collateral by reason of this Agreement,  nor shall the Deal Agent, the
Liquidity  Agent  or any  Secured  Party  be  obligated  to  perform  any of the
obligations  or  duties  of the  Borrower  thereunder  or to take any  action to
collect or enforce any claim for payment assigned hereunder.

Section 3.02.     Release of Collateral; No Legal Title.

(a) The lien created by this Agreement in favor of the Deal Agent,  as agent for
the Secured Parties, with respect to the Collateral shall terminate with respect
to all of the Collateral,  on the Facility  Termination Date. In each case, upon
the request of, and at the expense of the Borrower, the Deal Agent shall execute
and deliver proper  documents  acknowledging  such release,  including,  without
limitation,  executing  and  delivering  to the  Borrower  such UCC  termination
statements  as may be required  to  terminate  the  financing  statements  filed
pursuant to the Transaction Documents.

(b) The Deal  Agent on behalf of the  Secured  Parties  will not,  except as may
result from the exercise of its remedies hereunder, have legal title to any part
of the  Collateral  on the  Facility  Termination  Date and will have no further
interest in or rights with respect to the Collateral.

Section 3.03.   Protection of Security Interest; Deal Agent as Attorney-in-Fact.

(a) The Borrower agrees that from time to time, at its expense, it will promptly
execute and deliver all  instruments and documents,  and take all actions,  that
may  reasonably  be  necessary  or  desirable,  or that the Deal  Agent may deem
necessary,  to perfect,  protect or more fully  evidence the  security  interest
granted to the Deal Agent, as agent for the Secured Parties,  in the Collateral,
or to enable the Deal Agent or the Secured Parties to exercise and enforce their
rights and remedies  hereunder.  Without  limiting the  foregoing,  the Borrower
will,  upon the  reasonable  request of the Deal Agent,  in order to  accurately
reflect the security  interest of the Deal Agent in the Collateral,  execute and
file  such  financing  or  continuation  statements  or  amendments  thereto  or
assignments  as may be requested by the Deal Agent and mark its records so as to
indicate  the Deal Agent's  security  interest in the  Receivables,  the related
Contracts, the Collections and the Related Security with respect thereto. At the
Deal Agent's  reasonable  request,  the  Borrower  agrees that it shall take all
actions  necessary to cause UAC and the Seller to similarly  mark its records to
reflect the sale of the  Receivables  and the  Contracts to the Borrower and the
Deal Agent's security interest in the Receivables,  the related  Contracts,  the
Collections and the Related Security with respect  thereto.  The Borrower shall,
at its own expense obtain such additional search reports as the Deal Agent shall
reasonably  request. To the fullest extent permitted by applicable law, the Deal
Agent shall be permitted to sign and file continuation statements and amendments
thereto and  assignments  thereof  without  the  Borrower's  signature.  Carbon,
photographic or other reproduction of this Agreement or any financing  statement
shall be sufficient as a financing statement.  The Borrower shall neither change
its name,  identity  or  corporate  structure  (within  the  meaning  of Section
9-402(7) of the Relevant  UCC) nor relocate  its chief  executive  office or any
office where records are kept unless it shall have: (i) given the Deal Agent and
the  Insurer at least 30 days prior  notice  thereof  and (ii)  prepared  at the
Borrower's  expense and  delivered to the Deal Agent all  financing  statements,
instruments and other documents necessary to preserve and protect the Collateral
or requested by the Deal Agent or the Insurer in connection  with such change or
relocation.  Any filings under the Relevant UCC or otherwise that are occasioned
by such change in name or location shall be made at the expense of the Borrower.
On the second Business Day after the end of each Settlement Period, if requested
by the Deal  Agent by the  last  Business  Day of such  Settlement  Period,  the
Borrower shall deliver to the Deal Agent an updated  Schedule of Contracts as of
the last day of such  Settlement  Period  (giving  effect to any releases by the
Deal Agent pursuant to Sections 2.05 and 3.04).

(b) If the Borrower fails to perform any of its obligations hereunder after five
Business  Days' notice from the Deal Agent,  the Deal Agent or any Secured Party
may (but shall not be  required  to)  perform,  or cause  performance  of,  such
obligation;  and the Deal Agent's or such Secured Party's  reasonable  costs and
expenses  incurred in connection  therewith  shall be payable by the Borrower as
provided in Article Nine. The Borrower irrevocably authorizes the Deal Agent and
appoints  the  Deal  Agent  as its  attorney-in-fact  to act  on  behalf  of the
Borrower,  (i) to  execute  on  behalf  of the  Borrower  and to file  financing
statements necessary or desirable in the Deal Agent's sole discretion to perfect
and to maintain  the  perfection  and  priority  of the  interest of the Secured
Parties  in the  Collateral,  and (ii) to file a carbon,  photographic  or other
reproduction  of this  Agreement or any financing  statement with respect to the
Collateral,  as a financing  statement  in such offices as the Deal Agent in its
sole  discretion  deems  necessary  or  desirable to perfect and to maintain the
perfection  and  priority  of  the  interests  of  the  Secured  Parties  in the
Collateral. This appointment is coupled with an interest and is irrevocable.

Section 3.04. Payments on Receivables; Application of Payments. If, on any day:

(a)      the  Outstanding  Balance of a  Receivable  is either (i)  reduced as a
         result of any defective,  rejected or returned  goods or services,  any
         cash discount,  credit, rebate, allowance or other dilution factor, any
         billing adjustment or other adjustment,  or (ii) reduced or canceled as
         a result of a setoff or offset in  respect  of any claim by any  Person
         (whether such claim arises out of the same or a related  transaction or
         an unrelated transaction);

(b)      any of the representations or warranties in Sale and Purchase Agreement
         I, Sale and Purchase Agreement II or Article Six is no longer true with
         respect to a Receivable;

(c)      a Receivable becomes a Defaulted Receivable;

then, in any such event, the Deal Agent shall, at the direction of the Borrower,
release its security  interest in, and Lien on, such  Receivable and the related
Contract;  provided,  that if immediately  after such release the Net Asset Test
would not be  satisfied,  then as a  condition  precedent  to such  release  the
Borrower shall deposit into the Collection Account an amount equal to the amount
which,  if applied to the reduction of the Net  Investment,  would cause the Net
Asset Test to be satisfied immediately after such release. All amounts deposited
into the Collection  Account pursuant to the foregoing  sentence will be treated
as Principal Receipts and shall be applied pursuant to Section 4.06.

                                  ARTICLE Four


<PAGE>





                           ADMINISTRATION AND ACCOUNTS

Section 4.01.     Servicer.

(a) The administration and servicing of the Receivables,  Contracts and Financed
Vehicles shall be conducted by the Servicer under the Servicing  Agreement.  UAC
shall serve as initial  Servicer  under the  Servicing  Agreement  and agrees to
perform the duties and obligations of the Servicer  contained therein and in the
other Transaction Documents until such time as a successor Servicer has accepted
an  appointment  under the  Servicing  Agreement  in  accordance  with the terms
thereof.  UAC hereby makes,  as of the Closing Date, to the Deal Agent, as agent
for the Secured  Parties,  each  representation  and warranty made by it (in its
individual  capacity or as Servicer) in the Servicing  Agreement,  and each such
representation and warranty is hereby incorporated herein by this reference.

(b) The Servicer will administer and service,  or cause to be  administered  and
serviced,  the Receivables,  Contracts and Financed  Vehicles upon the terms and
conditions set forth in the Servicing Agreement.

(c) The  occurrence of any of the following  events shall  constitute a Servicer
Default unless waived in writing by the Insurer,  or, if an Insurer  Default has
occurred, the Deal Agent:

(i)      (A) failure by the Servicer to deliver to the Deal Agent or the Insurer
         the  Settlement  Statement  for the  related  Settlement  Period,  that
         continues unremedied for a period of one Business Day after the earlier
         to  occur of (1)  discovery  by a  responsible  senior  officer  of the
         Servicer,  or (2) the date on which written notice has been received by
         a senior  officer of the Servicer or (B) any failure by the Servicer to
         make a payment,  transfer or deposit,  or deliver to the Deal Agent any
         proceeds or payment  required to be so delivered under the terms of the
         Note,  this  Agreement,  the  Servicing  Agreement  or any of the other
         Transaction Documents to which it is a party within one Business Day of
         the due date;

(ii)     failure on the part of the  Servicer  to duly  observe  or perform  any
         other  covenants or  agreements of the Servicer set forth in any of the
         Transaction  Documents to which the Servicer is a party,  which failure
         (A)would  have an  adverse  effect on the  rights or  interests  of the
         Insurer,  the  Lenders,  the  Deal  Agent  or the  Collateral  and  (B)
         continues  unremedied  for a period of 30 days after the  Servicer  has
         actual knowledge of such failure;

(iii)    the  entry of a decree  or order by a court or  agency  or  supervisory
         authority having  jurisdiction in the premises for the appointment of a
         conservator,   receiver,   or  liquidator   for  the  Servicer  in  any
         insolvency, readjustment of debt, marshaling of assets and liabilities,
         or similar  proceedings,  or for the winding up or  liquidation  of its
         affairs,  and the  continuance of any such decree or order unstayed and
         in effect for a period of 60 consecutive days;

(iv)     consent by the Servicer to the  appointment of a Trustee in bankruptcy,
         conservator  or receiver or liquidator in any  bankruptcy,  insolvency,
         readjustment  of debt,  marshaling of assets and liabilities or similar
         proceedings   of  or  relating  to  the  Servicer  of  or  relating  to
         substantially  all of its  property,  or the  Servicer  shall  admit in
         writing its  inability  to pay its debts  generally as they become due,
         filing  by  the  Servicer  of a  petition  to  take  advantage  of  any
         applicable insolvency or reorganization statute, making by the Servicer
         of an assignment for the benefit of its creditors,  or the  voluntarily
         suspension by the Servicer of payment of its obligations;

(v)      any  representation,  warranty or certification made by the Servicer in
         any  Transaction  Document  to which it is a party in its  capacity  as
         Servicer,  or in any certificate  delivered pursuant to any Transaction
         Document to which it is a party in its capacity as Servicer,  proves to
         have been incorrect when made,  which (i) would have a material adverse
         effect on the rights of the  Lenders,  the  Insurer or the  Collateral,
         respectively,  and (ii) if capable  of cure,  continues  uncured  for a
         period of 30 days;

(vi)     the occurrence of a material exception in any Servicing Audit which may
         have a material  adverse  effect on the  Lenders or the  Insurer or the
         Collateral, in the reasonable opinion of the Insurer;

(vii)    the Net Yield as of any Determination  Date is less than 2.00% during a
         Settlement Period in which the Net Investment is greater than zero each
         day of such Settlement Period; or

(viii)   the failure to pay by the Servicer trade payables within 45 days of the
         date due or the  default  and  failure  to cure  within  10 days by the
         Servicer  in the  payment of any other  amount  due of any  obligation,
         collectively in excess of $1 million outstanding at any one time, other
         than any items in dispute; or

(ix)     an "Event of Default" under the Servicing Agreement.

         The  Servicer  shall  provide to the Insurer and the Deal Agent  prompt
notice of any Servicer  Default or  Potential  Servicer  Default.  If a Servicer
Default shall not have been remedied,  the Insurer, or upon the occurrence of an
Insurer  Default,  the Deal  Agent,  by  notice  then  given in  writing  to the
Servicer,  may  terminate  all  (but  not  less  than  all)  of the  rights  and
obligations of the Servicer in and to the Receivables and proceeds  thereof.  As
promptly as possible  after the Insurer gives such notice (i) the Insurer shall,
in its sole and absolute discretion, appoint a successor Servicer or (ii) at the
direction  of  the  Insurer  and in  consideration  of  reasonable  market-based
compensation not to exceed $50,000, the Deal Agent shall use its best efforts to
secure  a  successor  Servicer  satisfactory  to  the  Insurer  to  service  the
Receivables in accordance with the Transaction Documents.  Any obligation of the
Deal Agent to assist in securing a  successor  Servicer  hereunder  shall not be
construed as an obligation of the Deal Agent to assume any of the obligations or
responsibilities  of the  Servicer  with  regard  to the  Receivables.  Upon the
occurrence of a Insurer  Default,  if the Deal Agent gives the Servicer a notice
of termination  pursuant to this Section,  the Deal Agent shall, in its sole and
absolute discretion, appoint a successor Servicer.

         Upon the  occurrence of a Servicer  Default and the  termination of the
Servicer, the Servicer shall continue to perform its functions as Servicer until
the date  specified in the  termination  notice or, if no such date is specified
therein,  the date of the Servicer's  receipt of such notice,  at which time all
rights, powers,  duties,  obligations and responsibilities of the Servicer under
this  Agreement  so  terminated  with  respect  to  the  Receivables  shall,  as
applicable,  vest  in  and  be  assumed  by  the  successor  Servicer  appointed
hereunder.  During the continuance of a Servicer Default,  at the request of the
Insurer,  or after an Insurer  Default,  at the request of the Deal  Agent,  the
Servicer shall promptly  deliver to the Insurer or a backup servicer  designated
by the Insurer or the Deal Agent,  as  applicable,  all material,  data,  backup
files,  software (non exclusive  right to limited use) and other  information on
the Receivables that the Servicer  possesses that is necessary to the collection
of the Receivables by any successor  Servicer  without the  participation of the
Servicer and, upon termination of the Servicer,  shall promptly deliver all such
material,  data,  backup fines,  software and other information to the successor
Servicer appointed as provided herein.

Section  4.02.  Books and Records.  The  Servicer  shall  maintain  accurate and
complete  accounts,  records and computer systems  pertaining to the Collateral.
Such  accounts,  records and computer  systems shall be maintained in accordance
with the requirements of the Servicing Agreement and this Agreement.

Section  4.03.  Appointment  to Act as  Borrower's  Agent.  The Borrower  hereby
appoints the Servicer as its agent for the purpose of causing the  repayment and
prepayment of the Net Investment as required or permitted pursuant Section 4.06.
The  Borrower  irrevocably  agrees that (i) the  Borrower  shall be bound by all
actions of the Servicer taken pursuant to the preceding sentence,  (ii) the Deal
Agent  is  authorized  to  accept   submissions,   determinations,   selections,
specifications,  transfers,  notices,  requests,  demands and payments  from the
Servicer on behalf of the Borrower and (iii) the  execution  and delivery by the
Servicer to the Deal Agent of any notice, request, demand or similar item or the
taking by the  Servicer of any other action  described in this Section  shall be
deemed conclusive  evidence,  as between the Borrower and the Deal Agent, of the
Servicer's  authority  to execute and deliver such  notice,  request,  demand or
similar item or take such other action on behalf of the Borrower hereunder.

Section 4.04. Delivery of Certain Reports. On or before each Determination Date,
the Servicer shall prepare and provide to the Deal Agent and the Insurer,  (i) a
Settlement  Statement as of the end of the preceding  Settlement Period, (ii) if
reasonably  requested by the Deal Agent or the Insurer  with one Business  Day's
prior notice, a computer tape listing by Obligor all Receivables,  together with
an aging of such Receivables and (iii) such other  information as the Deal Agent
or the  Insurer may  reasonably  request.  The Deal Agent  shall  provide to the
Borrower,  two  Business  Days  prior  to each  Determination  Date,  a  monthly
settlement  statement  containing  information  relating  to the  amount of each
obligation of the Borrower which comprises Interest and fees due and payable for
the most  recent  Settlement  Period and the amount of  earnings  in all related
accounts for such Settlement Period.

Section 4.05.     Establishment of Accounts; Investment of Funds.

(a) There shall be established at First Union as Collateral Agent on the Closing
Date and maintained,  for the benefit of the Deal Agent on behalf of the Secured
Parties,  in each case bearing a designation  clearly  indicating that the funds
deposited  therein  are held for the  benefit of the Deal Agent on behalf of the
Secured Parties, the following segregated accounts in the name of the Collateral
Agent  for the  benefit  of Deal  Agent on  behalf  of the  Secured  Parties,  a
collection   account  (the  "Collection   Account"),   prefunding  account  (the
"Prefunding  Account"),  a prefunding  interest reserve account (the "Prefunding
Interest Reserve  Account"),  a yield supplement  account (the "Yield Supplement
Account") and a reserve  account (the "Reserve  Account").  Subject to the terms
hereof,  the entity at which each  Account is located  shall  possess all right,
title  and  interest  in and to all  funds  deposited  from  time to time in the
related Account and such Account will be maintained at an Eligible  Institution.
If the  Eligible  Institution  holding an Account  shall cease to be an Eligible
Institution,  the Deal Agent shall have the right to direct the  transfer of the
Account to an Eligible Institution.

(b) Funds on deposit in the Collection  Account and Prefunding  Account shall be
invested  in  overnight  Eligible  Investments  and  funds  on  deposit  in  the
Prefunding  Interest  Reserve  Account,  Reserve  Account  and Yield  Supplement
Account  shall be invested in  Eligible  Investments,  in each case by or at the
written direction of the Borrower;  provided,  that if a Termination Event shall
have occurred, such investments shall be made as directed by the Deal Agent. Any
such written  directions shall specify the particular  investment to be made and
shall certify that such investment is an Eligible Investment and is permitted to
be made under this Agreement.

(c) Each  entity at which an Account is located  agrees that it shall not accept
for credit to such Account any  investment  as to which it has  knowledge of any
Adverse Claim thereto.  Each entity at which an Account is located hereby agrees
(and any other  Securities  Intermediary  holding an Account  shall so agree) to
comply with all  Entitlement  Orders  received by it with respect to the related
Account from the Deal Agent.

(d) Without the prior consent of the  Borrower,  no Eligible  Investment  may be
liquidated  or  disposed  of prior to its  maturity.  All  proceeds  of any such
Eligible  Investment shall be deposited in the related Account.  Investments may
be made in each  Account  on any  date  (provided  such  investments  mature  in
accordance  herewith),  only after giving effect to deposits to and  withdrawals
from such Account on such date.  Realized losses, if any, on amounts invested in
such  Eligible  Investments  shall be charged  against  investment  earnings  on
amounts on deposit in the related  Account.  The Borrower shall provide the Deal
Agent  and the  Collateral  Agent on the  Closing  Date and from time to time an
incumbency  certificate  or the  substantial  equivalent  with  respect  to each
officer of the Borrower that is authorized to provide  instructions  relating to
investments in Eligible Investments in the Accounts.

(e) Eligible  Investments  shall be maintained in the Accounts in such manner as
may be necessary to maintain the first priority  perfected  security interest in
favor of the Deal Agent on behalf of the Secured  Parties.  Each entity at which
an Account is located agrees (and any other Securities  Intermediary  holding an
Account  shall so agree)  that it shall not  agree to  comply  with  Entitlement
Orders with  respect to such  Account  given to it by any Person  other than the
Deal Agent.

Section 4.06.  Collections;  Collection Account;  Allocation of Available Funds;
Draws on Policy.

(a) The Servicer  shall  instruct all  Obligors to cause all  Collections  to be
deposited  directly with a Lock-Box Bank. The Servicer shall not add any bank as
a Lock-Box  Bank to those  listed on Exhibit G without  the  consent of the Deal
Agent and the Insurer,  which consent shall not be  unreasonably  withheld.  The
Servicer  shall not  terminate any bank as a Lock-Box Bank unless the Deal Agent
and the Insurer shall have  received 30 days' prior notice of such  termination.
If the Borrower or the Servicer  receives any  Collections,  the Borrower or the
Servicer, as applicable, shall immediately, but in any event within two Business
Days of receipt, remit such Collections to a Lock-Box Account.

(b) The  Servicer  shall  remit  daily  from the  Lock-Box  Account,  within two
Business Days of receipt,  to the Collection  Account all  Collections.  On each
Remittance  Date,  all  interest  and  earnings  (net of losses  and  investment
expenses) on funds on deposit in the  Collection  Account shall be considered to
be Collections and shall be distributed hereunder as such.

(c) On each Remittance  Date, the Servicer shall allocate all Available Funds on
deposit in the Collection  Account and, if the Net  Investment  equals zero, any
Principal  Receipts  allocable  hereunder  pursuant to Section  4.06(d),  in the
following amounts and order of priority:

(i)      to  repay  any  amounts  due  under  a  Hedging  Agreement  or  Hedging
         Transaction pro rata in accordance with amounts due thereunder;

(ii)     to the  Servicer,  (if the Servicer is not UAC) the fees,  expenses and
         other Carrying Costs due to such Servicer;

(iii)    to the  Collateral  Agent,  the fees  and  other  expenses  due to such
         Collateral Agent;

(iv)     to the Deal Agent, for the Lenders, accrued but unpaid Interest;

(v)      to the Deal Agent, Program Fees;

(vi)     to the Deal Agent, Facility Fees not to exceed the Facility Fee Cap;

(vii)    to the Deal Agent,  for the ratable payment to each Affected Party, the
         Capped Costs;

(viii)   to the Deal Agent,  for the Lenders,  to be applied in reduction of the
         Net Investment, to bring the Net Asset Test into compliance;

(ix)     to the Insurer,  the aggregate  amount of any  previously  unreimbursed
         draws on the Policy, plus accrued interest thereon at the rate provided
         in the Insurance Agreement;

(x)      to the Insurer,  the Premium,  including any overdue  Premium,  accrued
         interest  thereon  plus  any  amounts  owed  under  the  Policy  or the
         Insurance Agreement (other than those described in clause (ix) above);

(xi)     to the Reserve Account,  to the extent necessary to cause the amount on
         deposit therein to equal the Required Reserve Account Amount;

(xii)    to  the  Yield  Supplement  Account,  to  the  extent  of  any  amounts
         previously  withdrawn  therefrom and not  previously  reimbursed to the
         credit of the Yield  Supplement  Account  (to the extent the Deal Agent
         maintains an interest in the related Receivables);

(xiii)   to the Servicer (if the Servicer is UAC), the Servicing Fee;

(xiv)    after the Termination  Date, to the Deal Agent, for the ratable payment
         to the Lenders on an equal basis of  priority,  an amount  necessary to
         reduce the Net Investment to zero;

(xv)     to the Deal Agent, (i) the excess of (A) the Facility Fees over (B) the
         Facility  Fee Cap and,  (ii) for the ratable  payment to each  Affected
         Party,  the excess of (A) the sum of Increased Costs and the Additional
         Amounts over (B) the Capped Costs;

(xvi)    any remaining  Available Funds and Principal Receipts on deposit in the
         Collection Account shall be paid to the Borrower.

(d) On each Business Day on which there are Principal Receipts on deposit in the
Collection Account, the Deal Agent shall direct the Collateral Agent to, and the
Collateral Agent shall,  apply and remit all such Principal  Receipts on deposit
in the  Collection  Account to the Deal Agent in reduction of the Net Investment
until the Net Investment is reduced to zero. On any Remittance Date on which the
Net  Investment  is zero any  Principal  Receipts  on deposit in the  Collection
Account  shall be  allocated  in the  manner and  priority  set forth in Section
4.06(c).

(e) In the event that Available  Funds with respect to any  Remittance  Date and
any withdrawals  from the Yield  Supplement  Account are insufficient to provide
for the payment of the amounts  described in items (i) though (viii) above,  the
Collateral  Agent at the direction of the Servicer shall make a withdrawal  from
the Reserve  Account in the amount of such deficiency and the proceeds from such
withdrawal shall be applied to the required  distributions and payments.  To the
extent that amounts available in the Reserve Account are insufficient to provide
for payment of items (iv) through  (viii) above and the Borrower fails to make a
deposit to the Reserve Account in the amount of such  shortfall,  the Deal Agent
shall make a demand for  payment of such amount  under the Policy in  accordance
with its terms.  Amounts  received  under the Policy  pursuant to the  foregoing
sentence  shall be  applied  by the  Collateral  Agent at the  direction  of the
Servicer to items (iv) through  (viii)  above.  Notwithstanding  the  foregoing,
under no circumstances  will the payment on any Remittance Date under the Policy
for item  (vi)  above  exceed  the  Facility  Fee Cap.  On the  Final  Scheduled
Remittance  Date,  the Deal  Agent  shall  make a demand  under  the  Policy  in
accordance  with its terms for  payment of any unpaid  Interest,  Program  Fees,
Facility  Fees  not to  exceed  the  Facility  Fee  Cap,  Capped  Costs  and Net
Investment.

Section 4.07.  Prefunding Interest Reserve Account;  Prefunding Interest Reserve
Deposits; Interest Reserve Advances; Reimbursements.

(a) On the Business Day  preceding  each  Prefunding  Date,  the Borrower  shall
deposit  in the  Prefunding  Interest  Reserve  Account  an amount  equal to the
product of (i) the Negative Carry for such  Prefunding  Date, (ii) the principal
amount of the Prefunding  Deposit to be made on the Prefunding  Date and (iii) a
fraction,  the numerator of which is the number of days from the Prefunding Date
through the end of the  Settlement  Period  during  which such  Prefunding  Date
occurs  and the  denominator  of which is 360 (such  amount  with  respect  to a
Prefunding Date, the "Prefunding Interest Reserve Deposit").

(b) On each  Remittance  Date,  the  Servicer  shall  deposit to the  Collection
Account  an amount  equal to the  Interest  Reserve  Advance,  if any,  for such
Remittance  Date. In the event that, on any  Remittance  Date, the amount earned
over the  related  Settlement  Period on amounts  on  deposit in the  Prefunding
Account  shall exceed an amount  equal to the product of (i) the daily  weighted
average  amount  on  deposit  in  the  Prefunding  Account  during  the  related
Settlement  Period,  (A) the  Targeted  Interest  Rate and (B) a  fraction,  the
numerator  of which is the number of days in the related  Settlement  Period and
the denominator of which is 360, the Collateral  Agent, at the written direction
of the Servicer,  shall release such excess amount from the Prefunding  Interest
Reserve  Account  to the  Servicer  in  reimbursement  for  previously  advanced
Interest Reserve Advances or, to the extent no such unreimbursed advances exist,
the Servicer  shall apply such excess  amount as part of  Available  Funds under
Section 4.06.

(c) On each Remittance  Date, all amounts  deposited in the Prefunding  Interest
Reserve Account with respect to the related Settlement Period (together with any
earnings on amounts on deposit in the Prefunding Interest Reserve Account during
such Settlement Period) shall be deposited in the Collection Account.

Section 4.08.     Yield Supplement Account, Deposits; Withdrawals.

(a) On the  day  of the  initial  Prefunding  with  respect  to all  Receivables
recorded on the Servicer's  master  servicing  records as of such day and on any
Business  Day  thereafter  on which a Receivable  is recorded on the  Servicer's
master servicing  records,  the Borrower shall deposit into the Yield Supplement
Account for each such  Receivable  with  respect to which the  related  Contract
provides  for  interest  to accrue  thereunder  at a rate less than the  Minimum
Required APR  (determined  as of the date of such  recordation on the Servicer's
master servicing records) an amount (each such amount, a "Required Yield Deposit
Amount") equal to the product of (i) the number of monthly  payments  originally
required  under  such  Contract  and (ii) an amount  equal to (A) the  scheduled
monthly  payment on such  Contract  which  would be  required  to be made by the
Obligor  there under if such  Contract had a rate per annum equal to the Minimum
Required APR minus (B) the  scheduled  monthly  payment on such  Contract  which
would be required to be made by the Obligor  thereunder  if such  Contract had a
rate per annum equal to the rate set forth in such Contract. Notwithstanding the
foregoing,  no Required  Yield  Deposit  Amount need be  deposited  to the Yield
Supplement  Account  until the total amount of all  undeposited  Required  Yield
Deposit Amounts equals or exceeds $10,000.

(b) In the event that Available  Funds with respect to any  Remittance  Date are
insufficient  to provide  for the payment of the  amounts  described  in Section
4.06(c)(i)  through  (viii),  the  Collateral  Agent,  at the  direction  of the
Servicer,  shall  make a  withdrawal  from the Yield  Supplement  Account in the
amount of such deficiency and the proceeds from such withdrawal shall be applied
by the  Collateral  Agent,  at the  direction of the  Servicer,  to the required
distributions  and  payments.  On any day on which the Deal  Agent,  pursuant to
Section  2.05,  Section  3.02 or Section  3.04,  releases  to the  Borrower  its
security interest in a Contract and related Receivable with respect to which the
Borrower  deposited funds in the Yield  Supplement  Account  pursuant to Section
4.08(a),  the amount of such deposit  (together with any earnings  thereon) less
any  amounts  released  from the Yield  Supplement  Account in  accordance  with
Section  4.08  shall be  released  to the  Borrower.  Upon the  occurrence  of a
Termination  Event, all amounts on deposit in the Yield Supplement Account shall
be applied by the Servicer as part of Available Funds pursuant to Section 4.06.

Section 4.09.     Reserve Account; Releases.

(a) On each Prefunding Date, the Borrower shall deposit (or cause to be withheld
from the  Prefunding  Deposit)  to the credit of the  Reserve  Account an amount
equal to an amount necessary to fund the Reserve Account to the Required Reserve
Account  Amount.  The amount of any Reserve  Account  Guaranty  shall be counted
toward the amount of funds available in the Reserve Account.

(b) In the event that on any Remittance Date or day on which a Securitization or
Warehouse Transfer occurs after giving effect to Section 4.06(e),  the amount on
deposit in the Reserve Account (calculated as of the related  Determination Date
or the date of the Securitization or Warehouse Transfer,  as applicable) exceeds
the Required  Reserve Account Amount,  (i) the Collateral  Agent, at the written
direction  of the  Servicer  provided  that  no  Termination  Event  shall  have
occurred,  shall  release to the  Borrower an amount  equal to the excess of the
amount on deposit in the  Reserve  Account  over the  Required  Reserve  Account
Amount  and (ii)  the Deal  Agent  shall,  if a  Termination  Event  shall  have
occurred,  apply as part of Available  Funds pursuant to Section 4.06 the amount
on deposit in the Reserve Account.

(c) After the occurrence of the  Termination  Date,  upon the earlier of (i) the
day on which the Net Investment is zero, the Secured Parties shall have received
all Aggregate  Unpaids and all amounts due and owing the Insurer shall have been
paid in full and (ii) the day on which the aggregate  Outstanding Balance of the
Receivables  shall be zero,  the Deal Agent shall  release to the  Borrower  all
amounts on deposit in the Reserve Account.

                                  ARTICLE Five


<PAGE>





                      CONDITIONS OF CLOSING AND PREFUNDINGS

Section 5.01.  Conditions  to Closing.  No Lender shall be obligated to make the
initial Prefunding, nor shall any Secured Party, the Deal Agent or the Liquidity
Agent be obligated to take, fulfill or perform any other action hereunder, until
the following  conditions  have been  satisfied,  in the sole  discretion of, or
waived in writing  by the  Insurer,  or the Deal  Agent with the  consent of the
Insurer:

(a)      The Deal Agent shall have  received  each of the  following  documents,
         each of which is dated (unless  otherwise  indicated) as of the Closing
         Date, in form and substance satisfactory to the Deal Agent:

                  (i) this  Agreement,  executed  and  delivered  by the parties
hereto;

                  (ii) the Note, executed and delivered by the Borrower;

                  (iii) the Insurance  Agreement,  executed and delivered by the
parties thereto;

                  (iv)  the  Sale  and  Purchase  Agreement  I and the  Sale and
Purchase Agreement II executed and delivered by the parties thereto;

                  (v) the  Servicing  Agreement  executed  and  delivered by the
parties thereto;

                  (vi) certificate of the Secretary or an Assistant Secretary of
each of UAC and the Borrower, in each case certifying:

                  (A)               that  attached  thereto are true and correct
                                    copies  of the  following,  each of which is
                                    true, correct and complete as of the Closing
                                    Date:

                                    (1)               articles of incorporation,
                                                      including  all  amendments
                                                      thereto, certified as of a
                                                      recent  date,  in the case
                                                      of UAC,  by the  Secretary
                                                      of State  of the  State of
                                                      Indiana,  and, in the case
                                                      of  the  Borrower,  by the
                                                      Secretary  of State of the
                                                      State of Delaware;

                                    (2)               bylaws,    including   all
                                                      amendments thereto; and

                                    (3)               resolutions  of the  Board
                                                      of Directors  authorizing,
                                                      among  other  things,  the
                                                      execution,   delivery  and
                                                      performance     of    each
                                                      Transaction   Document  to
                                                      which UAC or the Borrower,
                                                      as the case  may be,  is a
                                                      party; and

                  (B)               the names and the signatures of its officers
                                    authorized to sign the Transaction Documents
                                    to which  UAC or the  Borrower,  as the case
                                    may be, is a party;

                  (vii) Officer's Certificate from each of UAC and the Borrower,
certifying  that (A) each of the  representations  and  warranties of such party
contained  in the  Transaction  Documents  to which  it is a party  are true and
correct  on  and as of  the  Closing  Date  as if  made  on  such  date,  (B) no
Termination Event,  Potential  Termination Event,  Servicer Default or Potential
Servicer  Default exists on the Closing Date and (C) no material  adverse change
in its  condition,  financial or  otherwise,  business,  operations,  results of
operations or properties  has occurred  which has not been disclosed to the Deal
Agent;

                  (viii) UCC,  judgment and tax lien search  reports for UAC and
the Borrower satisfactory to the Deal Agent;

                  (ix)  opinions  of counsel,  addressed  to the Lenders and the
Insurer, satisfactory to the Deal Agent, as to the following matters:

                  (A)               non-consolidation   in   bankruptcy  of  the
                                    Borrower and the Seller with UAC;

                  (B)               true sale of the Receivables from UAC to the
                                    Seller and from the Seller to the Borrower;

                  (C)               perfection and priority of security interest
                                    of the Deal Agent in the Collateral; and

                  (D)               authorization,   execution,   delivery   and
                                    enforceability of the Transaction  Documents
                                    to which the UAC Entities are parties;

                  (x) the Fee  Letter,  executed  and  delivered  by the parties
thereto;

                  (xi)  a  Hedging  Agreement,  executed  and  delivered  by the
parties thereto;

                  (xii) such  documents,  certificates  and  opinions  as to the
Servicer as the Deal Agent may reasonably request; and

                  (xiii) such other documents,  certificates and opinions as the
Deal Agent may reasonably request.

(b)               As of the Closing Date, the Deal Agent shall have received (i)
                  satisfactory  evidence  that each UAC Entity has  obtained all
                  required consents and approvals of all Persons,  including all
                  requisite Governmental Authorities, to the execution, delivery
                  and  performance of this  Agreement and the other  Transaction
                  Documents to which it is a party and the  consummation  of the
                  transactions   contemplated  hereby  or  thereby  or  (ii)  an
                  Officer's  Certificate  from  any  such  entity  in  form  and
                  substance  satisfactory  to the Deal Agent  affirming  that no
                  such consents or approvals are required.

(c)               As of the Closing Date, the Borrower shall be in compliance in
                  all material respects with all applicable Requirements of Law.

(d)               The Borrower  shall have paid, or cause to have been paid, all
                  fees required to be paid by it on the Closing Date,  including
                  all fees  required  hereunder  and under the Fee  Letter to be
                  paid  as of the  Closing  Date,  and,  subject  to  any  prior
                  agreement  among UAC, the  Borrower and the Deal Agent,  shall
                  have  reimbursed  each Lender and the Deal Agent for all fees,
                  costs and  expenses of closing the  transactions  contemplated
                  hereunder and under the other Transaction Documents, including
                  the legal and other document preparation costs incurred by the
                  Deal Agent and any Lender.

Section 5.02.  Conditions Precedent to Prefundings.  Each Prefunding  (including
the initial  Prefunding)  made  pursuant to Section 2.01 shall be subject to the
further conditions precedent that:

(a)               the Net Investment after giving effect to such Prefunding does
                  not exceed the Facility Amount;

(b)               after giving effect to such Prefunding,  the Net Asset Test is
                  satisfied;

(c)               the Borrower  shall have  deposited any Required Yield Deposit
                  Amount into the Yield Supplement  Account required pursuant to
                  Section 4.08;

(d)               the Borrower  will have made any deposit  into the  Prefunding
                  Interest Reserve Account required pursuant to Section 4.07;

(e)               the Policy is in full force and effect and no Insurer  Default
                  shall have occurred and the Insurer is not rated below "AA" by
                  Standard & Poors;

(f)               the amount on deposit in the Reserve  Account is not less than
                  the  Required   Reserve   Account   Amount   (calculated   (i)
                  immediately  prior to such Prefunding Date and (ii) as if such
                  Prefunding and related Reserve Account deposit shall have been
                  made);

(g)               a Potential  Termination  Event,  a  Termination  Event or the
                  Termination Date has not occurred and is not continuing;

(h)               on the related  Prefunding Date, a Responsible  Officer of the
                  Borrower  shall  have  certified  in  the  related  Prefunding
                  Request that:

                  (i) the  representations  and  warranties  of the Borrower set
forth in Section  6.01 are true and  correct on and as of such date,  before and
after giving effect to such  Prefunding  and to the  application of the proceeds
therefrom, as though made on and as of such date;

                  (ii) no event has occurred  which  constitutes  a  Termination
Event or a Potential Termination Event; and

                  (iii) the Borrower is in material  compliance with each of its
covenants set forth herein;

(i)               there  has  been no  change  in the  condition,  financial  or
                  otherwise,  business,  operations,  results of  operations  or
                  properties  of the Borrower  since the most recent  Prefunding
                  Date or,  in the case of the  initial  Prefunding,  since  the
                  Closing Date;

(j)               the making of the Prefunding on such  Prefunding Date will not
                  violate any  Requirement  of Law  applicable  to any Lender or
                  Investor;

(k)               as of the related  Prefunding Date, the information  contained
                  in the Prefunding  Request delivered  pursuant to Section 2.01
                  are true,  accurate,  complete  and  correct  in all  material
                  respects;

(l)               a Hedging Agreement shall be in effect;

(m)               the  Borrower  shall have taken such other  action,  including
                  delivery  of  approvals,  consents,  opinions,  documents  and
                  instruments  to VFCC,  the Deal Agent and the  Insurer as each
                  may reasonably request; and

(n)               UAC shall  not have  adopted  any  change  to its  Credit  and
                  Collection  Policy  that has been  disapproved  by the Insurer
                  pursuant to Section 7.01(a)(v).

Section 5.03.  Conditions  Precedent to Withdrawals from the Prefunding Account.
Each withdrawal from the Prefunding  Account made pursuant to Section 2.02 shall
be subject to the further conditions precedent that:

(a)               each of the  conditions  precedent to the  acquisition  by the
                  Borrower  of  each  related  Receivable  under  the  Sale  and
                  Purchase  Agreement  II  shall  have  been  fulfilled  in  all
                  respects and not waived; and

(b)               no event has occurred which constitutes a Termination Event or
                  Potential Termination Event and such withdrawal will not cause
                  a Termination Event or Potential Termination Event.

                                  ARTICLE Six


<PAGE>





                         REPRESENTATIONS AND WARRANTIES

Section 6.01.  Representations  and  Warranties  of the  Borrower.  The Borrower
represents and warrants as follows to the Deal Agent, each Secured Party and the
Liquidity Agent that:

(a)      Corporate  Existence  and Power.  The  Borrower is a  corporation  duly
         organized,  validly existing and in good standing under the laws of its
         jurisdiction of incorporation and has all corporate power,  legal right
         and all material governmental  licenses,  authorizations,  consents and
         approvals  required to own or lease its  properties and to carry on its
         business in each jurisdiction in which its business is now conducted.

(b)      Due Qualification. The Borrower is duly qualified to do business and is
         in good standing as a corporation,  and has obtained or will obtain all
         necessary licenses and approvals, in each jurisdiction in which failure
         to so qualify  would have a material  adverse  effect on its ability to
         perform its obligations hereunder.

(c)      Corporate and Governmental Authorization; Contravention. The execution,
         delivery  and  performance  by the Borrower of this  Agreement  and the
         other Transaction Documents are within the Borrower's corporate powers,
         have been duly authorized by all necessary corporate action, require no
         action by or in respect  of, or filing  with,  any  governmental  body,
         agency or official (except as contemplated by Section 3.03), and do not
         contravene,  or constitute a default under, any provision of applicable
         law or regulation or of the certificate of  incorporation  or bylaws of
         the Borrower or of any indenture,  contract, agreement,  mortgage, deed
         of trust,  judgment,  injunction,  order,  decree  or other  instrument
         binding  upon the  Borrower or under which it or any of its property is
         bound, or result in the creation or imposition of any lien on assets of
         the Borrower  (except as  contemplated by Section 3.03), or require the
         consent  or  approval  of,  or  the  filing  of  any  notice  or  other
         documentation with, any Governmental  Authority or other Person (except
         as contemplated by Section 3.03).

(d)      No Violation.  The  execution  and delivery of this  Agreement and each
         other  Transaction  Document  to which  the  Borrower  is a party,  the
         performance of the transactions contemplated hereby and thereby and the
         fulfillment  of the terms hereof and thereof will not conflict  with or
         violate, in any material respect, any Requirements of Law applicable to
         the Borrower.

(e)      Binding  Effect.  Each of this  Agreement  and  the  other  Transaction
         Documents and any Warehouse Transfer Agreement to which the Borrower is
         a party  constitutes  the legal,  valid and binding  obligation  of the
         Borrower,   enforceable  in  accordance  with  its  terms,  subject  to
         applicable  bankruptcy,  insolvency,  moratorium  or other similar laws
         affecting the rights of creditors.

(f)      All Consents Required. All approvals, authorizations,  consents, orders
         or  other  actions  of  any  Person  or of any  Governmental  Authority
         required in connection  with the execution and delivery by the Borrower
         of this Agreement and each other Transaction  Document to which it is a
         party, the performance by the Borrower of the transactions contemplated
         by this  Agreement and each such other  Transaction  Document,  and the
         fulfillment of the terms hereof and thereof by the Borrower,  have been
         obtained,  unless the failure to obtain such shall not  materially  and
         adversely  affect the Borrower's  performance of its obligations  under
         this  Agreement  and each other  Transaction  Document to which it is a
         party.

(g)      Perfection.  Immediately preceding each Prefunding,  the Borrower shall
         be the owner of all of the  Receivables,  free and clear of all  liens,
         encumbrances,   security  interests,   preferences  or  other  security
         arrangement  of any kind or nature  whatsoever,  except as permitted by
         this Agreement and the other Transaction Documents. On or prior to each
         Prefunding  and each day on which a Receivable  is sold to the Borrower
         by the  Seller  pursuant  to the Sale and  Purchase  Agreement  II or a
         Warehouse  Transfer  Agreement,  all  financing  statements  and  other
         documents  required  to be  recorded  or filed in order to perfect  and
         protect (i) the Borrower's  interest in the Receivables,  the Contracts
         related  thereto,  the Related  Security  with respect  thereto and all
         proceeds  thereof against all creditors of and purchasers from UAC, the
         Seller  or UAC  Finance,  and  (ii) the Deal  Agent's  interest  in the
         Collateral  against all creditors of and purchasers  from the Borrower,
         and all filing fees and taxes, if any,  payable in connection with such
         filings shall have been paid in full.

(h)      Accuracy of Information.  All information  heretofore  furnished by the
         Borrower (including without limitation,  the Settlement Statements, any
         reports  delivered   pursuant  to  Section  4.04  and  UAC's  financial
         statements) to and relied upon by the Deal Agent,  the Secured  Parties
         or any  of  the  other  Persons  party  hereto  for  purposes  of or in
         connection with this Agreement or any transaction  contemplated  hereby
         is, and all such information hereafter furnished by the Borrower to any
         such Person will be, true and accurate in every  material  respect,  on
         the date such information is stated or so furnished.  All the financial
         statements  have been  prepared in accordance  with GAAP,  consistently
         applied,  but in the case of quarterly  financial  statements,  without
         footnotes.

(i)      Accuracy of  Representations  and Warranties.  Each  representation  or
         warranty by the  Borrower  contained  herein or in any  certificate  or
         other  document  furnished  by  the  Borrower  pursuant  hereto  or  in
         connection herewith is true and correct in all material respects on and
         as of the  Prefunding  Date,  before  and  after  giving  effect to the
         Prefunding  to be made on such  date and the  application  of  proceeds
         therefrom, as though made on and as of such date.

(j)      Tax Status.  All tax returns (federal,  state and local) required to be
         filed with respect to the Borrower  have been filed (which  filings may
         be  made  by an  Affiliate  of the  Borrower  on a  consolidated  basis
         covering  the  Borrower  and other  Persons) and there has been paid or
         adequate  provision made for the payment of all taxes,  assessments and
         other governmental  charges in respect of the Borrower (or in the event
         consolidated  returns  have been  filed,  with  respect to the  Persons
         subject to such returns).

(k)      Action,  Suits.  Except  as  set  forth  in  Exhibit  H,  there  are no
         proceedings or investigations  pending or, to the best knowledge of the
         Borrower,  threatened  against the  Borrower,  before any  Governmental
         Authority (i) asserting the  invalidity of this  Agreement or any other
         Transaction  Document to which it is a party,  (ii)  seeking to prevent
         the  consummation  of any  of the  transactions  contemplated  by  this
         Agreement or any such other  Transaction  Document or (iii) seeking any
         determination  or  ruling  that  could  reasonably  be  expected  to be
         adversely determined, and if adversely determined, would materially and
         adversely  affect the  performance  by the Borrower of its  obligations
         under this Agreement or any other Transaction Document to which it is a
         party.

(l)      Use of  Proceeds.  The proceeds of any  Prefunding  will be used by the
         Borrower to (i) acquire the Receivables,  the Contracts related thereto
         and the Related  Security with respect thereto  pursuant to a Warehouse
         Transfer Agreement or from the Seller pursuant to the Sale and Purchase
         Agreement II, (ii) to pay down debt in connection  with the purchase of
         the  Receivables  and  Contracts  pursuant  to the  Sale  and  Purchase
         Agreement  II  or  Warehouse  Transfer  Agreement,  or  (iii)  to  make
         distributions constituting a return of capital.

(m)      Place of  Business.  The chief  place of business  and chief  executive
         office of the  Borrower  are  located at the  address  of the  Borrower
         indicated in Section  12.02  hereof and the offices  where the Borrower
         keeps all its  records,  are located at the  address(es)  described  on
         Exhibit I or such other  locations in respect of which the Borrower has
         given the Deal Agent and VFCC notice in accordance with this Agreement.

(n)      Good Title.  On each day on which a Receivable and related  Contract is
         sold to the Borrower pursuant to a Warehouse  Transfer  Agreement or by
         the Seller  pursuant to the Sale and  Purchase  Agreement  II, the Deal
         Agent  shall  acquire a valid and  perfected  first  priority  security
         interest in each  Receivable  and related  Contract  that exists on the
         date of such sale and in the  Related  Security  and  Collections  with
         respect thereto free and clear of any Adverse Claim.

(o)      Tradenames,  Etc.  As of the  date  hereof:  (i)  the  Borrower  has no
         subsidiaries  or  divisions;  (ii) the  Borrower  has no  trade  names,
         fictitious  names,  assumed names or "doing business as" names or other
         names under which it has done or is doing  business;  and (iii)  within
         the last five years,  has not changed its name,  merged with or into or
         consolidated  with any other  corporation  or been the  subject  of any
         proceeding under Title 11, United States Code (Bankruptcy).

(p)      Nature of Receivables.  Each Receivable  represented by the Borrower as
         an  Eligible  Receivable  hereunder  or  in  any  report,  document  or
         instrument   delivered  hereunder  or  in  connection  with  the  other
         Transaction  Documents  and  any  Warehouse  Transfer  Agreement  is an
         Eligible Receivable at the time of such representation.

(q)      No  Termination  Event.  No event has occurred and is continuing and no
         condition exists which  constitutes a Termination  Event or a Potential
         Termination Event.

(r)      Not an Investment Company.  The Borrower is not an "investment company"
         or a company  "controlled"  by an "investment  company" or a "principal
         underwriter"  or  "promoter"  for an  "investment  company"  within the
         meaning of the  Investment  Company Act.  With respect to the Borrower,
         the  consummation of the  transactions  contemplated by the Transaction
         Documents and any Warehouse Transfer Agreement to which the Borrower is
         a  party  do not  violate  any  provision  of  such  Act  or any  rule,
         regulation or order issued by the  Securities  and Exchange  Commission
         thereunder.

(s)      ERISA.  Each of the Borrower and its ERISA  Affiliates is in compliance
         in all material  respects  with ERISA and has not incurred and does not
         expect to incur any liabilities (except for premium payments arising in
         the ordinary  course of  business)  under ERISA and no lien in favor of
         the Pension Benefit Guaranty Corporation on any of the Receivables will
         exist.

(t)      Lock-Box  Accounts.  The names and addresses of all the Lock-Box Banks,
         together  with the  account  numbers of the  Lock-Box  Accounts at such
         Lock-Box  Banks,  are  specified  in Exhibit G hereto (or at such other
         Lock-Box  Banks and/or with such other  Lock-Box  Accounts as have been
         notified to the Deal Agent).  All Obligors have been instructed to make
         payment to a Lock-Box Account.

(u)      Insurance  Policies.  At the  time of the sale of each  Receivable  and
         related  Contract  by Seller to the  Borrower  pursuant to the Sale and
         Purchase  Agreement II, each Financed Vehicle is required to be covered
         by  physical  damage and  liability  insurance  obtained by the related
         Obligor at least in the amount  required by the related  Contract,  and
         each such  required  insurance  policy is  required to name UAC as loss
         payee and is required to be in full force and effect.

(v)      Consents;  Receivable.  With respect to each  Receivable  referenced in
         clause (p) above, all consents,  licenses,  approvals,  authorizations,
         registrations or declarations with any Governmental  Authority required
         to be obtained,  effected or given by the Borrower in  connection  with
         the  acquisition  of such  Receivable  by the  Borrower  have been duly
         obtained, effected or given and are in full force and effect.

(w)      Solvency. At all relevant times prior to, and immediately following the
         consummation of the transactions  contemplated under this Agreement and
         each other  Transaction  Document to which it is a party,  the Borrower
         was, is and will be, Solvent.

(x)      Selection  Procedures.  No  procedures  that  could be  adverse  to the
         interests  of the Secured  Parties  were  utilized  by the  Borrower in
         identifying  and/or  selecting  the  Receivables  that were funded by a
         Prefunding except to the extent resulting from the Eligible  Receivable
         criteria.

(y)      Exchange Act Compliance.  No proceeds of any Prefunding will be used by
         the  Borrower  to acquire  any  security  in any  transaction  which is
         subject to Section 13 or 14 of the Securities  Exchange Act of 1934, as
         amended.

(z)      Separate Entity.  The Borrower is operated as an entity with assets and
         liabilities distinct from those of UAC and any affiliate thereof (other
         than the  Borrower),  and the  Borrower  hereby  acknowledges  that the
         Secured Parties are entering into the transactions contemplated by this
         Agreement in reliance upon the Borrower's  identity as a separate legal
         entity from UAC and from each such other affiliate of UAC.

(aa)     Security  Interest;  True Sale.  The  provisions  of  Section  3.01 are
         effective to grant a first priority security interest in the Collateral
         to the Deal Agent, as agent for the Secured Parties,  to secure payment
         and performance of the Obligations.  On or before the Closing Date, the
         Deal  Agent,  as  agent  for the  Secured  Parties,  will  have a first
         priority  perfected  security interest in the Collateral.  The Borrower
         accounts for the transfer to it from the Seller of the  Receivables and
         all  proceeds  thereof  as a sale  thereof in its  books,  records  and
         financial  statements,  consistent with GAAP and with the  requirements
         set forth herein.

(bb)     No  Prohibition  On  Transfer.  The  Borrower  has not entered into any
         agreement with any Obligor that prohibits,  restricts or conditions the
         assignment of any portion of the Receivables.

(cc)     All Filings  Made.  All filings  (including,  without  limitation,  UCC
         filings)  required to be made by any Person and actions  required to be
         taken or performed by any Person in any  jurisdiction  to give the Deal
         Agent,  as agent for the Secured  Parties,  a first priority  perfected
         security  interest in the Collateral and the proceeds thereof have been
         made, taken or performed.

(dd)     No  Impairment.  Except as otherwise  contemplated  by the  Transaction
         Documents,  it has not done  anything to convey any right to any Person
         that would  result in such Person  having a right to payments due under
         any portion or all of the  Collateral or otherwise to impair the rights
         of any Secured Party or the Deal Agent in any of the  Collateral or the
         proceeds thereof.

(ee)     No Subsidiaries.  The Borrower has no subsidiaries.

         The  representations  and  warranties  set forth in this Section  shall
survive the pledge of the  Collateral to the Deal Agent as agent for the Secured
Parties. Upon discovery by the Borrower,  the Deal Agent, any Secured Party, the
Liquidity Agent or VFCC of a breach of any of the foregoing  representations and
warranties,  the party  discovering such breach shall give prompt written notice
to the others.

ARTICLE Seven


<PAGE>





                        GENERAL COVENANTS OF THE BORROWER

Section  7.01.  Covenants  of  Borrower  and  UAC.  The  Borrower  and  UAC,  as
applicable,  hereby  covenants that until the date on which all Obligations have
been indefeasibly paid in full:

(a)      Financial  Reporting.  The  Borrower  and UAC each will  maintain,  for
         itself and each  subsidiary,  a system of  accounting  established  and
         administered   in  accordance   with  generally   accepted   accounting
         principles,  and UAC (or,  in the case of clauses  (iii) and (iv),  the
         Borrower) will furnish to the Deal Agent and the Insurer:

         (i)      Annual  Reporting.  Within 90 days  after the close of each of
                  its fiscal years,  audited financial  statements,  prepared in
                  accordance  with GAAP on a  consolidated  basis for itself and
                  its  subsidiaries,  including  balance sheets as of the end of
                  such period,  related statements of operations,  shareholder's
                  equity and cash  flows,  accompanied  by an audit  report of a
                  nationally  recognized  firm of independent  certified  public
                  accountants  (or  such  other  firm of  independent  certified
                  public  accountants  acceptable  to the  Deal  Agent  and  the
                  Insurer) which report shall be unqualified as to going concern
                  and  scope of audit  and shall  state  that such  consolidated
                  financial  statements present fairly the financial position of
                  UAC and its Affiliates at the dates  indicated and the results
                  of their  operations  and  their  cash  flow  for the  periods
                  indicated is in conformity  with GAAP and that the examination
                  had been made in accordance with generally  accepted  auditing
                  standards.

         (ii)     Quarterly  Reporting.  Within  45 days  after the close of the
                  first three quarterly periods of each of its fiscal years, for
                  itself  and its  Affiliates,  consolidated  unaudited  balance
                  sheets as of the close of each such  period  and  consolidated
                  related  statements of  operations,  shareholder's  equity and
                  cash flows for the period  from the  beginning  of such fiscal
                  year to the end of such  quarter,  all  certified by its chief
                  financial officer.

         (iii)    Compliance Certificate.  Concurrently with the delivery by UAC
                  of the financial  statements required hereunder,  a compliance
                  certificate  signed by its president or vice president stating
                  that no  Termination  Event  or  Potential  Termination  Event
                  exists, or if any Termination  Event or Potential  Termination
                  Event exists, stating the nature and status thereof.

         (iv)     Notice of Termination Events or Potential  Termination Events.
                  As soon as possible and in any event within two days after the
                  occurrence  of  each  Termination   Event  or  each  Potential
                  Termination  Event,  a  statement  of the  president  or  vice
                  president  of the  Borrower  setting  forth  details  of  such
                  Termination  Event  or  Potential  Termination  Event  and the
                  action  which  the  Borrower  proposes  to take  with  respect
                  thereto.

         (v)      Change in Credit  and  Collection  Policy.  Within  three days
                  after  the date any  material  change in or  amendment  to the
                  Credit and Collection Policy is made, a copy of the Credit and
                  Collection  Policy  then in effect  indicating  such change or
                  amendment.  Any material  change in the Credit and  Collection
                  Policy  shall be deemed  disapproved  by the Insurer as of the
                  time  and date  that  (i) the  Insurer  gives  notice  of such
                  disapproval  or (ii) the Insurer has not approved  such change
                  and ten days  have  passed  since  the  date on  which  UAC is
                  required to provide the  Insurer  with notice of such  change.
                  Any approval by the Insurer shall be final.

         (vi)     Credit and Collection  Policy.  Upon request by the Deal Agent
                  or any  Secured  Party,  a  complete  copy of the  Credit  and
                  Collection Policy then in effect.

         (vii)    Blue  Book.  Within 45 days  after the close of the  quarterly
                  period  of  each  of  its  fiscal  years,  a copy  of the  UAC
                  Quarterly Statistical Update (a/k/a/UAC's "blue book").

         (viii)   ERISA. Promptly after the filing or receiving thereof,  copies
                  of all  reports  and notices  with  respect to any  Reportable
                  Event (as defined in Article IV of ERISA) which the  Borrower,
                  UAC or any ERISA  Affiliate of the Borrower or UAC files under
                  ERISA with the Internal Revenue  Service,  the Pension Benefit
                  Guaranty  Corporation or the U.S. Department of Labor or which
                  the Borrower,  UAC or any ERISA  Affiliates of the Borrower or
                  UAC receives from the Internal  Revenue  Service,  the Pension
                  Benefit Guaranty Corporation or the U.S. Department of Labor.

         (ix)     Other   Information.   Such   other   information   (including
                  non-financial  information) as the Deal Agent,  the Collateral
                  Agent or any  Secured  Party may from time to time  reasonably
                  request.

(b)      Conduct of Business.  The  Borrower  will and UAC will (i) carry on and
         conduct  its  business  in   substantially   the  same  manner  and  in
         substantially the same or related fields of enterprise  (including,  in
         the  case of  UAC,  consumer  finance  activities)  as it is  presently
         conducted  and do all things  necessary  to remain  duly  incorporated,
         validly existing and in good standing as a domestic  corporation in its
         jurisdiction of incorporation and (ii) maintain all requisite authority
         to conduct its business in each  jurisdiction  in which its business is
         conducted.

(c)      Compliance  with Laws.  The  Borrower  will and UAC will  comply in all
         material respects with all laws,  rules,  regulations,  orders,  writs,
         judgments, injunctions, decrees or awards to which it may be subject.

(d)      Furnishing of  Information  and Inspection of Contract  Documents.  The
         Borrower  will  furnish to the Deal Agent and the Secured  Parties from
         time to time such  information  with respect to the  Receivables as the
         Deal Agent or any  Secured  Party may  reasonably  request,  including,
         without   limitation,   listings   identifying   the  Obligor  and  the
         Outstanding  Balance for each  Receivable.  Upon at least two  Business
         Days' prior notice,  the Borrower and UAC will during regular  business
         hours  permit the Deal Agent or any Secured  Party,  or their agents or
         representatives,  (i) to examine and make copies of and abstracts  from
         all Contract  Documents and (ii) to visit the offices and properties of
         the  Borrower  and UAC for  the  purpose  of  examining  such  Contract
         Documents,  and to  discuss  matters  relating  to  Receivables  or the
         Borrower's  or  UAC's  performance  hereunder  or  under  the  Sale and
         Purchase  Agreement  I, the  Sale and  Purchase  Agreement  II,  or the
         Servicing Agreement with any of the officers,  employees or independent
         public  accountants  of the  Borrower or UAC having  knowledge  of such
         matters.

(e)      Keeping  of  Records  and  Books  of  Account.  The  Borrower  and  UAC
         (consistent  with its role as Servicer)  will  maintain  and  implement
         administrative and operating procedures (including, without limitation,
         an ability to recreate records  evidencing  Receivables in the event of
         the destruction of the originals thereof),  and keep and maintain,  all
         documents, books, records and other information reasonably necessary or
         advisable for the  collection of all  Receivables  (including,  without
         limitation, records adequate to permit the daily identification of each
         new Receivable and all  Collections of and adjustments to each existing
         Receivable). The Borrower and UAC will give the Deal Agent, the Insurer
         and  Standard  &  Poor's   notice  of  any   material   change  in  the
         administrative  and  operating  procedures  referred to in the previous
         sentence.

(f)      Performance and Compliance with Receivables and Contracts. The Borrower
         and UAC will at their expense  timely and fully perform and comply with
         all material  provisions,  covenants and other promises  required to be
         observed by it under the Contracts related to the Receivables.

(g)      Credit  and  Collection  Policies.  UAC  will  comply  in all  material
         respects  with the  Credit  and  Collection  Policy  in  regard to each
         Receivable and the related Contract.

(h)      Collections.  The Borrower and UAC shall instruct all Obligors to cause
         all Collections to be deposited directly to a Lock-Box Account.

(i)      Collections  Received.  The Borrower  and UAC shall hold in trust,  and
         deposit, immediately, but in any event not later than two Business Days
         of its receipt thereof, to a Lock-Box Account all Collections  received
         from time to time by them.

(j)      Corporate  Documents.  The Borrower shall only amend,  alter, change or
         repeal   Articles  III,  IV,  V,  VI  and  XI  of  its  certificate  of
         incorporation  as in effect on the date hereof  with the prior  written
         consent of the Deal Agent.

(k)      No Sales, Liens, Etc. Except in conjunction with a Year-End Transfer or
         as otherwise  provided herein,  neither the Borrower nor UAC will sell,
         assign (by operation of law or  otherwise) or otherwise  dispose of, or
         create or suffer to exist any Adverse  Claim upon (or the filing of any
         financing  statement)  or with  respect to, any  Receivable  or related
         Contract,  or upon or with respect to any account which concentrates in
         a Lock-Box Bank to which any Collections of any Receivable are sent, or
         assign any right to receive income in respect thereof.

(l)      No Extension or Amendment of Receivables. Except as otherwise permitted
         in the Servicing Agreement, Credit and Collection Policy or as required
         by law,  neither the Borrower  nor UAC will extend,  amend or otherwise
         modify the terms of any Receivable,  or amend, modify or waive any term
         or condition of any Contract related thereto.

(m)      No  Change in  Business,  Credit  and  Collection  Policy or  Servicing
         Agreement.  Neither  the  Borrower  nor UAC  shall,  without  the prior
         written  consent of the Deal Agent and the Insurer,  make any change in
         the character of its business,  in the Credit and Collection  Policy or
         in the  Servicing  Agreement,  which change  would,  in either case (i)
         impair  the  collectibility  of  any  Receivable  or  (ii)  change  the
         write-off  policy in effect as of the Closing  Date with respect to the
         Receivables and the Contracts.

(n)      Sale of Assets,  Etc.  Neither the Borrower nor UAC will sell, lease or
         transfer all or  substantially  all of its assets to any other  person;
         provided, however, that no such sale shall be deemed to occur solely as
         a result of a Year-End  Transfer,  a Take-Out  or solely as a result of
         the sale of Contracts and related Receivables which are released to the
         Borrower pursuant to Section 2.05.

(o)      Change in Payment  Instructions  to Obligors.  Neither the Borrower nor
         UAC nor the Servicer  will add or terminate any bank as a Lock-Box Bank
         or any account as a Lock-Box Account to or from those listed in Exhibit
         G hereto or make any change in its  instructions to Obligors  regarding
         payments  to  be  made  to  any  Lock-Box  Account,   unless  (i)  such
         instructions are to deposit such payments to another existing  Lock-Box
         Account or (ii) the Deal Agent shall have  received  written  notice of
         such addition, termination or change at least 30 days prior thereto.

(p)      Change of Name,  Etc.  The  Borrower  will not move,  or consent to the
         Servicer moving,  the Contract Documents without 30 days' prior written
         notice to the Deal Agent and the  Insurer and will not change its name,
         identity or structure or its chief executive office, unless at least 30
         days  prior to the  effective  date of any  such  change  the  Borrower
         delivers to the Deal Agent UCC  financing  statements,  executed by the
         Borrower   necessary  to  reflect  such  change  and  to  continue  the
         perfection of the Deal Agent's security interest in the Receivables.

(q)      No Mergers,  Etc.  Neither the Borrower nor UAC will (i) consolidate or
         merge with or into any other  Person,  or (ii) sell,  lease or transfer
         all or substantially all of its assets to any other person,  unless (A)
         the Borrower or UAC, respectively,  is the surviving entity or (B) such
         sale or transfer constitutes a Year-End Transfer.

(r)      Sale Treatment.  Neither the Borrower,  UAC nor the Seller will account
         for (including for  accounting and tax purposes),  or otherwise  treat,
         the transactions  contemplated by the Sale and Purchase Agreement I and
         Sale and  Purchase  Agreement  II in any manner other than as a sale of
         Receivables by the Seller to the Borrower.

(s)      Indebtedness. The Borrower shall not create, incur, assume or suffer to
         exist any  indebtedness,  whether current or funded, or other liability
         whatsoever  other than (i)  indebtedness  of the Borrower  representing
         fees,  expenses and indemnities arising hereunder or under the Sale and
         Purchase  Agreement II for the purchase price of the Receivables  under
         the Sale and Purchase  Agreement II, (ii)  obligations  incurred  under
         this Agreement,  (iii)  liabilities  incident to the maintenance of its
         corporate  existence  in good  standing,  (iv) as  contemplated  in the
         Transaction  Documents  and any  Warehouse  Transfer  Agreement and (v)
         other  Indebtedness  incurred in the ordinary course of its business in
         an amount not to exceed $9,500 at any time outstanding.

(t)      Security  Interests.  Except as  contemplated in this Agreement and the
         other Transaction Documents, the Borrower will not sell, pledge, assign
         or otherwise  transfer to any other Person,  or grant,  create,  incur,
         assume or suffer  to exist  any Lien on, or any  portion  or all of the
         Collateral  hereunder  without  the prior  written  consent of the Deal
         Agent.  The  Borrower  shall,  or shall cause the Deal Agent to, in the
         normal course of its or the Deal Agent's business,  cause any such Lien
         to be removed or released.  The Borrower will promptly  notify the Deal
         Agent  of  the  existence  of  any  Lien  on the  Collateral  upon  the
         Borrower's  knowledge  of the same and the  Borrower  shall  defend the
         right,  title and interest of the Deal Agent,  as agent for the Secured
         Parties, in to and under any part of the Collateral, against all claims
         of third  parties;  provided,  however,  that  nothing in this  Section
         7.01(u)  shall  prevent  or be deemed to  prohibit  the  Borrower  from
         suffering  to exist  Permitted  Liens  upon any  portion  or all of the
         Collateral.

(u)      Agreements; Modifications. The Borrower shall not become a party to, or
         permit any of its properties to be bound by, any  indenture,  mortgage,
         instrument,  contract,  agreement  or other  undertaking,  except  this
         Agreement  and  the  other  Transaction  Documents  and  any  Warehouse
         Transfer  Agreement  to  which it is a party,  or amend or  modify  the
         provisions of its articles of incorporation,  bylaws or any Transaction
         Documents  and any  Warehouse  Transfer  Agreement,  without  the prior
         written  consent of the Deal Agent and the Insurer,  or issue any power
         of attorney except to the Servicer in connection with the duties of the
         Servicer under this Agreement and to the Deal Agent.

(v)      Amendments;  Modifications.  The Borrower  shall not agree to permit to
         occur or execute any amendment,  modification, waiver or restatement to
         any Transaction Documents or to any provision thereof without the prior
         written  consent of the Deal Agent and the Insurer which,  for any such
         modification  or  amendment  made to cure  any  ambiguity,  correct  or
         supplement  any  provision  in such  Transaction  Document  that may be
         inconsistent  with  other  provisions  therein,  or to make  any  other
         provisions  with  respect to matters or  questions  arising  under such
         agreement  that  are  not  inconsistent  with  the  provisions  of  the
         agreement, shall not be unreasonably withheld.

(w)      Activities;  Separate  Corporate  Existence and Business.  The Borrower
         shall:

         (i)      not engage in any  business or activity of any kind,  or enter
                  into  any  transaction  or  indenture,  mortgage,  instrument,
                  agreement,  contract, lease or other undertaking, which is not
                  incidental to the transactions  contemplated and authorized by
                  the Transaction Documents and any Warehouse Agreement,  except
                  for any subsequent securitizations or financings for which the
                  Borrower has received the prior  written  approval of the Deal
                  Agent;

         (ii)     at all  times  (A) to the  extent  the  Borrower's  office  is
                  located in the  offices of UAC or any  Affiliate  of UAC,  pay
                  fair market rent for its executive office space located in the
                  offices  of UAC or any  Affiliate  of UAC,  (B)  maintain  the
                  Borrower's books, financial statements, accounting records and
                  other corporate  documents and records  separate from those of
                  UAC or any other  entity,  (C) not  commingle  the  Borrower's
                  assets  with  those  of UAC  or any  other  entity  (it  being
                  understood  that certain  Collections on Receivables  owned by
                  the Borrower may be temporarily commingled with collections on
                  other  receivables  serviced  by UAC),  (D) act  solely in its
                  corporate  name and through its own  authorized  officers  and
                  agents,  (E) make  investments  directly or by brokers engaged
                  and paid by the Borrower or its agents  (provided  that if any
                  such  Agent  is an  Affiliate  of the  Borrower  it  shall  be
                  compensated  at a fair  market  rate  for its  services),  (F)
                  separately manage the Borrower's liabilities from those of UAC
                  or  any  Affiliates  of  UAC  and  pay  its  own  liabilities,
                  including all administrative  expenses,  from its own separate
                  assets, and (G) pay from the Borrower's assets all obligations
                  and  indebtedness  of any kind incurred by the  Borrower.  The
                  Borrower  shall (i) pay all its  liabilities,  (ii) not assume
                  the  liabilities of UAC or any Affiliate of UAC, and (iii) not
                  guarantee the  liabilities of UAC or any Affiliate of UAC. The
                  officers and directors of the Borrower (as appropriate)  shall
                  make   decisions  with  respect  to  the  business  and  daily
                  operations of the Borrower  independent of and not dictated by
                  any controlling entity;

         (iii)    conduct its affairs  strictly in accordance  with its articles
                  of  incorporation  and observe all necessary,  appropriate and
                  customary corporate  formalities,  including,  but not limited
                  to,  holding  all  regular  and  special   shareholders,   and
                  directors'  meetings  appropriate  to authorize  all corporate
                  action, keeping separate and accurate minutes of its meetings,
                  passing all  resolutions  or consents  necessary  to authorize
                  actions  taken or to be taken,  and  maintaining  accurate and
                  separate  books,  records  and  accounts,  including,  but not
                  limited to, payroll and intercompany transaction accounts; and

         (iv)     take  or  refrain  from  taking,  as  applicable,  each of the
                  activities  specified in the  "non-substantive  consolidation"
                  opinion of Barnes & Thornburg  delivered on the Closing  Date,
                  upon which the conclusions expressed therein are based.

         (x)      Collateral;   Further   Assurances.   With   respect   to  the
                  Collateral,  the Borrower  will (i) acquire  Receivables  only
                  pursuant to and in  accordance  with the terms of the Sale and
                  Purchase  Agreement II and any Warehouse  Transfer  Agreement,
                  (ii) take all action  necessary  to perfect,  protect and more
                  fully  evidence  the Deal Agent's  interest,  on behalf of the
                  Secured   Parties  in  the  Collateral,   including,   without
                  limitation, (A) filing and maintaining (or causing to be filed
                  and maintained),  effective financing  statements (Form UCC-1)
                  naming  (1)  UAC  as   seller/debtor   and  the   Borrower  as
                  purchaser/creditor  and (2) the Borrower as seller/debtor  and
                  the  Deal   Agent  on  behalf  of  the   Secured   Parties  as
                  purchaser/creditor  in all  necessary  or  appropriate  filing
                  offices,  and filing  continuation  statements,  amendments or
                  assignments  with respect  thereto in such filing  offices and
                  (B) executing or causing to be executed such other instruments
                  or notices as may be necessary or  appropriate  and (iii) take
                  all  additional  actions  that the Deal  Agent may  reasonably
                  request  to  perfect,  protect  and more  fully  evidence  the
                  respective interests of the Deal Agent and the Secured Parties
                  in the Collateral.

(y)      Payment of Principal, Interest and Other Amounts Due. The Borrower will
         pay when due all amounts payable by it hereunder in accordance with the
         terms hereof.

(z)      Settlement  Statement.  The  Borrower  shall  deliver  or  cause  to be
         delivered to the Deal Agent no later than 12:00 p.m. (Charlotte,  North
         Carolina time) on each Determination Date, a Settlement  Statement with
         respect to the most recently ended Settlement Period.

(aa)     Payment of Taxes.  The  Borrower  will pay or cause to be paid when due
         all  Taxes  (after  giving  effect  to  any  extensions),  assessments,
         governmental charges or levies imposed upon it or its income,  profits,
         payroll or any property  belonging to it, including without  limitation
         all withholding taxes, and all claims for labor, materials and supplies
         which,  if unpaid,  might become a material  Lien or charge upon any of
         its  properties or assets;  provided,  that it shall not be required to
         pay any  such  Tax,  assessment,  charge,  levy or claim so long as the
         validity  thereof  shall be  contested  in good  faith  by  appropriate
         proceedings  promptly  initiated  and  diligently  conducted by it, and
         neither  execution nor foreclosure  sale or similar  proceedings  shall
         have been commenced in respect thereof (or such proceedings  shall have
         been stayed pending the  disposition of such contest of validity),  and
         it shall have set aside on its books,  adequate  reserves  with respect
         thereto.

Section 7.02.     Hedging Agreement.

(a) On or prior to each  Prefunding  Date,  the Borrower  shall have (i) entered
into  one or more  Hedging  Transactions  for  the  Receivables  funded  on such
Prefunding  Date and (ii)  prior to such  Prefunding  Date,  certify to the Deal
Agent  and the  Insurer  on the  Prefunding  Request  that the  Servicer  or the
Borrower,  as the case may be, has entered into Hedging Transactions  satisfying
the conditions of this  Agreement.  Each such Hedging  Transaction  shall (i) be
entered into with a Hedging  Counterparty  and governed by a Hedging  Agreement,
(ii) require the Hedging  Counterparty to make all payments owed to the Borrower
under  the  related  Hedging  Agreement  to the  Collection  Account;  provided,
however,  any such  payments  which  relate to  Receivables  to be released in a
Securitization  or a Warehouse  Transfer may be made to the  Borrower  after the
pricing of such  Securitization  or the  release  of  Collateral  pursuant  to a
Warehouse  Transfer,  (iii) in the  case of a  Hedging  Transaction  which is an
interest rate cap, have a cap rate such that the excess of the weighted  average
APR of the  Receivables  over the cap rate is equal to or greater than 600 basis
points,  (iv) in the case of a Hedging  Transaction  which is an  interest  rate
swap, have a fixed rate such that the excess of the weighted  average APR of the
Receivables over the fixed rate is equal to or greater than 600 basis points and
(v) in the case of any other type of Hedging  Transaction,  be  consented  to in
writing by the Deal Agent and the Insurer.  The aggregate  amount of all Hedging
Transactions  shall have an aggregate  notional amount at least equal to the Net
Investment;  provided,  however,  such notional  amount shall not be required to
exceed the Facility  Amount;  provided,  further,  such  required  amount may be
reduced,  for the  period of time  between  the  pricing  and the  funding  of a
Structured Financing, by the aggregate Outstanding Balance of the Receivables to
be released in such Structured  Financing,  or as otherwise  consented to by the
Insurer.  In connection with any Settlement  Statement provided  hereunder,  the
Servicer  shall  provide  a copy  of all  Hedging  Transactions  not  previously
delivered.

(b) As  additional  security  hereunder,  the  Borrower has assigned to the Deal
Agent,  as agent for the  Secured  Parties,  all right,  title and  interest  of
Borrower in the Hedging Collateral.  The Borrower acknowledges that, as a result
of that  assignment,  the Borrower may not exercise any rights under any Hedging
Agreement,  except for the Borrower's right under any Hedging Agreement to enter
into Hedging Transactions in order to meet the Borrower's obligations hereunder.
Nothing  herein shall have the effect of releasing  the Borrower from any of its
obligations  under any  Hedging  Agreement  or any Hedging  Transaction,  nor be
construed as requiring the consent of the Deal Agent, the Insurer or any Secured
Party for the performance by the Borrower of any such obligations.

                                 ARTICLE Eight


<PAGE>





                               TERMINATION EVENTS

Section 8.01.     Termination Events.

(a)      Each of the following events shall constitute an "Termination Event":

         (i)      any representation,  warranty, certification or statement made
                  by the Borrower, the Seller or UAC in this Agreement, the Sale
                  and Purchase  Agreement I, the Sale and Purchase Agreement II,
                  the Insurance  Agreement,  any Warehouse Transfer Agreement or
                  in any other  Transaction  Document  shall  prove to have been
                  incorrect  in any  material  respect when made or deemed made,
                  which,  in the  case of a  violation  of a  representation  or
                  warranty  with  respect  to a  Receivable  under  the Sale and
                  Purchase  Agreement I and the Sale and Purchase  Agreement II,
                  will not  constitute a  Termination  Event if (i) the Borrower
                  remains in  compliance  with the Net Asset Test or (ii) UAC or
                  the Seller  indemnifies  the Borrower by  depositing  into the
                  Collection  Account  an amount  equal to the lesser of (A) the
                  principal  amount of, and  accrued  interest  on, the  related
                  Receivable or (B) the amount  necessary to bring the Net Asset
                  Test into compliance;

         (ii)     the  Borrower,   the  Seller  or  UAC  shall  default  in  the
                  performance   of  (A)  any  payment   obligation   under  this
                  Agreement,  the Sale and  Purchase  Agreement  I, the Sale and
                  Purchase  Agreement II, any Warehouse Transfer Agreement or in
                  any other  Transaction  Document or (B) any other  covenant or
                  undertaking under the Transaction  Documents and any Warehouse
                  Transfer  Agreement which in the case of this clause (B) shall
                  remain unremedied for five days;

         (iii)    the  entry of a  decree  or  order  by a court  or  agency  or
                  supervisory  authority having jurisdiction in the premises for
                  the appointment of a conservator,  receiver, or liquidator for
                  the   Borrower,   the   Seller  or  UAC  in  any   insolvency,
                  readjustment of debt, marshaling of assets and liabilities, or
                  similar  proceedings,  or for the winding up or liquidation of
                  its affairs,  and the  continuance of any such decree or order
                  unstayed and in effect for a period of 60 consecutive days;

         (iv)     the  consent  by  the  Borrower,  the  Seller  or  UAC  to the
                  appointment  of a conservator or receiver or liquidator in any
                  insolvency,  readjustment  of debt,  marshaling  of assets and
                  liabilities,  or similar  proceedings  of or  relating  to the
                  Borrower,  the Seller or UAC of or relating  to  substantially
                  all of its property;  or the  admission by the  Borrower,  the
                  Seller or UAC in  writing  of its  inability  to pay its debts
                  generally as they become due, the filing by the Borrower,  the
                  Seller  or  UAC  of  a  petition  to  take  advantage  of  any
                  applicable insolvency or reorganization statute, the making by
                  the  Borrower,  the  Seller  or UAC of an  assignment  for the
                  benefit of its creditors,  or the voluntary  suspension by the
                  Borrower, the Seller or UAC of payment of its obligations;

         (v)      a Servicer  Default  shall have occurred or for any reason UAC
                  is not the Servicer;

         (vi)     either  of the  Borrower,  the  Seller or the  Servicer  shall
                  consolidate  or merge with or into any other person whereby it
                  is not the surviving entity;

         (vii)    there shall have occurred any material  adverse  change in the
                  operations of the Borrower,  the Seller or the Servicer  since
                  the Closing Date, or any other event shall have occurred which
                  materially  affects  the  Borrower's,   the  Seller's  or  the
                  Servicer's  ability to either  collect the  Receivables  or to
                  perform under the Transaction Documents;

         (viii)   the  Liquidity  Agent shall have given notice that an event of
                  default has occurred and is  continuing  under its  agreements
                  with VFCC;

         (ix)     the  Commercial  Paper  issued  by VFCC  shall not be rated at
                  least "A-2" by S&P and at least "P-2" by Moody's;

         (x)      the Net Investment  minus amounts on deposit in the Prefunding
                  Account shall at any time exceed the Net Receivables  Balance,
                  or (ii) the Net Asset Test is not satisfied;

(xi)              a Take-Out  shall not occur at least once in any period of six
                  consecutive calendar months, provided, however, no Termination
                  Event will have occurred if the Net  Investment  has been zero
                  at any time during the prior six months;

         (xii)    the Net Yield as of any Determination  Date is less than 2.00%
                  during a  Settlement  Period  in which the Net  Investment  is
                  greater than zero each day of such Settlement Period;

         (xiii)   a draw is made under the Policy;

         (xiv)    an Insurer Default has occurred and is continuing;

         (xv)     the term of the  Policy  is not of the term  required  by VFCC
                  (which  term shall be at least equal to the term of the latest
                  maturing  Receivable  in the  facility  plus  one year and one
                  day);

         (xvi)    the sum of (A) the amount on deposit  in the  Reserve  Account
                  and (B) the amount  available  pursuant to any Reserve Account
                  Guaranty is less than the Required  Reserve Account Amount for
                  two consecutive Business Days;

         (xvii)   the  Borrower  shall  fail to make any  payment  of any amount
                  required to be made under the terms of this Agreement and such
                  failure continues unremedied for a period of two Business Days
                  after the due date set forth herein for such payment, or if no
                  due date is specified,  such failure continues for a period of
                  ten days after written request for such payment has been made;

         (xviii)  the Deal Agent, as agent for the Secured  Parties,  shall fail
                  for  any  reason  to  have a valid  perfected  first  priority
                  security  interest in any of the Collateral  free and clear of
                  any Adverse  Claim;  provided,  however,  such  failure  shall
                  constitute  a  Termination  Event  only  if it  is  materially
                  adverse to any of the Secured Parties;

         (xix)    failure of the Hedging  Counterparty to make any payment under
                  the Hedging  Agreement when due and failure of the Borrower to
                  replace  the  Hedging  Counterparty  within  30  days  of such
                  failure; and

         (xx)     the   failure  of  the   Borrower   to  replace   the  Hedging
                  Counterparty   within  45  days  in  the  event  the   Hedging
                  Counterparty  no  longer   satisfies  the  Short-Term   Rating
                  Requirement or the Long-Term Rating Requirement.

then,  and in any such event,  the Deal Agent shall at the written  direction of
the Insurer or the Required  Investors with the consent of the Insurer or, if an
Insurer  Default has  occurred,  at the request of the  Required  Investors,  by
notice to the Borrower  declare the Termination  Date to have occurred,  without
demand,  protest or future notice of any kind, all of which are hereby expressly
waived by the Borrower,  and the Net  Investment  and all other amounts owing by
the Borrower  under this Agreement  shall be  accelerated  and become payable in
accordance with Section 4.06; provided, that in the event that Termination Event
described in subsection  (iii) herein has occurred,  the Termination  Date shall
automatically occur,  without demand,  protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.

Section  8.02.   Actions  Upon  Termination   Date.  Upon  the  declaration  and
continuance  of a  Termination  Date,  the  Deal  Agent  shall,  at the  written
direction of the Insurer, or the Deal Agent may, with consent of the Insurer, in
respect of the Collateral,  in addition to any and all other rights and remedies
otherwise available to it and subject to Section 12.13, pursue all of the rights
and  remedies of a secured  party upon  default  under the UCC (such  rights and
remedies to be cumulative and nonexclusive).  In addition to the foregoing, upon
the occurrence and continuance of a Termination  Event,  the Insurer may request
that the Deal Agent  intervene in judicial  proceedings  that affect the Note or
the  security  therefor  and the Deal Agent may at the  direction of the Insurer
(provided  that no such  direction  shall be required if an Insurer  Default has
occurred) take the following remedial actions:

(a)      if UAC is the Servicer, terminate UAC as Servicer;

(b)      the Deal Agent may,  without notice to the Borrower  except as required
         by law and at any  time  or from  time to  time,  charge,  set-off  and
         otherwise  apply all or any part of the Net  Investment,  any  Interest
         accrued  thereon  and or any other  amount due and owing to any Secured
         Party against  amounts payable to the Borrower from the Accounts or any
         part of such Accounts in  accordance  with the  priorities  required by
         Section 4.06;

(c)      consistent  with the rights and  remedies of a secured  party under the
         UCC (and except as otherwise  required by the UCC), the Deal Agent may,
         without notice except as specified  below,  solicit and accept bids for
         and sell the  Collateral  or any part of the  Collateral in one or more
         parcels at public or private sale, at any exchange,  broker's  board or
         at the Deal Agent's  offices or  elsewhere,  for cash, on credit or for
         future  delivery,  and upon such other terms as the Deal Agent may deem
         commercially reasonable; the Borrower agrees that, to the extent notice
         of sale shall be required by law, at least ten Business Days' notice to
         the Borrower of the time and place of any public sale or the time after
         which  any  private  sale is to be  made  shall  constitute  reasonable
         notification; the Deal Agent shall not be obligated to make any sale of
         Collateral  regardless  of notice of sale having  been given;  the Deal
         Agent  may  adjourn  any  public or  private  sale from time to time by
         announcement  at the time and place fixed for such sale,  and such sale
         may, without further notice,  be made at the time and place to which it
         was so  adjourned;  which such sale shall  operate to divest all right,
         title, interest,  claim and demand whatsoever of the Borrower in and to
         the  Collateral so sold,  and shall be a perpetual bar, both at law and
         in equity,  against the Borrower or any Person  claiming the Collateral
         sold through the Borrower and its  successors or assigns;  any proceeds
         from the sale of Collateral by the Deal Agent  pursuant to this Section
         shall be promptly  distributed  by the Deal Agent in payment of amounts
         owed by the  Borrower  hereunder  in  accordance  with  the  priorities
         required by Section 4.06(c);

(d)      upon the  completion  of any sale under Section  8.02(c),  the Borrower
         will deliver or cause to be delivered all of the Collateral sold to the
         purchaser or  purchasers  at such sale on the date of sale, or within a
         reasonable time thereafter if it shall be impractical to make immediate
         delivery,  but in any event full title and right of  possession to such
         property shall pass to such purchaser or purchasers  forthwith upon the
         completion  of such sale;  nevertheless,  if so  requested  by the Deal
         Agent or by any purchaser,  the Borrower shall confirm any such sale or
         transfer by  executing  and  delivering  to such  purchaser  all proper
         instruments   of  conveyance  and  transfer  and  releases  as  may  be
         designated in any such request;

(e)      at any sale under Section  8.02(c),  UAC, the Deal Agent or any Secured
         Party may bid for and purchase the property  offered for sale and, upon
         compliance with the terms of sale, may hold, retain and dispose of such
         property  without further  accountability  therefor;  any Secured Party
         purchasing  property at a sale under  subsection  (c) above may set off
         the  purchase  price of such  property  against  amounts  owing to such
         Secured Party in full payment of such purchase price; and

(f)      the Deal Agent may exercise at the Borrower's  sole expense any and all
         rights and remedies of the  Borrower  under or in  connection  with the
         Collateral.

Section  8.03.  Exercise  of  Remedies.  No waiver of any  Termination  Event or
Potential Termination Event shall be effective without the prior written consent
of the  Insurer.  No failure or delay on the part of the Deal Agent to  exercise
any right,  power or  privilege  under this  Agreement  and no course of dealing
between the Borrower, the Secured Parties, the Liquidity Agent or the Deal Agent
shall  operate  as a waiver of such  right,  power or  privilege,  nor shall any
single or partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise of such right,  power or privilege or the
exercise  of any other  right,  power or  privilege.  The  rights  and  remedies
expressly  provided in this  Agreement are  cumulative  and not exclusive of any
rights or remedies which the Deal Agent or the Secured  Parties would  otherwise
have pursuant to law or equity.  No notice to or demand on any party in any case
shall entitle such party to any other or further  notice or demand in similar or
other  circumstances,  or constitute a waiver of the right of the other party to
any other or further action in any circumstances without notice or demand.

Section 8.04.  Waiver of Certain Laws. The Borrower  agrees,  to the full extent
that it may lawfully so agree,  that neither it nor anyone  claiming  through or
under  it will  set up,  claim  or seek  to  take  advantage  of any  appraisal,
valuation,  stay,  extension or redemption  law now or hereafter in force in any
locality  where any  Collateral  may be situated in order to prevent,  hinder or
delay the enforcement or foreclosure of this Agreement,  or the absolute sale of
any of the  Collateral  or any part thereof,  or the final and absolute  putting
into possession thereof, immediately after such sale, of the purchasers thereof,
and the Borrower,  for itself and all who may at any time claim through or under
it,  hereby  waives,  to the full  extent  that it may be lawful  so to do,  the
benefit of all such laws, and any and all right to have any of the properties or
assets constituting the Collateral marshaled upon any such sale, and agrees that
the Deal  Agent or any court  having  jurisdiction  to  foreclose  the  security
interests granted in this Agreement may sell the Collateral as an entirety or in
such parcels as the Deal Agent or such court may determine.

Section 8.05. Power of Attorney.  The Borrower hereby  irrevocably  appoints the
Deal Agent its true and lawful attorney (with full power of substitution) in its
name, place and stead and at its expense,  in connection with the enforcement of
the  rights  and  remedies  provided  for in this  Article,  including  with the
following powers:  (i) to give any necessary receipts or acquittance for amounts
collected or received  hereunder,  (ii) to make all  necessary  transfers of the
Collateral  in  connection  with  any sale or other  disposition  made  pursuant
hereto,  (iii) to execute  and deliver for value all  necessary  or  appropriate
bills of sale,  assignments  and other  instruments in connection  with any such
sale or other  disposition,  the Borrower  thereby  ratifying and confirming all
that such attorney (or any substitute)  shall lawfully do hereunder and pursuant
hereto, and (iv) to sign any agreements, orders or other documents in connection
with or pursuant to any Transaction Document.  Nevertheless,  if so requested by
the Deal Agent or a  purchaser  of any of the  Collateral,  the  Borrower  shall
ratify  and  confirm  any  such  sale or  other  disposition  by  executing  and
delivering  to the  Deal  Agent  or such  purchaser  all  proper  bills of sale,
assignments,  releases and other  instruments  as may be  designated in any such
request.

                                  ARTICLE Nine


<PAGE>





                                 INDEMNIFICATION

Section 9.01.  Indemnities  by the Borrower.  Without  limiting any other rights
which the Deal Agent,  the Collateral  Agent,  the Liquidity  Agent, any Secured
Party or its assignee,  or any of their respective affiliates may have hereunder
or under applicable law, the Borrower hereby agrees to indemnify the Deal Agent,
the Collateral Agent, the Liquidity Agent, any Secured Party or its assignee and
each of their  respective  affiliates  and  officers,  directors,  employees and
agents thereof  (collectively,  the "Indemnified  Parties") from and against any
and all damages,  losses,  claims,  liabilities  and related costs and expenses,
including  reasonable  attorneys'  fees  and  disbursements  (collectively,  the
"Indemnified  Amounts")  awarded  against or incurred  by, any such  Indemnified
Party or other non-monetary damages of any such Indemnified Party arising out of
or as a result of this Agreement, excluding, however, Indemnified Amounts to the
extent resulting from gross negligence or willful  misconduct on the part of any
Indemnified Party. Without limiting the foregoing,  the Borrower shall indemnify
the Indemnified Parties for Indemnified Amounts relating to or resulting from:

(a)      any Receivable represented by the Borrower to be an Eligible Receivable
         which is not at the applicable time an Eligible Receivable;

(b)      reliance on any  representation  or warranty made or deemed made by the
         Borrower,  the  Servicer  (or one of its  affiliates)  or any of  their
         respective  officers under or in connection  with this Agreement or the
         other Transaction Documents or any Warehouse Transfer Agreement,  which
         shall have been false or incorrect in any material respect when made or
         deemed made or delivered;

(c)      the failure by the  Borrower  or the  Servicer to comply with any term,
         provision  or  covenant   contained  in  this   Agreement,   the  other
         Transaction  Documents or any Warehouse Transfer Agreement or a failure
         by the Borrower or the  Servicer to comply with any term,  provision or
         covenant  contained in any agreement  executed in connection  with this
         Agreement,  the other Transaction  Documents or any Warehouse  Transfer
         Agreement,  or with any applicable law, rule or regulation with respect
         to any Receivable;

(d)      the failure to vest and maintain  vested in the Servicer,  as agent for
         the Secured Parties,  a valid and enforceable first priority  perfected
         security interest in any or all of the Collateral;

(e)      the failure to file,  or any delay in filing,  financing  statements or
         other similar  instruments or documents under the UCC of any applicable
         jurisdiction  or other  applicable laws with respect to the Collateral,
         whether at the time of a Prefunding  or at any  subsequent  time and as
         required  by  the  Transaction  Documents  or  any  Warehouse  Transfer
         Agreement;

(f)      any  dispute,  claim,  offset or defense  (other than the  discharge in
         bankruptcy  of the  Obligor)  of the  Obligor  to  the  payment  of any
         Receivable  funded by a Prefunding  which is, or is purported to be, an
         Eligible Receivable (including,  without limitation, a defense based on
         the Receivable not being a legal,  valid and binding obligation of such
         Obligor enforceable against it in accordance with its terms);

(g)      any failure by the  Borrower to perform  its duties or  obligations  in
         accordance with the provisions of this Agreement;

(h)      any products liability claim or personal injury or property damage suit
         or other  similar or related  claim or action of whatever  sort arising
         out of or in connection  with any Receivable  and the related  Financed
         Vehicle;

(i)      the  failure  by the  Borrower  to pay when due any Taxes for which the
         Borrower  is  liable,  including  without  limitation,  sales,  excise,
         franchise or personal  property  taxes payable in  connection  with the
         Collateral;

(j)      any repayment by the Deal Agent, the Liquidity Agent or a Secured Party
         of any amount previously distributed in reduction of the Net Investment
         or  payment  of  Interest,  any  obligation  or any  other  amount  due
         hereunder  or under any Hedging  Agreement,  in each case which  amount
         such entity believes in good faith is required to be repaid;

(k)      any proceeding (i) in respect of any  Receivable,  (ii) relating to the
         use  of the  proceeds  of any  Prefunding  or  (iii)  related  to  this
         Agreement  that is not  commenced  by the  Indemnified  Party  or if so
         commenced, in which such Indemnified Party is not the prevailing party;
         provided,   that  no  Indemnified   Party  shall  be  entitled  to  any
         indemnification  for any item  described in this clause  resulting from
         such Indemnified Party's gross negligence or willful misconduct;

(l)      the use of the proceeds of any Prefunding;

(m)      any failure by the Borrower to give reasonably  equivalent value to UAC
         in  consideration  for  the  transfer  by  UAC  to  the  Borrower  of a
         Receivable or any attempt by any Person to void or otherwise  avoid any
         such transfer under any statutory  provision or common law or equitable
         action, including,  without limitation, any provision of the Bankruptcy
         Code; and

(n)      the  failure  of the  Borrower  to  remit  to the  Collection  Account,
         Collections  remitted  to the  Borrower  in  accordance  with the terms
         hereof.

         Notwithstanding the foregoing,  in no event shall any Indemnified Party
be  indemnified  against  any  damages,  losses  or claims  to the  extent  such
Indemnified  Amounts are or result from taxes asserted with respect to taxes on,
or measured by, the net income of the applicable Indemnified Party.

         Any amounts subject to the  indemnification  provisions of this Section
shall be paid by the Borrower  solely pursuant to the provisions of Section 4.06
in the order and priority set forth therein.

ARTICLE Ten


<PAGE>

          THE DEAL AGENT, THE COLLATERAL AGENT AND THE LIQUIDITY AGENT

Section 10.01.    Authorization and Action.

(a) Each  Secured  Party  hereby  designates  and appoints FSI as Deal Agent and
First Union as Collateral Agent hereunder, and authorizes each of the Deal Agent
and the  Collateral  Agent to take such  actions  as agent on its  behalf and to
exercise  such  powers as are  delegated  to it by the  terms of this  Agreement
together with such powers as are reasonably incidental thereto. Neither the Deal
Agent nor the Collateral Agent shall have any duties or responsibilities  except
those expressly set forth herein, or any fiduciary relationship with any Lender,
and no implied covenants,  functions,  responsibilities,  duties, obligations or
liabilities on the part of the Deal Agent or the Collateral  Agent shall be read
into this  Agreement  or  otherwise  exist for the Deal Agent or the  Collateral
Agent. In performing its functions and duties hereunder,  each of the Deal Agent
and the Collateral  Agent shall act solely as agent for the Secured  Parties and
does  not  assume  nor  shall  be  deemed  to have  assumed  any  obligation  or
relationship  of  trust  or  agency  with  or  for  the  Borrower  or any of its
successors or assigns.  Neither the Deal Agent nor the Collateral Agent shall be
required to take any action which  exposes it to personal  liability or which is
contrary to this Agreement or applicable  law.  Except as otherwise  provided in
this  Agreement,  appointment  and authority of the Deal Agent  hereunder  shall
terminate at the indefeasible payment in full of the Obligations. Subject to the
foregoing, the Insurer may request the Deal Agent to intervene in any proceeding
that effects the Note or the Collateral and the Borrower, Servicer and Investors
consent to such intervention.

(b) Each Investor hereby  designates and appoints First Union as Liquidity Agent
hereunder,  and authorizes the Liquidity  Agent to take such actions as agent on
its behalf and to exercise such powers as are  delegated to the Liquidity  Agent
by the  terms of this  Agreement  together  with such  powers as are  reasonably
incidental   thereto.   The  Liquidity  Agent  shall  not  have  any  duties  or
responsibilities,  except those  expressly  set forth  herein,  or any fiduciary
relationship   with  any  Investor,   and  no  implied   covenants,   functions,
responsibilities,  duties,  obligations  or  liabilities  on  the  part  of  the
Liquidity  Agent shall be read into this  Agreement or  otherwise  exist for the
Liquidity Agent. In performing its functions and duties hereunder, the Liquidity
Agent shall act solely as agent for the  Investors and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Borrower or any of its  successors or assigns.  The  Liquidity  Agent
shall not be required to take any action which  exposes the  Liquidity  Agent to
personal liability or which is contrary to this Agreement or applicable law. The
appointment  and authority of the Liquidity  Agent  hereunder shall terminate at
the indefeasible payment in full of the Obligations.

Section  10.02.  Delegation of Duties.  Each of the Deal Agent,  the  Collateral
Agent and the Liquidity Agent may execute any of its duties under this Agreement
by or through  agents or  attorneys-in-fact  and shall be  entitled to advice of
counsel  concerning  all matters  pertaining  to such  duties.  Neither the Deal
Agent,  the  Collateral  nor the Liquidity  Agent shall be  responsible  for the
negligence or misconduct of any agents or attorneys-in-fact  selected by it with
reasonable care.

Section 10.03.    Exculpatory Provisions.

(a) Neither the Deal Agent,  Collateral  Agent,  the Liquidity  Agent nor any of
their  directors,  officers,  agents or  employees  shall be (i)  liable for any
action  lawfully  taken  or  omitted  to be  taken  by it or  them  under  or in
connection with this Agreement (except for its, their or such Person's own gross
negligence  or  willful  misconduct  or, in the case of each of the Deal  Agent,
Collateral  Agent  and  the  Liquidity  Agent,  the  breach  of its  obligations
expressly set forth in this Agreement), or (ii) responsible in any manner to the
Deal Agent or any of the  Secured  Parties,  as  applicable,  for any  recitals,
statements, representations or warranties made by the Borrower contained in this
Agreement or in any certificate, report, statement or other document referred to
or provided for in, or received under or in connection with, this Agreement, any
other Transaction  Document or any Warehouse Transfer Agreement to which it is a
party for the value,  validity,  effectiveness,  genuineness,  enforceability or
sufficiency  of this  Agreement or any other  document  furnished in  connection
herewith,  or for  any  failure  of the  Borrower  to  perform  its  obligations
hereunder,  or for the satisfaction of any condition  specified in Article Five.
Each of the Deal Agent,  Collateral  Agent and the Liquidity  Agent shall not be
under any  obligation  to any  Secured  Party  or, in the case of the  Liquidity
Agent,  the Deal  Agent to  ascertain  or to  inquire  as to the  observance  or
performance  of any of the  agreements or covenants  contained in, or conditions
of,  this  Agreement,  or to  inspect  the  properties,  books or records of the
Borrower. Each of the Deal Agent, Collateral Agent and the Liquidity Agent shall
not be deemed to have  knowledge  of  Termination  Event  unless it has received
written notice thereof from the Borrower,  the Deal Agent,  the Liquidity Agent,
Collateral Agent or a Secured Party, as applicable.

Section 10.04.    Reliance.

(a) Each of the Deal Agent,  Collateral  Agent and the Liquidity  Agent shall in
all cases be entitled to rely, and shall be fully protected in relying, upon any
document  or  conversation  believed by it to be genuine and correct and to have
been  signed,  sent or made by the proper  Person or Persons and upon advice and
statements  of legal  counsel  (including,  without  limitation,  counsel to the
Borrower), independent accountants and other experts selected by the Deal Agent,
the  Collateral  Agent or the Liquidity  Agent,  as the case may be. Each of the
Deal Agent,  the Collateral  Agent and the Liquidity Agent shall in all cases be
fully  justified in failing or refusing to take any action under this  Agreement
or any other  document  furnished in connection  herewith  unless it shall first
receive such advice or concurrence  of VFCC or the Required  Investors or all of
the Secured Parties, as applicable, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders; provided, that, unless and until
the Deal Agent, the Collateral Agent or the Liquidity Agent, as the case may be,
shall have received such advice,  it may take or refrain from taking any action,
as it shall deem advisable and in the best interests of the Lenders. Each of the
Deal Agent, Collateral Agent and the Liquidity Agent shall in all cases be fully
protected in acting,  or in refraining from acting, in accordance with a request
of VFCC or the Required Investors or all of the Secured Parties,  as applicable,
and such request and any action taken or failure to act pursuant  thereto  shall
be binding upon all the Lenders.

Section 10.05.  Non-Reliance  on Deal Agent,  Liquidity Agent and Other Lenders.
Each Secured  Party  expressly  acknowledges  that  neither the Deal Agent,  the
Collateral  Agent,  the Liquidity  Agent nor any of their  respective  officers,
directors,  employees,  agents,  attorneys-in-fact  or  affiliates  has made any
representations  or  warranties  to it and  that no act by the Deal  Agent,  the
Collateral  Agent or the Liquidity Agent  hereafter  taken,  including,  without
limitation,  any  review  of the  affairs  of the  Borrower,  shall be deemed to
constitute  any  representation  or warranty by the Deal Agent,  the  Collateral
Agent or the Liquidity Agent.  Each Secured Party represents and warrants to the
Deal Agent,  the  Collateral  Agent and to the  Liquidity  Agent that it has and
will,  independently  and without  reliance upon the Deal Agent,  the Collateral
Agent,  the  Liquidity  Agent  or any  other  Secured  Party  and  based on such
documents and information as it has deemed  appropriate,  made its own appraisal
of  and  investigation  into  the  business,  operations,  property,  prospects,
financial and other conditions and creditworthiness of the Borrower and made its
own decision to enter into this Agreement.

Section  10.06.  Reimbursement  and  Indemnification.  The  Investors  agree  to
reimburse  and  indemnify  VFCC,  the Deal  Agent,  the  Collateral  Agent,  the
Liquidity Agent and each of their  respective  officers,  directors,  employees,
representatives  and agents ratably  according to their pro rata shares,  to the
extent not paid or  reimbursed  by the  Borrower  (i) for any  amounts for which
VFCC, the Liquidity  Agent,  acting in its capacity as Liquidity Agent, the Deal
Agent,  acting in its capacity as Deal Agent, or the Collateral Agent, acting in
its capacity as Collateral  Agent is entitled to  reimbursement  by the Borrower
hereunder and (ii) for any other expenses incurred by VFCC, the Liquidity Agent,
acting in its capacity as Liquidity Agent, or the Deal Agent, in its capacity as
Deal Agent and acting on behalf of the Secured Parties, or the Collateral Agent,
acting  in  its  capacity  as  Collateral   Agent,   in   connection   with  the
administration and enforcement of this Agreement.

Section 10.07.  Deal Agent,  the Collateral  Agent and Liquidity  Agent in their
Individual Capacities. The Deal Agent, the Collateral Agent, the Liquidity Agent
and each of their respective  affiliates may make loans to, accept deposits from
and generally  engage in any kind of business with the Borrower or any affiliate
of the Borrower as though the Deal Agent,  the Collateral Agent or the Liquidity
Agent, as the case may be, were not the Deal Agent,  the Collateral Agent or the
Liquidity Agent, as the case may be,  hereunder.  With respect to the Prefunding
Deposits made pursuant to this Agreement,  the Deal Agent, the Collateral Agent,
the Liquidity Agent and each of their respective  affiliates shall have the same
rights and powers  under this  Agreement as any Lender and may exercise the same
as though it were not the Deal  Agent,  the  Collateral  Agent or the  Liquidity
Agent, as the case may be, and the terms "Investor,"  "Lender,"  "Investors" and
"Lenders"  shall include the Deal Agent,  the Collateral  Agent or the Liquidity
Agent, as the case may be, in its individual capacity.

Section 10.08.    Successor Deal Agent, Collateral Agent or Liquidity Agent.

(a) Each of the Deal Agent and the Collateral  Agent may, upon five days' notice
to the Borrower and the Lenders,  the Insurer, the Deal Agent and the Collateral
Agent, as applicable, will, upon the direction of all of the Lenders (other than
the Deal  Agent and the  Collateral  Agent,  as  applicable,  in its  individual
capacity) and the Insurer resign as Deal Agent or the Collateral  Agent,  as the
case may be. If either the Deal Agent or the Collateral Agent shall resign, then
the  Required  Investors  with the consent of the  Insurer  during such five day
period shall appoint from among the Lenders a successor agent. If for any reason
no  successor  Deal  Agent or  Collateral  Agent is  appointed  by the  Required
Investors  during such five day period,  then  effective  upon the expiration of
such five day period,  the Lenders  shall  perform all of the duties of the Deal
Agent or the Collateral  Agent,  as the case may be,  hereunder and the Borrower
shall make all  payments in respect of the  Obligations  or under any fee letter
delivered by the Borrower to the Deal Agent and the Secured Parties  directly to
the applicable Secured Parties and for all purposes shall deal directly with the
Secured  Parties.   After  any  retiring  Deal  Agent's  or  Collateral  Agent's
resignation hereunder as Deal Agent or Collateral Agent, as the case may be, the
provisions  of  Articles  Ten and Eleven  shall  inure to its  benefit as to any
actions taken or omitted to be taken by it while it was Deal Agent or Collateral
Agent, as the case may be, under this Agreement.

(b) The Liquidity  Agent may,  upon five days' notice to the Borrower,  the Deal
Agent and the Investors, and the Liquidity Agent will, upon the direction of all
of the Investors  (other than the Liquidity  Agent, in its individual  capacity)
resign as  Liquidity  Agent.  If the  Liquidity  Agent  shall  resign,  then the
Required  Investors  during such  five-day  period shall  appoint from among the
Investors a successor  Liquidity Agent. If for any reason no successor Liquidity
Agent is appointed by the Required  Investors during such five day period,  then
effective  upon the  expiration of such  five-day  period,  the Investors  shall
perform all of the duties of the Liquidity  Agent  hereunder and all payments in
respect of the Net Investment.  After any retiring Liquidity Agent's resignation
hereunder as Liquidity  Agent,  the  provisions of Articles Ten and Eleven shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it was Liquidity Agent under this Agreement.

ARTICLE Eleven


<PAGE>

                           ASSIGNMENTS; PARTICIPATIONS

Section 11.01.    Assignments and Participations.

(a) Each Investor may upon at least 30 days' notice to VFCC, the Deal Agent, the
Insurer and the Liquidity  Agent,  assign to one or more banks or other entities
all or a portion of its rights and obligations  under this Agreement;  provided,
however, that (i) each such assignment shall be of a constant, and not a varying
percentage of all of the assigning  Investor's rights and obligations under this
Agreement,  (ii) the amount of the  Commitment of the assigning  Investor  being
assigned  pursuant  to each such  assignment  (determined  as of the date of the
Assignment and Acceptance with respect to such assignment)  shall in no event be
less than the lesser of (A) $15,000,000 or an integral multiple of $1,000,000 in
excess  of that  amount  and (B) the full  amount  of the  assigning  Investor's
Commitment,  (iii) each such assignment shall be to an Eligible  Assignee,  (iv)
the parties to each such assignment shall execute and deliver to the Deal Agent,
for its  acceptance  and recording in the Investor  Register,  an Assignment and
Acceptance,  together with a processing  and  recordation  fee of $3,500 or such
lesser  amount as shall be approved  by the Deal Agent,  (v) the parties to each
such  assignment  shall have agreed to reimburse  the Deal Agent,  the Liquidity
Agent and VFCC for all reasonable fees, costs and expenses  (including,  without
limitation,  the reasonable fees and out-of-pocket  expenses of counsel for each
of the Deal Agent, the Liquidity Agent and VFCC) incurred by the Deal Agent, the
Liquidity Agent and VFCC, respectively, in connection with such assignment, (vi)
each Person that becomes an Investor under an Assignment  and  Acceptance  shall
agree to be bound by the  confidentiality  provisions of Section 12.11 and (vii)
there shall be no increased costs, expenses or taxes incurred by the Deal Agent,
the Liquidity Agent or VFCC upon such assignment or participation; and provided,
further,  that upon the  effective  date of such  assignment  the  provisions of
Section 3.03(f) of the VFCC  Administration  Agreement shall be satisfied.  Upon
such  execution,  delivery and  acceptance  by the Deal Agent and the  Liquidity
Agent and the  recording by the Deal Agent,  from and after the  effective  date
specified in each Assignment and  Acceptance,  which effective date shall be the
date of acceptance  thereof by the Deal Agent and the Liquidity Agent,  unless a
later date is specified  therein,  (i) the assignee  thereunder shall be a party
hereto  and,  to the extent  that  rights and  obligations  hereunder  have been
assigned to it pursuant to such Assignment and  Acceptance,  have the rights and
obligations of an Investor  hereunder and (ii) the Investor assignor  thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such  Assignment  and  Acceptance,  relinquish  its rights and be
released  from its  obligations  under this  Agreement  (and,  in the case of an
Assignment and Acceptance  covering all or the remaining portion of an assigning
Investor's  rights and  obligations  under this  Agreement,  such Investor shall
cease to be a party hereto).

(b) By executing  and  delivering  an Assignment  and  Acceptance,  the Investor
assignor  thereunder and the assignee  thereunder confirm to and agree with each
other and the other  parties  hereto as  follows:  (i) other than as provided in
such Assignment and Acceptance,  such assigning Investor makes no representation
or  warranty  and  assumes no  responsibility  with  respect to any  statements,
warranties or  representations  made in or in connection  with this Agreement or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of this Agreement or any other instrument or document  furnished  pursuant
hereto;  (ii) such assigning  Investor makes no  representation  or warranty and
assumes no responsibility with respect to the financial condition of VFCC or the
performance or observance by VFCC of any of its obligations under this Agreement
or any other  instrument  or  document  furnished  pursuant  hereto;  (iii) such
assignee  confirms that it has received a copy of this Agreement,  together with
copies of such financial  statements and other  documents and  information as it
has deemed  appropriate  to make its own credit  analysis  and decision to enter
into such Assignment and Acceptance;  (iv) such assignee will, independently and
without  reliance upon the Deal Agent or the  Liquidity  Agent,  such  assigning
Investor or any other Investor and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this  Agreement;  (v) such assigning  Investor
and such assignee confirm that such assignee is an Eligible Assignee;  (vi) such
assignee  appoints and authorizes each of the Deal Agent and the Liquidity Agent
to take such  action as agent on its behalf and to exercise  such  powers  under
this Agreement as are delegated to such agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the  terms  of  this  Agreement  are  required  to be  performed  by it as an
Investor.

(c) The Deal Agent shall  maintain  at its address  referred to herein a copy of
each  Assignment and  Acceptance  delivered to and accepted by it and a register
for the recordation of the names,  addresses and Commitment of each Investor and
the amount of the Net  Investment  made by each  Investor from time to time (the
"Investor  Register").  The entries in the Investor Register shall be conclusive
and binding for all purposes,  absent manifest error, and VFCC, the Borrower and
the  Investors  may treat each Person  whose name is  recorded  in the  Investor
Register as an  Investor  hereunder  for all  purposes  of this  Agreement.  The
Investor Register shall be available for inspection by VFCC, the Liquidity Agent
or any  Investor at any  reasonable  time and from time to time upon  reasonable
prior notice.

(d)  Subject to the  provisions  of  Section  11.01(a),  upon its  receipt of an
Assignment and Acceptance executed by an assigning Investor and an assignee, the
Deal Agent and the Liquidity Agent shall each, if such Assignment and Acceptance
has been completed,  accept such  Assignment and Acceptance,  and the Deal Agent
shall then (i) record the information contained therein in the Investor Register
and (ii) give prompt notice thereof to VFCC.

(e) Each Investor may sell participations to one or more banks or other entities
in or to all or a portion  of its rights and  obligations  under this  Agreement
(including,  without  limitation,  all or a portion of its  Commitment  and each
Prefunding made by it); provided,  however, that (i) such Investor's obligations
under this Agreement (including,  without limitation,  its Commitment hereunder)
shall remain  unchanged,  (ii) such Investor shall remain solely  responsible to
the other parties hereto for the  performance of such  obligations and (iii) the
Deal Agent and the other  Investors  shall  continue to deal solely and directly
with such Investor in connection  with such  Investor's  rights and  obligations
under this  Agreement;  and  provided,  further,  that the Deal Agent shall have
confirmed that upon the effective date of such  participation  the provisions of
Section  3.03(f)  of the  VFCC  Administration  Agreement  shall  be  satisfied.
Notwithstanding anything herein to the contrary, each participant shall have the
rights of an Investor  (including  any right to receive  payment) under Sections
2.10 and 2.11;  provided,  however,  that no  participant  shall be  entitled to
receive  payment  under  either such  Section in excess of the amount that would
have been payable  under such  Section by the Borrower to the Investor  granting
its  participation  had such  participation  not been  granted,  and no Investor
granting a participation  shall be entitled to receive payment under either such
Section  in an amount  which  exceeds  the sum of (i) the  amount to which  such
Investor  is  entitled  under such  Section  with  respect to any portion of any
Prefunding owned by such Investor which is not subject to any participation plus
(ii) the  aggregate  amount to which its  participants  are entitled  under such
Sections with respect to the amounts of their  respective  participations.  With
respect to any participation described in this Section, the participant's rights
as set  forth in the  agreement  between  such  participant  and the  applicable
Investor  to agree to or to  restrict  such  Investor's  ability to agree to any
modification,  waiver or  release  of any of the terms of this  Agreement  or to
exercise or refrain from exercising any powers or rights which such Investor may
have  under or in  respect  of this  Agreement  shall be limited to the right to
consent to any of the matters set forth in Section 12.01.

(f) Each Investor may, in connection  with any  assignment or  participation  or
proposed assignment or participation  pursuant to this Section,  disclose to the
assignee or participant  or proposed  assignee or  participant  any  information
relating to the Borrower or VFCC  furnished to such  Investor by or on behalf of
the Borrower or VFCC.

(g) Nothing  herein shall  prohibit any Investor  from  pledging or assigning as
Collateral any of its rights under this Agreement to any Federal Reserve Bank in
accordance with applicable law and any such pledge or Collateral  assignment may
be made without compliance with Section 11.01(a) or 11.01(b).

ARTICLE Twelve


<PAGE>





                                  MISCELLANEOUS

Section 12.01.  Amendments  and Waivers.  Except as provided in this Section and
7.01(n),  no amendment,  waiver or other  modification  of any provision of this
Agreement  or any  schedule or exhibit  hereto  shall be  effective  without the
written  agreement of the Borrower,  the Deal Agent,  VFCC,  the Insurer and the
Required Investors; provided, however, this Agreement may be modified or amended
without the written  agreement of the Required  Investors to cure any ambiguity,
correct or  supplement  any provision in such  Transaction  Document that may be
inconsistent with other provisions therein, or to make any other provisions with
respect to matters  or  questions  arising  under  such  agreement  that are not
inconsistent with the provisions of the agreement.

         No  amendment,  waiver or other  modification  affecting  the rights or
obligations of any Hedging  Counterparty shall be effective against such Hedging
Counterparty without the written agreement of such Hedging Counterparty.

Section 12.02. Notices,  Etc. All notices and other communications  provided for
hereunder shall,  unless otherwise stated herein, be in writing (including telex
communication  and  communication  by  facsimile  copy)  and  mailed,   telexed,
transmitted  or  delivered,  as to each party  hereto,  at its address set forth
under its name on the  signature  pages  hereof  or  specified  in such  party's
Assignment  and  Acceptance  or at such other  address as shall be designated by
such party in a written notice to the other parties hereto. All such notices and
communications shall be effective, upon receipt, or in the case of notice by (i)
mail,  five days after being  deposited in the United  States mail,  first class
postage  prepaid,  (ii) telex,  when telexed  against  receipt of answer back or
(iii) facsimile copy, when verbal  communication of receipt is obtained,  except
that notices and  communications  pursuant to Article Two shall not be effective
until received with respect to any notice sent by mail or telex.

Section  12.03.  No Waiver,  Rights and Remedies.  No failure on the part of the
Deal Agent,  the  Liquidity  Agent or any Secured  Party or any  assignee of any
Secured  Party to  exercise,  and no delay in  exercising,  any  right or remedy
hereunder  shall  operate as a waiver  thereof;  nor shall any single or partial
exercise of any right or remedy hereunder preclude any other or further exercise
thereof or the  exercise  of any other  right.  The rights and  remedies  herein
provided are cumulative and not exclusive of any rights and remedies provided by
law.

Section 12.04. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Borrower, the Deal Agent, the Collateral Agent, the Liquidity
Agent, the Secured Parties and their respective successors and permitted assigns
and, in addition,  the  provisions of Section 4.06 shall inure to the benefit of
each Hedging Counterparty, whether or not that Hedging Counterparty is a Secured
Party.

Section  12.05.  Term of this  Agreement.  This  Agreement,  including,  without
limitation,  the  Borrower's  obligation  to observe its  covenants set forth in
Article  Seven  shall  remain  in full  force  and  effect  until  the  Facility
Termination Date; provided,  however,  that the rights and remedies with respect
to any breach of any  representation  and  warranty  made or deemed  made by the
Borrower pursuant to Articles Five and Six and the  indemnification  and payment
provisions of Article Nine and the  provisions of Sections 12.10 and 12.11 shall
be continuing and shall survive any termination of this Agreement.

Section 12.06.  GOVERNING LAW; CONSENT TO  JURISDICTION;  WAIVER OF OBJECTION TO
VENUE.  THIS AGREEMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
THE LAWS OF THE STATE OF NEW YORK.  EACH OF THE PARTIES  HERETO HEREBY AGREES TO
THE NON-EXCLUSIVE  JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF
NEW YORK.  EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON FORUM
NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN
ANY OF THE  AFOREMENTIONED  COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

Section 12.07.  WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE  PARTIES  HERETO  WAIVES  ANY  RIGHT TO HAVE A JURY  PARTICIPATE  IN
RESOLVING ANY DISPUTE,  WHETHER SOUNDING IN CONTRACT,  TORT OR OTHERWISE BETWEEN
THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH,  RELATED TO, OR INCIDENTAL TO
THE  RELATIONSHIP  BETWEEN ANY OF THEM IN CONNECTION  WITH THIS AGREEMENT OR THE
TRANSACTIONS  CONTEMPLATED  HEREBY.  INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

Section 12.08.    Costs, Expenses and Taxes.

(a) In addition to the rights of indemnification  granted to the Deal Agent, the
Liquidity Agent, the Secured Parties and its or their respective  affiliates and
officers,  directors,  employees and agents  thereof  under  Article  Nine,  the
Borrower  agrees to pay on demand all reasonable  costs and expenses of the Deal
Agent,  the Liquidity Agent and the Secured Parties  incurred in connection with
the administration (including periodic auditing),  amendment or modification of,
or any waiver or consent issued in connection with, this Agreement and the other
documents  to be  delivered  hereunder  or in  connection  herewith,  including,
without  limitation,  the reasonable fees and out-of-pocket  expenses of counsel
for the Deal Agent, the Liquidity Agent and Secured Parties with respect thereto
and with respect to advising the Deal Agent, the Liquidity Agent and the Secured
Parties as to their respective  rights and remedies under this Agreement and the
other  documents to be delivered  hereunder or in connection  herewith,  and all
costs and expenses,  if any  (including  reasonable  counsel fees and expenses),
incurred by the Deal Agent,  the Liquidity  Agent and/or the Secured  Parties in
connection  with the enforcement of this Agreement and the other documents to be
delivered hereunder or in connection herewith.

(b) The Borrower shall pay on demand any and all stamp,  sales, excise and other
taxes and fees  payable  or  determined  to be payable  in  connection  with the
execution, delivery, filing and recording of this Agreement, the other documents
to be delivered hereunder or any agreement or other document providing liquidity
support,  credit  enhancement or other similar support to a Lender in connection
with this Agreement or the funding or maintenance of Prefundings hereunder.

Section 12.09.    No Proceedings.

(a) Each of the parties  hereto (other than VFCC) hereby agrees that it will not
institute  against,  or join any other  Person in  instituting  against VFCC any
Insolvency  Proceeding so long as any  commercial  paper issued by VFCC shall be
outstanding and there shall not have elapsed one year and one day since the last
day on which any such commercial paper shall have been outstanding.

(b) Each of the  parties  hereto  (other  than the Deal  Agent  and the  Secured
Parties)  hereby  agrees that it will not institute  against,  or join any other
Person in instituting against the Borrower any Insolvency  Proceeding so long as
there shall not have elapsed one year and one day since the Facility Termination
Date.

Section 12.10.    Recourse Against Certain Parties.

(a) No recourse under or with respect to any  obligation,  covenant or agreement
(including,   without  limitation,   the  payment  of  any  fees  or  any  other
obligations)  of the Deal Agent,  the  Liquidity  Agent or any Secured  Party as
contained  in this  Agreement  or any other  agreement,  instrument  or document
entered  into by it  pursuant  hereto  or in  connection  herewith  shall be had
against any such Person or any  manager or  administrator  of such Person or any
incorporator,  affiliate,  stockholder,  officer,  employee  or director of such
Person or of the Borrower or of any such manager or  administrator,  as such, by
the  enforcement of any assessment or by any legal or equitable  proceeding,  by
virtue of any statute or otherwise.

(b) Notwithstanding anything in this Agreement or any other Transaction Document
to the contrary,  VFCC shall have no obligation to pay any amount required to be
paid by it hereunder  or  thereunder  in excess of any amount  available to VFCC
after paying or making  provision for the payment of its Commercial  Paper.  All
payment  obligations of VFCC hereunder are contingent  upon the  availability of
funds in excess of the amounts  necessary to pay Commercial  Paper;  and each of
the Borrower,  the Deal Agent, the Collateral Agent, the Liquidity Agent and the
Secured  Parties agrees that they shall not have a claim under Section 101(5) of
the  Bankruptcy  Code if and to the  extent  that  any such  payment  obligation
exceeds the amount  available to VFCC to pay such amounts after paying or making
provision for the payment of its Commercial Paper.

(c)      The  provisions of this Section shall survive the  termination  of this
         Agreement.

Section 12.11.    Confidentiality.

(a) Each of the  parties  hereto  shall  maintain  and shall  cause  each of its
employees and officers to maintain the  confidentiality of the Agreement and the
other  confidential  proprietary  information  with respect to the other parties
hereto and their respective businesses obtained by it or them in connection with
the  structuring,  negotiating  and execution of the  transactions  contemplated
herein,  except  that each such party and its  officers  and  employees  may (i)
disclose  such  information  to its external  accountants  and  attorneys and as
required  by an  applicable  law or  order  of any  judicial  or  administrative
proceeding, (ii) disclose the existence of this Agreement, but not the financial
terms thereof and (iii) disclose the Agreement and such information in any suit,
action,  proceeding or investigation (whether in law or in equity or pursuant to
arbitration)  involving any of the  Receivables  or the related  Receivables  or
related Financed  Vehicles or any Hedging Agreement for the purpose of defending
itself,  reducing its liability,  or protecting or exercising any of its claims,
rights,  remedies,  or  interests  under  or  in  connection  with  any  of  the
Receivables  or the  related  Receivables  or related  Financed  Vehicles or any
Hedging Agreement.

(b)  Anything  herein  to the  contrary  notwithstanding,  the  Borrower  hereby
consents to the disclosure of any nonpublic  information  with respect to it (i)
by and among the Deal Agent, the Liquidity Agent or the Secured Parties, (ii) by
the Liquidity  Agent,  the Deal Agent or a Secured Party to any  prospective  or
actual  Eligible  Assignee  or  participant  of any of them or (iii) by the Deal
Agent,  the Liquidity Agent or a Secured Party to any Rating Agency,  commercial
paper  dealer  or  provider  of  a  surety,  guaranty  or  credit  or  liquidity
enhancement to such Person and to any officers,  directors,  employees,  outside
accountants  and  attorneys of any of the  foregoing;  provided,  that each such
Person is informed of the confidential  nature of such information and agreed to
be bound hereby.  In addition,  the Secured Party,  the Liquidity  Agent and the
Deal Agent may  disclose  any such  nonpublic  information  pursuant to any law,
rule, regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings.

Section  12.12.  Execution  in  Counterparts;  Severability;  Integration.  This
Agreement 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 agreement.  In case any provision in or obligation under this Agreement
shall be invalid,  illegal or unenforceable in any  jurisdiction,  the validity,
legality and  enforceability of the remaining  provisions or obligations,  or of
such provision or obligation in any other jurisdiction,  shall not in any way be
affected or impaired  thereby.  This  Agreement  contains the final and complete
integration  of all prior  expressions by the parties hereto with respect to the
subject  matter  hereof  and shall  constitute  the entire  agreement  among the
parties hereto with respect to the subject matter hereof,  superseding all prior
oral or written understandings other than any fee letter contemplated hereby.

Section  12.13 No  Recourse.  Except as  otherwise  provided in the  Transaction
Documents and any Warehouse Transfer Agreement, the Borrower's obligations under
the Note and this  Agreement  are payable  solely from the  Borrower;  provided,
however,  such  recourse  shall  not  constitute  recourse  against  UAC  or its
Affiliates  (other than the Borrower) and shall be limited only to assets of the
Borrower  which  constitute  (i)  Collateral  and  proceeds  therefrom  and (ii)
Unrestricted  Cash  held by the  Borrower  pursuant  to  Section  4.6(f)  of the
Insurance Agreement.


<PAGE>





                                                         82

         IN WITNESS  WHEREOF,  the  parties  have caused  this  Agreement  to be
executed by their respective officers thereunto duly authorized,  as of the date
first above written.

THE BORROWER:               UAFC-2 CORPORATION




                            By:  /s/ Leeanne W. Graziani
                                  Title:

                            9240 Bonita Beach Road, Suite 1109-E
                            Bonita Springs, Florida 34135-4250
                            Attention: Leeanne W. Graziani, President
                            Telephone: (941) 948-1854
                            Telecopy: (941) 948-1855

THE SERVICER:               UNION ACCEPTANCE CORPORATION




                            By:  /s/ Melanie S. Otto
                                  Title:

                            Union Acceptance Corporation
                            250 North Shadeland Avenue
                            Indianapolis, Indiana 46219
                            Attention: Melanie S. Otto
                            Telephone: (317) 231-2717
                            Telecopy: (317) 231-7926

THE INVESTORS:              FIRST UNION NATIONAL BANK




                            By:  /s/ Bill A. Shirley
                                  Title:

                            Commitment: $200,000,000
                            First Union National Bank
                            One First Union Center, TW-9
                            Charlotte, North Carolina 28288
                            Attention: Terry Begley
                            Facsimile No.: (704) 383-6913
                            Confirmation No: (704) 374-4001


<PAGE>



VFCC:                          VARIABLE FUNDING CAPITAL CORPORATION

                               By:    FIRST UNION SECURITIES INC.,
                                        as attorney-in-fact




                               By:  /s/ Darrell R. Baber
                                     Title:

                               Variable Funding Capital Corporation
                               c/o First Union Securities Inc.
                               One First Union Center, TW-9
                               Charlotte, North Carolina  28288
                               Attention:  Conduit Administration
                               Facsimile No.:  (704) 383-6036
                               Confirmation No.:  (704) 383-9343

With a copy to:                Lord Securities Corp.
                               2 Wall Street, 19th Floor
                               New York, New York
                               Attention:  Vice President
                               Facsimile No.:  (212) 346-9012
                               Confirmation No.:  (212) 346-9008

THE DEAL AGENT:                FIRST UNION SECURITIES INC.




                               By:  /s/ Rodney K. Sanders
                                     Title:

                               First Union Securities Inc.
                               One First Union Center, TW-9
                               Charlotte, North Carolina 28288
                               Attention: Bennett S. Cole
                               Facsimile No.: (704) 374-3254
                               Telephone No.: (704) 383-3766


<PAGE>



THE COLLATERAL AGENT:                  FIRST UNION NATIONAL BANK



                                       By:  /s/ Bill A. Shirley
                                             Title:

                            First Union National Bank
                            One First Union Center, TW-9
                            Charlotte, North Carolina 28288
                            Attention: Bennett S. Cole
                            Facsimile No.: (704) 374-3254
                            Telephone No.: (704) 383-3766



THE INSURER:                           ASSET GUARANTY INSURANCE COMPANY




                                       By:  /s/Scott Mangan
                                             Title:

                         Asset Guaranty Insurance Company
                         335 Madison Avenue, 25th Floor
                         New York, NY 10017
                         Attention: Chief Risk Officer
                         Facsimile No.: (212) 682-5377
                         Telephone No.: (212) 983-5859

THE LIQUIDITY AGENT:                   FIRST UNION NATIONAL BANK




                                       By:  Bill A. Shirley
                                             Title:

                          First Union National Bank
                          One First Union Center, TW-9
                          Charlotte, North Carolina 28288
                          Attention: Terry Begley
                          Facsimile No.: (704) 374-3254
                          Telephone No.: (704) 374-4001