Document:

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                                                                    EXHIBIT 10.4

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                                 HYDRIL COMPANY

                             -----------------------
                             NOTE PURCHASE AGREEMENT
                             -----------------------

                            DATED AS OF JUNE 25, 1998

            $60,000,000 6.85% SENIOR SECURED NOTES DUE JUNE 30, 2003

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                             PAGE
<S>                                                                          <C>
1.   AUTHORIZATION OF NOTES .................................................   1

2.   SALE AND PURCHASE OF NOTES .............................................   1

3.   CLOSING ................................................................   2

4.   CONDITIONS TO CLOSING ..................................................   2
     4.1  Representations and Warranties ....................................   2
     4.2  Performance; No Default ...........................................   2
     4.3  Compliance Certificates ...........................................   2
     4.4  Opinions of Counsel ...............................................   3
     4.5  Purchase Permitted By Applicable Law, etc. ........................   3
     4.6  Sale of Other Notes ...............................................   3
     4.7  Payment of Special Counsel Fees ...................................   3
     4.8  Private Placement Number ..........................................   3
     4.9  Changes in Corporate Structure ....................................   4
     4.10 Intercreditor Agreement ...........................................   4
     4.11 Collateral ........................................................   4
     4.12 Bank Agreement ....................................................   4
     4.13 Proceedings and Documents .........................................   4

5.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY ..........................   5
     5.1  Organization; Power and Authority .................................   5
     5.2  Authorization, etc. ...............................................   5
     5.3  Disclosure ........................................................   5
     5.4  Organization and Ownership of Shares of Subsidiaries; Affiliates ..   6
     5.5  Financial Statements ..............................................   6
     5.6  Compliance with Laws, Other Instruments, etc. .....................   6
     5.7  Governmental Authorizations, etc. .................................   7
     5.8  Litigation; Observance of Agreements, Statutes and Orders .........   7
     5.9  Taxes .............................................................   7
     5.10 Title to Property; Leases .........................................   8
     5.11 Licenses, Permits; etc. ...........................................   8
     5.12 Compliance with ERISA .............................................   9
     5.13 Private Offering by the Company ...................................  10
     5.14 Use of Proceeds; Margin Regulations ...............................  10
     5.15 Existing Debt; Future Liens .......................................  10
     5.16 Foreign Assets Control Regulations, etc. ..........................  11
     5.17 Status under Certain Statutes .....................................  11
     5.18 Environmental Matters .............................................  11
     5.19 Labor Relations ...................................................  12

6.   REPRESENTATIONS OF THE PURCHASER........................................  12
     6.1 Purchase for Investment ............................................  12
     6.2 Source of Funds ....................................................  12
</TABLE>

HYDRIL COMPANY                        i                 NOTE PURCHASE AGREEMENT
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                            TABLE OF CONTENTS (CONT.)

<TABLE>
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<S>                                                                         <C>
7.   INFORMATION AS TO COMPANY ............................................   14
     7.1   Financial and Business Information .............................   14
     7.2   Officer's Certificate ..........................................   17
     7.3   Inspection .....................................................   17

8.   PAYMENT OF THE NOTES .................................................   18
     8.1   Payment at Maturity ............................................   18
     8.2   Optional Prepayments with Make-Whole Amount ....................   18
     8.3   Change in Control ..............................................   18
     8.4   Allocation of Partial Prepayments ..............................   19
     8.5   Maturity; Surrender, etc. ......................................   20
     8.6   No Other Optional Prepayments or Purchase of Notes..............   20
     8.7   Make-Whole Amount ..............................................   20

9.   AFFIRMATIVE COVENANTS ................................................   22
     9.1   Compliance with Law ............................................   22
     9.2   Insurance ......................................................   22
     9.3   Maintenance of Properties ......................................   22
     9.4   Payment of Taxes and Claims ....................................   22
     9.5   Corporate Existence, etc. ......................................   23
     9.6   Further Assurances .............................................   23
     9.7   Maintenance of Most Favored Lender Status ......................   23
     9.8   Subsidiary Guaranties ..........................................   24

10.  NEGATIVE COVENANTS ...................................................   24
     10.1  Consolidated Funded Debt .......................................   24
     10.2  Subsidiary Debt ................................................   25
     10.3  Tangible Net Worth .............................................   26
     10.4  Liens ..........................................................   26
     10.5  Restricted Investments and Restricted Payments .................   29
     10.6  Merger, Consolidation, etc. ....................................   30
     10.7  Disposition of Assets ..........................................   31
     10.8  Transactions with Affiliates ...................................   33
     10.9  Line of Business ...............................................   33
     10.10 EVI Indebtedness ...............................................   33

11.  EVENTS OF DEFAULT ....................................................   34

12.  REMEDIES ON DEFAULT, ETC. ............................................   37
     12.1  Acceleration ...................................................   37
     12.2  Other Remedies .................................................   37
     12.3  Rescission .....................................................   37
     12.4  No Waivers or Election of Remedies, Expenses, etc. .............   38
</TABLE>

HYDRIL COMPANY                        ii                NOTE PURCHASE AGREEMENT
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                            TABLE OF CONTENTS (CONT.)

<TABLE>
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<C>                                                                        <S>
13.  REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES .......................   38
     13.1  Registration of Notes .........................................   38
     13.2  Transfer and Exchange of Notes ................................   38
     13.3  Replacement of Notes ..........................................   39

14.  PAYMENTS ON NOTES ...................................................   39
     14.1  Place of Payment ..............................................   39
     14.2  Home Office Payment ...........................................   39

15.  EXPENSES, ETC. ......................................................   40
     15.1  Transaction Expenses ..........................................   40
     15.2  Survival ......................................................   40

16.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
     AGREEMENT ...........................................................   41

17.  AMENDMENT AND WAIVER ................................................   41
     17.1  Requirements ..................................................   41
     17.2  Solicitation of Holders of Notes ..............................   41
     17.3  Binding Effect, etc. ..........................................   42
     17.4  Notes held by Company, etc. ...................................   42

18.  NOTICES .............................................................   42

19.  REPRODUCTION OF DOCUMENTS ...........................................   42

20.  CONFIDENTIAL INFORMATION ............................................   43

21.  SUBSTITUTION OF PURCHASER ...........................................   44

22.  MISCELLANEOUS .......................................................   45
     22.1  Successors and Assigns ........................................   45
     22.2  Payments Due on Non-Business Days; When Payments Deemed
           Received ......................................................   45
     22.3  Maximum Interest Payable ......................................   45
     22.4  Release of Liens ..............................................   46
     22.5  Severability ..................................................   46
     22.6  Construction ..................................................   46
     22.7  Counterparts ..................................................   46
     22.8  Governing Law .................................................   46
     22.9  Consent to Jurisdiction; etc. .................................   46
     22.10 Section Headings and Table of Contents ........................   47
</TABLE>

HYDRIL COMPANY                       iii                NOTE PURCHASE AGREEMENT
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                            TABLE OF CONTENTS (cont.)

<TABLE>
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                                                                                                 PAGE
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<S>                           <C>       <C>
        SCHEDULE A            --        Information Relating to Purchasers

        SCHEDULE B            --        Defined Terms

        SCHEDULE 3            --        Payment Instructions

        SCHEDULE 4.9          --        Changes in Corporate Structure

        SCHEDULE 4.11         --        Collateral Documents

        SCHEDULE 5.3          --        Disclosure Materials

        SCHEDULE 5.4          --        Subsidiaries of the Company and Ownership of
                                        Subsidiary Stock

        SCHEDULE 5.5          --        Financial Statements

        SCHEDULE 5.8          --        Certain Litigation

        SCHEDULE 5.11         --        Patents, etc.

        SCHEDULE 5.12         --        ERISA Affiliates

        SCHEDULE 5.14         --        Use of Proceeds

        SCHEDULE 5.15         --        Existing Debt and Liens

        SCHEDULE 5.19         --        Collective Bargaining Agreements

        SCHEDULE 10.5         --        Existing Investments

        SCHEDULE 10.8         --        Permitted Transactions with Affiliates

        EXHIBIT 1             --        Form of Note

        EXHIBIT 4.4(a)        --        Form of Opinion of Special Counsel for the Company

        EXHIBIT 4.4(b)        --        Form of Opinion of Special Counsel for the Purchasers

        EXHIBIT 4.10          --        Form of Intercreditor Agreement
</TABLE>

HYDRIL COMPANY                       iv                 NOTE PURCHASE AGREEMENT

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                                 HYDRIL COMPANY
                       3300 NORTH SAM HOUSTON PARKWAY EAST
                            HOUSTON, TEXAS 77032-3411

                  6.85% SENIOR SECURED NOTES DUE JUNE 30, 2003

                                                       Dated as of June 25, 1998

To the Purchaser Named on
the Signature Page Hereto

Ladies and Gentlemen:

     HYDRIL COMPANY, a Delaware corporation (together with its successors and
assigns, the "COMPANY"), agrees with you as follows:

1. AUTHORIZATION OF NOTES.

     The Company will authorize the issue and sale of $60,000,000 aggregate
principal amount of its 6.85% Senior Secured Notes due June 30, 2003 (the
"NOTES", such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter
defined)). The Notes shall be substantially in the form set out in Exhibit 1.
Certain capitalized terms used in this Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement.

2. SALE AND PURCHASE OF NOTES.

     Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified below your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified below
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT

<PAGE>   7

3. CLOSING.

     The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Andrews & Kurth L.L.P., 600 Travis,
Houston, Texas 77002, at 10:00 a.m., local time, at a closing (the "CLOSING") on
June 26, 1998 or on such other Business Day thereafter on or prior to June 30,
1998 as may be agreed upon by the Company and you and the Other Purchasers. At
the Closing the Company will deliver to you the Notes to be purchased by you in
the form of a single Note (or such greater number of Notes in denominations of
at least $100,000 as you may request), dated the date of the Closing and
registered in your name (or in the name of your nominee), as indicated in
Schedule A, against payment by federal funds wire transfer in immediately
available funds of the amount of the purchase price therefor as directed by the
Company in Schedule 3. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.

4. CONDITIONS TO CLOSING.

     Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:

     4.1 REPRESENTATIONS AND WARRANTIES.

     The representations and warranties of the Company in this Agreement shall
be correct when made and at the time of the Closing.

     4.2 PERFORMANCE; NO DEFAULT.

     The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Except as shall be described in Schedule 5.3, neither the Company
nor any Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Section 10 had such Section
applied since such date.

     4.3 COMPLIANCE CERTIFICATES.

          (a) OFFICER'S CERTIFICATE. The Company shall have delivered to you an
     Officer's Certificate, dated the date of the Closing, certifying that the
     conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

          (b) SECRETARY'S CERTIFICATE. The Company shall have delivered to you a
     certificate of its Secretary or one of its Assistant Secretaries, dated
     the date of the Closing, certifying as to the resolutions attached thereto
     and other corporate proceedings relating to the authorization, execution
     and delivery of the Financing Documents to which it is a party.

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       2

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     4.4 OPINIONS OF COUNSEL.

     You shall have received opinions in form and substance satisfactory to you,
dated the date of the Closing, from

          (a) Baker & Botts, counsel for the Company, substantially in the form
     set out in Exhibit 4.4(a), and covering such other matters incident to the
     transactions contemplated hereby as you or your counsel may reasonably
     request (and the Company hereby instructs such counsel to deliver such
     opinion to you), and

          (b) Hebb & Gitlin, your special counsel in connection with such
     transactions, substantially in the form set out in Exhibit 4.4(b), and
     covering such other matters incident to such transactions as you may
     reasonably request.

     4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

     On the date of the Closing your purchase of Notes shall (a) be permitted by
the laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject you to any
tax, penalty or liability under or pursuant to any applicable law or regulation.
If requested by you, you shall have received an Officer's Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.

     4.6 SALE OF OTHER NOTES.

     Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.

     4.7 PAYMENT OF SPECIAL COUNSEL FEES.

     Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the reasonable fees, charges and disbursements of
your special counsel referred to in Section 4.4(b) to the extent reflected in a
statement of such counsel rendered to the Company on or prior to the date of the
Closing.

     4.8 PRIVATE PLACEMENT NUMBER.

     A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau
(in cooperation with the Securities Valuation Office of the National Association
of Insurance Commissioners) shall have been obtained for the Notes.

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       3

<PAGE>   9

     4.9 CHANGES IN CORPORATE STRUCTURE.

     Except as specified in Schedule 4.9, the Company shall not have changed its
jurisdiction of incorporation or been a party to any merger or consolidation and
shall not have succeeded to all or any substantial part of the liabilities of
any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.

     4.10 INTERCREDITOR AGREEMENT.

     An intercreditor and collateral agency agreement substantially in the form
of Exhibit 4.10 (as amended from time to time, the "INTERCREDITOR AGREEMENT")
shall have been duly executed and delivered by you, each of the Other
Purchasers, the Banks, Bank One, as agent for the Banks, and the Collateral
Agent, and an original copy thereof evidencing such due execution and delivery
shall be delivered to you.

     4.11 COLLATERAL.

     The Company and the Collateral Agent shall have entered into the Second
Lien Deed of Trust and Security Agreements identified on Schedule 4.11
(collectively, the "DEEDS OF TRUST") and amendments to or assignments of the
documents set forth on Schedule 4.11 (such documents, including the Deeds of
Trust and any other security agreement, pledge agreement, collateral assignment,
mortgage or other instrument or agreement relating to the Collateral, whether
existing on or entered into after the date of Closing, as so amended or
assigned, and as may be further amended, modified or restated from time to time,
collectively, the "COLLATERAL DOCUMENTS"), in form and substance satisfactory to
you, and copies thereof shall be delivered to you, certified as true and correct
by the Company.

     4.12 BANK AGREEMENT.

     The Company shall have delivered to you a fully executed copy of the Bank
Agreement as in effect on, and as amended as of, the date of Closing, certified
as true, complete and correct by a Responsible Officer of the Company, and such
agreement shall be in form and substance reasonably satisfactory to you.

     4.13 PROCEEDINGS AND DOCUMENTS.

     All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       4

<PAGE>   10

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to you, as of the date of the Closing,
that:

     5.1 ORGANIZATION; POWER AND AUTHORITY.

     The Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority, to own or
hold under lease the Properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver the Financing Documents to which it is a party and to perform the
provisions thereof.

     5.2 AUTHORIZATION, ETC.

     Each of the Financing Documents has been duly authorized by all necessary
corporate action on the part of the Company, and constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

     5.3 DISCLOSURE.

     The Company, through its agent, Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, has delivered to you and each Other Purchaser a copy of a
Confidential Private Placement Memorandum, dated May 1998 (the "MEMORANDUM"),
relating to the transactions contemplated hereby. The Memorandum fairly
describes, in all material respects, the general nature of the business and
principal Properties of the Company and its Subsidiaries. Except as disclosed in
Schedule 5.3, this Agreement, the memorandum, the documents, certificates or
other writings delivered to you by or on behalf of the Company in connection
with the transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
December 31, 1997, there has been no change in the financial condition,
operations, business, Properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       5

<PAGE>   11

     5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.

          (a) Schedule 5.4 contains (except as noted therein) complete and
     correct lists of the Company's Subsidiaries, showing, as to each
     Subsidiary, the correct name thereof, the jurisdiction of its organization,
     and the percentage of shares of each class of its Capital Stock outstanding
     owned by the Company and each other Subsidiary. The Company has no
     Affiliates other than trusts and charitable organizations, none of which is
     engaged in any operating business.

          (b) All of the outstanding shares of Capital Stock of each Subsidiary
     shown in Schedule 5.4 as being owned by the Company and its Subsidiaries
     have been validly issued, are fully paid and nonassessable and are owned
     by the Company or another Subsidiary free and clear of any Lien (except as
     otherwise disclosed in Schedule 5.4).

          (c) Each Subsidiary identified in Schedule 5.4 is a corporation or
     other legal entity duly organized, validly existing and in good standing
     under the laws of its jurisdiction of organization, and is duly qualified
     as a foreign corporatIon or other legal entity and is in good standing in
     each jurisdiction in which such qualification is required by law, other
     than those jurisdictions as to which the failure to be so qualified or in
     good standing could not, individually or in the aggregate, reasonably be
     expected to have a Material Adverse Effect. Each such Subsidiary has the
     corporate or other power and authority to own or hold under lease the
     Properties it purports to own or hold under lease and to transact the
     business it transacts and proposes to transact.

          (d) No Subsidiary is a party to, or otherwise subject to any legal
     restriction or any agreement (other than this Agreement, the agreements
     listed in Schedule 5.4 and customary limitations imposed by corporate law
     statutes) restricting the ability of such Subsidiary to pay dividends out
     of profits or make any other similar distributions of profits to the
     Company or any of its Subsidiaries that owns outstanding shares of Capital
     Stock of such Subsidiary.

     5.5 FINANCIAL STATEMENTS.

     The Company has delivered to you and each Other Purchaser copies of the
financial statements of the Company and its Subsidiaries listed in Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments and the inclusion of abbreviated
footnotes).

     5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

     The execution, delivery and performance by the Company of this Agreement,
the Notes and the other Financing Documents will not

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       6

<PAGE>   12

          (a) contravene, result in any breach of, or constitute a default
     under, or result in the creation of any Lien (other than Liens on the
     Collateral in favor of the Collateral Agent) in respect of any Property of
     the Company or any Subsidiary under, any indenture, mortgage, deed of
     trust, loan, purchase or credit agreement, lease, corporate charter or
     by-laws, or any other agreement or instrument to which the Company or any
     Subsidiary is bound or by which the Company or any Subsidiary or any of
     their respective Properties may be bound or affected,

          (b) conflict with or result in a breach of any of the terms,
     conditions or provisions of any order, judgment, decree, or ruling of any
     court, arbitrator or Governmental Authority applicable to the Company or
     any Subsidiary, or

          (c) violate any provision of any statute or other rule or regulation
     of any Governmental Authority applicable to the Company or any Subsidiary.

     5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.

     No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of the Financing Documents.

     5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.

          (a) Except as disclosed in Schedule 5.8, there are no actions, suits
     or proceedings pending or, to the knowledge of the Company, threatened
     against or affecting the Company or any Subsidiary or any Property of the
     Company or any Subsidiary in any court or before any arbitrator of any kind
     or before or by any Governmental Authority that, individually or in the
     aggregate, could reasonably be expected to have a Material Adverse Effect.

          (b) Neither the Company nor any Subsidiary is in default under any
     term of any agreement or instrument to which it is a party or by which it
     is bound, or any order, judgment, decree or ruling of any court, arbitrator
     or Governmental Authority or is in violation of any applicable law,
     ordinance, rule or regulation (including, without limitation, Environmental
     Laws) of any Governmental Authority, which default or violation,
     individually or in the aggregate, could reasonably be expected to have a
     Material Adverse Effect.

     5.9 TAXES.

     The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their Properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of which is not
individually or in the aggregate Material or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       7

<PAGE>   13

reserves on the books of the Company and its Subsidiaries in respect of Federal,
state or other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended December 31, 1993.

     5.10 TITLE TO PROPERTY; LEASES.

     The Company and its Subsidiaries have good and sufficient title to their
respective Properties that individually or in the aggregate are Material,
including all such Properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.

     5.11 LICENSES, PERMITS, ETC.

     Except as disclosed in Schedule 5.11,

          (a) the Company and its Subsidiaries own or possess all licenses,
     permits, franchises, authorizations, patents, copyrights, service marks,
     trademarks and trade names, or rights thereto, without known conflict with
     the rights of others, unless the failure to have such ownership or
     possession could not reasonably be expected to result in a Material Adverse
     Effect;

          (b) to the best knowledge of the Company, no product or practice of
     the Company or any Subsidiary infringes in any respect any license, permit,
     franchise, authorization, patent, copyright, service mark, trademark, trade
     name or other right owned by any other Person, unless such infringement
     could not reasonably be expected to result in a Material Adverse Effect;

          (c) to the best knowledge of the Company, there is no violation by any
     Person of any right of the Company or any of its Subsidiaries with respect
     to any patent, copyright, service mark, trademark, trade name or other
     right owned or used by the Company or any of its Subsidiaries, which
     violation could reasonably be expected to result in a Material Adverse
     Effect;

          (d) all filings in federal and state offices (including, without
     limitation, the United States Patent and Trademark Office) in respect of
     all Material patents, pending patents, copyrights, service marks,
     trademarks and trade names, and licenses with respect thereto, necessary to
     protect the rights therein of the Company and its Subsidiaries against
     third parties, have been made; and

          (e) Schedule 5.11 correctly lists all United States patents and
     trademarks (including those pending) held by the Company and its
     Subsidiaries.

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       8

<PAGE>   14

     5.12 COMPLIANCE WITH ERISA.

          (a) COMPLIANCE WITH LAW. The Company and each ERISA Affiliate have
     operated and administered each Plan in compliance with all applicable laws
     except for such instances of noncompliance as have not resulted in and
     could not reasonably be expected to result in a Material Adverse Effect.
     Neither the Company nor any ERISA Affiliate has incurred any liability
     pursuant to Title I or IV of ERISA or the penalty or excise tax provisions
     of the Code relating to employee benefit plans (as defined in section 3 of
     ERISA), and no event, transaction or condition has occurred or exists that
     could reasonably be expected to result in the incurrence of any such
     liability by the Company or any ERISA Affiliate, or in the imposition of
     any Lien on any of the rights, Properties or assets of the Company or any
     ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to
     such penalty or excise tax provisions or to section 401(a)(29) or 412 of
     the Code, other than such liabilities or Liens as would not reasonably be
     expected, individually or in the aggregate, to have a Material Adverse
     Effect.

          (b) BENEFIT LIABILITIES. The present value of the aggregate benefit
     liabilities under each of the Plans (other than Multiemployer Plans),
     determined as of the end of such Plan's most recently ended plan year on
     the basis of the actuarial assumptions specified for funding purposes in
     such Plan's most recent actuarial valuation report, did not exceed the
     aggregate current value of the assets of such Plan allocable to such
     benefit liabilities by more than $4,800,000. The term "BENEFIT LIABILITIES"
     has the meaning specified in section 4001 of ERISA and the terms "CURRENT
     VALUE" and "PRESENT VALUE" have the meaning specified in section 3 of
     ERISA.

          (c) MULTIEMPLOYER WITHDRAWAL LIABILITIES. The Company and the ERISA
     Affiliates have not incurred withdrawal liabilities (and are not subject to
     contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in
     respect of Multiemployer Plans that individually or in the aggregate are
     Material.

          (d) POSTRETIREMENT BENEFITS. The expected postretirement benefit
     obligation (determined as of the last day of the Company's most recently
     ended fiscal year in accordance with Financial Accounting Standards Board
     Statement No. 106, without regard to liabilities attributable to
     continuation coverage mandated by section 4980B of the Code) of the Company
     and its Subsidiaries could not reasonably be expected to have a Material
     Adverse Effect.

          (e) PROHIBITED TRANSACTIONS. The execution and delivery of this
     Agreement and the issuance and sale of the Notes hereunder will not involve
     any transaction that is subject to the prohibitions of section 406 of ERISA
     or in connection with which a tax could be imposed pursuant to section
     4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
     first sentence of this Section 5.12(e) is made in reliance upon and subject
     to the accuracy of your representation in Section 6.2 as to the Sources
     used to pay the purchase price of the Notes to be purchased by you.

          (f) PLANS. Schedule 5.12 sets forth all ERISA Affiliates and all
     "employee benefit plans" maintained by the Company (or any "affiliate"
     thereof) or in respect of which the Notes could constitute an "employer
     security" ("EMPLOYEE BENEFIT PLAN" has the meaning specified in section 3
     of ERISA, "AFFILIATE" has the meaning specified in section

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       9

<PAGE>   15

     407(d) of ERISA and section V of the Department of Labor Prohibited
     Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and "EMPLOYER
     SECURITY" has the meaning specified in section 407(d) of ERISA).

          (g) FOREIGN PENSION PLANS. All Foreign Pension Plans have been
     established, operated, administered and maintained in compliance with all
     laws, regulations and orders applicable thereto except for such failures,
     in the aggregate for all such failures, to comply that could not reasonably
     be expected to have a Material Adverse Effect. All premiums, contributions
     and any other amounts required by applicable Foreign Pension Plan documents
     or applicable laws have been paid or accrued as required, except for
     premiums, contributions and amounts that, in the aggregate for all such
     obligations, could not reasonably be expected to have a Material Adverse
     Effect. The present value of all benefits vested under each Foreign Pension
     Plan, determined as of the most recent valuation date in respect thereof
     does not exceed the value of the assets of such Foreign Pension Plan, and
     all required payments in respect of funding such Foreign Pension Plan have
     been made, unless any such excess or the failure to make any such payments
     could not reasonably be expected to have a Material Adverse Effect.

     5.13 PRIVATE OFFERING BY THE COMPANY.

     Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the Other Purchasers and not more than 30 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of section 5 of the Securities Act.

     5.14 USE OF PROCEEDS; MARGIN REGULATIONS.

     The Company will apply the proceeds of the sale of the Notes as set forth
in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 1% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 1% of the value of such
assets. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING
OR CARRYING" shall have the meanings assigned to them in said Regulation U.

     5.15 EXISTING DEBT; FUTURE LIENS.

          (a) Except as described therein, Schedule 5.15 sets forth a complete
     and correct list of all outstanding Debt of the Company and its
     Subsidiaries, with a principal amount in excess of $500,000, as of May 31,
     1998 (and specifying, as to each such Debt, the collateral, if any,
     securing such Debt), since which date there has been no Material

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       10

<PAGE>   16

     change in the amounts, interest rates, sinking funds, instalment payments
     or maturities of the Debt of the Company or its Subsidiaries. Neither the
     Company nor any Subsidiary is in default and no waiver of default is
     currently in effect, in the payment of any principal or interest on any
     Debt of the Company or such Subsidiary and no event or condition exists
     with respect to any Debt of the Company or any Subsidiary that would permit
     (or that with notice or the lapse of time, or both, would permit) one or
     more Persons to cause such Debt to become due and payable before its stated
     maturity or before its regularly scheduled dates of payment.

          (b) Except as disclosed in Schedule 5.15, neither the Company nor any
     Subsidiary has agreed or consented to cause or permit in the future (upon
     the happening of a contingency or otherwise) any of its Property, whether
     now owned or hereafter acquired, to be subject to a Lien not permitted by
     Section 10.4.

          (c) No Subsidiary has given any Guaranty of any obligations owing by
     the Company under the Bank Agreement.

     5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.

     Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.

     5.17 STATUS UNDER CERTAIN STATUTES.

     Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the
Federal Power Act, as amended.

     5.18 ENVIRONMENTAL MATTERS.

     Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real Properties or other assets now or formerly owned, leased or
operated by any of them, alleging any damage to the environment or violation of
any Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,

          (a) neither the Company nor any Subsidiary has knowledge of any facts
     which would give rise to any claim, public or private, of violation of
     Environmental Laws or damage to the environment emanating from, occurring
     on or in any way related to real Properties now or formerly owned, leased
     or operated by any of them or to other assets or their use, except, in each
     case, such as could not reasonably be expected to result in a Material
     Adverse Effect;

          (b) neither the Company nor any of its Subsidiaries has stored any
     Hazardous Materials on real Properties now or formerly owned, leased or
     operated by any of them

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       11

<PAGE>   17

     or disposed of any Hazardous Materials in a manner contrary to any
     Environmental Laws in each case in any manner that could reasonably be
     expected to result in a Material Adverse Effect; and

          (c) all buildings on all real Properties now owned, leased or operated
     by the Company or any of its Subsidiaries are in compliance with applicable
     Environmental Laws, except where failure to comply could not reasonably be
     expected to result in a Material Adverse Effect.

     5.19 LABOR RELATIONS.

     Except as set forth on Schedule 5.19, neither the Company nor any
Subsidiary is a party to any collective bargaining agreement. There are no
grievances, disputes or controversies with any union or other organization
affecting the Company or any Subsidiary that could, individually or in the
aggregate, be expected to have a Material Adverse Effect.

6. REPRESENTATIONS OF THE PURCHASER.

     6.1 PURCHASE FOR INVESTMENT.

     You represent that you are purchasing the Notes for your own account or for
one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their Property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.

     6.2 SOURCE OF FUNDS.

     You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "SOURCE") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:

          (a) the Source is an "insurance company general account" as defined
     in United States Department of Labor Prohibited Transaction Exemption
     ("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect thereof you
     represent that there is no "employee benefit plan" (as defined in section
     3(3) of ERISA and section 4975(e)(1) of the Code, treating as a single plan
     all plans maintained by the same employer or employee organization or
     affiliate thereof) with respect to which the amount of the general account
     reserves and liabilities of all contracts held by or on behalf of such plan
     exceeds 10% of the total reserves and liabilities of such general account
     (exclusive of separate account liabilities) plus surplus, as set forth in
     the National Association of Insurance Commissioners' Annual Statement filed
     with your state of domicile and that such acquisition is eligible for and
     satisfies the other requirements of such exemption; or

          (b) if you are an insurance company, the Source does not include
     assets allocated to any separate account maintained by you in which any
     employee benefit plan

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       12

<PAGE>   18

     (or its related trust) has any interest, other than a separate account that
     is maintained solely in connection with your fixed contractual obligations
     under which the amounts payable, or credited, to such plan and to any
     participant or beneficiary of such plan (including any annuitant) are not
     affected in any manner by the investment performance of the separate
     account; or

          (c) the Source is either (i) an insurance company pooled separate
     account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
     a bank collective investment fund, within the meaning of the PTE 91-38
     (issued July 12,1991) and, except as you have disclosed to the Company in
     writing pursuant to this clause (c), no employee benefit plan or group of
     plans maintained by the same employer or employee organization beneficially
     owns more than 10% of all assets allocated to such pooled separate account
     or collective investment fund; or

          (d) the Source constitutes assets of an "investment fund" (within the
     meaning of part V of PTE 84-14 (the "QPAM EXEMPTION")) managed by a
     "qualified professional asset manager" or "QPAM" (within the meaning of
     part V of the QPAM Exemption), no employee benefit plan's assets that are
     included in such investment fund, when combined with the assets of all
     other employee benefit plans established or maintained by the same employer
     or by an affiliate (within the meaning of section V(c)(1) of the QPAM
     Exemption) of such employer or by the same employee organization and
     managed by such QPAM, exceed 20% of the total client assets managed by such
     QPAM, the conditions of part I(c) and (g) of the QPAM Exemption are
     satisfied, neither the QPAM nor a person controlling or controlled by the
     QPAM (applying the definition of "control" in section V(e) of the QPAM
     Exemption) owns a 5% or more interest in the Company and

               (i)  the identity of such QPAM and

               (ii) the names of all employee benefit plans whose assets are
          included in such investment fund

     have been disclosed to the Company in writing pursuant to this clause (d);
     or

          (e) the Source is a governmental plan; or

          (f) the Source is one or more employee benefit plans, or a separate
     account or trust fund comprised of one or more employee benefit plans, each
     of which has been identified to the Company in writing pursuant to this
     clause (f); or

          (g) the Source does not include assets of any employee benefit plan,
     other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in section 3 of ERISA.

HYDRIL COMPANY                                          NOTE PURCHASE AGREEMENT
                                       13

<PAGE>   19

7.       INFORMATION AS TO COMPANY.

         7.1      FINANCIAL AND BUSINESS INFORMATION.

         The Company shall deliver to each holder of Notes that is an
Institutional Investor:

                  (a) QUARTERLY STATEMENTS -- within 45 days after the end of
         each quarterly fiscal period in each fiscal year of the Company (other
         than the last quarterly fiscal period of each such fiscal year),
         duplicate copies of,

                           (i) a consolidated balance sheet of the Company and
                  its Subsidiaries as at the end of such quarter, and

                           (ii) consolidated statements of income and cash flows
                  of the Company and its Subsidiaries, for such quarter and (in
                  the case of the second and third quarters) for the portion of
                  the fiscal year ending with such quarter,

         setting forth in each case in comparative form the figures for the
         corresponding periods in the previous fiscal year, all in reasonable
         detail, prepared in accordance with GAAP applicable to quarterly
         financial statements generally, and certified by a Senior Financial
         Officer as fairly presenting, in all material respects, the
         consolidated financial position of the companies being reported on and
         their consolidated results of operations and cash flows, subject to
         changes resulting from year-end adjustments;

                  (b) ANNUAL STATEMENTS -- within 120 days after the end of each
         fiscal year of the Company, duplicate copies of,

                           (i) a consolidated balance sheet of the Company and
                  its Subsidiaries, as at the end of such year, and

                           (ii) consolidated statements of income, shareholders'
                  equity and cash flows of the Company and its Subsidiaries, for
                  such year,

         setting forth in each case in comparative form the figures for the
         previous fiscal year, all in reasonable detail, prepared in accordance
         with GAAP, and accompanied by

                                    (A) an opinion thereon of independent
                           certified public accountants of recognized national
                           standing, which opinion shall state that such
                           financial statements present fairly, in all material
                           respects, the consolidated financial position of the
                           companies being reported upon and their consolidated
                           results of operations and cash flows and have been
                           prepared in conformity with GAAP, and that the
                           examination of such accountants in connection with
                           such financial statements has been made in accordance
                           with generally accepted auditing standards, and that
                           such audit provides a reasonable basis for such
                           opinion in the circumstances, and

                                    (B) a report of such accountants stating
                           whether, in making their audit, they have become
                           aware of any condition or event that then

HYDRIL COMPANY                         14                NOTE PURCHASE AGREEMENT
<PAGE>   20

                           constitutes a Default or an Event of Default, and, if
                           they are aware that any such condition or event then
                           exists, specifying the nature and period of the
                           existence thereof (it being understood that such
                           accountants shall not be liable, directly or
                           indirectly, for any failure to obtain knowledge of
                           any Default or Event of Default unless such
                           accountants should have obtained knowledge thereof in
                           making an audit in accordance with generally accepted
                           auditing standards or did not make such an audit);

                  (c) SEC AND OTHER REPORTS -- promptly upon their becoming
         available, one copy of (i) each financial statement, report (including,
         without limitation, the Company's annual report to shareholders, if
         any, prepared pursuant to Rule 14a-3 under the Exchange Act), notice
         or proxy statement sent by the Company or any Subsidiary to public
         securities holders generally, and (ii) each regular or periodic report,
         each registration statement (without exhibits except as expressly
         requested by such holder), and each prospectus and all amendments
         thereto filed by the Company or any Subsidiary with the Securities and
         Exchange Commission and of all press releases and other statements made
         available generally by the Company or any Subsidiary to the public
         concerning developments that are Material;

                  (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in
         any event within five Business Days after a Responsible Officer
         becoming aware

                           (i) of the existence of any Default or Event of
                  Default, or

                           (ii) that any Person has given any notice or taken
                  any action with respect to a claimed default hereunder, or

                           (iii) that any Person has given any notice or taken
                  any action with respect to a claimed default under the Bank
                  Agreement, or

                           (iv) that any Person has given any notice or taken
                  any action with respect to a claimed default of the type
                  referred to in Section 11(f),

         a written notice specifying the nature, the period of existence thereof
         and what action the Company is taking or proposes to take with respect
         thereto;

                  (e) ERISA MATTERS -- promptly, and in any event within five
         days after a Responsible Officer becoming aware of any of the
         following, a written notice setting forth the nature thereof and the
         action, if any, that the Company or an ERISA Affiliate proposes to take
         with respect thereto:

                           (i) with respect to any Plan, any reportable event,
                  as defined in section 4043(c) of ERISA and the regulations
                  thereunder, for which notice thereof has not been waived
                  pursuant to such regulations as in effect on the date of the
                  Closing; or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under section 4042 of ERISA for the termination of, or the
                  appointment of a trustee to administer, any Plan, or the

HYDRIL COMPANY                         15                NOTE PURCHASE AGREEMENT
<PAGE>   21

                  receipt by the Company or any ERISA Affiliate of a notice from
                  a Multiemployer Plan that such action has been taken by the
                  PBGC with respect to such Multiemployer Plan;

                           (iii) any event, transaction or condition that could
                  result in the incurrence of any liability by the Company or
                  any ERISA Affiliate pursuant to Title I or IV of ERISA or the
                  penalty or excise tax provisions of the Code relating to
                  employee benefit plans, or in the imposition of any Lien on
                  any of the rights, Properties or assets of the Company or any
                  ERISA Affiliate pursuant to Title I or IV of ERISA or such
                  penalty or excise tax provisions, if such liability or Lien,
                  taken together with any other such liabilities or Liens then
                  existing, could reasonably be expected to have a Material
                  Adverse Effect; or

                           (iv) any material contributions to any Foreign
                  Pension Plan have not been made when due and such default
                  cannot immediately be remedied, or any Foreign Pension Plan is
                  not funded to the extent required by applicable law, based
                  upon reasonable actuarial assumptions, or any material change
                  is anticipated to any Foreign Pension Plan, except for changes
                  that individually or in the aggregate could not reasonably be
                  expected to have a Material Adverse Effect;

                  (f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in
         any event within 30 days of receipt thereof, copies of any notice to
         the Company or any Subsidiary from any Federal or state Governmental
         Authority relating to any order, ruling, statute or other law or
         regulation that could reasonably be expected to have a Material Adverse
         Effect;

                  (g) ACTIONS, PROCEEDINGS -- promptly after a Responsible
         Officer becomes aware of the commencement thereof, notice of any action
         or proceeding relating to the Company or any Subsidiary in any court or
         before any Governmental Authority or arbitration board or tribunal as
         to which there is a reasonable possibility of an adverse determination
         and that, if adversely determined, could reasonably be expected to have
         a Material Adverse Effect;

                  (h) OTHER CREDITORS -- as soon as practicable, copies of any
         financial statements, projections or reports (other than routine
         notices, communications or other documents delivered in connection with
         ordinary course borrowing, or the administration of any borrowing base
         or similar test for ordinary course advances under a credit agreement)
         furnished to any Bank (or its agent) pursuant to the Bank Agreement to
         the extent that the information contained in such statement, report or
         certificate has not already been delivered to each holder of Notes;

                  (i) RULE 144A -- with reasonable promptness, such information
         regarding the Company as may from time to time be required to satisfy
         the requirements of 17 C.F.R. Section 230.144A, as amended, in
         connection with any contemplated transfer of the Notes; and

                  (j) REQUESTED INFORMATION -- with reasonable promptness, such
         other data and information relating to the business, operations,
         financial condition, assets or Properties of the Company or any of its
         Subsidiaries or relating to the ability of the

HYDRIL COMPANY                         16                NOTE PURCHASE AGREEMENT
<PAGE>   22

         Company to perform its obligations hereunder and under the Notes as
         from time to time may be reasonably requested by any such holder of
         Notes.

         7.2      OFFICER'S CERTIFICATE.

         Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:

                  (a) COVENANT COMPLIANCE -- the information (including detailed
         calculations) required in order to establish whether the Company was in
         compliance with the requirements of Sections 10.1 through 10.7,
         inclusive, during the quarterly or annual period covered by the
         statements then being furnished (including with respect to each such
         Section, where applicable, the calculations of the maximum or minimum
         amount, ratio or percentage, as the case may be, permissible under the
         terms of such Sections, and the calculation of the amount, ratio or
         percentage then in existence); and

                  (b) EVENT OF DEFAULT -- a statement that such officer has
         reviewed the relevant terms hereof and has made, or caused to be made,
         under his or her supervision, a review of the transactions and
         conditions of the Company and its Subsidiaries from the beginning of
         the quarterly or annual period covered by the statements then being
         furnished to the date of the certificate and that such review has not
         disclosed the existence during such period of any condition or event
         that constitutes a Default or an Event of Default or, if any such
         condition or event existed or exists (including, without limitation,
         any such event or condition resulting from the failure of the Company
         or any Subsidiary to comply with any Environmental Law), specifying the
         nature and period of existence thereof and what action the Company
         shall have taken or proposes to take with respect thereto.

         7.3      INSPECTION.

         The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:

                  (a) NO DEFAULT -- if no Default or Event of Default then
         exists, at the expense of such holder and upon reasonable prior notice
         to the Company, to visit the principal executive office of the Company,
         to discuss the affairs, finances and accounts of the Company and its
         Subsidiaries with the Company's officers, and (with the consent of the
         Company, which consent will not be unreasonably withheld) its
         independent public accountants, and (with the consent of the Company,
         which consent will not be unreasonably withheld) to visit the other
         offices and Properties of the Company and each Subsidiary, all at such
         reasonable times and as often as may be reasonably requested in
         writing, provided that an officer of the Company shall be entitled to
         be present during any such visit; and

                  (b) DEFAULT -- if a Default or Event of Default then exists,
         at the expense of the Company, to visit and inspect any of the offices
         or Properties of the Company or any Subsidiary, to examine all their
         respective books of account, records, reports and other papers, to make
         copies and extracts therefrom, and to discuss their respective affairs,

HYDRIL COMPANY                         17                NOTE PURCHASE AGREEMENT
<PAGE>   23

         finances and accounts with their respective officers and independent
         public accountants (and by this provision the Company authorizes said
         accountants to discuss the affairs, finances and accounts of the
         Company and its Subsidiaries), all at such times and as often as may be
         requested.

8.       PAYMENT OF THE NOTES.

         8.1      PAYMENT AT MATURITY.

         On June 30, 2003, the Company will pay $60,000,000 principal amount
(or such lesser principal amount as shall then be outstanding) of the Notes at
par and without payment of the Make-Whole Amount or any premium. Such payment
shall be made together with interest on the outstanding principal amount of the
Notes accrued to the date of such payment.

         8.2      OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.

         The Company may, at its option, upon notice as provided below, prepay
at any time all, or from time to time any part of, the Notes (but if in part, in
an amount not less than $1,000,000 or such lesser amount as shall then be
outstanding), at 100% of the principal amount so prepaid, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 20 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify

                  (a) the prepayment date,

                  (b) the aggregate principal amount of the Notes to be prepaid
         on such date,

                  (c) the principal amount of each Note held by such holder to
         be prepaid (determined in accordance with Section 8.4), and

                  (d) the interest to be paid on the prepayment date with
         respect to such principal amount being prepaid,

and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to such
prepayment, the Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.

         8.3      CHANGE IN CONTROL.

                  (a) NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. The Company
         will, within 5 Business Days after any Responsible Officer has
         knowledge of the occurrence of any Change in Control or Control Event,
         give written notice of such Change in Control or Control Event to each
         holder of Notes. In the case that a Change in Control has occurred,
         such notice shall contain and constitute an offer to prepay Notes as
         described

HYDRIL COMPANY                         18                NOTE PURCHASE AGREEMENT
<PAGE>   24

         in clause (b) of this Section 8.3 and shall be accompanied by the
         certificate described in clause (e) of this Section 8.3.

                  (b) OFFER TO PREPAY NOTES. The offer to prepay Notes
         contemplated by clause (a) of this Section 8.3 shall be an offer to
         prepay, in accordance with and subject to this Section 8.3, all, but
         not less than all, the Notes held by each holder (in this case only,
         "holders" in respect of any Note registered in the name of a nominee
         for a disclosed beneficial owner shall mean such beneficial owner) on a
         date specified in such offer (the "PROPOSED PREPAYMENT DATE") that is
         not less than 30 days and not more than 45 days after the date of such
         offer (if the Proposed Prepayment Date shall not be specified in such
         offer, the Proposed Prepayment Date shall be the 45th day after the
         date of such offer).

                  (c) ACCEPTANCE; REJECTION. A holder of Notes may accept the
         offer to prepay made pursuant to this Section 8.3 by causing a notice
         of such acceptance to be delivered to the Company at least five days
         prior to the Proposed Prepayment Date. A failure by a holder of Notes
         to respond to an offer to prepay made pursuant to this Section 8.3
         shall be deemed to constitute a rejection of such offer by such holder.

                  (d) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant
         to this Section 8.3 shall be at 100% of the principal amount of such
         Notes, plus the Make-Whole Amount determined for the date of prepayment
         with respect to such principal amount, together with interest on such
         Notes accrued to the date of prepayment. On the Business Day preceding
         the date of prepayment, the Company shall deliver to each holder of
         Notes being prepaid a statement showing the Make-Whole Amount due in
         connection with such prepayment and setting forth the details of the
         computation of such amount. The prepayment shall be made on the
         Proposed Prepayment Date.

                  (e) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
         pursuant to this Section 8.3 shall be accompanied by a certificate,
         executed by a Senior Financial Officer of the Company and dated the
         date of such offer, specifying: (i) the Proposed Prepayment Date; (ii)
         that such offer is made pursuant to this Section 8.3; (iii) the
         principal amount of each Note offered to be prepaid; (iv) the estimated
         Make-Whole Amount due in connection with such prepayment (calculated as
         if the date of such notice were the date of the prepayment), setting
         forth the details of such computation; (v) the interest that would be
         due on each Note offered to be prepaid, accrued to the Proposed
         Prepayment Date; (vi) that the conditions of this Section 8.3 have been
         fulfilled; and (vii) in reasonable detail, the nature and date of the
         Change in Control.

         8.4      ALLOCATION OF PARTIAL PREPAYMENTS.

         In the case of each partial prepayment of the Notes pursuant to Section
8.2, the principal amount of the Notes to be prepaid shall be allocated among
all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.

HYDRIL COMPANY                         19                NOTE PURCHASE AGREEMENT
<PAGE>   25

         8.5      MATURITY; SURRENDER, ETC.

         In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.

         8.6      NO OTHER OPTIONAL PREPAYMENTS OR PURCHASE OF NOTES.

         The Company will not prepay (whether directly or indirectly by
purchase, redemption or other acquisition) any of the outstanding Notes except
upon the payment or prepayment of the Notes in accordance with the terms of this
Section 8. The Company will promptly cancel all Notes acquired by it or any
Affiliate, and no Notes may be issued in substitution or exchange for any such
Notes.

         8.7      MAKE-WHOLE AMOUNT.

         The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:

                  "CALLED PRINCIPAL" means, with respect to any Note, the
         principal of such Note that is to be prepaid pursuant to Section 8.2 or
         Section 8.3 or has become or is declared to be immediately due and
         payable pursuant to Section 12.1, as the context requires.

                  "DISCOUNTED VALUE" means, with respect to the Called Principal
         of any Note, the amount obtained by discounting all Remaining Scheduled
         Payments with respect to such Called Principal from their respective
         scheduled due dates to the Settlement Date with respect to such Called
         Principal, in accordance with accepted financial practice and at a
         discount factor (applied on the same periodic basis as that on which
         interest on the Notes is payable) equal to the Reinvestment Yield with
         respect to such Called Principal.

                  "REINVESTMENT YIELD" means, with respect to the Called
         Principal of any Note, 0.50% over the yield to maturity implied by

                           (i) the yields reported, as of 10:00 A.M. (New York
                  City time) on the second Business Day preceding the Settlement
                  Date with respect to such Called Principal, on the display
                  designated as "Page 678" on the Dow Jones Markets Service (or
                  such other display as may replace Page 678 on the Dow Jones
                  Markets Service) for actively traded U.S. Treasury securities
                  having a maturity equal to the Remaining Average Life of such
                  Called Principal as of such Settlement Date, or

HYDRIL COMPANY                         20                NOTE PURCHASE AGREEMENT
<PAGE>   26

                           (ii) if such yields are not reported as of such time
                  or the yields reported as of such time are not ascertainable,
                  the Treasury Constant Maturity Series Yields reported, for the
                  latest day for which such yields have been so reported as of
                  the second Business Day preceding the Settlement Date with
                  respect to such Called Principal, in Federal Reserve
                  Statistical Release H.15 (519) (or any comparable successor
                  publication) for activity traded U.S. Treasury securities
                  having a constant maturity equal to the Remaining Average Life
                  of such Called Principal as of such Settlement Date.

         Such implied yield will be determined, if necessary, by (a) converting
         U.S. Treasury bill quotations to bond-equivalent yields in accordance
         with accepted financial practice and (b) interpolating linearly between
         (1) the actively traded U.S. Treasury security with the duration
         closest to and greater than the Remaining Average Life and (2) the
         actively traded U.S. Treasury security with the duration closest to and
         less than the Remaining Average Life.

                  "REMAINING AVERAGE LIFE" means, with respect to any Called
         Principal, the number of years (calculated to the nearest one-twelfth
         year) obtained by dividing

                           (i) such Called Principal into

                           (ii) the sum of the products obtained by multiplying

                                    (a) the principal component of each
                           Remaining Scheduled Payment with respect to such
                           Called Principal by

                                    (b) the number of years (calculated to the
                           nearest one-twelfth year) that will elapse between
                           the Settlement Date with respect to such Called
                           Principal and the scheduled due date of such
                           Remaining Scheduled Payment.

                  "REMAINING SCHEDULED PAYMENTS" means, with respect to the
         Called Principal of any Note, all payments of such Called Principal and
         interest thereon that would be due after the Settlement Date with
         respect to such Called Principal if no payment of such Called Principal
         were made prior to its scheduled due date, provided that if such
         Settlement Date is not a date on which interest payments are due to be
         made under the term of the Notes, then the amount of the next
         succeeding scheduled interest payment will be reduced by the amount of
         interest accrued to such Settlement Date and required to be paid on
         such Settlement Date pursuant to Section 8.2, Section 8.3 or 12.1.

                  "SETTLEMENT DATE" means, with respect to the Called Principal
         of any Note, the date on which such Called Principal is to be prepaid
         pursuant to Section 8.2 or Section 8.3 or has become or is declared to
         be immediately due and payable pursuant to Section 12.1, as the context
         requires.

HYDRIL COMPANY                         21                NOTE PURCHASE AGREEMENT
<PAGE>   27

9.       AFFIRMATIVE COVENANTS.

         The Company covenants that so long as any of the Notes are outstanding:

         9.1      COMPLIANCE WITH LAW.

         The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is subject, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective Properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

         9.2      INSURANCE.

         The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective Properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.

         9.3      MAINTENANCE OF PROPERTIES.

         The Company will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective Properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
Properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

         9.4      PAYMENT OF TAXES AND CLAIMS.

         The Company will and will cause each of its Subsidiaries to

                  (a) file all tax returns required to be filed in any
         jurisdiction and to pay and discharge all taxes shown to be due and
         payable on such returns and all other taxes, assessments, governmental
         charges, or levies imposed on them or any of their Properties, assets,
         income or franchises, and

                  (b) pay all claims of materialmen, mechanics, carriers,
         warehousemen, vendors, landlords and other like Persons,

to the extent such taxes, assessments, charges, levies or claims have become due
and payable and before they have become delinquent or that have or might become
a Lien on Properties or

HYDRIL COMPANY                         22                NOTE PURCHASE AGREEMENT
<PAGE>   28

assets of the Company or any Subsidiary, provided that neither the Company nor
any Subsidiary need pay any such tax or assessment or claim if (i) the amount,
applicability or validity thereof is contested by the Company or such Subsidiary
on a timely basis in good faith and in appropriate proceedings, and the Company
or a Subsidiary has established adequate reserves therefor in accordance with
GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of
all such taxes, assessments, charges, levies and claims in the aggregate could
not reasonably be expected to have a Material Adverse Effect.

         9.5      CORPORATE EXISTENCE, ETC.

         The Company will at all times preserve and keep in full force and
effect its existence as a corporation organized under the laws of a State of the
United States of America. Subject to Sections 10.6 and 10.7, the Company will at
all times preserve and keep in full force and effect the corporate or other
existence of each of its Subsidiaries and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force and effect such
existence, right or franchise could not, individually or in the aggregate, have
a Material Adverse Effect.

         9.6      FURTHER ASSURANCES.

                  (a) GENERALLY. The Company will, and will cause each
         Subsidiary to, execute and deliver, within 30 days after any request
         therefor by the Required Holders, all further instruments and documents
         and take all further action that may be necessary, in order to give
         effect to, and to aid in the exercise and enforcement of the Liens,
         rights and remedies of the holders of Notes under, the Financing
         Documents.

                  (b) LIENS. The Company will, and will cause each Subsidiary
         to, execute and deliver, within 30 days after any request therefor by
         the Required Holders, all further instruments and documents and take
         all further action that may be necessary, in order to create and
         perfect Liens in favor of the Collateral Agent in any Property of the
         Company or the Subsidiaries that is not then subject to, but under the
         Collateral Documents is intended to be subject to, a Lien or to a
         perfected Lien.

         9.7      MAINTENANCE OF MOST FAVORED LENDER STATUS.

         The Company and the holders of the Notes hereby acknowledge and agree
that if the Company shall enter into any amendment to the Bank Agreement that
provides for the benefit of the lenders thereunder any Financial Covenants that
are relatively more favorable to such lenders than the Financial Covenants that
are currently in effect pursuant to the Bank Agreement as compared to the
Financial Covenants set forth in this Agreement, then, and in each and any such
event, the Financial Covenants in this Agreement shall be and shall be deemed to
be, notwithstanding the provisions of Section 17 and without any further action
on the part of the Company or any other Person being necessary or required,
amended to afford the holders of Notes the same benefits and rights as such
amendment to, or other agreements in respect of, the Financial Covenants of the
Bank Agreement afforded to such lenders; provided, however, that if any such
amendment shall be modified or terminated, then the deemed amendment to this
Agreement effected by this Section 9.7 shall be deemed to have been
simultaneously modified (if any such modification of the Bank Agreement
amendment would itself require a deemed amendment pursuant to this Section 9.7)
or terminated (if such Bank Agreement amendment has

HYDRIL COMPANY                         23                NOTE PURCHASE AGREEMENT
<PAGE>   29

been terminated or if such modification of the Bank Agreement amendment would
not itself require a deemed amendment pursuant to this Section 9.7). (If such
deemed amendment shall be deemed to have been terminated, the relevant Financial
Covenant or Financial Covenants herein shall be deemed to provide as it or they
would have if such deemed amendment had never come into effect). The Company
will promptly deliver to each holder of the Notes a copy of each amendment or
other modification to or waiver of any provision of the Bank Agreement entered
into after the date of Closing. "FINANCIAL COVENANTS" means any covenant (or
substantially equivalent default provision) which requires the Company to attain
or maintain a prescribed level of financial condition or financial achievement,
including, without limitation, covenants of the type set forth in Section 10 of
this Agreement, but excluding provisions equivalent to Section 10.8 and Section
10.9, and any borrowing base or similar test for ordinary course advances under
the Bank Agreement.

         9.8      SUBSIDIARY GUARANTIES.

         If any Subsidiary shall give a Guaranty (a "BANK GUARANTY") of any
obligations owing by the Company under the Bank Agreement, the Company shall
take such action as shall be necessary so that such Subsidiary shall, within one
Business Day after giving a Bank Guaranty, give to each holder of Notes a
Guaranty of all obligations of the Company hereunder and under the Notes
containing substantially the same terms and conditions as the Bank Guaranty.

10.      NEGATIVE COVENANTS.

         The Company covenants that, on and after date of the Closing and so
long as any of the Notes are outstanding:

         10.1     CONSOLIDATED FUNDED DEBT.

         The Company will not, and will not permit any Subsidiary to, directly
or indirectly, create, incur, assume, guarantee, or otherwise become directly or
indirectly liable with respect to, any Funded Debt, other than Funded Debt of a
Subsidiary owing to the Company or another Subsidiary, other than:

                  (a) the Notes;

                  (b) Funded Debt outstanding on the date of the Closing and
         identified on Schedule 5.15;

                  (c) all Funded Debt available to be borrowed under the Bank
         Agreement, the UBS Facility and the Clydesdale Bank Facility, in each
         case, as in effect on the date of Closing; and

                  (d) renewals, extensions, substitutions, refinancings or
         replacements of any Funded Debt outstanding pursuant to the foregoing
         clauses (a) through (c), inclusive, provided that such renewals,
         extensions, substitutions, refinancings or replacements do not exceed
         the amount so renewed, extended, substituted, refinanced or replaced;

unless, immediately after giving effect to the creation, incurrence, assumption,
guarantee, or becoming liable in respect thereof and to the application of the
proceeds thereof,

HYDRIL COMPANY                         24                NOTE PURCHASE AGREEMENT

<PAGE>   30

                           (i) no Event of Default would exist;

                           (ii) Consolidated Funded Debt would not exceed 55% of
                  Consolidated Total Capitalization; and

                           (iii) the ratio of (a) Consolidated EBITDA for the
                  period of four full consecutive fiscal quarters of the Company
                  ending on, or most recently ended prior to, the date of such
                  creation, incurrence, assumption, guarantee, or becoming
                  liable, to (b) Consolidated Fixed Charges for such period
                  would be greater than 1.5 to 1.0.

For purposes of the foregoing clause (iii), Consolidated EBITDA and Consolidated
Fixed Charges shall be determined on the basis that

                  (x)      (I) such Funded Debt, together with all other Funded
                  Debt incurred during such four fiscal quarter period, was
                  incurred on the first day of such period,

                           (II) any Debt repaid with the proceeds of such Funded
                  Debt, or such other Funded Debt, was repaid on the first day
                  of such period, and

                           (III) the interest rate in effect for such Funded
                  Debt, and such other Funded Debt, on the date of incurrence
                  thereof was in effect at all times during such period, and
                  such Funded Debt, and such other Funded Debt, was outstanding
                  at all times during such period, and

                  (y) all acquisitions of Voting Stock or other equity interests
         of a Person sufficient to cause such Person to become a Subsidiary, and
         all acquisitions of all or substantially all of an operating unit of a
         business, in each case made by the Company or a Subsidiary during such
         period, occurred on the first day of such period.

Any such determination of Consolidated EBITDA and Consolidated Fixed Charges
shall be made in good faith and on a reasonable basis by a Responsible Officer.

         For the purposes of this Section 10.1 and Section 10.2, any Person
becoming a Subsidiary after the date hereof shall be deemed, at the time it
becomes a Subsidiary, to have incurred all of its then outstanding Debt, and any
Person extending, renewing or refunding any Debt shall be deemed to have
incurred such Debt at the time of such extension, renewal or refunding.

         10.2     SUBSIDIARY DEBT.

         The Company will not permit any Subsidiary to, directly or indirectly,
create, incur, assume, guarantee, or otherwise become directly or indirectly
liable with respect to, any Debt, other than Debt owing to the Company or
another Subsidiary, unless, immediately after giving effect thereto and to the
application of the proceeds thereof:

                  (a) no Event of Default would exist;

                  (b) such Debt would be incurred in compliance with Section
         10.1; and

HYDRIL COMPANY                         25                NOTE PURCHASE AGREEMENT

<PAGE>   31

                  (c) the sum of

                           (i) the aggregate Debt of all Subsidiaries (other
                  than Debt owing to the Company or other Subsidiaries) plus

                           (ii) the aggregate amount of obligations secured by
                  Liens permitted pursuant to Section 10.4(k) outstanding at
                  such time,

would not exceed 15% of Consolidated Tangible Net Worth at such time.

         10.3     TANGIBLE NET WORTH.

         The Company will not, at any time, permit Consolidated Tangible Net
Worth to be less than $75,000,000.

         10.4     LIENS.

         The Company will not, and will not permit any Subsidiary to, directly
or indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any Property
(including, without limitation, any document or instrument in respect of goods
or accounts receivable) of the Company or any such Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom (whether or
not provision is made for the equal and ratable securing of the Notes in
accordance with the last paragraph of this Section 10.4), or assign or otherwise
convey any right to receive income or profits, except:

                  (a) Liens securing Debt of the Company and the Subsidiaries
         outstanding on the date of the Closing and listed on Schedule 5.15;

                  (b) Liens renewing or replacing Liens then in existence and
         permitted by clause (a) of this Section 10.4 to the extent that the
         underlying obligations secured by such existing Liens are being
         extended, renewed or refunded, provided that

                           (i) no such renewal or replacement Lien shall extend
                  to any Property of the Company or any Subsidiary other than
                  Property already encumbered by the existing Lien being so
                  renewed or replaced,

                           (ii) the principal amount of the underlying
                  obligation secured by such existing Lien which could have been
                  outstanding at the time of such renewal or replacement shall
                  not be increased in connection with such renewal or
                  replacement, and

                           (iii) immediately prior to, and immediately after
                  giving effect to, such renewal or replacement, no Event of
                  Default exists or would exist;

                  (c) Liens (other than any Lien imposed by ERISA) incurred or
         deposits made in the ordinary course of business

                           (i) in connection with workers' compensation,
                  unemployment insurance and other types of social security or
                  retirement benefits, or

HYDRIL COMPANY                         26                NOTE PURCHASE AGREEMENT

<PAGE>   32

                           (ii) to secure (or to obtain letters of credit that
                  secure) the performance of tenders, statutory obligations,
                  surety bonds, bids, leases (other than Capital Leases),
                  performance bonds, purchase, construction or sales contracts
                  and other similar obligations,

         in each case not incurred or made in connection with the borrowing of
         money, the obtaining of advances or credit or the payment of the
         deferred purchase price of Property and which Liens, in the aggregate,
         do not materially affect the value of the Property of the Company or
         its Subsidiaries affected thereby and do not materially impair the use
         of such Property in the ordinary course of the business of the Company
         or any such Subsidiary;

                  (d) any Lien created to secure all or any part of the purchase
         price, or to secure Debt incurred or assumed to pay all or any part of
         the purchase price or cost of construction, of Property (or any
         improvement thereon) acquired or constructed by the Company or a
         Subsidiary after the date of the Closing, provided that

                           (i) any such Lien shall extend solely to the item or
                  items of such Property (or improvement thereon or proceeds
                  thereof) so acquired or constructed and, if required by the
                  terms of the instrument originally creating such Lien, other
                  Property (or improvement thereon or proceeds thereof) which is
                  an improvement to or is acquired for specific use in
                  connection with such acquired or constructed Property (or
                  improvement thereon or proceeds thereof) or which is real
                  Property being improved by such acquired or constructed
                  Property (or improvement thereon or proceeds thereof),

                           (ii) the principal amount of the Debt secured by any
                  such Lien shall at no time exceed an amount equal to 80% (or,
                  in the case of any such Debt which is a Capital Lease
                  Obligation, 100%) of the lesser of (A) the cost to the Company
                  or such Subsidiary of the Property (or improvement thereon) so
                  acquired or constructed and (B) the Fair Market Value (as
                  determined in good faith by the board of directors of the
                  Company or by a Senior Financial Officer acting pursuant to
                  delegated or standing authority granted by the board of
                  directors of the Company) of such Property (or improvement
                  thereon) at the time of such acquisition or construction, and

                           (iii) any such Lien shall be created
                  contemporaneously with, or within twelve months after, the
                  acquisition or construction of such Property;

                  (e) statutory Liens of landlords and Liens of carriers,
         warehousemen, mechanics, materialmen and, other similar Liens, in each
         case incurred in the ordinary course of business for sums not yet due
         and payable or the payment of which is not at the time required by
         Section 9.4;

                  (f) Liens arising from judicial attachments or judgments, or
         securing appeal bonds, and other similar Liens, provided that

                           (i) all claims secured thereby are no more than
                  $3,000,000 in the aggregate, or

HYDRIL COMPANY                         27                NOTE PURCHASE AGREEMENT

<PAGE>   33

                           (ii) the execution or other enforcement of such Liens
                  is effectively stayed and the claims secured thereby are being
                  actively contested in good faith and adequate reserves in
                  respect thereof have been established by the Company or such
                  Subsidiary in accordance with GAAP;

                  (g) leases or subleases granted to others, easements,
         rights-of-way, restrictions and other similar charges or encumbrances,
         in each case incidental to, and not interfering with, the ordinary
         conduct of the business of the Company or any of the Subsidiaries,
         provided that such Liens do not, in the aggregate, materially impair
         use by the Company or such Subsidiary of the Property affected thereby;

                  (h) Liens for taxes, assessments or other governmental charges
         which are not yet due and payable or the payment of which is not at the
         time required by Section 9.4;

                  (i) any Lien existing on Property of a Person immediately
         prior to its being consolidated with or merged into the Company or a
         Subsidiary, or any Lien existing on any Property acquired by the
         Company or any Subsidiary at the time such Property is so acquired
         (whether or not the Debt secured thereby shall have been assumed),
         provided that (i) no such Lien shall have been created or assumed in
         contemplation of such consolidation or merger or such acquisition of
         Property, and (ii) each such Lien shall extend solely to the item or
         items of Property so acquired;

                  (j) Liens on Property of a Subsidiary, provided that such
         Liens secure only Debt owing to the Company or a Subsidiary; and

                  (k) other Liens not otherwise permitted by clauses (a) through
         (j) of this Section 10.4, so long as immediately after giving effect to
         the creation thereof,

                           (i) the sum, without duplication, of

                                    (A) the aggregate amount of Debt secured by
                           such Liens, plus

                                    (B) the aggregate amount of Debt of all
                           Subsidiaries (other than any such Debt owing to the
                           Company or other Subsidiaries),

                  does not exceed 15% of Consolidated Tangible Net Worth,

                           (ii) no Event of Default would exist, and

                           (iii) the Company would be permitted by the
                  provisions of Section 10.1 to incur at least $1.00 of
                  additional Funded Debt (other than Funded Debt owing to a
                  Subsidiary or Funded Debt incurred pursuant to clauses (a)
                  through (d), inclusive, of Section 10.1).

         If, notwithstanding the prohibition contained herein, the Company
shall, or shall permit any of the Subsidiaries to, directly or indirectly
create, incur, assume or permit to exist any Lien, other than those Liens
permitted by the provisions of clauses (a) through (k) of this Section 10.4, the
Company will make or cause to be made effective provision whereby the Notes will
be secured equally and ratably with any and all other obligations thereby
secured, such security to be

HYDRIL COMPANY                         28                NOTE PURCHASE AGREEMENT

<PAGE>   34

pursuant to agreements reasonably satisfactory to the Required Holders and, in
any such case, the Notes shall have the benefit, to the fullest extent that, and
with such priority as, the holders of the Notes may be entitled under applicable
law, of an equitable Lien on the affected Property. Such violation of this
Section 10.4 will constitute an Event of Default, whether or not provision is
made for an equal and ratable Lien pursuant to this Section 10.4.

         Notwithstanding anything to the contrary set forth in this Section 10.4
or any other provision of this Agreement, if any bank or other financing
institution shall obtain collateral for any obligations owing to it in respect
of term loans, revolving loans, or lines of credit (regardless of whether the
grant of a Lien on such collateral shall be specifically permitted hereunder),
then the Company shall take such action as shall be necessary or appropriate so
that the Notes and all obligations of the Company in respect of this Agreement
shall be secured equally and ratably with such obligations owing to such bank or
other financing institution.

         10.5     RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS.

                  (a) LIMITATION. The Company will not, and will not permit any
         of the Subsidiaries to, at any time, (i) declare or make, or incur any
         liability to declare or make, any Restricted Payment or (ii) make, or
         incur any liability to make, any Restricted Investment unless,
         immediately after giving effect to such action:

                           (i) the sum of (x) the aggregate amount of Restricted
                  Payments of the Company and the Subsidiaries declared or made
                  during the period commencing on the date of Closing, and
                  ending on the date such Restricted Payment is declared or
                  made, inclusive, plus (y) the aggregate amount of all
                  outstanding Restricted Investments would not exceed the sum of

                                    (A) $5,000,000, plus

                                    (B) 50% of Consolidated Net Income for the
                           period commencing on April 1, 1998 and ending with
                           the last day of the fiscal quarter of the Company
                           most recently ended at the time of such action (or
                           minus 100% of Consolidated Net Income for such period
                           if Consolidated Net Income for such period is a
                           loss), plus

                                    (C) the aggregate net cash proceeds received
                           by the Company from the issue or sale of Capital
                           Stock of the Company after the date of Closing to a
                           Person other than a Subsidiary;

                           (ii) no Default or Event of Default would exist; and

                           (iii) the Company would be permitted by the
                  provisions of Section 10.1 to incur at least $1.00 of
                  additional Funded Debt (other than Funded Debt owing to a
                  Subsidiary or Funded Debt incurred pursuant to clauses (a)
                  through (d), inclusive, of Section 10.1).

                  (b) INVESTMENTS OF SUBSIDIARIES. Each Person which becomes a
         Subsidiary after the date of Closing will be deemed to have made, on
         the date such Person becomes a Subsidiary, all Restricted Investments
         of such Person in existence on such date.

HYDRIL COMPANY                         29                NOTE PURCHASE AGREEMENT
<PAGE>   35

         Investments in any Person that ceases to be a Subsidiary after the date
         of Closing (but in which the Company or another Subsidiary continues to
         maintain an Investment) will be deemed to have been made on the date on
         which such Person ceases to be a Subsidiary of the Company.

                  (c) TIME OF PAYMENT. The Company will not, nor will it permit
         any of its Subsidiaries to, authorize a Restricted Payment that is not
         payable within 60 days of authorization.

         10.6 MERGER, CONSOLIDATION, ETC.

         The Company will not, and will not permit any Subsidiary to,
consolidate with or merge with any other corporation or convey, transfer or
lease substantially all of its assets in a single transaction or series of
transactions to any Person, except that:

                  (a) the Company may consolidate with or merge with another
         corporation or convey or transfer (except by lease) all or
         substantially all of its assets in a single transaction or series of
         transactions to another Person if:

                           (i) the successor formed by such consolidation or the
                  survivor of such merger or the Person that acquires by
                  conveyance or transfer all or substantially all of the assets
                  of the Company as an entirety, as the case may be (the
                  "SUCCESSOR CORPORATION"), shall be a solvent Person organized
                  and existing under the laws of the United States of America,
                  any State thereof or the District of Columbia;

                           (ii) if the Company is not the Successor Corporation,
                  such Person shall have executed and delivered to each holder
                  of Notes its assumption of the due and punctual performance
                  and observance of each covenant and condition of the Financing
                  Documents (pursuant to such agreements and instruments as
                  shall be reasonably satisfactory to the Required Holders), and
                  the Company shall have caused to be delivered to each holder
                  of Notes an opinion of nationally recognized outside counsel,
                  or other outside counsel reasonably satisfactory to the
                  Required Holders, to the effect that all agreements or
                  instruments effecting such assumption are enforceable in
                  accordance with their terms and comply with the terms hereof;
                  and

                           (iii) immediately after giving effect to such
                  transaction,

                                    (A) no Default or Event of Default would
                           exist, and

                                    (B) the Successor Corporation would be
                           permitted by the provisions of Section 10.1 to incur
                           at least $1.00 of additional Funded Debt (other than
                           Funded Debt owing to a Subsidiary or Funded Debt
                           incurred pursuant to clauses (a) through (d),
                           inclusive, of Section 10.1);

                  (b) a Subsidiary may consolidate with or merge with the
         Company (so long as the Company is the surviving corporation) or
         another Subsidiary or convey, transfer or

HYDRIL COMPANY                         30                NOTE PURCHASE AGREEMENT

<PAGE>   36

         lease all or substantially all of its assets in a single transaction or
         series of transactions to the Company or another Subsidiary; and

                  (c) a Subsidiary may consolidate with or merge with another
         corporation or convey, transfer or lease all or substantially all of
         its assets in a single transaction or series of transactions to another
         Person if such transaction is effected in compliance with Section 10.7.

No such conveyance, transfer or lease of all or substantially all of the assets
of the Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement, the Notes or any other
Financing Document.

         10.7 DISPOSITION OF ASSETS.

                  (a) PROHIBITED AND PERMITTED TRANSFERS. The Company will not,
         and will not permit any Subsidiary to, sell, lease as lessor, transfer
         or otherwise dispose of any Property (including, without limitation,
         (x) any sale, lease, transfer or other disposition of Capital Stock of
         any Subsidiary and (y) any transfer of Capital Stock of any Subsidiary
         or Property of any Subsidiary, in either case, by means of a merger or
         consolidation of such Subsidiary, except as permitted with respect to
         the Company under Section 10.6) (herein referred to, collectively, as
         "TRANSFERS"), except:

                           (i) Transfers of inventory and other assets for cash
                  (or cash equivalents) equal to the Fair Market Value of such
                  inventory or other assets, in each case in the ordinary course
                  of business of the Person making such Transfer;

                           (ii) Transfers consisting of a swap of Property of
                  the Company or a Subsidiary for Property of another Person
                  that (x) will be used and useful in the business of the
                  Company or such Subsidiary and (y) has a Fair Market Value
                  substantially the same as the Property Transferred by the
                  Company or such Subsidiary, so long as such swap is customary
                  in the industry in which the Company or such Subsidiary
                  operates and is consummated on customary terms and conditions;

                           (iii) Transfers from a Subsidiary to the Company or
                  a Wholly-Owned Subsidiary;

                           (iv) Transfers from the Company to a Wholly-Owned
                  Subsidiary;

                           (v) the issuance of directors' qualifying shares or,
                  in the case of a Person organized under the laws of a
                  jurisdiction outside the United States, the issuance of equity
                  to local residents to the extent required by local law
                  ("REQUIRED LOCAL EQUITY"); and

                           (vi) a Transfer (other than as specified in the
                  foregoing clauses (i) to (v), inclusive) of Property in
                  exchange for the Fair Market Value thereof, provided that,
                  immediately after giving effect thereto,

                                (A) no Event of Default would exist, and

HYDRIL COMPANY                         31                NOTE PURCHASE AGREEMENT
<PAGE>   37

                                    (B) the aggregate net book value of all
                           Transfers consummated under this Section 10.7(a)(vi)
                           (such net book value being determined immediately
                           after the consummation of each such Transfer) during
                           the then current fiscal year of the Company would not
                           exceed 15% of Consolidated Total Capitalization
                           determined as of the last day of the then most
                           recently ended fiscal year of the Company;

                  provided, that if the requirements set forth in the foregoing
                  clause (B) shall not be satisfied immediately after
                  consummation of such Transfer, the Company shall be deemed to
                  be in compliance with such clause (B) on a provisional basis,
                  with respect to such Transfer (a "PROVISIONAL QUALIFIED
                  TRANSFER"), for a period of 365 days following such
                  consummation, so long as such Transfer was in exchange for
                  cash (or cash equivalents).

                           If all Net Proceeds arising from any Provisional
                  Qualified Transfer (x) shall be invested by the Company and
                  the Subsidiaries in Operating Assets at any time during such
                  365 day period or (y) shall be applied to the prepayment of
                  the principal of any Senior Funded Debt during such period,
                  then the Company shall be deemed to have complied with this
                  Section 10.7(a) with respect to such Provisional Qualified
                  Transfer. If all such Net Proceeds shall not be so invested or
                  applied by the end of such period, the Company shall be deemed
                  not to have complied with this Section 10.7(a) with respect to
                  such Provisional Qualified Transfer.

                  (b) SUBSIDIARY STOCK. Anything contained herein to the
         contrary notwithstanding, the Company will not at any time, and will
         not at any time permit any of the Subsidiaries to, sell or otherwise
         dispose of any shares of Capital Stock (or any options or warrants to
         purchase Capital Stock or other Securities exchangeable for or
         convertible into Capital Stock) of a Subsidiary (said Capital Stock,
         options, warrants and other Securities being herein referred to as
         "SUBSIDIARY STOCK"), nor will any Subsidiary issue, sell or otherwise
         dispose of any shares of its own Subsidiary Stock, if the effect of the
         transaction would be to reduce the proportionate interest of the
         Company and the other Subsidiaries in the outstanding Subsidiary Stock
         of the Subsidiary whose shares are the subject of the transaction to a
         level whereby such corporation would no longer constitute a
         "Subsidiary" as such term is defined in this Agreement, provided that
         the foregoing restrictions do not apply to:

                           (i) Subsidiary Stock pledged to the Collateral Agent
                  pursuant to any of the Collateral Documents;

                           (ii) the issuance of directors' qualifying shares or
                  Required Local Equity; and

                           (iii) the sale, to the extent permitted by Section
                  10.7(a), to a Person (other than directly or indirectly to an
                  Affiliate) of the entire Investment (whether represented by
                  stock, debt, claims or otherwise) of the Company and the other
                  Subsidiaries in any Subsidiary, if all of the following
                  conditions are met:

HYDRIL COMPANY                         32                NOTE PURCHASE AGREEMENT
<PAGE>   38

                                    (A) the Subsidiary being disposed of has no
                           continuing Investment in any other Subsidiary not
                           being simultaneously disposed of, or in the Company;
                           and

                                    (B) immediately after the consummation of
                           the transaction, and after giving effect thereto, no
                           Default or Event of Default would exist.

                  For purposes of determining the book value of Property
         constituting Subsidiary Stock being Transferred as provided in the
         foregoing clause (iii), such book value shall be deemed to be equal to
         the percentage of aggregate book value of the Property of the
         Subsidiary that shall have issued such Subsidiary Stock that is equal
         to the percentage of the entire equity of such Subsidiary represented
         by the Subsidiary Stock being Transferred.

                  (c) PREFERRED STOCK. Without limiting the foregoing, the
         Company will not permit any Subsidiary to issue or have outstanding any
         Preferred Stock if such Preferred Stock is to be held by a Person other
         than the Company or a Wholly-Owned Subsidiary, and the Company shall
         not sell, or permit any Subsidiary to sell, any Preferred Stock of any
         Subsidiary to any Person other than to the Company or to a Wholly-Owned
         Subsidiary.

         10.8 TRANSACTIONS WITH AFFILIATES.

         Except as set forth in Schedule 10.8 and except for transactions
involving only the Company and Wholly-Owned Subsidiaries, the Company will not,
and will not permit any Subsidiary to, enter into directly or indirectly any
transaction or group of related transactions (including, without limitation, the
purchase, lease, sale or exchange of Properties of any kind, the rendering of
any service, or any other transaction in the ordinary course of business) with
any Affiliate, except upon fair and reasonable terms not materially less
favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.

         10.9 LINE OF BUSINESS.

         The Company will not, and will not permit any of its Subsidiaries to,
engage to any substantial extent in any business other than the businesses in
which the Company and its Subsidiaries were engaged during the fiscal year ended
December 31, 1997, as described in the Memorandum, and businesses reasonably
related thereto or in furtherance thereof.

         10.10 EVI INDEBTEDNESS.

         In making any determination of the Company's compliance with any
provision of this Section 10, the EVI Indebtedness and all interest charges and
other expenses incurred in connection therewith shall be disregarded. The "EVI
INDEBTEDNESS" means all of the obligations of the Company under that certain
Master Agreement between the Company and The Chase Manhattan Bank with respect
to the two transactions thereunder confirmed by the two letter agreements dated
January 6, 1998.

HYDRIL COMPANY                         33                NOTE PURCHASE AGREEMENT
<PAGE>   39

11. EVENTS OF DEFAULT.

         An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:

                  (a) PRINCIPAL OR MAKE-WHOLE AMOUNT PAYMENT -- the Company
         defaults in the payment of any principal or Make-Whole Amount, if any,
         on any Note when the same becomes due and payable, whether at maturity
         or at a date fixed for prepayment or by declaration or otherwise; or

                  (b) INTEREST PAYMENT -- the Company defaults in the payment of
         any interest on any Note for more than five days after the same becomes
         due and payable; or

                  (c) SPECIFIED COVENANTS -- the Company defaults in the
         performance of or compliance with (i) its obligations under Section
         7.1(d) or (ii) any covenant contained in Section 10; or

                  (d) OTHER COVENANTS -- the Company defaults in the performance
         of or compliance with any term contained herein (other than those
         referred to in clauses (a), (b) and (c) of this Section 11) and such
         default is not remedied within 30 days after the earlier of (i) a
         Responsible Officer obtaining actual knowledge of such default and (ii)
         the Company receiving written notice of such default from any holder of
         a Note; or

                  (e) REPRESENTATIONS AND WARRANTIES -- any representation or
         warranty made in writing by or on behalf of the Company or by any
         officer of the Company in any Financing Document or in any writing
         furnished in connection with the transactions contemplated hereby
         proves to have been false or misleading in any material respect on the
         date as of which made; or

                  (f) CROSS-DEFAULT --

                           (i) the Company or any Subsidiary is in default (as
                  principal or as guarantor or other surety) in the payment of
                  any principal of or premium or make-whole amount or interest
                  on any Debt (other than Debt under this Agreement and the
                  Notes) beyond any period of grace provided with respect
                  thereto, that individually or together with such other Debt as
                  to which any such failure exists has an aggregate outstanding
                  principal amount of at least $3,000,000, or

                           (ii) the Company or any Subsidiary is in default in
                  the performance of or compliance with any term of any evidence
                  of any Debt (other than Debt under this Agreement and the
                  Notes) that, individually or together with such other Debt as
                  to which any such failure exists has an aggregate outstanding
                  principal amount of at least $3,000,000, or of any mortgage,
                  indenture or other agreement relating thereto or any other
                  condition exists, and as a consequence of such default or
                  condition such Debt has become, or has been declared (or one
                  or more Persons are entitled to declare such Debt to be), due
                  and payable before its stated maturity or before its regularly
                  scheduled dates of payment, or

HYDRIL COMPANY                         34                NOTE PURCHASE AGREEMENT
<PAGE>   40

                           (iii) as a consequence of the occurrence or
                  continuation of any event or condition (other than the passage
                  of time or the right of the holder of Debt to convert such
                  Debt into equity interests),

                                    (A) the Company or any Subsidiary has become
                           obligated to purchase or repay Debt before its
                           regular maturity or before its regularly scheduled
                           dates of payment in an aggregate outstanding
                           principal amount of at least $3,000,000, or

                                    (B) one or more Persons have the right to
                           require the Company or any Subsidiary so to purchase
                           or repay such Debt; or

                  (g) INSOLVENCY -- the Company or any Subsidiary

                           (i) is generally not paying, or admits in writing its
                  inability to pay, its debts as they become due,

                           (ii) files, or consents by answer or otherwise to the
                  filing against it of, a petition for relief or reorganization
                  or arrangement or any other petition in bankruptcy, for
                  liquidation or to take advantage of any bankruptcy,
                  insolvency, reorganization, moratorium or other similar law of
                  any jurisdiction,

                           (iii) makes an assignment for the benefit of its
                  creditors,

                           (iv) consents to the appointment of a custodian,
                  receiver, trustee or other officer with similar powers with
                  respect to it or with respect to any substantial part of its
                  Property,

                           (v) is adjudicated as insolvent or to be liquidated,
                  or

                           (vi) takes corporate action for the purpose of any of
                  the foregoing; or

                  (h) APPOINTMENT OF A RECEIVER -- a court or governmental
         authority of competent jurisdiction enters an order appointing, without
         consent by the Company or any Subsidiary, a custodian, receiver,
         trustee or other officer with similar powers with respect to the
         Company or such Subsidiary or with respect to any substantial part of
         the Property of the Company or any such Subsidiary, or constituting an
         order for relief or approving a petition for relief or reorganization
         or any other petition in bankruptcy or for liquidation or to take
         advantage of any bankruptcy or insolvency law of any jurisdiction, or
         ordering the dissolution, winding-up or liquidation of the Company or
         any of the Subsidiaries, or any such petition shall be filed against
         the Company or any of the Subsidiaries and such petition shall not be
         dismissed within 60 days; or

                  (i) FINAL JUDGMENT -- a final judgment or judgments for the
         payment of money aggregating in excess of $5,000,000 are rendered
         against one or more of the Company and the Subsidiaries and such
         judgment or judgments are not, within 60 days after entry thereof,
         bonded, discharged or stayed pending appeal, or are not discharged
         within 60 days after the expiration of such stay, provided that the
         calculation of the $5,000,000 shall exclude all or any portion of any
         final judgment to the extent, but only to the extent, such

HYDRIL COMPANY                         35                NOTE PURCHASE AGREEMENT
<PAGE>   41

         portion of such judgment will be covered by payments from insurance
         policies issued by sound and reputable insurers, so long as each such
         insurer shall have agreed, in writing, to make such payment in respect
         of such judgment; or

                  (j) ERISA -- if

                           (i) any Plan shall fail to satisfy the minimum
                  funding standards of ERISA or the Code for any plan year or
                  part thereof or a waiver of such standards or extension of any
                  amortization period is sought or granted under section 412 of
                  the Code,

                           (ii) a notice of intent to terminate any Plan shall
                  have been or is reasonably expected to be filed with the PBGC
                  or the PBGC shall have instituted proceedings under ERISA
                  section 4042 to terminate or appoint a trustee to administer
                  any Plan or the PBGC shall have notified the Company or any
                  ERISA Affiliate that a Plan may become a subject of any such
                  proceedings,

                           (iii) the aggregate "amount of unfunded benefit
                  liabilities" (within the meaning of section 4001(a)(18) of
                  ERISA) under all Plans, determined in accordance with Title IV
                  of ERISA, shall at any time exceed $3,000,000,

                           (iv) the Company or any ERISA Affiliate shall have
                  incurred or is reasonably expected to incur any liability
                  pursuant to Title I or IV of ERISA or the penalty or excise
                  tax provisions of the Code relating to employee benefit plans,

                           (v) the Company or any ERISA Affiliate withdraws from
                  any Multiemployer Plan, or

                           (vi) the Company or any Subsidiary establishes or
                  amends any employee welfare benefit plan that provides
                  post-employment welfare benefits in a manner that would
                  increase the liability of the Company or any Subsidiary
                  thereunder;

         and any such event or events described in clauses (i) through (vi)
         above, either individually or together with any other such event or
         events, could reasonably be expected to have a Material Adverse Effect
         (as used in this Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and
         "EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings
         assigned to such terms in section 3 of ERISA); or

                  (k) FINANCING DOCUMENTS -- any Financing Document shall cease
         to be in full force and effect or shall be declared by a court or other
         Governmental Authority of competent jurisdiction to be void, voidable
         or unenforceable against the Company; the validity or enforceability of
         any Financing Document against the Company shall be contested by the
         Company or any Subsidiary or Affiliate; the Company or any Subsidiary
         or Affiliate shall deny that the Company has any further liability or
         obligation under any Financing Document; or the Company or any
         Subsidiary or Affiliate shall default in the performance of any of its
         obligations in any Financing Document beyond any period of grace
         provided therefor.

HYDRIL COMPANY                         36                NOTE PURCHASE AGREEMENT
<PAGE>   42

12. REMEDIES ON DEFAULT, ETC.

         12.1 ACCELERATION.

                  (a) If an Event of Default with respect to the Company
         described in clause (g) or clause (h) of Section 11 (other than an
         Event of Default described in such clause (i) of clause (g) or
         described in such clause (vi) of clause (g) by virtue of the fact that
         such clause encompasses clause (i) of clause (g)) has occurred, all the
         Notes then outstanding shall automatically become immediately due and
         payable.

                  (b) If any other Event of Default has occurred and is
         continuing, any holder or holders of more than 25% in principal amount
         of the Notes at the time outstanding may at any time at its or their
         option, by notice or notices to the Company, declare all the Notes then
         outstanding to be immediately due and payable.

                  (c) If any Event of Default described in clause (a) or (b) of
         Section 11 has occurred and is continuing, any holder or holders of
         Notes at the time outstanding affected by such Event of Default may at
         any time, at its or their option, by notice or notices to the Company,
         declare all the Notes held by it or them to be immediately due and
         payable.

         Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

         12.2 OTHER REMEDIES.

         If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.

         12.3 RESCISSION.

         At any time after any Notes have been declared due and payable pursuant
to clause (b) or clause (c) of Section 12.1, the holders of not less than 76% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if

HYDRIL COMPANY                         37                NOTE PURCHASE AGREEMENT
<PAGE>   43

                  (a) the Company has paid all overdue interest on the Notes,
         all principal of and Make-Whole Amount, if any, due and payable on any
         Notes other than by reason of such declaration, and all interest on
         such overdue principal and Make-Whole Amount, if any, and (to the
         extent permitted by applicable law) any overdue interest in respect of
         the Notes, at the Default Rate,

                  (b) all Events of Default and Defaults, other than non-payment
         of amounts that have become due solely by reason of such declaration,
         have been cured or have been waived pursuant to Section 17, and

                  (c) no judgment or decree has been entered for the payment of
         any monies due pursuant hereto or to the Notes.

No rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.

         12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

         No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by any Financing Document upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise. Without
limiting the obligations of the Company under Section 15, the Company will pay
to the holder of each Note on demand such further amount as shall be sufficient
to cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.

13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

         13.1 REGISTRATION OF NOTES.

         The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.

         13.2 TRANSFER AND EXCHANGE OF NOTES.

         Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
its attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and

HYDRIL COMPANY                         38                NOTE PURCHASE AGREEMENT
<PAGE>   44

deliver, at the Company's expense (except as provided below), one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form of Exhibit 1. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $100,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 6.2.

         13.3 REPLACEMENT OF NOTES.

         Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and

                  (a) in the case of loss, theft or destruction, of indemnity
         reasonably satisfactory to it (provided that if the holder of such Note
         is, or is a nominee for, an original purchaser or a Qualified
         Institutional Buyer, such Person's own unsecured agreement of indemnity
         shall be deemed to be satisfactory), or

                  (b) in the case of mutilation, upon surrender and cancellation
         thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.

14. PAYMENTS ON NOTES.

         14.1 PLACE OF PAYMENT.

         Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in
Houston, Texas at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.

         14.2 HOME OFFICE PAYMENT.

         So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the

HYDRIL COMPANY                         39                NOTE PURCHASE AGREEMENT
<PAGE>   45

method and at the address specified for such purpose below your name in Schedule
A, or by such other method or at such other address as you shall have from time
to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.

15. EXPENSES, ETC.

         15.1 TRANSACTION EXPENSES.

         Whether or not the transactions contemplated hereby are consummated,
the Company will pay all reasonable costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of any of the Financing Documents (whether or
not such amendment, waiver or consent becomes effective), including, without
limitation:

                  (a) the costs and expenses incurred in enforcing or defending
         (or determining whether or how to enforce or defend) any rights under
         the Financing Documents or in responding to any subpoena or other legal
         process or informal investigative demand issued in connection with the
         Financing Documents, or by reason of being a holder of any Note; and

                  (b) the reasonable costs and expenses, including financial
         advisors' fees, incurred in connection with the insolvency or
         bankruptcy of the Company or any Subsidiary or in connection with any
         work-out or restructuring of the transactions contemplated hereby and
         by the Notes.

         The Company will pay, and will save you and each other holder of a Note
         harmless from, all claims in respect of any fees, costs or expenses if
         any, of brokers and finders retained by the Company.

         15.2 SURVIVAL.

         The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of any Financing Document, and the termination of any Financing
Document.

HYDRIL COMPANY                         40                NOTE PURCHASE AGREEMENT
<PAGE>   46

16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

         All representations and warranties contained in the Financing Documents
shall survive the execution and delivery of this Agreement and the Notes, the
purchase or transfer by you of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any subsequent holder of
a Note, regardless of any investigation made at any time by or on behalf of you
or any other holder of a Note. All statements contained in any certificate or
other instrument signed by an officer of the Company and delivered by the
Company pursuant to any Financing Document shall be deemed representations and
warranties of the Company under this Agreement. Subject to the preceding
sentence, the Financing Documents embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.

17. AMENDMENT AND WAIVER.

         17.1 REQUIREMENTS.

         This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as
it is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 and
20.

         17.2 SOLICITATION OF HOLDERS OF NOTES.

                  (a) SOLICITATION. The Company will provide each holder of the
         Notes (irrespective of the amount of Notes then owned by it) with
         sufficient information, sufficiently far in advance of the date a
         decision is required, to enable such holder to make an informed and
         considered decision with respect to any proposed amendment, waiver or
         consent in respect of any of the provisions hereof or of the Notes.
         The Company will deliver executed or true and correct copies of each
         amendment, waiver or consent effected pursuant to the provisions of
         this Section 17 to each holder of outstanding Notes promptly following
         the date on which it is executed and delivered by, or receives the
         consent or approval of, the requisite holders of Notes.

                  (b) PAYMENT. The Company will not directly or indirectly pay
         or cause to be paid any remuneration, whether by way of supplemental or
         additional interest, fee or otherwise, or grant any security, to any
         holder of Notes as consideration for or as an inducement to the
         entering into by any holder of Notes of any waiver or amendment of any
         of the terms and provisions hereof unless such remuneration is
         concurrently paid, or security is concurrently granted, on the same
         terms, ratably to each holder of Notes then outstanding even if such
         holder did not consent to such waiver or amendment.

HYDRIL COMPANY                         41                NOTE PURCHASE AGREEMENT
<PAGE>   47
         17.3 BINDING EFFECT, ETC.

         Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.

         17.4 NOTES HELD BY COMPANY, ETC.

         Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under any
Financing Document, or have directed the taking of any action provided herein or
in the Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then outstanding, Notes
directly or indirectly owned by the Company or any of its Affiliates shall be
deemed not to be outstanding.

18. NOTICES.

         All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

                  (i) if to you or your nominee, to you or it at the address
         specified for such communications in Schedule A, or at such other
         address as you or it shall have specified to the Company in writing,

                  (ii) if to any other holder of any Note, to such holder at
         such address as such other holder shall have specified to the Company
         in writing, or

                  (iii) if to the Company, to the Company at its address set
         forth at the beginning hereof to the attention of the Chief Financial
         Officer, telecopier: (281) 985-3287, or at such other address as the
         Company shall have specified to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

19. REPRODUCTION OF DOCUMENTS.

         This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and

HYDRIL COMPANY                         42                NOTE PURCHASE AGREEMENT
<PAGE>   48

other information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any original document
so reproduced. The Company agrees and stipulates that, to the extent permitted
by applicable law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.

20. CONFIDENTIAL INFORMATION.

         For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that was clearly marked or labeled or otherwise adequately identified
when received by you as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that

                  (a) was publicly known or otherwise known to you prior to the
         time of such disclosure,

                  (b) subsequently becomes publicly known through no act or
         omission by you or any Person acting on your behalf,

                  (c) otherwise becomes known to you other than through
         disclosure by the Company or any Subsidiary, or

                  (d) constitutes financial statements delivered to you under
         Section 7.1 that are otherwise publicly available.

You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you and you will use such information
only in connection with your investment in the Notes, provided that you may
deliver or disclose Confidential Information to:

                  (i) your directors, officers, trustees, employees, agents,
         attorneys and affiliates (to the extent such disclosure reasonably
         relates to the administration of the investment represented by your
         Notes),

                  (ii) your financial advisors and other professional advisors
         who agree to hold confidential the Confidential Information
         substantially in accordance with the terms of this Section 20,

                  (iii) any other holder of any Note,

HYDRIL COMPANY                         43                NOTE PURCHASE AGREEMENT
<PAGE>   49

                  (iv) any Institutional Investor to which you sell or offer to
         sell such Note or any part thereof or any participation therein (if
         such Person has agreed in writing prior to its receipt of such
         Confidential Information to be bound by the provisions of this Section
         20),

                  (v) any Person from which you offer to purchase any security
         of the Company (if such Person has agreed in writing prior to its
         receipt of such Confidential Information to be bound by the provisions
         of this Section 20),

                  (vi) any federal or state regulatory authority having
         jurisdiction over you,

                  (vii) the National Association of Insurance Commissioners or
         any similar organization, or any nationally recognized rating agency
         that requires access to information about your investment portfolio or

                  (viii) any other Person to which such delivery or disclosure
         may be necessary or appropriate

                           (A) to effect compliance with any law, rule,
                  regulation or order applicable to you,

                           (B) in response to any subpoena or other legal
                  process,

                           (C) in connection with any litigation to which you
                  are a party, or

                           (D) if an Event of Default has occurred and is
                  continuing, to the extent you may reasonably determine such
                  delivery and disclosure to be necessary or appropriate in the
                  enforcement or for the protection of the rights and remedies
                  under your Notes, this Agreement and the other Financing
                  Documents,

         provided that, prior to your disclosure of any information described in
         this clause (viii) and to the extent practicable in the circumstances,
         you will attempt to provide advance notice of such disclosure to the
         Company but your failure to give such notice shall not result in any
         liability for you.

Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.

21. SUBSTITUTION OF PURCHASER.

         You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice,

HYDRIL COMPANY                         44                NOTE PURCHASE AGREEMENT
<PAGE>   50
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall be deemed to refer to such Affiliate in lieu of you. In the
event that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever the
word "you" is used in this Agreement (other than in this Section 21), such word
shall no longer be deemed to refer to such Affiliate, but shall refer to you,
and you shall have all the rights of an original holder of the Notes under this
Agreement.

22. MISCELLANEOUS.

         22.1 SUCCESSORS AND ASSIGNS.

         All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.

         22.2 PAYMENTS DUE ON NON-BUSINESS DAYS; WHEN PAYMENTS DEEMED RECEIVED.

                  (a) PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
         Agreement or the Notes to the contrary notwithstanding, any payment of
         principal of or Make-Whole Amount or interest on any Note that is due
         on a date other than a Business Day shall be made on the next
         succeeding Business Day without including the additional days elapsed
         in the computation of the interest payable on such next succeeding
         Business Day.

                  (b) PAYMENTS, WHEN RECEIVED. Any payment to be made to the
         holders of Notes hereunder or under the Notes shall be deemed to have
         been made on the Business Day such payment actually becomes available
         to such holder at such holder's bank prior to 1:00 p.m. (local time of
         such bank).

         22.3 MAXIMUM INTEREST PAYABLE.

         The Company and each holder of Notes specifically intend and agree to
limit contractually the amount of interest payable under this Agreement and the
Notes, and all other instruments and agreements related hereto and thereto, to
the maximum amount of interest lawfully permitted to be charged under applicable
law. If applicable law is ever construed so as to render usurious any amounts
called for under this Agreement, the Notes or any related document, or
contracted for, charged, taken, reserved or received with respect to the
extension of credit evidenced hereby and thereby, or if acceleration of maturity
of any of the Notes or if any prepayment by the Company results in the Company
having paid, or demand having been made on the Company to pay, any interest in
excess of that permitted by applicable law, then all excess amounts theretofore
received by the holder or holders of the Notes shall be credited on the
principal balances of the Notes (or, if the Notes have been or would thereby be
repaid in full, refunded to the Company), and the provisions of this Agreement,
the Notes and any related document or demand on the Company shall immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
shall immediately be reduced, without the necessity of the execution of any new
documents, so as to comply with applicable law, but so as to permit the recovery
of the fullest amounts otherwise called for hereunder and thereunder.

HYDRIL COMPANY                         45                NOTE PURCHASE AGREEMENT
<PAGE>   51

         22.4 RELEASE OF LIENS.

         At such time as all obligations owing to the Banks have been
indefeasibly paid in full and the Bank Agreement has been terminated, or at such
time as the Banks shall execute documents releasing all Liens created in their
favor pursuant to the Collateral Documents or any other agreements, and if no
Default or Event of Default shall be continuing either immediately prior to,
or immediately after giving effect to, such payment and termination, or such
release, the holders of the Notes shall execute all commercially reasonable
documents, prepared at the Company's expense, required to release all Liens
created in their favor pursuant to the Collateral Documents.

         22.5 SEVERABILITY.

         Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

         22.6 CONSTRUCTION.

         Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

         22.7 COUNTERPARTS.

         This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.

         22.8 GOVERNING LAW.

         THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.

         22.9 CONSENT TO JURISDICTION; ETC.

                  (a) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
         ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS,
         AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
         PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
         ANY BREACH UNDER THIS AGREEMENT OR ANY

HYDRIL COMPANY                         46                NOTE PURCHASE AGREEMENT
<PAGE>   52

         DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY
         IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR
         ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH
         PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
         DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
         UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
         EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVE AND
         AGREE NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
         MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO
         THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF
         THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
         BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
         OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
         TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION
         CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY
         WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
         ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

                  (b) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES
         THAT PROCESS PERSONALLY SERVED, SERVED BY U.S. REGISTERED MAIL OR
         SERVED IN THE MANNER PROVIDED FOR NOTICES IN THIS AGREEMENT, AT THE
         ADDRESSES PROVIDED HEREIN FOR NOTICES, SHALL CONSTITUTE, TO THE EXTENT
         PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
         PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
         DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION
         OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT
         OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
         HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
         EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL
         SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.

                  (c) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
         LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY WRITS, PROCESS OR
         SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
         JURISDICTION OVER ANY OTHER PARTY HERETO IN SUCH OTHER JURISDICTION,
         AND IN SUCH OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.

         22.10 SECTION HEADINGS AND TABLE OF CONTENTS.

         The titles of the Sections and the Table of Contents appear as a matter
of convenience only, do not constitute a part hereof and shall not affect the
construction hereof. The words "HEREIN", "HEREOF", "HEREUNDER" and "HERETO"
refer to this Agreement as a whole and not to any particular Section or other
subdivision. References to Sections are, unless otherwise specified, references
to Sections of this Agreement.

      [Remainder of page intentionally blank. Next page is signature page.]

HYDRIL COMPANY                         47                NOTE PURCHASE AGREEMENT

<PAGE>   53

         If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.

                                       Very truly yours,

                                       HYDRIL COMPANY

                                       By
                                         ---------------------------------------
                                            Name:
                                            Title:

The foregoing is hereby
agreed to as of the
date thereof.

[NAME OF PURCHASER]

By
  ---------------------------------------
     Name:
     Title:

By
  ---------------------------------------
     Name:
     Title:

HYDRIL COMPANY                                           NOTE PURCHASE AGREEMENT
<PAGE>   54

                                   SCHEDULE B

                                  DEFINED TERMS

                As used herein, the following terms have the respective meanings
        set forth below or set forth in the Section hereof following such term:

                "AFFILIATE" means, at any time, and with respect to any Person,

                        (a) any other Person that at such time directly or
                indirectly through one or more intermediaries Controls, or is
                Controlled by, or is under common Control with, such first
                Person, and

                        (b) any Person beneficially owning or holding, directly
                or indirectly, 10% or more of any class of voting or equity
                interests of the Company or any Subsidiary or any corporation of
                which the Company and the Subsidiaries beneficially own or hold,
                in the aggregate, directly or indirectly, 10% or more of any
                class of voting or equity interests.

        As used in this definition, "CONTROL" means the possession, directly or
        indirectly, of the power to direct or cause the direction of the
        management and policies of a Person, whether through the ownership of
        voting securities, by contract or otherwise. Unless the context
        otherwise clearly requires, any reference to an "Affiliate" is a
        reference to an Affiliate of the Company.

                "AGREEMENT, THIS" -- Section 17.3.

                "BANK AGREEMENT" means the Amended and Restated Loan Agreement,
         dated as of March 23, 1998, among each of the Company, the Banks and
         Bank One, as agent for the Banks, as amended by a First Amendment to
         Amended and Restated Loan Agreement dated as of June 25, 1998 and as
         may be further amended, supplemented, refinanced or modified from time
         to time.

                "BANK GUARANTY" -- Section 9.8.

                "BANK ONE" means Bank One, Texas, N.A.

                "BANKS" means, collectively, the "Lenders" (as defined in the
         Bank Agreement) which are parties to the Bank Agreement from time to
         time.

                "BUSINESS DAY" means (a) for the purposes of Section 8.7 only,
         any day other than a Saturday, a Sunday or a day on which commercial
         banks in New York City are required or authorized to be closed, and (b)
         for the purposes of any other provision of this Agreement, any day
         other than a Saturday, a Sunday or a day on which commercial banks in
         Houston, Texas, or New York City, New York are required or authorized
         to be closed.

                "CAPITAL LEASE" means a lease with respect to which the lessee
         is required concurrently to recognize the acquisition of an asset and
         the incurrence of a liability on its balance sheet in accordance with
         GAAP.

HYDRIL COMPANY                    SCHEDULE B-1           NOTE PURCHASE AGREEMENT

<PAGE>   55

                "CAPITAL STOCK" means any class of capital stock, share capital
         or similar equity interest of a Person.

                "CAPITAL LEASE OBLIGATION" means, with respect to any Person and
         a Capital Lease to which such Person is a party, the amount of the
         obligation of such Person as the lessee under such Capital Lease which
         would, in accordance with GAAP, appear as a liability on a balance
         sheet of such Person.

                "CHANGE IN CONTROL" means the failure, at any time and for any
         reason, of the Initial Stockholder Affiliates, as a group, to
         beneficially own (as such term is used in Section 13(d) of the Exchange
         Act as in effect on the date of Closing) and to control more than 50%
         of the Voting Stock of the Company outstanding at such time.

                "CLYDESDALE BANK FACILITY" means the $3,000,000 unsecured line
         of credit provided by Clydesdale Bank of Scotland for the benefit of
         the Company.

                "CLOSING" -- Section 3.

                "CODE" means the Internal Revenue Code of 1986, as amended from
         time to time, and the rules and regulations promulgated thereunder from
         time to time.

                "COLLATERAL" means any and all Property that at any time is
         granted to the Collateral Agent pursuant to the Collateral Documents as
         security for the payment of any or all of the obligations of the
         Company under this Agreement, the Other Agreements, the Notes and the
         Bank Agreement.

                "COLLATERAL AGENT" means Bank One, solely in its capacity as
         collateral agent under the Collateral Documents and the Intercreditor
         Agreement, and together with any successor or co-agent that becomes
         such in accordance with the provisions of the Collateral Documents and
         the Intercreditor Agreement.

                "COLLATERAL DOCUMENTS" -- Section 4.11.

                "COMPANY" -- introductory sentence.

                "CONFIDENTIAL INFORMATION" -- Section 20.

                "CONSOLIDATED DEPRECIATION EXPENSE" means, for any period, the
         amount of depreciation, depletion and amortization expense of the
         Company and the Subsidiaries, determined on a consolidated basis for
         such period, but only to the extent deducted from revenues in the
         determination of Consolidated Net Income for such period.

                "CONSOLIDATED EBITDA" means, for any period, the sum of:

                       (a)   Consolidated Net Income; plus

                       (b)   Consolidated Interest Expense; plus

                       (c)   Consolidated Tax Expense; plus

HYDRIL COMPANY                    SCHEDULE B-2           NOTE PURCHASE AGREEMENT

<PAGE>   56

                       (d)   Consolidated Depreciation Expense;

         in each case determined in respect of such period.

                "CONSOLIDATED FIXED CHARGES" means, in respect of any period,
         the sum of (a) Consolidated Interest Expense for such period, plus (b)
         Lease Rentals of the Company and the Subsidiaries for such period,
         after eliminating all offsetting debits and credits between the Company
         and the Subsidiaries and all other items required to be eliminated in
         the course of the preparation of consolidated financial statements of
         the Company and the Subsidiaries in accordance with GAAP.

                "CONSOLIDATED FUNDED DEBT" means, as of any date of
         determination, the total of all Funded Debt of the Company and the
         Subsidiaries outstanding on such date, after eliminating all offsetting
         debits and credits between the Company and the Subsidiaries and all
         other items required to be eliminated in the course of the preparation
         of consolidated financial statements of the Company and the
         Subsidiaries in accordance with GAAP.

                "CONSOLIDATED INTEREST EXPENSE" means, for any period, the
         amount of interest accrued on, or with respect to, interest bearing
         obligations of the Company and the Subsidiaries, including, without
         limitation, amortization of debt discount, imputed interest on Capital
         Leases and interest on the Notes, determined in accordance with GAAP on
         a consolidated basis for such period, but only to the extent deducted
         from revenues in the determination of Consolidated Net Income for such
         period.

                "CONSOLIDATED NET INCOME" means, with reference to any period,
         the net income (or loss) of the Company and the Subsidiaries for such
         period (taken as a cumulative whole), as determined in accordance with
         GAAP, after eliminating all offsetting debits and credits between the
         Company and the Subsidiaries and all other items required to be
         eliminated in the course of the preparation of consolidated financial
         statements of the Company and the Subsidiaries in accordance with GAAP,
         provided that there shall be excluded therefrom:

                       (a) the income (or loss) of any Person accrued prior to
                the date it becomes a Subsidiary or is merged into or
                consolidated with the Company or a Subsidiary, and the income
                (or loss) of any Person, substantially all of the assets of
                which have been acquired in any manner, realized by such other
                Person prior to the date of acquisition, and

                       (b) the income (or loss) of any business, Properties or
                assets acquired (by means of a merger, consolidation, purchase
                or otherwise) by the Company or any Subsidiary, which income (or
                loss) accrued prior to the date of such acquisition.

                "CONSOLIDATED TANGIBLE NET WORTH" means, at any time,

                       (a) the total assets of the Company and the Subsidiaries
                which would be shown as assets on a consolidated balance sheet
                of the Company and the Subsidiaries as of such time prepared in
                accordance with GAAP, after eliminating all amounts properly
                attributable to minority interests, if any, in the stock and
                surplus of such Subsidiaries, minus

HYDRIL COMPANY                    SCHEDULE B-3           NOTE PURCHASE AGREEMENT

<PAGE>   57

                       (b) the total liabilities of the Company and the
                Subsidiaries which would be shown as liabilities on a
                consolidated balance sheet of the Company and the Subsidiaries
                as of such time prepared in accordance with GAAP, minus

                       (c) the net book amount of all assets of the Company and
                the Subsidiaries (after deducting any reserves applicable
                thereto) which would be shown as intangible assets on a
                consolidated balance sheet of the Company and the Subsidiaries
                as of such time prepared in accordance with GAAP including,
                without limitation, good will, trademarks, trade names, service
                marks, brand names, copyrights, patents, capitalized research
                and development expenses, unamortized debt discount and expense
                and other similar intangible assets.

                "CONSOLIDATED TAX EXPENSE" means, for any period, tax expense of
         the Company and the Subsidiaries, determined on a consolidated basis in
         accordance with GAAP for such period, but only to the extent deducted
         from revenues in the determination of Consolidated Net Income for such
         period.

                "CONSOLIDATED TOTAL CAPITALIZATION" means, at any time, the sum
         of Consolidated Tangible Net Worth and Consolidated Funded Debt.

                "CONTROL EVENT" means

                       (a) the execution of any written agreement which, when
                fully performed by the parties thereto, would result in a Change
                in Control; or

                       (b) the making of any written offer by any person (as
                such term is used in Section 13(d) and Section 14(d)(2) of the
                Exchange Act as in effect on the date of Closing) or related
                persons constituting a group (as such term is used in Rule 13d-5
                under the Exchange Act as in effect on the date of Closing) to
                the holders of the common stock which offer, if accepted by
                the requisite number of such holders, would result in a Change
                in Control.

                "DEBT" means, with respect to any Person, without duplication,

                       (a) its liabilities for borrowed money;

                       (b) its liabilities for the deferred purchase price of
                Property acquired by such Person (excluding accounts payable and
                accrued liabilities arising in the ordinary course of business
                but including, without limitation, all liabilities created or
                arising under any conditional sale or other title retention
                agreement with respect to any such Property);

                       (c) its Capital Lease Obligations;

                       (d) all liabilities for borrowed money secured by any
                Lien with respect to any Property owned by such Person (whether
                or not it has assumed or otherwise become liable for such
                liabilities); and

HYDRIL COMPANY                    SCHEDULE B-4           NOTE PURCHASE AGREEMENT

<PAGE>   58

                       (e) any Guaranty of such Person with respect to
                liabilities of a type described in any of clauses (a) through
                (d) hereof.

        Debt of any Person shall include all obligations of such Person of the
        character described in clauses (a) through (e) above to the extent such
        Person remains legally liable in respect thereof notwithstanding that
        any such obligation is deemed to be extinguished under GAAP.

                "DEEDS OF TRUST" -- Section 4.11.

                "DEFAULT" means an event or condition the occurrence or
         existence of which would, with the lapse of time or the giving of
         notice or both, become an Event of Default.

                "DEFAULT RATE" means 8.85% per annum.

                "ENVIRONMENTAL LAWS" means any and all Federal, state, local,
         and foreign statutes, laws, regulations, ordinances, rules, judgments,
         orders, decrees, permits, concessions, grants, franchises, licenses,
         agreements or governmental restrictions relating to pollution and the
         protection of the environment or the release of any materials into the
         environment, including but not limited to those related to hazardous
         substances or wastes, air emissions and discharges to waste or public
         systems.

                "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended from time to time, and the rules and regulations
         promulgated thereunder from time to time in effect.

                "ERISA AFFILIATE" means any trade or business (whether or not
         incorporated) that is treated as a single employer together with the
         Company under section 414 of the Code.

                "EVENT OF DEFAULT" -- Section 11.

                "EVI INDEBTEDNESS" -- Section 10.10.

                "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
         amended from time to time.

                "FAIR MARKET VALUE" means, at any time and with respect to any
         Property, the sale value of such Property that would be realized in an
         arm's-length sale at such time between an informed and willing buyer
         and an informed and willing seller (neither being under a compulsion to
         buy or sell).

                "FINANCIAL COVENANTS" -- Section 9.7.

                "FINANCING DOCUMENTS" means this Agreement, the Other
         Agreements, the Notes, the Collateral Documents, the Intercreditor
         Agreement and each other document or agreement executed from time to
         time in connection therewith, all as amended from time to time.

HYDRIL COMPANY                    SCHEDULE B-5           NOTE PURCHASE AGREEMENT

<PAGE>   59

                "FOREIGN PENSION PLAN" means any plan, fund or other similar
         program

                       (a) established or maintained outside of the United
                States of America by the Company or any Subsidiary primarily for
                the benefit of the employees (substantially all of whom are
                aliens not residing in the United States of America) of the
                Company or such Subsidiary, as the case may be, which plan, fund
                or other similar program provides for retirement income for such
                employees or results in a deferral of income for such employees
                in contemplation of retirement, and

                       (b) not otherwise subject to ERISA.

                "FUNDED DEBT" means, with respect to any Person, all Debt of
         such Person which by its terms or by the terms of any instrument or
         agreement relating thereto matures, or which is otherwise payable or
         unpaid, one year or more from, or is directly or indirectly renewable
         or extendible at the option of the obligor in respect thereof to a date
         one year or more (including, without limitation, an option of such
         obligor under a revolving credit or similar agreement obligating the
         lender or lenders to extend credit over a period of one year or more)
         from, the date of the creation thereof.

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

                "GOVERNMENTAL AUTHORITY" means

                       (a) the government of

                           (i) the United States of America or any state or
                       other political subdivision thereof, or

                           (ii) any jurisdiction in which the Company or any
                       Subsidiary conducts all or any part of its business, or
                       that asserts jurisdiction over any Properties of the
                       Company or any Subsidiary, or

                       (b) any entity exercising executive, legislative,
                judicial, regulatory or administrative functions of, or
                pertaining to, any such government.

                "GUARANTY" means, with respect to any Person, any obligation
         (except the endorsement in the ordinary course of business of
         negotiable instruments for deposit or collection) of such Person
         guaranteeing or in effect guaranteeing any indebtedness, dividend or
         other obligation of any other Person in any manner, whether directly or
         indirectly, including, without limitation, obligations incurred through
         an agreement, contingent or otherwise, by such Person:

                       (a) to purchase such indebtedness or obligation or any
                Property constituting security therefor;

                       (b) to advance or supply funds (i) for the purchase or
                payment of such indebtedness or obligation, or (ii) to maintain
                any working capital or other balance sheet condition or any
                income statement condition of any other Person or otherwise to

HYDRIL COMPANY                    SCHEDULE B-6           NOTE PURCHASE AGREEMENT

<PAGE>   60

                advance or make available funds for the purchase or payment of
                such indebtedness or obligation;

                       (c) to lease Properties or to purchase Properties or
                services primarily for the purpose of assuring the owner of such
                indebtedness or obligation of the ability of any other Person to
                make payment of the indebtedness or obligation; or

                       (d) otherwise to assure the owner of such indebtedness or
                obligation against loss in respect thereof.

         In any computation of the indebtedness or other liabilities of the
         obligor under any Guaranty, the indebtedness or other obligations that
         are the subject of such Guaranty shall be assumed to be direct
         obligations of such obligor.

                "HAZARDOUS MATERIAL" means any and all pollutants, toxic or
         hazardous wastes or any other substances that might pose a hazard to
         health or safety, the removal of which may be required or the
         generation, manufacture, refining, production, processing, treatment,
         storage, handling, transportation, transfer, use, disposal, release,
         discharge, spillage, seepage, or filtration of which is or shall be
         restricted, prohibited or penalized by any applicable law (including,
         without limitation, asbestos, urea formaldehyde foam insulation and
         polychlorinated biphenyls).

                "HOLDER" means, with respect to any Note, the Person in whose
         name such Note is registered in the register maintained by the Company
         pursuant to Section 13.1.

                "INITIAL STOCKHOLDER" means and includes Richard C. Seaver and
         Christopher T. Seaver.

                "INITIAL STOCKHOLDER AFFILIATES" means

                       (a) any Initial Stockholder;

                       (b) a spouse, child, lineal descendant, parent or sibling
                of an Initial Stockholder and any of their estates and legal
                representatives (each a "Related Person");

                       (c) any trust or charitable organization of which any
                Related Person is a trustee, director, beneficiary or grantor;
                and

                       (d) a corporation, partnership, limited liability company
                or other similar business entity of which more than 50% of the
                Voting Stock thereof is controlled, directly or indirectly, by
                any Person described in clause (a) or clause (b) of this
                definition.

                "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
         Note, (b) any holder of a Note holding more than 5% of the aggregate
         principal amount of the Notes then outstanding, and (c) any bank, trust
         company, savings and loan association or other financial institution,
         any pension plan, any investment company, any insurance company, any
         broker or dealer, or any other similar financial institution or entity,
         regardless of legal form, holding (together with any of its affiliates)
         Notes in an aggregate principal amount equal to at least $750,000.

HYDRIL COMPANY                    SCHEDULE B-7           NOTE PURCHASE AGREEMENT

<PAGE>   61

                "INTERCREDITOR AGREEMENT" -- Section 4.10.

                "INVESTMENT" means any investment, made in cash or by delivery
         of Property, by the Company or any of the Subsidiaries in any Person,
         whether by acquisition of stock, indebtedness or other obligation or
         Security, or by loan, Guaranty, advance, capital contribution or
         otherwise. An Investment shall be valued at the greater of (x) the cost
         thereof to the Company or any Subsidiary or (y) the amount originally
         entered on the books of the Company or any Subsidiary with respect
         thereto, less, in each case, any return of capital (after income taxes
         applicable thereto) upon such Investment through the sale or other
         liquidation thereof or part thereof or otherwise.

                "LEASE RENTALS" of any Person means, with respect to any period
         of 12 consecutive calendar months, the sum of the rental and other
         obligations required to be paid during such period by such Person or
         any of its Subsidiaries as lessee under all leases of real or personal
         Property (other than Capital Leases), excluding any amount required to
         be paid by the lessee (whether or not therein designated as rental or
         additional rental) on account of maintenance and repairs, insurance,
         taxes, assessments, water rates and similar charges, provided that, if
         at the date of determination, any such rental or other obligations are
         contingent or not otherwise definitely determinable by the terms of the
         related lease, the amount of such obligations (a) shall be assumed to
         be equal to the amount of such obligations for the period of 12
         consecutive calendar months immediately preceding the date of
         determination or (b) if the related lease was not in effect during such
         preceding 12-month period, shall be the amount estimated by a Senior
         Financial Officer of such Person on a reasonable basis and in good
         faith.

                "LIEN" means, with respect to any Person, any mortgage, lien,
         pledge, charge, security interest or other encumbrance, or any interest
         or title of any vendor, lessor, lender or other secured party to or of
         such Person under any conditional sale or other title retention
         agreement or Capital Lease, upon or with respect to any Property or
         asset of such Person (including in the case of stock, stockholder
         agreements, voting trust agreements and all similar arrangements).

                "MAKE-WHOLE AMOUNT" -- Section 8.7.

                "MATERIAL" means material in relation to the business,
         operations, affairs, financial condition, assets or Properties of the
         Company and the Subsidiaries taken as a whole.

                "MATERIAL ADVERSE EFFECT" means a material adverse effect on

                       (a) the business, operations, financial condition, assets
                or Properties of the Company and its Subsidiaries taken as a
                whole,

                       (b) the ability of the Company to perform its obligations
                under this Agreement, the Notes, or any other Financing Document
                to which it is a party, or

                       (c) the validity or enforceability of any of the terms or
                provisions of this Agreement, the Notes or any other Financing
                Document.

                "MEMORANDUM" -- Section 5.3.

HYDRIL COMPANY                    SCHEDULE B-8           NOTE PURCHASE AGREEMENT

<PAGE>   62

                "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
         plan" (as such term is defined in section 4001(a)(3) of ERISA).

                "NET PROCEEDS" means, with respect to any Transfer of any
         Property by any Person, an amount equal to:

                       (a) the aggregate amount of the consideration (valued at
                the Fair Market Value of such consideration at the time of the
                consummation of such Transfer) received by such Person in
                respect of such Transfer; minus

                       (b) all reasonable out-of-pocket costs, fees, commissions
                and other expenses incurred by such Person in connection with
                such Transfer and income taxes and indemnification obligations
                paid or reasonably estimated to be payable in connection
                therewith; minus

                       (c) all obligations required to be paid by such Person as
                a result of such Transfer.

                "NOTES" -- Section 1.

                "OFFICER'S CERTIFICATE" means a certificate of a Senior
         Financial Officer or of any other officer of the Company whose
         responsibilities extend to the subject matter of such certificate.

                "OPERATING ASSETS" means operating assets of the Company or any
         Subsidiary used in the ordinary course of business of the Company or
         such Subsidiary, as such businesses were conducted on the date of
         Closing.

                "OTHER AGREEMENTS" -- Section 2.

                "OTHER PURCHASERS" -- Section 2.

                "PBGC" means the Pension Benefit Guaranty Corporation referred
         to and defined in ERISA or any successor thereto.

                "PERSON" means an individual, partnership, corporation, limited
         liability company, association, trust, unincorporated organization, or
         a government or agency or political subdivision thereof.

                "PLAN" means an "employee benefit plan" (as defined in section
         3(3) of ERISA) that is or, within the preceding five years, has been
         established or maintained, or to which contributions are or, within the
         preceding five years, have been made or required to be made, by the
         Company or any ERISA Affiliate or with respect to which the Company or
         any ERISA Affiliate may have any liability.

                "PREFERRED STOCK" means any class of Capital Stock of a Person
         that is preferred over any other class of Capital Stock of such Person
         as to the payment of dividends or other equity distributions or the
         payment of any amount upon liquidation or dissolution of such Person.

HYDRIL COMPANY                    SCHEDULE B-9           NOTE PURCHASE AGREEMENT

<PAGE>   63

                "PROPERTY" means, unless otherwise specifically limited, real or
         personal property of any kind, tangible or intangible, choate or
         inchoate.

                "PROPOSED PREPAYMENT DATE" -- Section 8.3(b).

                "PROVISIONAL QUALIFIED TRANSFER" -- Section 10.7(a).

                "PTE" -- Section 6.2(a).

                "QPAM EXEMPTION" -- Section 6.2(d).

                "QUALIFIED INSTITUTIONAL BUYER" means any Person who is a
         "qualified institutional buyer" within the meaning of such term as set
         forth in Rule 144A(a)(1) under the Securities Act.

                "REQUIRED HOLDERS" means, at any time, the holders of at least
         66 2/3% in principal amount of the Notes at the time outstanding
         (exclusive of Notes then owned by the Company, any Subsidiary, or any
         Affiliate).

                "REQUIRED LOCAL EQUITY" -- Section 10.7(a)(v).

                "RESPONSIBLE OFFICER" means any Senior Financial Officer and any
         other officer of the Company with responsibility for the administration
         of the relevant portion of this Agreement.

                "RESTRICTED INVESTMENTS" means all Investments other than the
         following:

                       (a) Investments existing on the date of the Closing and
                disclosed on Schedule 10.5 hereto;

                       (b) Investments in the Company, one or more Subsidiaries,
                or any Person that concurrently with such investment becomes a
                Subsidiary;

                       (c) Investments in commercial paper maturing not more
                than 270 days from the date of acquisition thereof by the
                Company or a Subsidiary and, at the time of such acquisition,
                given the highest rating by S&P, Moody's or any other credit
                rating agency of recognized national standing;

                       (d) Investments in United States Governmental Securities,
                provided that such obligations mature within 365 days from the
                date of acquisition thereof;

                       (e) Investments in certificates of deposit issued by an
                Acceptable Bank, provided that such obligations mature within
                365 days from the date of acquisition thereof;

                       (f) Investments in Eurodollar certificates of deposit or
                time deposits issued by an Acceptable Eurodollar Bank, provided
                that such obligations mature within 365 days from the date of
                acquisition thereof; and

                       (g) Investments in Repurchase Agreements.

HYDRIL COMPANY                    SCHEDULE B-10          NOTE PURCHASE AGREEMENT

<PAGE>   64

As used in this definition:

                "Acceptable Bank" means any bank or trust company (A) which is
         organized under the laws of the United States of America or any State
         thereof and (B) which has capital, surplus and undivided profits
         aggregating at least $100,000,000.

                "Acceptable Eurodollar Bank" means any bank or trust company
         which has capital, surplus and undivided profits aggregating at least
         One Billion Dollars ($1,000,000,000) (or the equivalent in another
         currency).

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

                "Repurchase Agreement" means any written agreement:

                       (a) that provides for (i) the transfer of one or more
                United States Governmental Securities in an aggregate principal
                amount at least equal to the amount of the Transfer Price
                (defined below) to the Company or any of its Subsidiaries from
                an Acceptable Bank against a transfer of funds (the "Transfer
                Price") by the Company or such Subsidiary to such Acceptable
                Bank, and (ii) a simultaneous agreement by the Company or such
                Subsidiary, in connection with such transfer of funds, to
                transfer to such Acceptable Bank the same or substantially
                similar United States Governmental Securities for a price not
                less than the Transfer Price plus a reasonable return thereon
                at a date certain not later than 30 days after such transfer of
                funds;

                       (b) in respect of which the Company or such Subsidiary
                shall have the right, whether by contract or pursuant to
                applicable law, to liquidate such agreement upon the occurrence
                of any default thereunder; and

                       (c) in connection with which the Company or such
                Subsidiary, or an agent thereof, shall have taken all action
                required by applicable law or regulations to perfect a lien in
                such United States Governmental Securities.

                "S&P" means Standard & Poor's Ratings Group, a division of
         McGraw Hill, Inc.

                "United States Governmental Security" means any direct
         obligation of, or obligation guaranteed by, the United States of
         America, or any agency controlled or supervised by or acting as an
         instrumentality of the United States of America pursuant to authority
         granted by the Congress of the United States of America, so long as
         such obligation or guarantee shall have the benefit of the full faith
         and credit of the United States of America which shall have been
         pledged pursuant to authority granted by the Congress of the United
         States of America.

         "RESTRICTED PAYMENT" means:

                       (a) any dividend or other distribution, direct or
         indirect, on account of any shares of Capital Stock or Rights of the
         Company (including, without limitation, any common stock of the
         Company), now or hereafter outstanding, except a dividend or other
         distribution payable solely in shares of common stock of the Company;

HYDRIL COMPANY                    SCHEDULE B-11          NOTE PURCHASE AGREEMENT

<PAGE>   65

                       (b) any dividend or other distribution, direct or
                indirect, on account of any shares of Capital Stock or Rights of
                any Subsidiary, now or hereafter outstanding, except:

                           (i) a dividend payable solely in shares of common
                       stock of such Subsidiary; and

                           (ii) to the extent that such dividend or distribution
                       is, directly or indirectly, payable to the Company or a
                       Wholly-Owned Subsidiary;

                       (c) any redemption, retirement, purchase or other
                acquisition, direct or indirect, of any shares of Capital Stock
                or Rights of the Company now or hereafter outstanding, except to
                the extent that such redemption, retirement, purchase or other
                acquisition is effected solely by the issuance of common stock
                (or the sale proceeds from the issuance thereof); and

                       (d) any payment, whether in respect of principal,
                premium, interest, fees, expenses or otherwise, in respect of,
                or any redemption, retirement, purchase or other acquisition,
                direct or indirect, of, any Debt owed by the Company or any
                Subsidiary to any Affiliate (other than a Subsidiary) to the
                extent that all such payments subsequent to April 1, 1998 and on
                or prior to any date of determination are in excess of all
                similar amounts paid by any Affiliate (other than a Subsidiary)
                to the Company or any Subsidiary on or after April 1, 1998 and
                on or prior to such date of determination.

         For purposes of this Agreement, the amount of any Restricted Payment
         made in Property shall be the greater of (x) the Fair Market Value of
         such Property (as determined in good faith by the board of directors
         (or equivalent governing body) of the Person making such Restricted
         Payment) and (y) the net book value thereof on the books of such
         Person, in each case determined as of the date on which such Restricted
         Payment is made.

                "RIGHTS" means, with respect to any Person, any right, warrant,
         option or other similar right to purchase or receive Capital Stock of
         such Person.

                "SECURITIES ACT" means the Securities Act of 1933, as amended
         from time to time.

                "SECURITY" means "security" as defined by section 2(1) of the
         Securities Act.

                "SENIOR FINANCIAL OFFICER" means the chief financial officer,
         principal accounting officer, treasurer or comptroller of the Company.

                "SENIOR FUNDED DEBT" means the Notes and Funded Debt outstanding
         under the Bank Agreement ("Bank Funded Debt"), provided that, in
         connection with a repayment of Senior Funded Debt under Section 10.7,
         the availability of Bank Funded Debt under the Bank Agreement is
         permanently reduced in an amount equal to the amount of Bank Funded
         Debt so repaid.

                "SOURCE" -- Section 6.2.

HYDRIL COMPANY                    SCHEDULE B-12          NOTE PURCHASE AGREEMENT

<PAGE>   66

                "SUBSIDIARY" shall mean, as to any Person, any corporation,
         association or other business entity in which such Person or one or
         more of its Subsidiaries or such Person and one or more of its
         Subsidiaries owns more than 50% (by number of votes) of each class of
         the Voting Stock or sufficient equity or voting interests to enable it
         or them (as a group) ordinarily, in the absence of contingencies, to
         elect a majority of the directors (or Persons performing similar
         functions) of such entity. Unless the context otherwise clearly
         requires, any reference to a "Subsidiary" is a reference to a
         Subsidiary of the Company.

                "SUBSIDIARY STOCK" -- Section 10.7(b).

                "SUCCESSOR CORPORATION" -- Section 10.6.

                "TRANSFERS" -- Section 10.7(a).

                "UBS FACILITY" means the $10,000,000 unsecured revolving line
         of credit provided by Union Bank of Switzerland for the benefit of
         Hydril S.A. or any replacement, refunding, amendment, refinancing or
         modification thereof.

                "UNAPPLIED NET PROCEEDS" means, at any date, the Net Proceeds
         from Provisional Qualified Transfers that have not been applied as
         provided in either clause (x) or clause (y) of the last paragraph of
         Section 10.7(a) as of such date.

                "VOTING STOCK" shall mean, with respect to any Person, Capital
         Stock of any class or classes of a corporation, an association or
         another business entity the holders of which are ordinarily, in the
         absence of contingencies, entitled to vote in the election of corporate
         directors (or individuals performing similar functions) of such Person
         or which permit the holders thereof to control the management of such
         Person, including general partnership interests in a partnership and
         membership interests in a limited liability company.

                "WHOLLY-OWNED SUBSIDIARY" shall mean, as to any Person, any
         Subsidiary 100% of all of the capital stock or other ownership interest
         of which is owned by any one or more of such Person and such Person's
         other Wholly-Owned Subsidiaries.

HYDRIL COMPANY                    SCHEDULE B-13          NOTE PURCHASE AGREEMENT<PAGE>

                                                                     EXHIBIT 4.1
                                                                     -----------

================================================================================

                AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                      Class A-1 6.89% Asset Backed Notes
                      Class A-2 7.52% Asset Backed Notes
                  Class A-3 Floating Rate Asset Backed Notes
                  Class A-4 Floating Rate Asset Backed Notes

                             _____________________

                                   INDENTURE

                           Dated as of May 22, 2000

                             _____________________

                                BANK ONE, N.A.
                      Trustee and Trust Collateral Agent

================================================================================
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>                                                                                         <C>
ARTICLE I  DEFINITIONS AND INCORPORATION BY REFERENCE.....................................    3

    SECTION 1.1      Definitions..........................................................    3
    SECTION 1.2      Incorporation by Reference of Trust Indenture Act....................   11
    SECTION 1.3      Rules of Construction................................................   11

ARTICLE II  THE NOTES.....................................................................   11

    SECTION 2.1      Form.................................................................   12
    SECTION 2.2      Execution, Authentication and Delivery...............................   12
    SECTION 2.3      Temporary Notes......................................................   12
    SECTION 2.4      Registration; Registration of Transfer and Exchange..................   13
    SECTION 2.5      Mutilated, Destroyed, Lost or Stolen Notes...........................   14
    SECTION 2.6      Persons Deemed Owner.................................................   15
    SECTION 2.7      Payment of Principal and Interest; Defaulted Interest................   17
    SECTION 2.8      Cancellation.........................................................   17
    SECTION 2.9      Release of Collateral................................................   17
    SECTION 2.10     Book-Entry Notes.....................................................   18
    SECTION 2.11     Notices to Clearing Agency...........................................   18
    SECTION 2.12     Definitive Notes.....................................................   18

ARTICLE III  COVENANTS....................................................................   18

    SECTION 3.1      Payment of Principal and Interest....................................   18
    SECTION 3.2      Maintenance of Office or Agency......................................   19
    SECTION 3.3      Money for Payments to be Held in Trust...............................   19
    SECTION 3.4      Existence............................................................   20
    SECTION 3.5      Protection of Trust Estate...........................................   21
    SECTION 3.6      Opinions as to Trust Estate..........................................   21
    SECTION 3.7      Performance of Obligations; Servicing of Receivables.................   22
    SECTION 3.8      Negative Covenants...................................................   23
    SECTION 3.9      Annual Statement as to Compliance....................................   24
    SECTION 3.10     Issuer May Consolidate, Etc. Only on Certain Terms...................   24
    SECTION 3.11     Successor or Transferee..............................................   26
    SECTION 3.12     No Other Business....................................................   27
    SECTION 3.13     No Borrowing.........................................................   27
    SECTION 3.14     Servicer's Obligations...............................................   27
    SECTION 3.15     Guarantees, Loans, Advances and Other Liabilities....................   27
    SECTION 3.16     Capital Expenditures.................................................   27
    SECTION 3.17     Compliance with Laws.................................................   27
    SECTION 3.18     Restricted Payments..................................................   27
    SECTION 3.19     Notice of Events of Default..........................................   28
    SECTION 3.20     Further Instruments and Acts.........................................   28
    SECTION 3.21     Amendments of Sale and Servicing Agreement and Trust Agreement.......   28
    SECTION 3.22     Income Tax Characterization..........................................   28

ARTICLE IV  SATISFACTION AND DISCHARGE....................................................   28

    SECTION 4.1      Satisfaction and Discharge of Indenture..............................   28
    SECTION 4.2      Application of Trust Money...........................................   29
    SECTION 4.3      Repayment of Moneys Held by Note Paying Agent........................   29

ARTICLE V  REMEDIES.......................................................................   30

    SECTION 5.1      Events of Default....................................................   30
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                             <C>
    SECTION 5.2      Rights Upon Event of Default............................................   31
    SECTION 5.3      Collection of Indebtedness and Suits for Enforcement by Trustee.........   33
    SECTION 5.4      Remedies................................................................   35
    SECTION 5.5      Optional Preservation of the Receivables................................   37
    SECTION 5.6      Priorities..............................................................   37
    SECTION 5.7      Limitation of Suits.....................................................   38
    SECTION 5.8      Unconditional Rights of Noteholders To Receive Principal and Interest...   38
    SECTION 5.9      Restoration of Rights and Remedies......................................   39
    SECTION 5.10     Rights and Remedies Cumulative..........................................   39
    SECTION 5.11     Delay or Omission Not a Waiver..........................................   39
    SECTION 5.12     Control by Noteholders..................................................   39
    SECTION 5.13     Waiver of Past Defaults.................................................   40
    SECTION 5.14     Undertaking for Costs...................................................   40
    SECTION 5.15     Waiver of Stay or Extension Laws........................................   41
    SECTION 5.16     Action on Notes.........................................................   41
    SECTION 5.17     Performance and Enforcement of Certain Obligations......................   41

ARTICLE VI  THE TRUSTEE AND THE TRUST COLLATERAL AGENT.......................................   41

    SECTION 6.1      Duties of Trustee.......................................................   41
    SECTION 6.2      Rights of Trustee.......................................................   43
    SECTION 6.3      Individual Rights of Trustee............................................   45
    SECTION 6.4      Trustee's Disclaimer....................................................   45
    SECTION 6.5      Notice of Defaults......................................................   45
    SECTION 6.6      Reports by Trustee to Holders...........................................   45
    SECTION 6.7      Compensation and Indemnity..............................................   45
    SECTION 6.8      Replacement of Trustee..................................................   46
    SECTION 6.9      Successor Trustee by Merger.............................................   47
    SECTION 6.10     Appointment of Co-Trustee or Separate Trustee...........................   48
    SECTION 6.11     Eligibility: Disqualification...........................................   49
    SECTION 6.12     Preferential Collection of Claims Against Issuer........................   49
    SECTION 6.13     Appointment and Powers..................................................   49
    SECTION 6.14     Performance of Duties...................................................   50
    SECTION 6.15     Limitation on Liability.................................................   50
    SECTION 6.16     Reliance Upon Documents.................................................   50
    SECTION 6.17     Successor Trust Collateral Agent........................................   51
    SECTION 6.18     Compensation............................................................   52
    SECTION 6.19     Representations and Warranties of the Trust Collateral Agent............   52
    SECTION 6.20     Waiver of Setoffs.......................................................   53
    SECTION 6.21     Control by the Controlling Party........................................   53

ARTICLE VII  NOTEHOLDERS' LISTS AND REPORTS..................................................   53

    SECTION 7.1      Issuer To Furnish To Trustee Names and Addresses of Noteholders.........   53
    SECTION 7.2      Preservation of Information; Communications to Noteholders..............   53
    SECTION 7.3      Reports by Issuer.......................................................   53
    SECTION 7.4      Reports by Trustee......................................................   54

ARTICLE VIII  ACCOUNTS, DISBURSEMENTS AND RELEASES...........................................   54

    SECTION 8.1      Collection of Money.....................................................   54
    SECTION 8.2      Release of Trust Estate.................................................   55
    SECTION 8.3      Opinion of Counsel......................................................   55

ARTICLE IX  SUPPLEMENTAL INDENTURES..........................................................   55

    SECTION 9.1      Supplemental Indentures Without Consent of Noteholders..................   55
    SECTION 9.2      Supplemental Indentures with Consent of Noteholders.....................   57
    SECTION 9.3      Execution of Supplemental Indentures....................................   58
    SECTION 9.4      Effect of Supplemental Indenture........................................   58
</TABLE>

                                      ii
<PAGE>

<TABLE>
<S>                                                                                     <C>
    SECTION 9.5      Conformity With Trust Indenture Act............................    59
    SECTION 9.6      Reference in Notes to Supplemental Indentures..................    59

ARTICLE X  REDEMPTION OF NOTES......................................................    59

    SECTION 10.1     Redemption.....................................................    59
    SECTION 10.2     Form of Redemption Notice......................................    60
    SECTION 10.3     Notes Payable on Redemption Date...............................    61

ARTICLE XI  MISCELLANEOUS...........................................................    61

    SECTION 11.1     Compliance Certificates and Opinions, etc......................    61
    SECTION 11.2     Form of Documents Delivered to Trustee.........................    63
    SECTION 11.3     Acts of Noteholders............................................    63
    SECTION 11.4     Notices, etc., to Trustee, Issuer and Rating Agencies..........    64
    SECTION 11.5     Notices to Noteholders; Waiver.................................    65
    SECTION 11.6     [Reserved].....................................................    65
    SECTION 11.7     Conflict with Trust Indenture Act..............................    65
    SECTION 11.8     Effect of Headings and Table of Contents.......................    66
    SECTION 11.9     Successors and Assigns.........................................    66
    SECTION 11.10    Separability...................................................    66
    SECTION 11.11    Benefits of Indenture..........................................    66
    SECTION 11.12    Legal Holidays.................................................    66
    SECTION 11.13    GOVERNING LAW..................................................    66
    SECTION 11.14    Counterparts...................................................    66
    SECTION 11.15    Recording of Indenture.........................................    66
    SECTION 11.16    Trust Obligation...............................................    67
    SECTION 11.17    No Petition....................................................    67
    SECTION 11.18    Inspection.....................................................    67
</TABLE>

                                      iii
<PAGE>

          INDENTURE dated as of May 22, 2000, between AMERICREDIT AUTOMOBILE
RECEIVABLES TRUST 2000-B, a Delaware business trust (the "Issuer"), and BANK
ONE, N.A., a national banking association, as trustee (the "Trustee") and Trust
Collateral Agent (as defined below)

          Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuer's Class A-1 6.89%
Asset Backed Notes (the "Class A-1 Notes"), the Class A-2 7.52% Asset Backed
Notes (the "Class A-2 Notes"), the Class A-3 Floating Rate Asset Backed Notes
(the "Class A-3 Notes") and the Class A-4 Floating Rate Asset Backed Notes (the
"Class A-4 Notes" and together with the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes, the "Notes").

          As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Indenture Collateral (as defined below) as collateral to the Trust
Collateral Agent for the benefit of the Trustee on behalf of the Noteholders.

          Financial Security Assurance Inc. (the "Security Insurer") has issued
and delivered a financial guaranty insurance policy, dated the Closing Date
(with endorsements, the "Note Policy"), pursuant to which the Security Insurer
guarantees Scheduled Payments, as defined in the Insurance Agreement.

          As an inducement to the Security Insurer to issue and deliver the Note
Policy, the Issuer and the Security Insurer have executed and delivered the
Insurance and Indemnity Agreement, dated as of May 22, 2000 (as amended from
time to time, the "Insurance Agreement"), among the Security Insurer, the
Issuer, AmeriCredit Financial Services, Inc., AmeriCredit Corp., AFS Funding
Trust and AFS Funding Corp..

          As an additional inducement to the Security Insurer to issue the Note
Policy, and as security for the performance by the Issuer of the Insurer Issuer
Secured Obligations and as security for the performance by the Issuer of the
Trustee Issuer Secured Obligations, the Issuer has agreed to assign the
Collateral (as defined below) as collateral to the Trust Collateral Agent for
the benefit of the Issuer Secured Parties, as their respective interests may
appear.

                                       1
<PAGE>

                                GRANTING CLAUSE

          The Issuer hereby Grants to the Trust Collateral Agent at the Closing
Date, for the benefit of the Issuer Secured Parties, all of the Issuer's right,
title and interest in and to (a) the Initial Receivables; (b) an assignment of
the security interests in the Financed Vehicles granted by Obligors pursuant to
the Initial Receivables and any Subsequent Receivables and any other interest of
the Issuer in the Financed Vehicles; (c) any proceeds with respect to the
Initial Receivables and the Subsequent Receivables repurchased by a Dealer,
pursuant to a Dealer Agreement, as a result of a breach of representation or
warranty in the related Dealer Agreement; (d) all rights under any Service
Contracts on the related Financed Vehicles; (e) any proceeds with respect to the
Initial Receivables and the Subsequent Receivables from claims on any physical
damage, credit life or disability insurance policies covering Financed Vehicles
or Obligors; (f) the Trust Accounts and all funds on deposit from time to time
in the Trust Accounts, and in all investments and proceeds thereof and all
rights of the Issuer therein (including all income thereon); (g) the Issuer's
rights and benefits, but none of its obligations or burdens, under the Purchase
Agreement and each Subsequent Purchase Agreement, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of AmeriCredit and CP Funding Corp. under the Purchase Agreement;
(h) all items contained in the Receivable Files and any and all other documents
that AmeriCredit keeps on file in accordance with its customary procedures
relating to the Receivables, the Obligors or the Financed Vehicles, (i) the
Issuer's rights and benefits, but none of its obligations or burdens, under the
Sale and Servicing Agreement (including all rights of the Seller under the
Purchase Agreement, any Subsequent Purchase Agreement and any Subsequent
Transfer Agreement assigned to the Issuer pursuant to the Sale and Servicing
Agreement); and (j) all present and future claims, demands, causes and choses of
action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing (collectively, the "Collateral").

          The foregoing Grant is made in trust to the Trust Collateral Agent,
for the benefit of the Trustee on behalf of the Noteholders and for the benefit
of the Security Insurer.  The Trust Collateral Agent hereby acknowledges such
Grant, accepts the trusts under this Indenture in accordance with the provisions
of this Indenture and agrees to perform its duties required in this Indenture to
the end that the interests of such parties, recognizing the priorities of their
respective interests may be adequately and effectively protected.

                                       2
<PAGE>

                                   ARTICLE I

                  Definitions and Incorporation by Reference
                  ------------------------------------------

          SECTION 1.1 Definitions. Except as otherwise specified herein, the
                      -----------
following terms have the respective meanings set forth below for all purposes of
this Indenture.

          "Act" has the meaning specified in Section 11.3(a).
           ---

          "Affiliate" means, with respect to any specified Person, any other
           ---------
Person controlling or controlled by or under common control with such specified
Person.  For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.  A Person shall not be
deemed to be an Affiliate of any person solely because such other Person has the
contractual right or obligation to manage such Person unless such other Person
controls such Person through equity ownership or otherwise.

          "Authorized Officer" means, with respect to the Issuer and the
           ------------------
Servicer, any officer or agent acting pursuant to a power of attorney of the
Owner Trustee or the Servicer, as applicable, who is authorized to act for the
Owner Trustee or the Servicer, as applicable, in matters relating to the Issuer
and who is identified on the list of Authorized Officers delivered by each of
the Owner Trustee and the Servicer to the Trustee on the Closing Date (as such
list may be modified or supplemented from time to time thereafter).

          "Basic Documents" means this Indenture, the Certificate of Trust, the
           ---------------
Trust Agreement, as amended, the Sale and Servicing Agreement, the Spread
Account Agreement, the Spread Account Agreement Supplement, the Insurance
Agreement, the Assignment and other documents and certificates delivered in
connection therewith.

          "Book Entry Notes" means a beneficial interest in the Notes, ownership
           ----------------
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.10.

          "Business Day" means (i) with respect to the Note Policy, any day
           ------------
other than a Saturday, Sunday, legal holiday or other day on which commercial
banking institutions in Wilmington, Delaware, New York, New York, Columbus, Ohio
or Fort Worth, Texas or any other location of any successor Servicer, successor
Owner Trustee or successor Trust Collateral Agent are authorized or obligated by
law, executive order or governmental decree to be closed and (ii) otherwise, a
day other than a Saturday, a Sunday or other day on which commercial banks
located in the states of Delaware, Texas, New York or Ohio are authorized or
obligated to be closed.

          "Certificate" means a trust certificate evidencing the beneficial
           -----------
interest of a Certificateholder in the Trust.

                                       3
<PAGE>

          "Certificateholder" means the Person in whose name a Certificate is
           -----------------
registered on the Certificate Register.

          "Certificate of Trust" means the certificate of trust of the Issuer
           --------------------
substantially in the form of Exhibit B to the Trust Agreement.

          "Class A-1 Interest Rate" means 6.89% per annum (computed on the basis
           -----------------------
of a 360-day year and the actual number of days in the related Interest Period).

          "Class A-1 Notes" means the Class A-1 6.89% Asset Backed Notes,
           ---------------
substantially in the form of Exhibit A-1.

          "Class A-1 Prepayment Amount" means, as of the Distribution Date on or
           ---------------------------
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-1 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.

          "Class A-2 Interest Rate" means 7.52% per annum (computed on the basis
           -----------------------
of a 360-day year of twelve 30-day months).

          "Class A-2 Notes" means the Class A-2 7.52% Asset Backed Notes,
           ---------------
substantially in the form of Exhibit A-2.

          "Class A-2 Prepayment Amount" means, as of the Distribution Date on or
           ---------------------------
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-2 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.

          "Class A-3 Interest Rate" means LIBOR+ 0.14% per annum (computed on
           -----------------------
the basis of a 360-day year and the actual number of days in the related
Interest Period).

          "Class A-3 Notes" means the Class A-3 Floating Rate Asset Backed
           ---------------
Notes, substantially in the form of Exhibit A-3.

          "Class A-3 Prepayment Amount" means, as of the Distribution Date on or
           ---------------------------
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-3 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.

          "Class A-4 Interest Rate" means LIBOR+ 0.20% per annum (computed on
           -----------------------
the basis of a 360-day year and the actual number of days in the related
Interest Period).

          "Class A-4 Notes" means the Class A-4 Floating Rate Asset Backed
           ---------------
Notes, substantially in the form of Exhibit A-4.

                                       4
<PAGE>

          "Class A-4 Prepayment Amount" means, as of the Distribution Date on or
           ---------------------------
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-4 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Distribution Date.

          "Clearing Agency" means an organization registered as a "clearing
           ---------------
agency" pursuant to Section 17A of the Exchange Act.

          "Clearing Agency Participant" means a broker, dealer, bank, other
           ---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.

          "Closing Date" means May 25, 2000.
           ------------

          "Code" means the Internal Revenue Code of 1986, as amended from time
           ----
to time, and Treasury Regulations promulgated thereunder.

          "Collateral" has the meaning specified in the Granting Clause of this
           ----------
Indenture.

          "Controlling Party" means the Security Insurer, so long as no Insurer
           -----------------
Default shall have occurred and be continuing, and the Trustee, for so long as
an Insurer Default shall have occurred and be continuing.

          "Corporate Trust Office" means the principal office of the Trustee at
           ----------------------
which at any particular time its corporate trust business shall be administered
which office at date of the execution of this Agreement is located at 100 East
Broad Street, 8th Floor, Columbus, Ohio 43215 (facsimile number (614) 248-5195)
Attention:  Indenture Trust Administration or at such other address as the
Trustee may designate from time to time by notice to the Noteholders, the
Security Insurer, the Servicer and the Issuer, or the principal corporate trust
office of any successor Trustee (the address of which the successor Trustee will
notify the Noteholders and the Issuer).

          "Default" means any occurrence that is, or with notice or the lapse of
           -------
time or both would become, an Event of Default.

          "Definitive Notes" has the meaning specified in Section 2.10.
           ----------------

          "Distribution Date" has the meaning specified in the Sale and
           -----------------
Servicing Agreement.

          "Event of Default" has the meaning specified in Section 5.1.
           ----------------

          "Exchange Act" means the Securities Exchange Act of 1934, as amended.
           ------------

          "Executive Officer" means, with respect to any corporation, the Chief
           -----------------
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
any Executive Vice

                                       5
<PAGE>

President, any Vice President, the Secretary or the Treasurer of such
corporation; and with respect to any partnership, any general partner thereof.

          "Grant" means mortgage, pledge, bargain, warrant, alienate, remise,
           -----
release, convey, assign, transfer, create, grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.

          "Holder" or "Noteholder" means the Person in whose name a Note is
           ------      ----------
registered on the Note Register.

          "Indebtedness" means, with respect to any Person at any time, (a)
           ------------
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.

          "Indenture" means this Indenture as amended and supplemented from time
           ---------
to time.

          "Independent" means, when used with respect to any specified Person,
           -----------
that the person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.

          "Independent Certificate" means a certificate or opinion to be
           -----------------------
delivered to the Trust Collateral Agent under the circumstances described in,
and otherwise complying with, the applicable requirements of Section 11.1,
prepared by an Independent appraiser or other expert

                                       6
<PAGE>

appointed by an Issuer Order and approved by the Trust Collateral Agent in the
exercise of reasonable care, and such opinion or certificate shall state that
the signer has read the definition of "Independent" in this Indenture and that
the signer is Independent within the meaning thereof.

          "Insurance Agreement Indenture Cross Default" has the meaning
           -------------------------------------------
specified therefor in the Insurance Agreement.

          "Insured Distribution Date" has the meaning specified in the Sale and
           -------------------------
Servicing Agreement.

          "Insurer Issuer Secured Obligations" means all amounts and obligations
           ----------------------------------
which the Issuer may at any time owe to or on behalf of the Security Insurer
under this Indenture, the Insurance Agreement or any other Basic Document.

          "Interest Rate" means, with respect to the (i) Class A-1 Notes, the
           -------------
Class A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate,
(iii) Class A-3 Notes, the Class A-3 Interest Rate and (iv) Class A-4 Notes, the
Class A-4 Interest Rate.

          "Issuer" means the party named as such in this Indenture until a
           ------
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.

          "Issuer Order" and "Issuer Request" means a written order or request
           ------------       --------------
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Trustee.

          "Issuer Secured Obligations" means the Insurer Issuer Secured
           --------------------------
Obligations and the Trustee Issuer Secured Obligations.

          "Issuer Secured Parties" means each of the Trustee in respect of the
           ----------------------
Trustee Issuer Secured Obligations and the Security Insurer in respect of the
Insurer Issuer Secured Obligations.

          "Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note or a
           ----
Class A-4 Note.

          "Note Owner" means, with respect to a Book-Entry Note, the person who
           ----------
is the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).

          "Note Paying Agent" means the Trustee or any other Person that meets
           -----------------
the eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make the payments to and distributions from the
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.

          "Note Policy" means the insurance policy issued by the Security
           -----------
Insurer with respect to the Notes, including any endorsements thereto.

                                       7
<PAGE>

          "Note Policy Claim Amount" has the meaning specified in the Sale and
           ------------------------
Servicing Agreement.

          "Note Register" and "Note Registrar" have the respective meanings
           -------------       --------------
specified in Section 2.4.

          "Notice of Claim" has the meaning specified in the Sale and Servicing
           ---------------
Agreement.

          "Officer's Certificate" means a certificate signed by any Authorized
           ---------------------
Officer of the Owner Trustee, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 and TIA
(S) 314, and delivered to the Trustee.  Unless otherwise specified, any
reference in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.

          "Opinion of Counsel" means one or more written opinions of counsel who
           ------------------
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Trustee and, if
addressed to the Security Insurer, satisfactory to the Security Insurer, and
which shall comply with any applicable requirements of Section 11.1, and shall
be in form and substance satisfactory to the Trustee, and if addressed to the
Security Insurer, satisfactory to the Security Insurer.

          "Outstanding" means, as of the date of determination, all Notes
           -----------
theretofore authenticated and delivered under this Indenture except:

          (i)   Notes theretofore canceled by the Note Registrar or delivered to
     the Note Registrar for cancellation;

          (ii)  Notes or portions thereof the payment for which money in the
     necessary amount has been theretofore deposited with the Trustee or any
     Note Paying Agent in trust for the Noteholders (provided, however, that if
                                                     --------  -------
     such Notes are to be redeemed, notice of such redemption has been duly
     given pursuant to this Indenture or provision therefor, satisfactory to the
     Trustee); and

          (iii) Notes in exchange for or in lieu of other Notes which have been
     authenticated and delivered pursuant to this Indenture unless proof
     satisfactory to the Trustee is presented that any such Notes are held by a
     bona fide purchaser;

provided, however, that Notes which have been paid with proceeds of the Note
--------  -------
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Security Insurer has been paid as subrogee hereunder or reimbursed pursuant
to the Insurance Agreement as evidenced by a written notice from the Security
Insurer delivered to the Trustee, and the Security Insurer shall be deemed to be
the Holder thereof to the extent of any payments thereon made by the Security
Insurer; provided, further, that in determining whether the Holders of the
         --------  -------
requisite Outstanding Amount of the Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes, the
Seller or any Affiliate of any of the foregoing Persons shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be

                                       8
<PAGE>

protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible Officer of the Trustee
either actually knows to be so owned or has received written notice thereof
shall be so disregarded. Notes so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons.

          "Outstanding Amount" means the aggregate principal amount of all
           ------------------
Notes, or class of Notes, as applicable, Outstanding at the date of
determination.

          "Predecessor Note" means, with respect to any particular Note, every
           ----------------
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.

          "Preference Claim" has the meaning specified in the Sale and Servicing
           ----------------
Agreement.

          "Proceeding" means any suit in equity, action at law or other judicial
           ----------
or administrative proceeding.

          "Rating Agency" means each of Moody's and Standard & Poor's, so long
           -------------
as such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller and
(so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Security Insurer.

          "Rating Agency Condition" means, with respect to any action, that each
           -----------------------
Rating Agency shall have been given 10 days (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Security
Insurer, the Trustee, the Owner Trustee and the Issuer in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes.

          "Record Date" means, with respect to a Distribution Date or Redemption
           -----------
Date, the close of business on the Business Day immediately preceding such
Distribution Date or Redemption Date.

          "Redemption Date" means (a) in the case of a redemption of the Notes
           ---------------
pursuant to Section 10.1(a) or a payment to Noteholders pursuant to Section
10.1(b), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.1(a) or (b) as applicable.

          "Redemption Price" means (a) in the case of a redemption of the Notes
           ----------------
pursuant to Section 10.1(a), an amount equal to the unpaid principal amount of
the then outstanding principal amount of each class of Notes being redeemed plus
accrued and unpaid interest thereon to but excluding the Redemption Date, or (b)
in the case of a payment made to Noteholders

                                       9
<PAGE>

pursuant to Section 10.1(b), the amount on deposit in the Note Distribution
Account, but not in excess of the amount specified in clause (a) above.

          "Responsible Officer" means, with respect to the Trustee or the Trust
           -------------------
Collateral Agent, any officer within the Corporate Trust Office of the Trustee,
including any Vice President, Assistant Vice President, Assistant Treasurer,
Assistant Secretary, or any other officer of the Trustee or the Trust Collateral
Agent customarily performing functions similar to those performed by any of the
above designated officers and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.

          "Sale and Servicing Agreement" means the Sale and Servicing Agreement
           ----------------------------
dated as of May 22, 2000, among the Issuer, the Seller, the Servicer and the
Trustee as Backup Servicer and Trust Collateral Agent, as the same may be
amended or supplemented from time to time.

          "Scheduled Payments" has the meaning specified in the Note Policy.
           ------------------

          "State" means any one of the 50 states of the United States of America
           -----
or the District of Columbia.

          "Termination Date" means the latest of (i) the expiration of the Note
           ----------------
Policy and the return of the Note Policy to the Security Insurer for
cancellation, (ii) the date on which the Security Insurer shall have received
payment and performance of all Insurer Issuer Secured Obligations and (iii) the
date on which the Trustee shall have received payment and performance of all
Trustee Issuer Secured Obligations.

          "Trust Collateral Agent" means, initially, Bank One, N.A., in its
           ----------------------
capacity as collateral agent on behalf of the Issuer Secured Parties, including
its successors-in-interest, until and unless a successor Person shall have
become the Trust Collateral Agent pursuant to Section 6.17 hereof, and
thereafter "Trust Collateral Agent" shall mean such successor Person.

          "Trust Estate" means all money, instruments, rights and other property
           ------------
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Trust Collateral Agent), including all proceeds
thereof.

          "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
           -------------------      ---
as amended and as in force on the date hereof, unless otherwise specifically
provided.

          "Trustee" means Bank One, N.A., a national banking association, not in
           -------
its individual capacity but as trustee under this Indenture, or any successor
trustee under this Indenture.

          "Trustee Issuer Secured Obligations" means all amounts and obligations
           ----------------------------------
which the Issuer may at any time owe to or on behalf of the Trustee for the
benefit of the Noteholders under this Indenture or the Notes.

                                       10
<PAGE>

          "UCC" means, unless the context otherwise requires, the Uniform
           ---
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.

          Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Sale and Servicing Agreement or the
Trust Agreement.

          SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
                      -------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

          "Commission" means the Securities and Exchange Commission.

          "indenture securities" means the Notes.

          "indenture security holder" means a Noteholder.

          "indenture to be qualified" means this Indenture.

          "indenture trustee" or "institutional trustee" means the Trustee.

          "obligor" on the indenture securities means the Issuer.

          All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.

          SECTION 1.3 Rules of Construction. Unless the context otherwise
                      ---------------------
requires:

               (i)    a term has the meaning assigned to it;

               (ii)   an accounting term not otherwise defined has the meaning
          assigned to it in accordance with generally accepted accounting
          principles as in effect from time to time;

               (iii)  "or" is not exclusive;

               (iv)   "including" means including without limitation; and

               (v)    words in the singular include the plural and words in
the plural include the singular.

                                  ARTICLE II

                                   The Notes
                                   ---------

                                       11
<PAGE>

          SECTION 2.1 Form. The Class A-1 Notes, the Class A-2 Notes, the Class
                      ----
A-3 Notes and the Class A-4 Notes, in each case together with the Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibits A-1, A-2, A-3 and A-4, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.

          The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.

          Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits A-1, A-2, A-3 and A-4 are part of the terms of
this Indenture.

          SECTION 2.2 Execution, Authentication and Delivery. The Notes shall
                      --------------------------------------
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.

          Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.

          The Trustee shall, upon receipt of the Note Policy and Issuer Order,
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of $192,000,000, Class A-2 Notes for original issue in the
aggregate principal amount of $393,000,000, Class A-3 Notes for original issue
in an aggregate principal amount of $275,000,000 and Class A-4 Notes for
original issue in an aggregate principal amount of $340,000,000.  The Class A-1
Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes outstanding at any
time may not exceed such amounts except as provided in Section 2.5.

          The Notes shall be issuable as registered Notes in the minimum
denomination of $1,000 and in integral multiples thereof (except for one Note of
each class which may be issued in a denomination other than an integral multiple
of $1,000).

          No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.

          SECTION 2.3 Temporary Notes. Pending the preparation of Definitive
                      ---------------
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or

                                       12
<PAGE>

otherwise produced, of the tenor of the Definitive Notes in lieu of which they
are issued and with such variations not inconsistent with the terms of this
Indenture as the officers executing such Notes may determine, as evidenced by
their execution of such Notes.

          If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.2, without charge to the Noteholder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.

          SECTION 2.4 Registration; Registration of Transfer and Exchange. The
                      ---------------------------------------------------
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.

          If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to conclusively rely upon a certificate executed on
behalf of the Note Registrar by an Executive Officer thereof as to the names and
addresses of the Noteholders of the Notes and the principal amounts and number
of such Notes.

          Subject to Sections 2.10 and 2.12 hereof, upon surrender for
registration of transfer of any Note at the office or agency of the Issuer to be
maintained as provided in Section 3.2, if the requirements of Section 8-401(1)
of the UCC are met the Issuer shall execute and upon its request the Trustee
shall authenticate and the Noteholder shall obtain from the Trustee, in the name
of the designated transferee or transferees, one or more new Notes, in any
authorized denominations, of the same class and a like aggregate principal
amount.

          At the option of the Noteholder, Notes may be exchanged for other
Notes in any authorized denominations, of the same class and a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency.  Whenever any Notes are so surrendered for exchange, subject to Sections
2.10 and 2.12 hereof, if the requirements of Section 8-401(1) of the UCC are met
the Issuer shall execute and upon its request the Trustee shall authenticate and
the Noteholder shall obtain from the Trustee, the Notes which the Noteholder
making the exchange is entitled to receive.

                                       13
<PAGE>

          All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.

          Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in the form attached to Exhibits A-1, A-2, A-3 and A-4
duly executed by, the Holder thereof or such Holder's attorney duly authorized
in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar which requirements
include membership or participation in Securities Transfer Agents Medallion
Program ("Stamp") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, Stamp,
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Trustee may require.

          Notwithstanding the foregoing, in the case of any sale or other
transfer of a Definitive Note, the transferor of such Definitive Note shall be
required to represent and warrant in writing that the prospective transferee
either (a) is not (i) an employee benefit plan (as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
which is subject to the provisions of Title I of ERISA, (ii) a plan (as defined
in section 4975(e)(1) of the Code), which is subject to Section 4975 of the
Code, or (iii) an entity whose underlying assets are deemed to be assets of a
plan described in (i) or (ii) above by reason of such plan's investment in the
entity (any such entity described in clauses (i) through (iii), a "Benefit Plan
Entity") or (b) is a Benefit Plan Entity and the acquisition and holding of the
Definitive Note by such prospective transferee is covered by a Department of
Labor Prohibited Transaction Class Exemption.  Each transferee of a Book Entry
Note that is a Benefit Plan Entity shall be deemed to represent that its
acquisition and holding of the Book Entry Note is covered by a Department of
Labor Prohibited Transaction Class Exemption.

          No service charge shall be made to a Noteholder for any registration
of transfer or exchange of Notes, but the Note Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.

          The preceding provisions of this section notwithstanding, the Issuer
shall not be required to make and the Note Registrar shall not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.

          SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
                      ------------------------------------------
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee and the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) such security or indemnity as may
be required by it to hold the Issuer, the Trustee and the Security Insurer
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Trustee that such Note has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the UCC are met, the Issuer
shall execute and upon its request the Trustee shall

                                       14
<PAGE>

authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; provided, however, that if
                                                    --------  -------
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Note, the Issuer may direct the
Trustee, in writing, to pay such destroyed, lost or stolen Note when so due or
payable or upon the Redemption Date without surrender thereof.  If, after the
delivery of such replacement Note or payment of a destroyed, lost or stolen Note
pursuant to the proviso to the preceding sentence, a bona fide purchaser of the
original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer, the Trustee and the Security Insurer
shall be entitled to recover such replacement Note (or such payment) from the
Person to whom it was delivered or any Person taking such replacement Note from
such Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Trustee in connection therewith.

          Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Trustee) connected therewith.

          Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.

          The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.

          SECTION 2.6 Persons Deemed Owner. Prior to due presentment  for
                      --------------------
registration of transfer of any Note, the Issuer, the Trustee and any agent of
the Issuer or the Trustee, or the Security Insurer may treat the Person in whose
name any Note is registered (as of the Record Date) as the owner of such Note
for the purpose of receiving payments of principal of and interest, if any on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Security Insurer, the Trustee nor any agent
of the Issuer or the Trustee shall be affected by notice to the contrary.

          SECTION 2.7 Payment of Principal and Interest; Defaulted Interest.
                      -----------------------------------------------------

          (a) The Notes shall accrue interest as provided in the forms of the
Class A-1 Note, the Class A-2 Note, the Class A-3 Note and the Class A-4 Note
set forth in Exhibits A-1, A-2, A-3 and A-4, respectively, and such interest
shall be due and payable on each Distribution Date and each Insured Distribution
Date, as specified therein. Any installment of interest or principal, if any,
payable on any Note which is punctually paid or duly provided for by the Issuer
on the applicable Distribution Date or Insured Distribution Date shall be paid
to the Person in

                                       15
<PAGE>

whose name such Note (or one or more Predecessor Notes) is registered on the
Record Date, by check mailed first-class, postage prepaid, to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.12, with respect
to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made
by wire transfer in immediately available funds to the account designated by
such nominee and except for the final installment of principal payable with
respect to such Note on a Distribution Date or Insured Distribution Date or on
the Final Scheduled Distribution Date (or the Insured Distribution Date which
immediately follows such Final Scheduled Distribution Date)(and except for the
Redemption Price for any Note called for redemption pursuant to Section 10.1(a))
which shall be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.3.

          (b) The principal of each Note shall be payable in installments on
each Distribution Date or Insured Distribution Date, as applicable, as provided
in the forms of the Class A-1 Note, the Class A-2 Note, the Class A-3 Note and
the Class A-4 Note set forth in Exhibits A-1, A-2, A-3 and A-4, respectively.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable, if not previously paid, on the date on which an Event
of Default shall have occurred and be continuing, if the Trustee or the
Noteholders representing not less than a majority of the Outstanding Amount of
the Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2. All principal payments on each class of Notes
shall be made pro rata to the Noteholders of such class entitled thereto. Upon
written notice from the Issuer, the Trustee shall notify the Person in whose
name a Note is registered at the close of business on the Record Date preceding
the Distribution Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.2.

          (c) If the Issuer defaults in a payment of interest on the Notes, and
such default is waived by the Controlling Party, the Issuer shall pay defaulted
interest (plus interest on such defaulted interest to the extent lawful) at the
applicable Interest Rate in any lawful manner. The Issuer may pay such defaulted
interest to the Persons who are Noteholders on the immediately following Insured
Distribution Date, and, if such amount is not paid on such following Insured
Distribution Date, then on a subsequent special record date, which date shall be
at least five Business Days prior to the payment date. The Issuer shall fix or
cause to be fixed any such special record date and payment date, and, at least
15 days before any such special record date, the Issuer shall mail to each
Noteholder and the Trustee a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.

          (d) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Trustee, the Trustee shall, if the Security Insurer has paid any amount in
respect of the Notes under the Note Policy or otherwise which has not been
reimbursed to it, deliver such surrendered Notes to the Security Insurer.

                                       16
<PAGE>

          SECTION 2.8  Cancellation. Subject to Section 2.7(d), all Notes
                       ------------
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. Subject to Section 2.7(d), the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. Subject to Section 2.7(d), all canceled Notes may
be held or disposed of by the Trustee in accordance with its standard retention
or disposal policy as in effect at the time unless the Issuer shall timely
direct by an Issuer Order that they be destroyed or returned to it; provided
that such Issuer Order is timely and the Notes have not been previously disposed
of by the Trustee.

          SECTION 2.9  Release of Collateral. The Trust Collateral Agent shall,
                       ---------------------
on or after the Termination Date, release any remaining portion of the Trust
Estate from the lien created by this Indenture and deposit in the Collection
Account any funds then on deposit in any other Trust Account. The Trust
Collateral Agent shall release property from the lien created by this Indenture
pursuant to this Section 2.9 only upon receipt of an Issuer Request accompanied
by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1)
meeting the applicable requirements of Section 11.1.

          SECTION 2.10 Book-Entry Notes.  The Notes, upon original issuance,
                       ----------------
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Note Owner will receive a Definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to Note Owners pursuant to Section 2.12:

               (i)    the provisions of this Section shall be in full force and
          effect;

               (ii)   the Note Registrar and the Trustee shall be entitled to
          deal with the Clearing Agency for all purposes of this Indenture
          (including the payment of principal of and interest on the Notes and
          the giving of instructions or directions hereunder) as the sole Holder
          of the Notes, and shall have no obligation to the Note Owners;

               (iii)  to the extent that the provisions of this Section conflict
          with any other provisions of this Indenture, the provisions of this
          Section shall control;

               (iv)   the rights of Note Owners shall be exercised only through
          the Clearing Agency and shall be limited to those established by law
          and agreements between such Note Owners and the Clearing Agency and/or
          the Clearing Agency Participants. Unless and until Definitive Notes
          are issued pursuant to Section 2.12, the initial Clearing Agency will
          make book-entry transfers among the

                                       17
<PAGE>

          Clearing Agency Participants and receive and transmit payments of
          principal of and interest on the Notes to such Clearing Agency
          Participants;

               (v)   whenever this Indenture requires or permits actions to be
          taken based upon instructions or directions of Noteholders evidencing
          a specified percentage of the Outstanding Amount of the Notes, the
          Clearing Agency shall be deemed to represent such percentage only to
          the extent that it has received instructions to such effect from Note
          Owners and/or Clearing Agency Participants owning or representing,
          respectively, such required percentage of the beneficial interest in
          the Notes and has delivered such instructions to the Trustee; and

               (vi)  Note Owners may receive copies of any reports sent to
          Noteholders pursuant to this Indenture, upon written request, together
          with a certification that they are Note Owners and payment of
          reproduction and postage expenses associated with the distribution of
          such reports, from the Trustee at the Corporate Trust Office.

          SECTION 2.11 Notices to Clearing Agency.  Whenever a notice or other
                       --------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Trustee shall give all such notices and communications specified
herein to be given to the Noteholders to the Clearing Agency, and shall have no
obligation to the Note Owners.

          SECTION 2.12 Definitive Notes.  If (i) the Servicer advises the
                       ----------------
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities with respect to the Notes, and the
Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option advises the Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency or (iii) after the occurrence of an Event of
Default, Note Owners representing beneficial interests aggregating at least a
majority of the Outstanding Amount of the Notes advise the Trustee through the
Clearing Agency in writing that the continuation of a book entry system through
the Clearing Agency is no longer in the best interests of the Note Owners, then
the Clearing Agency shall notify all Note Owners and the Trustee of the
occurrence of any such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Trustee of the typewritten
Note or Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Trustee shall be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be fully protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Trustee shall recognize
the Holders of the Definitive Notes as Noteholders.

                                  ARTICLE III

                                   Covenants
                                   ---------

          SECTION 3.1 Payment of Principal and Interest. The Issuer will duly
                      ---------------------------------
and punctually pay the principal of and interest on the Notes in accordance with
the terms of the

                                       18
<PAGE>

Notes and this Indenture. Without limiting the foregoing, the Issuer will cause
to be distributed all amounts on deposit in the Note Distribution Account on a
Distribution Date deposited therein pursuant to the Sale and Servicing Agreement
(i) for the benefit of the Class A-l Notes, to Class A-1 Noteholders, (ii) for
the benefit of the Class A-2 Notes, to Class A-2 Noteholders, (iii) for the
benefit of the Class A-3 Notes, to Class A-3 Noteholders and (iv) for the
benefit of the Class A-4 Notes, to the Class A-4 Noteholders. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.

          SECTION 3.2 Maintenance of Office or Agency. The Issuer will maintain
                      -------------------------------
in Columbus, Ohio, an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Trustee to serve as its agent for the foregoing
purposes. The Issuer will give prompt written notice to the Trustee of the
location, and of any change in the location, of any such office or agency. If at
any time the Issuer shall fail to maintain any such office or agency or shall
fail to furnish the Trustee with the address thereof, such surrenders, notices
and demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Trustee as its agent to receive all such surrenders, notices
and demands.

          SECTION 3.3 Money for Payments to be Held in Trust. On or before each
                      --------------------------------------
Distribution Date, Insured Distribution Date and Redemption Date, the Issuer
shall deposit or cause to be deposited in the Note Distribution Account from the
Collection Account an aggregate sum sufficient to pay the amounts then becoming
due under the Notes, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless the Note Paying Agent is the Trustee) shall
promptly notify the Trustee of its action or failure so to act.

          The Issuer will cause each Note Paying Agent other than the Trustee to
execute and deliver to the Trustee and the Security Insurer an instrument in
which such Note Paying Agent shall agree with the Trustee (and if the Trustee
acts as Note Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Note Paying Agent will:

               (i)    hold all sums held by it for the payment of amounts due
          with respect to the Notes in trust for the benefit of the Persons
          entitled thereto until such sums shall be paid to such Persons or
          otherwise disposed of as herein provided and pay such sums to such
          Persons as herein provided;

               (ii)   give the Trustee notice of any default by the Issuer (or
          any other obligor upon the Notes) of which it has actual knowledge in
          the making of any payment required to be made with respect to the
          Notes;

               (iii)  at any time during the continuance of any such default,
          upon the written request of the Trustee, forthwith pay to the Trustee
          all sums so held in trust by such Paying Agent;

               (iv)   immediately resign as a Note Paying Agent and forthwith
          pay to the Trustee all sums held by it in trust for the payment of
          Notes if at any time it

                                       19
<PAGE>

          ceases to meet the standards required to be met by a Note Paying Agent
          at the time of its appointment; and

               (v)   comply with all requirements of the Code with respect to
          the withholding from any payments made by it on any Notes of any
          applicable withholding taxes imposed thereon and with respect to any
          applicable reporting requirements in connection therewith.

          The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Note Paying Agent to pay to the Trustee all sums held in trust
by such Note Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which the sums were held by such Note Paying Agent; and
upon such a payment by any Note Paying Agent to the Trustee, such Note Paying
Agent shall be released from all further liability with respect to such money.

          Subject to applicable laws with respect to the escheat of funds, any
money held by the Trustee or any Note Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request with the consent of the Security
Insurer (unless an Insurer Default shall have occurred and be continuing) and
shall be deposited by the Trustee in the Collection Account; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Issuer for payment thereof (but only to the extent of the amounts so paid to the
Issuer), and all liability of the Trustee or such Note Paying Agent with respect
to such trust money shall thereupon cease; provided, however, that if such
                                           --------  -------
money or any portion thereof had been previously deposited by the Security
Insurer or the Trust Collateral Agent with the Trustee for the payment of
principal or interest on the Notes, to the extent any amounts are owing to the
Security Insurer, such amounts shall be paid promptly to the Security Insurer
upon the Trustee's receipt of a written request by the Security Insurer to such
effect, and provided, further, that the Trustee or such Note Paying Agent,
before being required to make any such repayment, shall at the expense of the
Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in New York, New York, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Issuer. The Trustee shall also adopt and employ, at the expense of
the Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Trustee or of any Note Paying Agent, at the
last address of record for each such Holder).

          SECTION 3.4 Existence. Except as otherwise permitted by the provisions
                      ---------
of Section 3.10, the Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Issuer will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do

                                       20
<PAGE>

business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate.

          SECTION 3.5 Protection of Trust Estate. The Issuer intends the
                      --------------------------
security interest Granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Estate,
and the Issuer shall take all actions necessary to obtain and maintain, in favor
of the Trust Collateral Agent, for the benefit of the Issuer Secured Parties, a
first lien on and a first priority, perfected security interest in the Trust
Estate. The Issuer will from time to time prepare (or shall cause to be
prepared), execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:

               (i)       Grant more effectively all or any portion of the Trust
                         Estate;

               (ii)      maintain or preserve the lien and security interest
          (and the priority thereof) in favor of the Trust Collateral Agent for
          the benefit of the Issuer Secured Parties created by this Indenture or
          carry out more effectively the purposes hereof;

               (iii)     perfect, publish notice of or protect the validity of
          any Grant made or to be made by this Indenture;

               (iv)      enforce any of the Collateral;

               (v)       preserve and defend title to the Trust Estate and the
          rights of the Trust Collateral Agent in such Trust Estate against the
          claims of all persons and parties; and

               (vi)      pay all taxes or assessments levied or assessed upon
          the Trust Estate when due.

The Issuer hereby designates the Trust Collateral Agent its agent and attorney-
in-fact to execute any financing statement, continuation statement or other
instrument required by the Trust Collateral Agent pursuant to this Section.

          SECTION 3.6 Opinions as to Trust Estate.
                      ---------------------------

          (a)  On the Closing Date, the Issuer shall furnish to the Trustee, the
Trust Collateral Agent and the Security Insurer an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the first priority lien and security
interest in favor of the Trust Collateral Agent, for the benefit of the Issuer
Secured Parties, created by this Indenture and reciting the details of such
action, or stating that, in the opinion of such counsel, no such action is
necessary to make such lien and security interest effective.

                                       21
<PAGE>

          (b)  Within 120 days after the beginning of each calendar year,
beginning with the first calendar year beginning more than six months after the
Closing Date, the Issuer shall furnish to the Trustee, Trust Collateral Agent
and the Security Insurer an Opinion of Counsel either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
are necessary to maintain the lien and security interest created by this
Indenture and reciting the details of such action or stating that in the opinion
of such counsel no such action is necessary to maintain such lien and security
interest. Such Opinion of Counsel shall also describe the recording, filing, re-
recording and refiling of this Indenture, any indentures supplemental hereto and
any other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to maintain the lien and security interest of this
Indenture until January 30 in the following calendar year.

          SECTION 3.7  Performance of Obligations; Servicing of Receivables.
                       ----------------------------------------------------

          (a)  The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Basic Documents or such other instrument or agreement.

          (b)  The Issuer may contract with other Persons acceptable to the
Security Insurer (so long as no Insurer Default shall have occurred and be
continuing) to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Trustee and the
Security Insurer in an Officer's Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer to assist the Issuer in performing its duties under this Indenture.

          (c)  The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Estate, including, but
not limited to, preparing (or causing to prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Trustee, the Security Insurer or the Holders
of at least a majority of the Outstanding Amount of the Notes.

          (d)  If a responsible officer of the Owner Trustee shall have actual
knowledge of the occurrence of a Servicer Termination Event under the Sale and
Servicing Agreement, the Issuer shall promptly notify the Trustee, the Security
Insurer and the Rating Agencies thereof in accordance with Section 11.4, and
shall specify in such notice the action, if any, the Issuer is

                                       22
<PAGE>

taking in respect of such default. If a Servicer Termination Event shall arise
from the failure of the Servicer to perform any of its duties or obligations
under the Sale and Servicing Agreement with respect to the Receivables, the
Issuer shall take all reasonable steps available to it to remedy such failure.

          (e)  The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Basic Documents (x) without the prior consent of the Security Insurer (unless an
Insurer Default shall have occurred and be controlling) or (y) if the effect
thereof would adversely affect the Holders of the Notes.

          SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding,
                      ------------------
the Issuer shall not:

               (i)   except as expressly permitted by this Indenture or the
          Basic Documents, sell, transfer, exchange or otherwise dispose of any
          of the properties or assets of the Issuer, including those included in
          the Trust Estate, unless directed to do so by the Controlling Party;

               (ii)  claim any credit on, or make any deduction from the
          principal or interest payable in respect of, the Notes (other than
          amounts properly withheld from such payments under the Code) or assert
          any claim against any present or former Noteholder by reason of the
          payment of the taxes levied or assessed upon any part of the Trust
          Estate; or

               (iii) (A) permit the validity or effectiveness of this Indenture
          to be impaired, or permit the lien in favor of the Trust Collateral
          Agent created by this Indenture to be amended, hypothecated,
          subordinated, terminated or discharged, or permit any Person to be
          released from any covenants or obligations with respect to the Notes
          under this Indenture except as may be expressly permitted hereby, (B)
          permit any lien, charge, excise, claim, security interest, mortgage or
          other encumbrance (other than the lien of this Indenture) to be
          created on or extend to or otherwise arise upon or burden the Trust
          Estate or any part thereof or any interest therein or the proceeds
          thereof (other than tax liens, mechanics' liens and other liens that
          arise by operation of law, in each case on a Financed Vehicle and
          arising solely as a result of an action or omission of the related
          Obligor), (C) permit the lien of this Indenture not to constitute a
          valid first priority (other than with respect to any such tax,
          mechanics' or other lien) security interest in the Trust Estate or (D)
          amend, modify or fail to comply with the provisions of the Basic
          Documents without the prior written consent of the Controlling Party.

                                       23
<PAGE>

          SECTION 3.9  Annual Statement as to Compliance. The Issuer will
                       ---------------------------------
deliver to the Trustee and the Security Insurer, within 120 days after the end
of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 2000), and otherwise in compliance with the requirements of TIA
Section 314(a)(4) an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that

               (i)     a review of the activities of the Issuer during such year
          and of performance under this Indenture has been made under such
          Authorized Officer's supervision; and

               (ii)    to the best of such Authorized Officer's knowledge, based
          on such review, the Issuer has complied with all conditions and
          covenants under this Indenture throughout such year, or, if there has
          been a default in the compliance of any such condition or covenant,
          specifying each such default known to such Authorized Officer and the
          nature and status thereof.

          SECTION 3.10  Issuer May Consolidate, Etc. Only on Certain Terms.
                        --------------------------------------------------

          (a)  The Issuer shall not consolidate or merge with or into any other
               Person, unless

                    (i)    the Person (if other than the Issuer) formed by or
          surviving such consolidation or merger shall be a Person organized and
          existing under the laws of the United States of America or any state
          and shall expressly assume, by an indenture supplemental hereto,
          executed and delivered to the Trustee, in form satisfactory to the
          Trustee and the Security Insurer (so long as no Insurer Default shall
          have occurred and be continuing), the due and punctual payment of the
          principal of and interest on all Notes and the performance or
          observance of every agreement and covenant of this Indenture on the
          part of the Issuer to be performed or observed, all as provided
          herein;

                    (ii)   immediately after giving effect to such transaction,
          no Default or Event of Default shall have occurred and be continuing;

                    (iii)  the Rating Agency Condition shall have been satisfied
          with respect to such transaction;

                    (iv)   the Issuer shall have received an Opinion of Counsel
          (and shall have delivered copies thereof to the Trustee and the
          Security Insurer (so long as no Insurer Default shall have occurred
          and be continuing)) to the effect that such transaction will not have
          any material adverse tax consequence to the Trust, the Security
          Insurer, any Noteholder or the Certificateholder;

                    (v)    any action as is necessary to maintain the lien and
          security interest created by this Indenture shall have been taken;

                    (vi)   the Issuer shall have delivered to the Trustee an
          Officer's Certificate and an Opinion of Counsel each stating that such
          consolidation or merger and such supplemental indenture comply with
          this Article III and that all

                                       24
<PAGE>

          conditions precedent herein provided for relating to such transaction
          have been complied with (including any filing required by the Exchange
          Act); and

               (vii)  so long as no Insurer Default shall have occurred and be
          continuing, the Issuer shall have given the Security Insurer written
          notice of such conveyance or transfer at least 20 Business Days prior
          to the consummation of such action and shall have received the prior
          written approval of the Security Insurer of such conveyance or
          transfer and the Issuer or the Person (if other than the Issuer)
          formed by or surviving such conveyance or transfer has a net worth,
          immediately after such conveyance or transfer, that is (a) greater
          than zero and (b) not less than the net worth of the Issuer
          immediately prior to giving effect to such conveyance or transfer.

          (b)  The Issuer shall not convey or transfer all or substantially all
of its properties or assets, including those included in the Trust Estate, to
any Person, unless

               (i)     the Person that acquires by conveyance or transfer the
          properties and assets of the Issuer the conveyance or transfer of
          which is hereby restricted shall (A) be a United States citizen or a
          Person organized and existing under the laws of the United States of
          America or any state, (B) expressly assume, by an indenture
          supplemental hereto, executed and delivered to the Trustee, in form
          satisfactory to the Trustee, and the Security Insurer (so long as no
          Insurer Default shall have occurred and be continuing), the due and
          punctual payment of the principal of and interest on all Notes and the
          performance or observance of every agreement and covenant of this
          Indenture and each of the Basic Documents on the part of the Issuer to
          be performed or observed, all as provided herein, (C) expressly agree
          by means of such supplemental indenture that all right, title and
          interest so conveyed or transferred shall be subject and subordinate
          to the rights of Holders of the Notes, (D) unless otherwise provided
          in such supplemental indenture, expressly agree to indemnify, defend
          and hold harmless the Issuer against and from any loss, liability or
          expense arising under or related to this Indenture and the Notes and
          (E) expressly agree by means of such supplemental indenture that such
          Person (or if a group of persons, then one specified Person) shall
          prepare (or cause to be prepared) and make all filings with the
          Commission (and any other appropriate Person) required by the Exchange
          Act in connection with the Notes;

               (ii)    immediately after giving effect to such transaction, no
          Default or Event of Default shall have occurred and be continuing;

               (iii)   the Rating Agency Condition shall have been satisfied
          with respect to such transaction;

               (iv)    the Issuer shall have received an Opinion of Counsel (and
          shall have delivered copies thereof to the Trustee and the Security
          Insurer (so long as no Insurer Default shall have occurred and be
          continuing)) to the effect that such

                                       25
<PAGE>

          transaction will not have any material adverse tax consequence to the
          Trust, the Security Insurer, any Noteholder or the Certificateholder;

               (v)     any action as is necessary to maintain the lien and
          security interest created by this Indenture shall have been taken;

               (vi)    the Issuer shall have delivered to the Trustee an
          Officers' Certificate and an Opinion of Counsel each stating that such
          conveyance or transfer and such supplemental indenture comply with
          this Article III and that all conditions precedent herein provided for
          relating to such transaction have been complied with (including any
          filing required by the Exchange Act); and

               (vii)   so long as no Insurer Default shall have occurred and be
          continuing, the Issuer shall have given the Security Insurer written
          notice of such conveyance or transfer at least 20 Business Days prior
          to the consummation of such action and shall have received the prior
          written approval of the Security Insurer of such consolidation or
          merger and the Issuer or the Person (if other than the Issuer) formed
          by or surviving such consolidation or merger has a net worth,
          immediately after such consolidation or merger, that is (a) greater
          than zero and (b) not less than the net worth of the Issuer
          immediately prior to giving effect to such consolidation or merger.

          SECTION 3.11  Successor or Transferee.
                        -----------------------

          (a)  Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.

          (b)  Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10 (b), AmeriCredit Automobile Receivables
Trust 2000-B will be released from every covenant and agreement of this
Indenture to be observed or performed on the part of the Issuer with respect to
the Notes immediately upon the delivery of written notice to the Trustee stating
that AmeriCredit Automobile Receivables Trust 2000-B is to be so released.

                                       26
<PAGE>

          SECTION 3.12  No Other Business. The Issuer shall not engage in any
                        -----------------
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto. After the Funding Period, the Issuer shall
not fund the purchase of any additional Receivables.

          SECTION 3.13  No Borrowing. The Issuer shall not issue, incur, assume,
                        ------------
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Security Insurer under the Insurance Agreement and (iii) any other
Indebtedness permitted by or arising under the Basic Documents. The proceeds of
the Notes shall be used exclusively to fund the Issuer's purchase of the
Receivables and the other assets specified in the Sale and Servicing Agreement,
to fund the Pre-Funding Account, the Capitalized Interest Account and the Spread
Account and to pay the Issuer's organizational, transactional and start-up
expenses.

          SECTION 3.14  Servicer's Obligations. The Issuer shall cause the
                        ----------------------
Servicer to comply with Sections 4.9, 4.10, 4.11 and 5.10 of the Sale and
Servicing Agreement.

          SECTION 3.15  Guarantees, Loans, Advances and Other Liabilities.
                        -------------------------------------------------
Except as contemplated by the Sale and Servicing Agreement or this Indenture,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.

          SECTION 3.16  Capital Expenditures. The Issuer shall not make any
                        --------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).

          SECTION 3.17  Compliance with Laws. The Issuer shall comply with the
                        --------------------
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Basic Document.

          SECTION 3.18  Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
--------  -------
to the Servicer, the Owner Trustee, the Trustee and the Certificateholders as
permitted by, and to the extent funds are available for such purpose under, the
Sale and Servicing Agreement or Trust Agreement. The Issuer will not, directly
or indirectly, make payments to or distributions from the Collection Account
except in accordance with this Indenture and the Basic Documents.

                                       27
<PAGE>

          SECTION 3.19  Notice of Events of Default. Upon a responsible officer
                        ---------------------------
of the Owner Trustee having actual knowledge thereof, the Issuer agrees to give
the Trustee, the Security Insurer and the Rating Agencies prompt written notice
of each Event of Default hereunder and each default on the part of the Servicer
or the Seller of its obligations under the Sale and Servicing Agreement.

          SECTION 3.20  Further Instruments and Acts. Upon request of the
                        ----------------------------
Trustee or the Security Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.

          SECTION 3.21  Amendments of Sale and Servicing Agreement and Trust
                        ----------------------------------------------------
Agreement. The Issuer shall not agree to any amendment to Section 12.1 of the
---------
Sale and Servicing Agreement or Section 10.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.

          SECTION 3.22  Income Tax Characterization. For purposes of federal
                        ---------------------------
income, state and local income and franchise and any other income taxes, the
Issuer will treat the Notes as indebtedness and hereby instructs the Trustee to
treat the Notes as indebtedness for all applicable tax reporting purposes.

                                  ARTICLE IV

                          Satisfaction and Discharge
                          --------------------------

          SECTION 4.1   Satisfaction and Discharge of Indenture. This Indenture
                        ---------------------------------------
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Trustee hereunder (including the rights of the Trustee under
Section 6.7 and the obligations of the Trustee under Section 4.2) and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them, and the Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when

          (A)       either

               (1)  all Notes theretofore authenticated and delivered (other
          than (i) Notes that have been destroyed, lost or stolen and that have
          been replaced or paid as provided in Section 2.5 and (ii) Notes for
          whose payment money has theretofore been deposited in trust or
          segregated and held in trust by the Issuer and thereafter repaid to
          the Issuer or discharged from such trust, as provided in Section 3.3)
          have been delivered to the Trustee for cancellation and the Note
          Policy has expired and been returned to the Security Insurer for
          cancellation; or

               (2)  all Notes not theretofore delivered to the Trustee for
          cancellation

                                       28
<PAGE>

                    (i)    have become due and payable,

                    (ii)   will become due and payable at their respective Final
               Scheduled Distribution Dates within one year, or

                    (iii)  are to be called for redemption within one year under
               arrangements satisfactory to the Trustee for the giving of notice
               of redemption by the Trustee in the name, and at the expense, of
               the Issuer,

          and the Issuer, in the case of (i), (ii) or (iii) above, has
          irrevocably deposited or caused to be irrevocably deposited with the
          Trust Collateral Agent cash or direct obligations of or obligations
          guaranteed by the United States of America (which will mature prior to
          the date such amounts are payable), in trust for such purpose, in an
          amount sufficient to pay and discharge the entire indebtedness on such
          Notes not theretofore delivered to the Trustee for cancellation when
          due to the Final Scheduled Distribution Date or Redemption Date (if
          Notes shall have been called for redemption pursuant to Section
          10.1(a)), as the case may be;

          (B)  the Issuer has paid or caused to be paid all Insurer Issuer
     Secured Obligations and all Trustee Issuer Secured Obligations; and

          (C)  the Issuer has delivered to the Trustee, the Trust Collateral
     Agent and the Security Insurer an Officer's Certificate, an Opinion of
     Counsel and if required by the TIA, the Trustee, the Trust Collateral Agent
     or the Security Insurer (so long as an Insurer Default shall not have
     occurred and be continuing) an Independent Certificate from a firm of
     certified public accountants, each meeting the applicable requirements of
     Section 11.1(a) and each stating that all conditions precedent herein
     provided for relating to the satisfaction and discharge of this Indenture
     have been complied with.

          SECTION 4.2  Application of Trust Money. All moneys deposited with the
                       --------------------------
Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Note Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.

          SECTION 4.3   Repayment of Moneys Held by Note Paying Agent. In
                        ---------------------------------------------
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Note Paying Agent other than the Trustee
under the provisions of this Indenture with respect to such Notes shall, upon
demand of the Issuer, be paid to the Trustee to be held and applied according to
Section 3.3 and thereupon such Note Paying Agent shall be released from all
further liability with respect to such moneys.

                                       29
<PAGE>

                                   ARTICLE V

                                   Remedies
                                   --------

          SECTION 5.1   Events of Default. "Event of Default", wherever used
                        -----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

               (i)     default in the payment of any interest on any Note when
          the same becomes due and payable, and such default shall continue for
          a period of five days (solely for purposes of this clause, (x) a
          payment due on a Distribution Date shall not be considered "due" until
          the immediately following Insured Distribution Date and (y) a payment
          on the Notes funded by the Security Insurer or the Collateral Agent
          pursuant to the Spread Account Agreement shall be deemed to be a
          payment made by the Issuer); or

               (ii)    default in the payment of the principal of or any
          installment of the principal of any Note when the same becomes due and
          payable (solely for purposes of this clause, (x) a payment due on a
          Distribution Date shall not be considered "due" until the immediately
          following Insured Distribution Date and (y) a payment on the Notes
          funded by the Security Insurer or the Collateral Agent pursuant to the
          Spread Account Agreement, shall be deemed to be a payment made by the
          Issuer); or

               (iii)   so long as an Insurer Default shall not have occurred and
          be continuing, an Insurance Agreement Indenture Cross Default shall
          have occurred; provided, however, that the occurrence of an Insurance
                         --------  -------
          Agreement Cross Default may not form the basis of an Event of Default
          unless the Security Insurer shall, upon prior written notice to the
          Rating Agencies, have delivered to the Issuer and the Trustee and not
          rescinded a written notice specifying that such Insurance Agreement
          Indenture Cross Default constitutes an Event of Default under the
          Indenture; or

               (iv)    so long as an Insurer Default shall have occurred and be
          continuing, default in the observance or performance of any covenant
          or agreement of the Issuer made in this Indenture (other than a
          covenant or agreement, a default in the observance or performance of
          which is elsewhere in this Section specifically dealt with), or any
          representation or warranty of the Issuer made in this Indenture or in
          any certificate or other writing delivered pursuant hereto or in
          connection herewith proving to have been incorrect in any material
          respect as of the time when the same shall have been made, and such
          default shall continue or not be cured, or the circumstance or
          condition in respect of which such misrepresentation or warranty was
          incorrect shall not have been eliminated or otherwise cured, for a
          period of 30 days (or for such longer period, not in excess of 90
          days, as may be reasonably necessary to remedy such default;

                                       30
<PAGE>

          provided that such default is capable of remedy within 90 days or less
          and the Servicer on behalf of the Owner Trustee delivers an Officer's
          Certificate to the Trustee to the effect that the Issuer has
          commenced, or will promptly commence and diligently pursue, all
          reasonable efforts to remedy such default) after there shall have been
          given, by registered or certified mail, to the Issuer by the Trustee
          or to the Issuer and the Trustee by the Holders of at least 25% of the
          Outstanding Amount of the Notes, a written notice specifying such
          default or incorrect representation or warranty and requiring it to be
          remedied and stating that such notice is a "Notice of Default"
          hereunder; or

               (v)     so long as an Insurer Default shall have occurred and be
          continuing, the filing of a decree or order for relief by a court
          having jurisdiction in the premises in respect of the Issuer or any
          substantial part of the Trust Estate in an involuntary case under any
          applicable federal or State bankruptcy, insolvency or other similar
          law now or hereafter in effect, or appointing a receiver, liquidator,
          assignee, custodian, trustee, sequestrator or similar official of the
          Issuer or for any substantial part of the Trust Estate, or ordering
          the winding-up or liquidation of the Issuer's affairs, and such decree
          or order shall remain unstayed and in effect for a period of 60
          consecutive days; or

               (vi)    so long as an Insurer Default shall have occurred and be
          continuing, the commencement by the Issuer of a voluntary case under
          any applicable federal or State bankruptcy, insolvency or other
          similar law now or hereafter in effect, or the consent by the Issuer
          to the entry of an order for relief in an involuntary case under any
          such law, or the consent by the Issuer to the appointment or taking
          possession by a receiver, liquidator, assignee, custodian, trustee,
          sequestrator or similar official of the Issuer or for any substantial
          part of the Trust Estate, or the making by the Issuer of any general
          assignment for the benefit of creditors, or the failure by the Issuer
          generally to pay its debts as such debts become due, or the taking of
          action by the Issuer in furtherance of any of the foregoing.

          The Issuer shall deliver to the Trustee and the Security Insurer,
within five days after the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under clause (iii), its status and what
action the Issuer is taking or proposes to take with respect thereto.

          SECTION 5.2  Rights Upon Event of Default.
                       ----------------------------

          (a)  If an Insurer Default shall not have occurred and be continuing
and an Event of Default shall have occurred and be continuing, the Notes shall
become immediately due and payable at par, together with accrued interest
thereon. If an Event of Default shall have occurred and be continuing, the
Controlling Party may exercise any of the remedies specified in Section 5.4(a).
In the event of any acceleration of any Notes by operation of this Section 5.2,
the Trustee shall continue to be entitled to make claims under the Note Policy
pursuant to the Sale and Servicing Agreement for Scheduled Payments on the
Notes. Payments under the Note Policy following acceleration of any Notes shall
be applied by the Trustee:

                                       31
<PAGE>

          FIRST:   to Noteholders for amounts due and unpaid on the Notes for
     interest, ratably, without preference or priority of any kind, according to
     the amounts due and payable on the Notes for interest; and

          SECOND:  to Noteholders for amounts due and unpaid on the Notes for
     principal, ratably, without preference or priority of any kind, according
     to the amounts due and payable on the Notes for principal.

          (b)  In the event any Notes are accelerated due to an Event of
Default, the Security Insurer shall have the right (in addition to its
obligation to pay Scheduled Payments on the Notes in accordance with the Note
Policy), but not the obligation, to make payments under the Note Policy or
otherwise of interest and principal due on such Notes, in whole or in part, on
any date or dates following such acceleration as the Security Insurer, in its
sole discretion, shall elect.

          (c)  If an Insurer Default shall have occurred and be continuing and
an Event of Default shall have occurred and be continuing, the Trustee in its
discretion may, or if so requested in writing by Holders holding Notes
representing not less than a majority of the Outstanding Amount of the Notes,
declare by written notice to the Issuer that the Notes become, whereupon they
shall become, immediately due and payable at par, together with accrued interest
thereon.

          (d)  If an Insurer Default shall have occurred and be continuing, then
at any time after such declaration of acceleration of maturity has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Noteholders
representing a majority of the Outstanding Amount of the Notes, by written
notice to the Issuer and the Trustee, may rescind and annul such declaration and
its consequences if:

                    (i)  the Issuer has paid or deposited with the Trustee a sum
          sufficient to pay:

                         (A)  all payments of principal of and interest on all
                    Notes and all other amounts that would then be due hereunder
                    or upon such Notes if the Event of Default giving rise to
                    such acceleration had not occurred; and

                         (B)  all sums paid or advanced by the Trustee hereunder
                    and the reasonable compensation, expenses, disbursements and
                    advances of the Trustee and its agents and counsel; and

                    (ii)   all Events of Default, other than the nonpayment of
          the principal of the Notes that has become due solely by such
          acceleration, have been cured or waived as provided in Section 5.12.

          No such rescission shall affect any subsequent default or impair any
right consequent thereto.

                                       32
<PAGE>

          SECTION 5.3  Collection of Indebtedness and Suits for Enforcement by
                       -------------------------------------------------------
                       Trustee.
                       -------

          (a)  The Issuer covenants that if (i) default is made in the payment
of any interest on any Note when the same becomes due and payable, and such
default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will pay to the Trustee, for the
benefit of the Holders of the Notes, the whole amount then due and payable on
such Notes for principal and interest, with interest upon the overdue principal,
and, to the extent payment at such rate of interest shall be legally
enforceable, upon overdue installments of interest, at the applicable Interest
Rate and in addition thereto such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.

          (b)  Each Issuer Secured Party hereby irrevocably and unconditionally
appoints the Controlling Party as the true and lawful attorney-in-fact of such
Issuer Secured Party for so long as such Issuer Secured Party is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
of such Issuer Secured Party such acts, things and deeds for or on behalf of and
in the name of such Issuer Secured Party under this Indenture (including
specifically under Section 5.4) and under the Basic Documents which such Issuer
Secured Party could or might do or which may be necessary, desirable or
convenient in such Controlling Party's sole discretion to effect the purposes
contemplated hereunder and under the Basic Documents and, without limitation,
following the occurrence of an Event of Default, exercise full right, power and
authority to take, or defer from taking, any and all acts with respect to the
administration, maintenance or disposition of the Trust Estate.

          (c)  If an Event of Default occurs and is continuing, the Trustee may
in its discretion but with the consent of the Controlling Party and shall, at
the direction of the Controlling Party (except as provided in Section 5.3(d)
below), proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the Trustee or the Controlling
Party shall deem most effective to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Indenture or
in aid of the exercise of any power granted herein, or to enforce any other
proper remedy or legal or equitable right vested in the Trustee by this
Indenture or by law.

          (d)  Notwithstanding anything to the contrary contained in this
Indenture (including, without limitation, Sections 5.4(a), 5.12, 5.13 and 5.17)
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Issuer fails to perform its obligations under Section 10.1(b)
hereof when and as due, the Trustee may in its discretion (and without the
consent of the Controlling Party) proceed to protect and enforce its rights and
the rights of the Noteholders by such appropriate proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether for
specific performance of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Trustee by this Indenture or by law;
provided that the Trustee shall only be entitled to take any such actions
without the consent of the Controlling Party to the extent such actions (x) are
taken only to

                                       33
<PAGE>

enforce the Issuer's obligations to redeem the principal amount of Notes and (y)
are taken only against the portion of the Collateral, if any, consisting of the
Pre-Funding Account, the Capitalized Interest Account, any investments therein
and any proceeds thereof.

          (e)  In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Estate, proceedings under Title 11 of the United States
Code or any other applicable federal or State bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:

               (i)    to file and prove a claim or claims for the whole amount
          of principal and interest owing and unpaid in respect of the Notes and
          to file such other papers or documents as may be necessary or
          advisable in order to have the claims of the Trustee (including any
          claim for reasonable compensation to the Trustee and each predecessor
          Trustee, and their respective agents, attorneys and counsel, and for
          reimbursement of all expenses and liabilities incurred, and all
          advances made, by the Trustee and each predecessor Trustee, except as
          a result of negligence, bad faith or willful misconduct) and of the
          Noteholders allowed in such proceedings;

               (ii)   unless prohibited by applicable law and regulations, to
          vote on behalf of the Noteholders in any election of a trustee, a
          standby trustee or person performing similar functions in any such
          proceedings;

               (iii)  to collect and receive any moneys or other property
          payable or deliverable on any such claims and to distribute all
          amounts received with respect to the claims of the Noteholders and of
          the Trustee on their behalf; and

               (iv)   to file such proofs of claim and other papers or documents
          as may be necessary or advisable in order to have the claims of the
          Trustee or the Noteholders allowed in any judicial proceedings
          relative to the Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.

                                       34
<PAGE>

          (f)  Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such Proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.

          (g)  All rights of action and of asserting claims under this
Indenture, the Spread Account Agreement or under any of the Notes, may be
enforced by the Trustee without the possession of any of the Notes or the
production thereof in any trial or other proceedings relative thereto, and any
such action or Proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.

          (h)  In any Proceedings brought by the Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture or
the Spread Account Agreement), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such proceedings.

          SECTION 5.4  Remedies.
                       --------

          (a)  If an Event of Default shall have occurred and be continuing, the
Controlling Party may do one or more of the following (subject to Section 5.5):

               (i)    institute Proceedings in its own name and as trustee of an
          express trust for the collection of all amounts then payable on the
          Notes or under this Indenture with respect thereto, whether by
          declaration or otherwise, enforce any judgment obtained, and collect
          from the Issuer and any other obligor upon such Notes moneys adjudged
          due;

               (ii)   institute Proceedings from time to time for the complete
          or partial foreclosure of this Indenture with respect to the Trust
          Estate;

               (iii)  exercise any remedies of a secured party under the UCC and
          take any other appropriate action to protect and enforce the rights
          and remedies of the Trustee and the Holders of the Notes; and

               (iv)   direct the Trust Collateral Agent to sell the Trust Estate
          or any portion thereof or rights or interest therein, at one or more
          public or private sales called and conducted in any manner permitted
          by law; provided, however, that
                  --------  -------

          (A)  if the Security Insurer is the Controlling Party, the Security
     Insurer may not sell or otherwise liquidate the Trust Estate following an
     Insurance Agreement Indenture Cross Default unless

                                       35
<PAGE>

                    (I)  such Insurance Agreement Indenture Cross Default arises
               from a claim being made on the Note Policy or from the insolvency
               of the Trust or the Seller, or

                    (II) the proceeds of such sale or liquidation distributable
               to the Noteholders are sufficient to discharge in full all
               amounts then due and unpaid upon such Notes for principal and
               interest; or

          (B)  if the Trustee is the Controlling Party, the Trustee may not sell
     or otherwise liquidate the Trust Estate following an Event of Default
     unless

                    (I)  such Event of Default is of the type described in
               Section 5.01(i) or (ii), or

                    (II) either

                         (x)  the Holders of 100% of the Outstanding Amount of
                    the Notes consent thereto,

                         (y)  the proceeds of such sale or liquidation
                    distributable to the Noteholders are sufficient to discharge
                    in full all amounts then due and unpaid upon such Notes for
                    principal and interest, or

                         (z)  the Trustee determines that the Trust Estate will
                    not continue to provide sufficient funds for the payment of
                    principal of and interest on the Notes as they would have
                    become due if the Notes had not been declared due and
                    payable, and the Trustee provides prior written notice to
                    the Rating Agencies and obtains the consent of Holders of
                    66-2/3% of the Outstanding Amount of the Notes.

          In determining such sufficiency or insufficiency with respect to
clause (y) and (z), the Trustee may, but need not, obtain and conclusively rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.

                                       36
<PAGE>

          SECTION 5.5  Optional Preservation of the Receivables.  If the Trustee
                       ----------------------------------------
is the Controlling Party and if the Notes have been declared to be due and
payable under Section 5.2 following an Event of Default and such declaration and
its consequences have not been rescinded and annulled, the Trustee may, but need
not, elect to direct the Trust Collateral Agent to maintain possession of the
Trust Estate. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Trustee shall take such desire into account when
determining whether or not to direct the Trust Collateral Agent to maintain
possession of the Trust Estate. In determining whether to direct the Trust
Collateral Agent to maintain possession of the Trust Estate, the Trustee may,
but need not, obtain and conclusively rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.

          SECTION 5.6  Priorities.
                       ----------

          (a)  Following (1) the acceleration of the Notes pursuant to Section
5.2 or (2) if an Insurer Default shall have occurred and be continuing, the
occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iv),
5.1(v) or 5.1(vi) of the Indenture or (3) the receipt of Insolvency Proceeds
pursuant to Section 10.1(b) of the Sale and Servicing Agreement, the
Distribution Amount, including any money or property collected pursuant to
Section 5.4 of the Indenture and any such Insolvency Proceeds, shall be applied
by the Trust Collateral Agent on the related Distribution Date in the following
order of priority:

          FIRST:   amounts due and owing and required to be distributed to the
     Servicer (provided there is no Servicer Event of Default), the Owner
     Trustee, the Trustee, the Collateral Agent, Back Up Servicer and the Trust
     Collateral Agent, respectively, pursuant to priorities (i) and (ii) of
     Section 5.7(b) of the Sale and Servicing Agreement and not previously
     distributed, in the order of such priorities and without limitation,
     preference or priority of any kind within such priorities;

          SECOND:  to Noteholders for amounts due and unpaid on the Notes for
     interest, ratably, without preference or priority of any kind, according to
     the amounts due and payable on the Notes for interest;

          THIRD:   to Noteholders for amounts due and unpaid on the Notes for
     principal, ratably, without preference or priority of any kind, according
     to the amounts due and payable on the Notes for principal;

          FOURTH:  amounts due and owing and required to be distributed to the
     Security Insurer pursuant to priority (v) of Section 5.7(b) of the Sale and
     Servicing Agreement and not previously distributed); and

          FIFTH:   to the Collateral Agent to be applied as provided in the
     Spread Account Agreement;

provided that any amounts collected from the Pre-Funding Account or the
--------
Capitalized Interest Account shall be paid, first, for amounts due and unpaid on
the Notes for principal for

                                       37
<PAGE>

distribution to Noteholders in accordance with Section 10.1(b) and, second, in
accordance with priorities FIRST through FIFTH above.

          (b)  The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.6. At least 15 days before
such record date the Issuer shall mail to each Noteholder and the Trustee a
notice that states the record date, the payment date and the amount to be paid.

          SECTION 5.7  Limitation of Suits.  No Holder of any Note shall have
                       -------------------
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:

               (i)    such Holder has previously given written notice to the
          Trustee of a continuing Event of Default;

               (ii)   the Holders of not less than 25% of the Outstanding Amount
          of the Notes have made written request to the Trustee to institute
          such Proceeding in respect of such Event of Default in its own name as
          Trustee hereunder;

               (iii)  such Holder or Holders have offered to the Trustee
          indemnity reasonably satisfactory to it against the costs, expenses
          and liabilities to be incurred in complying with such request;

               (iv)   the Trustee for 60 days after its receipt of such notice,
          request and offer of indemnity has failed to institute such
          Proceedings;

               (v)    no direction inconsistent with such written request has
          been given to the Trustee during such 60-day period by the Holders of
          a majority of the Outstanding Amount of the Notes; and

               (vi)   an Insurer Default shall have occurred and be continuing;

it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the manner
herein provided.

          In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Noteholders, each representing
less than a majority of the Outstanding Amount of the Notes, the Trustee in its
sole discretion may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.

          SECTION 5.8  Unconditional Rights of Noteholders To Receive Principal
                       --------------------------------------------------------
and Interest.  Notwithstanding any other provisions in this Indenture, the
------------
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to

                                       38
<PAGE>

institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.

          SECTION 5.9   Restoration of Rights and Remedies.  If the Controlling
                        ----------------------------------
Party or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Trustee or to
such Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.

          SECTION 5.10  Rights and Remedies Cumulative.  No right or remedy
                        ------------------------------
herein conferred upon or reserved to the Controlling Party or to the Noteholders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

          SECTION 5.11  Delay or Omission Not a Waiver.  No delay or omission of
                        ------------------------------
the Trustee, the Controlling Party or any Holder of any Note to exercise any
right or remedy accruing upon any Default or Event of Default shall impair any
such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this Article
V or by law to the Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the
Noteholders, as the case may be.

          SECTION 5.12  Control by Noteholders.  If the Trustee is the
                        ----------------------
Controlling Party, the Holders of a majority of the Outstanding Amount of the
Notes shall have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Trustee with respect to the Notes
or exercising any trust or power conferred on the Trustee; provided that

               (i)    such direction shall not be in conflict with any rule of
          law or with this Indenture;

               (ii)   subject to the express terms of Section 5.4, any direction
          to the Trustee to sell or liquidate the Trust Estate shall be by the
          Noteholders representing not less than 100% of the Outstanding Amount
          of the Notes;

               (iii)  if the conditions set forth in Section 5.5 have been
          satisfied and the Trustee elects to retain the Trust Estate pursuant
          to such Section, then any direction to the Trustee by Noteholders
          representing less than 100% of the Outstanding Amount of the Notes to
          sell or liquidate the Trust Estate shall be of no force and effect;
          and

               (iv)   the Trustee may take any other action deemed proper by the
          Trustee that is not inconsistent with such direction;

                                       39
<PAGE>

provided, however, that, subject to Article VI, the Trustee need not take any
--------  -------
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.

          SECTION 5.13  Waiver of Past Defaults.  If an Insurer Default shall
                        -----------------------
have occurred and be continuing, prior to the declaration of the acceleration of
the maturity of the Notes as provided in Section 5.4, the Noteholders of not
less than a majority of the Outstanding Amount of the Notes may waive any past
Default or Event of Default and its consequences except a Default (a) in payment
of principal of or interest on any of the Notes or (b) in respect of a covenant
or provision hereof which cannot be modified or amended without the consent of
the Holder of each Note. In the case of any such waiver, the Issuer, the Trustee
and the Holders of the Notes shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.

          Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.

          SECTION 5.14  Undertaking for Costs.  All parties to this Indenture
                        ---------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (a)
any suit instituted by the Trustee, (b) any suit instituted by any Noteholder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).

                                       40
<PAGE>

          SECTION 5.15  Waiver of Stay or Extension Laws.  The Issuer covenants
                        --------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.

          SECTION 5.16  Action on Notes.  The Trustee's right to seek and
                        ---------------
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Trustee or the Noteholders shall be impaired by the recovery of any
judgment by the Trustee against the Issuer or by the levy of any execution under
such judgment upon any portion of the Trust Estate or upon any of the assets of
the Issuer.

          SECTION 5.17  Performance and Enforcement of Certain Obligations.
                        --------------------------------------------------

          (a)  Promptly following a request from the Trustee to do so and at the
Servicer's expense, the Issuer agrees to take all such lawful action as the
Trustee may request to compel or secure the performance and observance by the
Seller and the Servicer, as applicable, of each of their obligations to the
Issuer under or in connection with the Sale and Servicing Agreement in
accordance with the terms thereof, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with the Sale and Servicing Agreement to the extent and in the manner directed
by the Trustee, including the transmission of notices of default on the part of
the Seller or the Servicer thereunder and the institution of legal or
administrative actions or Proceedings to compel or secure performance by the
Seller or the Servicer of each of their obligations under the Sale and Servicing
Agreement.

          (b)  If the Trustee is a Controlling Party and if an Event of Default
has occurred and is continuing, the Trustee may, and, at the written direction
of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, subject
to Article VI, exercise all rights, remedies, powers, privileges and claims of
the Issuer against the Seller or the Servicer under or in connection with the
Sale and Servicing Agreement, including the right or power to take any action to
compel or secure performance or observance by the Seller or the Servicer of each
of their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.

                                  ARTICLE VI

                  The Trustee and the Trust Collateral Agent
                  ------------------------------------------

          SECTION 6.1   Duties of Trustee.
                        -----------------
          (a)  If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
the Basic Documents to which is

                                       41
<PAGE>

a Party and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs.

          (b)  Except during the continuance of an Event of Default:

                 (i)   the Trustee undertakes to perform such duties and only
          such duties as are specifically set forth in this Indenture and no
          implied covenants or obligations shall be read into this Indenture
          against the Trustee; and

                 (ii)  in the absence of bad faith on its part, the Trustee may
          conclusively rely, as to the truth of the statements and the
          correctness of the opinions expressed therein, upon certificates or
          opinions furnished to the Trustee and conforming to the requirements
          of this Indenture; however, the Trustee shall examine the certificates
          and opinions to determine whether or not they conform on their face to
          the requirements of this Indenture.

          (c)  The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:

                 (i)   this paragraph does not limit the effect of paragraph (b)
          of this Section;

                 (ii)  the Trustee shall not be liable for any error of judgment
          made in good faith by a Responsible Officer unless it is proved that
          the Trustee was negligent in ascertaining the pertinent facts; and

                 (iii) the Trustee shall not be liable with respect to any
          action it takes or omits to take in good faith in accordance with a
          direction received by it pursuant to Section 5.12.

          (d)  The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer.

          (e)  Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Indenture
or the Sale and Servicing Agreement.

          (f)  No provision of this Indenture shall require the Trustee 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 it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

          (g)  Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 6.1 and to the provisions of the TIA.

                                       42
<PAGE>

          (h)  The Trustee shall, upon two Business Days' prior notice to the
Trustee, permit any representative of the Security Insurer at the expense of the
Trust, during the Trustee's normal business hours, to examine all books of
account, records, reports and other papers of the Trustee relating to the Notes,
to make copies and extracts therefrom and to discuss the Trustee's affairs and
actions, as such affairs and actions relate to the Trustee's duties with respect
to the Notes, with the Trustee's officers and employees responsible for carrying
out the Trustee's duties with respect to the Notes.

          (i)  The Trustee shall, and hereby agrees that it will, perform all of
the obligations and duties required of it under the Sale and Servicing
Agreement.

          (j)  The Trustee shall, and hereby agrees that it will, hold the Note
Policy in trust, and will hold any proceeds of any claim on the Note Policy in
trust solely for the use and benefit of the Noteholders.

          (k)  Without limiting the generality of this Section 6.1, the Trustee
shall have no duty (i) to see to any recording, filing or depositing of this
Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Financed Vehicles, or to see to the
maintenance of any such recording or filing or depositing or to any recording,
refiling or redepositing of any thereof, (ii) to see to any insurance of the
Financed Vehicles or Obligors or to effect or maintain any such insurance, (iii)
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, (iv) to confirm or verify the contents of
any reports or certificates delivered to the Trustee pursuant to this Indenture
or the Sale and Servicing Agreement believed by the Trustee to be genuine and to
have been signed or presented by the proper party or parties, or (v) to inspect
the Financed Vehicles at any time or ascertain or inquire as to the performance
of observance of any of the Issuer's, 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 the Sale
and Servicing Agreement.

          (l)  In no event shall Bank One, N.A., in any of its capacities
hereunder, be deemed to have assumed any duties of the Owner Trustee under the
Delaware Business Trust Statute, common law, or the Trust Agreement.

          SECTION 6.2  Rights of Trustee.
                       -----------------

          (a)  The Trustee may conclusively rely on any document believed by it
to be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.

          (b)  Before the Trustee acts or refrains from acting, it may require
an Officer's Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.

          (c)  The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for

                                       43
<PAGE>

the supervision of, AmeriCredit Financial Services, Inc., or any other such
agent, attorney, custodian or nominee appointed with due care by it hereunder.

          (d)  The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
        --------  -------
willful misconduct, negligence or bad faith.

          (e)  The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Notes shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.

          (f)  The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture, at
the request, order or direction of any of the Noteholders or the Controlling
Party, pursuant to the provisions of this Indenture, unless such Noteholders or
the Controlling Party shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; provided, however, that the Trustee shall, upon the
                    --------  -------
occurrence of an Event of Default (that has not been cured), exercise the rights
and powers vested in it by this Indenture with reasonable care and skill.

          (g)  The Trustee shall not be bound to make any investigation into the
facts or 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 Security Insurer (so
long as no Insurer Default shall have occurred and be continuing) or (if an
Insurer Default shall have occurred and be continuing) by the Noteholders
evidencing not less than 25% of the Outstanding Amount thereof; provided,
                                                                --------
however, that if the payment within a reasonable time to the Trustee of the
-------
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture or the
Sale and Servicing Agreement, the 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 Person making
such request, or, if paid by the Trustee, shall be reimbursed by the Person
making such request upon demand.

          (h)  The Trustee shall not be liable for any losses on investments
except for losses resulting from the failure of the Trustee to make an
investment in accordance with instructions given in accordance hereunder. If the
Trustee acts as the Note Paying Agent or Note Registrar, the rights and
protections afforded to the Trustee shall be afforded to the Note Paying Agent
and Note Registrar.

                                       44
<PAGE>

          SECTION 6.3  Individual Rights of Trustee.  The Trustee in its
                       ----------------------------
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Note Paying Agent, Note Registrar, co-
registrar or co-Note Paying Agent may do the same with like rights. However, the
Trustee must comply with Sections 6.11 and 6.12.

          SECTION 6.4  Trustee's Disclaimer.  The Trustee shall not be
                       --------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture, the Trust Estate or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.

          SECTION 6.5  Notice of Defaults.  If an Event of Default occurs and is
                       ------------------
continuing and if it is either known by, or written notice of the existence
thereof has been delivered to, a Responsible Officer of the Trustee, the Trustee
shall mail to each Noteholder notice of the Default within 90 days after such
knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Trustee may withhold the
notice if and so long as a committee of two or more of its Responsible Officers
in good faith determines that withholding the notice is in the interests of
Noteholders.

          SECTION 6.6  Reports by Trustee to Holders.  The Trustee shall deliver
                       -----------------------------
to each Noteholder such information as may be reasonably required to enable such
Holder to prepare its federal and State income tax returns.

          SECTION 6.7  Compensation and Indemnity.
                       --------------------------

          (a)  Pursuant to Section 5.7(b) of the Sale and Servicing Agreement,
the Issuer shall, or shall cause the Servicer to, pay to the Trustee from time
to time compensation for its services. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall cause the Servicer to reimburse the Trustee and the Trust Collateral Agent
for all reasonable out-of-pocket expenses incurred or made by it, including
costs of collection, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee's, the Backup Servicer's, the Collateral Agent's and
the Trust Collateral Agent's agents, counsel, accountants and experts. The
Issuer shall cause the Servicer to indemnify the Trustee, the Trust Collateral
Agent and their respective officers, directors, employees and agents against any
and all loss, liability or expense (including attorneys' fees and expenses)
incurred by each of them in connection with the acceptance or the administration
of this Trust and the performance of its duties hereunder. The Trustee, Trust
Collateral Agent, the Collateral Agent or the Backup Servicer shall notify the
Issuer and the Servicer promptly of any claim for which it may seek indemnity.
Failure by the Trustee or Trust Collateral Agent to so notify the Issuer and the
Servicer shall not relieve the Issuer of its obligations hereunder or the
Servicer of its obligations under Article XI of the Sale and Servicing
Agreement. The Issuer shall cause the Servicer to defend the claim, the Trustee,
Trust Collateral Agent, the Collateral Agent or the Backup Servicer may have
separate counsel and the Issuer shall cause the Servicer to pay the fees and

                                       45
<PAGE>

expenses of such counsel. Neither the Issuer nor the Servicer need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee or Trust Collateral Agent through the Trustee's or Trust Collateral
Agent's own willful misconduct, negligence or bad faith.

          (b)  The Issuer's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture or the earlier resignation
or removal of the Trustee or the Trust Collateral Agent or the Collateral Agent
or the Backup Servicer. When the Trustee, the Trust Collateral Agent, the
Collateral Agent or the Backup Servicer incurs expenses after the occurrence of
a Default specified in Section 5.1(v) or (vi) with respect to the Issuer, the
expenses are intended to constitute expenses of administration under Title 11 of
the United States Code or any other applicable federal or State bankruptcy,
insolvency or similar law. Notwithstanding anything else set forth in this
Indenture or the Basic Documents, the Trustee agrees that the obligations of the
Issuer (but not the Servicer) to the Trustee hereunder and under the Basic
Documents shall be recourse to the Trust Estate only and specifically shall not
be recourse to the assets of the Certificateholder or any Noteholder. In
addition, the Trustee agrees that its recourse to the Issuer, the Trust Estate,
the Seller and amounts held pursuant of the Spread Account Agreement shall be
limited to the right to receive the distributions referred to in Section 5.7(b)
of the Sale and Servicing Agreement.

          SECTION 6.8  Replacement of Trustee.  The Trustee may resign at any
                       ----------------------
time by so notifying the Issuer and the Security Insurer. The Issuer may and, at
the request of the Security Insurer (unless an Insurer Default shall have
occurred and be continuing) shall, remove the Trustee, if:

               (i)    the Trustee fails to comply with Section 6.11;

               (ii)   a court having jurisdiction in the premises in respect of
          the Trustee in an involuntary case or proceeding under federal or
          state banking or bankruptcy laws, as now or hereafter constituted, or
          any other applicable federal or state bankruptcy, insolvency or other
          similar law, shall have entered a decree or order granting relief or
          appointing a receiver, liquidator, assignee, custodian, trustee,
          conservator, sequestrator (or similar official) for the Trustee or for
          any substantial part of the Trustee's property, or ordering the
          winding-up or liquidation of the Trustee's affairs;

               (iii)  an involuntary case under the federal bankruptcy laws, as
          now or hereafter in effect, or another present or future federal or
          state bankruptcy, insolvency or similar law is commenced with respect
          to the Trustee and such case is not dismissed within 60 days;

               (iv)   the Trustee commences a voluntary case under any federal
          or state banking or bankruptcy laws, as now or hereafter constituted,
          or any other applicable federal or state bankruptcy, insolvency or
          other similar law, or consents to the appointment of or taking
          possession by a receiver, liquidator, assignee, custodian, trustee,
          conservator, sequestrator (or other similar official) for the Trustee
          or for any substantial part of the Trustee's property, or makes any
          assignment for the benefit of creditors or fails generally to pay its
          debts as such

                                       46
<PAGE>

          debts become due or takes any corporate action in furtherance of any
          of the foregoing; or

               (v)  the Trustee otherwise becomes incapable of acting.

          If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuer shall promptly appoint a successor
Trustee acceptable to the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing).  If the Issuer fails to appoint such a
successor Trustee, the Security Insurer may appoint a successor Trustee.

          A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee, the Security Insurer (provided that no
Insurer Default shall have occurred and be continuing) and to the Issuer.
Thereupon the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the retiring Trustee under this Indenture subject to satisfaction of
the Rating Agency Condition.  The successor Trustee shall mail a notice of its
succession to Noteholders.  The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee.

          If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in Outstanding Amount of the Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee.

          If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

          Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to Section 6.8 and payment of all fees and expenses owed to the
outgoing Trustee.

          Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's and the Servicer's obligations under Section 6.7 shall
continue for the benefit of the retiring Trustee.

          SECTION 6.9  Successor Trustee by Merger.  If the Trustee consolidates
                       ---------------------------
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee. The Trustee shall provide the Rating
Agencies prior written notice of any such transaction.

          In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the

                                       47
<PAGE>

Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.

          SECTION 6.10  Appointment of Co-Trustee or Separate Trustee.
                        ---------------------------------------------

          (a)  Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust may at the time be located, the Trustee with the
consent of the Security Insurer (so long as an Insurer Default shall not have
occurred and be continuing) shall have the power and may execute and deliver all
instruments to appoint one or more Persons to act as a co-trustee or co-
trustees, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Trust, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.8 hereof.

          (b)  Every 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 Trustee shall be conferred or imposed upon and
          exercised or performed by the 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 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 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
          Trustee;

                 (ii)  no trustee hereunder shall be personally liable by reason
          of any act or omission of any other trustee hereunder, including acts
          or omissions of predecessor or successor trustees; and

                 (iii) the Trustee may at any time accept the resignation of or
          remove any separate trustee or co-trustee.

          (c)  Any notice, request or other writing given to the 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 VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its

                                       48
<PAGE>

instrument of appointment, either jointly with the Trustee or separately, as may
be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.

          (d)  Any separate trustee or co-trustee may at any time constitute the
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, dissolve, become insolvent, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
invest in and be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.

          (e)  Any and all amounts relating to the fees and expenses of the co-
trustee or separate trustee will be borne by the Trust Estate.

          SECTION 6.11  Eligibility: Disqualification.  The Trustee shall at all
                        -----------------------------
times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and it shall have a long term debt
rating of BBB- or better by the Rating Agencies. The Trustee shall provide
copies of such reports to the Security Insurer upon request. The Trustee shall
comply with TIA (S) 310(b), including the optional provision permitted by the
second sentence of TIA (S) 310(b)(9); provided, however, that there shall be
                                      --------  -------
excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA (S) 310(b)(1) are met.

          SECTION 6.12  Preferential Collection of Claims Against Issuer.  The
                        ------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.

          SECTION 6.13  Appointment and Powers.  Subject to the terms and
                        ----------------------
conditions hereof, each of the Issuer Secured Parties hereby appoints Bank One,
N.A. as the Trust Collateral Agent with respect to the Collateral, and Bank One,
N.A. hereby accepts such appointment and agrees to act as Trust Collateral Agent
with respect to the Indenture Collateral for the Issuer Secured Parties, to
maintain custody and possession of such Indenture Collateral (except as
otherwise provided hereunder) and to perform the other duties of the Trust
Collateral Agent in accordance with the provisions of this Indenture and the
other Basic Documents. Each Issuer Secured Party hereby authorizes the Trust
Collateral Agent to take such action on its behalf, and to exercise such rights,
remedies, powers and privileges hereunder, as the Controlling Party may direct
and as are specifically authorized to be exercised by the Trust Collateral Agent
by the terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto, including, but not limited to,
the execution of any powers of attorney. The Trust Collateral Agent shall act
upon and in compliance with the written instructions of the Controlling Party
delivered pursuant to this Indenture promptly following receipt of such written
instructions; provided that the Trust Collateral Agent shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions

                                       49
<PAGE>

of, this Indenture, (ii) which are in violation of any applicable law, rule or
regulation or (iii) for which the Trust Collateral Agent has not received
reasonable indemnity. Receipt of such instructions shall not be a condition to
the exercise by the Trust Collateral Agent of its express duties hereunder,
except where this Indenture provides that the Trust Collateral Agent is
permitted to act only following and in accordance with such instructions.

          SECTION 6.14  Performance of Duties.  The Trust Collateral Agent shall
                        ---------------------
have no duties or responsibilities except those expressly set forth in this
Indenture and the other Basic Documents to which the Trust Collateral Agent is a
party or as directed by the Controlling Party in accordance with this Indenture.
The Trust Collateral Agent shall not be required to take any discretionary
actions hereunder except at the written direction and with the indemnification
of the Controlling Party. The Trust Collateral Agent shall, and hereby agrees
that it will, subject to this Article, perform all of the duties and obligations
required of it under the Sale and Servicing Agreement.

          SECTION 6.15  Limitation on Liability.  Neither the Trust Collateral
                        -----------------------
Agent nor any of its directors, officers or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder, or in connection
herewith, except that the Trust Collateral Agent shall be liable for its
negligence, bad faith or willful misconduct; nor shall the Trust Collateral
Agent be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Issuer of this Indenture or any of the Indenture
Collateral (or any part thereof). Notwithstanding any term or provision of this
Indenture, the Trust Collateral Agent shall incur no liability to the Issuer or
the Issuer Secured Parties for any action taken or omitted by the Trust
Collateral Agent in connection with the Indenture Collateral, except for the
negligence, bad faith or willful misconduct on the part of the Trust Collateral
Agent, and, further, shall incur no liability to the Issuer Secured Parties
except for negligence, bad faith or willful misconduct in carrying out its
duties to the Issuer Secured Parties. The Trust Collateral Agent shall be
protected and shall incur no liability to any such party in relying upon the
accuracy, acting in reliance upon the contents, and assuming the genuineness of
any notice, demand, certificate, signature, instrument or other document
reasonably believed by the Trust Collateral Agent to be genuine and to have been
duly executed by the appropriate signatory, and (absent actual knowledge to the
contrary by a Responsible Officer of the Trust Collateral Agent) the Trust
Collateral Agent shall not be required to make any independent investigation
with respect thereto. The Trust Collateral Agent shall at all times be free
independently to establish to its reasonable satisfaction, but shall have no
duty to independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Basic Documents. The Trust Collateral Agent may consult with
counsel, and shall not be liable for any action taken or omitted to be taken by
it hereunder in good faith and in accordance with the advice of such counsel.
The Trust Collateral Agent shall not be under any obligation to exercise any of
the remedial rights or powers vested in it by this Indenture or to follow any
direction from the Controlling Party or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder unless it
shall have received reasonable security or indemnity satisfactory to the Trust
Collateral Agent against the costs, expenses and liabilities which might be
incurred by it.

          SECTION 6.16  Reliance Upon Documents.  In the absence of negligence,
                        -----------------------
bad faith or willful misconduct on its part, the Trust Collateral Agent shall be
entitled to conclusively

                                       50
<PAGE>

rely on any communication, instrument, paper or other document reasonably
believed by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons and shall have no liability in acting, or omitting to
act, where such action or omission to act is in reasonable reliance upon any
statement or opinion contained in any such document or instrument.

          SECTION 6.17  Successor Trust Collateral Agent.
                        --------------------------------

          (a)  Merger.  Any Person into which the Trust Collateral Agent may be
               ------
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, merger, consolidation,
sale or transfer to which the Trust Collateral Agent is a party, shall (provided
it is otherwise qualified to serve as the Trust Collateral Agent hereunder) be
and become a successor Trust Collateral Agent hereunder and be vested with all
of the title to and interest in the Indenture Collateral and all of the trusts,
powers, discretions, immunities, privileges and other matters as was its
predecessor without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding, except to the extent, if any, that any
such action is necessary to perfect, or continue the perfection of, the security
interest of the Issuer Secured Parties in the Indenture Collateral; provided
that any such successor shall also be the successor Trustee under Section 6.9.

          (b)  Resignation.  The Trust Collateral Agent and any successor Trust
               -----------
Collateral Agent may resign at any time by so notifying the Issuer and the
Security Insurer; provided that the Trust Collateral Agent shall not so resign
unless it shall also resign as Trustee hereunder.

          (c)  Removal.  The Trust Collateral Agent may be removed by the
               -------
Controlling Party at any time (and should be removed at any time that the
Trustee has been removed), with or without cause, by an instrument or concurrent
instruments in writing delivered to the Trust Collateral Agent, the other Issuer
Secured Party and the Issuer. A temporary successor may be removed at any time
to allow a successor Trust Collateral Agent to be appointed pursuant to
subsection (d) below. Any removal pursuant to the provisions of this subsection
(c) shall take effect only upon the date which is the latest of (i) the
effective date of the appointment of a successor Trust Collateral Agent and the
acceptance in writing by such successor Trust Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in accordance
with the provisions hereof, and (ii) receipt by the Controlling Party of an
Opinion of Counsel to the effect described in Section 3.6.

          (d)  Acceptance by Successor.  The Controlling Party shall have the
               -----------------------
sole right to appoint each successor Trust Collateral Agent. Every temporary or
permanent successor Trust Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Trustee, each Issuer
secured Party and the Issuer an instrument in writing accepting such appointment
hereunder and the relevant predecessor shall execute, acknowledge and deliver
such other documents and instruments as will effectuate the delivery of all
Indenture Collateral to the successor Trust Collateral Agent, whereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations
of its predecessor. Such predecessor shall, nevertheless, on the written request
of

                                       51
<PAGE>

either Issuer Secured Party or the Issuer, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers of
such predecessor hereunder. In the event that any instrument in writing from the
Issuer or an Issuer Secured Party is reasonably required by a successor Trust
Collateral Agent to more fully and certainly vest in such successor the estates,
properties, rights, powers, duties and obligations vested or intended to be
vested hereunder in the Trust Collateral Agent, any and all such written
instruments shall, at the request of the temporary or permanent successor Trust
Collateral Agent, be forthwith executed, acknowledged and delivered by the
Trustee or the Issuer, as the case may be. The designation of any successor
Trust Collateral Agent and the instrument or instruments removing any Trust
Collateral Agent and appointing a successor hereunder, together with all other
instruments provided for herein, shall be maintained with the records relating
to the Indenture Collateral and, to the extent required by applicable law, filed
or recorded by the successor Trust Collateral Agent in each place where such
filing or recording is necessary to effect the transfer of the Indenture
Collateral to the successor Trust Collateral Agent or to protect or continue the
perfection of the security interests granted hereunder.

          SECTION 6.18  Compensation.  The Trust Collateral Agent shall not be
                        ------------
entitled to any compensation for the performance of its duties hereunder other
than the compensation it is entitled to receive in its capacity as Trustee.

          SECTION 6.19  Representations and Warranties of the Trust Collateral
                        ------------------------------------------------------
Agent.  The Trust Collateral Agent represents and warrants to the Issuer and to
-----
each Issuer Secured Party as follows:

          (a)  Due Organization.  The Trust Collateral Agent is a national
               ----------------
banking association and is duly authorized and licensed under applicable law to
conduct its business as presently conducted.

          (b)  Corporate Power.  The Trust Collateral Agent has all requisite
               ---------------
right, power and authority to execute and deliver this Indenture and to perform
all of its duties as Trust Collateral Agent hereunder.

          (c)  Due Authorization.  The execution and delivery by the Trust
               -----------------
Collateral Agent of this Indenture and the other Transaction Documents to which
it is a party, and the performance by the Trust Collateral Agent of its duties
hereunder and thereunder, have been duly authorized by all necessary corporate
proceedings and no further approvals or filings, including any governmental
approvals, are required for the valid execution and delivery by the Trust
Collateral Agent, or the performance by the Trust Collateral Agent, of this
Indenture and such other Basic Documents.

          (d)  Valid and Binding Indenture.  The Trust Collateral Agent has
               ---------------------------
duly executed and delivered this Indenture and each other Basic Document to
which it is a party, and each of this Indenture and each such other Basic
Document constitutes the legal, valid and binding obligation of the Trust
Collateral Agent, enforceable against the Trust Collateral Agent in accordance
with its terms, except as (i) such enforceability may be limited by bankruptcy,
insolvency, reorganization and similar laws relating to or affecting the
enforcement of creditors'

                                       52
<PAGE>

rights generally and (ii) the availability of equitable remedies may be limited
by equitable principles of general applicability.

          SECTION 6.20 Waiver of Setoffs.  The Trust Collateral Agent hereby
                       -----------------
expressly waives any and all rights of setoff that the Trust Collateral Agent
may otherwise at any time have under applicable law with respect to any Trust
Account and agrees that amounts in the Trust Accounts shall at all times be held
and applied solely in accordance with the provisions hereof.

          SECTION 6.21 Control by the Controlling Party.  The Trust Collateral
                       --------------------------------
Agent shall comply with notices and instructions given by the Issuer only if
accompanied by the written consent of the Controlling Party, except that if any
Event of Default shall have occurred and be continuing, the Trust Collateral
Agent shall act upon and comply with notices and instructions given by the
Controlling Party alone in the place and stead of the Issuer.

                                  ARTICLE VII

                        Noteholders' Lists and Reports
                        ------------------------------

          SECTION 7.1  Issuer To Furnish To Trustee Names and Addresses of
                       ---------------------------------------------------
Noteholders.  The Issuer will furnish or cause to be furnished to the Trustee
-----------
(a) not more than five days after the earlier of (i) each Record Date and (ii)
three months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Record
Date, (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Note Registrar,
           --------  -------
no such list shall be required to be furnished.  The Trustee or, if the Trustee
is not the Note Registrar, the Issuer shall furnish to the Security Insurer in
writing on an annual basis on each June 30 and at such other times as the
Security Insurer may request a copy of the list.

          SECTION 7.2  Preservation of Information; Communications to
                       ----------------------------------------------
Noteholders. (a) The Trustee shall preserve, in as current a form as is
-----------
reasonably practicable, the names and addresses of the Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.1 and the
names and addresses of Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in such
Section 7.1 upon receipt of a new list so furnished.

          (b)  Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.

          (c)  The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA (S) 312(c).

          SECTION 7.3  Reports by Issuer.
                       -----------------

          (a)  The Issuer shall:

                                       53
<PAGE>

               (i)   file with the Trustee, within 15 days after the Issuer is
          required to file the same with the Commission, copies of the annual
          reports and of the information, documents and other reports (or copies
          of such portions of any of the foregoing as the Commission may from
          time to time by rules and regulations prescribe) which the Issuer may
          be required to file with the Commission pursuant to Section 13 or
          15(d) of the Exchange Act;

               (ii)  file with the Trustee and the Commission in accordance with
          rules and regulations prescribed from time to time by the Commission
          such additional information, documents and reports with respect to
          compliance by the Issuer with the conditions and covenants of this
          Indenture as may be required from time to time by such rules and
          regulations; and

               (iii) supply to the Trustee (and the Trustee shall transmit by
          mail to all Noteholders described in TIA (S) 313(c)) such summaries of
          any information, documents and reports required to be filed by the
          Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may
          be required by rules and regulations prescribed from time to time by
          the Commission.

          (b)  Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.

          SECTION 7.4  Reports by Trustee.  If required by TIA (S) 313(a),
                       ------------------
within 60 days after each May 31, beginning with May 31, 2000, the Trustee shall
mail to each Noteholder as required by TIA (S) 313(c) a brief report dated as of
such date that complies with TIA (S) 313(a). The Trustee also shall comply with
TIA (S) 313(b).

          A copy of each report at the time of its mailing to Noteholders shall
be filed by the Trustee with the Commission and each stock exchange, if any, on
which the Notes are listed.  The Issuer shall notify the Trustee if and when the
Notes are listed on any stock exchange.

                                 ARTICLE VIII

                     Accounts, Disbursements and Releases
                     ------------------------------------

          SECTION 8.1  Collection of Money.  Except as otherwise expressly
                       -------------------
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trust Collateral Agent pursuant to this Indenture and the Sale
and Servicing Agreement. The Trustee shall apply all such money received by it,
or cause the Trust Collateral Agent to apply all money received by it as
provided in this Indenture and the Sale and Servicing Agreement. Except as
otherwise expressly provided in this Indenture or in the Sale and Servicing
Agreement, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Trust Estate, the Trustee
may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
proceedings. Any such action shall be without

                                       54
<PAGE>

prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.

          SECTION 8.2  Release of Trust Estate.
                       -----------------------

          (a)  Subject to the payment of its fees and expenses and other amounts
pursuant to Section 6.7, the Trust Collateral Agent may, and when required by
the provisions of this Indenture shall, execute instruments to release property
from the lien of this Indenture, in a manner and under circumstances that are
not inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Trust Collateral Agent as provided in this Article
VIII shall be bound to ascertain the Trust Collateral Agent's authority, inquire
into the satisfaction of any conditions precedent or see to the application of
any moneys.

          (b)  The Trust Collateral Agent shall, at such time as there are no
Notes outstanding and all sums due the Trustee pursuant to Section 6.7 have been
paid, release any remaining portion of the Trust Estate that secured the Notes
from the lien of this Indenture and release to the Issuer or any other Person
entitled thereto any funds then on deposit in the Trust Accounts. The Trustee
shall release property from the lien of this Indenture pursuant to this Section
8.2(b) only upon receipt of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.

          SECTION 8.3  Opinion of Counsel.  The Trust Collateral Agent shall
                       ------------------
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.2(a), accompanied by copies of any instruments
involved, and the Trustee shall also require as a condition to such action, an
Opinion of Counsel in form and substance satisfactory to the Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
                                                   --------  -------
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Trustee in connection with any such action.

                                  ARTICLE IX

                            Supplemental Indentures
                            -----------------------

          SECTION 9.1  Supplemental Indentures Without Consent of Noteholders.
                       ------------------------------------------------------

          (a)  Without the consent of the Holders of any Notes but with the
consent of the Security Insurer (unless an Insurer Default shall have occurred
and be continuing) and with prior notice to the Rating Agencies by the Issuer,
as evidenced to the Trustee, the Issuer and the Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust

                                       55
<PAGE>

Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Trustee, for any of the following purposes:

               (i)   to correct or amplify the description of any property at
          any time subject to the lien of this Indenture, or better to assure,
          convey and confirm unto the Trust Collateral Agent any property
          subject or required to be subjected to the lien of this Indenture, or
          to subject to the lien of this Indenture additional property;

               (ii)  to evidence the succession, in compliance with the
          applicable provisions hereof, of another person to the Issuer, and the
          assumption by any such successor of the covenants of the Issuer herein
          and in the Notes contained;

               (iii) to add to the covenants of the Issuer, for the benefit of
          the Holders of the Notes, or to surrender any right or power herein
          conferred upon the Issuer;

               (iv)  to convey, transfer, assign, mortgage or pledge any
          property to or with the Trust Collateral Agent;

               (v)   to cure any ambiguity, to correct or supplement any
          provision herein or in any supplemental indenture which may be
          inconsistent with any other provision herein or in any supplemental
          indenture or to make any other provisions with respect to matters or
          questions arising under this Indenture or in any supplemental
          indenture; provided that such action shall not adversely affect the
                     --------
          interests of the Holders of the Notes;

               (vi)  to evidence and provide for the acceptance of the
          appointment hereunder by a successor trustee with respect to the Notes
          and to add to or change any of the provisions of this Indenture as
          shall be necessary to facilitate the administration of the trusts
          hereunder by more than one trustee, pursuant to the requirements of
          Article VI; or

               (vii) to modify, eliminate or add to the provisions of this
          Indenture to such extent as shall be necessary to effect the
          qualification of this Indenture under the TIA or under any similar
          federal statute hereafter enacted and to add to this Indenture such
          other provisions as may be expressly required by the TIA.

          The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.

          (b)  The Issuer and the Trustee, when authorized by an Issuer Order,
may, also without the consent of any of the Holders of the Notes but with prior
notice to the Rating Agencies by the Issuer, as evidenced to the Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that such action
                                           --------  -------
shall not, as

                                       56
<PAGE>

evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of any Noteholder.

          SECTION 9.2  Supplemental Indentures with Consent of Noteholders. The
                       ---------------------------------------------------
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to the Rating Agencies, with the consent of the Security Insurer (unless
an Insurer Default shall have occurred and be continuing) and with the consent
of the Holders of not less than a majority of the outstanding Amount of the
Notes, by Act of such Holders delivered to the Issuer and the Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that, subject to
                                           --------  -------
the express rights of the Security Insurer under the Basic Documents, no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:

               (i)   change the date of payment of any installment of principal
          of or interest on any Note, or reduce the principal amount thereof,
          the interest rate thereon or the Redemption Price with respect
          thereto, change the provision of this Indenture relating to the
          application of collections on, or the proceeds of the sale of, the
          Trust Estate to payment of principal of or interest on the Notes, or
          change any place of payment where, or the coin or currency in which,
          any Note or the interest thereon is payable, provided, that any change
          necessitated by the assumption by the Backup Servicer or other
          successor Servicer to the duties of AmeriCredit Financial Services,
          Inc., as Servicer, which results in the Distribution Date becoming the
          same date as the Insured Distribution Date shall not be considered an
          event which requires the consent of the Trustee, the Security Insurer
          or any Noteholder;

               (ii)  impair the right to institute suit for the enforcement of
          the provisions of this Indenture requiring the application of funds
          available therefor, as provided in Article V, to the payment of any
          such amount due on the Notes on or after the respective due dates
          thereof (or, in the case of redemption, on or after the Redemption
          Date);

               (iii) reduce the percentage of the Outstanding Amount of the
          Notes, the consent of the Holders of which is required for any such
          supplemental indenture, or the consent of the Holders of which is
          required for any waiver of compliance with certain provisions of this
          Indenture or certain defaults hereunder and their consequences
          provided for in this Indenture;

               (iv)  modify or alter the provisions of the proviso to the
          definition of the term "Outstanding";

               (v)   reduce the percentage of the Outstanding Amount of the
          Notes required to direct the Trustee to direct the Issuer to sell or
          liquidate the Trust Estate pursuant to Section 5.4;

                                       57
<PAGE>

               (vi)   modify any provision of this Section except to increase
          any percentage specified herein or to provide that certain additional
          provisions of this Indenture or the Basic Documents cannot be modified
          or waived without the consent of the Holder of each Outstanding Note
          affected thereby;

               (vii)  modify any of the provisions of this Indenture in such
          manner as to affect the calculation of the amount of any payment of
          interest or principal due on any Note on any Distribution Date or any
          Insured Distribution Date (including the calculation of any of the
          individual components of such calculation) or to affect the rights of
          the Noteholders to the benefit of any provisions for the mandatory
          redemption of the Notes contained herein; or

               (viii) permit the creation of any lien ranking prior to or on a
          parity with the lien of this Indenture with respect to any part of the
          Trust Estate or, except as otherwise permitted or contemplated herein
          or in any of the Basic Documents, terminate the lien of this Indenture
          on any property at any time subject hereto or deprive the Holder of
          any Note of the security provided by the lien of this Indenture.

          The Trustee may determine whether or not any Notes would be affected
by any supplemental indenture and any such determination shall be conclusive
upon the Holders of all Notes, whether theretofore or thereafter authenticated
and delivered hereunder.  The Trustee shall not be liable for any such
determination made in good faith.

          It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.

          Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture.  Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.

          SECTION 9.3  Execution of Supplemental Indentures.  In executing, or
                       ------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the amendments or modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive,
shall be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.

          SECTION 9.4  Effect of Supplemental Indenture.  Upon the execution of
                       --------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities

                                       58
<PAGE>

under this Indenture of the Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.

          SECTION 9.5  Conformity With Trust Indenture Act.  Every amendment of
                       -----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.

          SECTION 9.6  Reference in Notes to Supplemental Indentures.  Notes
                       ---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.

                                   ARTICLE X

                              Redemption of Notes
                              -------------------

          SECTION 10.1 Redemption.
                       ----------

          (a)  The Notes are subject to redemption in whole, but not in part, at
the direction of the Servicer or the Seller pursuant to Section 10.1(a) of the
Sale and Servicing Agreement, on any Distribution Date on which the Servicer or
Seller exercises its option to purchase the Trust Estate pursuant to said
Section 10.1(a), for a purchase price equal to the Redemption Price; provided,
                                                                     --------
however, that the Issuer has available funds sufficient to pay the Redemption
-------
Price. The Servicer or the Issuer shall furnish the Security Insurer and the
Rating Agencies notice of such redemption. If the Notes are to be redeemed
pursuant to this Section 10.1(a), the Servicer or the Issuer shall furnish
notice of such election to the Trustee not later than 35 days prior to the
Redemption Date and the Issuer shall deposit with the Trustee in the Note
Distribution Account the Redemption Price of the Notes to be redeemed whereupon
all such Notes shall be due and payable on the Redemption Date upon the
furnishing of a notice complying with Section 10.2 to each Holder of Notes.

          (b)  In the event that on the Distribution Date on which the Funding
Period ends (or on the Distribution Date on or immediately following the last
day of the Funding Period, if the Funding Period does not end on a Distribution
Date), the Pre-Funded Amount after giving effect to the purchase of all
Subsequent Receivables, including any such purchase on such Redemption Date, the
Notes will be redeemed in part, on a pro rata basis, in an aggregate principal
amount equal to the Class A-1 Prepayment Amount, the Class A-2 Prepayment
Amount, the Class A-3 Prepayment Amount and the Class A-4 Prepayment Amount.

          (c)  In the event that the assets of the Trust are distributed
pursuant to Section 8.1 of the Trust Agreement, all amounts on deposit in the
Note Distribution Account shall be paid to

                                       59
<PAGE>

the Noteholders up to the Outstanding Amount of the Notes and all accrued and
unpaid interest thereon. If amounts are to be paid to Noteholders pursuant to
this Section 10.1(c), the Servicer or the Issuer shall, to the extent
practicable, furnish notice of such event to the Trustee not later than 45 days
prior to the Redemption Date whereupon all such amounts shall be payable on the
Redemption Date.

          SECTION 10.2  Form of Redemption Notice.
                        -------------------------

          (a)  Notice of redemption under Section 10.1(a) shall be given by the
Trustee by facsimile or by first-class mail, postage prepaid, transmitted or
mailed prior to the applicable Redemption Date to each Holder of Notes, as of
the close of business on the Record Date preceding the applicable Redemption
Date, at such Holder's address appearing in the Note Register.

          All notices of redemption shall state:

                  (i)   the Redemption Date;

                  (ii)  the Redemption Price;

                  (iii) that the Record Date otherwise applicable to such
          Redemption Date is not applicable and that payments shall be made only
          upon presentation and surrender of such Notes and the place where such
          Notes are to be surrendered for payment of the Redemption Price (which
          shall be the office or agency of the Issuer to be maintained as
          provided in Section 3.2); and

                  (iv)  that interest on the Notes shall cease to accrue on the
          Redemption Date.

          Notice of redemption of the Notes shall be given by the Trustee in the
name and at the expense of the Issuer.  Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.

          (b)  Prior notice of redemption under Section 10.1(b) is not required
to be given to Noteholders.

                                       60
<PAGE>

          SECTION 10.3  Notes Payable on Redemption Date.  The Notes to be
                        --------------------------------
redeemed shall, following notice of redemption as required by Section 10.2 (in
the case of redemption pursuant to Section 10.1(a)), on the Redemption Date
become due and payable at the Redemption Price and (unless the Issuer shall
default in the payment of the Redemption Price) no interest shall accrue on the
Redemption Price for any period after the date to which accrued interest is
calculated for purposes of calculating the Redemption Price.

                                  ARTICLE XI

                                 Miscellaneous
                                 -------------

          SECTION 11.1  Compliance Certificates and Opinions, etc.
                        -----------------------------------------

          (a)  Upon any application or request by the Issuer to the Trustee or
the Trust Collateral Agent to take any action under any provision of this
Indenture, the Issuer shall furnish to the Trustee or the Trust Collateral
Agent, as the case may be, and to the Security Insurer if the application or
request is made to the Trust Collateral Agent (i) an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA) an
Independent Certificate from a firm of certified public accountants meeting the
applicable requirements of this Section, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.

          Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:

               (i)    a statement that each signatory of such certificate or
          opinion has read or has caused to be read such covenant or condition
          and the definitions herein relating thereto;

               (ii)   a brief statement as to the nature and scope of the
          examination or investigation upon which the statements or opinions
          contained in such certificate or opinion are based;

               (iii)  a statement that, in the opinion of each such signatory,
          such signatory has made such examination or investigation as is
          necessary to enable such signatory to express an informed opinion as
          to whether or not such covenant or condition has been complied with;
          and

               (iv)   a statement as to whether, in the opinion of each such
          signatory such condition or covenant has been complied with.

          (b) (i) Prior to the deposit of any Collateral or other property or
          securities with the Trust Collateral Agent that is to be made the
          basis for the release of any property or securities subject to the
          lien of this Indenture, the Issuer shall, in addition to any
          obligation imposed in Section 11.1(a) or elsewhere in this

                                       61
<PAGE>

          Indenture, furnish to the Trust Collateral Agent and the Security
          Insurer an Officer's Certificate certifying or stating the opinion of
          each person signing such certificate as to the fair value (within 90
          days of such deposit) to the Issuer of the Collateral or other
          property or securities to be so deposited.

               (ii)  Whenever the Issuer is required to furnish to the Trust
          Collateral Agent and the Security Insurer an Officer's Certificate
          certifying or stating the opinion of any signer thereof as to the
          matters described in clause (i) above, the Issuer shall also deliver
          to the Trust Collateral Agent and the Security Insurer an Independent
          Certificate as to the same matters, if the fair value to the Issuer of
          the securities to be so deposited and of all other such securities
          made the basis of any such withdrawal or release since the
          commencement of the then-current fiscal year of the Issuer, as set
          forth in the certificates delivered pursuant to clause (i) above and
          this clause (ii), is 10% or more of the Outstanding Amount of the
          Notes, but such a certificate need not be furnished with respect to
          any securities so deposited, if the fair value thereof to the Issuer
          as set forth in the related Officer's Certificate is less than $25,000
          or less than 1% percent of the Outstanding Amount of the Notes.

               (iii) Other than with respect to the release of any Purchased
          Receivables or Liquidated Receivables, whenever any property or
          securities are to be released from the lien of this Indenture, the
          Issuer shall also furnish to the Trust Collateral Agent and the
          Security Insurer an Officer's Certificate certifying or stating the
          opinion of each person signing such certificate as to the fair value
          (within 90 days of such release) of the property or securities
          proposed to be released and stating that in the opinion of such person
          the proposed release will not impair the security under this Indenture
          in contravention of the provisions hereof.

               (iv)  Whenever the Issuer is required to furnish to the Trustee
          and the Security Insurer an Officer's Certificate certifying or
          stating the opinion of any signer thereof as to the matters described
          in clause (iii) above, the Issuer shall also furnish to the Trust
          Collateral Agent and the Security Insurer an Independent Certificate
          as to the same matters if the fair value of the property or securities
          and of all other property other than Purchased Receivables and
          Defaulted Receivables, or securities released from the lien of this
          Indenture since the commencement of the then current calendar year, as
          set forth in the certificates required by clause (iii) above and this
          clause (iv), equals 10% or more of the Outstanding Amount of the
          Notes, but such certificate need not be furnished in the case of any
          release of property or securities if the fair value thereof as set
          forth in the related Officer's Certificate is less than $25,000 or
          less than 1 percent of the then Outstanding Amount of the Notes.

               (v)   Notwithstanding Section 2.9 or any other provision of this
          Section, the Issuer may (A) collect, liquidate, sell or otherwise
          dispose of Receivables as and to the extent permitted or required by
          the Basic Documents and (B) make

                                       62
<PAGE>

          cash payments out of the Trust Accounts as and to the extent permitted
          or required by the Basic Documents.

          SECTION 11.2  Form of Documents Delivered to Trustee.  In any case
                        --------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.

          Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous.  Any such certificate of an Authorized Officer
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Servicer, the Seller or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the Seller
or the Issuer, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.

          Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

          Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report.  The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.

          SECTION 11.3  Acts of Noteholders.
                        -------------------

          (a)  Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of

                                       63
<PAGE>

execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section.

          (b)  The fact and date of the execution by any person of any such
instrument or writing may be proved in any customary manner of the Trustee.

          (c)  The ownership of Notes shall be proved by the Note Register.

          (d)  Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.

          SECTION 11.4  Notices, etc., to Trustee, Issuer and Rating Agencies.
                        -----------------------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:

          (a)  The Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed certified mail, return receipt requested and shall
be deemed to have been duly given upon receipt to the Trustee at its Corporate
Trust Office, or

          (b)  The Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed certified mail, return receipt requested and shall
deemed to have been duly given upon receipt to the Issuer addressed to:
AmeriCredit Automobile Receivables Trust 2000-B, in care of Bankers Trust
(Delaware), E.A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre
Road, Suite 200, Wilmington, Delaware 19805 Attention: Lisa Wilkins, with a copy
to Bankers Trust Company, 4 Albany Street, New York, New York 10006, Attention:
Corporate Trust Agency, or at any other address previously furnished in writing
to the Trustee by Issuer. The Issuer shall promptly transmit any notice received
by it from the Noteholders to the Trustee.

          (c)  The Security Insurer by the Issuer or the Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by registered mail
or personally delivered or telexed or telecopied to the recipient as follows:

          To the Security Insurer:      Financial Security Assurance Inc.
                                        350 Park Avenue
                                        New York, NY 10022
                                        Attention:  Transaction Oversight
                                                    Department

                                        Telex No.: (212) 688-3101
                                        Confirmation: (212)826-0100
                                        Telecopy Nos.:  (212)339-3518 or
                                                        (212) 339-3529

                                       64
<PAGE>

(In each case in which notice or other communication to the Security Insurer
refers to an Event of Default, a claim on the Note Policy or with respect to
which failure on the part of the Security Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head--Financial Guaranty Group "URGENT MATERIAL ENCLOSED.")
                                    ------------------------

          Notices required to be given to the Rating Agencies by the Issuer, the
Trustee or the Owner Trustee shall be in writing, personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004 and (ii) in
the case of S&P, at the following address: Standard & Poor's, A Division of the
McGraw-Hill Companies, 55 Water Street, 40th Floor, New York, New York 10041,
Attention of Asset Backed Surveillance Department; or as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.

          SECTION 11.5  Notices to Noteholders; Waiver.  Where this Indenture
                        ------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner here
in provided shall conclusively be presumed to have been duly given.

          Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.

          In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.

          Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.

          SECTION 11.6  [Reserved]
                        ----------

          SECTION 11.7  Conflict with Trust Indenture Act.  If any provision
                        ---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.

                                       65
<PAGE>

          The provisions of TIA (S)(S) 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

          SECTION 11.8  Effect of Headings and Table of Contents.  The Article
                        ----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.

          SECTION 11.9  Successors and Assigns.  All covenants and agreements in
                        ----------------------
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Trustee in this
Indenture shall bind its successors. All agreements of the Trust Collateral
Agent in this Indenture shall bind its successors.

          SECTION 11.10 Separability.  In case any provision in this Indenture
                        ------------
or in the Notes 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.

          SECTION 11.11 Benefits of Indenture.  The Security Insurer and its
                        ---------------------
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture so long as no Insurer Default shall have occurred
and be continuing. Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other person with an Ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture. The Security Insurer may disclaim any of its rights and powers
under this Indenture (in which case the Trustee may exercise such right or power
hereunder), but not its duties and obligations under the Note Policy, upon
delivery of a written notice to the Trustee.

          SECTION 11.12 Legal Holidays.  In any case where the date on which any
                        --------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date an which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

          SECTION 11.13 GOVERNING LAW.  THIS INDENTURE SHALL BE CONSTRUED IN
                        -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

          SECTION 11.14 Counterparts.  This Indenture may be executed in any
                        ------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

          SECTION 11.15 Recording of Indenture.  If this Indenture is subject to
                        ----------------------
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at

                                       66
<PAGE>

its expense accompanied by an Opinion of Counsel (which may be counsel to the
Trustee or any other counsel reasonably acceptable to the Trustee and the
Security Insurer) to the effect that such recording is necessary either for the
protection of the Noteholders or any other person secured hereunder or for the
enforcement of any right or remedy granted to the Trustee or the Trust
Collateral Agent under this Indenture or the Collateral Agent under the Spread
Account Agreement.

          SECTION 11.16  Trust Obligation.  No recourse may be taken, directly
                         ----------------
or indirectly, with respect to the obligations of the Issuer, the Seller, the
Servicer, the Owner Trustee, the Trust Collateral Agent or the Trustee on the
Notes or under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against (i) the Seller, the Servicer, the
Trustee, the Trust Collateral Agent or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Seller, the Servicer, the Trustee, the Trust Collateral Agent or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Seller, the Servicer, the Owner Trustee, the Trust Collateral Agent
or the Trustee or of any successor or assign of the Seller, the Servicer, the
Trustee, the Trust Collateral Agent or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Trustee, the Trust Collateral Agent and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Article VI, VII and VIII of the
Trust Agreement.

          SECTION 11.17  No Petition.  The Trustee and the Trust Collateral
                         -----------
Agent, by entering into this Indenture, and each Noteholder, by accepting a
Note, hereby covenant and agree that they will not at any time institute against
the Seller, or the Issuer, or join in any institution against the Seller, or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
State bankruptcy or similar law in connection with any obligations relating to
the Notes, this Indenture or any of the Basic Documents.

          SECTION 11.18  Inspection.  The Issuer agrees that, on reasonable
                         ----------
prior notice, it will permit any representative of the Trustee or of the
Security Insurer, during the Issuer's normal business hours, to examine all the
books of account, records, reports, and other papers of the Issuer, to make
copies and extracts therefrom, to cause such books to be audited by independent
certified public accountants, and to discuss the Issuer's affairs, finances and
accounts with the Issuer's officers, employees, and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. Notwithstanding anything herein to the contrary, the foregoing shall
not be construed to prohibit (i) disclosure of any and all information that is
or becomes publicly known, (ii) disclosure of any and all information (A) if
required to do so by any applicable statute, law, rule or regulation, (B) to any
government agency or regulatory body having or claiming authority to regulate or
oversee any respects of the Trustee's business or that of its affiliates, (C)
pursuant to any subpoena, civil investigative demand or similar demand or
request of any court, regulatory authority, arbitrator or arbitration to which
the Trustee or an

                                       67
<PAGE>

affiliate or an officer, director, employer or shareholder thereof is a party,
(D) in any preliminary or final offering circular, registration statement or
contract or other document pertaining to the transactions contemplated by the
Indenture approved in advance by the Servicer or the Issuer or (E) to any
independent or internal auditor, agent, employee or attorney of the Trustee
having a need to know the same, provided that the Trustee advises such recipient
of the confidential nature of the information being disclosed, or (iii) any
other disclosure authorized by the Servicer or the Issuer.

                           [SIGNATURE PAGE FOLLOWS]

                                       68
<PAGE>

          IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers, hereunto duly
authorized, all as of the day and year first above written.

                         AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B,

                         By:  BANKERS TRUST (DELAWARE), not in its individual
                              capacity but solely as Owner Trustee

                         By:  /s/ Lisa Wilkins
                              -----------------------------------------------
                              Name:   Lisa Wilkins
                              Title:  Assistant Vice President

                         BANK ONE, N.A., not in its individual capacity but
                         solely as Trustee and Trust Collateral Agent

                         By:  /s/ John Rothrock
                              -----------------------------------------------
                              Name:   John Rothrock
                              Title:  Authorized Signer

                                  [Indenture]
<PAGE>

                                                                     EXHIBIT A-1

REGISTERED                                                          $192,000,000

No. RB-A-1

                      SEE REVERSE FOR CERTAIN DEFINITIONS

                                                            CUSIP NO.  03061NCR8

          Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

          THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

                AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                      CLASS A-1 6.890% ASSET BACKED NOTE

          AmeriCredit Automobile Receivables Trust 2000-B, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ONE HUNDRED NINETY-TWO MILLION
DOLLARS payable on each Distribution Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $192,000,000
and the denominator of which is $192,000,000 by (ii) the aggregate amount, if
any, payable from the Note Distribution Account in respect of principal on the
Class A-1 Notes pursuant to the Indenture; provided, however, that the entire
                                           --------  -------
unpaid principal amount of this Note shall be due and payable on the June 2001
Insured Distribution Date (the "Final Scheduled Distribution Date").  The Issuer
will pay interest on this Note at the rate per annum shown above on each
Distribution Date until the principal of this Note is paid or made available for
payment.  Interest on this Note will accrue for each Distribution Date from the
most recent Distribution Date on which interest has been paid to but excluding
such Distribution Date or, if no interest has yet been paid, from May 25, 2000.
Interest will be computed on the basis of a 360-day year and the actual number
of days in the related Interest Period.  Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.

          The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and

                                     A-1-1
<PAGE>

private debts. All payments made by the Issuer with respect to this Note shall
be applied first to interest due and payable on this Note as provided above and
then to the unpaid principal of this Note.

          The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Note Policy") issued by Financial Security Assurance Inc.
(the "Security Insurer"), pursuant to which the Security Insurer has
unconditionally guaranteed payments of the Noteholders' Interest Distributable
Amount and the Noteholders' Principal Distributable Amount with respect to each
Distribution Date will be paid on or prior to the related Insured Distribution
Date, all as more fully set forth in the Indenture and the related Sale and
Servicing Agreement.  The Record Date applicable to any Insured Distribution
Date is the Record Date applicable to the related Distribution Date.

          Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.

          Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.

                                     A-1-2
<PAGE>

          IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer as of the date set
forth below.

                              AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                              by

                              BANKERS TRUST (DELAWARE), not in its individual
                              capacity but solely as Owner Trustee under the
                              Trust Agreement

                              by_____________________________________
                              Name:
                              Title:

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

          This is one of the Notes designated above and referred to in the
within-mentioned Indenture.

Date:  May 25, 2000           BANK ONE, N.A., not in its individual capacity
                              but solely as Trustee

                              by_____________________________
                              Authorized Signer

                                     A-1-3
<PAGE>

                               [REVERSE OF NOTE]

          This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 6.890% Asset Backed Notes (herein called the "Class
A-1 Notes"), all issued under an Indenture dated as of May 22, 2000 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Bank One, N.A. , as trustee (the "Trustee", which term
includes any successor Trustee under the Indenture) and as trust collateral
agent (the "Trust Collateral Agent"), which term includes any successor Trust
Collateral Agent) to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture.  All terms used in this
Note that are defined in the Indenture, as supplemented or amended, shall have
the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.

          The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.

          Principal of the Class A-1 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifth day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, provided that such day for payment shall in no event be
earlier than the third Business Day of the month, commencing July 6, 2000.  The
term "Distribution Date," shall be deemed to include the Final Scheduled
Distribution Date.

          As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Redemption Date, if any, pursuant to the Indenture. As described above,
a portion of the unpaid principal balance of this Note shall be due and payable
on the Redemption Date.  Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable (i) on the date on which
an Event of Default shall have occurred and be continuing so long as an Insurer
Default shall not have occurred and be continuing or (ii) if an Insurer Default
shall have occurred and be continuing, on the date on which an Event of Default
shall have occurred and be continuing and the Trustee or the Holders of the
Notes representing at least 66-2/3% of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
the Indenture.  All principal payments on the Class A-1 Notes shall be made pro
rata to the Class A-1 Noteholders entitled thereto.

          Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee.  Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be

                                     A-1-4
<PAGE>

submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Distribution Date by
notice mailed prior to such Distribution Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Trustee's principal Corporate Trust Office or at the office of the Trustee's
agent appointed for such purposes located in Columbus, Ohio.

          The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Interest Rate to the extent lawful.

          As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees.  No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.

          Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees (i) that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or
under the Indenture or any certificate or other writing delivered in connection
therewith, against (a) the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, (b) any owner of a
beneficial interest in the Issuer or (c) any partner, owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the General Partner,
the Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity,

                                     A-1-5
<PAGE>

and (ii) to treat the Notes as indebtedness for purposes of federal income,
state and local income and franchise and any other income taxes.

          Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Trustee and the Security Insurer and any agent of the
Issuer, the Trustee or the Security Insurer may treat the Person in whose name
this Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and neither the Issuer, the Trustee nor any
such agent shall be affected by notice to the contrary.

          The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Security Insurer and of the
Noteholders representing a majority of the Outstanding Amount of all Notes at
the time Outstanding.  The Indenture also contains provisions permitting the
Noteholders representing specified percentages of the Outstanding Amount of the
Notes, on behalf of the Holders of all the Notes, to waive compliance by the
Issuer with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences.  Any such consent or waiver by the Holder
of this Note (or any one of more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Note.  The Indenture also permits the Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.

          The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.

          The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the
Noteholders under the Indenture.

          The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.

          This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.

          No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.

          Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither Bankers Trust
(Delaware) in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally

                                     A-1-6
<PAGE>

liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purposes of
binding the interests of the Owner Trustee in the assets of the Issuer. The
Holder of this Note by the acceptance hereof agrees that except as expressly
provided in the Indenture or the Basic Documents, in the case of an Event of
Default under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
                                                       --------  -------
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.

                                     A-1-7
<PAGE>

                                  ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee

          FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________
              (name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.

Dated________________________/1/            ______________________________
                                            Signature Guaranteed:

_____________________________               ______________________________

_____________________________

/1/  NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

                                     A-1-8
<PAGE>

                                                                     EXHIBIT A-2

REGISTERED                                                          $393,000,000

No. RB-A-2
                      SEE REVERSE FOR CERTAIN DEFINITIONS
                                                            CUSIP NO.  03061NCS6

          Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

          THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

                AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                      CLASS A-2 7.520% ASSET BACKED NOTE

          AmeriCredit Automobile Receivables Trust 2000-B, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of THREE HUNDRED NINETY-THREE MILLION
DOLLARS payable on each Distribution Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $393,000,000
and the denominator of which is $393,000,000 by (ii) the aggregate amount, if
any, payable from the Note Distribution Account in respect of principal on the
Class A-2 Notes pursuant to the Indenture; provided, however, that the entire
                                           --------  -------
unpaid principal amount of this Note shall be due and payable on the September
2003 Insured Distribution Date (the "Final Scheduled Distribution Date").  The
Issuer will pay interest on this Note at the rate per annum shown above on each
Distribution Date until the principal of this Note is paid or made available for
payment.  Interest on this Note will accrue for each Distribution Date from the
most recent Distribution Date on which interest has been paid to but excluding
such Distribution Date or, if no interest has yet been paid, from May 25, 2000.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.  Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.

          The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and

                                     A-2-1
<PAGE>

private debts. All payments made by the Issuer with respect to this Note shall
be applied first to interest due and payable on this Note as provided above and
then to the unpaid principal of this Note.

          The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Note Policy") issued by Financial Security Assurance Inc.
(the "Security Insurer"), pursuant to which the Security Insurer has
unconditionally guaranteed payments of the Noteholders' Interest Distributable
Amount and the Noteholders' Principal Distributable Amount with respect to each
Distribution Date will be paid on or prior to the related Insured Distribution
Date, all as more fully set forth in the Indenture and the related Sale and
Servicing Agreement.  The Record Date applicable to any Insured Distribution
Date is the Record Date applicable to the related Distribution Date.

          Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.

          Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.

                                     A-2-2
<PAGE>

          IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer as of the date set
forth below.

                              AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                              by

                              BANKERS TRUST (DELAWARE), not in its individual
                              capacity but solely as Owner Trustee under the
                              Trust Agreement

                              by____________________________
                              Name:
                              Title:

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

          This is one of the Notes designated above and referred to in the
within-mentioned Indenture.

Date:  May 25, 2000           BANK ONE, N.A., not in its individual capacity but
                              solely as Trustee

                              by____________________________
                              Authorized Signer

                                     A-2-3
<PAGE>

                               [REVERSE OF NOTE]

          This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 7.520% Asset Backed Notes (herein called the "Class
A-2 Notes"), all issued under an Indenture dated as of May 22, 2000 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Bank One, N.A. , as trustee (the "Trustee", which term
includes any successor Trustee under the Indenture) and as trust collateral
agent (the "Trust Collateral Agent"), which term includes any successor Trust
Collateral Agent) to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture.  All terms used in this
Note that are defined in the Indenture, as supplemented or amended, shall have
the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.

          The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.

          Principal of the Class A-2 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifth day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, provided that such day for payment shall in no event be
earlier than the third Business Day of the month, commencing July 6, 2000.  The
term "Distribution Date," shall be deemed to include the Final Scheduled
Distribution Date.

          As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Redemption Date, if any, pursuant to the Indenture. As described above,
a portion of the unpaid principal balance of this Note shall be due and payable
on the Redemption Date.  Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable (i) on the date on which
an Event of Default shall have occurred and be continuing so long as an Insurer
Default shall not have occurred and be continuing or (ii) if an Insurer Default
shall have occurred and be continuing, on the date on which an Event of Default
shall have occurred and be continuing and the Trustee or the Holders of the
Notes representing at least 66-2/3% of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
the Indenture.  All principal payments on the Class A-2 Notes shall be made pro
rata to the Class A-2 Noteholders entitled thereto.

          Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee.  Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be

                                     A-2-4
<PAGE>

submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Distribution Date by
notice mailed prior to such Distribution Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Trustee's principal Corporate Trust Office or at the office of the Trustee's
agent appointed for such purposes located in Columbus, Ohio.

          The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Interest Rate to the extent lawful.

          As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees.  No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.

          Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees (i) that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or
under the Indenture or any certificate or other writing delivered in connection
therewith, against (a) the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, (b) any owner of a
beneficial interest in the Issuer or (c) any partner, owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the General Partner,
the Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity,

                                     A-2-5
<PAGE>

and (ii) to treat the Notes as indebtedness for purposes of federal income,
state and local income and franchise and any other income taxes.

          Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Trustee and the Security Insurer and any agent of the
Issuer, the Trustee or the Security Insurer may treat the Person in whose name
this Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and neither the Issuer, the Trustee nor any
such agent shall be affected by notice to the contrary.

          The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Security Insurer and of the
Noteholders representing a majority of the Outstanding Amount of all Notes at
the time Outstanding.  The Indenture also contains provisions permitting the
Noteholders representing specified percentages of the Outstanding Amount of the
Notes, on behalf of the Holders of all the Notes, to waive compliance by the
Issuer with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences.  Any such consent or waiver by the Holder
of this Note (or any one of more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Note.  The Indenture also permits the Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.

          The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.

          The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the
Noteholders under the Indenture.

          The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.

          This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.

          No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.

          Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither Bankers Trust
(Delaware) in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners,

                                     A-2-6
<PAGE>

beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in this
Note or the Indenture, it being expressly understood that said covenants,
obligations and indemnifications have been made by the Owner Trustee for the
sole purposes of binding the interests of the Owner Trustee in the assets of the
Issuer. The Holder of this Note by the acceptance hereof agrees that except as
expressly provided in the Indenture or the Basic Documents, in the case of an
Event of Default under the Indenture, the Holder shall have no claim against any
of the foregoing for any deficiency, loss or claim therefrom; provided, however,
                                                              --------  -------
that nothing contained herein shall be taken to prevent recourse to, and
enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.

                                     A-2-7
<PAGE>

                                  ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee

          FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________
              (name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.

Dated__________________________/1/            _______________________________
                                              Signature Guaranteed:

_______________________________               _______________________________

     /1/ NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

                                    A-2-8
<PAGE>

                                                                     EXHIBIT A-3

REGISTERED                                                          $275,000,000

No. RB-A-3
                      SEE REVERSE FOR CERTAIN DEFINITIONS

                                                            CUSIP NO.  03061NCT4

          Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

          THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

                AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                  CLASS A-3 FLOATING RATE  ASSET BACKED NOTE

          AmeriCredit Automobile Receivables Trust 2000-B, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of TWO HUNDRED SEVENTY-FIVE MILLION
DOLLARS payable on each Distribution Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $275,000,000
and the denominator of which is $275,000,000 by (ii) the aggregate amount, if
any, payable from the Note Distribution Account in respect of principal on the
Class A-3 Notes pursuant to the Indenture; provided, however, that the entire
                                           --------  -------
unpaid principal amount of this Note shall be due and payable on the September
2004 Insured Distribution Date (the "Final Scheduled Distribution Date").  The
Issuer will pay interest on this Note at the floating rate per annum equal to
LIBOR plus 0.14% on each Distribution Date until the principal of this Note is
paid or made available for payment.  Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from May 25, 2000.  Interest will be computed on the basis of a 360-
day year and the actual number of days in the related Interest Period.  Such
principal of and interest on this Note shall be paid in the manner specified on
the reverse hereof.

                                     A-3-1
<PAGE>

          The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.  All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.

          The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Note Policy") issued by Financial Security Assurance Inc.
(the "Security Insurer"), pursuant to which the Security Insurer has
unconditionally guaranteed payments of the Noteholders' Interest Distributable
Amount and the Noteholders' Principal Distributable Amount with respect to each
Distribution Date will be paid on or prior to the related Insured Distribution
Date, all as more fully set forth in the Indenture and the related Sale and
Servicing Agreement.  The Record Date applicable to any Insured Distribution
Date is the Record Date applicable to the related Distribution Date.

          Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.

          Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.

                                     A-3-2
<PAGE>

          IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer as of the date set
forth below.

                              AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                              by

                              BANKERS TRUST (DELAWARE), not in its individual
                              capacity but solely as Owner Trustee under the
                              Trust Agreement

                              by________________________________
                              Name:
                              Title:

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

          This is one of the Notes designated above and referred to in the
within-mentioned Indenture.

Date:  May 25, 2000           BANK ONE, N.A., not in its individual capacity but
                              solely as Trustee

                              by________________________________
                              Authorized Signer

                                     A-3-3
<PAGE>

                               [REVERSE OF NOTE]

          This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 Floating Rate Asset Backed Notes (herein called the
"Class A-3 Notes"), all issued under an Indenture dated as of May 22, 2000 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Bank One, N.A. , as trustee (the "Trustee", which term
includes any successor Trustee under the Indenture) and as trust collateral
agent (the "Trust Collateral Agent"), which term includes any successor Trust
Collateral Agent) to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture.  All terms used in this
Note that are defined in the Indenture, as supplemented or amended, shall have
the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.

          The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.

          Principal of the Class A-3 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifth day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, provided that such day for payment shall in no event be
earlier than the third Business Day of the month, commencing July 6, 2000.  The
term "Distribution Date," shall be deemed to include the Final Scheduled
Distribution Date.

          As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Redemption Date, if any, pursuant to the Indenture. As described above,
a portion of the unpaid principal balance of this Note shall be due and payable
on the Redemption Date.  Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable (i) on the date on which
an Event of Default shall have occurred and be continuing so long as an Insurer
Default shall not have occurred and be continuing or (ii) if an Insurer Default
shall have occurred and be continuing, on the date on which an Event of Default
shall have occurred and be continuing and the Trustee or the Holders of the
Notes representing at least 66-2/3% of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
the Indenture.  All principal payments on the Class A-3 Notes shall be made pro
rata to the Class A-3 Noteholders entitled thereto.

          Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee.  Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be

                                     A-3-4
<PAGE>

submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Distribution Date by
notice mailed prior to such Distribution Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Trustee's principal Corporate Trust Office or at the office of the Trustee's
agent appointed for such purposes located in Columbus, Ohio.

          The Issuer shall pay interest on overdue installments of interest at
the Class A-3 Interest Rate to the extent lawful.

          As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees.  No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.

          Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees (i) that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or
under the Indenture or any certificate or other writing delivered in connection
therewith, against (a) the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, (b) any owner of a
beneficial interest in the Issuer or (c) any partner, owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the General Partner,
the Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity,

                                     A-3-5
<PAGE>

and (ii) to treat the Notes as indebtedness for purposes of federal income,
state and local income and franchise and any other income taxes.

          Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Trustee and the Security Insurer and any agent of the
Issuer, the Trustee or the Security Insurer may treat the Person in whose name
this Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and neither the Issuer, the Trustee nor any
such agent shall be affected by notice to the contrary.

          The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Security Insurer and of the
Noteholders representing a majority of the Outstanding Amount of all Notes at
the time Outstanding.  The Indenture also contains provisions permitting the
Noteholders representing specified percentages of the Outstanding Amount of the
Notes, on behalf of the Holders of all the Notes, to waive compliance by the
Issuer with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences.  Any such consent or waiver by the Holder
of this Note (or any one of more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Note.  The Indenture also permits the Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.

          The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.

          The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the
Noteholders under the Indenture.

          The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.

          This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.

          No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.

          Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither Bankers Trust
(Delaware) in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners,

                                     A-3-6
<PAGE>

beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in this
Note or the Indenture, it being expressly understood that said covenants,
obligations and indemnifications have been made by the Owner Trustee for the
sole purposes of binding the interests of the Owner Trustee in the assets of the
Issuer. The Holder of this Note by the acceptance hereof agrees that except as
expressly provided in the Indenture or the Basic Documents, in the case of an
Event of Default under the Indenture, the Holder shall have no claim against any
of the foregoing for any deficiency, loss or claim therefrom; provided, however,
                                                              --------  -------
that nothing contained herein shall be taken to prevent recourse to, and
enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.

                                     A-3-7
<PAGE>

                                  ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee

          FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________
              (name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.

Dated___________________/1/                   ________________________
                                              Signature Guaranteed:

________________________                      ________________________

     /1/ NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

                                     A-3-8

<PAGE>

                                                                     EXHIBIT A-4

REGISTERED                                                          $340,000,000
No. RB-A-4
                      SEE REVERSE FOR CERTAIN DEFINITIONS
                                                            CUSIP NO.  03061NCU1

          Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

          THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

                AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                   CLASS A-4 FLOATING RATE ASSET BACKED NOTE

          AmeriCredit Automobile Receivables Trust 2000-B, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of THREE HUNDRED FORTY MILLION DOLLARS
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $340,000,000 and the
denominator of which is $340,000,000 by (ii) the aggregate amount, if any,
payable from the Note Distribution Account in respect of principal on the Class
A-4 Notes pursuant to the Indenture; provided, however, that the entire unpaid
                                     --------  -------
principal amount of this Note shall be due and payable on the April 2007 Insured
Distribution Date (the "Final Scheduled Distribution Date").  The Issuer will
pay interest on this Note at the floating rate per annum equal to LIBOR plus
0.20% on each Distribution Date until the principal of this Note is paid or made
available for payment.  Interest on this Note will accrue for each Distribution
Date from the most recent Distribution Date on which interest has been paid to
but excluding such Distribution Date or, if no interest has yet been paid, from
May 25, 2000.  Interest will be computed on the basis of a 360-day year and the
actual number of days in the related Interest Period.  Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.

          The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and

                                     A-4-1
<PAGE>

private debts. All payments made by the Issuer with respect to this Note shall
be applied first to interest due and payable on this Note as provided above and
then to the unpaid principal of this Note.

          The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Note Policy") issued by Financial Security Assurance Inc.
(the "Security Insurer"), pursuant to which the Security Insurer has
unconditionally guaranteed payments of the Noteholders' Interest Distributable
Amount and the Noteholders' Principal Distributable Amount with respect to each
Distribution Date will be paid on or prior to the related Insured Distribution
Date, all as more fully set forth in the Indenture and the related Sale and
Servicing Agreement.  The Record Date applicable to any Insured Distribution
Date is the Record Date applicable to the related Distribution Date.

          Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.

          Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.

                                     A-4-2
<PAGE>

          IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer as of the date set
forth below.

                              AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 2000-B

                              by

                              BANKERS TRUST (DELAWARE), not in its individual
                              capacity but solely as Owner Trustee under the
                              Trust Agreement

                              by_______________________________________
                              Name:____________________________________
                              Title:___________________________________

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

          This is one of the Notes designated above and referred to in the
within-mentioned Indenture.

Date:  May 25, 2000           BANK ONE, N.A., not in its individual capacity but
                              solely as Trustee

                              by_______________________________________
                              Authorized Signer

                                     A-4-3
<PAGE>

                               [REVERSE OF NOTE]

          This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 Floating Rate Asset Backed Notes (herein called the
"Class A-4 Notes"), all issued under an Indenture dated as of May 22, 2000 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Bank One, N.A. , as trustee (the "Trustee", which term
includes any successor Trustee under the Indenture) and as trust collateral
agent (the "Trust Collateral Agent"), which term includes any successor Trust
Collateral Agent) to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture.  All terms used in this
Note that are defined in the Indenture, as supplemented or amended, shall have
the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.

          The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.

          Principal of the Class A-4 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifth day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, provided that such day for payment shall in no event be
earlier than the third Business Day of the month, commencing July 6, 2000.  The
term "Distribution Date," shall be deemed to include the Final Scheduled
Distribution Date.

          As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Redemption Date, if any, pursuant to the Indenture. As described above,
a portion of the unpaid principal balance of this Note shall be due and payable
on the Redemption Date.  Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable (i) on the date on which
an Event of Default shall have occurred and be continuing so long as an Insurer
Default shall not have occurred and be continuing or (ii) if an Insurer Default
shall have occurred and be continuing, on the date on which an Event of Default
shall have occurred and be continuing and the Trustee or the Holders of the
Notes representing at least 66-2/3% of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
the Indenture.  All principal payments on the Class A-4 Notes shall be made pro
rata to the Class A-4 Noteholders entitled thereto.

          Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee.  Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be

                                     A-4-4
<PAGE>

submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Distribution Date by
notice mailed prior to such Distribution Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Trustee's principal Corporate Trust Office or at the office of the Trustee's
agent appointed for such purposes located in Columbus, Ohio.

          The Issuer shall pay interest on overdue installments of interest at
the Class A-4 Interest Rate to the extent lawful.

          As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees.  No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.

          Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees (i) that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or
under the Indenture or any certificate or other writing delivered in connection
therewith, against (a) the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, (b) any owner of a
beneficial interest in the Issuer or (c) any partner, owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the General Partner,
the Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity,

                                     A-4-5
<PAGE>

and (ii) to treat the Notes as indebtedness for purposes of federal income,
state and local income and franchise and any other income taxes.

          Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Trustee and the Security Insurer and any agent of the
Issuer, the Trustee or the Security Insurer may treat the Person in whose name
this Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and neither the Issuer, the Trustee nor any
such agent shall be affected by notice to the contrary.

          The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Security Insurer and of the
Noteholders representing a majority of the Outstanding Amount of all Notes at
the time Outstanding.  The Indenture also contains provisions permitting the
Noteholders representing specified percentages of the Outstanding Amount of the
Notes, on behalf of the Holders of all the Notes, to waive compliance by the
Issuer with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences.  Any such consent or waiver by the Holder
of this Note (or any one of more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Note.  The Indenture also permits the Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.

          The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.

          The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the
Noteholders under the Indenture.

          The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.

          This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.

          No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.

          Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither Bankers Trust
(Delaware) in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners,

                                     A-4-6
<PAGE>

beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in this
Note or the Indenture, it being expressly understood that said covenants,
obligations and indemnifications have been made by the Owner Trustee for the
sole purposes of binding the interests of the Owner Trustee in the assets of the
Issuer. The Holder of this Note by the acceptance hereof agrees that except as
expressly provided in the Indenture or the Basic Documents, in the case of an
Event of Default under the Indenture, the Holder shall have no claim against any
of the foregoing for any deficiency, loss or claim therefrom; provided, however,
                                                              --------  -------
that nothing contained herein shall be taken to prevent recourse to, and
enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.

                                     A-4-7
<PAGE>

                                  ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee

          FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________
                (name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.

Dated____________________________/1/        ________________________________
                                            Signature Guaranteed:

_________________________________           ________________________________

_______________________________

     /1/  NOTE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

                                     A-4-8

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