Document:

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                                PHOTOWORKS, INC.

                            INVESTOR RIGHTS AGREEMENT
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                                PHOTOWORKS, INC.
                            INVESTOR RIGHTS AGREEMENT

     THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is made as of February 14,
2000, by and among  PhotoWorks,  Inc., a Washington  corporation (the "Company")
and the persons  listed on the  attached  Exhibit A who from time to time become
signatories to this Agreement (collectively, the "Investors").

                                    RECITALS

     A. The Company and the  Investors  have entered  into a Series A  Preferred
Stock and Warrant Purchase Agreement for sale by the Company and purchase by the
Investors of the Company's Series A Preferred Stock and warrants to purchase the
Company's Common Stock (the "Purchase Agreement").

     B. In connection  with the purchase and sale of the  Company's  securities,
the Company and the Investors  desire to provide for the rights of the Investors
with respect to information about the Company,  the nomination of members to the
Company's  board of directors and  registration  of the Common Stock issued upon
conversion of the securities according to the terms of this Agreement.

     THE PARTIES AGREE AS FOLLOWS:

     1. Certain  Definitions.  As used in this  Agreement,  the following  terms
shall have the following respective meanings:

     1.1 "Commission"  shall mean the Securities and Exchange  Commission or any
other federal agency at the time administering the Securities Act.

     1.2  "Convertible  Securities"  shall mean the shares of Series A Preferred
Stock and the  Warrants  purchased  by the  Investors  pursuant to the  Purchase
Agreement.

     1.3  "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  as
amended.

     1.4  "Form  S-3"  shall  mean  Form S-3  issued  by the  Commission  or any
substantially similar form then in effect.

     1.5 "Holder"  shall mean any holder of outstanding  Registrable  Securities
which have not been sold to the  public,  but only if such  holder is one of the
Investors or an assignee or  transferee of  registration  rights as permitted by
Section 12.

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     1.6 "Incentive  Plans" shall mean  collectively  the Incentive Stock Option
Plan as amended and restated as of April 1, 1996, the 1987 Stock Option Plan, as
amended and restated as of April 1, 1996, the 1993 Employee Stock Purchase Plan,
as amended and restated as of May 31, 1995,  the 1999 Employee Stock Option Plan
dated October 20, 1999 and the 1999 Stock Incentive  Compensation Plan, approved
by the Company's board of directors on November 23, 1999.

     1.7  "Initiating  Holders"  shall mean Holders who in the aggregate hold at
least 50% of the Registrable Securities.

     1.8 "Material  Adverse Event" shall mean an occurrence having a consequence
that either (a) is materially adverse as to the business, properties, prospects,
or financial  condition of the Company or (b) is reasonably  foreseeable,  has a
reasonable  likelihood  of occurring,  and if it were to occur might  materially
adversely affect the business,  properties,  prospects or financial condition of
the  Company;  provided,  however,  that the  following  shall not be taken into
account in determining a "Material Adverse Event": (i) any adverse change, event
or effect that is  directly  attributable  to  conditions  affecting  the United
States economy generally unless such conditions adversely affect such party in a
materially disproportionate manner, and (ii) any adverse change, event or effect
that is directly  attributable  to conditions  affecting the Company's  industry
generally,  unless such conditions  adversely  affect such party in a materially
disproportionate manner.

     1.9 "New Securities"  shall mean any capital stock of the Company,  whether
authorized or not, and any rights, options, or warrants to purchase said capital
stock,  and  securities  of  any  type  whatsoever  that  are,  or  may  become,
convertible  into said capital stock;  provided that "New  Securities"  does not
include  (i) the  Convertible  Securities  and the Common  Stock  issuable  upon
conversion or exercise of the Convertible Securities, (ii) securities offered to
the public pursuant to a registration  statement filed under the Securities Act,
(iii) securities  issued pursuant to the  acquisition of another  corporation by
the Company by merger,  purchase of  substantially  all of the assets,  or other
reorganization,  if approved by the Company's  Board of  Directors,  (iv) shares
issued  or  issuable  to  the  Company's  officers,  directors,   employees  and
consultants,  contractors  and  advisors  to the  Company  pursuant to any stock
option,   subscription  or  stock  purchase  right  or  restricted  stock  grant
outstanding  as of the date of this  Agreement or which is  subsequently  issued
under the  Company's  Incentive  Plans as such plans have been  approved  by the
Company's Board of Directors as of the date of this Agreement, (v) shares issued
without  consideration  pursuant to a stock  dividend,  stock split,  or similar
transaction,  (vi) shares or warrants, and shares issuable upon exercise of such
warrants,  issued to  financial  institutions  or  lessors  in  connection  with
commercial credit arrangements,  equipment  financings,  leasing arrangements or
similar  transactions,  and (vii) any  other shares of Common Stock or any other

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securities  convertible into or exchangeable or exercisable for shares of Common
Stock that are  designated as excluded from the  definition of New Securities by
the vote or  written  consent  of  holders  of at least a  majority  of the then
outstanding shares of Convertible Securities.

     1.10 The  terms  "Register",  "Registered"  and  "Registration"  refer to a
registration  effected by preparing and filing a registration  statement on Form
S-1 or  S-3  (or a  successor  form)  in  compliance  with  the  Securities  Act
("Registration  Statement") and the declaration or ordering of the effectiveness
of such Registration Statement.

     1.11  "Registrable  Securities"  shall mean all Common Stock not previously
sold to the public and issued or issuable upon  conversion or exercise of any of
the Company's  Convertible  Securities  purchased by or issued to the Investors,
including  Common Stock issued  pursuant to stock  splits,  stock  dividends and
similar  distributions,  and any securities of the Company granted  registration
rights pursuant to Section 14 of this Agreement.

     1.12  "Registration  Expenses"  shall  mean all  expenses  incurred  by the
Company  in  complying  with  Section 9 of this  Agreement,  including,  without
limitation,  all federal and state registration,  qualification and filing fees,
printing  expenses,  fees and  disbursements  of counsel for the Company and one
special counsel for all Holders (if different from counsel to the Company), blue
sky fees and  expenses,  and the  expense of any special  audits  incident to or
required by any such registration.

     1.13 "Rubinstein  Debenture  Agreement"  shall mean that certain  Debenture
Subscription  Agreement  dated  August 14, 1981,  as amended by Amendment  No. 1
dated June 1984,  Amendment No. 2 dated January 1986, Amendment No. 3 dated June
1996 and Amendment No. 4 dated February 2000.

     1.14 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar  federal  statute,  and the rules and  regulations of the Commission
thereunder, all as the same shall be in effect at the time.

     1.15 "Selling  Expenses" shall mean all underwriting  discounts and selling
commissions  applicable to the sale of Registrable  Securities  pursuant to this
Agreement.

     1.16 "Shelf Registration Statement" shall mean a Registration Statement for
an  offering  to be made  on a  continuous  basis  pursuant  to Rule  415 of the
Securities Act (or such successor rule or similar provision then in effect)

     1.17 "Warrants" shall mean the warrants to purchase shares of the Company's
Common Stock issued to the Investors pursuant to the Purchase Agreement.

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     2. Financial  Statements and Reports. As long as an Investor holds Series A
Preferred, the Company will deliver to such Investor:

     (a) as soon  as  practicable  after  the  end of  each  fiscal  year of the
Company, and in any event within 90 days thereafter, an audited balance sheet of
the  Company  as of the end of such  year  and  audited  statements  of  income,
shareholders'  equity  and cash flow for such  year,  which  year-end  financial
reports shall be in reasonable  detail and shall be prepared in accordance  with
generally accepted  accounting  principles and accompanied by the opinion of the
Company's independent public accountants;

     (b) as soon as practicable after the end of each of first three quarters of
any  fiscal  year,  and in any event  within 45 days  thereafter,  an  unaudited
balance  sheet  of the  Company  as of the end of such  quarter,  and  unaudited
statements  of income and cash flow for such quarter and for the current  fiscal
year  to  date,  prepared  in  accordance  with  generally  accepted  accounting
principles (other than for accompanying notes);

     (c) as soon as  practicable  after the end of the  month,  and in any event
within 20  days of the end of each  month,  an  unaudited  balance  sheet of the
Company and  unaudited  statements of income and cash flow for and as of the end
of such month;

     (d) as soon as  practicable  following  submission  to and  approval by the
Board of Directors  of the Company,  but in no event later than the start of the
next fiscal year, an operating budget respecting the next fiscal year and copies
of all monthly budgets and forecasts presented to the Board of Directors;

     (e) copies of all audit  letters  delivered  by the  Company's  independent
public accountants to management;

     (f) copies of all written information distributed to the Board of Directors
at or prior to Board meetings; and

     (g) a capitalization  table reflecting the number of outstanding  shares of
capital stock, warrants,  options, rights and other convertible securities as of
the Company's  fiscal year-end and any other  capitalization  information in the
Company's possession which is reasonably requested by an Investor.

     3. Board of Directors

     3.1  Investor  Nominees.  Promptly  following  the  annual  meeting  of the
Company's  shareholders  scheduled to be held on February 15, 2000,  the Company
shall cause the Board of Directors to be  increased  to seven  members,  and the
existing directors shall appoint one individual  designated by Orca Bay Partners
("Orca  Bay") and one  individual  designated  by Madrona  Venture Fund I, L. P.

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("Madrona")  to fill the vacancies  created  thereby.  So long as the holders of
Series A Preferred  Stock have the right to elect two  directors,  the Investors
agree to vote the  shares of  Series A  Preferred  Stock  they hold to elect one
director  nominated  by Orca Bay and one  director  nominated  by Madrona to the
Board of Directors.  The size of the Board of Directors may be decreased to less
than seven in the future, provided that such decrease does not affect the rights
of the holders of Series A Preferred Stock to nominate  individuals to the Board
pursuant to the Company's articles of incorporation.

     3.2 Expenses of Attending Board  Meetings.  The Company shall reimburse the
representatives  of the  Investors  serving on the Board of Directors  for their
reasonable travel and out-of-pocket  expenses incurred in attending  meetings of
the Board of Directors or any committee on which they serve.

     3.3 Observer Rights. So long as Orca Bay Partners or its affiliates owns at
least  2,500  shares of Series A Preferred  Stock,  Tim Carver (so long as he is
affiliated  with Orca Bay Partners)  shall have the right to attend  meetings of
the Board of Directors as a non-voting observer, on behalf of Orca Bay Partners,
subject to the Board's right to call an executive session at any time outside of
Mr. Carver's presence.

     4. Right of First Refusal.

     4.1 Right of First Refusal of New Securities.  The Company hereby grants to
each  Investor the right of first refusal to purchase up to its "Pro Rata Share"
(as defined below) of New  Securities  which the Company may, from time to time,
propose to sell and issue. The Investors may purchase said New Securities on the
same terms and at the same price at which the  Company  proposes to sell the New
Securities. The "Pro Rata Share" of each Investor, for purposes of this right of
first  refusal,  is the ratio of (i) the  total number of shares of Common Stock
held by such Investor (including any shares of Common Stock into which shares of
the Convertible  Securities  held by such Investor are  convertible) to (ii) the
total  number of shares of Common  Stock  outstanding  immediately  prior to the
issuance of the New  Securities  (including  any shares of Common Stock issuable
upon exercise or conversion of all  outstanding  options,  warrants or rights to
acquire or debt or equity  securities  convertible into Common Stock,  including
all outstanding Convertible Securities).

     4.2 Notice.  In the event the Company  proposes to undertake an issuance of
New Securities,  it shall give to each Investor written notice (the "Notice") of
its intention,  describing the type of New Securities, the price, the terms upon
which the Company  proposes to issue the same,  the number of shares  which such
Investor is entitled to purchase  pursuant to Section 4.1, and a statement  that
each Investor shall have 20 days to respond to such Notice.  Each Investor shall
have 20 days from the date of receipt of the Notice to agree to purchase  any or
all of its Pro Rata Share of the New Securities for the price and upon the terms
specified  in the Notice by giving  written  notice to the  Company  and stating
therein the quantity of New  Securities to be purchased and  forwarding  payment
for such New Securities to the Company if immediate  payment is required by such
terms.

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     4.3 Sale of New  Securities.  In the event an Investor fails to exercise in
full its right of first  refusal  within such 20 day period,  the Company  shall
have 90 days  thereafter  to sell or enter into an agreement  (pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within 60
days after the date of such  agreement)  to sell the New  Securities  respecting
which such  Investor's  rights were not  exercised,  at a price and upon general
terms no more  favorable to the purchaser  thereof than specified in the Notice.
In the event the  Company  has not sold the New  Securities  within  such 90 day
period (or sold and issued  New  Securities  in  accordance  with the  foregoing
within  60 days  from  the  date of  such  agreement),  the  Company  shall  not
thereafter  issue  or sell  any  New  Securities  without  first  offering  such
securities to such Investor in the manner provided above.

     (a)  Termination  of Right of First  Refusal.  The  right of first  refusal
granted  under this Section 4 shall expire upon the date on which such  Investor
no longer holds any Series A Preferred Stock.

     5. Demand Registration.

     5.1  Request  for  Registration  on Form S-3.  If a Holder or Holders of at
least 50% of the  outstanding  Registrable  Securities  request that the Company
file a  Registration  Statement on Form S-3 (or any successor  form to Form S-3)
for a public  offering of shares of Registrable  Securities and the Company is a
registrant  entitled to use Form S-3 to register the Registrable  Securities for
such an offering,  the Company  shall use all  reasonable  efforts to cause such
Registrable  Securities  to be  Registered  for the offering on such form and to
cause such Registrable  Securities to be qualified in such  jurisdictions as the
Holder or Holders may reasonably request;  provided,  however,  that the Company
shall not be  required to effect  more than two  Registrations  pursuant to this
Section 5.1. If requested by the  Initiating  Holders,  the Company shall file a
Shelf Registration  Statement for one of the Registrations  effected pursuant to
this  Section  5.1 and  shall  use its  reasonable  best  efforts  to keep  such
Registration Statement effective for a period of 12 months.

     5.2 Right of Deferral. Notwithstanding the foregoing, the Company shall not
be obligated to file a registration statement pursuant to this Section 5:

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     (a) in any particular  jurisdiction  in which the Company would be required
to  execute  a  general   consent  to  service  of  process  in  effecting  such
Registration,  qualification,  or  compliance,  unless  the  Company  is already
subject to service in such  jurisdiction  and except as may be  required  by the
Securities Act;

     (b) if the  Company,  within ten days of the  receipt of the request of the
Initiating Holders, gives notice of its bona fide intention to effect the filing
of a Registration  Statement  with the  Commission  within 90 days of receipt of
such request (other than with respect to a registration  statement relating to a
Rule 145  transaction  or an offering  solely to  employees),  provided that the
Company is actively employing in good faith all reasonable efforts to cause such
Registration Statement to become effective;

     (c) within three months  immediately  following the  effective  date of any
Registration Statement pertaining to the securities of the Company (other than a
registration  of  securities  in a Rule 145  transaction  or with  respect to an
employee benefit plan); or

     (d) if the Company shall  furnish to such Holders a  certificate  signed by
the  President  of the Company  stating  that in the good faith  judgment of the
Board of  Directors  it would be  seriously  detrimental  to the  Company or its
shareholders  for a  Registration  Statement to be filed at such time,  then the
Company's  obligation to use its best efforts to file a  Registration  Statement
shall be  deferred  for a period  not to exceed 90 days from the  receipt of the
request  to file such  registration  by  Initiating  Holders  provided  that the
Company shall not exercise the right  contained in this  paragraph (d) more than
once in any 12 month period.

     5.3   Registration  of  Other  Securities  in  Demand   Registration.   Any
Registration  Statement filed pursuant to the request of the Initiating  Holders
under this Section 5 may,  subject to the  provisions  of Section  5.4,  include
securities of the Company other than Registrable Securities.

     5.4 Underwriting in Demand Registration.

     (a) Notice of Underwriting.  If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the  Company as a part of their  request  made  pursuant to
this  Section 5. The right of any Holder to  Registration  pursuant to Section 5
shall be  conditioned  upon  such  Holder's  agreement  to  participate  in such
underwriting  and the inclusion of such Holder's  Registrable  Securities in the
underwriting.

     (b)  Inclusion  of Other  Holders in Demand  Registration.  If the Company,
officers or directors of the Company holding Common Stock other than Registrable
Securities, or holders of securities other than Registrable Securities,  request
inclusion in such Registration,  the Initiating Holders, to the extent they deem
advisable and consistent with the goals of such Registration, may, in their sole
discretion,  on behalf of all Holders,  offer to any or all of the Company, such
officers or  directors,  and such holders of securities  other than  Registrable
Securities that such securities other than Registrable Securities be included in
the  underwriting and may condition such offer on the acceptance by such persons
of the terms of this Section 5.

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     (c)  Selection of  Underwriter  in Demand  Registration.  The Company shall
(together with all Holders proposing to distribute their securities through such
underwriting)  enter  into an  underwriting  agreement  with the  representative
("Underwriter's Representative") of the underwriter or underwriters selected for
such  underwriting  by the Holders of a majority of the  Registrable  Securities
being registered by the Initiating Holders and agreed to by the Company.

     (d)  Marketing  Limitation  in  Demand  Registration.   In  the  event  the
Underwriter's  Representative  advises the  Initiating  Holders in writing  that
market factors (including, without limitation, the aggregate number of shares of
Common Stock  requested to be Registered,  the general  condition of the market,
and the status of the  persons  proposing  to sell  securities  pursuant  to the
Registration)  require a limitation of the number of shares to be  underwritten,
then (i) first,  the  securities  other than  Registrable  Securities,  and (ii)
second,  the  securities  requested to be  registered  by the Company,  shall be
excluded from such Registration to the extent required by such limitation.  If a
limitation of the number of shares is still  required,  the  Initiating  Holders
shall so advise all Holders and the number of shares of  Registrable  Securities
that may be included in the  Registration  and  underwriting  shall be allocated
among all Holders in  proportion,  as nearly as  practicable,  to the respective
amounts of  Registrable  Securities  entitled to inclusion in such  Registration
held by such  Holders  at the time of  filing  the  Registration  Statement.  No
Registrable  Securities or other  securities  excluded from the  underwriting by
reason of this Section 5.4(d) shall be included in such Registration Statement.

     (e)  Right  of  Withdrawal  in  Demand  Registration.   If  any  Holder  of
Registrable Securities,  or a holder of other securities entitled (upon request)
to  be  included  in  such  Registration,   disapproves  of  the  terms  of  the
underwriting,  such person may elect to withdraw  therefrom by written notice to
the  Company,  the  Underwriter's  Representative  and  the  Initiating  Holders
delivered at least seven days prior to the  effective  date of the  Registration
Statement.  The  securities  so  withdrawn  shall  also be  withdrawn  from  the
Registration Statement.

     5.5 Blue  Sky in  Demand  Registration.  In the  event of any  Registration
pursuant to Section 5, the Company  will  exercise  its best efforts to Register
and qualify the  securities  covered by the  Registration  Statement  under such
other  securities or Blue Sky laws of such  jurisdictions as shall be reasonably
appropriate for the distribution of such securities; provided, however, that (i)
the Company shall not be required to do business or to file a general consent to
service of process in any such states or jurisdictions, and (ii) notwithstanding
anything in this  Agreement to the contrary,  in the event any  jurisdiction  in
which the securities shall be qualified imposes a non-waivable  requirement that
expenses  incurred in the connection with the qualification of the securities be
borne by  selling  shareholders,  such  expenses  shall be  payable  pro rata by
selling shareholders.

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     6. Piggyback Registration.

     6.1  Notice  of  Piggyback   Registration   and  Inclusion  of  Registrable
Securities.  Subject to the terms of this  Agreement,  if the Company decides to
Register any of its Common Stock (either for its own account or the account of a
security  holder or holders  exercising  their  respective  demand  registration
rights) on a form that would be suitable  for a  registration  involving  solely
Registrable Securities, the Company will: (i) within 15 days prior to the filing
of any  registration  statement  give each  Holder  written  notice  thereof and
(ii) include in such Registration (and any related  qualification under Blue Sky
laws or other  compliance),  and in any underwriting  involved therein,  all the
Registrable  Securities  specified in a written request delivered to the Company
by any Holder  within 20 days after  delivery  of such  written  notice from the
Company.

     6.2 Underwriting in Piggyback Registration.

     (a) Notice of Underwriting in Piggyback  Registration.  If the Registration
of which the Company gives notice is for a Registered public offering  involving
an  underwriting,  the  Company  shall so advise  the  Holders  as a part of the
written  notice given  pursuant to Section 6.1. In such event,  the right of any
Holder to  Registration  shall be  conditioned  upon such  underwriting  and the
inclusion of such Holder's  Registrable  Securities in such  underwriting to the
extent provided in this  Section 6.  All Holders  proposing to distribute  their
securities  through such  underwriting  shall (together with the Company and the
other holders  distributing their securities  through such  underwriting)  enter
into an underwriting  agreement with the Underwriter's  Representative  for such
offering. The Holders shall have no right to participate in the selection of the
underwriters for an offering pursuant to this Section 6.

     (b)  Marketing  Limitation  in  Piggyback  Registration.  In the  event the
Underwriter's   Representative  advises  the  Holders  seeking  registration  of
Registrable Securities pursuant to this Section 6 in writing that market factors
(including,  without limitation,  the aggregate number of shares of Common Stock
requested to be Registered,  the general condition of the market, and the status
of the  persons  proposing  to sell  securities  pursuant  to the  Registration)
require  a  limitation  of  the  number  of  shares  to  be  underwritten,   the
Underwriter's  Representative  (subject to the allocation  priority set forth in
Section 6.2(c))  may limit the number of shares of Registrable  Securities to be
included in such Registration and underwriting.

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     (c) Allocation of Shares in Piggyback  Registration.  In the event that the
Underwriter's  Representative  limits the number of shares to be  included  in a
Registration  pursuant to Section 6.2(b), the number of shares to be included in
such  Registration  shall be allocated in the  following  manner:  the number of
shares  that may be  included  in the  Registration  and  underwriting  shall be
allocated  first to the Company;  second,  to the Holders and Sam Rubinstein and
his  successors  and  assigns on a pro rata basis  based on the total  number of
Registrable  Securities  held by a Holder or, in the case of Sam  Rubinstein and
his successors and assigns, the total number of shares of common stock that such
person has a right to require the Company to register  under the  Securities Act
pursuant to Section 6.2 of the Rubinstein Debenture Agreement; and third, to any
shareholder  of the  Company  other  than a  Holder  or Sam  Rubinstein  (or his
successors and assigns) on a pro rata basis. No Registrable  Securities or other
securities excluded from the underwriting by reason of this Section 6.2(c) shall
be included in the Registration Statement.

     (d) Withdrawal in Piggyback Registration.  If any Holder disapproves of the
terms of any such  underwriting,  such person may elect to withdraw therefrom by
written notice to the Company and the Underwriter's  Representative delivered at
least seven days prior to the effective date of the Registration Statement.  Any
Registrable  Securities  or other  securities  excluded or  withdrawn  from such
underwriting shall be withdrawn from such Registration.

     7.  Expenses  of  Registration.   All  Registration  Expenses  incurred  in
connection  with  two  Registrations   pursuant  to  Section 5.1  and  unlimited
Registrations  pursuant  to  Section  6,  shall  be borne  by the  Company.  All
Registration  Expenses  incurred  in  connection  with any  other  Registration,
qualification,  or compliance,  shall be apportioned among the Holders and other
holders of the  securities so registered on the basis of the number of shares so
registered.  Notwithstanding the above, the Company shall not be required to pay
for any expenses of any  Registration  proceeding begun pursuant to Section 5 if
the Registration request is subsequently withdrawn at the request of the Holders
of a majority of the  Registrable  Securities  to be registered  (which  Holders
shall bear such  expenses),  unless the Holders of a majority of the Registrable
Securities  agree to forfeit  their  right to one demand  Form S-3  Registration
pursuant to Section 5;  provided further,  however,  that if at the time of such
withdrawal, the Holders have learned of a Material Adverse Event with respect to
the condition, business, or prospects of the Company not known to the Holders at
the time of their request,  then the Holders shall not be required to pay any of
such expenses and shall retain their rights  pursuant to Section 5.  All Selling
Expenses shall be borne by the holders of the securities  Registered pro rata on
the basis of the number of shares Registered.

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     8. Termination of Registration  Rights.  The rights to cause the Company to
register  securities  granted  under  Sections 5 and 6 of this  Agreement  shall
terminate,  with respect to each  Holder,  as soon as such Holder is eligible to
sell  all  of  such  Holder's  Registrable  Securities  under  Rule  144  of the
Securities  Act within any three month period  without  volume  limitations,  or
under Rule 144(k) thereunder.

     9.  Registration  Procedures and Obligations.  Whenever required under this
Agreement to effect the registration of any Registrable Securities,  the Company
shall, as expeditiously as reasonably possible:

     (a) Prepare and file with the  Commission  a  Registration  Statement  with
respect to such Registrable  Securities and use all reasonable  efforts to cause
such Registration  Statement to become  effective,  and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder,  keep
such Registration  Statement effective for up to 120 days, or in the case of the
Shelf Registration Statement, 12 months.

     (b) Prepare and file with the Commission such amendments and supplements to
such  Registration  Statement and the  prospectus  used in connection  with such
registration  statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement.

     (c)  Furnish  to the  Holders  such  numbers  of  copies  of a  prospectus,
including a preliminary  prospectus,  in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.

     (d) Use all  reasonable  efforts to register  and  qualify  the  securities
covered by such  registration  statement under such other securities or Blue Sky
laws of such  jurisdictions  as shall be  reasonably  requested  by the Holders,
provided that the Company shall not be required in connection  therewith or as a
condition  thereto  to qualify to do  business  or to file a general  consent to
service of process in any such states or  jurisdictions,  and  provided  further
that in the event any  jurisdiction  in which the securities  shall be qualified
imposes a non-waivable requirement that expenses incurred in connection with the
qualification of the securities be borne by selling shareholders,  such expenses
shall be payable pro rata by selling shareholders.

     (e) In the  event  of any  underwritten  public  offering,  enter  into and
perform its obligations under an underwriting  agreement, in usual and customary
form, with the managing underwriter of such offering.  Each Holder participating
in such  underwriting  shall also enter into and perform its  obligations  under
such an agreement.

                                       11

<PAGE>

     (f) Promptly notify each Holder of Registrable  Securities  covered by such
Registration  Statement  at any  time  when a  prospectus  relating  thereto  is
required to be delivered  under the  Securities  Act (i) of the happening of any
event  as a  result  of  which  the  prospectus  included  in such  Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material  fact  required to be stated  therein or  necessary to
make the  statements  therein not  misleading in the light of the  circumstances
then existing,  (ii) of any request by the SEC or any state securities authority
for amendments and supplements to a Registration Statement and prospectus or for
additional information after the Registration Statement has become effective and
(iii) of the issuance by the SEC or any state  securities  authority of any stop
order suspending the effectiveness of a Registration Statement or the initiation
of any  proceedings  for  that  purpose.  In the  case of a  Shelf  Registration
Statement, the Company agrees that, upon the happening of any event described in
subsections  (i), (ii) and (iii) of this Section 9(f), the Company shall use its
best efforts to file and have  declared  effective  (if an amendment) as soon as
practicable an amendment or supplement to the Shelf  Registration  Statement and
shall extend the period during which such Shelf Registration  Statement shall be
maintained  effective by the number of days in the period from and including the
date of the  giving of notice of such event to and  including  the date when the
Company  gives  notice  that the  amendment  or  supplement  has been  filed and
declared effective (if an amendment).

     (g) Provide a transfer agent and registrar for all  Registrable  Securities
registered  pursuant to such  Registration  Statement and a CUSIP number for all
such Registrable  Securities,  in each case not later than the effective date of
such registration.

     (h)  Furnish,  at the  request of any  Holder  requesting  registration  of
Registrable  Securities  pursuant  to this  Agreement,  on the  date  that  such
Registrable  Securities are delivered for sale in connection with a registration
pursuant  to this  Agreement,  (i) an opinion,  dated such date,  of the counsel
representing  the Company for the  purposes  of such  registration,  in form and
substance as is customarily  given to  underwriters  in an  underwritten  public
offering,  and (ii) a letter  dated such date,  from the  independent  certified
public accountants of the Company, in form and substance as is customarily given
by independent  certified public  accountants to underwriters in an underwritten
public offering, addressed to the underwriters.

     10. Information  Furnished by Holder. It shall be a condition  precedent of
the Company's  obligations  under this Agreement that each Holder of Registrable
Securities included in any Registration  furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder or Holders as
the Company may reasonably request.

                                       12

<PAGE>

     11. Indemnification.

     11.1 Company's  Indemnification of Holders. To the extent permitted by law,
the  Company  will  indemnify  each  Holder,  each of its  officers,  directors,
constituent partners, legal counsel for the Holders, and each person controlling
such Holder, with respect to which Registration, qualification, or compliance of
Registrable  Securities has been effected  pursuant to this Agreement,  and each
underwriter,  if any, and each person who controls any  underwriter  against all
claims,   losses,   damages,   liabilities,   or  actions  in  respect   thereof
(collectively,  "Damages")  to the extent such Damages arise out of or are based
upon any untrue  statement  (or alleged  untrue  statement)  of a material  fact
contained  in  any   prospectus  or  other   document   (including  any  related
Registration  Statement or amendment or supplement thereto) incident to any such
Registration,  qualification,  or  compliance,  or are based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,  or any violation by
the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state  securities law applicable to the Company in connection  with any such
Registration,  qualification, or compliance; and the Company will reimburse each
such Holder, each such underwriter, and each person who controls any such Holder
or  underwriter,  for any legal and any other  expenses  reasonably  incurred in
connection  with  investigating  or  defending  any such  claim,  loss,  damage,
liability,  or action;  provided,  however, that the indemnity contained in this
Section 11.1  shall not apply to amounts paid in  settlement of any such Damages
if  settlement  is effected  without the consent of the Company  (which  consent
shall not  unreasonably be withheld);  and provided,  further,  that the Company
will not be liable in any such case to the extent  that any such  Damages  arise
out of or are based upon any untrue  statement  or omission  based upon  written
information furnished to the Company by such Holder, underwriter, or controlling
person and stated to be for use in connection with the offering of securities of
the Company.

     11.2 Holder's  Indemnification of Company.  To the extent permitted by law,
each Holder will, if Registrable  Securities held by such Holder are included in
the securities as to which such  Registration,  qualification  or, compliance is
being effected  pursuant to this Agreement,  indemnify the Company,  each of its
directors and officers,  each legal  counsel and  independent  accountant of the
Company, each underwriter, if any, of the Company's securities covered by such a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of the  Securities  Act, and each other such Holder,  each of
its officers,  directors,  and constituent partners, and each person controlling
such other Holder,  against all Damages  arising out of or based upon any untrue
statement (or alleged untrue statement) of a material fact contained in any such
Registration Statement or amendment or supplement thereto, prospectus,  offering
circular,  or other  document,  or any omission  (or alleged  omission) to state

                                       13

<PAGE>

therein a material fact  required to be stated  therein or necessary to make the
statements  therein  not  misleading,  or any  violation  by such  Holder of the
Securities  Act,  the  Exchange  Act,  any state  securities  law or any rule or
regulation  promulgated  under the Securities Act, the Exchange Act or any state
securities  law   applicable  to  such  Holder  in  connection   with  any  such
Registration, qualification, or compliance, and will reimburse the Company, such
Holders, such directors,  officers, partners, persons, law and accounting firms,
underwriters or control persons for any legal and any other expenses  reasonably
incurred in connection  with  investigating  or defending any such claim,  loss,
damage,  liability,  or  action,  in each  case to the  extent,  but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such Registration Statement,  prospectus,  offering
circular,  or other  document in reliance  upon and in  conformity  with written
information   furnished  to  the  Company  by  such  Holder  and  stated  to  be
specifically  for use in  connection  with the  offering  of  securities  of the
Company,  provided,  however,  that the indemnity contained in this Section 11.2
shall not apply to amounts paid in  settlement of any such Damages if settlement
is  effected  without the consent of such  Holder  (which  consent  shall not be
unreasonably withheld) and provided, further, that each Holder's liability under
this  Section  11.2 shall not  exceed  such  Holder's  gross  proceeds  from the
offering of securities made in connection with such Registration.

     11.3  Indemnification  Procedure.  Promptly after receipt by an indemnified
party under this Section 11 of notice of the  commencement  of any action,  such
indemnified  party will, if a claim in respect  thereof is to be made against an
indemnifying  party  under this  Section 11,  notify the  indemnifying  party in
writing of the  commencement  thereof and generally  summarize such action.  The
indemnifying  party  shall  have the right to  participate  in and to assume the
defense of such claim;  provided,  however, that the indemnifying party shall be
entitled to select  counsel  for the defense of such claim with the  approval of
any  parties   entitled  to   indemnification,   which  approval  shall  not  be
unreasonably  withheld;   provided  further,   however,  that  if  either  party
reasonably  determines that there may be a conflict  between the position of the
Company and the  Investors in  conducting  the defense of such action,  suit, or
proceeding by reason of recognized  claims for indemnity under this  Section 11,
then  counsel  for such party  shall be  entitled  to conduct the defense to the
extent  reasonably  determined  by such  counsel to be  necessary to protect the
interest of such party and the fees and expenses of counsel for such party shall
be paid by the Company.  The failure to notify an indemnifying party promptly of
the  commencement  of any such  action,  if  prejudicial  to the  ability of the
indemnifying party to defend such action, shall relieve such indemnifying party,
to the extent so  prejudiced,  of any liability to the  indemnified  party under
this Section 11,  but the omission so to notify the indemnifying  party will not
relieve such party of any liability that such party may have to any  indemnified
party otherwise other than under this Section 11.

                                       14

<PAGE>

     11.4 Contribution.  If the indemnification  provided for in this Section 11
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with  respect to any Damages  referred to therein,  then the  indemnifying
party,  in  lieu  of  indemnifying  such  indemnified  party  hereunder,   shall
contribute to the amount paid or payable by such  indemnified  party as a result
of such Damages in such  proportion  as is  appropriate  to reflect the relative
fault of the indemnifying  party on the one hand and of the indemnified party on
the other in connection  with the  statements or omissions that resulted in such
Damages as well as any other  relevant  equitable  considerations.  The relative
fault of the indemnifying party and of the indemnified party shall be determined
by  reference  to,  among other  things,  whether  the untrue or alleged  untrue
statement of a material fact or the omission to state a material fact relates to
information  supplied by the indemnifying  party or by the indemnified party and
the parties' relative intent, knowledge, access to information,  and opportunity
to correct or prevent such statement or omission;  provided, however, that in no
event shall any  contribution  by a Holder  exceed the gross  proceeds  from the
offering of securities  made in connection  with such  Registration  received by
such Holder.

     11.5  Conflicts.  Notwithstanding  the  foregoing,  to the extent  that the
provisions on  indemnification  and  contribution  contained in the underwriting
agreement  entered into in connection with the underwritten  public offering are
in conflict with the foregoing  provisions,  the provisions in the  underwriting
agreement shall control.

     11.6 Survival of  Obligations.  The  obligations of the Company and Holders
under  this  Section 11   shall  survive  the  completion  of  any  offering  of
Registrable  Securities  in a  registration  statement  under this  Agreement or
otherwise.

     12.  Transfer of Rights.  The rights to information  under  Section 2,  the
right of first  refusal  under  Section 4  and the right to cause the Company to
Register securities granted by the Company to the Investors under this Agreement
may be assigned  by any Holder to a  transferee  or assignee of any  Convertible
Securities or  Registrable  Securities  which is a subsidiary,  parent,  general
partner, limited partner, retired partner, member or retired member of a Holder;
provided, however, that (i) the Company must receive written notice prior to the
time of said  transfer,  stating  the name and  address  of said  transferee  or
assignee and  identifying  the securities  with respect to which such rights are
being assigned, and (ii) the transferee or assignee of such rights must not be a
person  deemed by the  Board of  Directors  of the  Company,  in its  reasonable
judgment, to be a competitor or potential competitor of the Company.

                                       15

<PAGE>

     13.  Market  Stand-off.  Each Holder hereby agrees that, if so requested by
the Company and the Underwriter's Representative (if any) in connection with any
Registration effected by the Company, such Holder shall not sell, make any short
sale of, loan,  grant any option for the  purchase of, or otherwise  transfer or
dispose of any Registrable Securities or other securities of the Company without
the prior written consent of the Underwriter's Representative for such period of
time (not to exceed 180 days)  following  the effective  date of a  Registration
Statement of the Company filed under the  Securities  Act as may be requested by
the Underwriter's Representative.

     14.  No-Action  Letter  or  Opinion  of  Counsel  in Lieu of  Registration;
Conversion of Preferred Stock.  Notwithstanding anything else in this Agreement,
if the Company shall have obtained from the  Commission a "no-action"  letter in
which the  Commission  has  indicated  that it will take no action  if,  without
Registration  under the  Securities  Act,  any Holder  disposes  of  Registrable
Securities  covered by a request for Registration  made under Section 5.1 in the
specific  manner in which such  Holder  proposes  to dispose of the  Registrable
Securities included in such request, and that such Registrable Securities may be
sold to the public without Registration, or if in the opinion of counsel for the
Company concurred in by counsel for such Holder,  which concurrence shall not be
unreasonably  withheld,  no Registration under the Securities Act is required in
connection  with such  disposition and that such  Registrable  Securities may be
sold to the public without Registration,  the Registrable Securities included in
such  request  pursuant to Section 5.1 shall not be  eligible  for  Registration
under this Agreement;  provided, however, that any Registrable Securities not so
disposed of shall be eligible for  Registration  in accordance with the terms of
this  Agreement  with  respect  to other  proposed  dispositions  to which  this
Section 14  does not  apply.  The  Registration  rights  of the  Holders  of the
Registrable  Securities  set forth in this  Agreement are  conditioned  upon the
conversion of the Registrable  Securities with respect to which  registration is
sought  into  Common  Stock  prior  to the  effective  date of the  Registration
Statement.

     15. Reports Under the Exchange Act. With a view to making  available to the
Holders the benefits of Rule 144  promulgated  under the  Securities Act and any
other rule or regulation of the Commission  that may at any time permit a Holder
to sell securities of the Company to the public without Registration or pursuant
to a registration on Form S-3, the Company agrees to:

     (a) file with the  Commission  in a timely  manner  all  reports  and other
documents required of the Company under the Securities Act and the Exchange Act;
and

     (b)  furnish  to any  Holder,  so long as the Holder  owns any  Registrable
Securities, promptly upon request (i) a written statement by the Company that it
has complied with the reporting requirements of Rule 144, the Securities Act and
the Exchange Act, or that it qualifies as a registrant  whose  securities may be
resold  pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly
report of the  Company  and such other  reports  and  documents  so filed by the
Company,  and (iii) such other  information  as may be  reasonably  requested in
availing any Holder of any rule or  regulation of the  Commission  which permits
the  selling of any such  securities  without  Registration  or pursuant to such
form.

                                       16

<PAGE>

     16. Miscellaneous.

     16.1 Governing  Law. This Agreement  shall be governed by, and construed in
accordance  with, the laws of the State of Washington  excluding those laws that
direct the application of the laws of another jurisdiction.

     16.2 Counterparts.  This Agreement may be executed in counterparts, each of
which shall be deemed an original,  but all of which together  shall  constitute
one and the same instrument.

     16.3  Headings.  The  headings of the  Sections of this  Agreement  are for
convenience  and shall not by themselves  determine the  interpretation  of this
Agreement.

     16.4 Notices.  Any notice required or permitted hereunder shall be given in
writing  and  shall be  conclusively  deemed  effectively  given  upon  personal
delivery or delivery by courier, or on the first business day after transmission
if sent by confirmed facsimile transmission or electronic mail transmission,  or
five days after  deposit in the United  States mail,  by registered or certified
mail, postage prepaid,  addressed (i) if to the Company,  as set forth below the
Company's  name  on the  signature  page of this  Agreement,  and  (ii) if to an
Investor,  at such Investor's address as set forth on the signature page to this
Agreement,  or at  such  other  address  as the  Company  or such  Investor  may
designate by 10 days' advance written notice to the other parties hereto.

     16.5 Amendment or Waiver.  This  Agreement may be amended or modified,  and
the  obligations  of the  Company  under the  Agreement  may be  waived  (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively), only upon the written consent of the Company and holders of more
than a majority of the Registrable  Securities.  Any amendment,  modification or
waiver pursuant to, and in accordance with, this  Section 16.5  shall be binding
on the Company,  all holders of Registrable  Securities at the time  outstanding
and each future holder of any such  securities.  Notwithstanding  the foregoing,
this  Agreement may be amended by the Company with no further action on the part
of any other  party  hereto to include as  Investors  hereunder  any  persons or
entities who purchase Convertible  Securities in a "Subsequent Closing" pursuant
to the Purchase Agreement,  which amendment will be effective when the purchaser
evidences  his, her or its agreement to be bound by the terms of this  Agreement
by executing a counterpart signature page of this Agreement as an Investor,  and
thereby shall be deemed  "Holders" for all purposes  under this  Agreement.  The
foregoing  notwithstanding,  this Agreement and any term thereof may be amended,
waived,  discharged or terminated  by a written  instrument  signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.

                                       17

<PAGE>

     16.6  Severability.  In case  any  provision  of this  Agreement  shall  be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

     16.7 Entire Agreement;  Successors and Assigns.  This Agreement constitutes
the entire contract among the Company and the Investors  relative to the subject
matter  hereof.  Any  previous  agreement  between the Company and any  Investor
concerning  Registration rights is superseded by this Agreement.  Subject to the
exceptions  specifically  set forth in this  Agreement  and the  limitations  on
transfer set forth in  Section 12,  the terms and  conditions of this  Agreement
shall  inure to the  benefit of and be binding  upon the  respective  executors,
administrators, heirs, successor, and permitted assigns of the parties.

                                       18

<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have executed this Investor Rights
Agreement as of the day and year first above written.

Company:              PHOTOWORKS, INC., a Washington corporation

                      By:    /s/ Gary Christopherson
                             Gary Christophersen, President and CEO

                      Address:      1260 16th Avenue West
                                    Seattle, Washington 98119
                                    Fax No. (206) 284-5357

Investors:            MADRONA VENTURE FUND I-A, L.P.
                      By Madrona Investment Partners, LLC,
                      its General Partner

                      By:          /s/ Paul Goodrich

                      Name:        Paul Goodrich

                      Title:       Managing Director

                      Address:     1000 Second Avenue, Suite 3700
                                   Seattle, WA  98104

                  {SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT}

<PAGE>

                      MADRONA VENTURE FUND I-B, L.P.
                      By Madrona Investment Partners, LLC,
                      its General Partner

                      By:          /s/ Paul Goodrich

                      Name:        Paul Goodrich

                      Title:       Managing Director

                      Address:     1000 Second Avenue, Suite 3700
                                   Seattle, WA  98104

                      MADRONA MANAGING DIRECTOR FUND, LLC

                      By:          /s/ Paul Goodrich

                      Name:        Paul Goodrich

                      Title:       Managing Director

                      Address:     1000 Second Avenue, Suite 3700
                                   Seattle, WA  98104

                  {SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT}

<PAGE>

                      THE TAHOMA FUND, L.L.C.

                      By:          /s/ Ross Chapin

                      Name:        Ross Chapin

                      Title:       Managing Member

                      Address:     P.O. Box 21749
                                   Seattle, WA  98111

                      ORCA BAY CAPITAL CORPORATION

                      By:          /s/ Stanley McCammon

                      Name:        Stanley McCammon

                      Title:       President

                      Address:     P.O. Box 21749
                                   Seattle, WA  98111

                      TIM and ALEXA CARVER

                      By:          /s/ Tim Carver

                      Name:        Tim Carver

                      By:          /s/ Alexa Carver

                      Name:        Alexa Carver

                      Address:     P.O. Box 21749
                                   Seattle, WA  98111

                  {SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT}

<PAGE>

                      STANLEY McCAMMON

                      By:          /s/ Stanley McCammon

                      Name:        Stanley McCammon

                      Address:     P.O. Box 21749
                                   Seattle, WA  98111

                      AARON SINGLETON

                      By:          /s/ Aaron Singleton

                      Name:        Aaron Singleton

                      Address:     P.O. Box 21749
                                   Seattle, WA  98111

                  {SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT}

<PAGE>

                                   EXHIBIT A
                              SCHEDULE OF INVESTORS

      The Tahoma Fund, L.L.C.

      Orca Bay Capital Corporation

      Tim and Alexa Carver

      Stanley McCammon

      Aaron Singleton

      Madrona Venture Fund I-A, L.P.

      Madrona Venture Fund I-B, L.P.

      Madrona Managing Director Fund, LLCUAC SECURITIZATION CORPORATION
                                     Seller

                          UNION ACCEPTANCE CORPORATION
                                    Servicer

                                       and

                 FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
                                  Owner Trustee

                         TRUST AND SERVICING AGREEMENT,

                          Dated as of February 1, 2000

                            UACSC 2000-A Owner Trust

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I             Creation of Trust........................................1

         SECTION 1.01. Name....................................................1
         SECTION 1.02. Office..................................................1
         SECTION 1.03.  Purposes and Powers....................................1
         SECTION 1.04. Appointment of Owner Trustee............................2
         SECTION 1.05. Initial Capital Contribution of Trust Estate............2
         SECTION 1.06. Declaration of Trust....................................2
         SECTION 1.07. Title to Trust Property.................................3
         SECTION 1.08. Situs of Trust..........................................3

ARTICLE II            Definitions..............................................3

         SECTION 2.01.  Definitions............................................3
         SECTION 2.02.  Usage of Terms........................................15
         SECTION 2.03.  Closing Date and Record Date..........................15
         SECTION 2.04.  Section References....................................15

ARTICLE III           Conveyance of Receivables...............................15

ARTICLE IV            Acceptance by Trustee...................................17

ARTICLE V             Information Delivered to the Rating Agencies............17

ARTICLE VI            Agent for Service.......................................18

ARTICLE VII           The Receivables.........................................18

         SECTION 7.01.  Representations and Warranties of Seller..............18
         SECTION 7.02.  Repurchase Upon Breach................................19
         SECTION 7.03.  Custody of Receivable Files...........................19
         SECTION 7.04.  Duties of Servicer as Custodian.......................20
         SECTION 7.05.  Instructions; Authority to Act........................21
         SECTION 7.06.  Custodian's Indemnification...........................21
         SECTION 7.07.  Effective Period and Termination......................21

                                                        -i-

<PAGE>

ARTICLE VIII          Administration and Servicing of Receivables.............21

         SECTION 8.01.  Duties of Servicer....................................21
         SECTION 8.02.  Collection of Receivable Payments.....................22
         SECTION 8.03.  Realization Upon Receivables..........................23
         SECTION 8.04.  Physical Damage Insurance.............................23
         SECTION 8.05.  Maintenance of Security Interests
                                in Financed Vehicles..........................23
         SECTION 8.06.  Covenants of Servicer.................................24
         SECTION 8.07.  Purchase of Receivables Upon Breach...................24
         SECTION 8.08.  Servicing Fee.........................................24
         SECTION 8.09.  Servicer's Certificate................................25
         SECTION 8.10.  Annual Statement as to Compliance; Notice of Default..25
         SECTION 8.11.  Annual Independent Certified Public
                                Accountant's Report...........................26
         SECTION 8.12.  Access to Certain Documentation and Information
                                    Regarding Receivables.....................26
         SECTION 8.13.  Servicer Expenses.....................................27
         SECTION 8.14.  Reports to Noteholders................................27

ARTICLE IX            Collections; Distributions to Noteholders
                                and Certificateholder.........................27

         SECTION 9.01.  Collection Account....................................27
         SECTION 9.02.  Collections...........................................27
         SECTION 9.03.  Purchase Amounts......................................28
         SECTION 9.04.  Application of Funds..................................28
         SECTION 9.05.  Advances..............................................30
         SECTION 9.06.  Net Deposits..........................................30
         SECTION 9.07.  No Segregation of Moneys; No Interest.................30
         SECTION 9.08.  Accounting and Reports to the Certificateholder,
                                    the Internal Revenue Service and Others...30
         SECTION 9.09.  Payahead Account.  ...................................31

ARTICLE X             Intentionally Blank.....................................32

ARTICLE XI            The Certificate.........................................32

         SECTION 11.01.  The Certificate......................................32
         SECTION 11.02.  Authentication of Certificate........................32
         SECTION 11.03.  Registration of Transfer and Exchange
                                of Certificate................................32
         SECTION 11.04.  Mutilated, Destroyed, Lost, or Stolen Certificates...33

                                                       -ii-

<PAGE>

ARTICLE XII           The Seller..............................................34

         SECTION 12.01.  Representations and Undertakings of Seller...........34
         SECTION 12.02.  Liability of Seller; Indemnities.....................36
         SECTION 12.03.  Merger or Consolidation of, or Assumption
                                    of the Obligations of Seller .............37
         SECTION 12.04.  Limitation on Liability of Seller and Others.........38

ARTICLE XIII          The Servicer............................................38

         SECTION 13.01.  Representations of Servicer..........................38
         SECTION 13.02.  Indemnities of Servicer..............................39
         SECTION 13.03.  Merger or Consolidation of, or Assumption of the
                                    Obligations of Servicer...................41
         SECTION 13.04.  Limitation on Liability of Servicer and Others.......41
         SECTION 13.05.  Servicer Not to Resign...............................42
         SECTION 13.06.  Delegation of Duties.................................42

ARTICLE XIV           Servicer Default........................................42

         SECTION 14.01.  Events of Servicer Default...........................42
         SECTION 14.02.  Appointment of Successor.............................44
         SECTION 14.03.  Notice of Events of Servicer Default.................45
         SECTION 14.04.  Waiver of Past Defaults..............................45

ARTICLE XV            The Owner Trustee.......................................46

         SECTION 15.01.  Duties of Owner Trustee..............................46
         SECTION 15.02.  Owner Trustee's Certificate..........................48
         SECTION 15.03.  Trust's Assignment of Purchased Receivables..........48
         SECTION 15.04.  Certain Matters Affecting the Owner Trustee..........49
         SECTION 15.05.  Owner Trustee Not Liable for Certificate
                                or Receivables................................50
         SECTION 15.06.  Owner Trustee May Own Notes..........................51
         SECTION 15.07.  Owner Trustee's and Indenture Trustee's
                                    Fees and Expenses; Indemnification........51
         SECTION 15.08.  Eligibility Requirements for Owner Trustee...........52
         SECTION 15.09.  Resignation or Removal of Owner Trustee..............53
         SECTION 15.10.  Successor Owner Trustee..............................53
         SECTION 15.11.  Merger or Consolidation of Owner Trustee.............54
         SECTION 15.12.  Appointment of Co-Trustee or Separate Owner Trustee..54

                                                       -iii-

<PAGE>

         SECTION 15.13.  Representations and Warranties of Owner Trustee......55

ARTICLE XVI           Termination.............................................56
         SECTION 16.01.  Termination of the Trust.............................56
         SECTION 16.02.  Optional Disposition of All Receivables..............57

ARTICLE XVII          Miscellaneous Provisions................................57

         SECTION 17.01.  Amendment............................................57
         SECTION 17.02.  Protection of Title to Trust.........................59
         SECTION 17.03.  Limitation on Rights of Certificateholder............61
         SECTION 17.04.  Governing Law........................................61
         SECTION 17.05.  Notices..............................................61
         SECTION 17.06.  Severability of Provisions...........................62
         SECTION 17.07.  Assignment...........................................62
         SECTION 17.08.  Certificate Nonassessable and Fully Paid.............62
         SECTION 17.09.  Nonpetition Covenant.................................62
         SECTION 17.10.  Counterparts.........................................62
         SECTION 17.11.  Third Party Beneficiary.  ...........................63

EXHIBIT 1     -    Owner Trustee's Certificate Pursuant to Section 15.02
EXHIBIT 2     -    Owner Trustee's Certificate Pursuant to Section 15.02
EXHIBIT 3     -    Servicer's Certificate
EXHIBIT A     -    Form of Certificate of Trust
EXHIBIT B     -    Form of Certificate

SCHEDULE A    -    Schedule of Receivables
SCHEDULE B    -    Location of Receivables

                                                       -iv-

<PAGE>

         This TRUST AND  SERVICING  AGREEMENT,  dated as of February 1, 2000, is
made with respect to the  formation  of the UACSC 2000-A Owner Trust,  among UAC
SECURITIZATION CORPORATION, a Delaware corporation, as depositor (the "Seller"),
UNION  ACCEPTANCE  CORPORATION,   an  Indiana  corporation,   as  servicer  (the
"Servicer"),  and FIRST UNION TRUST COMPANY,  NATIONAL  ASSOCIATION,  a national
banking  corporation  with its  principal  place  of  business  in the  State of
Delaware, as owner trustee (in such capacity the "Owner Trustee").

         WITNESSETH  THAT:  In  consideration  of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:

                                    ARTICLE I

                                Creation of Trust

         Upon the  execution  of this  Agreement  by the parties  hereto and the
prompt filing  thereafter of the  Certificate of Trust in the State of Delaware,
there is hereby created the UACSC 2000-A Owner Trust.

         SECTION 1.01.  Name.  The Trust created hereby shall be known as "UACSC
2000-A Owner  Trust",  in which name the Owner  Trustee may conduct the business
and affairs of the Trust,  make and execute  contracts and other  instruments on
behalf of the Trust and sue and be sued on behalf of the Trust.  The Trust shall
constitute  a  business  trust  within the  meaning  of  Section  3801(a) of the
Delaware  Business Trust Act for which the Owner Trustee has filed a certificate
of trust  with the  Secretary  of State of the  State of  Delaware  pursuant  to
Section 3810(a) of the Delaware Business Trust Act.

         SECTION 1.02.  Office.  The office of the Trust shall be in care of the
Owner  Trustee at its  Corporate  Trust  Office or at such other  address as the
Owner  Trustee may  designate by written  notice to the  Certificateholder,  the
Servicer, the Seller, the Insurer and the Indenture Trustee.

         SECTION  1.03.  Purposes  and  Powers.  The  purpose of the Trust is to
engage in the following activities:

                      (i) to issue the Notes  pursuant to the  Indenture and the
         Certificate  pursuant to this  Agreement  and to sell or  transfer  the
         Notes and the Certificate in one or more transactions;

                      (ii)  with the  proceeds  of the sale of the Notes and the
         Certificate, to purchase the Receivables pursuant to this Agreement;

                      (iii) to assign,  grant,  transfer,  pledge,  mortgage and
         convey the Trust estate  pursuant to the Indenture and to hold,  manage
         and distribute to the

                                                         1

<PAGE>

         Certificateholder  pursuant to the terms of this  Agreement any portion
         of the Trust  estate  released  from the Lien of, and  remitted  to the
         Trust pursuant to, the Indenture;

                      (iv) to enter into and perform its  obligations  under the
         related documents to which it is to be a party;

                      (v) to engage in those activities, including entering into
         agreements,  that are  necessary,  suitable or convenient to accomplish
         the foregoing or are incidental thereto or connected therewith; and

                      (vi) subject to compliance with the related documents,  to
         engage in such other  activities as may be required in connection  with
         conservation of the Trust estate and the making of distributions to the
         Certificateholder,  the  Noteholders  and the others  specified in this
         Agreement.

         The Trust is hereby  authorized to engage in the foregoing  activities.
         The Trust  shall not engage in any  activity  other than in  connection
         with the foregoing or other than as required or authorized by the terms
         of this Agreement or the other Basic Documents.

         SECTION 1.04.  Appointment of Owner Trustee. The Seller hereby appoints
the Owner  Trustee as trustee of the Trust  effective as of the date hereof,  to
have all the  rights,  powers and duties  set forth  herein and in the  Delaware
Business Trust Act.

         SECTION 1.05. Initial Capital  Contribution of Trust Estate. The Seller
hereby sells, assigns, transfers,  conveys and sets over to the Trust, as of the
date hereof,  the Trust estate.  The Owner Trustee on behalf of the Trust hereby
acknowledges  receipt in trust from the Seller,  as of the date  hereof,  of the
foregoing  contribution,  which shall  constitute the initial Trust estate.  The
Seller shall pay the  organizational  expenses of the Trust as they may arise or
shall,  upon the  request of the Owner  Trustee,  promptly  reimburse  the Owner
Trustee for any such expenses paid by the Owner Trustee.

         SECTION 1.06.  Declaration of Trust.  The Owner Trustee hereby declares
that it will hold the Trust  estate in trust upon and subject to the  conditions
set forth  herein for the use and benefit of the  Certificateholder,  subject to
the  obligations  of the  Trust  under the other  related  documents.  It is the
intention of the parties hereto that the Trust constitute a business trust under
the Delaware Business Trust Act and that this Agreement constitute the governing
instrument of such Trust. Furthermore, it is the intention of the parties hereto
that, solely for federal,  state and local income and franchise tax purposes (i)
so long as there is a sole Certificateholder,  the Trust shall be disregarded as
a separate  entity,  with the assets of the Trust being treated as the assets of
such sole  Certificateholder,  and the Notes being non-recourse debt of the sole
Certificateholder, and (ii) if there

                                                         2

<PAGE>

is more than one Certificateholder, the Trust shall be treated as a partnership,
with the assets of the partnership  being the Trust estate,  the partners of the
partnership being the Certificateholder and the Notes being non-recourse debt of
the partnership. The Trust shall not elect to be treated as an association under
Treasury Regulations Section 301.7701-3(a) for federal income tax purposes.  The
parties agree that,  unless  otherwise  required by appropriate tax authorities,
the sole Certificateholder or the Administrator on behalf of the Trust will file
or cause to be filed annual or other necessary returns,  reports and other forms
consistent  with the  characterization  of the Trust as  provided  in the second
preceding sentence for such tax purposes.  The Owner Trustee,  the Seller as the
initial  Certificateholder and each successor  Certificateholder (as a condition
to acquiring its Certificate)  agree to disregard the trust as a separate entity
and to treat the Notes as indebtedness for purposes of federal, state, and local
income or franchise taxes.

         SECTION 1.07. Title to Trust Property.  Legal title to all of the Trust
estate  shall be vested at all times in the  Trust as a  separate  legal  entity
except where  applicable law in any  jurisdiction  requires title to any part of
the Trust  estate to be vested in a trustee  or  trustees,  in which  case title
shall be  deemed  to be  vested in the  Owner  Trustee,  a  co-trustee  and/or a
separate trustee, as the case may be.

         SECTION  1.08.   Situs  of  Trust.   The  Trust  will  be  located  and
administered in the State of Delaware. Any bank accounts maintained by the Owner
Trustee on behalf of the Trust  shall be located in the State of  Delaware.  The
Trust shall not have any employees in any state other than  Delaware;  provided,
however,  that nothing  herein shall restrict or prohibit the Owner Trustee from
having employees within or without the State of Delaware. Payments, if any, will
be received by the Trust only in Delaware, and payments, if any, will be made by
the  Trust  only from  Delaware.  The only  office  of the Trust  will be at the
Corporate Trust Office in Delaware.

                                   ARTICLE II

                                   Definitions

         SECTION  2.01.  Definitions.  Capitalized  terms which are used in this
Agreement  but are not defined  herein shall have the  meanings  provided in the
Indenture.  Whenever used in this  Agreement,  the following  words and phrases,
unless the context otherwise requires, shall have the following meanings:

         "Accrued  Interest" means all interest accrued on the Receivables prior
to the opening of business on the day following the Cutoff Date.

         "Administration  Agreement" means the Administration Agreement dated as
of February 1, 2000, between the Trust and the Administrator and acknowledged by
the Indenture Trustee.

                                                         3

<PAGE>

         "Administrator"   means  the  Administrator  under  the  Administration
Agreement, which is initially UAC, and its successors and assigns thereunder.

         "Advance"  means,  with respect to a  Receivable  and with respect to a
Collection  Period, the amount that the Servicer is required to advance pursuant
to Section 9.05.

         "Agreement"  means this Trust and Servicing  Agreement  executed by the
Seller,  the Servicer and the Owner Trustee,  and all amendments and supplements
thereto.

         "Amount  Financed"  means,  with  respect to a  Receivable,  the amount
advanced under the Receivable  toward the purchase price of the Financed Vehicle
and any related costs.

         "Approved  Rating" means a short-term rating of P-1 by Moody's and A-l+
by Standard & Poor's.

         "Authorized  Newspaper" means a newspaper of general circulation in the
Borough of Manhattan,  the City of New York, printed in the English language and
customarily  published  on  each  Business  Day,  whether  or not  published  on
Saturdays, Sundays and holidays.

         "Available   Funds"  means  the  amount  defined  as  such  in  Section
9.04(a)(i).

         "Available  Spread  Amount"  means,  on any Payment Date, the amount on
deposit in the Spread Account,  including any income or gain from any investment
of funds in the Spread Account,  net of any losses from such  investment  before
giving effect to deposits into or  withdrawals  from the Spread  Account on such
Payment Date pursuant to Article IX of the Indenture.

         "Basic Documents" has the meaning provided in the Indenture.

         "Business Day" means, unless otherwise specified,  any day other than a
Saturday,  a  Sunday  or a day on  which  banking  institutions  in  Wilmington,
Delaware,  Chicago,  Illinois  or New York,  New York (or, if the  Servicer  has
provided  prior  written  notice to each of the  Owner  Trustee,  the  Indenture
Trustee and the  Insurer  that such day is not a Business  Day, in Little  Rock,
Arkansas or  Indianapolis,  Indiana)  shall be  authorized  or obligated by law,
executive order, or governmental decree to be closed.

         "Certificate"  means a certificate  executed on behalf of the Trust and
authenticated by the Owner Trustee  substantially in the form attached hereto as
Exhibit B, which represents ownership of a 100% interest in the Trust.

                                                         4

<PAGE>

         "Certificate  of Trust" means the  Certificate of Trust of the Trust in
substantially the form of Exhibit A hereto.

         "Certificate  Register"  means  the  register  maintained  by the Owner
Trustee pursuant to Section 11.03.

         "Certificateholder"  or  "Holder"  means the  Person in whose  name the
Certificate shall be registered in the Certificate Register.

         "Closing Date" means February 15, 2000

         "Collected  Interest"  on  a  Receivable,  as  of  the  last  day  of a
Collection  Period,  means the portion of all payments  received by the Servicer
allocable to interest relating to such Collection Period.

         "Collected  Principal"  on a  Receivable,  as  of  the  last  day  of a
Collection  Period,  means the portion of all payments  received by the Servicer
allocable to principal relating to such Collection Period.

         "Collection Account" means the account designated as such,  established
and maintained pursuant to Section 9.01.

         "Collection Period" means (i) initially,  the period from the day after
the Cutoff Date to the end of the  calendar  month of February,  2000,  and (ii)
thereafter,  each calendar month,  until the Trust shall  terminate  pursuant to
Article XVI.

         "Consolidated  Net Income" means, for any period,  the consolidated net
income of UAC and its subsidiaries  determined in accordance with GAAP and, with
respect to  Consolidated  Net Income for any fiscal  year,  as reported in UAC's
audited consolidated financial statements.

         "Consolidated  Tangible  Net Worth"  means the  excess,  if any, of the
consolidated   assets  of  UAC  and  its  subsidiaries   over  the  consolidated
liabilities  of UAC  and  its  subsidiaries  less  any  goodwill,  trade  names,
trademarks,   patents,   unamortized  debt  discount  and  expense,   and  other
intangibles,  except that dealer premium rebates and excess  servicing shall not
be so deducted, determined in accordance with GAAP.

         "Contract Rate" means, with respect to a Receivable,  the contract rate
of interest on such Receivable, exclusive of prepaid finance charges.

                                                         5

<PAGE>

         "Corporate Trust Office" means the office of the Owner Trustee at which
its corporate  trust business shall,  at any particular  time, be  administered,
which office at the date of the  execution  of this  Agreement is located at One
Rodney  Square,  Suite 102, 920 King Street,  Wilmington,  DE 19801,  Attention:
Corporate Trust Administration, Telecopy (302) 888-7544 or at such other address
as the  Owner  Trustee  may  designate  from  time  to  time  by  notice  to the
Certificateholder, the Seller, the Servicer and the Indenture Trustee.

         "Cutoff Date" means January 31, 2000.

         "Dealer"  means the seller of a Financed  Vehicle,  who  originated and
assigned  the related  Receivable  to UAC, UAC Finance  Corporation,  PAC or the
Predecessor under an existing agreement with UAC, UAC Finance  Corporation,  PAC
or the  Predecessor or who arranged for a loan from UAC, PAC or the  Predecessor
to the purchaser of a Financed Vehicle under an existing agreement with UAC, PAC
or the Predecessor.

         "Defaulted  Receivable"  means, for any Collection Period, a Receivable
as to which the earliest to occur of any of the following has occurred:  (i) any
payment, or part thereof, in excess of $10.00 was delinquent 120 days or more as
of the last  day of such  Collection  Period,  (ii) the  Financed  Vehicle  that
secures  the  Receivable  has  been  repossessed,  or  (iii)  the  Servicer  has
determined  that  the  Receivable  is   uncollectible  in  accordance  with  the
Servicer's  customary  practices  on or before  the last day of such  Collection
Period;  provided,  however,  that "Defaulted  Receivable" shall not include any
Receivable  that is to be  repurchased  pursuant  to Section  7.02 or  purchased
pursuant to Section 8.07; provided further,  that any Advances made with respect
to a Receivable shall not be considered in the  determination of the delinquency
status of such Receivable.

         "Delaware Business Trust Act" means the Delaware Business Trust Act, 12
Del. C.ss.3801 et seq.

         "Determination  Date" means,  for each  Collection  Period,  the second
Business Day prior to the related Payment Date.

         "Dissolution  Payment  Date"  means  the  Payment  Date  following  the
liquidation of the Trust corpus pursuant to Section 16.02.

         "Eligible  Bank" means any  depository  institution  with trust  powers
(including  the Owner Trustee and the Indenture  Trustee),  organized  under the
laws of the  United  States  or any  State  having  a net  worth  in  excess  of
$50,000,000,  the deposits of which are insured to the full extent  permitted by
law  by  the  Federal  Deposit  Insurance  Corporation,   which  is  subject  to
supervision and examination by Federal or State  authorities and which (i) has a
long-term  unsecured  debt  rating  of at least  Baa3  from  Moody's  or (ii) is
approved by each Rating Agency.

                                                         6

<PAGE>

         "Eligible Investment" means any of the following:

                   (i)  direct  obligations  of,  and  obligations  the full and
         timely  payment of principal and interest on which is fully  guaranteed
         by,  the  United  States of  America,  the  Federal  National  Mortgage
         Association,  or any agency or  instrumentality of the United States of
         America  the  obligations  of which are  backed  by the full  faith and
         credit of the United States of America;

              (ii) (A) demand and time deposits in, certificates of deposits of,
         bankers' acceptances issued by, or federal funds sold by any depository
         institution  or  trust  company  (including  the  Owner  Trustee,   the
         Indenture  Trustee or any of their agents,  acting in their  respective
         commercial capacities) incorporated under the laws of the United States
         of  America,  any State  thereof or the  District  of  Columbia  or any
         foreign  depository  institution with a branch or agency licensed under
         the laws of the United  States of  America  or any State,  in each case
         subject to supervision  and examination by Federal and/or State banking
         authorities  and  having  an  Approved  Rating  at  the  time  of  such
         investment or contractual  commitment  providing for such investment or
         (B) any other demand or time deposit or certificate of deposit which is
         fully insured by the Federal Deposit Insurance Corporation;

                 (iii)  repurchase  obligations with respect to (A) any security
         described  in  clause  (i) above or (B) any  other  security  issued or
         guaranteed  by an agency or  instrumentality  of the  United  States of
         America,  in either case entered into with a depository  institution or
         trust company (acting as principal) described in clause (ii) (A) above;

                  (iv)  short-term  securities  bearing  interest  or  sold at a
         discount issued by any corporation  incorporated  under the laws of the
         United  States  of  America  or  any  State  the  short-term  unsecured
         obligations  of  which  have an  Approved  Rating  at the  time of such
         investment; provided, however, that securities issued by any particular
         corporation  will  not  be  Eligible  Investments  to the  extent  that
         investment therein will cause the then outstanding  principal amount of
         securities issued by such corporation and held as part of the corpus of
         the Trust to exceed 10% of amounts held in the Collection Account;

                  (v) commercial  paper having an Approved Rating at the time of
         such investment;

                  (vi) a guaranteed  investment contract issued by any insurance
         company  or  other  corporation  acceptable  to  the  Rating  Agencies,
         provided  that the Owner  Trustee or the  Indenture  Trustee shall have
         received written notice from the Rating Agencies to the effect that the
         investment of funds in such a contract will not result in the reduction
         or withdrawal of any rating on the Notes;

                                                         7

<PAGE>

                 (vii) interests in any money market fund having a rating of Aaa
         by Moody's or AAAm by  Standard & Poor's  (including  the money  market
         funds  of  the  Owner  Trustee  and  the  Indenture  Trustee  in  their
         commercial capacities); and

                  (viii) any other investment  approved in advance in writing by
         the Rating Agencies and the Insurer.

         "Event of Servicer Default" means an event specified in Section 14.01.

         "Financed Vehicle" means a new or used automobile,  light truck or van,
together with all accessions thereto,  securing an Obligor's  indebtedness under
the respective Receivable.

         "GAAP" means generally accepted accounting  principles set forth in the
opinions and  pronouncements of the Accounting  Principles Board of the American
Institute of Certified Public  Accountants and statements and  pronouncements of
the Financial  Accounting  Standards Board, or in such other statements that are
described  in  Statement  on Auditing  Standards  No. 69 "The Meaning of Present
Fairly in  Conformity  With  Generally  Accepted  Accounting  Principles  in the
Independent Auditor's Report" that are applicable to the circumstances as of the
date of determination, applied on a consistent basis.

         "Holder" -- see "Certificateholder."

         "Indenture"  means the Indenture dated as of February 1, 2000,  between
the Trust and Harris Trust and Savings Bank as Indenture Trustee, which provides
for the issuance of the Notes.

         "Indenture  Trustee"  means Harris Trust and Savings  Bank, an Illinois
banking corporation,  in its role as Indenture Trustee under the Indenture,  and
its permitted successors and assigns.

         "Indenture Trustee Office" means the office of the Indenture Trustee at
which  its  business  as  Indenture   Trustee  under  the  Indenture   shall  be
administered,  which office is presently located at 311 West Monroe Street, 12th
Floor,  Chicago,  Illinois 60606,  Attention:  Indenture  Trust  Administration,
Telecopy  (312)  461-3525 or at such other address as the Indenture  Trustee may
designate from time to time by notice to the Owner Trustee, the Servicer and the
Noteholders.

         "Insolvency  Event"  with  respect to a party  means (i) 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  trustee-in-bankruptcy  or
similar  official  for  such  party  in any  insolvency,  readjustment  of debt,
marshalling  of assets  and  liabilities,  or  similar  proceedings,  or for the
winding up or liquidation of their  respective  affairs,  and the continuance of
any such decree or order  unstayed and in effect for a period of 60  consecutive
days;  or (ii) the  consent by such party to the  appointment  of a  trustee-in-
bankruptcy  or  similar  official  in  any  insolvency,  readjustment  of  debt,
marshalling of assets and liabilities,  or similar proceedings of or relating to
such party or of or relating to substantially all of its property; or (iii) such
party shall admit in writing its  inability  to pay its debts  generally as they
become due, file a petition to take  advantage of any  applicable  insolvency or
reorganization  statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations.

         "Insolvency Proceeding" means the commencement,  after the date hereof,
of any bankruptcy, insolvency, readjustment of debt, reorganization,  marshaling
of assets and liabilities or similar  proceedings by or against UAC, UAFC or the
Seller,  the  commencement,  after the date  hereof,  of any  proceedings  by or
against UAC, UAFC or the Seller for the winding up or liquidation of its affairs
or the  consent,  after  the  date  hereof,  to the  appointment  of a  trustee,
conservator, receiver, or liquidator in any bankruptcy, insolvency, readjustment
of debt,  reorganization,  marshaling  of  assets  and  liabilities  or  similar
proceedings of or relating to UAC, UAFC or the Seller.

         "Insurance Agreement" means the Insurance and Reimbursement  Agreement,
dated as of the Closing Date, among the Trust, the Seller,  UAC individually and
as  Servicer,  UAFC and the Insurer  pursuant  to which the  Insurer  issued the
Policy.

         "Insurer"  means  MBIA  Insurance  Corporation,  a New  York  domiciled
insurance company.

         "Insurer Default" has the meaning specified in the Indenture.

         "Interest Advance Amount" with respect to a simple interest  Receivable
as to which an Advance is  required  to be made on the last day of a  Collection
Period,  shall mean an amount  equal to 30 days of interest  upon the  Principal
Balance of such  Receivable as of such date;  and, with respect to a Precomputed
Receivable  as to which an Advance is  required  to be made on the last day of a
Collection  Period,  shall mean an amount  equal to that portion of the earliest
delinquent  Scheduled  Payment  allocable  to interest  (using the  actuarial or
constant yield method).

         "Interest  Shortfall" means, as to any simple interest Receivable as of
the last day of any Collection Period, the amount, if any, by which (a) interest
due on such Receivable  exceeds (b) the Collected  Interest on such  Receivable.
"Interest Shortfall" with respect to a Precomputed Receivable as of the last day
of any Collection  Period means the amount,  if any, by which the portion of the
Scheduled Payment due during such Collection Period allocable to interest (using
the actuarial or constant yield method)  exceeds the Collected  Interest on such
Receivable  (computed  using the same method except that the amount of Collected
Interest in respect of  Precomputed  Receivables  shall be  increased  by giving
effect to the withdrawal for the related Payment Date of any previously received
Scheduled  Payments in respect of such Receivable  from the Payahead  Account in
accordance with Sections 8.02(b) hereof and Section 9.09 of the Indenture).

                                                         8

<PAGE>

         "Lien" means a security  interest,  lien,  charge,  pledge,  equity, or
encumbrance of any kind other than tax liens,  mechanics'  liens,  and any liens
which  attach to the  respective  Receivable  or  related  Financed  Vehicle  by
operation of law.

         "Liquidation Proceeds" means the monies collected from whatever source,
including insurance proceeds,  on Defaulted  Receivables,  net of the sum of any
amounts expended by the Servicer for the account of the Obligor plus any amounts
required by law to be  remitted  to the  Obligor.  "Liquidation  Proceeds"  with
respect to a Payment  Date  means such  monies  collected  during the  preceding
Collection Period. In no event shall Liquidation Proceeds be less than zero.

         "Monthly Interest" means the amount of interest which is payable to the
Noteholders on any Payment Date pursuant to the terms of the Indenture.

         "Monthly  Principal"  means the amount of principal which is payable to
the Noteholders on any Payment Date pursuant to the terms of the Indenture.

         "Monthly  Servicing  Fee" means,  (i) for the first Payment  Date,  the
product of the following:  the (a) monthly Servicing Rate (b) the number of days
from and including the Closing Date to the end of the first  Collection  Period,
assuming the month of the Closing Date is a 30-day month,  divided by 30 and (c)
the Original Pool Balance and (ii) for any subsequent  Payment Date, the product
of (a) the Pool Balance as of the beginning of the related Collection Period and
(b) the monthly Servicing Rate.

         "Moody's" means Moody's Investors Service, Inc.

         "Notes" has the meaning specified in the Indenture.

         "Noteholders" has the meaning specified in the Indenture.

         "Obligor" on a Receivable  means the purchaser or the  co-purchasers of
the Financed Vehicle or any other Person who owes payments under the Receivable.
The phrase  "payment made on behalf of an Obligor"  shall mean all payments made
with  respect to a  Receivable  except  payments  made by UAC, the Seller or the
Servicer.

         "Officers'  Certificate"  means a certificate  signed by any two of the
chairman of the board,  the president,  any vice chairman of the board, any vice
president,  the treasurer, or the controller of UAC, the Seller or the Servicer,
as the case may be; provided that no individual shall sign in a dual capacity.

         "Opinion of  Counsel"  means a written  opinion of counsel,  who may be
counsel to the Seller and/or Servicer,  which counsel shall be acceptable to the
Owner Trustee.

                                                         9

<PAGE>

         "Optional  Disposition  Price"  means the amount  specified  as such in
Section 16.02.

         "Original Pool Balance" means $282,721,339.93.

         "Outstanding  Advances" as of any date,  with respect to a  Receivable,
means  the  total  amount  of  Advances  made on such  Receivable  for which the
Servicer has not been reimbursed.

         "Owner Trustee" means First Union Trust Company,  National Association,
a national banking association with its principal place of business in the State
of Delaware,  acting not in its individual  capacity but solely as trustee under
this Agreement and its successors or any corporation resulting from or surviving
any merger or  consolidation to which it or its successors may be a party or any
successor trustee at the time serving as successor trustee hereunder.

         "Owner  Trustee's   Certificate"  means  a  certificate  completed  and
executed  by the Owner  Trustee by a  Responsible  Officer  pursuant  to Section
15.02,  substantially  in the form  of,  in the  case of an  assignment  to UAC,
Exhibit 1, and in the case of an assignment to the Servicer, Exhibit 2.

         "PAC" means  Performance  Acceptance  Corporation,  a subsidiary of UAC
which was merged into UAC,  and/or UAC doing business as Performance  Acceptance
Corporation.

         "Payahead"  on a  Precomputed  Receivable  means the amount,  as of the
close of business on the last day of a Collection Period, computed in accordance
with Section 8.02(b) with respect to such Receivable.

         "Payahead  Account" means the account  designated as such,  established
and maintained pursuant to Section 9.09.

         "Payahead Balance" on a Precomputed Receivable means the sum, as of the
close of business on the last day of a Collection  Period, of all Payaheads made
by or on behalf of the Obligor with respect to such Precomputed  Receivable,  as
reduced by applications of previous  Payaheads with respect to such  Precomputed
Receivable, pursuant to Sections 8.02(b) and 9.09 hereof and Section 9.09 of the
Indenture.

         "Payment Date" means, for each Collection  Period,  the eighth calendar
day of the month following the end of the related  Collection Period or, if such
day is not a Business Day, the first Business Day thereafter.  The first Payment
Date shall be March 8, 2000.

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

                                                        10

<PAGE>

         "Policy" means the  irrevocable  Financial  Guaranty  Insurance  Policy
dated as of the Closing Date issued by the Insurer to the Indenture  Trustee for
the benefit of the Noteholders as required under the Indenture.

         "Pool Balance" as of any date means the aggregate  Principal Balance of
the  Receivables  as of such  date;  provided,  however,  that for  purposes  of
determining Monthly Principal,  the Principal Balance of a Defaulted  Receivable
or a Purchased  Receivable (if actually purchased by the Servicer or repurchased
by UAC)  shall be deemed to be zero on and  after the close of  business  on the
last day of the Collection  Period in which the  Receivable  becomes a Defaulted
Receivable or a Purchased Receivable that is actually purchased or repurchased.

         "Precomputed  Receivable"  means any Receivable under which the portion
of a payment  allocable  to earned  interest  (which may be  referred  to in the
related  contract as an add-on finance charge) and the portion  allocable to the
Amount Financed is determined according to the sum of periodic balances, the sum
of monthly balances, the rule of 78's or any equivalent method.

         "Predecessor"  means Union  Federal  Savings  Bank of  Indianapolis,  a
federally chartered stock savings bank.

         "Prepayment Charges," as used in the Agreement, shall be interpreted to
include,  without  limitation,  in the case of a Precomputed  Receivable that is
prepaid in full, the difference between the Principal Balance of such Receivable
(plus accrued  interest to the date of prepayment) and the Principal  Balance of
such  Receivable  computed in  accordance  with the method  provided  for in the
contract governing such Receivable, such as the rule of 78's.

         "Principal Balance" of a simple interest Receivable, as of the close of
business on the last day of a Collection Period, means the Amount Financed minus
that portion of all payments received on or before the close of business on such
last day  allocable to principal of such  Receivable.  "Principal  Balance" with
respect to a Precomputed  Receivable,  as of the close of business on the Cutoff
Date, means the gross principal balance of such Receivable on the records of the
Servicer,  net of unearned or accrued interest reflected therein,  and as of the
close of business on the last day of a Collection  Period,  means the  Principal
Balance as of the  Cutoff  Date minus  that  portion of all  Scheduled  Payments
received with respect to such  Receivable in respect of such  Collection  Period
and all prior Collection Periods allocable to principal of such Receivable using
the actuarial or constant yield method.

         "Purchase  Agreement" means the Purchase Agreement dated as of the date
hereof by and among  the  Seller,  UAC and UAFC,  as  amended,  supplemented  or
modified  from time to time pursuant to which the Seller  purchases  Receivables
which have been or shall be transferred to the Trust.

                                                        11

<PAGE>

         "Purchase Amount" of any Receivable, as of the close of business on the
last day of any  Collection  Period,  means the  amount  equal to the sum of the
Principal  Balance of such Receivable  plus any unpaid interest  accrued and due
during or prior to such Collection Period on such Receivable.

         "Purchased  Receivable"  means a  Receivable  purchased by the Servicer
pursuant to Section  8.07 or  repurchased  by UAC  pursuant to Section  7.02 not
later than the respective dates required thereby.

         "Rating  Agency"  means each of Moody's and Standard & Poor's and their
successors and assigns.

         "Rating Agency Condition" has the meaning specified in the Indenture.

         "Receivable"  means  any  simple  interest  or  pre-computed   (add-on)
interest  installment sales contract or installment loan and security  agreement
which shall appear on Schedule A to the Agreement.

         "Receivable Files" means the documents specified in Section 7.03.

         "Receivables" or "Receivables Pool" means those Receivables conveyed to
the Trust by the Seller listed as of the Cutoff Date in Schedule A.

         "Record Date" has the meaning specified in the Indenture.

         "Recoveries of Advances" means, for any Collection Period, all payments
received by the Servicer by or on behalf of Obligors  (other than  Obligors with
respect to Defaulted  Receivables  and excluding  reimbursements  of Outstanding
Advances on  Defaulted  Receivables  pursuant to Section 9.05 hereof and Section
9.04(a)(i)  of  the  Indenture)  during  such  Collection  Period   representing
recoveries  of  Interest  Shortfalls  for  which  Advances  were  made for prior
Collection Periods.

         "Responsible  Officer"  means,  when  used  with  respect  to the Owner
Trustee,  any officer within the Corporate  Trust Office (or any successor group
of the Owner Trustee) including any managing director, vice president, assistant
vice president, assistant treasurer, assistant secretary or any other officer of
the Owner Trustee customarily performing functions similar to those performed by
the persons who at the time shall be such officers, respectively, or to whom any
corporate  trust matter is referred  because of his knowledge of and familiarity
with the particular subject.

                                                        12

<PAGE>

         "Scheduled  Payment" on a Receivable  means that portion of the payment
required  to be made by the  Obligor  during the  respective  Collection  Period
sufficient  to amortize  the  Principal  Balance and to provide  interest at the
Contract Rate.

         "Secured Parties" means each of the Indenture Trustee,  the Noteholders
and the Insurer pursuant to the Indenture.

         "Seller" means UAC Securitization  Corporation, a Delaware corporation,
in its capacity as the seller of the Receivables under this Agreement,  and each
successor to UAC  Securitization  Corporation (in the same capacity) pursuant to
Section 12.03.

         "Servicer" means Union Acceptance Corporation,  an Indiana corporation,
in its capacity as the servicer of the  Receivables  and each successor to Union
Acceptance  Corporation  (in the same  capacity)  pursuant  to Section  13.03 or
14.02.

         "Servicer's  Certificate" means a certificate completed and executed by
an officer of the Servicer pursuant to Section 8.09.

         "Servicing Rate" means 1.00% per annum,  payable monthly at one-twelfth
of the annual rate,  subject to adjustment with respect to a successor  Servicer
pursuant to Section 14.02.

         "Spread Account" means the account designated as such,  established and
maintained pursuant to the Indenture.

         "Standard  &  Poor's"  means  Standard  & Poor's  Ratings  Services,  a
division of The McGraw- Hill Companies, Inc.

         "State" means (i) any state of the United States of America or (ii) the
District of Columbia.

         "Stated Final Payment Date"  means September 10, 2007.

         "Trigger  Event" means any of the events  identified as such in Section
6.01 of the Insurance Agreement.

         "Trust" means the Delaware business trust created by the Agreement, the
estate of which shall generally  comprise the Receivables  (other than Purchased
Receivables) and all monies paid thereon, and all monies due thereon,  including
Accrued  Interest,  as of and  after the  Cutoff  Date  (but  excluding  Accrued
Interest  paid on or prior  to the  Closing  Date);  security  interests  in the
Financed  Vehicles;  funds  deposited in the Collection  Account;  all documents
contained  in the  Receivable  Files;  any  property  that shall have  secured a
Receivable and that shall have been acquired by or on behalf of the

                                                        13

<PAGE>

Trust;  any  Liquidation  Proceeds and any rights of the Seller in 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; the interest of the Seller in recourse to Dealers
relating to certain of the Receivables;  the proceeds of the foregoing;  amounts
on deposit from time to time in the Spread  Account;  the benefits of the Policy
and  certain  rights of the  Seller  under the  Purchase  Agreement,  including,
without limitation, Section 3.04 thereof.

         "UAC" means Union Acceptance Corporation,  an Indiana corporation,  and
its successors and assigns, other than in its capacity as Servicer.

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

         "UAFC"  means  Union  Acceptance   Funding   Corporation,   a  Delaware
corporation, and its successors and assigns.

         "UCC" means the Uniform  Commercial Code as in effect in the respective
jurisdiction.

         SECTION  2.02.  Usage  of  Terms.  With  respect  to all  terms in this
Agreement,  the singular includes the plural and the plural the singular;  words
importing any gender include the other genders;  references to "writing" include
printing,  typing, lithography and other means of reproducing words in a visible
form;  references to agreements and other  contractual  instruments  include all
subsequent amendments thereto or changes therein entered into in accordance with
their  respective  terms and not  prohibited  by this  Agreement;  references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation."

         SECTION  2.03.  Closing Date and Record  Date.  All  references  to the
Record Date prior to the first  Record Date in the life of the Trust shall be to
the Closing Date.

         SECTION  2.04.  Section  References.  All  section  references  in this
Agreement shall be to Sections in this Agreement unless otherwise specified.

                                   ARTICLE III

                            Conveyance of Receivables

         In  consideration  of the Trust's  issuance of, and the Owner Trustee's
delivery to the Seller of, the  Certificate  and the  proceeds to be realized by
the Trust from the issuance of the Notes pursuant to the  Indenture,  the Seller
does hereby sell,  transfer,  assign, and otherwise convey to the Trust, without
recourse (subject to the obligations herein):

                                                        14

<PAGE>

                  (i) all right, title, and interest of the Seller in and to the
         Receivables listed in Schedule A hereto;

                  (ii) the security  interests in the Financed  Vehicles granted
         by Obligors pursuant to the Receivables;

                  (iii) any Liquidation Proceeds 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;

                  (iv) funds deposited in the Collection Account;

                  (v) the interest of the Seller in any proceeds  from  recourse
         to Dealers relating to the Receivables;

                  (vi) all documents contained in the Receivable Files;

                  (vii) all monies  paid and all monies due,  including  Accrued
         Interest,  as of  and  after  the  Cutoff  Date,  with  respect  to the
         Receivables  held by the  Servicer  or Seller  (but  excluding  Accrued
         Interest paid prior to the Closing Date);

                  (viii)  the  rights of the  Seller  pursuant  to the  Purchase
         Agreement  to require UAC to  repurchase  any  Receivables  as to which
         there has been a breach of the representations and warranties contained
         therein;

                  (ix)     the benefits of the Policy; and

                  (x)      all proceeds of the foregoing.

         The Seller  does  hereby  further  assign,  convey,  pledge and grant a
security interest in (i) any and all other right, title and interest,  including
any  beneficial  interest  the Seller may have in the  Collection  Account,  the
Spread Account and the funds deposited therein,  and (ii) any proceeds of any of
the  foregoing,  to the Owner Trustee and for the benefit of the  Noteholders to
secure amounts  payable to Noteholders  as provided  under this  Agreement.  The
Seller  acknowledges  that all of the foregoing  shall  constitute  the "Pledged
Assets" pursuant to the terms of the Indenture and the Seller hereby consents to
the pledge of all of such assets to the Indenture Trustee for the benefit of the
Secured Parties pursuant to the Indenture.

         The Seller does not convey to the Trust any  interest in any  contracts
with Dealers  related to any "dealer  reserve" or any rights to the recapture of
any dealer reserve.

                                                        15

<PAGE>

                                   ARTICLE IV

                              Acceptance by Trustee

         The  Owner  Trustee  does  hereby  accept  on  behalf  of the Trust all
consideration  conveyed by the Seller pursuant to Article III, and declares that
the Owner Trustee shall hold such consideration upon the trusts herein set forth
for the  benefit of all present  and future  Certificateholders,  subject to the
terms and provisions of this Agreement.

                                    ARTICLE V

                  Information Delivered to the Rating Agencies

                  (a) The Servicer  hereby  expresses  its  intention to deliver
promptly to each Rating Agency (i) a copy of each Servicer's Certificate that it
delivers to the Owner Trustee, the Indenture Trustee and the Insurer pursuant to
Section 8.09, (ii) a copy of each annual Officers'  Certificate as to compliance
and any notice of default that it delivers to the Indenture Trustee or the Owner
Trustee pursuant to Section 8.10, (iii) delinquency and loss information for the
Receivables,  the  amount  of any  draws on the  Policy,  written  notice of any
merger, consolidation,  or other succession of the Servicer, pursuant to Section
13.03, or the Seller,  pursuant to Section 12.03,  (iv) a copy of each amendment
to this Agreement and (v) any Opinion of Counsel  delivered to the Owner Trustee
pursuant to Section 17.02(i).

                  (b) The  Owner  Trustee  hereby  expresses  its  intention  to
deliver  promptly  to each  Rating  Agency (i) a copy of each  annual  certified
public  accountant's  report  received by the Owner Trustee  pursuant to Section
8.11,  (ii) a copy of each  amendment to this  Agreement and (iii) a copy of the
notice of termination of the Trust provided to the Certificateholder pursuant to
Section 16.01.

                  (c) For purposes of delivery pursuant to paragraphs (a) and
(b) of this Article V, the addresses for the Rating Agencies are:

                           Structured Finance/Asset Backed Surveillance Group
                           Standard & Poor's Ratings Services, a division of The

                           McGraw-Hill Companies, Inc.
                           55 Water Street, 40th Floor
                           New York, New York 10041-0003

                                                        16

<PAGE>

                           Moody's Investors Service, Inc.
                           Attention:  ABS Monitoring Department
                           4th Floor
                           99 Church Street
                           New York, New York 10007

                  (d) The  provisions of this Article V are included  herein for
convenience  of  reference  only and shall not be  construed  to be  contractual
undertakings or obligations. The failure of the Servicer or the Owner Trustee to
comply with any or all of the  provisions of this Article V shall not constitute
an Event of Servicer  Default or a default of any kind under this  Agreement  or
make any remedy available to any Person.

                                   ARTICLE VI

                                Agent for Service

         The agent for service  for the Seller  shall be The  Corporation  Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801.

         The agent for service for the Servicer shall be The  Corporation  Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801.

         A copy of any service of process  served on the Seller or the  Servicer
hereunder  shall also be sent to the parties to receive notices on behalf of the
Seller or Servicer, as the case may be, under Section 17.05 of this Agreement.

                                   ARTICLE VII

                                 The Receivables

         SECTION 7.01.  Representations  and  Warranties of Seller.  Pursuant to
Article III, the Seller has assigned to the Trust the benefit of, and its rights
respecting,  the  representations  and  warranties  made  to the  Seller  in the
Purchase  Agreement as to the Receivables on which the Trust relies in accepting
the  Receivables,  issuing the  Certificate  and  executing and  delivering  the
Indenture.  The Seller  agrees  that the  representations  shall also be for the
benefit of the Secured Parties.  Such representations and warranties speak as of
the execution and delivery of the Purchase Agreement but shall survive the sale,
transfer, and assignment of the Receivables to the Trust.

                                                        17

<PAGE>

         (a) The Seller hereby  represents and warrants to the Trust that it has
entered into the Purchase  Agreement  with UAC and UAFC,  that UAC and UAFC have
made  the   representations   and  warranties  set  forth  therein,   that  such
representations and warranties run to and are for the benefit of the Seller, and
that pursuant to Article III of this  Agreement the Seller has  transferred  and
assigned  to the Trust all rights of the Seller to cause UAC under the  Purchase
Agreement  to  repurchase   Receivables  in  the  event  of  a  breach  of  such
representations and warranties.

         (b) It is the intention of the Seller that,  other than for Federal and
applicable  state and local income and franchise tax purposes,  the transfer and
assignment  herein  contemplated,  taken  as a whole,  constitute  a sale of the
Receivables from the Seller to the Trust and that the beneficial interest in and
title to the Receivables not be part of the receivership  estate in the event of
the  appointment  of a receiver  for the Seller.  No  Receivable  has been sold,
transferred,  assigned,  or pledged  by the Seller to any Person  other than the
Trust. Immediately prior to the transfer and assignment herein contemplated, the
Seller had good and marketable  title to each  Receivable  free and clear of all
liens, and, immediately upon the transfer thereof, the Trust (for the benefit of
the  Certificateholder  and the Secured Parties pursuant to the Indenture) shall
have good and marketable title to each  Receivable,  free and clear of all liens
and rights of others,  except  for the rights of the  Certificateholder  and the
Insurer;  and the transfer has been perfected  under the UCC. On or prior to the
Closing Date, all filings (including, without limitation, UCC filings) necessary
in any  jurisdiction to give the Trust a first perfected  ownership  interest in
the Receivables shall have been made.

         SECTION 7.02. Repurchase Upon Breach. The Seller, UAC, the Servicer, or
the Owner Trustee,  as the case may be, shall inform the Indenture Trustee,  the
Insurer and the other parties  promptly,  in writing,  upon the discovery of any
breach  of  the  representations  and  warranties   contained  in  the  Purchase
Agreement. This obligation shall not constitute an obligation on the part of the
Owner Trustee to actively seek to discover any such breaches.  Unless the breach
shall have been cured by the second Record Date  following the  discovery,  UAC,
pursuant to its obligations under the Purchase  Agreement,  shall repurchase any
Receivable  materially  and  adversely  affected by the breach as of such Record
Date (or, at UAC's option,  the first Record Date following the  discovery).  In
consideration  of the purchase of the  Receivable,  UAC shall remit the Purchase
Amount,  in the manner  specified in Section 9.03.  The sole remedy of the Owner
Trustee,  the Trust,  or the  Indenture  Trustee with respect to a breach of the
representations  and warranties  referred to in Section 7.01 shall be to require
UAC to  repurchase  Receivables  pursuant  to the  Purchase  Agreement  and this
Section 7.02.

         SECTION 7.03. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce  administrative  costs, the Trust,  upon
the  execution  and delivery of the  Agreement,  hereby  revocably  appoints the
Servicer,  and the Servicer hereby accepts such appointment,  for the benefit of
the Trust and the Indenture Trustee, to act as the agent of the Trust

                                                        18

<PAGE>

as  custodian  of the  following  documents  or  instruments  which  are  hereby
constructively delivered to the Trust with respect to each Receivable:

                  (i)      The original of the Receivable.

                  (ii) The original  credit  application  fully  executed by the
         Obligor.

                  (iii) The original certificate of title or such documents that
         the Seller or  Servicer  shall  keep on file,  in  accordance  with its
         customary procedures, evidencing the security interest of the Seller in
         the Financed Vehicle.

                  (iv) Any and all  other  documents  that the  Servicer  or the
         Seller shall keep on file, in accordance with its customary procedures,
         relating to a Receivable, an Obligor, or a Financed Vehicle.

         SECTION 7.04.  Duties of Servicer as Custodian.

         (a) Safekeeping. The Servicer, in its capacity as custodian, shall hold
the  Receivable  Files on behalf of the  Trust  for the use and  benefit  of the
Trust, and maintain such accurate and complete accounts,  records,  and computer
systems  pertaining to each  Receivable File as shall enable the Trust to comply
with this  Agreement  and the other Basic  Documents to which it is a party.  In
performing its duties as custodian the Servicer shall act with reasonable  care,
using  that  degree of skill and  attention  that the  Servicer  exercises  with
respect  to  the  receivable   files  relating  to  all  comparable   automotive
receivables that the Servicer  services for itself.  The Servicer shall conduct,
or cause to be conducted,  periodic  audits of the  Receivable  Files held by it
under  this  Agreement,  and of the  related  accounts,  records,  and  computer
systems,  in such a manner as shall  enable the Trust to verify the  accuracy of
the Servicer's  record keeping.  The Servicer shall promptly report to the Owner
Trustee and the Indenture Trustee any failure on its part to hold the Receivable
Files and  maintain  its  accounts,  records,  and  computer  systems  as herein
provided  and  promptly  take  appropriate  action to remedy  any such  failure;
provided,  however,  notwithstanding anything to the contrary in Section 7.03 or
this Section 7.04, the Servicer shall not be required to possess the original of
Receivables representing less than 2% of the Original Pool Balance until 30 days
following the Closing Date.

         (b)  Maintenance of and Access to Records.  The Servicer shall maintain
each  Receivable  File at one of its  offices  specified  in  Schedule B to this
Agreement,  or at such other office as shall be  specified to the Owner  Trustee
and the  Indenture  Trustee by prior  written  notice.  The Servicer  shall make
available  to the  Owner  Trustee  and the  Indenture  Trustee  and  their  duly
authorized  representatives,  attorneys,  or auditors a list of locations of the
Receivable Files, the Receivable Files, and the related accounts,  records,  and
computer  systems  maintained by the Servicer at such times as the Owner Trustee
shall instruct.

                                                        19

<PAGE>

         (c) Release of Documents.  Upon instruction from the Owner Trustee, the
Servicer  shall release any document in a Receivable  File to the Owner Trustee,
the Owner Trustee's agent, or the Owner Trustee's designee,  as the case may be,
at  such  place  or  places  as the  Owner  Trustee  may  designate,  as soon as
practicable.

         SECTION  7.05.  Instructions;  Authority to Act. The Servicer  shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written  instructions signed by a Responsible Officer of the
Owner Trustee on behalf of the Trust.

         SECTION  7.06.  Custodian's   Indemnification.   The  Servicer,   shall
indemnify the Trust,  the Owner Trustee and the Indenture  Trustee  (which shall
include, for purposes of this Section 7.06, their directors, officers, employees
and  agents)  for any and all  liabilities,  obligations,  losses,  compensatory
damages, payments, costs, or expenses of any kind whatsoever that may be imposed
on, incurred,  or asserted against the Trust, the Owner Trustee or the Indenture
Trustee as the result of any improper act or omission in any way relating to the
maintenance  and custody by the  Servicer  of the  Receivable  Files;  provided,
however,  that the  Servicer  shall not be liable  for any  portion  of any such
amount resulting from the willful  misfeasance,  bad faith, or negligence of the
Owner  Trustee or the  Indenture  Trustee.  This  indemnity  shall  survive  the
termination  of this  Agreement  and the  resignation  or  removal  of the Owner
Trustee or the Indenture Trustee.

         SECTION  7.07.   Effective  Period  and  Termination.   The  Servicer's
appointment as custodian shall become  effective as of the Cutoff Date and shall
continue in full force and effect  until  terminated  pursuant  to this  Section
7.07.  If the Servicer  shall resign in accordance  with the  provisions of this
Agreement or if all of the rights and  obligations  of the  Servicer  shall have
been  terminated  under  Section  14.01,  the  appointment  of the  Servicer  as
custodian  may be  terminated  by the Trust with the  consent  of the  Indenture
Trustee  and the  Insurer  (so  long as the  Insurer  is not in  default  of its
obligations  under  the  Policy).  In  addition,  the Trust  may  terminate  the
Servicer's  appointment  as  custodian  with  cause  at any  time  upon  written
notification to the Servicer and the Indenture  Trustee.  As soon as practicable
after any  termination  of such  appointment,  the  Servicer  shall  deliver the
Receivable Files to the Indenture  Trustee or the Trust's agent at such place or
places as the Owner  Trustee  on behalf of the  Trust,  with the  consent of the
Insurer and the Indenture Trustee, may reasonably designate.

                                  ARTICLE VIII

                   Administration and Servicing of Receivables

         SECTION 8.01. Duties of Servicer.  The Servicer, for the benefit of the
Trust and the Secured  Parties,  shall  manage,  service,  administer,  and make
collections on the Receivables  with reasonable care, using that degree of skill
and attention that the Servicer exercises with respect to all

                                                        20

<PAGE>

comparable  automotive  receivables that it services for itself.  The Servicer's
duties shall include collection and posting of all payments, making Advances (in
the  Servicer's  sole  discretion),  responding  to  inquiries of Obligors or of
federal,   state  or  local   governmental   authorities  with  respect  to  the
Receivables,  investigating delinquencies,  sending payment coupons to Obligors,
accounting for collections,  and furnishing monthly and annual statements to the
Owner  Trustee and the  Indenture  Trustee  with respect to  distributions.  The
Servicer  shall follow its  customary  standards,  policies,  and  procedures in
performing  its duties as  Servicer.  Without  limiting  the  generality  of the
foregoing,  the Servicer is authorized and empowered by the Trust to execute and
deliver,  on behalf of  itself,  the Trust,  the Owner  Trustee,  the  Indenture
Trustee or any of them, any and all instruments of satisfaction or cancellation,
or partial or full release or discharge,  and all other comparable  instruments,
with respect to such  Receivables  or to the  Financed  Vehicles  securing  such
Receivables.  If the Servicer  shall  commence a legal  proceeding  to enforce a
Receivable or a Defaulted Receivable,  the Trust and the Indenture Trustee shall
thereupon be deemed to have  automatically  assigned,  solely for the purpose of
collection, such Receivable to the Servicer. The Owner Trustee and the Indenture
Trustee shall  execute any  documents  prepared by the Servicer and delivered to
the Trust for execution that are necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder.

         SECTION 8.02. Collection of Receivable Payments. (a) The Servicer shall
make  reasonable  efforts to collect all payments called for under the terms and
provisions of such  Receivables  as and when the same shall become due and shall
follow such  collection  procedures as it follows with respect to all comparable
automotive  receivables that it services for itself. If payments are extended in
the ordinary course of the Servicer's collection  procedures,  and, as a result,
any Receivable  would be outstanding at the Stated Final Payment Date,  then the
Servicer shall be obligated to purchase such Receivable pursuant to Section 8.07
(unless such Receivable is otherwise being purchased  pursuant to Section 16.02)
as of the last day of the  Collection  Period  immediately  preceding the Stated
Final Payment Date.  The Servicer may in its  discretion  waive any late payment
charge or any other fees that it is entitled to retain under  Section  8.08,  or
other fee (to the extent consistent with its credit and collection policy on the
Closing  Date) that may be  collected  in the  ordinary  course of  servicing  a
Receivable.

         (b) All  allocations  of  payments  with  respect to a  simple-interest
Receivable to principal and interest and  determinations of periodic charges and
the like  shall be made using the simple  interest  method,  based on either the
actual number of days elapsed and the actual number of days in the calendar year
or on the basis of a thirty-day  month and a 360-day calendar year, as specified
in the related  installment  sales  contract or  installment  loan and  security
agreement.  Each payment on a simple interest  Receivable shall be applied first
to the amount of  interest  accrued on such  Receivable  to the date of receipt;
second,  to principal due on such  Receivable;  third, to late charges,  if any,
accrued on such Receivable;  and last, to reduce the remaining  principal amount
outstanding on such Receivable. Payments made by or on behalf of an Obligor on a
Precomputed Receivable including any

                                                        21

<PAGE>

Payaheads previously made and added to the Payahead Balance with respect to such
Precomputed  Receivable  shall be applied  first to overdue  Scheduled  Payments
(including reduction of Outstanding Advances as provided in Section 9.05). Next,
any excess shall be applied to the Scheduled  Payment and any  remaining  excess
shall be added to the  Payahead  Balance,  and shall be  applied  to prepay  the
Precomputed Receivable, but only if such Payahead Balance shall be sufficient to
prepay the Receivable in full.  Otherwise,  any such remaining  excess  payments
shall constitute a Payahead and shall increase the Payahead Balance.

         SECTION 8.03. Realization Upon Receivables.  (a) On behalf of the Trust
and the Secured Parties the Servicer shall use its best efforts, consistent with
its  customary  servicing  procedures,  to repossess  or  otherwise  convert the
ownership  of the  Financed  Vehicle  securing  any  Receivable  as to which the
Servicer shall have  determined that eventual  payment in full is unlikely.  The
Servicer  shall follow such  customary and usual  practices and procedures as it
shall deem  necessary or advisable in its servicing of  automotive  receivables,
which may include reasonable efforts to realize upon any recourse to Dealers and
selling the Financed  Vehicle at public or private sale. The foregoing  shall be
subject to the provision  that, in any case in which the Financed  Vehicle shall
have suffered damage, the Servicer shall not expend funds in connection with the
repair or the repossession of such Financed Vehicle unless it shall determine in
its  discretion  that  such  repair  and/or   repossession   will  increase  the
Liquidation Proceeds. After appropriate disposition of the Financed Vehicle, the
Servicer shall also take such measures as it deems reasonable and appropriate to
realize value in respect of any deficiency  balance of the Receivable  including
pursuit of action on behalf of the Trust and/or the Secured  Parties against the
Obligor with respect to such deficiency.

         (b) Unless  otherwise  stated in this  Agreement,  the  Servicer  shall
either purchase or liquidate each Financed  Vehicle that has not previously been
liquidated  and that secures,  or  previously  secured,  a Defaulted  Receivable
either  (i) by the end of the  Collection  Period  preceding  the  Stated  Final
Payment  Date or (ii) if  earlier,  by the end of the  ninth  Collection  Period
following the Collection  Period during which such Receivable became a Defaulted
Receivable.  Any purchase of a Financed Vehicle by the Servicer shall be made at
a price equal to the fair market value of the Financed  Vehicle as determined by
the Servicer in accordance with the Servicer's normal servicing standards.

         SECTION 8.04.  Physical Damage Insurance.  The Servicer,  in accordance
with its  customary  servicing  procedures  and  underwriting  standards,  shall
require that each Obligor shall have obtained and shall maintain physical damage
insurance covering the Financed Vehicle.

         SECTION 8.05.  Maintenance of Security  Interests in Financed Vehicles.
The Servicer shall, in accordance with its customary servicing procedures,  take
such steps as are necessary to ensure that  perfection of the security  interest
created by each  Receivable in the related  Financed  Vehicle has been obtained,
and to maintain such security interest. The Trust hereby authorizes the Servicer
to take such steps as are  necessary to  re-perfect  such  security  interest on
behalf of the Trust in the event of

                                                        22

<PAGE>

the relocation of a Financed  Vehicle or for any other reason.  Without limiting
the foregoing,  in the event that the Servicer  consigns a repossessed  Financed
Vehicle to an  affiliate  for  liquidation,  it shall take such  measures as are
necessary  or  appropriate  to maintain  the  security  interest in the Financed
Vehicle in the hands of the consignee until such Financed Vehicle is liquidated,
including appropriate  precautionary UCC-1 filings. In addition, UAC and/or such
affiliate  will notify such  affiliate's  creditors,  if any, of such  consignee
affiliate arrangements described above on or before such arrangements are made.

         SECTION 8.06. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle  securing any Receivable from the security  interest granted by
such  Receivable  in whole or in part  except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the  Certificateholder  or the Secured Parties in the Receivables,  nor shall
the Servicer  change the amount of the  Scheduled  Payment under a Receivable or
change the Amount  Financed  under a Receivable or reduce the Contract Rate of a
Receivable  (except  if  so  ordered  by a  bankruptcy  court  in  a  proceeding
concerning the Obligor or otherwise mandated by law).

         SECTION 8.07.  Purchase of Receivables Upon Breach.  The Servicer,  the
Indenture  Trustee or the Owner  Trustee  shall  inform the other  party and the
Indenture  Trustee and the Insurer promptly,  in writing,  upon the discovery of
(i) any breach by the Servicer of its obligations under Section 8.06 or (ii) the
existence of the  Servicer's  obligation  to purchase a  Receivable  pursuant to
Section 8.02(a).  This obligation shall not constitute an obligation on the part
of the Owner Trustee or the  Indenture  Trustee to discover any such breaches or
circumstances. Unless the breach under Section 8.06 shall have been cured by the
second Record Date  following the  discovery,  the Servicer  shall  purchase any
Receivable  materially and adversely affected by such breach as of such day (or,
at  the  Servicer's  election,  as  of  the  first  Record  Date  following  the
discovery).  In consideration  of the purchase of such Receivable,  the Servicer
shall remit the Purchase  Amount with respect to such  Receivable  in the manner
specified in Section 9.03. The sole remedy of the Owner Trustee,  the Trust,  or
the Secured  Parties  with  respect to a breach  pursuant to Section 8.06 or the
grant of an extension which triggers an obligation of the Servicer under Section
8.02(a)  shall be to require the  Servicer to purchase  Receivables  pursuant to
this Section 8.07, except as provided in Section 13.02.

         SECTION 8.08.  Servicing Fee. The servicing fee for a Collection Period
shall equal the Monthly  Servicing  Fee (except  that in the case of a successor
Servicer, the servicing fee shall equal such amount as is arranged in accordance
with Section  14.02).  The Servicer shall be entitled to retain from payments of
interest on the Receivables collected during a Collection Period an amount equal
to the Monthly  Servicing  Fee due the  Servicer  in respect of such  Collection
Period and need not deposit such amount in the Collection Account.  The Servicer
shall  also be  entitled  to  retain,  and need not  deposit  in the  Collection
Account, all late fees, Prepayment Charges, other administrative fees or similar
charges allowed by applicable law with respect to Receivables, if any, collected
(from whatever  source) on the  Receivables.  The Monthly  Servicing Fee will be
paid only out of the funds

                                                        23

<PAGE>

of the  Trust  and not from the  Owner  Trustee's  own  funds.  So long as Union
Acceptance  Corporation  is the Servicer,  if the Servicer fails to pay the fees
and expenses of the Owner Trustee or the Indenture  Trustee  pursuant to Section
15.07  hereof or  pursuant to the  Indenture,  the Owner  Trustee and  Indenture
Trustee shall be entitled to receive such amount from the Monthly  Servicing Fee
prior to payment  thereof to the Servicer and the Servicer shall not retain from
collections  that portion of the Monthly  Servicing Fee equal to any fees of the
Owner  Trustee  and  Indenture  Trustee  that are due and payable and any unpaid
amount that the  Servicer has  received  notice is due the Owner  Trustee or the
Indenture Trustee as reimbursement for expenses.

         SECTION 8.09.  Servicer's  Certificate.  On or before the Determination
Date following each Collection  Period,  the Servicer shall deliver to the Owner
Trustee,  the  Indenture  Trustee and the Insurer a  Servicer's  Certificate  in
substantially  the form of Exhibit 3 attached hereto  containing all information
necessary to make the  distributions  pursuant to Section 9.04 of the  Indenture
(so long as the Notes remain  outstanding)  for the Collection  Period preceding
the date of such Servicer's  Certificate  and all information  necessary for the
Indenture Trustee to send statements to the Noteholders and the Owner Trustee to
send statements to the Certificateholder,  including (A) the amount of aggregate
collections  on the  Receivables,  (B)  the  aggregate  Purchase  Amount  of the
Receivables  repurchased by UAC and purchased by the Servicer,  (C) with respect
to Precomputed  Receivables  the net deposit from the Collection  Account to the
Payahead  Account  or the  net  withdrawal  from  the  Payahead  Account  to the
Collection Account required for the Collection Period in accordance with Section
9.09 of the Indenture, and in the case of a net withdrawal, the Monthly Interest
and Monthly Principal reported on such Servicer's  Certificate shall reflect the
portions of such withdrawal  allocable to interest and principal,  respectively,
in accordance with this Agreement,  (D) the amount, if any, to be withdrawn from
the Spread  Account  and the  amount,  if any,  to be drawn on the  Policy,  (E)
information  respecting (i) delinquent  Receivables  that are 30, 60 and 90 days
past due, and (ii) the number of repossessions  of Financed  Vehicles during the
preceding  Collection  Period,  number  of  unliquidated   repossessed  Financed
Vehicles, gross and net losses on the Receivables, and recoveries on charged off
Receivables;  and (F) each other item  listed in Section  9.04 of the  Indenture
reasonably requested by a Rating Agency, the Indenture Trustee or the Insurer in
order to monitor the performance of the  Receivables.  Receivables  purchased by
UAC as of the last day of such Collection  Period shall be identified by the UAC
account  number with respect to such  Receivable  (as specified in Schedule A to
this Agreement).

         SECTION 8.10. Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Owner Trustee,  the Indenture  Trustee and the
Insurer,  on or before  April 30 of each year,  beginning  on the first April 30
that is at least six months after the Closing  Date,  an Officers'  Certificate,
dated as of December 31 of the preceding year,  stating that (i) a review of the
activities of the Servicer during the preceding  12-month period (or in the case
of the initial  Officer's  Certificate,  the period from the Closing Date to and
including the date of such Officer's  Certificate) and of its performance  under
this Agreement has been made under such officer's supervision and (ii)

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<PAGE>

to the best of such officer's knowledge,  based on such review, the Servicer has
fulfilled all its obligations under this Agreement  throughout such year, or, if
there has been a default in the fulfillment of any such  obligation,  specifying
each such  default  known to such officer and the nature and status  thereof.  A
copy of such  certificate  and the report  referred  to in  Section  8.11 may be
obtained by any  Certificateholder at its own expense by a request in writing to
the Owner Trustee addressed to the Corporate Trust Office.

         (b) The Servicer  shall deliver to a  Responsible  Officer of the Owner
Trustee,  the Indenture Trustee and the Insurer,  promptly after having obtained
knowledge  thereof,  but in no event  later  than 5  Business  Days  thereafter,
written notice in an Officers' Certificate of any event which with the giving of
notice or lapse of time,  or both,  would  become an Event of  Servicer  Default
under Section 14.01. The Seller or UAC shall deliver to a Responsible Officer of
the Owner Trustee, the Indenture Trustee and the Insurer,  promptly after having
obtained  knowledge  thereof,  but  in no  event  later  than  5  Business  Days
thereafter,  written notice in an Officers'  Certificate of any event which with
the  giving  of  notice  or lapse of time,  or both,  would  become  an Event of
Servicer Default under clause (ii) of Section 14.01.

         SECTION 8.11. Annual Independent  Certified Public Accountant's Report.
The Servicer shall cause a firm of independent certified public accountants, who
may also render other services to the Servicer, to deliver to the Owner Trustee,
the  Indenture  Trustee and the Insurer on or before  September  30 of each year
concerning  the 12-month  period  ended June 30 of such year (or shorter  period
since the date of this Agreement), beginning on the first September 30 following
the first June 30 after the Closing  Date,  a report  addressed  to the Board of
Directors  of the  Servicer  to the  effect  that  such  firm has  reviewed  the
servicing of the  Receivables  by the Servicer and that such review (1) included
tests relating to new or used automobile, van and light truck loans serviced for
others in accordance  with the  requirements of the Uniform Single Audit Program
for  Mortgage  Bankers,  to the  extent  the  procedures  in  such  program  are
applicable  to the servicing  obligations  set forth in the  Agreement,  and (2)
except as described  in the report,  disclosed  no  exceptions  or errors in the
records  relating to  automobile,  van or light truck loans  serviced for others
that, in the firm's opinion,  paragraph four of such program  requires such firm
to report.

         The  report  will also  indicate  that the firm is  independent  of the
Servicer within the meaning of the Code of  Professional  Ethics of the American
Institute of Certified Public Accountants.

         SECTION 8.12. Access to Certain Documentation and Information Regarding
Receivables.  The Servicer shall provide to the Owner Trustee, Indenture Trustee
and the Insurer access to the Receivables Files in such cases where such parties
shall  be  required  by  applicable  statutes  or  regulations  to  review  such
documentation. Access shall be afforded without charge, but only upon reasonable
request and during the normal  business hours at the  respective  offices of the
Servicer. Nothing in this Section shall affect the obligation of the Servicer to
observe any applicable law

                                                        25

<PAGE>

prohibiting disclosure of information regarding the Obligors, and the failure of
the Servicer to provide  access to  information  as a result of such  obligation
shall not constitute a breach of this Section 8.12.

         SECTION 8.13. Servicer Expenses.  The Servicer shall be required to pay
all  expenses  incurred  by it in  connection  with  its  activities  hereunder,
including fees and  disbursements of independent  accountants,  taxes imposed on
the  Servicer,  and expenses  incurred in connection  with regular  payments and
reports to Noteholders.

         SECTION 8.14.  Reports to Noteholders.  The Owner Trustee shall provide
to any Noteholder who so requests in writing  (addressed to the Corporate  Trust
Office)  a copy  of any  certificate  described  in  Section  8.09,  the  annual
statement  described in Section 8.10, or the annual report  described in Section
8.11. The Owner Trustee may require the requesting party to pay a reasonable sum
to cover the cost of the Owner Trustee complying with such request.

                                   ARTICLE IX

         Collections; Distributions to Noteholders and Certificateholder

         SECTION  9.01.  Collection  Account.  The Seller  shall  establish  the
Collection  Account as a segregated  trust  account in the name of the Trust for
the benefit of the Secured Parties with the Indenture  Trustee (at the Indenture
Trustee  Office)  or  another  Eligible  Bank.  The  Servicer  shall  direct the
Indenture  Trustee to invest the amounts in the  Collection  Account in Eligible
Investments  that  mature  not  later  than the  Business  Day prior to the next
succeeding Payment Date and to hold such Eligible  Investments to maturity.  The
Servicer  shall  instruct the  Indenture  Trustee (or its  custodian) to and the
Indenture  Trustee shall at all times (i) maintain  possession of any negotiable
instruments or securities evidencing Eligible Investments until the time of sale
or maturity and each certificated  security or negotiable  instrument evidencing
an Eligible Investment shall be endorsed in blank or to the Indenture Trustee or
registered  in the  name of the  Owner  Trustee  and  (ii)  cause  any  Eligible
Investment  represented  by an  uncertificated  security to be registered in the
name of the Indenture Trustee.

         SECTION  9.02.  Collections.  (a)  The  Servicer  shall  remit  to  the
Collection  Account  all  payments  by or on  behalf  of  the  Obligors  on  the
Receivables  and  all  Liquidation  Proceeds,   both  as  collected  during  the
Collection Period net of Monthly Servicing Fees and administrative  fees allowed
to be retained by the Servicer  pursuant to Section 8.08 and net of charge backs
(attributable  to errors in posting,  returned  checks,  or rights of offset for
amounts that should not have been paid or that must be refunded as the result of
a successful  claim or defense under  bankruptcy or similar laws) not later than
the second  Business  Day  following  the Business Day on which such amounts are
received by the Servicer.  Notwithstanding the foregoing, for so long as (a) UAC
remains the Servicer,  (b) no Event of Servicer  Default shall have occurred and
be  continuing  and (c)(1) UAC maintains a short- term rating of at least A-1 by
Standard & Poor's and P-l by Moody's  (and for five  Business  Days  following a
reduction in either such rating) or (2) prior to ceasing daily remittances,  the
Rating  Agency  Condition  shall  have been  satisfied  (and any  conditions  or
limitations imposed by the Rating Agencies in connection  therewith are complied
with) and the prior  written  consent  of the  Insurer  (not to be  unreasonably
withheld) shall have been obtained, the Servicer may remit all such payments and
Liquidation  Proceeds with respect to any  Collection  Period to the  Collection
Account on a less frequent basis,  but in no event later than the  Determination
Date  immediately  preceding  each Payment  Date.  The Servicer  shall remit any
Advances  with respect to a Collection  Period to the  Collection  Account on or
before the Determination Date.

         (b) The Servicer,  the Owner  Trustee  and/or  Indenture  Trustee shall
deposit in the Collection  Account any funds received by such parties in respect
of funds drawn under the Policy from the Insurer.

         (c) If the Available  Funds for a Payment Date are  insufficient to pay
current and past due  Insurance  Premiums,  or any amounts  owing to the Insurer
pursuant   to   the   Insurance   Agreement   including,   without   limitation,
reimbursements,  indemnities,  fees and expenses, plus accrued interest thereon,
to the Insurer,  the Servicer  shall notify the Owner  Trustee and the Indenture
Trustee of such  deficiency,  and the Available  Spread Amount,  if any, then on
deposit in the Spread  Account (after giving effect to any withdrawal to satisfy
a deficiency  in Monthly  Interest or Monthly  Principal)  shall be available to
cover such deficiency.

         SECTION 9.03.  Purchase  Amounts.  (a) Not later than the Determination
Date,  the  Servicer,  UAC or the Owner  Trustee  shall remit to the  Collection
Account the aggregate  Purchase  Amount for such  Collection  Period pursuant to
Sections 7.02 and 8.07 and (b) not later than 11:00 a.m. (New York City time) on
the related Payment Date, the Servicer shall remit to the Collection Account the
aggregate  Optional  Disposition  Price for  Receivables  on such  Payment  Date
pursuant to Section 16.02.

         SECTION 9.04. Application of Funds. (a) On each Determination Date, the
Servicer shall  determine (i) the amount of payments on all  Receivables and all
Liquidation  Proceeds  received  during such  Collection  Period,  the amount of
Advances for such Collection Period, and the Purchase Amount for all Receivables
purchased or repurchased with respect to such Collection  Period which have been
deposited  in the  Collection  Account  (excluding  amounts  required to be paid
pursuant to Sections  7.02,  8.07, and 9.05 but not so paid) after giving effect
to the net transfer from the Collection  Account to the Payahead Account or from
the Payahead  Account to the  Collection  Account as provided in Section 9.09 of
the Indenture (the "Available Funds"), and (ii) the amount of funds necessary to
make the distributions  required pursuant to Section 9.04(a) (i) through (xi) of
the  Indenture,  inclusive,  on the next Payment Date.  The Servicer  shall by a
Servicer's  Certificate  on or before the  Determination  Date  notify the Owner
Trustee and the Indenture Trustee of such

                                                        26

<PAGE>

amounts by telecopy to the  Corporate  Trust  Office and the  Indenture  Trustee
Office or to such  numbers as the Owner  Trustee or  Indenture  Trustee may from
time to time  provide,  followed  promptly  by mailing  such notice to the Owner
Trustee and the Indenture Trustee and to the Insurer.

         (b) On any  Payment  Date on which there are not  sufficient  Available
Funds to make the distributions required pursuant to Section 9.04(a) (i) through
(vi) of the Indenture  (after reducing the amount of Monthly  Principal which is
payable  on such date  pursuant  to Section  9.04(b)(i)  of the  Indenture),  if
necessary,  the  Indenture  Trustee  may, or the  Servicer on its behalf  shall,
withdraw from the Spread Account,  to the extent of the Available Spread Amount,
an amount  equal to such  deficiency  and  promptly  deposit  such amount in the
Collection  Account. If such deficiency exceeds the Available Spread Amount, the
Servicer  shall  simultaneously  and in the same  manner  also  notify the Owner
Trustee,  the  Indenture  Trustee  and the  Insurer of the amount of such excess
deficiency.

         (c) On each Payment Date,  the Owner  Trustee  shall  distribute to the
Certificateholder the amount of funds on deposit in the Spread Account in excess
of the Required  Spread Amount,  if any, for such Payment Date, as received from
the  Indenture  Trustee  pursuant to Section  10.02(e) of the  Indenture on such
Payment Date.

         (d)  On  each  Payment  Date,  the  Owner  Trustee  shall  send  to the
Certificateholder  the  Servicer's  Report  provided to the Owner Trustee by the
Servicer for such Payment Date.

         (e) In the event that any  withholding  tax is  imposed on the  Trust's
payment  (or  allocations  of income) to the  Certificateholder,  such tax shall
reduce the amount otherwise distributable to the Certificateholder in accordance
with this Section 9.04.  The Owner Trustee is hereby  authorized and directed to
retain from amounts otherwise distributable to the Certificateholder  sufficient
funds for the  payment  of any tax that is  legally  owed by the Trust (but such
authorization  shall not prevent the Owner Trustee from  contesting any such tax
in appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to a Certificateholder shall be treated as cash distributed
to such Certificateholder at the time it is withheld by the Trust to be remitted
to the appropriate taxing authority.  If there is a possibility that withholding
tax is payable  with  respect to a  distribution  (such as a  distribution  to a
non-U.S.  Certificateholder),  the Owner Trustee in its sole discretion may (but
unless  otherwise  required  by law shall not be  obligated  to)  withhold  such
amounts  in   accordance   with  this   paragraph   (e).   Upon   request,   any
Certificateholder  shall provide its federal employer  identification  number or
any other  information or tax forms the Owner Trustee or the  Administrator  may
reasonably request. In the event that a Certificateholder  wishes to apply for a
refund of any such withholding tax, the Owner Trustee shall reasonably cooperate
with   such   Certificateholder   in   making   such   claim  so  long  as  such
Certificateholder  agrees to reimburse the Owner Trustee for any out-of-  pocket
expenses incurred.

                                                        27

<PAGE>

         (f) Distributions  required to be made to the  Certificateholder on any
Payment Date shall be made to each  Certificateholder of record on the preceding
Record Date either by wire transfer,  in  immediately  available  funds,  to the
account of such  Certificateholder  at a bank or other entity having appropriate
facilities therefor, or by check mailed to such Certificateholder at the address
of such Certificateholder appearing in the Certificate Register.

         SECTION  9.05.  Advances.  (a)  As of  the  last  day  of  the  initial
Collection Period, the Servicer shall advance funds equal to the excess, if any,
of Monthly Interest due in respect of the initial  Collection  Period,  over the
Collected  Interest for such  Collection  Period;  and (b) as of the last day of
each  subsequent  Collection  Period,  the Servicer  shall  advance funds in the
amount of the  Interest  Advance  Amount (or such other  amount as the  Servicer
shall reasonably  determine to cover an Interest Shortfall) with respect to each
Receivable  that is delinquent  for more than 30 days, in each such case, to the
extent that the Servicer,  in its sole  discretion,  determines that the Advance
will be recoverable  from payments by or on behalf of the Obligor,  the Purchase
Amount, or Liquidation  Proceeds.  With respect to each Receivable,  the Advance
paid  pursuant  to  this  Section  9.05  shall  increase  Outstanding  Advances.
Outstanding  Advances shall be reduced by subsequent payments by or on behalf of
the Obligor,  collections of Liquidation  Proceeds,  or payments of the Purchase
Amount.  The  Servicer  shall remit any  Advances  with  respect to a Collection
Period to the Collection Account by the related Determination Date.

         If the  Servicer  shall  determine  that an  Outstanding  Advance  with
respect  to any  Receivable  shall not be  recoverable,  the  Servicer  shall be
reimbursed  from any  collections  made on other  Receivables in the Trust,  and
Outstanding   Advances  with  respect  to  such  Receivable   shall  be  reduced
accordingly.

         SECTION 9.06. Net Deposits. For so long as Union Acceptance Corporation
is the Servicer,  Union Acceptance  Corporation (in whatever  capacity) may make
the remittances with respect to any Payment Date pursuant to Section 9.02 above,
net of amounts to be  distributed  to itself or its delegee  under Section 13.06
(also in whatever  capacity),  if it  determines  pursuant to Section  9.02 that
there is no  deficiency in Available  Funds for such Payment Date.  Nonetheless,
the Servicer  shall  account for all of the above  described  amounts as if such
amounts were deposited and distributed.

         SECTION 9.07. No Segregation of Moneys; No Interest. Subject to Section
9.04,  moneys received by the Owner Trustee  hereunder need not be segregated in
any manner  except to the extent  required by law or this  Agreement  and may be
deposited  under such general  conditions  as may be  prescribed by law, and the
Owner Trustee shall not be liable for any interest thereon.

         SECTION  9.08.  Accounting  and Reports to the  Certificateholder,  the
Internal  Revenue  Service and Others.  The Owner  Trustee  shall deliver to the
Certificateholder,  as may be  required  by the  Code  and  applicable  Treasury
Regulations, or as may be requested by such Certificateholder, such

                                                        28

<PAGE>

information,   reports  or   statements  as  may  be  necessary  to  enable  the
Certificateholder   to  prepare  its  federal  and  state  income  tax  returns.
Consistent with the Trust's  characterization  for tax purposes as a disregarded
entity so long as the Seller or any other Person is the sole beneficial owner of
the Trust,  no federal  income tax return  shall be filed on behalf of the Trust
unless  either (i) the Owner  Trustee  shall receive an Opinion of Counsel that,
based on a change in  applicable  law occurring  after the date hereof,  or as a
result of a transfer by a selling Certificateholder  permitted by Section 11.03,
the Code  requires  such a filing or (ii) the  Internal  Revenue  Service  shall
determine  that the Trust is required  to file such a return.  In the event that
there  shall  be two or more  beneficial  owners  of the  Trust  (including  the
treatment of any class of Notes as a beneficial  ownership in the Trust pursuant
to a final  determination of the Internal Revenue Service or a court), the Owner
Trustee  shall inform the  Indenture  Trustee in writing of such event,  (x) the
Administrator,  on  behalf  of the  Trust  shall  prepare  or shall  cause to be
prepared  federal and, if  applicable,  state or local  partnership  tax returns
required to be filed by the Trust and shall remit such returns to the Seller for
signature (or if the Seller no longer owns the Certificate, to the Seller to the
extent its tax  liability is affected  thereby and  otherwise  to the  successor
Certificateholder)  at least (5) days before  such  returns are due to be filed,
and (y)  capital  accounts  shall be  maintained  for each  beneficial  owner in
accordance  with the  Treasury  Regulations  under  Section  704(b)  of the Code
reflecting each such beneficial owner's share of the income, gains,  deductions,
and  losses  of the  Trust  and/or  guaranteed  payments  made by the  Trust and
contributions  to,  and  distributions  from,  the  Trust.  The  Seller (or such
successor Certificateholder, as applicable) shall promptly sign such returns and
deliver such returns  after  signature  to the  Administrator,  on behalf of the
Trust and such  returns  shall be filed by the  Administrator,  on behalf of the
Trust with the  appropriate  tax  authorities.  In the event that a "tax matters
partner"  (within  the  meaning of Code  Section  6231(a)(7))  is required to be
appointed  with  respect to the Trust,  the Seller is hereby  designated  as tax
matters  partner or, if the Seller is not the  Certificateholder,  the Seller to
the extent its tax  liability is affected  thereby and  otherwise  the successor
Certificateholder, shall be designated as tax matters partner. In no event shall
the  Owner  Trustee,   the   Administrator  or  the  Seller  (or  such  designee
Certificateholder,  as  applicable)  be  liable  for any  liabilities,  costs or
expenses of the Trust or the  Noteholders  arising out of the application of any
tax law,  including federal,  state,  foreign or local income or excise taxes or
any other tax  imposed on or  measured  by income (or any  interest,  penalty or
addition  with respect  thereto or arising  from a failure to comply  therewith)
except  for any  such  liability,  cost or  expense  attributable  to any act or
omission by the Owner Trustee, the Administrator or the Seller (or such designee
Certificateholder  as  applicable),  as  the  case  may  be,  in  breach  of its
obligations under this Agreement.  Unless otherwise  instructed by a majority in
interest   of  the   Certificateholders,   none  of  the  Owner   Trustee,   the
Administrator, or the Seller shall elect, or shall cause an election to be made,
under  (i)  Section  1278 of the  Code to  accrue  its  market  discount  income
currently or (ii) Section 754 of the Code.

         SECTION  9.09.  Payahead  Account.  The Servicer  shall  establish  the
Payahead  Account  in the name of the Trust on behalf  of the  Obligors  and the
Noteholder  as their  interests  may appear.  The  Servicer  shall  maintain the
Payahead Account pursuant to Section 9.09 of the Indenture.

                                                        29

<PAGE>

                                    ARTICLE X

                               Intentionally Blank

                                   ARTICLE XI

                                 The Certificate

         SECTION 11.01. The Certificate.  The Certificate shall be issued in the
form of one or more  certificates  and shall  initially be issued to the Seller.
The Certificate  shall be executed on behalf of the Trust by manual or facsimile
signature of a Responsible  Officer of the Owner Trustee. A Certificate  bearing
the manual or facsimile  signatures  of  individuals  who were, at the time when
such  signatures  shall have been  affixed,  authorized to sign on behalf of the
Trust,  shall be a valid and binding  obligation  of the Trust,  notwithstanding
that such individuals or any of them shall have ceased to be so authorized prior
to the  authentication  and  delivery of such  Certificate  or did not hold such
offices at the date of such Certificate.

         SECTION 11.02.  Authentication of Certificate.  The Owner Trustee shall
cause the Certificate to be executed on behalf of the Trust,  authenticated  and
delivered to or upon the written order of the Seller,  signed by its chairman of
the board,  its president,  or any vice  president,  without  further  corporate
action by the Seller, in authorized  denominations,  pursuant to this Agreement.
No Certificate shall entitle its holder to any benefit under this Agreement,  or
shall be valid for any purpose,  unless there shall appear on such Certificate a
certificate  of  authentication,  substantially  as set  forth  in the  form  of
Certificate attached as an exhibit to this Agreement,  executed by a Responsible
Officer of the Owner  Trustee by manual  signature;  such  authentication  shall
constitute  conclusive  evidence  that  such  Certificate  shall  have been duly
authenticated and delivered hereunder.  Each Certificate shall be dated the date
of its authentication.

         SECTION 11.03.  Registration  of Transfer and Exchange of  Certificate.
The Owner Trustee shall keep or cause to be kept, at the Corporate Trust Office,
a Certificate  Register in which,  subject to such reasonable  regulations as it
may  prescribe,  the  Owner  Trustee  shall  provide  for  the  registration  of
Certificates  and of  transfers  and  exchanges of  Certificates  subject to the
restrictions provided herein.

         Upon surrender for  registration  of transfer of any Certificate at the
Corporate  Trust  Office,  the Owner Trustee shall  execute,  authenticate,  and
deliver,  in the name of the designated  transferee or transferees,  one or more
new Certificates in authorized denominations of a like aggregate amount

                                                        30

<PAGE>

dated the date of authentication by the Owner Trustee,  provided,  however, that
registration  of transfer of a  Certificate  may not be effected  unless (A) the
Owner Trustee receives an Opinion of Counsel,  satisfactory to it, to the effect
that  (i) such  transfer  may be made in  reliance  upon an  exemption  from the
registration  requirements  of the Securities Act of 1933, as amended,  and (ii)
such transfer  will not  adversely  affect the tax treatment of the Trust or the
Notes;  (B) the Insurer has consented to such transfer and (C) the Rating Agency
Condition shall have been satisfied with respect to such transfer.

         Every Certificate presented or surrendered for registration of transfer
or exchange  shall be  accompanied  by a written  instrument of transfer in form
satisfactory  to the Owner  Trustee duly  executed by the Holder or his attorney
duly authorized in writing.  Each  Certificate  surrendered for  registration of
transfer and exchange shall be canceled and subsequently  destroyed by the Owner
Trustee.

         The  Seller,  as the  initial  Certificateholder,  and each  subsequent
Certificateholder by its acceptance of its Certificate,  represents and warrants
to the  Trust,  the  Owner  Trustee  and the  Secured  Parties  that it is not a
"Benefit  Plan" (as such  term is  defined  in the  Employee  Retirement  Income
Security  Act of 1974,  as  amended)  or a person  who is not a  "United  States
person"  within the  meaning of  Section  7701(a)(30)  of the Code and agrees to
indemnify and hold harmless the Trust, the Owner Trustee and the Secured Parties
in respect of any tax,  loss,  liability or expense  incurred as a result of the
breach of such representation and warranty by such Certificateholder.

         No service  charge  shall be made for any  registration  of transfer or
exchange of a  Certificate,  but the Owner Trustee may require  payment of a sum
sufficient  to cover  any tax or  governmental  charge  that may be  imposed  in
connection with any transfer or exchange of a Certificate.

         SECTION 11.04. Mutilated,  Destroyed, Lost, or Stolen Certificates.  If
(a) any mutilated  Certificate shall be surrendered to the Owner Trustee,  or if
the Owner Trustee shall receive evidence to its satisfaction of the destruction,
loss, or theft of any  Certificate and (b) there shall be delivered to the Owner
Trustee such security or indemnity as may be required by it to save it harmless,
then in the absence of notice that such Certificate  shall have been acquired by
a bona fide  purchaser,  the Owner  Trustee on behalf of the Trust shall execute
and the Owner Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost, or stolen Certificate, a new Certificate
of like tenor and  denomination.  In  connection  with the  issuance  of any new
Certificate  under this Section 11.04, the Owner Trustee may require the payment
of a sum  sufficient to cover any tax or other  governmental  charge that may be
imposed in connection  therewith.  Any duplicate  Certificate issued pursuant to
this  Section  11.04 shall  constitute  conclusive  evidence of ownership in the
Trust, as if originally  issued,  whether or not the lost,  stolen, or destroyed
Certificate shall be found at any time.

                                                        31

<PAGE>

                                   ARTICLE XII

                                   The Seller

         SECTION 12.01.  Representations  and  Undertakings  of Seller.  (a) The
Seller  makes  the  following  representations  on which  the  Trust  relies  in
accepting the Receivables and executing and  authenticating  the Certificate and
undertaking  its  obligations  under the  Indenture.  The Seller agrees that the
representations  and  undertakings  shall  also be for the  benefit of the Owner
Trustee and the Secured Parties.  The representations  speak as of the execution
and delivery of this Agreement and shall survive the sale of the  Receivables to
the Trust.

                           (i)  Organization  and Good Standing.  The Seller has
                  been duly  organized and is validly  existing as a corporation
                  in good standing under the laws of the State of Delaware, with
                  power and authority to own its  properties  and to conduct its
                  business as such properties  shall be currently owned and such
                  business  is  presently  conducted,  and  had at all  relevant
                  times, and has, power,  authority,  and legal right to acquire
                  and own the Receivables.

                           (ii) Due Qualification.  The Seller is duly qualified
                  to do business as a foreign corporation in good standing,  and
                  has  obtained  all  necessary  licenses  and  approvals in all
                  jurisdictions  in which the  ownership or lease of property or
                  the conduct of its business requires such qualifications.

                           (iii) Power and  Authority.  The Seller has the power
                  and  authority  to execute and deliver this  Agreement  and to
                  carry out its terms;  the Seller has full power and  authority
                  to sell and assign the property to be sold and assigned to and
                  deposited with the Trust and has duly authorized such sale and
                  assignment to the Trust by all necessary corporate action; and
                  the execution,  delivery, and performance of the Agreement has
                  been duly authorized by the Seller by all necessary  corporate
                  action.

                           (iv) Valid Sale; Binding Obligations.  This Agreement
                  evidences  a  valid  sale,  transfer,  and  assignment  of the
                  Receivables,  enforceable  against creditors of and purchasers
                  from the Seller;  and  evidences a legal,  valid,  and binding
                  obligation of the Seller  enforceable  in accordance  with its
                  terms.

                           (v)   No   Violation.   The   consummation   of   the
                  transactions contemplated by the Agreement and the fulfillment
                  of the terms hereof do not conflict with, result in any breach
                  of any of the terms and provisions of, nor constitute (with or
                  without notice or lapse of time) a default under,  the charter
                  or by-laws of the

                                                        32

<PAGE>

                  Seller,  or any indenture,  agreement,  or other instrument to
                  which the Seller is a party or by which it shall be bound; nor
                  result in the creation or  imposition  of any Lien upon any of
                  its  properties  pursuant to the terms of any such  indenture,
                  agreement,  or other  instrument  (other than this Agreement);
                  nor violate any law or, to the best of the Seller's knowledge,
                  any order, rule, or regulation applicable to the Seller of any
                  court   or  of  any   federal   or  State   regulatory   body,
                  administrative  agency, or other governmental  instrumentality
                  having jurisdiction over the Seller or its properties.

                           (vi) No  Proceedings.  There  are no  proceedings  or
                  investigations  pending,  or, to the Seller's best  knowledge,
                  threatened,  before any court, regulatory body, administrative
                  agency,   or   other   governmental   instrumentality   having
                  jurisdiction over the Seller or its properties:  (A) asserting
                  the invalidity of this  Agreement,  (B) seeking to prevent the
                  consummation of any of the  transactions  contemplated by this
                  Agreement,  (C) seeking any determination or ruling that might
                  materially and adversely  affect the performance by the Seller
                  of its obligations  under,  or the validity or  enforceability
                  of, this Agreement,  or (D) which might  adversely  affect the
                  federal income tax attributes of the Trust.

                  (b) The Seller further covenants that, prior to termination of
         the Trust:

                           (i) It will not engage at any time in any business or
                  business  activity  other than such  activities  expressly set
                  forth in its  Certificate  of  Incorporation  delivered to the
                  Insurer on or prior to the  Closing  Date,  and will not amend
                  its  Certificate  of  Incorporation  without the prior written
                  consent of the Insurer.

                           (ii) It will not,  without the consent of the Insurer
                  (not to be unreasonably  withheld),  sell,  assign,  pledge or
                  otherwise  transfer,  in whole, or in part or in any series of
                  related or unrelated  transactions any of its right,  title or
                  interest in or to the Certificate.

                           (iii) It will not:

                                    (A)  Fail  to do  all  things  necessary  to
                           maintain its corporate  existence  separate and apart
                           from UAC and any  other  Person,  including,  without
                           limitation,   holding   regular   meetings   of   its
                           stockholders  and board of directors and  maintaining
                           appropriate  corporate books and records (including a
                           current minute book);

                                    (B) Suffer any  limitation  on the authority
                           of its own  directors  and  officers  to conduct  its
                           business and affairs in accordance with

                                                        33

<PAGE>

                           their  independent  business judgment or authorize or
                           suffer any Person  other  than its own  officers  and
                           directors  to  customarily  delegated to others under
                           powers  of  attorney  for which a  corporation's  own
                           Officers   and   directors   would   customarily   be
                           responsible;

                                    (C)  Fail to (I)  maintain  or  cause  to be
                           maintained  by an  agent  of  the  Seller  under  the
                           Seller's control physical possession of all its books
                           and records,  (II) maintain  capitalization  adequate
                           for the conduct of its  business,  (III)  account for
                           and manage all its liabilities  separately from those
                           of any other Person,  including  payment by it of all
                           payroll,  administrative  expenses and taxes, if any,
                           from its own  assets,  (IV)  segregate  and  identify
                           separately  all of its assets from those of any other
                           Person, (V) to the extent any such payments are made,
                           pay its  employees,  officers and agents for services
                           performed  for the Seller or (VI) maintain a separate
                           office address with a separate  telephone number from
                           those of UAC or any other affiliate thereof; or

                                    (D)  Except  as  may  be  provided  in  this
                           Agreement,  or a similar agreement  relating to other
                           securitizations  in  which  the  Seller  has  similar
                           rights and/or  obligations,  commingle its funds with
                           those  of UAC or any  affiliate  thereof  or use  its
                           funds for other than the Seller's uses.

         SECTION 12.02.  Liability of Seller;  Indemnities.  The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.

                         (i)  The  Seller  shall  indemnify,  defend,  and  hold
         harmless, the Owner Trustee in its individual and trust capacities, the
         Indenture Trustee, their respective officers, directors,  employees and
         agents,  the Trust and the Noteholders  from and against any taxes that
         may at any time be asserted  against  such parties with respect to, and
         as of the date  of,  the sale of the  Receivables  to the  Trust or the
         issuance and original sale of the Certificate and the Notes,  including
         any sales, gross receipts, general corporation,  tangible or intangible
         personal property, privilege, or license taxes (but, in the case of the
         Trust,  not including  any taxes  asserted with respect to ownership of
         the  Receivables  or  federal  or other  income  taxes  arising  out of
         distributions  on the  Certificate or the Notes) and costs and expenses
         in defending against the same.

                        (ii)  The  Seller  shall  indemnify,  defend,  and  hold
         harmless,  the Owner Trustee (in its individual and trust  capacities),
         the Indenture Trustee, their officers, directors,  employees and agents
         and the Trust from and against any loss, liability, or expense incurred

                                                        34

<PAGE>

         by  reason of (a) the  Seller's  willful  misfeasance,  bad  faith,  or
         negligence in the performance of its duties under this Agreement, or by
         reason of reckless  disregard of its  obligations and duties under this
         Agreement and (b) the Seller's violation of federal or State securities
         laws  in  connection   with  the   registration  of  the  sale  of  the
         Certificate.

         Indemnification  under  this  Section  12.02  shall  include,   without
limitation,  reasonable fees and expenses of counsel and expenses of litigation.
Neither the Seller nor any of the persons  indemnified  under this Section 12.02
will in any event be  entitled  to make any claim upon the Trust  estate for the
payment or reimbursement of any losses,  liabilities,  taxes, costs, expenses or
fees under this  Section  12.02.  If the  Seller  shall have made any  indemnity
payments to the Owner  Trustee,  the Indenture  Trustee or the Trust pursuant to
this  Section  and  the  Owner  Trustee,  the  Indenture  Trustee  or the  Trust
thereafter shall collect any of such amounts from others, the Owner Trustee, the
Indenture  Trustee or the Trust, as the case may be, shall repay such amounts to
the Seller, without interest. This indemnification shall survive the termination
of this  Agreement  and the  resignation  or removal of the Owner Trustee or the
Indenture Trustee.  Notwithstanding the foregoing,  any amounts Seller shall pay
pursuant to this  Section  12.02 shall be paid  solely from  Available  Funds in
excess of funds necessary to pay all  outstanding  interest and principal due to
the  Noteholders in accordance  with the priorities set forth in Section 9.04 of
the  Indenture  (or, if an Event of Default (as  defined in the  Indenture)  has
occurred  under the  Indenture,  in accordance  with the priorities set forth in
Section  5.06 of the  Indenture)  and  shall in any case be  nonrecourse  to the
Seller and to the Seller's  assets and, to the extent funds are not so available
to pay any amounts when due and owing,  the claims  relating  thereto  shall not
constitute  a claim (as defined in Section 101 of Title 11 of the United  States
Bankruptcy  Code)  against the Seller but shall  continue to accrue.  Each party
hereto  agrees that the payment of any claim of any such party  pursuant to this
Section 12.02 shall be  subordinated  to the payment in full of all  outstanding
interest and principal due to the Noteholders. The payment of any claim pursuant
to this Section 12.02 shall in no event be construed as a "fee" of the Indenture
Trustee or the Owner Trustee as such term is used in Section  5.06(a)(ii) of the
Indenture.

         SECTION  12.03.  Merger  or  Consolidation  of,  or  Assumption  of the
Obligations  of  Seller.  Any  Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party, or (c) which may succeed to all or substantially all of
the properties and assets of the Seller's  business,  which Person in any of the
foregoing cases executes an agreement of assumption to perform every  obligation
of the  Seller  under  this  Agreement,  shall be the  successor  to the  Seller
hereunder  without the execution or filing of any document or any further act by
any of the parties to this Agreement;  provided,  however,  that (i) immediately
after giving  effect to such  transaction,  no  representation  or warranty made
pursuant  to  Section  7.01 shall have been  breached  and no Event of  Servicer
Default, and no event that, after notice or lapse of time, or both, would become
an Event of Servicer  Default  shall have happened and be  continuing,  (ii) the
Seller shall have  delivered to the Owner Trustee and the  Indenture  Trustee an
Officers'  Certificate  and  an  Opinion  of  Counsel  each  stating  that  such
consolidation, merger, or

                                                        35

<PAGE>

succession and such  agreement of assumption  comply with this Section 12.03 and
that all conditions  precedent,  if any, provided for in this Agreement relating
to such  transaction  have been  complied  with and (iii) the Seller  shall have
delivered an Opinion of Counsel to the Owner Trustee and the  Indenture  Trustee
either  (A)  stating  that,  in the  opinion  of  such  counsel,  all  financing
statements and continuation statements and amendments thereto have been executed
and filed that are  necessary  fully to preserve and protect the interest of the
Trust and the Indenture Trustee in the Receivables,  and reciting the details of
such  filings,  or (B) stating  that,  in the opinion of such  Counsel,  no such
action shall be necessary to preserve and protect such interest. Notwithstanding
the foregoing,  the Seller shall not engage in any merger or consolidation  with
any Person,  or a disposition of all or substantially  all of its assets without
providing  advance  written notice  thereof to the Owner Trustee,  the Indenture
Trustee and the Rating Agencies and without  obtaining the prior written consent
of the Insurer, not to be unreasonably withheld.

         SECTION 12.04. Limitation on Liability of Seller and Others. The Seller
and any  director or officer or employee or agent of the Seller may rely in good
faith on the advice of  counsel  or on any  document  of any kind,  prima  facie
properly  executed and submitted by any Person  respecting  any matters  arising
hereunder. The Seller shall not be under any obligation to appear in, prosecute,
or defend any legal action that shall not be incidental to its obligations under
this  Agreement,  and that in its  opinion  may  involve  it in any  expense  or
liability.

                                  ARTICLE XIII

                                  The Servicer

         SECTION  13.01.  Representations  of Servicer.  The Servicer  makes the
following representations on which the Trust relies in accepting the Receivables
and issuing the  Certificate  and executing and delivering  the  Indenture.  The
Servicer  agrees that the  representations  shall also be for the benefit of the
Owner  Trustee  and the Secured  Parties.  The  representations  speak as of the
execution  and  delivery  of this  Agreement  and shall  survive the sale of the
Receivables to the Owner Trustee and the pledge to the Secured Parties  pursuant
to the Indenture.

                         (i)  Organization  and Good  Standing.  The Servicer is
         duly organized and validly existing as a corporation  under the laws of
         the State of Indiana,  with power and  authority to own its  properties
         and to conduct its business as such  properties are currently owned and
         such business is presently  conducted,  and had at all relevant  times,
         and has, power,  authority,  and legal right to acquire, own, sell, and
         service the Receivables  and to hold the Receivable  Files as custodian
         on behalf of the Trust.

                                                        36

<PAGE>

                        (ii) Due  Qualification.  The Servicer is duly qualified
         to do  business  as a foreign  corporation  in good  standing,  and has
         obtained all necessary  licenses and approvals in all  jurisdictions in
         which the ownership or lease of property or the conduct of its business
         (including  the  servicing  of the  Receivables  as  required  by  this
         Agreement) requires such qualifications.

                       (iii) Power and Authority. The Servicer has the power and
         authority  to execute and deliver this  Agreement  and to carry out its
         terms; and the execution,  delivery,  and performance of this Agreement
         has been duly  authorized  by the Servicer by all  necessary  corporate
         action.

                        (iv) Binding Obligations.  This Agreement  constitutes a
         legal,  valid,  and binding  obligation of the Servicer  enforceable in
         accordance with its terms,  except as enforceability  may be limited by
         bankruptcy, insolvency, reorganization, or other similar laws affecting
         the  enforcement  of  creditors'  rights  in  general  and  by  general
         principles of equity,  regardless of whether such enforceability  shall
         be considered in a proceeding in equity or at law.

                         (v) No Violation.  The consummation of the transactions
         contemplated  by this Agreement and the fulfillment of the terms hereof
         does not  conflict  with,  result in any breach of any of the terms and
         provisions of, nor constitute (with or without notice or lapse of time)
         a default  under,  the  charter  or  by-laws  of the  Servicer,  or any
         indenture,  agreement,  or other  instrument to which the Servicer is a
         party or by which it is bound; nor result in the creation or imposition
         of any Lien  upon any of its  properties  pursuant  to the terms of any
         such  indenture,  agreement,  or  other  instrument  (other  than  this
         Agreement);  nor  violate  any law or,  to the  best of the  Servicer's
         knowledge, any order, rule, or regulation applicable to the Servicer of
         any court or of any federal or State  regulatory  body,  administrative
         agency, or other governmental  instrumentality having jurisdiction over
         the Servicer or its properties.

                        (vi)  No  Proceedings.   There  are  no  proceedings  or
         investigations  pending, or, to the Servicer's  knowledge,  threatened,
         before any court,  regulatory  body,  administrative  agency,  or other
         governmental  instrumentality  having jurisdiction over the Servicer or
         its  properties:  (A) asserting the invalidity of this  Agreement,  (B)
         seeking  to  prevent  the  consummation  of  any  of  the  transactions
         contemplated by this Agreement, (C) seeking any determination or ruling
         that might  materially  and  adversely  affect the  performance  by the
         Servicer of its obligations  under,  or the validity or  enforceability
         of, this  Agreement,  or (D) which might  adversely  affect the federal
         income tax attributes of the Trust.

                                                        37

<PAGE>

         SECTION 13.02. Indemnities of Servicer. The Servicer shall be liable in
accordance  herewith  only  to  the  extent  of  the  obligations   specifically
undertaken by the Servicer under this Agreement.

                         (i) The  Servicer  shall  defend,  indemnify,  and hold
         harmless the Owner Trustee (in its  individual  and trust  capacities),
         the Indenture  Trustee,  and their officers,  directors,  employees and
         agents, the Trust, the  Certificateholder  and the Noteholders from and
         against  any and all costs,  expenses,  losses,  damages,  claims,  and
         liabilities,  arising out of or resulting from the use,  ownership,  or
         operation  by the  Servicer  or any  affiliate  thereof  of a  Financed
         Vehicle.

                        (ii)  The  Servicer  shall  indemnify,  defend  and hold
         harmless the Owner Trustee (in its  individual  and trust  capacities),
         the Indenture Trustee, their officers, directors,  employees and agents
         and the  Trust  from  and  against  any  taxes  that may at any time be
         asserted   against  such  parties  with  respect  to  the  transactions
         contemplated herein,  including,  without limitation,  any sales, gross
         receipts,   general   corporation,   tangible  or  intangible  personal
         property,  privilege,  or license taxes (but, in the case of the Trust,
         not  including  any taxes  asserted with respect to, and as of the date
         of,  the  sale of the  Receivables  to the  Trust or the  issuance  and
         original sale of the  Certificate,  the Notes, or asserted with respect
         to  ownership  of the  Receivables,  or federal or other  income  taxes
         arising out of distributions on the Certificate or the Notes) and costs
         and expenses in defending against the same.

                       (iii) The  Servicer  shall  indemnify,  defend,  and hold
         harmless the Owner Trustee (in its  individual  and trust  capacities),
         the  Indenture  Trustee,  the  Insurer,   their  officers,   directors,
         employees  and agents,  and the Trust,  the  Certificateholder  and the
         Noteholders  from and  against  any and all  costs,  expenses,  losses,
         claims,  actions,  suits,  damages,  and liabilities to the extent that
         such cost, expense,  loss, claim, damage, or liability arose out of, or
         was  imposed  upon  such  parties  through,  the  negligence,   willful
         misfeasance,  or bad faith of the  Servicer in the  performance  of its
         duties under this Agreement,  or by reason of reckless disregard of its
         obligations  and duties  under this  Agreement.  This  indemnity  shall
         survive  the  termination  of  this  Agreement  or the  Trust  and  the
         resignation or removal of the Owner Trustee.

                        (iv) The  Servicer  shall  indemnify,  defend,  and hold
         harmless the Owner Trustee (in its  individual  and trust  capacities),
         the Indenture Trustee, their respective officers, directors,  employees
         and agents and the Trust from and against all costs, expenses,  losses,
         claims,  damages,  and  liabilities  arising  out  of  or  incurred  in
         connection  with the acceptance or performance of the trusts and duties
         herein contained,  except to the extent that such cost, expense,  loss,
         claim,   damage  or  liability:   (a)  shall  be  due  to  the  willful
         misfeasance,  bad  faith,  or  negligence  of the Owner  Trustee or the
         Indenture Trustee; (b) relates to any tax other than

                                                        38

<PAGE>

         the taxes with respect to which either the Seller or Servicer  shall be
         required to indemnify the Owner Trustee or the Indenture  Trustee;  (c)
         shall arise from the breach of any of the representations or warranties
         of the Owner  Trustee  set forth in Section  15.13 or by the  Indenture
         Trustee set forth in Section 6.13 of the Indenture; (d) shall be one as
         to which the Seller is required to indemnify  the Owner  Trustee or the
         Indenture  Trustee  under the  Agreement  and the  Seller has paid such
         indemnity claim; or (e) shall arise out of or be incurred in connection
         with the  acceptance or  performance by the Owner Trustee of the duties
         of successor Servicer.

         Indemnification  under this Section 13.02 shall include reasonable fees
and expenses of counsel and expenses of  litigation.  If the Servicer shall have
made  any  indemnity  payments  pursuant  to  this  Section  and  the  recipient
thereafter  collects  any of such  amounts  from  others,  the  recipient  shall
promptly   repay  such  amounts  to  the  Servicer,   without   interest.   This
indemnification  shall survive the termination of this Agreement and the removal
of the Servicer.

         SECTION  13.03.  Merger  or  Consolidation  of,  or  Assumption  of the
Obligations of Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party, or (c) which may succeed to all or substantially  all
of the properties and assets of the Servicer's indirect automobile financing and
receivables  servicing  business,  which  Person in any of the  foregoing  cases
executes an agreement of assumption to perform every  obligation of the Servicer
hereunder,  shall be the successor to the Servicer under this Agreement  without
further  act on the  part of any of the  parties  to this  Agreement;  provided,
however, that (i) immediately after giving effect to such transaction,  no Event
of Servicer Default, and no event which, after notice or lapse of time, or both,
would become an Event of Servicer Default shall have happened and be continuing,
(ii) the Servicer  shall have  delivered to the Owner  Trustee and the Indenture
Trustee an  Officers'  Certificate  and an Opinion of Counsel  each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section 13.03 and that all conditions  precedent  provided for in this
Agreement  relating to such  transaction  have been  complied with and (iii) the
Servicer shall have delivered an Opinion of Counsel to the Owner Trustee and its
Indenture  Trustee either (A) stating that, in the opinion of such counsel,  all
financing  statements and  continuation  statements and amendments  thereto have
been  executed  and filed that are  necessary  fully to preserve and protect the
interest of the Trust and the Secured Parties in the  Receivables,  and reciting
the  details  of such  filings,  or (B)  stating  that,  in the  opinion of such
Counsel,  no such  action  shall be  necessary  to  preserve  and  protect  such
interest.  Notwithstanding  the foregoing,  the Servicer shall not engage in any
merger or  consolidation  in which it is not the surviving  corporation  without
providing  advance written notice thereof to the Owner Trustee and the Indenture
Trustee and without  obtaining the prior written consent of the Insurer,  not to
be unreasonably withheld.

                                                        39

<PAGE>

         SECTION 13.04.  Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of the  directors or officers or employees or agents of the
Servicer shall be under any liability to the Trust, the Indenture  Trustee,  the
Certificateholder  or the Noteholders,  except as provided under this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this  Agreement;  provided,  however,  that this provision shall not protect the
Servicer  or any such person  against  any  liability  that would  otherwise  be
imposed  by reason of  willful  misfeasance,  bad faith,  or  negligence  in the
performance  of duties or by reason of reckless  disregard  of  obligations  and
duties  under  this  Agreement.  The  Servicer  and any  director  or officer or
employee or agent of the  Servicer may rely in good faith on any document of any
kind prima facie  properly  executed and submitted by any Person  respecting any
matters arising under this Agreement.

         Except as provided in this  Agreement,  the Servicer shall not be under
any  obligation to appear in,  prosecute,  or defend any legal action that shall
not be incidental to its duties to service the  Receivables  in accordance  with
this Agreement  (collection  actions with respect to Defaulted  Receivables  are
understood  to  be  incidental   to  the   Servicer's   duties  to  service  the
Receivables),  and  that  in  its  opinion  may  involve  it in any  expense  or
liability.

         SECTION  13.05.  Servicer Not to Resign.  The Servicer shall not resign
from its obligations and duties under this Agreement  except upon  determination
that  the  performance  of its  duties  shall no  longer  be  permissible  under
applicable law or otherwise with the consent of the Owner Trustee, the Indenture
Trustee and the  Insurer.  Any  determination  described  above  permitting  the
resignation  of the Servicer shall be evidenced by an Opinion of Counsel to such
effect  delivered  to the  Owner  Trustee.  No  such  resignation  shall  become
effective until the Indenture Trustee or a successor servicer shall have assumed
the  responsibilities and obligations of the Servicer in accordance with Section
14.02.

         SECTION  13.06.  Delegation  of Duties.  Except as  provided in Section
13.03  hereof,  it is  understood  and  agreed by the  parties  hereto  that the
Servicer or the Seller may at any time delegate any duties  including  duties as
custodian to any Person  willing to accept such  delegation  and to perform such
duties  (including  any  affiliate  of the  Servicer)  in  accordance  with  the
customary  procedures of the Servicer.  In connection with such delegation,  the
Servicer or the Seller may assign rights to the delegee or direct the payment to
the  delegee of  benefits  or amounts  otherwise  inuring to the  benefit of, or
payable to, the Seller or the Servicer hereunder.  Any such delegation shall not
relieve  the  Servicer  or  the  Seller  of  their   respective   liability  and
responsibility  with  respect  to  such  duties,  and  shall  not  constitute  a
resignation  within Section 13.05 hereof. The Servicer shall give written notice
to the Rating Agencies, the Owner Trustee, the Indenture Trustee and the Insurer
of any such delegation.

                                                        40

<PAGE>

                                   ARTICLE XIV

                                Servicer Default

         SECTION 14.01.  Events of Servicer Default. If any one of the following
events ("Events of Servicer Default") shall occur and be continuing:

                      (i) Any  failure by the  Servicer or UAC to deliver to the
         Collection Account (or to the Indenture Trustee for distribution to the
         Noteholders)  any proceeds or payment required to be so delivered under
         the terms of the Indenture, this Agreement or the Purchase Agreement or
         any  failure by the  Servicer  to deliver  any  Servicer's  Certificate
         pursuant  to  Section  8.09  that,  in  either  case,   shall  continue
         unremedied  for a period of two Business Days (A) after written  notice
         from either the Owner Trustee, the Indenture Trustee or the Insurer (so
         long as the  Insurer  is not in default  of its  obligations  under the
         Policy) or by the holders of Notes  evidencing not less than 25% of the
         aggregate  outstanding balance of the Notes is received by the Servicer
         or UAC as  specified  in this  Agreement  or (B) after  discovery by an
         officer of the Servicer; or

                      (ii)  Failure on the part of the  Servicer,  the Seller or
         UAC duly to observe or to perform  in any  material  respect  any other
         covenants or agreements of the Servicer, the Seller or UAC, as the case
         may be, set forth in this  Agreement or the Purchase  Agreement,  which
         failure shall (a)  materially  and  adversely  affect the rights of the
         Certificateholder  or the Secured  Parties and (b) continue  unremedied
         for a period of 60 days after the date on which written  notice of such
         failure,  requiring  the same to be remedied,  shall have been given to
         the  Servicer,  UAC or the  Seller,  as the case may be,  by the  Owner
         Trustee,  the Indenture  Trustee or the Insurer (so long as the Insurer
         is not in  default  of its  obligations  under  the  Policy)  or by the
         holders  of  Notes  evidencing  not  less  than  25% of  the  aggregate
         outstanding balance of the Notes; or

                      (iii) The  occurrence of an Insolvency  Event with respect
         to the Servicer;

then, and in each and every case, so long as an Event of Servicer  Default shall
not have been remedied, the Insurer (so long as the Insurer is not in default of
its obligations  under the Policy),  or the Indenture Trustee (upon direction to
do so by the holders of Notes  evidencing  not less than 25% of the  outstanding
principal  balance of the Notes if the Insurer is in default  under the Policy),
by notice then given in writing to the Servicer may, terminate all of the rights
and obligations of the Servicer under this Agreement.  In addition, if a Trigger
Event (as defined in the Insurance  Agreement) shall have occurred,  the Insurer
may (A) require that the Indenture  Trustee or the  Administrator,  on behalf of
the Owner Trustee, deliver a notice of termination to the Servicer and appoint a
successor Servicer  designated by the Insurer in such notice pursuant to Section
14.02; (B)

                                                        41

<PAGE>

require that the Indenture Trustee or the Administrator,  on behalf of the Owner
Trustee,  amend certificates of title relating to the Financed Vehicles and take
other  actions to  identify  the  Indenture  Trustee  (on behalf of the  Secured
Parties) as the new secured party on such certificates of title; (C) as provided
in the Insurance  Agreement,  require that the Servicer or successor Servicer or
the Indenture  Trustee instruct  Obligors in respect of the Receivables to remit
payment on the  Receivable  directly to the Owner Trustee or a separate  account
established  exclusively  for the Trust;  and (D) as provided  in the  Insurance
Agreement,  compel  transfer by the  Servicer of all  Receivables  Files and, if
applicable, certain rights in respect of servicing systems assets to the Insurer
or to the successor Servicer  designated by the Insurer. On or after the receipt
by the Servicer of such written notice,  all authority and power of the Servicer
under this Agreement,  whether with respect to the Certificate, the Notes or the
Receivables or otherwise,  shall,  without further action, pass to and be vested
in the Indenture Trustee (except that the Indenture Trustee may but shall not be
required to make Advances) or such successor  Servicer as may be appointed under
Section 14.02 pursuant to and under this Section 14.01; and, without limitation,
the Indenture Trustee is hereby authorized and empowered to execute and deliver,
on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and
all documents and other  instruments,  and to do or accomplish all other acts or
things  necessary  or  appropriate  to effect  the  purposes  of such  notice of
termination, whether to complete the transfer and endorsement of the Receivables
and related documents,  or otherwise.  The predecessor  Servicer shall cooperate
with  the  successor  Servicer  and  the  Indenture  Trustee  in  effecting  the
termination of the responsibilities and rights of the predecessor Servicer under
this Agreement,  including the transfer to the successor  Servicer of electronic
records  related to the  Receivables in such form as the successor  Servicer may
reasonably request and the transfer to the successor Servicer for administration
by it of all cash  amounts  that  shall  at the time be held by the  predecessor
Servicer  for  deposit,  or shall  thereafter  be  received  with  respect  to a
Receivable.  All  reasonable  costs and  expenses  (including  attorneys'  fees)
incurred in connection with  transferring  the Receivable Files to the successor
Servicer and amending  this  Agreement  to reflect such  succession  as Servicer
pursuant to this Section  14.01 shall be paid by the  predecessor  Servicer upon
presentation of reasonable documentation of such costs and expenses.

         SECTION  14.02.  Appointment  of  Successor.  (a) Upon  the  Servicer's
receipt of notice of  termination  pursuant to Section  14.01 or the  Servicer's
resignation  in accordance  with the terms of this  Agreement,  the  predecessor
Servicer  shall  continue  to  perform  its  functions  as  Servicer  under this
Agreement,  in the case of  termination,  only until the date  specified in such
termination  notice or, if no such date is specified in a notice of termination,
until receipt of such notice and, in the case of resignation, until the later of
(x) the date 45 days from the  delivery to the Owner  Trustee and the  Indenture
Trustee of written notice of such  resignation (or written  confirmation of such
notice) in  accordance  with the terms of this  Agreement  and (y) the date upon
which the  predecessor  Servicer  shall  become  unable to act as  Servicer,  as
specified in the notice of resignation and accompanying  Opinion of Counsel.  In
the event of the Servicer's resignation or termination hereunder,  the Indenture
Trustee shall appoint a successor  Servicer,  which successor  Servicer shall be
reasonably acceptable

                                                        42

<PAGE>

to the  Insurer  (so long as the  Insurer is not in  default of its  obligations
under the Policy),  and the successor Servicer shall accept its appointment by a
written  assumption  in form  acceptable  to the Owner Trustee and the Indenture
Trustee.  In the event that a successor  Servicer has not been  appointed at the
time when the  predecessor  Servicer has ceased to act as Servicer in accordance
with this Section  14.02,  the Indenture  Trustee  without  further action shall
automatically be appointed the successor  Servicer.  Notwithstanding  the above,
the Indenture  Trustee  shall,  if it shall be legally unable or unwilling so to
act,  appoint,  or petition a court of competent  jurisdiction  to appoint,  any
established  financial  institution,  having  a  net  worth  of  not  less  than
$50,000,000 and whose regular business shall include the servicing of automotive
receivables,  as the  successor to the Servicer  under this  Agreement and which
financial  institution  is, in the case of  appointment  by the  Owner  Trustee,
reasonably acceptable to the Insurer and the Indenture Trustee.

         (b) Upon appointment,  the successor Servicer shall be the successor in
all  respects  to the  predecessor  Servicer  and  shall be  subject  to all the
responsibilities,  duties, and liabilities  arising thereafter  relating thereto
placed  on the  predecessor  Servicer,  and  shall be  entitled  to the  Monthly
Servicing Fee and all of the rights granted to the predecessor  Servicer, by the
terms and  provisions  of this  Agreement.  The  predecessor  Servicer  shall be
entitled to be reimbursed for Outstanding Advances.

         (c) In connection with such appointment, the Indenture Trustee may make
such  arrangements for the successor  Servicer out of payments on Receivables it
and  such  successor  Servicer  shall  agree;  provided,  however,  that no such
compensation  shall be in excess of that  permitted the original  Servicer under
this  Agreement.  The Indenture  Trustee and such successor  Servicer shall take
such action, consistent with this Agreement, as shall be necessary to effectuate
any such succession.

         SECTION 14.03. Notice of Events of Servicer Default. Upon any notice of
an Event of Servicer  Default or upon any  termination  of, or  appointment of a
successor to, the Servicer pursuant to this Article XIV, the Owner Trustee shall
give  prompt  written  notice  thereof to the  Certificateholder  at the address
appearing  in the  Certificate  Register,  to the Insurer  and to the  Indenture
Trustee for further notice thereof to the Noteholders.

         SECTION  14.04.  Waiver of Past  Defaults.  The Insurer (so long as the
Insurer is not in default of its obligations  under the Policy) or the Indenture
Trustee (if the  Insurer is in default  under the Policy)  upon  direction  from
holders  of Notes  evidencing  not less  than 51% of the  outstanding  principal
balance of the Notes may waive any default by the Servicer in the performance of
its obligations  hereunder and its consequences,  except a default in making any
required deposits to or payments from the Collection  Account in accordance with
this  Agreement;  provided,  that no waiver of any default or  provision of this
Agreement shall become effective  without the consent of the Insurer (unless the
Insurer is in default of its obligations under the Policy). Upon any such waiver

                                                        43

<PAGE>

of a past default,  such default shall cease to exist, and any Event of Servicer
Default  arising  therefrom  shall be  deemed to have  been  remedied  for every
purpose of this  Agreement.  No such waiver  shall extend to any  subsequent  or
other default or impair any right consequent thereon.

                                   ARTICLE XV

                                The Owner Trustee

         SECTION 15.01. Duties of Owner Trustee.  The Owner Trustee,  both prior
to and after the occurrence of an Event of Servicer Default,  shall undertake to
perform such duties and only such duties as are  specifically  set forth in this
Agreement.  If an Event of Servicer  Default  shall have  occurred and shall not
have been cured and, in the case of an Event of Servicer  Default  described  in
clause (i) of Section 14.01, the Owner Trustee has received notice of such Event
of Servicer  Default,  the Owner Trustee  shall  exercise such of the rights and
powers vested in it by this Agreement, and shall use the same degree of care and
skill in their  exercise,  as a prudent  person would  exercise or use under the
circumstances in the conduct of his own affairs.

         The Owner Trustee  shall  execute and deliver,  on behalf of the Trust,
each  Basic  Document  to  which  the  Trust  is a party  and all  certificates,
instruments and agreements contemplated thereby. The Owner Trustee shall execute
and  authenticate  the  Certificates in accordance with this Agreement and shall
execute the Notes in accordance with the Indenture.

         It shall be the duty of the Owner  Trustee to discharge (or cause to be
discharged) all its responsibilities pursuant to the terms of this Agreement and
to administer the Trust in the interest of the Certificateholder, subject to and
in accordance  with the provisions of this Agreement and the other  documents to
which the Trust is a party.  Without  limiting the foregoing,  the Owner Trustee
shall,  upon  written  direction of the  Certificateholder  and on behalf of the
Trust,  file and prove any claim or claims that may exist on behalf of the Trust
against the Seller in connection with any claims paying  procedure as part of an
insolvency or a receivership  proceeding  involving the Seller.  Notwithstanding
the foregoing,  the Owner Trustee shall be deemed to have  discharged its duties
and responsibilities  hereunder and under the other documents to which the Trust
is a party to the extent  the  Administrator  has  agreed in the  Administration
Agreement to perform any act or to discharge  any duty of the Trust or the Owner
Trustee hereunder or under any other document to which the Trust is a party, and
the Owner  Trustee  shall not be held  liable for the  default or failure of the
Administrator to carry out its obligations under the  Administration  Agreement.
Except as expressly provided in the documents to which the Trust is a party, the
Owner Trustee shall have no  obligation  to  administer,  service or collect the
Receivables or to maintain,  monitor or otherwise  supervise the administration,
servicing or collection of the Receivables.

                                                        44

<PAGE>

         The Owner  Trustee,  upon  receipt  of all  resolutions,  certificates,
statements,  opinions, reports, documents, orders or other instruments furnished
to the  Owner  Trustee  that  shall be  specifically  required  to be  furnished
pursuant to any  provision of this  Agreement,  shall  examine them to determine
whether they conform to the requirements of this Agreement.

         No provision of this Agreement  shall be construed to relieve the Owner
Trustee from liability for its own negligent  action,  its own negligent failure
to act, or its own bad faith; provided, however, that:

                         (i)  Prior to the  occurrence  of an Event of  Servicer
         Default,  and after the curing of all such Events of  Servicer  Default
         that may have occurred, the duties and obligations of the Owner Trustee
         shall be determined solely by the express provisions of this Agreement,
         the Owner  Trustee shall not be liable  except for the  performance  of
         such duties and obligations as shall be specifically  set forth in this
         Agreement,  no implied covenants or obligations shall be read into this
         Agreement against the Owner Trustee and, in the absence of bad faith on
         the part of the Owner Trustee, or manifest error, the Owner Trustee may
         conclusively rely on the truth of the statements and the correctness of
         the opinions expressed in any certificates or opinions furnished to the
         Owner Trustee and conforming to the requirements of this Agreement;

                        (ii) The Owner  Trustee shall not be liable for an error
         of  judgment  made in good faith by a  Responsible  Officer,  unless it
         shall be proved that the Owner  Trustee  shall have been  negligent  in
         ascertaining the pertinent facts;

                       (iii) The Owner  Trustee shall not be liable with respect
         to any action taken,  suffered, or omitted to be taken in good faith in
         accordance   with  this   Agreement   or  at  the   direction   of  the
         Certificateholder relating to the time, method, and place of conducting
         any  proceeding  for any  remedy  available  to the Owner  Trustee,  or
         exercising any trust or power  conferred upon the Owner Trustee,  under
         this Agreement;

                        (iv)  The  Owner  Trustee  shall  not  be  charged  with
         knowledge of any failure by the Servicer to comply with the obligations
         of the Servicer referred to in clauses (i) or (ii) of Section 14.01, or
         of any  failure by the  Seller to comply  with the  obligations  of the
         Seller  referred  to  in  clause  (ii)  of  Section  14.01,   unless  a
         Responsible  Officer of the Owner Trustee  receives  written  notice of
         such failure (it being understood that knowledge of the Servicer or the
         Servicer as custodian,  in its capacity as agent for the Owner Trustee,
         is not  attributable  to the Owner  Trustee)  from the  Servicer or the
         Seller, as the case may be; and

                         (v) Without  limiting the generality of this Section or
         Section  15.04,  the Owner Trustee shall have no duty (A) to see to any
         recording, filing, or depositing of this

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         Agreement  or any  agreement  referred  to  therein  or  any  financing
         statement (or continuation statement) evidencing a security interest in
         the Receivables or the Financed Vehicles,  or to see to the maintenance
         of any such  recording or filing or depositing  or to any  rerecording,
         refiling or redepositing of any thereof, (B) to see to any insurance of
         the  Financed  Vehicles or  Obligors or to effect or maintain  any such
         insurance,  (C) to  see  to  the  payment  or  discharge  of  any  tax,
         assessment,  or other governmental charge or any Lien or encumbrance of
         any kind owing with respect to, assessed,  or levied against,  any part
         of the Trust,  (D) to confirm or verify the  contents of any reports or
         certificates  of the Servicer  delivered to the Trust  pursuant to this
         Agreement  believed by the Owner Trustee to be genuine and to have been
         signed or presented  by the proper party or parties,  or (E) to inspect
         the  Financed  Vehicles at any time or  ascertain  or inquire as to the
         performance  or  observance  of any of the  Seller's or the  Servicer's
         representations,  warranties or covenants or the Servicer's  duties and
         obligations as Servicer and as custodian of the Receivable  Files under
         this Agreement.

         The Owner Trustee shall not be required to expend or risk its own funds
or otherwise incur  financial  liability in the performance of any of its duties
hereunder,  or in the exercise of any of its rights or powers, if there shall be
reasonable  ground for  believing  that the  repayment of such funds or adequate
indemnity against such risk or liability shall not be reasonably  assured to it,
and none of the  provisions  contained  in this  Agreement  shall  in any  event
require  the Owner  Trustee  to  perform,  or be  responsible  for the manner of
performance  of, any of the  obligations  of the Servicer  under this  Agreement
except during such time, if any, as the Owner Trustee shall be the successor to,
and be vested with the rights,  duties,  powers, and privileges of, the Servicer
in accordance  with the terms of this  Agreement.  Except for actions  expressly
authorized by this Agreement,  the Owner Trustee shall take no action reasonably
likely to impair the security interests created or existing under any Receivable
or to impair the value of any Receivable.

         SECTION  15.02.  Owner  Trustee's   Certificate.   On  or  as  soon  as
practicable  after each Payment Date on which  Receivables shall be (i) assigned
to UAC  pursuant  to Section  7.02 or deemed to be  assigned  to the Seller as a
result of the application of Available Funds in respect of Defaulted Receivables
pursuant to Sections 9.04 and 9.05 or (ii) assigned to the Servicer  pursuant to
Section 8.07 or to the Servicer or any other Person  designated  by the Servicer
pursuant to Section 16.02,  the Owner Trustee shall,  at the written  request of
the Servicer, execute an Owner Trustee's Certificate,  substantially in the form
of,  in the case of an  assignment  to UAC,  Exhibit  1,  or,  in the case of an
assignment to the Servicer, Exhibit 2, based on the information contained in the
Servicer's  Certificate for the related Collection Period,  amounts deposited to
the  Collection  Account,  and  notices  received  pursuant  to this  Agreement,
identifying  the  Receivables  repurchased  or deemed to be  repurchased  by UAC
pursuant  to Section  7.02 or 9.02 or  purchased  by the  Servicer  pursuant  to
Section  8.07 or the  Servicer or any other  Person  designated  by the Servicer
pursuant to Section 16.02 during such Collection  Period, and shall deliver such
Owner Trustee's Certificate, accompanied by a copy of the Servicer's Certificate
for such Collection Period to UAC or the Servicer, as the case may be with a

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<PAGE>

copy to the  Indenture  Trustee.  The Owner  Trustee's  Certificate  shall be an
assignment pursuant to Section 15.03.

         SECTION  15.03.  Trust's  Assignment  of  Purchased  Receivables.  With
respect to each  Receivable  repurchased  by UAC  pursuant to Section  7.02,  or
deemed to be so repurchased  pursuant to Section 8.02, purchased by the Servicer
pursuant to Section 8.07 or the Servicer or any other Person  designated  by the
Servicer  pursuant to Section 16.02, the Trust shall assign,  as of the last day
of the  Collection  Period  during  which  such  Receivable  became a  Defaulted
Receivable or became subject to repurchase by UAC or purchase by the Servicer or
such other Person,  without recourse,  representation,  or warranty, to UAC, the
Servicer or such other Person (as the case may be) all the Trust's right, title,
and interest in and to such Receivables, and all security and documents relating
thereto,  such assignment being an assignment outright and not for security.  If
in any enforcement  suit or legal  proceeding it shall be held that the Servicer
may not enforce a Receivable  on the ground that it shall not be a real party in
interest  or a holder  entitled  to enforce the  Receivable,  the Owner  Trustee
shall,  at the  Servicer's  expense,  take such steps as the Owner Trustee deems
necessary to enforce the Receivable,  including bringing suit in its name and/or
the name of the Indenture Trustee.

         SECTION 15.04.  Certain Matters Affecting the Owner Trustee.  Except as
otherwise provided in Section 15.01:

                         (i) The Owner  Trustee may rely and shall be  protected
         in acting or  refraining  from  acting upon any  resolution,  Officers'
         Certificate,  Servicer's  Certificate,  certificate of auditors, or any
         other certificate,  statement,  instrument,  opinion,  report,  notice,
         request,  consent, order,  appraisal,  bond, or other paper or document
         believed by it to be genuine and to have been  signed or  presented  by
         the proper party or parties.

                        (ii) The Owner  Trustee may consult with counsel and any
         written  advice  or  Opinion  of  Counsel  shall be full  and  complete
         authorization and protection in respect of any action taken or suffered
         or omitted by it under this  Agreement in good faith and in  accordance
         with such written advice or Opinion of Counsel.

                       (iii) The Owner  Trustee  shall be under no obligation to
         exercise any of the rights or powers vested in it by this Agreement, or
         to institute, conduct, or defend any litigation under this Agreement or
         in relation to this Agreement,  at the request,  order, or direction of
         the  Certificateholder  pursuant to the  provisions of this  Agreement,
         unless the  Certificateholder  shall have offered to the Owner  Trustee
         reasonable security or indemnity  reasonably  satisfactory to the Owner
         Trustee  against  the  costs,  expenses,  and  liabilities  that may be
         incurred  therein or  thereby.  Nothing  contained  in this  Agreement,
         however,  shall relieve the Owner Trustee of the obligations,  upon the
         occurrence  of an Event of Servicer  Default  (that shall not have been
         cured), to exercise such of the rights and powers vested in

                                                        47

<PAGE>

         it by this  Agreement,  and to use the same degree of care and skill in
         their  exercise  as a  prudent  man  would  exercise  or use  under the
         circumstances in the conduct of his own affairs.

                        (iv) The  Owner  Trustee  shall  not be  liable  for any
         action taken,  suffered, or omitted by it in good faith and believed by
         it to be  authorized  or  within  the  discretion  or  rights or powers
         conferred upon it by this Agreement.

                         (v)  Prior to the  occurrence  of an Event of  Servicer
         Default and after the curing of all Events of Servicer Default that may
         have  occurred,  the  Owner  Trustee  shall  not be  bound  to make any
         investigation  into the  facts of  matters  stated  in any  resolution,
         certificate,  statement,  instrument, opinion, report, notice, request,
         consent,  order,  approval,  bond,  or other paper or document,  unless
         requested in writing to do so by the Insurer or the  Indenture  Trustee
         or holders  of Notes  evidencing  not less than 25% of the  outstanding
         principal balance of the Notes; provided,  however, that if the payment
         within a reasonable  time to the Owner Trustee of the costs,  expenses,
         or  liabilities  likely  to be  incurred  by it in the  making  of such
         investigation  shall  be, in the  opinion  of the  Owner  Trustee,  not
         reasonably  assured to the Owner Trustee by the security afforded to it
         by  the  terms  of  this  Agreement,  the  Owner  Trustee  may  require
         reasonable  indemnity  against  such cost,  expense,  or liability as a
         condition  to so  proceeding.  The  reasonable  expense  of every  such
         examination  shall be paid by the  Servicer  or,  if paid by the  Owner
         Trustee,  shall be reimbursed  by the Servicer upon demand.  Nothing in
         this clause (v) shall affect the  obligation of the Servicer to observe
         any applicable law prohibiting  disclosure of information regarding the
         Obligors.

                        (vi) The Owner  Trustee may execute any of the trusts or
         powers  hereunder  or perform any duties  under this  Agreement  either
         directly or by or through agents or attorneys or a custodian. The Owner
         Trustee  shall not be  responsible  for any  misconduct  or  negligence
         solely  attributable  to the acts or  omissions  of the Servicer in its
         capacity as Servicer or custodian or the Administrator.

                       (vii) The Owner Trustee shall have no duty of independent
         inquiry,  except as may be  required  by Section  15.01,  and the Owner
         Trustee may rely upon the  representations and warranties and covenants
         of the Seller and the Servicer contained in this Agreement with respect
         to the Receivables and the Receivable Files.

         SECTION 15.05. Owner Trustee Not Liable for Certificate or Receivables.
The recitals contained herein and in the Certificate (other than the certificate
of  authentication  on the Certificate)  shall be taken as the statements of the
Seller or the  Servicer,  as the case may be, and the Owner  Trustee  assumes no
responsibility  for the  correctness  thereof.  The Owner  Trustee shall make no
representations  as to the validity or  sufficiency  of this Agreement or of the
Certificate  (other than the certificate of  authentication on the Certificate),
or of any Receivable or related document. The

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<PAGE>

Owner Trustee shall at no time have any  responsibility or liability for or with
respect to the legality,  validity,  and enforceability of any security interest
in any Financed  Vehicle or any  Receivable,  or the  perfection and priority of
such a security interest or the maintenance of any such perfection and priority,
or for or with  respect to the  efficacy of the Trust or its ability to generate
the payments to be distributed to the Certificateholder or the Noteholders under
this Agreement or the Indenture,  including,  without limitation: the existence,
condition,  location,  and ownership of any Financed Vehicle;  the existence and
enforceability  of any  physical  damage  insurance,  lender's  single  interest
insurance,  or credit life or  disability  and  hospitalization  insurance  with
respect to any  Receivable;  the existence and contents of any Receivable or any
computer  or  other  record  thereof;  the  validity  of the  assignment  of any
Receivable to the Trust or of any intervening  assignment;  the  completeness of
any Receivable; the performance or enforcement of any Receivable; the compliance
by the Seller or the  Servicer  with any warranty or  representation  made under
this Agreement or in any related  document and the accuracy of any such warranty
or  representation  prior to the  Owner  Trustee's  receipt  of  notice or other
discovery of any noncompliance  therewith or any breach thereof;  any investment
of monies by the Servicer or any loss resulting  therefrom (it being  understood
that the Owner Trustee shall remain  responsible  for any Trust property that it
may hold); the acts or omissions of the Seller, the Servicer, or any Obligor; an
action of the Servicer taken in the name of the Owner Trustee;  or any action by
the Owner Trustee taken at the instruction of the Servicer.  Except with respect
to a claim based on the failure of the Owner Trustee to perform its duties under
this Agreement or based on the Owner Trustee's negligence or willful misconduct,
no recourse shall be had for any claim based on any provision of this Agreement,
the  Certificateholder  or the  Noteholders,  or any  Receivable  or  assignment
thereof against the Owner Trustee in its individual capacity,  the Owner Trustee
shall not have any personal  obligation,  liability,  or duty  whatsoever to any
Certificateholder  or the  Noteholders  or any other  Person with respect to any
such claim, and any such claim shall be asserted solely against the Trust or any
indemnitor who shall furnish indemnity as provided in this Agreement.  The Owner
Trustee shall not be deemed to owe any fiduciary duty to the Insurer.  The Owner
Trustee shall not be accountable for the use or application by the Seller of any
of the  Certificate  or  Notes  or of the  proceeds  thereof,  or for the use or
application  of any funds paid to the Seller or the  Servicer  in respect of the
Receivables.

         Notwithstanding  the foregoing or any other provision in this Agreement
to the contrary,  the Owner Trustee shall be liable in its  commercial  capacity
for losses attributable to its failure to make payments on Eligible  Investments
issued by the Owner Trustee in its commercial  capacity as principal obligor and
not as Owner Trustee  hereunder,  in accordance with the terms of the agreements
or instruments governing any such Eligible Investments.

         SECTION  15.06.  Owner Trustee May Own Notes.  The Owner Trustee in its
individual  or any other  capacity may become the owner or pledgee of Notes with
the same rights as it would have if it were not the Owner Trustee.

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<PAGE>

         SECTION  15.07.  Owner  Trustee's  and  Indenture  Trustee's  Fees  and
Expenses; Indemnification.  (a) The Servicer shall pay to the Owner Trustee, and
the Owner Trustee shall be entitled to, such  reasonable  compensation  as shall
have been separately  agreed to in writing on or prior to the date hereof (which
shall not be limited by any provision of law in regard to the  compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts created by this Agreement and in the exercise and  performance of any
of the Owner Trustee's powers and duties under this Agreement and the Indenture,
and the Servicer  shall pay or reimburse  the Owner Trustee upon its request for
all reasonable expenses,  disbursements,  and advances (including the reasonable
compensation  and the  expenses  and  disbursements  of its  counsel  and of all
persons not  regularly in its employ)  incurred or made by the Owner  Trustee in
accordance  with any provisions of this Agreement and the Indenture,  except any
such expense,  disbursement,  or advance as may be  attributable  to its willful
misfeasance,  negligence,  or bad faith.  The Servicer shall indemnify the Owner
Trustee (in its individual and trust  capacities)  (which,  for purposes of this
section, shall include its directors,  officers,  employees, and agents) for and
hold it  harmless  against  any loss,  liability,  claim,  action,  suit,  cost,
disbursement,  tax (other than taxes as or resulting from compensation  received
for  its  services  as  Owner  Trustee)  or  expense  incurred  without  willful
misfeasance,  negligence,  or  bad  faith  on  its  part,  arising  out of or in
connection  with the acceptance or  administration  of the Trust,  including the
costs and  expenses  of  defending  itself  against  any claim or  liability  in
connection with the exercise or performance of any of its powers or duties under
this Agreement and the  Indenture.  The Servicer shall pay the fees and expenses
of the Administrator under the Administration Agreement; provided, however, that
the Servicer shall only be required to pay the  reasonable  fees and expenses of
any  successor  Administrator  or such  other  fees  agreed to in writing by the
Servicer. Additionally, the Seller, pursuant to Section 12.02 and subject to the
limitations  set forth  therein,  and the Servicer,  pursuant to Section  13.02,
respectively, shall indemnify the Owner Trustee with respect to certain matters.
This indemnity shall survive the termination of this Agreement and the Indenture
or the  termination  of the Trust and the  resignation  or  removal of the Owner
Trustee.

         (b) The  Servicer  hereby  agrees  to pay or  reimburse  the  fees  and
expenses of the Indenture Trustee as provided in Section 6.07 of the Indenture.

         SECTION 15.08.  Eligibility  Requirements for Owner Trustee.  The Owner
Trustee under this Agreement  shall at all times be a corporation  (i) having an
office  in the same  State as the  location  of the  Corporate  Trust  Office as
specified in this Agreement; (ii) organized and doing business under the laws of
such State or the United States of America;  (iii) authorized under such laws to
exercise  corporate  trust  powers;   (iv)  having  a  net  worth  of  at  least
$50,000,000;  (v)  subject to  supervision  or  examination  by federal or State
authorities;  and (vi) the long-term  unsecured  debt of which is rated at least
Baa3 or  which is  approved  by the  Insurer  and each  Rating  Agency.  If such
corporation  shall publish reports of condition at least  annually,  pursuant to
law or to the requirements of the aforesaid  supervising or examining authority,
then for the purpose of this Section 15.08, the combined capital

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<PAGE>

and surplus of such  corporation  shall be deemed to be its combined capital and
surplus as set forth in its most recent  report of  condition so  published.  In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section 15.08, the Owner Trustee shall resign immediately
in the manner and with the effect specified in Section 15.09.

         SECTION  15.09.  Resignation  or  Removal of Owner  Trustee.  The Owner
Trustee may at any time resign and be discharged  from the trusts hereby created
by giving written notice thereof to the Servicer.  Upon receiving such notice of
resignation,  the Servicer, with the prior written consent of the Insurer, shall
promptly appoint a successor Owner Trustee, by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor  Owner Trustee.  If no successor  Owner Trustee shall have
been so appointed and have accepted  appointment within 30 days after the giving
of such notice of  resignation,  the  resigning  Owner  Trustee may petition any
court  of  competent  jurisdiction  for the  appointment  of a  successor  Owner
Trustee.

         If at any  time  the  Owner  Trustee  shall  cease  to be  eligible  in
accordance  with the  provisions of Section 15.08 and shall fail to resign after
written  request  therefor by the Servicer,  or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Owner Trustee or of its property  shall be  appointed,  or any
public  officer  shall take  charge or  control  of the Owner  Trustee or of its
property  or  affairs  for  the  purpose  of  rehabilitation,  conservation,  or
liquidation,  then the Servicer may remove the Owner Trustee. If it shall remove
the Owner Trustee under the authority of the immediately preceding sentence, the
Servicer shall promptly appoint a successor Owner Trustee by written instrument,
in  duplicate,  one copy of which  instrument  shall be  delivered  to the Owner
Trustee so removed and one copy to the successor Owner Trustee.

         Any  resignation  or removal of the Owner Trustee and  appointment of a
successor Owner Trustee  pursuant to any of the provisions of this Section 15.09
shall not become  effective  until  acceptance of  appointment  by the successor
Owner Trustee pursuant to Section 15.10.

         SECTION 15.10.  Successor  Owner Trustee.  Any successor  Owner Trustee
appointed pursuant to Section 15.09 shall execute,  acknowledge,  and deliver to
the Servicer and to its predecessor  Owner Trustee an instrument  accepting such
appointment  under this  Agreement,  and thereupon the resignation or removal of
the  predecessor  Owner Trustee shall become  effective and such successor Owner
Trustee, without any further act, deed, or conveyance, shall become fully vested
with all the rights,  powers,  duties,  and obligations of its predecessor under
this Agreement,  with like effect as if originally  named as Owner Trustee.  Any
successor  Owner  Trustee  appointed  hereunder  shall file an  amendment to the
Certificate  of Trust with the Delaware  Secretary of State  reflecting the name
and principal  place of business of such successor Owner Trustee in the State of
Delaware.  The  predecessor  Owner Trustee shall deliver to the successor  Owner
Trustee all documents and statements  held by it under this  Agreement;  and the
Servicer and the predecessor

                                                        51

<PAGE>

Owner  Trustee  shall  execute and deliver  such  instruments  and do such other
things  as may  reasonably  be  required  for fully and  certainly  vesting  and
confirming in the successor Owner Trustee all such rights,  powers,  duties, and
obligations.

         No successor Owner Trustee shall accept appointment as provided in this
Section 15.10 unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 15.08.

         Upon acceptance of appointment by a successor Owner Trustee pursuant to
this  Section  15.10,  the Servicer  shall mail notice of the  successor of such
Owner Trustee under this Agreement to the Indenture Trustee and to the Holder of
the  Certificate  at its address as shown in the  Certificate  Register.  If the
Servicer  shall  fail to mail such  notice  within 10 days after  acceptance  of
appointment by the successor  Owner Trustee,  the successor  Owner Trustee shall
cause such notice to be mailed at the expense of the Servicer.

         SECTION  15.11.   Merger  or  Consolidation   of  Owner  Trustee.   Any
corporation  into which the Owner  Trustee  may be merged or  converted  or with
which it may be  consolidated,  or any  corporation  resulting  from any merger,
conversion, or consolidation to which the Owner Trustee shall be a party, or any
corporation  succeeding  to all or  substantially  all  of the  corporate  trust
business  of the Owner  Trustee,  shall be the  successor  of the Owner  Trustee
hereunder,  provided  such  corporation  shall be  eligible  pursuant to Section
15.08,  without the execution or filing of any  instrument or any further act on
the  part  of  any  of the  parties  hereto,  anything  herein  to the  contrary
notwithstanding.

         SECTION  15.12.  Appointment  of Co-Trustee or Separate  Owner Trustee.
Notwithstanding  any other  provisions of this  Agreement,  at any time, for the
purpose of meeting any legal  requirements of any jurisdiction in which any part
of the Trust or any  Financed  Vehicle may at the time be located,  the Servicer
and the Owner Trustee  acting jointly shall have the power and shall execute and
deliver all  instruments  to appoint one or more  Persons  approved by the Owner
Trustee  to act as  co-trustee,  jointly  with the Owner  Trustee,  or  separate
trustee or separate  trustees,  of all or any part of the Trust,  and to vest in
such Person, in such capacity and for the benefit of the Certificateholder, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 15.12, such powers, duties, obligations,  rights, and trusts as the
Servicer and the Owner  Trustee may  consider  necessary  or  desirable.  If the
Servicer  shall not have  joined in such  appointment  within 15 days  after the
receipt by it of a request so to do, or in the case an Event of Servicer Default
shall have  occurred and be  continuing,  the Owner Trustee alone shall have the
power to make such  appointment.  No co-trustee  or separate  trustee under this
Agreement  shall be  required  to meet the terms of  eligibility  as a successor
Owner Trustee  pursuant to Section 15.08 and no notice to the  Certificateholder
of the  appointment  of any  co-trustee  or separate  trustee  shall be required
pursuant to Section 15.10.

                                                        52

<PAGE>

         Each separate trustee and co-trustee  shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

                  (i) All rights,  powers,  duties, and obligations conferred or
         imposed upon the Owner Trustee shall be conferred upon and exercised or
         performed by the Owner Trustee and such separate  trustee or co-trustee
         jointly (it being  understood that such separate  trustee or co-trustee
         is not authorized to act separately  without the Owner Trustee  joining
         in  such  act),  except  to  the  extent  that  under  any  law  of any
         jurisdiction  in which any  particular act or acts are to be performed,
         the Owner Trustee shall be  incompetent  or unqualified to perform such
         act  or  acts,  in  which  event  such  rights,   powers,  duties,  and
         obligations (including the holding of title to the Trust or any portion
         thereof in any such  jurisdiction)  shall be  exercised  and  performed
         singly  by such  separate  trustee  or  co-trustee,  but  solely at the
         direction of the Owner Trustee;

                  (ii) No  trustee  under  this  Agreement  shall be  personally
         liable by reason of any act or omission of any other trustee under this
         Agreement; and

                  (iii) The Servicer and the Owner Trustee acting jointly may at
         any time accept the  resignation  of or remove any separate  trustee or
         co-trustee.

         Any notice,  request, or other writing given to the Owner Trustee shall
be  deemed  to have  been  given  to  each of the  then  separate  trustees  and
co-trustees,  as  effectively  as if  given to each of  them.  Every  instrument
appointing any separate  trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XV. Each separate  trustee and  co-trustee,  upon
its  acceptance  of the trusts  conferred,  shall be vested  with the estates or
property  specified in its  instrument of  appointment,  either jointly with the
Owner  Trustee or  separately,  as may be provided  therein,  subject to all the
provisions of this  Agreement,  specifically  including  every provision of this
Agreement  relating to the conduct of,  affecting the liability of, or affording
protection to, the Owner Trustee.  Each such instrument  shall be filed with the
Owner Trustee and a copy thereof given to the Servicer.

         Any separate  trustee or  co-trustee  may at any time appoint the Owner
Trustee,  its agent or  attorney-in-fact  with full power and authority,  to the
extent not  prohibited  by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate  trustee or co- trustee
shall  die,  become  incapable  of acting,  resign,  or be  removed,  all of its
estates, properties, rights, remedies, and trusts shall vest in and be exercised
by the Owner Trustee, to the extent permitted by law, without the appointment of
a new or successor Owner Trustee.

         SECTION 15.13.  Representations  and  Warranties of Owner Trustee.  The
Owner Trustee makes the following  representations  and  warranties on which the
Seller, the Certificateholder and the Secured Parties may rely:

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<PAGE>

                         (i) Organization and Existence.  The Owner Trustee is a
         national banking  corporation with a principal place of business in the
         State of Delaware  and is  authorized  to engage in a banking and trust
         business under such laws.

                        (ii) Power and  Authority.  The Owner  Trustee  has full
         power, authority, and legal right to execute, deliver, and perform this
         Agreement,  and shall have taken all necessary  action to authorize the
         execution, delivery, and performance by it of this Agreement.

                       (iii)  Duly  Executed.   This  Agreement  has  been  duly
         executed and delivered by the Owner Trustee and  constitutes the legal,
         valid,  and binding  agreement  of the Owner  Trustee,  enforceable  in
         accordance with its terms, except as such enforceability may be limited
         by (i) bankruptcy, insolvency, liquidation, reorganization, moratorium,
         conservatorship,  receivership or other similar laws now or hereinafter
         in effect relating to the enforcement of creditors'  rights in general,
         as such  laws  would  apply in the event of a  bankruptcy,  insolvency,
         liquidation, reorganization, moratorium, conservatorship,  receivership
         or similar  occurrence  affecting the Owner  Trustee,  and (ii) general
         principles  of equity  (regardless  of whether such  enforceability  is
         considered  in a proceeding in equity or at law) as well as concepts of
         reasonableness, good faith and fair dealing.

                                   ARTICLE XVI

                                   Termination

         SECTION 16.01. Termination of the Trust. The respective obligations and
responsibilities  of the Seller,  the  Servicer  and the Owner  Trustee  created
hereby shall  terminate and the Trust created by this  Agreement  shall dissolve
upon (i) written notice to the Owner Trustee from the Servicer at any time after
the disposition of the Trust corpus as of the last day of any Collection  Period
at the direction of the Servicer,  at its option,  pursuant to Section 16.02, or
(ii) the payment to all Noteholders  and the Insurer of all amounts  required to
be paid to them  pursuant to this  Agreement,  the  Indenture  and the Insurance
Agreement  (as set forth in writing by the Insurer) and the  disposition  of all
property  held as part of the Trust;  provided,  however,  that the Trust  shall
terminate  one year and one day  following  the  date of the  occurrence  of (i)
above, if on the date of such occurrence,  UAC's Consolidated Tangible Net Worth
is less than $45,000,000,  plus 50% of UAC's cumulative  Consolidated Net Income
(with no  reduction  for  losses)  from and after  August  31,  1995;  provided,
further,  that in no event shall the trust  created by this  Agreement  continue
beyond the  expiration  of 21 years from the date as of which this  Agreement is
executed.  The Servicer  shall  promptly  notify the Owner Trustee and Indenture
Trustee in writing  of any  prospective  termination  pursuant  to this  Section
16.01. Notwithstanding the foregoing, the Trust shall continue and the Indenture
Trustee

                                                        54

<PAGE>

shall  pursue  recovery  of any  Preference  Amounts  under the  Policy  and the
distribution of the same to Noteholders  until the Policy  terminates by its own
terms.

         SECTION 16.02. Optional Disposition of All Receivables.  On any Payment
Date (after  giving  effect to any payments to be made on such Payment  Date) on
which the Note  Balances  will be equal to or less than 10% of the Initial  Note
Balances,  the Servicer shall have the option to cause the Owner Trustee to sell
(to the Servicer or any other person  designated  by the Servicer) the corpus of
the Trust at a price (the "Optional Disposition Price") equal to the fair market
value  of the  Receivables,  but  not  less  than  the  sum of (x)  100%  of the
outstanding Note Balances (including any overdue principal or interest thereon),
(y) accrued and unpaid  interest on such amount  computed at a rate equal to the
weighted average interest rate applicable to the Notes then outstanding, and (z)
all amounts due and owing to the Insurer under this Agreement, the Indenture and
the  Insurance  Agreement.  Any such purchase will be effective as of the end of
the Collection  Period which relates to the Payment Date on which the repurchase
occurs.  The proceeds of such sale will be deposited into the Collection Account
for distribution to the Indenture  Trustee (and, to the extent  applicable,  the
Insurer)  on  the  next  succeeding   Payment  Date.  In  connection  with  such
disposition, the Servicer is required to pay any unpaid fees and expenses of the
Owner  Trustee  and the  Indenture  Trustee  that it would  otherwise  have been
entitled to pursuant to this  Agreement.  The  Servicer  shall  notify the Owner
Trustee and the  Indenture  Trustee on or before the  Determination  Date if the
Note  Balances as of the related  Payment Date will be less than or equal to 10%
of the Initial Note  Balances.  The Servicer  shall notify the Owner  Trustee in
writing on or before the Determination  Date if the Servicer intends to exercise
its option to purchase the corpus of the Trust  pursuant to this Section  16.02.
Such price shall be deposited to the Collection Account in immediately available
funds by 11:00 a.m., New York City time, on the Payment Date and, upon notice to
the  Owner  Trustee  of such  deposit,  the Owner  Trustee  shall  transfer  the
Receivables and the Receivable Files to the purchaser, whereupon the Certificate
shall no  longer  evidence  any  right or  interest  in the  Receivables  or any
proceeds thereof.

                                  ARTICLE XVII

                            Miscellaneous Provisions

         SECTION 17.01. Amendment.  This Agreement may be amended by the Seller,
the Servicer and the Owner Trustee, without the consent of the Certificateholder
or the  Noteholders,  to cure  any  ambiguity,  to  correct  or  supplement  any
provisions in this  Agreement,  or to add any other  provisions  with respect to
matters or questions arising under this Agreement that shall not be inconsistent
with the provisions of this Agreement; provided, however, that such action shall
not, as  evidenced  by an Opinion of Counsel,  adversely  affect in any material
respect the interests of the Certificateholder or the Secured Parties.

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<PAGE>

         Notwithstanding  anything  to the  contrary  in this  Agreement  (i) no
amendment of this Agreement shall be effective without the prior written consent
of the Insurer and the holders of 51% of the outstanding Note Balances,  (ii) no
amendment to this  Agreement  shall be  recognized  or be effective  without the
written  consent of the Owner  Trustee  and  receipt by the Owner  Trustee of an
Opinion of Counsel to the effect that such amendment will not cause the Trust to
be treated as an association  taxable as a corporation  or as a  publicly-traded
partnership,  (iii) the Indenture Trustee shall receive a copy of all amendments
to this  Agreement and (iv) no amendment  which  affects the  Indenture  Trustee
shall be effective without the consent of the Indenture Trustee.

         So  long  as  an  Insurer  Default  shall  not  have  occurred  and  be
continuing,  the Insurer shall have the right to exercise all rights,  including
voting rights,  which the Noteholders are entitled to exercise  pursuant to this
Agreement,  without any consent of such  Noteholders;  provided,  however,  that
without the consent of each Noteholder  affected thereby,  the Insurer shall not
exercise such rights to amend this Agreement in any manner that would (i) reduce
the  amount  of,  or  delay  the  timing  of,  collections  of  payments  on the
Receivables  or  distributions  which are required to be made on any Note,  (ii)
adversely  affect in any  material  respect the  interests of the Holders of any
Notes,  or  (iii)  alter  the  rights  of any such  Holder  to  consent  to such
amendment.

         Notwithstanding any provision in this Agreement to the contrary, in the
event an Insurer  Default  shall have  occurred and be  continuing,  the Insurer
shall not have the right to take any action  under this  Agreement or to control
or direct the actions of the Trust,  the Seller,  the  Indenture  Trustee or the
Owner Trustee pursuant to the terms of this Agreement,  nor shall the consent of
the Insurer be required with respect to any action (or waiver of a right to take
action) to be taken by the Trust, the Seller, the Indenture  Trustee,  the Owner
Trustee or the Noteholders or the Certificateholders; provided, that the consent
of the Insurer  shall be required at all times with respect to any  amendment of
this Agreement.

         Promptly  after the  execution of any  amendment or consent,  the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to the  Certificateholder  and the Indenture Trustee for notification to
each of the Noteholders.

         It shall not be necessary for the consent of the  Certificateholder  or
the Noteholders pursuant to this Section 17.01 to approve the particular form of
any proposed  amendment or consent,  but it shall be  sufficient if such consent
shall approve the substance  thereof.  The manner of obtaining such consents and
of   evidencing   the   authorization   of   the   execution   thereof   by  the
Certificateholder  shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.

         Promptly  after the  execution of any amendment to the  Certificate  of
Trust,  the Owner  Trustee  shall  cause the filing of such  amendment  with the
Secretary of State of the State of Delaware.

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<PAGE>

         Prior  to the  execution  of any  amendment  to this  Agreement  or the
Certificate  of Trust,  the Owner  Trustee shall be entitled to receive and rely
upon an Opinion of Counsel  stating  that the  execution  of such  amendment  is
authorized or permitted by this Agreement and the Opinion of Counsel referred to
in Section  17.02(i)(1).  The Owner  Trustee may, but shall not be obligated to,
enter into any such  amendment  which  affects the Owner  Trustee's  own rights,
duties, or immunities under this Agreement.

         SECTION 17.02.  Protection of Title to Trust.

         (a) The Seller shall  execute and file such  financing  statements  and
cause to be executed and filed such continuation statements,  all in such manner
and in such places as may be required by law fully to  preserve,  maintain,  and
protect the interest of the Trust under this Agreement in the Receivables and in
the proceeds thereof. The Seller shall deliver (or cause to be delivered) to the
Owner  Trustee  and the  Indenture  Trustee  file-stamped  copies  of, or filing
receipts  for,  any  document  filed as  provided  above,  as soon as  available
following such filing.

         (b)  Neither  the  Seller  nor the  Servicer  shall  change  its  name,
identity,  or corporate structure in any manner that would, could, or might make
any  financing  statement  or  continuation  statement  filed by the  Seller  in
accordance with paragraph (a) above seriously  misleading  within the meaning of
ss.  9-402(7) of the UCC,  unless it shall have given the Owner  Trustee and the
Indenture Trustee at least 60 days' prior written notice thereof.

         (c) The  Seller  and the  Servicer  shall  give the Owner  Trustee  and
Indenture  Trustee at least 60 days' prior written  notice of any  relocation of
its  principal  executive  office  if,  as a  result  of  such  relocation,  the
applicable  provisions  of the UCC would  require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement  (in which  case the  Servicer  shall  file or cause to be filed  such
amendment or  continuation  statement  or new  financing  statement).  The Owner
Trustee and the Indenture  Trustee shall be permitted to waive the 60 day notice
period to any shorter  period;  provided that such UCC  financing  statements or
amendments  have been filed on or before the effective  date of any such waiver.
The Servicer shall at all times maintain each office from which it shall service
Receivables,  and its principal  executive  office,  within the United States of
America.

         (d)  The  Servicer  shall  maintain  accounts  and  records  as to each
Receivable  accurately and in sufficient detail to permit (i) the reader thereof
to know at any  time the  status  of such  Receivable,  including  payments  and
recoveries   made  and  payments  owing  (and  the  nature  of  each)  and  (ii)
reconciliation  between  payments  or  recoveries  on (or with  respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.

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<PAGE>

         (e) The Servicer shall maintain its computer  systems so that, from and
after the time of sale  under this  Agreement  of the  Receivables  to the Owner
Trustee, the Servicer's master computer records (including any back-up archives)
that  refer  to a  Receivable  shall  indicate  clearly  with  reference  to the
particular trust that such Receivable is owned by the Owner Trustee.  Indication
of the Owner  Trustee's  ownership  of a  Receivable  shall be  deleted  from or
modified on the Servicer's  computer systems when, and only when, the Receivable
shall have been paid in full or repurchased.

         (f) If at any time the Seller or the  Servicer  shall  propose to sell,
grant a security  interest in, or otherwise  transfer any interest in automotive
receivables to any  prospective  purchaser,  lender,  or other  transferee,  the
Servicer shall give to such prospective  purchaser,  lender, or other transferee
computer  tapes,  records,  or print-outs  (including  any restored from back-up
archives) that, if they shall refer in any manner  whatsoever to any Receivable,
shall  indicate  clearly that such  Receivable has been sold and is owned by the
Trust.

         (g) The Servicer  shall permit the Owner  Trustee and its agents at any
time during  normal  business  hours to inspect,  audit,  and make copies of and
abstracts from the Servicer's records regarding any Receivable.

         (h) Upon request,  the Servicer  shall furnish to the Owner Trustee and
the Indenture Trustee,  within five Business Days, a list of all Receivables (by
contract  number and name of Obligor)  then held as part of the Trust,  together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's  Certificates furnished before such request indicating removal of
Receivables from the Trust.

         (i) The Servicer  shall  deliver to the Owner Trustee and the Indenture
Trustee:

                  (1)  promptly   after  the  execution  and  delivery  of  this
         Agreement and of each amendment  thereto,  an Opinion of Counsel either
         (a)  stating  that,  in the  opinion  of such  counsel,  all  financing
         statements  and  continuation  statements  have been executed and filed
         that are  necessary  fully to preserve  and protect the interest of the
         Owner  Trustee in the  Receivables  and  reciting  the  details of such
         filings or referring to prior Opinions of Counsel in which such details
         are given, or (b) stating that, in the opinion of such counsel, no such
         action shall be necessary to preserve and protect such interest; and

                  (2) within 90 days after the  beginning of each  calendar year
         beginning with the first calendar year beginning more than three months
         after the Cutoff Date, an Opinion of Counsel, dated as of a date during
         such 90-day  period,  either (a) stating  that,  in the opinion of such
         counsel, all financing statements and continuation statements have been
         executed and filed that are necessary fully to preserve and protect the
         interest of the Owner  Trustee in the  Receivables,  and  reciting  the
         details of such filings or referring to prior Opinions of Counsel

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<PAGE>

         in which such details are given, or (b) stating that, in the opinion of
         such counsel, no such action shall be necessary to preserve and protect
         such interest.

         SECTION 17.03. Limitation on Rights of Certificateholder.  The death or
incapacity  of  the  Certificateholder  shall  not  operate  to  terminate  this
Agreement   or  the  Trust,   nor   entitle   such   Certificateholder's   legal
representatives  or  heirs  to claim an  accounting  or to take  any  action  or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations,  and liabilities of the parties to
this Agreement or any of them.

         No  Certificateholder  shall have any right to vote (except as provided
in  Section  17.01,  17.03 or  17.07) or in any  manner  otherwise  control  the
operation and management of the Trust, or the obligations of the parties to this
Agreement  except as  expressly  set forth  herein,  nor shall  anything in this
Agreement set forth, or contained in the terms of the Certificate,  be construed
so as to  constitute  the  Certificateholder  from time to time as members of an
association; nor shall any Certificateholder be under any liability to any third
person  by  reason  of any  action  taken  pursuant  to any  provision  of  this
Agreement.

         No  Certificateholder  shall  have any right by  virtue or by  availing
itself of any  provisions of this  Agreement to institute any suit,  action,  or
proceeding in equity or at law upon or under or with respect to this  Agreement,
unless such Certificateholder previously shall have given to the Owner Trustee a
written  notice of  default  and of the  continuance  thereof,  as  hereinbefore
provided, and unless also the Certificateholder requests in writing to the Owner
Trustee to institute such action, suit, or proceeding in its own name as Trustee
under this Agreement and shall have offered to the Owner Trustee such reasonable
indemnity as it may require against the costs,  expenses,  and liabilities to be
incurred  therein  or  thereby,  and the Owner  Trustee,  for 30 days  after its
receipt of such notice, request, and offer of indemnity, shall have neglected or
refused to institute any such action, suit, or proceeding and during such 30-day
period no direction inconsistent with such written request has been given to the
Owner Trustee.

         SECTION  17.04.  Governing  Law. This  Agreement  shall be construed in
accordance with the laws of the State of Delaware  applicable to agreements made
and to be performed within the State of Delaware,  and the obligations,  rights,
and  remedies  of the  parties  under  this  Agreement  shall be  determined  in
accordance with such laws.

         SECTION 17.05. Notices. All demands,  notices, and communications under
this Agreement shall be in writing,  personally delivered, sent by facsimile to,
sent by courier to or mailed by certified mail,  return receipt  requested,  and
shall be deemed to have been duly given unless otherwise  provided herein,  upon
receipt (a) in the case of the Seller to Leeanne W. Graziani, UAC Securitization
Corporation,  9240 Bonita Beach Road,  Suite  1109-A,  Bonita  Springs,  Florida
34135,  facsimile (941) 948-1855 or at such other address as shall be designated
by the Seller in a written notice to the

                                                        59

<PAGE>

Servicer or Trustee;  (b) in the case of the Servicer to Melanie S. Otto,  Union
Acceptance Corporation, 250 North Shadeland Avenue, Indianapolis, Indiana 46219,
facsimile (317) 231-7926, (c) in the case of the Owner Trustee, at the Corporate
Trust Office, (d) in the case of the Insurer,  MBIA Insurance  Corporation,  113
King  Street,  Armonk,  New York 10504,  facsimile  (914) 765- 3163,  Attention:
Insured  Portfolio  Management,  Structured  Finance  and (e) in the case of the
Indenture  Trustee at the Indenture  Trustee Office.  Unless otherwise  provided
herein,  any notice so mailed within the time prescribed in this Agreement shall
be  conclusively   presumed  to  have  been  duly  given,  whether  or  not  the
Certificateholder or Noteholders shall receive such notice.

         SECTION 17.06.  Severability  of Provisions.  If any one or more of the
covenants,  agreements,  provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements,  provisions, or
terms  shall be  deemed  severable  from the  remaining  covenants,  agreements,
provisions,  or terms of this  Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.

         SECTION  17.07.  Assignment.  Notwithstanding  anything to the contrary
contained herein, except as provided below or in Sections 12.03 and 13.03 and as
provided in the provisions of this Agreement  concerning the  resignation of the
Servicer,  this  Agreement  may not be  assigned  by the Seller or the  Servicer
without   the   prior   written   consent   of  the   Owner   Trustee   and  the
Certificateholder.

         SECTION   17.08.   Certificate   Nonassessable   and  Fully  Paid.  The
Certificateholder  shall not be personally  liable for obligations of the Trust.
The interests  represented by the  Certificate  shall be  nonassessable  for any
losses  or  expenses  of the  Trust  or for any  reason  whatsoever,  and,  upon
authentication  thereof by the Owner  Trustee  pursuant  to Section  11.02,  the
Certificate shall be deemed fully paid.

         SECTION  17.09.   Nonpetition  Covenants.   Notwithstanding  any  prior
termination  of this  Agreement,  the Servicer,  UAC and the Owner Trustee shall
not,  prior to the date which is one year and one day after the  termination  of
this Agreement with respect to the Trust or the Seller,  acquiesce,  petition or
otherwise  invoke or cause the Trust or the Seller to invoke the  process of any
court or government authority for the purpose of commencing or sustaining a case
against  the  Trust  or the  Seller  under  any  Federal  or  state  bankruptcy,
insolvency  or similar  law or  appointing  a  receiver,  liquidator,  assignee,
trustee,  custodian,  sequestrator or other similar official of the Trust or the
Seller or any  substantial  part of its property,  or ordering the winding up or
liquidation of the affairs of the Trust or the Seller.

         SECTION  17.10.  Counterparts.  For the  purpose  of  facilitating  the
execution  of this  Agreement  and for other  purposes,  this  Agreement  may be
executed simultaneously in any number

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<PAGE>

of counterparts,  each of which  counterparts shall be deemed to be an original,
and all of which counterparts shall constitute but one and the same instrument.

         SECTION 17.11. Third Party  Beneficiary.  This Agreement shall inure to
the benefit of the- Insurer,  the  Indenture  Trustee and their  successors  and
assigns.

                          [Next page is signature page]

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<PAGE>

         IN WITNESS  WHEREOF,  the  parties  hereto  have  caused this Trust and
Servicing  Agreement to be duly executed by their respective  officers as of the
day and year first above written.

                                UAC SECURITIZATION CORPORATION,
                                         as Seller

                                By /s/ Leeanne W. Graziani
                                TITLE:   President

                                UNION ACCEPTANCE CORPORATION,
                                         as Servicer

                                By /s/ Melanie S. Otto
                                TITLE:  Vice President

                                FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
                                         as Owner Trustee

                                By  /s/ Edward L. Truitt, Jr.
                                TITLE: Vice President

         Accepted and agreed to as of the day and year first above written.

                                HARRIS TRUST AND SAVINGS BANK,
                                not in its individual capacity but
                                solely as Indenture Trustee

                                By /s/ Robert D. Foltz
                                TITLE: Vice President

                        [SCHEDULES AND EXHIBITS OMITTED]

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