AMENDMENT NUMBER 1 TO
                     AMENDED AND RESTATED SECURITY AGREEMENT


                  AMENDMENT NUMBER 1 TO AMENDED AND RESTATED SECURITY  AGREEMENT
(this  "Amendment"),  dated as of August 31, 2000 by and among UNION  ACCEPTANCE
FUNDING CORPORATION,  an Indiana corporation,  as Seller (in such capacity,  the
"Seller"),  UAFC  CORPORATION,  a  Delaware  corporation,  as  debtor  (in  such
capacity, the "Debtor"),  UNION ACCEPTANCE  CORPORATION,  an Indiana corporation
("UAC"), individually and in its capacity as collection agent (in such capacity,
the "Collection Agent"),  ENTERPRISE FUNDING CORPORATION, a Delaware corporation
(the "Company"), MBIA INSURANCE CORPORATION, a New York stock insurance company,
as financial  guaranty  insurer  (the  "Insurer")  and BANK OF AMERICA,  N.A., a
national banking association ("Bank of America"), individually and as collateral
agent for the Company,  the Bank  Investors,  and the Insurer (in such capacity,
the "Collateral Agent") amending that certain Security Agreement dated as of May
12, 2000 (the "Security Agreement").

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

                  NOW, THEREFORE, the parties hereby agree as follows:

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

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

                  ""Commitment  Termination Date" shall mean August 30, 2001, or
         such  later  date to  which  the  Commitment  Termination  Date  may be
         extended by the Debtor, the Agent and the Bank Investors not later than
         30 days prior to the then current Commitment Termination Date."



                                                      1


<PAGE>



          (b)  Section  1.1 of the  Security  Agreement  is  hereby  amended  by
deleting the word "and"  appearing at the end of clause (xiii) of the definition
of "Eligible  Receivable,  " deleting the "." at the end of clause (xiv) of such
definition  and  replacing  it with "; and" and adding to such  definition a new
clause (xv) as follows:

                  "(xv) with respect to any Receivable  that is an  Undocumented
         Receivable,  all  documentation  required  to  be  received  after  the
         origination  of such  Receivable  pursuant to the Credit and Collection
         Policy has been  received and accepted by the  Collection  Agent within
         twenty (20) days  following  the date of the initial draft drawn by the
         originating  dealer on UAC in connection  with the  origination of such
         Receivable."

          (c)  Section  1.1 of the  Security  Agreement  is  hereby  amended  by
deleting the  definition  of  "Non-Prime  Percentage"  and replacing it with the
following:

                  ""Non-Prime   Percentage"  shall  mean  100%  less  the  Prime
Percentage".

          (d)  Section  1.1 of the  Security  Agreement  is  hereby  amended  by
deleting the definition of  "Noteholder's  Percentage" and replacing it with the
following (solely for convenience changed language is italicized):

                  ""Noteholder's  Percentage"  shall  mean an  amount  equal  to
         98.25% 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
         98.25%."

          (e) Section 1.1 of the Security  Agreement is hereby amended by adding
thereto in the proper  alphabetical  location a definition of "Prime Percentage"
which shall be as follows:

                  ""Prime  Percentage" shall mean a percentage (not greater than
         100%) equal to a fraction  where (i) the numerator  shall equal the Net
         Receivables  Balance of all Prime  Receivables and (ii) the denominator
         shall  equal the Net  Investment  minus the  amount on  deposit  in the
         Prefunding Account."

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



                                                      2


<PAGE>



                  ""Receivable" shall mean indebtedness owed to the Debtor by an
         Obligor  (without  giving  effect to any  transfer  hereunder)  under a
         Contract which is a Prime Receivable or a Non-Prime Receivable, 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.  Notwithstanding  the
         foregoing, once the Collateral Agent has released its security interest
         in a  Receivable  and the related  Contract  pursuant to Section 2.7 or
         Section  2.15  hereof,  it  shall no  longer  constitute  a  Receivable
         hereunder.   The  term  "Receivable"   specifically  excludes  Modified
         Receivables."

          (g)  Section  1.1 of the  Security  Agreement  is  hereby  amended  by
deleting the definition of "Required  Reserve Account  Percentage" and replacing
it with the following:

                  ""Required   Reserve  Account   Percentage"   shall  mean  the
         percentage  specified  in  the  following  table  corresponding  to the
         Non-Prime Percentage:

           Non-Prime Percentage       Required Reserve Account Percentage
           2.51% or greater           1.25%
           0.0 to 2.50%               1.00%"

          (h)  Section  1.1 of the  Security  Agreement  is  hereby  amended  by
deleting the  definition  of  "Take-Out"  and  replacing  it with the  following
(solely for convenience changed language is italicized):

                  ""Take-Out"  shall  mean  the  release,  pursuant  to  Section
         2.15(a) or 2.15(d),  excluding releases due to Warehouse Transfers,  by
         the Collateral Agent of Receivables and the Contracts  related thereto.
         In order to qualify as a "Take-Out",  the Take-Out  Percentage shall be
         no greater than 25%."

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

                  ""Termination  Date"  shall  mean  the  earliest  of (i)  that
         Business Day  designated by the Debtor to the Agent as the  Termination
         Date at any time following 60 days' written  notice to the Agent,  (ii)
         the date of termination of the liquidity



                                                      3


<PAGE>



         commitment  of the  Liquidity  Provider  under the  Liquidity  Provider
         Agreement,  (iii)  the date of  termination  of the  commitment  of the
         Credit Support  Provider under the Credit Support  Agreement,  (iv) the
         day on which a  Termination  Event occurs  pursuant to Section 7.1, (v)
         two business  days prior to the  Commitment  Termination  Date, or (vi)
         August 30,  2001,  unless  extended  prior to such date  pursuant  to a
         Revolving Period Extension (as defined in the Insurance Agreement)."

                  SECTION 2. Amendment to Section 2.3(a).  Section 2.3(a) of the
Security Agreement is hereby amended by deleting such paragraph and replacing it
with the following (solely for convenience added language is italicized):

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

                  SECTION 3. Amendment to Section 2.7(b).  Section 2.7(b) of the
Security Agreement is hereby amended by deleting such paragraph and replacing it
with the follow ing: "[RESERVED]".

                  SECTION 4. Amendment to Section  2.13(a).  Section  2.13(a) of
the  Security  Agreement  is hereby  amended  by  deleting  such  paragraph  and
replacing it with the follow ing:  (solely for convenience  changed  language is
italicized):



                                                      4


<PAGE>



                  "(a) On the day of the  Initial  Funding  with  respect to all
         Receivables recorded on the Collection Agent's master servicing records
         as of such day and on any Business Day thereafter on which a Receivable
         is recorded on the Collection  Agent's master  servicing  records,  the
         Debtor 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 Collection
         Agent'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 (x) 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 Minimum  Required APR minus
         (y) 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."

                  SECTION  5.   Amendment   to  Section   2.14(c)(ii).   Section
2.14(c)(ii)  of the  Security  Agreement  is hereby  amended  by  deleting  such
paragraph and replacing it with the following:  (solely for convenience  changed
and added language is italicized):

                  "(ii) In the event  that on any  Remittance  Date,  any day on
         which a  Take-Out  occurs  or any day on  which  a  Warehouse  Transfer
         occurs,  after  giving  effect to clause  (c)(i)  above,  the amount on
         deposit  in  the  Reserve   Account   (calculated  as  of  the  related
         Determination Date or the date of the Take-Out,  as applicable) exceeds
         the Required Reserve Account Amount,  the Collateral Agent shall (x) if
         no  Termination  Event  shall have  occurred,  release to the Debtor an
         amount  equal to the excess of the  amount on  deposit  in the  Reserve
         Account  over  the  Required  Reserve  Account  Amount  and  (y)  if  a
         Termination Event shall have occurred, apply as part of Available Funds
         pursuant to Section 2.3 an amount  equal to the excess of the amount on
         deposit  in the  Reserve  Account  over the  Required  Reserve  Account
         Amount."

                  SECTION 6. Limited  Scope.  This  amendment is specific to the
circumstanc es described above and does not imply any future amendment or waiver
of rights  allocated  to the  Debtor,  the  Collection  Agent,  the  Agent,  the
Administrative  Agent,  the Insurer or the  Collateral  Agent under the Security
Agreement.



                                                      5


<PAGE>



                  SECTION 7. Governing Law. THIS AMENDMENT  SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  SECTION 8. Severability;  Counterparts.  This Amendment may be
executed  in any  number of  counterparts  and by  different  parties  hereto in
separate  counterparts,  each of which when so executed shall be deemed to be an
original and all of which when taken together shall  constitute one and the same
instrument.   Any  provisions  of  this   Amendment   which  are  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

                  SECTION 9.  Ratification.  Except as expressly affected by the
provisions  hereof, the Security Agreement as amended shall remain in full force
and  effect in  accordance  with its terms and  ratified  and  confirmed  by the
parties  hereto.  On and after the date hereof,  each  reference in the Security
Agreement  to "this  Agreement",  "hereunder",  "herein" or words of like import
shall  mean and be a  reference  to the  Security  Agreement  as amended by this
Amendment.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]



                                                      6


<PAGE>




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

                                        ENTERPRISE FUNDING CORPORATION,
                                          as Company

                                        By: /s/ Bernard J. Angelo
                                            Name: Bernard J. Angelo
                                            Title:


                                        UAFC CORPORATION,
                                          as Debtor

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


                                        UNION ACCEPTANCE FUNDING
                                          CORPORATION, as Seller

                                        By: /s/ Maureen A. Schoch
                                            Name: Maureen A. Schoch
                                            Title:






                                                      7


<PAGE>
                                        UNION ACCEPTANCE CORPORATION,
                                          individually and as Collection Agent



                                      By: /s/ Melanie S. Otto
                                          Name: Melanie S. Otto
                                          Title:


                                      BANK OF AMERICA, N.A.,
                                        individually and as Collateral Agent
                                       and Bank Investor

                                      By: /s/ Michelle M. Heath
                                          Name: Michelle M. Heath
                                          Title:


                                      MBIA INSURANCE CORPORATION, as
                                        Insurer

                                      By: /s/ Nicholas Sourbis
                                          Name: Nicholas Sourbis
                                          Title:



                                       8